Document:

EXHIBIT 10.1 - 08/15/2005 FORM 8-K

EXHIBIT 10.1 

CONSENT 

               
CONSENT,  dated as of August 9, 2005 (this “Consent”), under the CREDIT
AGREEMENT, dated as of November 18, 1997, as amended and restated as of October 14, 2004
and as amended and waived by the First Amendment and Waiver dated as of March 31, 2005
(as in effect on the date immediately prior to the date hereof, the “Credit Agreement”),
among BALLY TOTAL FITNESS HOLDING CORPORATION, a Delaware corporation (the “Borrower”),
the lenders parties thereto (the “Lenders”), JPMORGAN CHASE BANK, N.A., as
agent for the Lenders (the “Agent”), DEUTSCHE BANK SECURITIES, INC., as
Syndication Agent, and LASALLE BANK NATIONAL ASSOCIATION, as Documentation Agent. Terms
used herein, but not defined, shall have the respective meanings set forth in the Credit
Agreement. 

W I T N E S S E T H: 

                    
1.    
          The requisite holders under the Borrower’s Subordinated Notes Indenture
          have delivered a notice of default dated August 4, 2005, and the trustee under
          each of the Borrower’s Subordinated Notes Indenture and Senior Unsecured
          Notes Indenture has delivered a notice of default dated August 5, 2005
          (collectively, the “August 2005 Default Notices”), in each case
          under Section 5.1(c) thereof with respect to the Borrower’s failure to
          satisfy certain financial reporting and delivery obligations thereunder. 

                    
2.    
          Pursuant to Section 8.07 of the Credit Agreement a Default and Event of Default
          will arise under the Credit Agreement 10 days after delivery of the August 2005
          Default Notices (“Credit Agreement Default Date”). 

                    
3.    
          The Borrower wishes to extend the Credit Agreement Default Date as a result of
          the delivery of the August 2005 Default Notices to August 31, 2005. 

                    
4.    
          The consent of the Majority Lenders is required to so extend the Credit
          Agreement Default Date. 

               
NOW, THEREFORE, the parties hereto hereby agree as follows: 

               
1.              Consent. With respect to the August 2005 Default Notices, the Lenders
          consent to the extension of the Credit Agreement Default Date to August 31,
          2005. 

               
2.    
          Conditions to Effectiveness of this Consent. This Consent shall become
          effective as of the date first set forth above (the “Effective
          Date”) at such time as: 

     		            
(i)    
          the Agent shall have received counterparts of this Consent duly executed and
          delivered by a duly authorized officer of each of the Borrower, each Guarantor
          and the Majority Lenders; and 

          

2 

     		            
(ii)    
          the Agent shall have received payment of all fees and expenses of the Agent and
          the Lenders that are earned, due and payable on or prior to the Effective Date
          in connection with this Consent. 

          

               
3.    
          Consent Fee. The Borrower agrees to pay to the Agent for the account of
          each Lender which executes and delivers this Consent by 5:00 pm EST on August
          12, 2005 (each, an “Approving Lender”), a consent fee equal to
          .05% of the sum of such Lender’s Term Advances and Revolving Credit
          Commitments on the Effective Date, earned, due and payable on the Effective
          Date. 

               
4.    
          Representations and Warranties. The Borrower represents and warrants to
          each Lender that as of the Effective Date after giving effect to this Consent:
          (a) the representations and warranties made by the Credit Parties in the Credit
          Documents are true and correct in all material respects on and as of the date
          hereof (except to the extent that such representations and warranties are
          expressly stated to relate to an earlier date, in which case such
          representations and warranties shall have been true and correct in all material
          respects on and as of such earlier date) and (b) no Default or Event of Default
          shall have occurred and be continuing as of the date hereof. 

               
5.    
          Counterparts. This Consent may be executed by one or more of the parties
          to this Consent on any number of separate counterparts (including by facsimile
          transmission), and all of said counterparts taken together shall be deemed to
          constitute one and the same instrument. The execution and delivery of this
          Amendment by any Lender shall be binding upon each of its successors and assigns
          and binding in respect of all of its Commitments and Advances, including any
          acquired subsequent to its execution and delivery hereof and prior to the
          effectiveness hereof. 

               
6.    
          Continuing Effect; No Other Amendments. This Consent is to be narrowly
          constructed. Except to the extent the Credit Agreement is expressly amended
          hereby, all of the terms and provisions of the Credit Agreement and the other
          Credit Documents are and shall remain in full force and effect. This Consent
          shall constitute a Credit Document. 

               
7.    
          GOVERNING LAW. THIS CONSENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
          HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
          WITH, THE LAW OF THE STATE OF NEW YORK. 

        [Rest
of page intentionally left blank] 

3 

               
IN WITNESS WHEREOF, the parties hereto have caused this Consent to be duly executed and
delivered by their proper and duly authorized officers as of the day and year first above
written. 

	  	BALLY TOTAL FITNESS HOLDING CORPORATION 

	  	By: 	/s/ Carl J. Landeck  
	  	  	
 
	  	Name: 	Carl J. Landeck 
	  	Title: 	Senior Vice President  
	  	  	Chief Financial Officer  

	  	JPMORGAN CHASE BANK, N.A., individually and as
Agent 

	  	By: 	/s/ Barry Bergman  
	  	  	
 
	  	Name: 	Barry Bergman 
	  	Title: 	Managing Director 

4 

	  	Bally Total Fitness Holding Corporation Consent dated as

of August 9, 2005 to the Amended and Restated Credit

Agreement: 

	  	LASALLE BANK NATIONAL ASSOCIATION 

	  	By: 	/s/ Patrick R. Keller  
	  	  	
 
	  	Name: 	Patrick R. Keller 
	  	Title: 	First Vice President 

	  	ADAR INVESTMENT FUND LTD 

	  	By: 	ADAR Investment Management LLC,  
	  	  	Investment Manager  

	  	By: 	/s/ Aaron Morse  
	  	  	
 
	  	Name: 	Aaron Morse 
	  	Title: 	Chief Operating Officer 

	  	ANCHORAGE CROSSOVER CREDIT OFFSHORE
MASTER FUND, LTD. 

	  	By: 	/s/ Kevin Ulrich  
	  	  	
 
	  	Name: 	Kevin Ulrich 
	  	Title: 	Director 

	  	Sankaty Advisors, LLC as Collateral Manager for AVERY
POINT CLO, LTD. 

	  	By: 	/s/ Diane J. Exter  
	  	  	
 
	  	Name: 	Diane J. Exter 
	  	Title: 	Managing Director Portfolio 
	  	  	Manager  

	  	Sankaty Advisors, Inc. as Collateral Manager for BRANT

POINT CBO 1999-1 LTD. 

	  	By: 	/s/ Diane J. Exter  
	  	  	
 
	  	Name: 	Diane J. Exter 
	  	Title: 	Managing Director Portfolio 
	  	  	Manager  

5 

	  	Sankaty Advisors, LLC as Collateral Manager for BRANT

POINT II CBO 2000-1 LTD. 

	  	By: 	/s/ Diane J. Exter  
	  	  	
 
	  	Name: 	Diane J. Exter 
	  	Title: 	Managing Director Portfolio 
	  	  	Manager  

	  	Sankaty Advisors, LLC as Collateral Manager for

CASTLE HILL I INGOTS, LTD. 

	  	By: 	/s/ Diane J. Exter  
	  	  	
 
	  	Name: 	Diane J. Exter 
	  	Title: 	Managing Director Portfolio 
	  	  	Manager  

	  	Sankaty Advisors, LLC as Collateral Manager for CASTLE

HILL II INGOTS, LTD. 

	  	By: 	/s/ Diane J. Exter  
	  	  	
 
	  	Name: 	Diane J. Exter 
	  	Title: 	Managing Director Portfolio 
	  	  	Manager  

	  	HARBOUR TOWN FUND LLC 

	  	By: 	/s/ Cristina Higgins  
	  	  	
 
	  	Name: 	Cristina Higgins 
	  	Title: 	Assistant Vice President 

	  	Sankaty Advisors, LLC as Collateral Manager for LOAN

FUNDING XI LLC 

	  	By: 	s/ Diane J. Exter  
	  	  	
 
	  	Name: 	Diane J. Exter 
	  	Title: 	Managing Director Portfolio 
	  	  	Manager  

	  	Sankaty Advisors, LLC as Collateral Manager for RACE

POINT CLO, LIMITED 

	  	By: 	s/ Diane J. Exter  
	  	  	
 
	  	Name: 	Diane J. Exter 

6 

	  	Title: 	Managing Director Portfolio 
	  	  	Manager  

	  	Sankaty Advisors, LLC as Collateral Manager for RACE

POINT II CLO, LIMITED 

	  	By: 	/s/ Diane J. Exter  
	  	  	
 
	  	Name: 	Diane J. Exter 
	  	Title: 	Managing Director Portfolio 
	  	  	Manager  

	  	SANKATY HIGH YIELD PARTNERS III, L.P. 

	  	By: 	/s/ Diane J. Exter  
	  	  	
 
	  	Name: 	Diane J. Exter 
	  	Title: 	Managing Director Portfolio 
	  	  	Manager  

	  	BLACK DIAMOND OFFSHORE, LTD. 

	  	By: 	Carlson Capital, L.P., its investment advisor  
	  	By: 	Asgard Investment Corp., its general partner  

	  	By: 	/s/ Clint D. Carlson  
	  	  	
 
	  	Name: 	Clint D. Carlson 
	  	Title: 	President 

	  	DOUBLE BLACK DIAMOND OFFSHORE LDC 

	  	By: 	Carlson Capital, L.P., its investment advisor  
	  	By: 	Asgard Investment Corp., its general partner  

	  	By: 	/s/ Clint D. Carlson  
	  	  	
 
	  	Name: 	Clint D. Carlson 
	  	Title: 	President 

	  	RED FOX FUNDING LLC 

	  	By: 	/s/ Cristina Higgins  
	  	  	
 
	  	Name: 	Cristina Higgins 
	  	Title: 	Assistant Vice President 

	  	CANYON CAPITAL CDO 2002-1, LTD 

7 

	  	By: 	/s/ R. Christian B. Evensen  
	  	  	
 
	  	Name: 	R. Christian B. Evensen 
	  	Title: 	Managing Director 

	  	By: Canyon Capital Advisors LLC,

a Delaware Limited Liability Company,

its Collateral Manager 

	  	CANYON CAPITAL CLO 2004-1, LTD 

	  	By: 	/s/ R. Christian B. Evensen  
	  	  	
 
	  	Name: 	R. Christian B. Evensen 
	  	Title: 	Managing Director 

	  	By: Canyon Capital Advisors LLC,

a Delaware Limited Liability Company,

its Collateral Manager 

	  	CITADEL HILL 2000 LTD 

	  	By: 	/s/ Brian Cerreta  
	  	  	
 
	  	Name: 	Brian Cerreta 
	  	Title: 	Authorized Signatory 

	  	CITADEL HILL 2004 LTD 

	  	By: 	/s/ Brian Cerreta  
	  	  	
 
	  	Name: 	Brian Cerreta 
	  	Title: 	Authorized Signatory 

	  	DEUTSCHE BANK TRUST COMPANY AMERICAS 

	  	By: 	/s/  Carin M. Keegan  
	  	  	
 
	  	Name: 	Carin M. Keegan 
	  	Title: 	Vice President 

	  	By: 	/s/  Lana Gifas  
	  	  	
 
	  	Name: 	Lana Gifas 
	  	Title: 	Vice President 

	  	HEALTH AND FITNESS TRUST 

	  	By: 	Wilmington Trust Cmpany not in its  

8 

	  	  	individual capacity, but solely as Owner

Trustee  

	  	By: 	/s/ Joseph B. Feil  
	  	  	
 
	  	Name: 	Joseph B. Feil 
	  	Title: 	Assistant Vice President 

	  	ALPHAGEN CREDIT FUND LIMITED 

	  	By: 	/s/ Varkki P. Chacko  
	  	  	
 
	  	Name: 	Varkki P. Chacko 
	  	Title: 	  

	  	General Electric Capital Corporation as administrator for,

MERRITT CLO HOLDING LLC 

	  	By: 	/s/ Robert Kadlick  
	  	  	
 
	  	Name: 	Robert Kadlick 
	  	Title: 	Duly Authorized Signatory 

	  	GENERAL ELECTRIC CAPITAL CORPORATION 

	  	By: 	/s/ Hittie C. Lee  
	  	  	
 
	  	Name: 	Hittie C. Lee 
	  	Title: 	Duly Authorized Signatory 

	  	HBK MASTER FUND L.P. 

	  	By: 	HBK Investment L.P., Investment Advisor  

	  	By: 	/s/ Jamiel A. Akhtar  
	  	  	
 
	  	Name: 	Jamiel A. Akhtar 
	  	Title: 	Authorized Signatory 

	  	LOAN FUNDING IV LLC 

	  	By: 	Highland Capital Management, L.P.,  
	  	  	        As Collateral Manager  
	  	By: 	Strand Advisors, Inc., Its General Partner  

	  	By: 	/s/ Chad Schramek  
	  	  	
 
	  	Name: 	Chad Schramek 
	  	Title: 	Assistant Treasurer 

9 

	  	LOAN FUNDING VII LLC 

	  	By: 	Highland Capital Management, L.P.,  
	  	  	        As Collateral Manager  
	  	By: 	Strand Advisors, Inc., Its General Partner  

	  	By: 	/s/ Chad Schramek  
	  	  	
 
	  	Name: 	Chad Schramek 
	  	Title: 	Assistant Treasurer 

	  	TRS LEDA LLC 

	  	By: 	/s/ Jay Hopkins  
	  	  	
 
	  	Name: 	Jay Hopkins 
	  	Title: 	Assistant Vice President 

	  	Q FUNDING III, L.P. 

	  	By: 	Prufrock Onshore, L.P., its General Partner  
	  	By: 	J. Alfred Onshore, LLC, its General Partner  

	  	By: 	Robert McCormick   
	  	  	
 
	  	Name: 	Robert McCormick 
	  	Title: 	Vice President 

	  	SEMINOLE FUNDING LLC 

	  	By: 	/s/ Cristina Higgins  
	  	  	
 
	  	Name: 	Cristina Higgins 
	  	Title: 	Assistant Vice President 

	  	JEFFERSON-PILOT LIFE INSURANCE COMPANY 

	  	By: 	TCW Advisors, Inc., as its Investment Advisor  

	  	By: 	/s/ G. Wayne Hosang   
	  	  	
 
	  	Name: 	G. Wayne Hosang 
	  	Title: 	Vice President 

	  	By: 	/s/ Stephen Suo   
	  	  	
 
	  	Name: 	Stephen Suo 
	  	Title: 	Vice President 

	  	C-SQUARED CDO LTD. 

	  	By: 	TCW Advisors, Inc., as its Portfolio Manager  

10 

	  	By: 	/s/ G. Wayne Hosang   
	  	  	
 
	  	Name: 	G. Wayne Hosang 
	  	Title: 	Vice President 

	  	By: 	/s/ Stephen Suo   
	  	  	
 
	  	Name: 	Stephen Suo 
	  	Title: 	Vice President 

	  	CELERITY CLO LIMITED 

	  	By: 	TCW Advisors, Inc., as Agent  

	  	By: 	/s/ G. Wayne Hosang   
	  	  	
 
	  	Name: 	G. Wayne Hosang 
	  	Title: 	Vice President 

	  	By: 	/s/ Stephen Suo   
	  	  	
 
	  	Name: 	Stephen Suo 
	  	Title: 	Vice President 

	  	FIRST 2004-I CLO, LTD. 

	  	By: 	TCW Advisors, Inc., as its Collateral Manager  

	  	By: 	/s/ G. Wayne Hosang   
	  	  	
 
	  	Name: 	G. Wayne Hosang 
	  	Title: 	Vice President 

	  	By: 	/s/ Stephen Suo   
	  	  	
 
	  	Name: 	Stephen Suo 
	  	Title: 	Vice President 

	  	FIRST 2004-II CLO, LTD. 

	  	By: 	TCW Advisors, Inc., as its Collateral Manager  

	  	By: 	/s/ G. Wayne Hosang   
	  	  	
 
	  	Name: 	G. Wayne Hosang 
	  	Title: 	Vice President 

	  	By: 	/s/ Stephen Suo   
	  	  	
 
	  	Name: 	Stephen Suo 
	  	Title: 	Vice President 

	  	LOAN FUNDING I LLC

a wholly owned subsidiary of Citibank, N.A.

By: TCW Advisors, Inc., as portfolio manager of Loan 

11 

	  	Funding I LLC 

	  	By: 	/s/ G. Wayne Hosang   
	  	  	
 
	  	Name: 	G. Wayne Hosang 
	  	Title: 	Vice President 

	  	By: 	/s/ Stephen Suo   
	  	  	
 
	  	Name: 	Stephen Suo 
	  	Title: 	Vice President 

	  	TCW SELECT LOAN, LIMITED 

	  	By: 	TCW Advisors, Inc., as its Collateral Manager   

	  	By: 	/s/ G. Wayne Hosang   
	  	  	
 
	  	Name: 	G. Wayne Hosang 
	  	Title: 	Vice President 

	  	By: 	/s/ Stephen Suo   
	  	  	
 
	  	Name: 	Stephen Suo 
	  	Title: 	Vice President 

	  	TCW SENIOR SECURED LOAN FUND 

	  	By: 	TCW Advisors, Inc., as its Investment Advisor   

	  	By: 	/s/ G. Wayne Hosang   
	  	  	
 
	  	Name: 	G. Wayne Hosang 
	  	Title: 	Vice President 

	  	By: 	/s/ Stephen Suo   
	  	  	
 
	  	Name: 	Stephen Suo 
	  	Title: 	Vice President 

	  	VELOCITY CLO, LTD. 

	  	By: 	TCW Advisors, Inc., its Collateral Manager   

	  	By: 	/s/ G. Wayne Hosang   
	  	  	
 
	  	Name: 	G. Wayne Hosang 
	  	Title: 	Vice President 

	  	By: 	/s/ Stephen Suo   
	  	  	
 
	  	Name: 	Stephen Suo 
	  	Title: 	Vice President 

	  	U.S. BANK NATIONAL ASSOCIATION 

12 

	  	By: 	/s/ Joseph L. Svehla   
	  	  	
 
	  	Name: 	Joseph L. Svehla 
	  	Title: 	Vice President 

	  	WB LOAN FUNDING 2, LLC 

	  	By: 	/s/ Diana M. Himes   
	  	  	
 
	  	Name: 	Diana M. Himes 
	  	Title: 	Associate 

	  	WELLS FARGO FOOTHILL, LLC 

	  	By: 	/s/ Juan Barrera  
	  	  	
 
	  	Name: 	Juan Barrera 
	  	Title: 	Vice President 

	  	FOOTHILL INCOME TRUST LP 

	  	By: 	FIT GP, LLC, Its Gen Parner 

	  	By: 	/s/ Richard M. Bohannon 
	  	  	
 
	  	Name: 	Richard M. Bohannon 
	  	Title: 	Managing Member 

13 

	  	THE CONSENT IS

        ACKNOWLEDGED AND AGREED:

	  	BALLY’S FITNESS AND RACQUET CLUBS, INC.

BALLY FITNESS FRANCHISING, INC.

BALLY FRANCHISE RSC, INC.

BALLY FRANCHISING HOLDINGS, INC.

BALLY ESTATE II, LLC

REAL ESTATE III, LLC

REAL ESTATE IV, LLC

BALLY REFS WEST HARTFORD, LLC

BALLY TOTAL FITNESS CORPORATION

BALLY TOTAL FITNESS HOLDING CORPORATION

BALLY TOTAL FITNESS INTERNATIONAL, INC.

BALLY TOTAL FITNESS OF MISSOURI, INC.

BALLY TOTAL FITNESS OF TOLEDO, INC.

BFIT REHAB OF WEST PALM BEACH, INC.

CONNECTICUT COAST FITNESS CENTERS, INC.

CONNECTICUT VALLEY FITNESS CENTERS, INC.

GREATER PHILLY NO. 1 HOLDING COMPANY

GREATER PHILLY NO. 2 HOLDING COMPANY

HEALTH & TENNIS CORPORATION OF NEW

YORK

HOLIDAY HEALTH & FITNESS CENTERS OF NEW

   YORK, INC.

HOLIDAY HEALTH CLUBS AND FITNESS

        CENTERS, INC.

HOLIDAY HEALTH CLUBS OF THE SOUTHEAST,

        INC.

HOLIDAY HEALTH CLUBS OF THE EAST COAST,

        INC.

HOLIDAY/SOUTHEAST HOLDING CORP.

HOLIDAY SPA HEALTH CLUBS OF CALIFORNIA

HOLIDAY UNIVERSAL, INC.

JACK LALANNE FITNESS CENTERS, INC.

JACK LALANNE HOLDING CORP.

MANHATTAN SPORTS CLUB, INC.

NEW FITNESS HOLDING CO., INC.

NYCON HOLDING CO., INC.

PHYSICAL FITNESS CENTERS OF PHILADELPHIA,

        INC.

PROVIDENCE FITNESS CENTERS, INC.

RHODE ISLAND HOLDING COMPANY

SCANDINAVIAN HEALTH SPA, INC.

SCANDINAVIAN U.S. SWIM & FITNESS, INC.

14 

	  	TIDELANDS HOLIDAY HEALTH CLUBS, INC.

U.S. HEALTH, INC.

59TH STREET GYM LLC

708 GYM LLC

ACE, LLC

CRUNCH FITNESS INTERNATIONAL, INC.

CRUNCH L.A. LLC

CRUNCH WORLD LLC

FLAMBE LLC

MISSION IMPOSSIBLE, LLC

SOHO HO LLC

WEST VILLAGE GYM AT THE ARCHIVES LLC

BALLY TOTAL FITNESS FRANCHISING, INC.

	  	By: 	/s/ Carl J. Landeck 
	  	  	
 

	  	Name: 	Carl J. Landeck 
	  	Title: 	Senior Vice President 
	  	  	Chief Financial OfficerAugust 15 2005 8K Exhibit 10.17

LOAN AND SECURITY AGREEMENT

by and among

CATHAY BANK

   and

SILICON STORAGE TECHNOLOGY, INC.

                  a California corporation,

SST INTERNATIONAL LTD,

                  a cayman islands corporation,

SST RG LLC,

                  a delaware limited liability company,

SST COMMUNICATIONS CORP.,

                  a delaware corporation

and

EMOSYN INTERNATIONAL LTD,

                  a cayman islands corporation

 

 

 

 

Dated As Of  August 11, 2005

                             TABLE OF CONTENTS 

	
 
	
 
	
Page

	
1.
	
Accounting And Other Terms
	
      1

	
2.
	
Loan And Terms Of Payment
	
      1

	
2.1
	
Promise to Pay
	
1

	
2.2
	
Overadvances
	
2

	
2.3
	
Interest Rate, Payments
	
2

	
2.4
	
Fees
	
2

	
3.
	
Conditions Of Loans
	
      3

	
3.1
	
Conditions Precedent to Initial Credit Extension
	
3

	
3.2
	
Conditions Precedent to all Credit Extensions
	
3

	
4.
	
Creation Of Security Interest
	
      3

	
4.1
	
Grant of Security Interest
	
3

	
5.
	
Representations And Warranties
	
      3

	
5.1
	
Due Organization and Authorization
	
3

	
5.2
	
Collateral
	
3

	
5.3
	
Litigation
	
4

	
5.4
	
No Material Adverse Change in Financial Statements
	
4

	
5.5
	
Solvency
	
4

	
5.6
	
Regulatory Compliance
	
4

	
5.7
	
Subsidiaries
	
4

	
5.7
	
Full Disclosure
	
4

	
6.
	
Affirmative Covenants
	
      5

	
6.1
	
Government Compliance
	
5

	
6.2
	
Financial Statements, Reports, Certificates
	
5

	
6.3
	
Inventory; Returns
	
5

	
6.4
	
Taxes
	
5

	
6.5
	
Insurance
	
6

	
6.6
	
Primary Accounts
	
6

	
6.7
	
Financial Covenants
	
6

	
6.8
	
Further Assurances
	
6

	
7.
	
Negative Covenants
	
      6

	
7.1
	
Dispositions
	
6

	
7.2
	
Changes in Business, Ownership, Management or Business Locations
	
7

	
7.3
	
Mergers or Acquisitions
	
7

	
7.4
	
Indebtedness
	
7

	
7.5
	
Encumbrance
	
7

	
7.6
	
Distributions; Investments
	
7

	
7.7
	
Transactions with Affiliates
	
7

	
7.8
	
Subordinated Debt
	
7

	
7.9
	
Compliance
	
7

	
8.
	
Events Of Default
	
      8

	
8.1
	
Payment Default
	
8

	
8.2
	
Covenant Default
	
8

	
8.3
	
Material Adverse Change
	
8

	
8.4
	
Attachment
	
8

	
8.5
	
Insolvency
	
8

	
8.6
	
Other Agreements
	
8

	
8.7
	
Judgments
	
8

	
8.8
	
Misrepresentations
	
9

	
9.
	
Bank's Rights And Remedies
	
      9

	
9.1
	
Rights and Remedies
	
9

	
9.2
	
Power of Attorney
	
9

	
9.3
	
Accounts Collection
	
10

	
9.4
	
Bank Expenses
	
10

	
9.5
	
Bank's Liability for Collateral
	
10

	
9.6
	
Remedies Cumulative
	
10

	
9.7
	
Demand Waiver
	
10

	
10.
	
Notices
	
      11

	
11.
	
Choice Of Law , Venue And Jury Trial Waiver
	
      11

	
12.
	
General Provisions
	
      11

	
12.1
	
Successors and Assigns
	
11

	
12.2
	
Indemnification
	
11

	
12.3
	
Time of Essence
	
11

	
12.4
	
Severability of Provision
	
11

	
12.5
	
Amendments in Writing, Integration
	
11

	
12.6
	
Counterparts
	
12

	
12.7
	
Survival
	
12

	
12.8
	
Confidentiality
	
12

	
12.9
	
Attorneys' Fees, Costs and Expenses
	
12

	
13.
	
Definitions
	
      12

LOAN AND SECURITY AGREEMENT

This Loan Agreement (this "Agreement") is made and entered into as of August
11, 2005, by and between CATHAY BANK ("Bank"), and SILICON STORAGE TECHNOLOGY, INC., a
California corporation ("Borrower").

RECITALS

A.Borrower wishes to obtain credit from Bank in the amount of up to Thirty-five Million
Dollars ($35,000,000).

B.Subject to the representations and warranties of Borrower herein and upon the terms and
conditions set forth in this Agreement, Bank is willing to extend credit to Borrower.

AGREEMENT

NOW THEREFORE, in consideration of the foregoing recitals and the terms and conditions
and agreements contained herein, the parties hereby agree as follows:

	Accounting And Other Terms.

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

	Loan And Terms Of Payment

2.1    Promise to Pay.  Borrower promises to pay
Bank the unpaid principal amount of all Credit Extensions and interest on the unpaid principal amount of the Credit
Extensions.

2.1.1    Revolving Advances.

	Bank will make Advances not exceeding (i) the lesser of (A) the amount of the Revolving
Line; (B) the Borrowing Base (however, no Borrowing Base is needed if borrowing is less than $20,000,000). Amounts
borrowed under this Section may be repaid and reborrowed during the term of this Agreement.

	To obtain an Advance, Borrower must notify Bank by facsimile or telephone by 11:00 a.m.
Pacific time on the Business Day the Advance is to be made if the advance is to be wired out of the Bank and by 3:00
p.m. Pacific time for disbursement to an account within Cathay Bank.  Borrower must promptly confirm the notification by
delivering to Bank the Payment/Advance Form attached as Exhibit B.  Bank will credit Advances to Borrower's deposit
account.  Bank may make Advances under this Agreement based on instructions from a Responsible Officer or his or
her designee or without instructions if the Advances are necessary to meet Obligations which have become due.  Bank
may rely on any telephone notice given by a person whom Bank believes is a Responsible Officer or designee. Borrower
will indemnify Bank for any loss Bank suffers due to such reliance.

	The Revolving Line terminates on the Revolving Maturity Date, when all Advances and
interest accrued are immediately payable.

	Bank's obligation to lend the undisbursed portion of the Obligations will terminate if, in
Bank's sole discretion, there has been a material adverse change in the general affairs, management, results of
operation, condition (financial or otherwise) or the prospect of repayment of the Obligations, or there has been any
material adverse deviation by Borrower from the most recent business plan of Borrower presented to and accepted by
Bank prior to the execution of this Agreement.

2.2    Overadvances.  If Borrower's Obligations under
Section 2.1.1, exceed the lesser of either (i) the Revolving Line or (ii) the Borrowing Base, Borrower must immediately
pay Bank the excess.

2.3    Interest Rate, Payments.

	Interest Rate.  Advances accrue interest on the outstanding principal balance at a
per annum rate of 1 percentage points below the Prime Rate, floating daily.  After an Event of Default, as defined in
Section 8, Obligations accrue interest at 5 percent above the Prime Rate effective immediately before the Event of
Default. The interest rate increases or decreases when the Prime Rate changes.  Interest is computed on a 360 day
year for the actual number of days elapsed. 

	Payments.  Interest due on the Revolving Line is payable on the 25th of each
month.  Bank may debit any of Borrower's deposit accounts including Account Number 12016209 for principal and
interest payments owing or any amounts Borrower owes Bank.  Bank will promptly notify Borrower when it debits
Borrower's accounts.  These debits are not a set-off.  Payments received after 11:00 a.m. Pacific time are considered
received at the opening of business on the next Business Day.  When a payment is due on a day that is not a Business
Day, the payment is due the next Business Day and additional fees or interest accrue.

2.4    Fees.  

Borrower will pay:

	Loan Fee.  A loan fee of $35,000.

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

	Late Fee.A late fee of five percent (5%) of any Obligation due if
such Obligation is not paid within the time frame set forth in Section 8.1 hereof.

	Conditions Of Loans.

3.1    Conditions Precedent to Initial Credit Extension.
Bank's obligation to make the initial Credit Extension is subject to the condition precedent that it receive the agreements,
documents and fees it requires.

3.2     Conditions Precedent to all Credit Extensions.
Bank's obligations to make each Credit Extension, including the initial Credit Extension, is subject to the
following:

	timely receipt of any Payment/Advance Form; and

	the representations and warranties in Section 5 must be materially true on the date of the
Payment/Advance Form and on the effective date of each Credit Extension and no Event of Default may have occurred
and be continuing, or result from the Credit Extension. Each Credit Extension is Borrower's representation and warranty
on that date that the representations and warranties of Section 5 remain true.

	Creation Of Security Interest.

4.1     Grant of Security Interest.  Borrower and each
Borrower Subsidiary grants Bank a continuing security interest in all presently existing and later acquired Collateral to
secure all Obligations and performance of each of Borrower's duties under the Loan Documents and each of them
hereby authorizes Bank to execute and file any and all documents necessary to perfect such security grant interest
granted hereunder.  Except for Permitted Liens, any security interest will be a first priority security interest in the
Collateral.  Bank may place a "hold" on any deposit account pledged as Collateral. If this Agreement is terminated,
Bank's lien and security interest in the Collateral will continue until Borrower fully satisfies its
Obligations.

	Representations And Warranties.  Borrower
represents and warrants as follows: 

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

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

5.2     Collateral.  Borrower has good title to the Collateral,
free of Liens except Permitted Liens.  The Accounts are bona fide, existing obligations, and the service or property has
been performed or delivered to the account debtor or its agent for immediate shipment to and unconditional acceptance
by the account debtor.  Borrower has no notice of any actual or imminent Insolvency Proceeding of any account debtor
whose accounts are an Eligible Account in any Borrowing Base Certificate.  All Inventory is in all material respects of
good and marketable quality, free from material defects.  

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

5.4     No Material Adverse Change in Financial
Statements.  All consolidated financial statements for Borrower, and any Subsidiary, delivered to Bank fairly present
in all material respects Borrower's consolidated financial condition and Borrower's consolidated results of operations.
There has not been any material deterioration in Borrower's consolidated financial condition since the date of the most
recent financial statements submitted to Bank.

5.5     Solvency.  The fair salable value of Borrower's
assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities and Borrower is able to pay its
debts (including trade debts) as they mature.

5.6     Regulatory Compliance.  Borrower is not an
"investment company" or a company "controlled" by an "investment company" under the Investment Company Act.
Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations T and
U of the Federal Reserve Board of Governors).  Borrower has complied in all material respects with the Federal Fair
Labor Standards Act.  Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably
be expected to cause a Material Adverse Change.  None of Borrower's or any Subsidiary's properties or assets has
been used by Borrower or any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in disposing,
producing, storing, treating, or transporting any hazardous substance other than legally.  Borrower and each Subsidiary
has timely filed all required tax returns and paid, or made adequate provision to pay, all material taxes, except those
being contested in good faith with adequate reserves under GAAP.  Borrower and each Subsidiary has obtained all
consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all government
authorities that are necessary to continue its business as currently conducted, except where the failure to do so could
not reasonably be expected to cause a Material Adverse Change.

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

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

	Affirmative Covenants.  Borrower will do all of the
following for so long as Bank has an obligation to lend, or there are outstanding Obligations:

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

6.2     Financial Statements, Reports,
Certificates.

	Borrower will deliver to Bank:  (i) as soon as available, but no later than 45
days after the last day of each fiscal quarter, consolidated financial statements covering Borrower's consolidated
operations during the period certified by a Responsible Officer and in a form acceptable to Bank; (ii) as soon as
available, but no later than 120 days after the last day of Borrower's fiscal year, audited consolidated financial
statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements
from an independent certified public accounting firm reasonably acceptable to Bank; (iii) a prompt 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 $100,000 or more; and (iv) budgets, sales projections, operating plans or other financial information
Bank reasonably requests.

	Whenever the balance of the Revolving Line exceeds $20,000,000 or the compensation
balance ratio falls below 1.0 : 1.0, within 15 days after the last day of each month thereafter, Borrower will
deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in the form of Exhibit C, with aged listings
of accounts receivable and accounts payable.

	Within 30 days after the last day of each month, Borrower will deliver to Bank a Compliance
Certificate signed by a Responsible Officer in the form of Exhibit D.

	Allow Bank's internal auditor to audit Borrower's Collateral at Borrower's expense (not to
exceed $2,000) within 60 days of the Closing Date.  Such audits will be conducted no more often than once every 6
months unless an Event of Default has occurred and is continuing.

6.3     Inventory; Returns.  Borrower will keep all Inventory
in good and marketable condition, free from material defects.  Returns and allowances between Borrower and its
account debtors will follow Borrower's customary practices as they exist at execution of this Agreement.  Borrower must
promptly notify Bank of all returns, recoveries, disputes and claims, that  involve more than $250,000.

6.4     Taxes.  Borrower will make, and cause each
Subsidiary to make, timely payment of all material federal, state, and local taxes or assessments (other than taxes and
assessments which Borrower is contesting in good faith, with adequate reserves maintained in accordance with GAAP)
and will deliver to Bank, on demand, appropriate certificates attesting to the payment.

6.5     Insurance.  Borrower will keep its business and the
Collateral insured for risks and in amounts standard for Borrower's industry, and as Bank may reasonably request.
Insurance policies will be in a form, with companies, and in amounts that are satisfactory to Bank in Bank's reasonable
discretion.  All property policies will have a lender's loss payable endorsement showing Bank as an additional loss payee
and all liability policies will show the Bank as an additional insured and provide that the insurer must give Bank at least
20 days notice before canceling its policy.  At Bank's request, Borrower will deliver certified copies of policies and
evidence of all premium payments. Proceeds payable under any policy will, at Bank's option, be payable to Bank on
account of the Obligations.

6.6     Primary Accounts.  Borrower and SST International,
Ltd. will maintain their primary depository and operating accounts with Bank with the understanding that they will use
their best efforts to transfer such accounts to Bank as soon as commercially reasonable. Borrower will use its best
efforts to maintain on deposit with Bank at least $20,000,000 during the term of this Agreement.

6.7     Financial Covenants.  Borrower will maintain as of
the last day of each month:

	Current Ratio.  A ratio of Current Assets to Current Liabilities of at least 1.75 to
1.00.

	Maximum Leverage Ratio.  A ratio of Total Liabilities excluding deferred revenues
divided by Tangible Net Worth of no more than 1:50 : 1:0.

	Minimum Liquidity Ratio.  A ratio of unrestricted cash (and equivalents) plus 95% of
any government securities held by Borrower and 85% of investment grade corporate bonds held by Borrower all divided
by Indebtedness of not less than 1.75 to 1.00. 

	Liquid Assets.  Borrower will maintain liquid assets of at least $35,000,000 which
are defined as 100% of unrestricted cash and equivalents plus 95% of government securities and 85% of investment
grade corporate bonds.

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

	Negative Covenants.  Borrower will not do any of the
following without Bank's prior written consent, which will not be unreasonably withheld, for so long as Bank has an
obligation to lend or there are any outstanding Obligations:

7.1     Dispositions.  Convey, sell, lease, transfer or
otherwise dispose of (collectively "Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of its business
or property, except for 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) of
worn out or obsolete Equipment and (iv) available for sale investments.

7.2     Changes in Business, Ownership, Management or
Business Locations.  Engage in or permit any of its Subsidiaries to engage in any business other than the
businesses currently engaged in by Borrower or reasonably related thereto or have a material change in its ownership or
management except for changes in ownership or management of its Subsidiaries for reorganization purposes.  Borrower
will not, without at least 30 days prior written notice, relocate its chief executive office. 

7.3     Mergers or Acquisitions.  Merge or consolidate, or permit any of its Subsidiaries to
merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially
all of the capital stock or property of another Person, except where (i) no Event of Default has occurred and is continuing
or would result from such action during the term of this Agreement and (ii) such transaction would not result in a
decrease of more than 25% of Tangible Net Worth. A Subsidiary may merge or consolidate into another Subsidiary or
into Borrower.

7.4     Indebtedness.  Create, incur, assume, or be
liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.

7.5     Encumbrance.  Create, incur, or allow any Lien on
any of its Intellectual Property or the Intellectual Property of any Borrower Subsidiary, except for Permitted Liens, or
permit any Collateral not to be subject to the first priority security interest granted here, subject to Permitted
Liens.

7.6     Distributions; Investments.  Directly or indirectly
acquire or own any Person, or make any Investment in any Person, other than Permitted Investments, or permit any of
its Subsidiaries to do so.  Pay any dividends or make any distribution or payment or redeem, retire or purchase any
capital stock.  

7.7     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.

7.8     Subordinated Debt.  Make or permit any payment on
any Subordinated Debt, without Bank's prior written consent.

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

	Events Of Default.  Any one of the following is an
Event of Default:

8.1     Payment Default.  If Borrower fails to pay any of the
Obligations within 3 days after their due date (10 days in the case of payment of interest). Borrower has an additional
period of 27 days (an additional 20 days in the case of payment of interest) to attempt to cure the default.  During the
additional period the failure to cure the default is not an Event of Default (but no Credit Extension will be made during the
cure period);

8.2     Covenant Default.  If Borrower does not perform any
obligation in Section 6 or violates any covenant in Section 7; or 

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

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

8.5     Insolvency.  If Borrower becomes insolvent or if
Borrower begins an Insolvency Proceeding or an Insolvency Proceeding is begun against Borrower and not dismissed or
stayed within 30 days (but no Credit Extensions will be made before any Insolvency Proceeding is
dismissed);

8.6     Other Agreements.  If there is a default in any
agreement between Borrower and a third party that gives the third party the right to accelerate any Indebtedness
exceeding $100,000 or that could cause a Material Adverse Change;

8.7     Judgments.  Except in connection with litigation
identified on the Litigation Schedule, if a money judgement(s) in the aggregate of at least $500,000 is rendered against
Borrower and is unsatisfied and unstayed for 10 days (but no Credit Extensions will be made before the judgment is
stayed or satisfied);

8.8     Misrepresentations.  If Borrower or any Person
acting for Borrower makes any material misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to induce Bank to enter this Agreement or any
Loan Document; or

	Bank's Rights And Remedies.

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

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

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

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

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

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

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

	Dispose of the Collateral according to the Code and, as to any Cayman Islands Borrower
Subsidiary, any other applicable Cayman Islands laws.

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

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

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

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

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

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

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

	Choice Of Law , Venue And Jury Trial Waiver.
California law governs the Loan Documents without regard to principles of conflicts of law.  Borrower, Bank and each
Borrower Subsidiary each submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County,
California.

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

	General Provisions.  

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

12.2     Indemnification.  Borrower will indemnify, defend
and hold harmless Bank and its officers, employees, and agents against:  (a) all obligations, demands, claims, and
liabilities asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b)
all losses or Bank Expenses incurred, or paid by Bank from, following, or consequential to transactions between Bank
and Borrower (including reasonable attorneys fees and expenses), 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 in this Agreement.

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

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

12.6     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, are an original, and all taken together, constitute one Agreement.

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

12.8     Confidentiality.  In handling any confidential
information, Bank will exercise the same degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank's subsidiaries or affiliates in connection with their business with
Borrower, (ii) to prospective transferees or purchasers of any interest in the loans (provided, however, Bank shall use
commercially reasonable efforts in obtaining such prospective transferee or purchasers agreement of the terms of this
provision), (iii) as required by law, regulation, subpoena, or other order, (iv) as required in connection with Bank's
examination or audit and (v) as Bank considers appropriate exercising remedies under this Agreement.  Confidential
information does not include information that either: (a) is in the public domain or in Bank's possession when disclosed
to Bank, or becomes part of the public domain after disclosure to Bank; or (b) is disclosed to Bank by a third party, if
Bank does not know that the third party is prohibited from disclosing the information.

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

	Definitions.  In this Agreement:

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

"Advance" or "Advances" is a loan advance (or advances) under the Committed Revolving
Line.

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

"Bank Expenses" are all UCC search and filing expenses, audit fees and expenses and
reasonable costs and expenses (including reasonable attorneys' fees and expenses) for preparing, negotiating,
administering, defending and enforcing the Loan Documents (including appeals or Insolvency Proceedings).

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

"Borrowing Base" is 80% of Eligible Accounts as determined by Bank from Borrower's most
recent Borrowing Base Certificate plus 25% of Inventory (finished goods only and up to $10,000,000 of inventory
financing); provided, however, that Bank may lower the percentage of the Borrowing Base after
performing an audit of Borrower's Collateral.

"Borrower Subsidiary" shall mean SST International Ltd, SST RG LLC, SST
Communications Corp. and Emosyn International Ltd.

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

"Closing Date" is the date of this Agreement.

"Code" is the Uniform Commercial Code, as applicable.

"Collateral" is the property described on Exhibit A.

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

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

"Credit Extension" is each Advance or any other extension of credit by Bank for Borrower's
benefit.

"Current Assets" are amounts that under GAAP should be included on that date as current
assets on Borrower's consolidated balance sheet.

"Current Liabilities" are the aggregate amount of Borrower's Total Liabilities which mature within
one (1) year.

"Eligible Accounts" are Accounts in the ordinary course of Borrower's business that meet all
Borrower's representations and warranties in Section 5; but Bank may change eligibility standards by giving
Borrower notice.  Unless Bank agrees otherwise in writing, Eligible Accounts will not include:

	Accounts that the account debtor has not paid within 61 days of due date;

	Accounts for an account debtor, 50% or more of whose Accounts have not been paid within
61 days of due date;

	Credit memos over 61 days from due date;

	Accounts for an account debtor, including Affiliates, whose total obligations to Borrower
exceed 15% of all Accounts (net of intercompany, Affiliate accounts, reserves for sales returns, bad debt reserves and
adjustments), for the amounts that exceed that percentage, unless the Bank approves in writing except for those certain
Accounts from Silicon Professional Technology, for which the percentage may be up to 50% ;

	Accounts for which the account debtor is a federal, state or local government entity or any
department, agency, or instrumentality;

	Accounts for which Borrower owes the account debtor, but only up to the amount owed
(sometimes called "contra" accounts, accounts payable, customer deposits or credit accounts);

	Accounts for demonstration or promotional equipment, or in which goods are consigned,
sales guaranteed, sale or return, sale on approval, bill and hold, or other terms if account debtor's payment may be
conditional;

	Accounts for which the account debtor is Borrower's Affiliate, officer, employee, or
agent;

	Accounts in which the account debtor disputes liability or makes any claim and Bank
believes there may be a basis for dispute (but only up to the disputed or claimed amount), or if the Account Debtor is
subject to an Insolvency Proceeding, or becomes insolvent, or goes out of business;

	Intercompany accounts; and

	Accounts for which Bank reasonably determines  collection to be doubtful.

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

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

"GAAP" is generally accepted accounting principles.

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

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

"Intellectual Property" is:

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

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

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

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

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

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

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

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

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

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

"Material Adverse Change" is described in Section 8.3.

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

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

"Permitted Indebtedness" is:

	Borrower's indebtedness to Bank under this Agreement or any other Loan
Document;

	Indebtedness existing on the Closing Date and shown on the Schedule;

	Subordinated Debt;

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

	Indebtedness secured by Permitted Liens.

"Permitted Investments" are:

	Investments shown on the Investment Schedule and existing on the Closing
Date; and

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

"Permitted Liens" are:

	Liens existing on the Closing Date and shown on the Schedule or arising under
this Agreement or other Loan Documents;

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

	Purchase money Liens (i) on Equipment acquired or held by Borrower or its Subsidiaries
incurred for financing the acquisition of the Equipment, or (ii) existing on equipment when acquired, if the Lien is
confined to the property and improvements and the proceeds of the equipment;

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

	Leases or subleases granted in the ordinary course of Borrower's business, including in
connection with Borrower's leased premises or leased property;

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

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

"Prime Rate" is the variable rate of interest, per annum that is reported by the Wall Street
Journal, Western Edition, from time to time as the "Prime Rate."

"Responsible Officer" is each of the Chief Executive Officer, the President, the Chief Financial
Officer and the Controller of Borrower.

"Revolving Line" is a Credit Extension of up to $35,000,000 subject to automatic
reduction to $20,000,000 if the Revolving Line is not participated by $15,000,000 within 60 days of the Closing
Date.

"Revolving Maturity Date" is August 11, 2006.

"Schedule" is any attached schedule of exceptions.

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

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

"Tangible Net Worth" is, on any date, the consolidated total assets of Borrower and its
Subsidiaries minus, (i) any amounts attributable to (a) goodwill, (b) intangible items such as unamortized debt discount
and expense, Patents, trade and service marks and names, Copyrights and research and development expenses except
prepaid expenses, and (c) reserves not already deducted from assets, and (ii) Total Liabilities.

"Total Liabilities" is on any day, obligations that should, under GAAP, be classified as liabilities
on Borrower's consolidated balance sheet, including all Indebtedness.

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

	 	
BORROWER:

SILICON STORAGE TECHNOLOGY, INC.

By:  /s/ JACK K. LAI

        Jack K. Lai

Title:  Vice President Finance & Administration, Chief Financial Officer and Secretary

	 	
SST INTERNATIONAL LTD

By:  /s/ JACK K. LAI

        Jack K. Lai

Title:  Secretary

	 	
SST RG, LLC

By:  /s/ BING YEH

        Bing Yeh

Title:  Member Manager

	 	
SST COMMUNICATIONS CORP.

By:  /s/ JACK K. LAI

        Jack K. Lai

Title:  Secretary

	 	
EMOSYN INTERNATIONAL LTD

By:  /s/ JACK K. LAI

       Jack K. Lai

Title:  Secretary

	 	 
	 	
BANK:

CATHAY BANK

By:  /s/ JANE HO

Title:  FVP and Manager

 EXHIBIT A

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

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

All inventory, now owned or hereafter acquired, including, without limitation, all merchandise, raw
materials, parts, supplies, packing and shipping materials, work in process and finished products including such
inventory as is 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;

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;

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

All documents, cash, deposit accounts, securities, securities entitlements, securities accounts,
investment property, financial assets, letters of credit, certificates of deposit, instruments and chattel paper now owned
or hereafter acquired and Borrower's or any Borrower Subsidiary's Books relating to the foregoing;

All Borrower's or any Borrower Subsidiary'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.

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

 EXHIBIT B

Loan Payment/Advance Request Form

Deadline for same day processing is 12:00 P.S.T. 

Fax To:Date: 

	
○ Loan Payment:

Sample documents  Silicon Storage Technology, Inc. (Borrower)

From Account # ____________________________To Account # _________________________

(Deposit Account #)Loan Account #)

Principal $____________________ and/or Interest $_________________________

All Borrower's representation and warranties in the Loan and Security
Agreement are true, correct and complete in all material respects to on the date of the telephone transfer request for and
advance, but those representations and warranties expressly referring to another date shall be true, correct and
complete in all material respects as of the date:

Authorized Signature: _______________________
Phone Number: ________________________

	 
	
○ Loan Advance:
Complete Outgoing Wire Request section below if all or a portion of
the funds from this loan advance are for an outgoing wire.

From Account # ____________________________To Account #
_________________________

(Deposit Account #)(Loan Account #)

Principal $____________________ and/or Interest $_________________________

All Borrower's representation and warranties in the Loan and Security
Agreement are true, correct and complete in all material respects to on the date of the telephone transfer request for and
advance, but those representations and warranties expressly referring to another date shall be true, correct and
complete in all material respects as of the date:

Authorized Signature: ________________________
Phone Number: ________________________

	 
	Outgoing Wire Request 

Complete only if all or a portion of funds from the loan advance
above are to be wired.

Deadline for same day processing is 12:00pm, P.S.T. 
Beneficiary Name: ____________________Amount of Wire: $ ______________

Beneficiary Bank: ________________Account Number: ____________________

City and Sate: ____________________

Beneficiary Bank Transit (ABA) #: __ __ __ __ __ __ __ __  Beneficiary Bank Code (Swift, Sort, Chip, etc.): ___________________

(For International Wire Only)

Intermediary Bank: ________________Transit (ABA) #: __________________

For Further Credit to: ____________________

Special Instruction: ______________________

By signing below, I (we) acknowledge and agree that my (our) funds transfer request shall be processed in
accordance with and subject to the terms and conditions set forth in the agreements(s) covering funds transfer
service(s), which agreements(s) were previously received and executed by me (us).

Authorized Signature:  _____________________ 2nd Signature (If Required): _____________________

Print Name/Title: ____________________  Print Name/Title: __________________

Telephone # ____________________Telephone # ____________________

EXHIBIT C

BORROWING BASE CERTIFICATE

 

	 
	
Borrower:
	
Silicon Storage Technology, Inc.
	 	
Bank:
	
Cathay Bank 

20195 Stevens Creek Boulevard

Suite 100

Cupertino, California  95014

	
Commitment Amount:$35,000,000 (Subject to reduction)

	 

ACCOUNTS RECEIVABLE 

	
1.
	
Accounts Receivable Book Value as of
        
	
$                      

	
2.
	
Additions (please explain on reverse)
	
$                      

	
3.
	
TOTAL ACCOUNTS RECEIVABLE
	
$                      

ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)

	
4.
	
Amounts over 61 days due
	
$                      

	
5.
	
Balance of 50% over 61 day accounts
	
$                      

	
6.
	
Credit balances over 61 days
	
$                      

	
7.
	
Concentration Limits*
	
$                      

	
8.
	
Contra Accounts
	
$                      

	
9.
	
Promotion or Demo Accounts
	
$                      

	
10.
	
Intercompany/Employee Accounts
	
$                      

	
11.
	
Other (please explain on reverse)
	
$                      

	
12.
	
TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS
	
$                      

	
13.
	
Eligible Accounts (#13 minus #12 )
	
$                      

	
14.
	
LOAN VALUE OF ACCOUNTS (80% of #13)
	
$                      

	
COMPLETED INVENTORY
	
	
$                      

BALANCES

	
15.
	
Maximum Loan Amount
	
$                      

	
16.
	
Total Funds Available [Lesser of #15 or #14
	
$                      

	
17.
	
Present balance owing on Line of Credit
	
$                      

	
18.
	
Outstanding under Sublimits (LC or FX)
	
$                      

	
19.
	
RESERVE POSITION (#16 minus #17 and #18)
	
$                      

 

The undersigned represents and warrants that this is true, complete and
correct, and that the information in this Borrowing Base Certificate complies with the representations and warranties in
the Loan and Security Agreement between the undersigned and Cathay Bank.

COMMENTS:

Silicon Storage Technology, Inc.

By: __________________________

Authorized Signer

EXHIBIT D

COMPLIANCE CERTIFICATE

 

TO: Cathay Bank 

     10001 North DeAnza Boulevard, Suite 210

      Cupertino, California  95014

FROM:Silicon Storage Technology, Inc.

 

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

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

	
Reporting Covenant
	
Required
	
Complies

	
Monthly financial statements + CC
	
Monthly within 30 days
	
YesNo

	
Annual (Audited)
	
FYE within 120 days
	
YesNo

	
A/R & A/P Agings
	
Monthly within 15 days
	
YesNo

	
A/R Audit
	
Initial and Semi-Annual
	
YesNo

	
Borrowing Base Certificate
	
Monthly within 30 days
	
YesNo

	
Financial Covenant
	
Required
	
Actual
	
Complies

	
Maintain on a Monthly Basis:
	 	 	 
	
    Minimum Current Ratio
	
1.75:1.00
	
_____:1.00
	
YesNo

	
    Minimum Liquidity Ratio
	
1.75:1.00
	
_____:1.00
	
YesNo

	
    Maximum Leverage Ratio
	
1.50:1.00
	
_____:1.00
	
YesNo

Have there been updates to Borrower's intellectual property, if appropriate?                    Yes / No

Comments Regarding Exceptions:  See Attached.

 

Sincerely,

 

Silicon Storage Technology, Inc.

By: __________________________

Signature

 _____________________________

Title

 _____________________________

Date

Litigation Schedule

In January and February 2005, multiple putative shareholder class action complaints were filed against SST and
certain directors and officers, in the United States District Court for the Northern District of California, following our
announcement of anticipated financial results for the fourth quarter of 2004.  On March 24, 2005, the putative class
actions were consolidated under the caption In re Silicon Storage Technology, Inc., Securities Litigation, Case No. C 05
00295 PJH (N.D. Cal.).  On May 3, 2005, the Honorable Phyllis J. Hamilton appointed the "Louisiana Funds
Group," consisting of the Louisiana School Employees' Retirement System and the Louisiana District Attorneys'
Retirement System, to serve as lead plaintiff and the law firms of Pomeranz Haudek Block Grossman & Gross LLP
and Berman DeValerio Pease Tabacco Burt & Pucillo to serve as lead counsel and liason counsel, respectively, for
the class.  The lead plaintiff filed a Consolidated Amended Class Action Complaint on July 15, 2005.  The complaint
seeks unspecified damages on alleged violations of federal securities laws during the period from April 21, 2004 to
December 20, 2004.  Responses to the Consolidated Amended Class Action Complaint are presently scheduled to be
due on September 16, 2005.  We intend to take all appropriate action in response to these lawsuits.  The impact related
to the outcome of these matters is undeterminable at this time.

In January and February 2005, following the filing of the putative class actions, multiple shareholder derivative
complaints were filed in California Superior Court for the County of Santa Clara, purportedly on behalf of SST against
certain directors and officers.  The factual allegations of these complaints are substantially identical to those contained in
the putative shareholder class actions filed in federal court.  The derivative complaints assert claims for, among other
things, breach of fiduciary duty and violations of the California Corporations Code.  These derivative actions have been
consolidated under the caption In Re Silicon Storage Technology, Inc. Derivative Litigation, Lead Case No.
1:05CV034387 (Cal. Super. Ct., Santa Clara Co.).  We intend to take all appropriate action in response to these
lawsuits.  The impact related to the outcome of these matters is undeterminable at this time.

Investment Schedule

	
 	
Silicon Storage Technology, Inc	
 	
 	
 	
 
	
 	
Investments at June 30, 2005	
 	
 	
 	
 
	
 	
 	
 	
 	
 	
 
	
 	
 	
# shares	
Carried	
Carried	
Closing Price
	
 	
 	
SST owned	
Investment	
Investment	
in NT$ @
	
 	
 	
Total	
In Total $	
Per share in $	
6/30/2005
	
Common Shares	
 	
 	
 	
 	
 
	
 	
KYE (King Yuan Electronics Corp.)	
     3,431,360 	
 $      1,299,460 	
 $       0.3787 	
          28.85 
	
 	
PTI (Powertech Technology, Inc.)	
     8,245,723 	
         3,044,042 	
 $       0.3692 	
          99.40 
	
 	
PCT Limited (Professional Computer Technology, Limited)	
     5,990,441 	
         1,620,712 	
 $       0.2705 	
          44.40 
	
 	
Insyde Software Corp.	
     1,533,401 	
           455,513 	
 $       0.2971 	
          21.75 
	
 	
Silicon Technology Co., Ltd.	
       250,000 	
           938,967 	
 $       3.7559 	
               -   
	
 	
APACER (Apacer Technology Inc.)	
     9,732,628 	
         4,357,240 	
 $       0.4477 	
               -   
	
 	
GSMC (Grace Semiconductor Manufacturing Corporation)	
 113,000,000 	
       83,150,000 	
 $       0.7358 	
               -   
	
 	
Acorn Campus Asia Fund I, L.P.	
       666,666 	
           891,718 	
 $       1.3376 	
               -   
	
 	
ACET (Advanced Chip Engineering Technology, Inc.)	
   11,000,000 	
         4,012,158 	
 $       0.3647 	
               -   
	
 	
Nanotech Corporation	
   30,000,000 	
         3,522,079 	
 $       0.1174 	
               -   
	
 	
 	
 	
 	
 	
 
	
Convertible Bonds	
 	
 	
 	
 	
 
	
 	
PCT Limited (Professional Computer Technology, Limited)	
       900,948 	
         1,721,376 	
 $          1.91 	
          44.40 
	
 	
Insyde Software Corp.	
     4,400,000 	
           132,705

	
 	
          21.75 
	
 	
 	
 	
 	
 	
 
	
 	
 	
 	
 $  105,145,970 

	
 	
 

 

SECURED PROMISSORY NOTE

$35,000,000Cupertino, California

August 11, 2005

FOR VALUE RECEIVED, the undersigned, Silicon Storage Technology, Inc., a California
corporation ("Borrower"), promises to pay to the order of Cathay Bank (the "Bank"), at such place
as the holder hereof may designate, in lawful money of the United States of America, the principal sum of up to
Thirty-Five Million Dollars ($35,000,000), or so much thereof as may be advanced from time to time, pursuant to the terms of
the Line of Credit made by Bank to Borrower under that certain Loan And Security Agreement between Borrower and
Bank of even date herewith, as amended from time to time (the "Loan Agreement").  Borrower shall also pay
interest on the unpaid advances under the Line of Credit at the rate and in accordance with the terms of the Loan
Agreement.  The entire principal amount and all accrued but unpaid interest thereon shall be due and payable on the
Maturity Date.  Terms with initial capital letters and not otherwise defined herein shall have the meanings designated for
such terms in the Loan Agreement.

Bank is hereby authorized by Borrower to endorse on Bank's books and records the principal
amount advanced pursuant to the Line of Credit under this Secured Promissory Note (the "Note") and the
amount of each payment or prepayment of principal received by Bank; it being understood, however, that failure to make
any such endorsement (or any errors in notation) shall not affect the obligations of Borrower with respect to amounts due
hereunder, and payments of principal by Borrower shall be credited to Borrower notwithstanding the failure to make a
notation (or any errors in notation) thereof on such books and records.

Borrower promises to pay Bank all costs and expenses of collection of this Note and to pay all
reasonable attorneys' fees incurred in such collection or in any suit or action to collect this Note or in any appeal thereof,
except where a judgment is rendered against Bank in any such suit or action.  Borrower waives presentment, demand,
protest, notice of protest, notice of dishonor, notice of nonpayment, and any and an other notices and demands in
connection with the delivery, acceptance, performance, default or enforcement of this Note, as well as any applicable
statute of limitations.  No delay by Bank in exercising any power or right hereunder shall operate as a waiver of any
power or right.  Time is of the essence as to all obligations hereunder.

This Note is issued pursuant to the Loan Agreement, which is hereby incorporated by reference,
and shall govern the rights and obligations of Borrower with respect to all obligations hereunder.

This Note is secured by a security interest in certain collateral, which security interest was
granted by Borrower to Bank pursuant to the terms and conditions of the Loan Agreement and other documents or
instruments referenced therein.

The obligations of each of Borrower hereunder shall be joint and several.

BORROWER AND BANK HEREBY WAIVE THEIR RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE, INCLUDING CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.  This Note shall
be deemed to be made under, and shall be construed in accordance with and governed by the laws of the State of
California, excluding conflicts of laws principles.

	 	
Silicon Storage Technology, Inc.,

a California corporation

By: /s/ JACK K. LAI

                Name: Jack K. Lai

                Title: VP, CFO

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00089-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00089-of-00352.parquet"}]]