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                                                                    EXHIBIT 10.7

                             SYNAPTICS INCORPORATED
                       -----------------------------------

                              AMENDED AND RESTATED
                        2001 EMPLOYEE STOCK PURCHASE PLAN
                      (AS AMENDED THROUGH JANUARY 8, 2002)
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                             SYNAPTICS INCORPORATED
                       -----------------------------------

                              AMENDED AND RESTATED
                        2001 EMPLOYEE STOCK PURCHASE PLAN

<TABLE>
<S>    <C>                                                                     <C>
1.     Purpose .............................................................     1
2.     Definitions .........................................................     1
3.     Eligibility .........................................................     3
4.     Offering Periods ....................................................     3
5.     Election to Participate .............................................     4
6.     Participant Contributions ...........................................     5
7.     Grant of Option .....................................................     6
8.     Exercise Price ......................................................     7
9.     Exercise of Options .................................................     7
10.    Delivery ............................................................     7
11.    Withdrawal; Termination of Employment ...............................     8
12.    Stock ...............................................................     8
13.    Administration ......................................................     9
14.    Designation of Beneficiary ..........................................     9
15.    Transferability .....................................................     9
16.    Participant Accounts ................................................     9
17.    Adjustments Upon Changes in Capitalization; Corporate Transactions ..     9
18.    Amendment of the Plan ...............................................    10
19.    Termination of the Plan .............................................    11
20.    Notices .............................................................    11
21.    Effective Date ......................................................    11
22.    Conditions Upon Issuance of Shares ..................................    11
23.    Expenses of the Plan ................................................    11
24.    No Employment Rights ................................................    11
25.    Applicable Law ......................................................    12
26.    Additional Restrictions of Rule 16b-3 ...............................    12
</TABLE>
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                             SYNAPTICS INCORPORATED
                          -----------------------------

                              AMENDED AND RESTATED
                        2001 EMPLOYEE STOCK PURCHASE PLAN

         1. Purpose. The purpose of the Plan is to provide incentive for present
and future employees of the Company and any Designated Subsidiary to acquire a
proprietary interest (or increase an existing proprietary interest) in the
Company through the purchase of Common Stock. It is the Company's intention that
the Plan qualify as an "employee stock purchase plan" under Section 423 of the
Code. Accordingly, the provisions of the Plan shall be administered, interpreted
and construed in a manner consistent with the requirements of that section of
the Code.

         2. Definitions.

                  (a) "Applicable Percentage" means the percentage specified in
Section 8, subject to adjustment by the Committee as provided in Section 8.

                  (b) "Board" means the Board of Directors of the Company.

                  (c) "Code" means the Internal Revenue Code of 1986, as
amended, and any successor thereto.

                  (d) "Committee" means the committee appointed by the Board to
administer the Plan as described in Section 13 of the Plan or, if no such
Committee is appointed, the Board.

                  (e) "Common Stock" means the Company's common stock, par value
$.001 per share.

                  (f) "Company" means Synaptics Incorporated, a California
corporation.

                  (g) "Compensation" means, with respect to each Participant for
each pay period, the full base salary and overtime paid to such Participant by
the Company or a Designated Subsidiary. Except as otherwise determined by the
Committee, "Compensation" does not include: (i) bonuses or commissions; (ii) any
amounts contributed by the Company or a Designated Subsidiary to any pension
plan; (iii) any automobile or relocation allowances (or reimbursement for any
such expenses); (iv) any amounts paid as a starting bonus or finder's fee; (v)
any amounts realized from the exercise of any stock options or incentive awards;
(vi) any amounts paid by the Company or a Designated Subsidiary for other fringe
benefits, such as health and welfare, hospitalization and group life insurance
benefits, or perquisites, or paid in lieu of such benefits, or; (vii) other
similar forms of extraordinary compensation.

                  (h) "Continuous Status as an Employee" means the absence of
any interruption or termination of service as an Employee. Continuous Status as
an Employee shall not be considered interrupted in the case of a leave of
absence agreed to in writing by the Company or the Designated Subsidiary that
employs the Employee, provided that such leave is for a period of not more than
90 days or reemployment upon the expiration of such leave is guaranteed by
contract or statute.
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                  (i) "Designated Subsidiaries" means the Subsidiaries that have
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.

                  (j) "Employee" means any person, including an Officer, whose
customary employment with the Company or one of its Designated Subsidiaries is
at least twenty (20) hours per week and more than five (5) months in any
calendar year.

                  (k) "Entry Date" means the first day of each Exercise Period.

                  (l) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.

                  (m) "Exercise Date" means the last Trading Day ending on or
before each June 30 and December 31.

                  (n) "Exercise Period" means, for any Offering Period, each
period commencing on the Offering Date and on the day after each Exercise Date,
and terminating on the immediately following Exercise Date.

                  (o) "Exercise Price" means the price per share of Common Stock
offered in a given Offering Period determined as provided in Section 8.

                  (p) "Fair Market Value" means, with respect to a share of
Common Stock, the Fair Market Value as determined under Section 7(b).

                  (q) "First Offering Date" means the commencement date of the
initial public offering contemplated by the Registration Statement on Form S-1
filed by the Company with the Securities and Exchange Commission.

                  (r) "Offering Date" means the first Trading Day of each
Offering Period; provided, that in the case of an individual who becomes
eligible to become a Participant under Section 3 after the first Trading Day of
an Offering Period, the term "Offering Date" shall mean the first Trading Day of
the Exercise Period coinciding with or next succeeding the day on which that
individual becomes eligible to become a Participant. Options granted after the
first day of an Offering Period will be subject to the same terms as the options
granted on the first Trading Day of such Offering Period except that they will
have a different grant date (thus, potentially, a different exercise price) and,
because they expire at the same time as the options granted on the first Trading
Day of such Offering Period, a shorter term.

                  (s) "Offering Period" means, subject to adjustment as provided
in Section 4, (i) with respect to the first Offering Period, the period
beginning on the First Offering Date and ending on December 31, 2003, and (ii)
with respect to each Offering Period thereafter, the period beginning on the
January 1 immediately following the end of the previous Offering Period and
ending on the December 31 which is 24 months thereafter.

                  (t) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 under the Exchange Act and the rules and
regulations promulgated thereunder.

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                  (u) "Participant" means an Employee automatically enrolled in
the Plan pursuant to Section 5(a) hereof, or an Employee who has elected to
participate in the Plan by filing an enrollment agreement with the Company as
provided in Section 5(b) hereof.

                  (v) "Plan" shall mean this Amended and Restated Synaptics
Incorporated 2001 Employee Stock Purchase Plan.

                  (w) "Plan Contributions" means, with respect to each
Participant, the lump sum cash transfers, if any, made by the Participant to the
Plan pursuant to Section 5(a) hereof, plus the after-tax payroll deductions, if
any, withheld from the Compensation of the Participant and contributed to the
Plan for the Participant as provided in Section 6 hereof, and any other amounts
contributed to the Plan for the Participant in accordance with the terms of the
Plan.

                  (x) "Subsidiary" shall mean any corporation, domestic or
foreign, of which the Company owns, directly or indirectly, 50% or more of the
total combined voting power of all classes of stock, and that otherwise
qualifies as a "subsidiary corporation" within the meaning of Section 424(f) of
the Code.

                  (y) "Trading Day" shall mean a day on which the national stock
exchanges and the Nasdaq system are open for trading.

         3. Eligibility.

                  (a) Any Employee who has completed at least three (3) months
of employment with the Company or any Subsidiary and who is an Employee as of
the Offering Date of a given Offering Period shall be eligible to become a
Participant as of any Entry Date within that Offering Period under the Plan,
subject to the requirements of Section 5(a) and the limitations imposed by
Section 423(b) of the Code; provided, however, that any Employee who is an
Employee as of the First Offering Date shall be eligible to become a Participant
as of such First Offering Date.

                  (b) Notwithstanding any provision of the Plan to the contrary,
no Participant shall be granted an option under the Plan (i) to the extent that
if, immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own stock and/or hold outstanding options to purchase stock possessing 5%
or more of the total combined voting power or value of all classes of stock of
the Company or of any Subsidiary of the Company, or (ii) to the extent that his
or her rights to purchase stock under all employee stock purchase plans of the
Company and its Subsidiaries intended to qualify under Section 423 of the Code
to accrue at a rate which exceeds $25,000 of fair market value of stock
(determined at the time such option is granted) for each calendar year in which
such option is outstanding at any time.

         4. Offering Periods. The Plan shall generally be implemented by a
series of Offering Periods. The first Offering Period shall commence on the
First Offering Date and end on December 31, 2003, and succeeding Offering
Periods shall commence on the January 1 immediately following the end of the
previous Offering Period and end on the December 31 which is 24 months
thereafter. If, however, the Fair Market Value of a share of Common Stock on any
Exercise Date (except the final scheduled Exercise Date of any Offering Period)
is lower than the Fair Market Value of a share

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of Common Stock on the Offering Date, then the Offering Period in progress shall
end immediately following the close of trading on such Exercise Date, and a new
Offering Period shall begin on the next subsequent January 1 or July 1, as
applicable, and shall extend for a 24 month period ending on December 31 or June
30, as applicable. Subsequent Offering Periods shall commence on the January 1
or July 1, as applicable, immediately following the end of the previous Offering
Period and shall extend for a 24 month period ending on December 31 or June 30,
as applicable. The Committee shall have the power to make other changes to the
duration and/or the frequency of Offering Periods with respect to future
offerings if such change is announced at least five (5) days prior to the
scheduled beginning of the first Offering Period to be affected.

         5. Participation.

                  (a) All Employees who are eligible Employees as of the First
Offering Date shall automatically become Participants in the Plan as of the
First Offering Date, and shall be eligible to purchase shares of the Common
Stock on the Exercise Date of the first Exercise Period of the initial Offering
Period in an amount equal to the lesser of (i) the aggregate purchase price for
one thousand five hundred (1,500) shares of Common Stock or (ii) fifteen (15%)
percent of the Compensation that the Participant receives during the first
Exercise Period of the initial Offering Period (subject to the restrictions
contained in Section 3(b) hereof), unless the Participant elects a lower level
of participation as provided under Section 5(c) hereof. Such purchase shall be
made by a direct lump sum cash transfer by the Participant to the Plan, unless
the Participant files a payroll deduction election in accordance with Section
5(c), or withdraws from the Plan pursuant to Section 11 hereof. No enrollment
agreement or payroll deduction election need be filed by a Participant with the
Company in order to participate in the initial Offering Period.

                  (b) Employees meeting the eligibility requirements of Section
3 hereof after the First Offering Date may elect to participate in the Plan
commencing on any Entry Date by completing an enrollment agreement on the form
provided by the Company and filing the enrollment agreement with the Company on
or prior to such Entry Date, unless a later time for filing the enrollment
agreement is set by the Committee for all eligible Employees with respect to a
given offering. The enrollment agreement shall contain a payroll deduction
election setting forth the percentage of the Participant's Compensation that is
to be withheld by payroll deduction pursuant to the Plan.

                  (c) No payroll deductions shall be made (and no payroll
deduction elections shall be accepted) by the Company for Participants during
the first Exercise Period of the initial Offering Period prior to the time that
a registration statement with respect to the shares of Common Stock being
offered under the Plan has been filed with the Securities Exchange Commission on
Form S-8, and is effective. Once the Form S-8 is effective, a Participant may,
but need not, make a payroll deduction election with respect to the first
Exercise Period of the initial Offering Period by filing an enrollment agreement
containing the payroll deduction election with the Company. A Participant may
elect a lower level of participation than that provided in Section 5(a) hereof
with respect to the first Exercise Period of the initial Offering Period at that
time. If a payroll deduction is elected under this Section 5(c), payroll
deductions may commence as early as with the first pay period beginning after
the First Offering Date. Subject to the participation level specified in Section
5(a), the rate of payroll deduction during the first Exercise Period of the
initial Offering Period may exceed the

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maximum permitted rate under Section 6(a) hereof to make up for the payroll
deductions, if any, which would otherwise have been made prior to the
effectiveness of the Form S-8 with respect to the Plan. If a payroll deduction
election is made under this Section 5(c), payroll deductions shall continue at
the rate elected by the Participant under Section 6(a) for subsequent Exercise
Periods, unless the Participant makes a change permitted under Section 6(b), or
withdraws from the Plan under Section 11.

                  (d) For all Exercise Periods subsequent to the first Exercise
Period of the initial Offering Period, purchases generally must be made via
payroll deduction. Participants in the first Exercise Period of the initial
Offering Period who do not make a payroll deduction election pursuant to Section
5(c) must file an enrollment form containing a payroll deduction election with
respect to subsequent Exercise Periods with the Company prior to the
commencement of a subsequent Exercise Period (unless a later time for filing is
set by the Administrator for all Participants) in order to make further
purchases under the Plan. Payroll deductions for Participants required to file a
payroll deduction election under this Section 5(d) shall commence on the first
payroll of the subsequent Exercise Period and shall end on the last payroll in
the Offering Period, unless sooner terminated by the Participant as provided in
Section 11.

                  (e) Except as otherwise determined by the Committee under
rules applicable to all Participants, payroll deductions for Participants
enrolling in the Plan after the First Offering Date under Section 5(b) shall
commence on the first payroll following the Entry Date on which the Participant
files an enrollment agreement in accordance with Section 5(b) and shall end on
the last payroll in the Offering Period, unless sooner terminated by the
Participant as provided in Section 11.

                  (f) Unless a Participant elects otherwise prior to the last
Exercise Date of an Offering Period, including the last Exercise Date prior to
termination in the case of an Offering Period terminated by operation of the
rule contained in Section 4 hereof, such Participant shall be deemed (i) to have
elected to participate in the immediately succeeding Offering Period (and, for
purposes of such Offering Period such Participant's "Entry Date" shall be deemed
to be the first day of such Offering Period) and (ii) to have authorized the
same payroll deduction for such immediately succeeding Offering Period as was in
effect for such Participant immediately prior to the commencement of such
succeeding Offering Period.

         6. Plan Contributions.

                  (a) Except with respect to the first Exercise Period of the
initial Offering Period, and except as otherwise authorized by the Committee
pursuant to Section 6(d) below, all contributions to the Plan shall be made only
by payroll deductions. At the time a Participant files the enrollment agreement
with respect to an Offering Period, the Participant may authorize payroll
deductions to be made on each payroll date during the portion of the Offering
Period that he or she is a Participant in an amount not less than 1% and not
more than 15% of the Participant's Compensation on each payroll date during the
portion of the Offering Period that he or she is a Participant (or subsequent
Offering Periods as provided in Section 5(f)). The amount of payroll deductions
shall be a whole percentage (i.e., 1%, 2%, 3%, etc.) of the Participant's
Compensation.

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                  (b) A Participant may discontinue his or her participation in
the Plan as provided in Section 11, or may decrease or increase the rate or
amount of his or her payroll deductions during such Offering Period (within the
limitations of Section 5(c) and 6(a) above) by completing and filing with the
Company a new enrollment agreement authorizing a change in the rate or amount of
payroll deductions; provided, that a Participant may not change the rate or
amount of his or her payroll deductions more than once in any Exercise Period.
The change in rate or amount shall be effective with the first full payroll
period following ten (10) business days after the Company's receipt of the new
enrollment agreement.

                  (c) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
Participant's payroll deductions may be decreased to 0% at such time during any
Exercise Period which is scheduled to end during the current calendar year that
the aggregate of all payroll deductions accumulated with respect to such
Exercise Period and any other Exercise Period ending within the same calendar
year are equal to the product of $25,000 multiplied by the Applicable Percentage
for the calendar year. Payroll deductions shall recommence at the rate provided
in the Participant's enrollment agreement at the beginning of the following
Exercise Period which is scheduled to end in the following calendar year, unless
terminated by the Participant as provided in Section 11.

                  (d) Notwithstanding anything to the contrary in the foregoing,
but subject to the limitations set forth in Section 3(b), the Committee may
permit Participants to make after-tax contributions to the Plan at such times
and subject to such terms and conditions as the Committee may in its discretion
determine. All such additional contributions shall be made in a manner
consistent with the provisions of Section 423 of the Code or any successor
thereto, and shall be held in Participants' accounts and applied to the purchase
of shares of Common Stock pursuant to options granted under this Plan in the
same manner as payroll deductions contributed to the Plan as provided above.

                  (e) All Plan Contributions made for a Participant shall be
deposited in the Company's general corporate account and shall be credited to
the Participant's account under the Plan. No interest shall accrue or be
credited with respect to a Participant's Plan Contributions. All Plan
Contributions received or held by the Company may be used by the Company for any
corporate purpose, and the Company shall not be obligated to segregate or
otherwise set apart such Plan Contributions from any other corporate funds.

         7. Grant of Option.

                  (a) On a Participant's Entry Date, subject to the limitations
set forth in Sections 3(b) and 12(a), the Participant shall be granted an option
to purchase on each subsequent Exercise Date during the Offering Period in which
such Entry Date occurs (at the Exercise Price determined as provided in Section
8 below) up to a number of shares of Common Stock determined by dividing such
Participant's Plan Contributions accumulated prior to such Exercise Date and
retained in the Participant's account as of such Exercise Date by the Exercise
Price; provided, that the maximum number of shares a Participant may purchase
during any Exercise Period shall be One Thousand Five Hundred (1,500) shares.
The Fair Market Value of a share of Common Stock shall be determined as provided
in Section 7(b).

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                  (b) The Fair Market Value of a share of Common Stock on a
given date shall be determined by the Committee in its discretion; provided,
that if there is a public market for the Common Stock, the Fair Market Value per
share shall be either (i) the closing price of the Common Stock on such date
(or, in the event that the Common Stock is not traded on such date, on the
immediately preceding trading date), as reported by the National Association of
Securities Dealers Automated Quotation (Nasdaq) National Market System, (ii) if
such price is not reported, the average of the bid and asked prices for the
Common Stock on such date (or, in the event that the Common Stock is not traded
on such date, on the immediately preceding trading date), as reported by Nasdaq,
(iii) in the event the Common Stock is listed on a stock exchange, the closing
price of the Common Stock on such exchange on such date (or, in the event that
the Common Stock is not traded on such date, on the immediately preceding
trading date), as reported in The Wall Street Journal, or (iv) if no such
quotations are available for a date within a reasonable time prior to the
valuation date, the value of the Common Stock as determined by the Committee
using any reasonable means. For purposes of the First Offering Date, the Fair
Market Value of a share of Common Stock shall be the Price to Public as set
forth in the final prospectus filed by the Company with the Securities and
Exchange Commission pursuant to Rule 424 under the Securities Act of 1933, as
amended.

         8. Exercise Price. The Exercise Price per share of Common Stock offered
to each Participant in a given Offering Period shall be the lower of: (i) the
Applicable Percentage of the greater of (A) the Fair Market Value of a share of
Common Stock on the Offering Date or (B) the Fair Market Value of a share of
Common Stock on the Entry Date on which the Employee elects to become a
Participant within the Offering Period or (ii) the Applicable Percentage of the
Fair Market Value of a share of Common Stock on the Exercise Date. The
Applicable Percentage with respect to each Offering Period shall be 85%, unless
and until such Applicable Percentage is increased by the Committee, in its sole
discretion, provided that any such increase in the Applicable Percentage with
respect to a given Offering Period must be established not less than fifteen
(15) days prior to the Offering Date thereof.

         9. Exercise of Options. Unless the Participant withdraws from the
Plan as provided in Section 11, the Participant's option for the purchase of
shares will be exercised automatically on each Exercise Date, and the maximum
number of full shares subject to such option shall be purchased for the
Participant at the applicable Exercise Price with the accumulated Plan
Contributions then credited the Participant's account under the Plan. During a
Participant's lifetime, a Participant's option to purchase shares hereunder is
exercisable only by the Participant.

         10. Delivery. As promptly as practicable after each Exercise Date, the
Company shall arrange for the delivery to each Participant (or the Participant's
beneficiary), as appropriate, or to a custodial account for the benefit of each
Participant (or the Participant's beneficiary) as appropriate, of a certificate
representing the shares purchased upon exercise of such Participant's option.
Any amount remaining to the credit of a Participant's account after the purchase
of shares by such Participant on an Exercise Date, or which is insufficient to
purchase a full share of Common Stock, shall be carried over to the next
Exercise Period if the Participant continues to participate in the Plan or, if
the Participant does not continue to participate, shall be returned to the
Participant.

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         11. Withdrawal; Termination of Employment.

                  (a) A Participant may withdraw from the Plan at any time after
the Company's registration statement on Form S-8 with respect to the Plan is
effective by giving written notice to the Company. All of the Plan Contributions
credited to the Participant's account, if any, and not yet invested in Common
Stock will be paid to the Participant as soon as administratively practicable
after receipt of the Participant's notice of withdrawal, the Participant's
option to purchase shares pursuant to the Plan automatically will be terminated,
and no further payroll deductions, if any have been authorized, for the purchase
of shares will be made for the Participant's account. Payroll deductions will
not resume on behalf of a Participant who has withdrawn from the Plan (a "Former
Participant") unless the Former Participant enrolls in a subsequent Offering
Period in accordance with Section 5(b).

                  (b) Upon termination of the Participant's Continuous Status as
an Employee prior to any Exercise Date for any reason, including retirement or
death, the Plan Contributions credited to the Participant's account and not yet
invested in Common Stock will be returned to the Participant or, in the case of
death, to the Participant's beneficiary as determined pursuant to Section 14,
and the Participant's option to purchase shares under the Plan will
automatically terminate.

                  (c) A Participant's withdrawal from an Offering Period will
not have any effect upon the Participant's eligibility to participate in
succeeding Offering Periods or in any similar plan which may hereafter be
adopted by the Company.

         12. Stock.

                  (a) Subject to adjustment as provided in Section 17, the
maximum number of shares of the Company's Common Stock that shall be made
available for sale under the Plan shall be One Million (1,0000,000) shares, plus
an automatic annual increase on the first day of each of the Company's fiscal
years beginning in 2002 and ending in 2011 equal to the lesser of (i) Five
Hundred Thousand (500,000) shares, (ii) 1% of all shares of Common Stock
outstanding on the last day of the immediately preceding fiscal year, or (iii) a
lesser amount determined by the Board. Shares of Common Stock subject to the
Plan may be newly issued shares or shares reacquired in private transactions or
open market purchases. If and to the extent that any right to purchase reserved
shares shall not be exercised by any Participant for any reason or if such right
to purchase shall terminate as provided herein, shares that have not been so
purchased hereunder shall again become available for the purpose of the Plan
unless the Plan shall have been terminated, but all shares sold under the Plan,
regardless of source, shall be counted against the limitation set forth above.

                  (b) A Participant will have no interest or voting right in
shares covered by his option until such option has been exercised.

                  (c) Shares to be delivered to a Participant under the Plan
will be registered in the name of the Participant or in the name of the
Participant and his or her spouse, as requested by the Participant.

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         13. Administration.

                  (a) The Plan shall be administered by the Committee. The
Committee shall have the authority to interpret the Plan, to prescribe, amend
and rescind rules and regulations relating to the Plan, and to make all other
determinations necessary or advisable for the administration of the Plan. The
administration, interpretation, or application of the Plan by the Committee
shall be final, conclusive and binding upon all persons.

                  (b) Notwithstanding the provisions of Subsection (a) of this
Section 13, in the event that Rule 16b-3 promulgated under the Exchange Act or
any successor provision thereto ("Rule 16b-3") provides specific requirements
for the administrators of plans of this type, the Plan shall only be
administered by such body and in such a manner as shall comply with the
applicable requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no
discretion concerning decisions regarding the Plan shall be afforded to any
person that is not "disinterested" as that term is used in Rule 16b-3.

         14. Designation of Beneficiary.

                  (a) A Participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
Participant's account under the Plan in the event of the Participant's death
subsequent to an Exercise Date on which the Participant's option hereunder is
exercised but prior to delivery to the Participant of such shares and cash. In
addition, a Participant may file a written designation of a beneficiary who is
to receive any cash from the Participant's account under the Plan in the event
of the Participant's death prior to the exercise of the option.

                  (b) A Participant's beneficiary designation may be changed by
the Participant at any time by written notice. In the event of the death of a
Participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such Participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the Participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the Participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.

         15. Transferability. Neither Plan Contributions credited to a
Participant's account nor any rights to exercise any option or receive shares of
Common Stock under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will or the laws of descent and
distribution, or as provided in Section 14). Any attempted assignment, transfer,
pledge or other distribution shall be without effect, except that the Company
may treat such act as an election to withdraw funds in accordance with Section
11.

         16. Participant Accounts. Individual accounts will be maintained for
each Participant in the Plan to account for the balance of his Plan
Contributions and options issued and shares purchased under the Plan. Statements
of account will be given to Participants semi-annually in due course following
each Exercise Date, which statements will set forth the amounts of payroll
deductions, the per share purchase price, the number of shares purchased and the
remaining cash balance, if any.

         17. Adjustments Upon Changes in Capitalization; Corporate Transactions.

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                  (a) If the outstanding shares of Common Stock are increased or
decreased, or are changed into or are exchanged for a different number or kind
of shares, as a result of one or more reorganizations, restructurings,
recapitalizations, reclassifications, stock splits, reverse stock splits, stock
dividends or the like, upon authorization of the Committee, appropriate
adjustments shall be made in the number and/or kind of shares, and the per-share
option price thereof, which may be issued in the aggregate and to any
Participant upon exercise of options granted under the Plan.

                  (b) In the event of the proposed dissolution or liquidation of
the Company, the Offering Period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee. In the event of a proposed sale of all or substantially all of the
Company's assets, or the merger of the Company with or into another corporation
(each, a "Sale Transaction"), each option under the Plan shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Committee determines, in
the exercise of its sole discretion and in lieu of such assumption or
substitution, to shorten the Exercise Period then in progress by setting a new
Exercise Date (the "New Exercise Date"). If the Committee shortens the Exercise
Period then in progress in lieu of assumption or substitution in the event of a
Sale Transaction, the Committee shall notify each Participant in writing, at
least ten (10) days prior to the New Exercise Date, that the exercise date for
such Participant's option has been changed to the New Exercise Date and that
such Participant's option will be exercised automatically on the New Exercise
Date, unless prior to such date the Participant has withdrawn from the Plan as
provided in Section 11. For purposes of this Section 17(b), an option granted
under the Plan shall be deemed to have been assumed if, following the Sale
Transaction, the option confers the right to purchase, for each share of option
stock subject to the option immediately prior to the Sale Transaction, the
consideration (whether stock, cash or other securities or property) received in
the Sale Transaction by holders of Common Stock for each share of Common Stock
held on the effective date of the Sale Transaction (and if such holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares of Common Stock); provided, that
if the consideration received in the Sale Transaction was not solely common
stock of the successor corporation or its parent (as defined in Section 424(e)
of the Code), the Committee may, with the consent of the successor corporation
and the Participant, provide for the consideration to be received upon exercise
of the option to be solely common stock of the successor corporation or its
parent equal in fair market value to the per share consideration received by the
holders of Common Stock in the Sale Transaction.

                  (c) In all cases, the Committee shall have sole discretion to
exercise any of the powers and authority provided under this Section 17, and the
Committee's actions hereunder shall be final and binding on all Participants. No
fractional shares of stock shall be issued under the Plan pursuant to any
adjustment authorized under the provisions of this Section 17.

         18. Amendment of the Plan. The Board or the Committee may at any time,
or from time to time, amend the Plan in any respect; provided, that (i) no such
amendment may make any change in any option theretofore granted which adversely
affects the rights of any Participant and (ii) the Plan may not be amended in
any way that will cause rights issued under the Plan to fail to meet the
requirements for employee stock purchase plans as defined in Section 423 of the
Code or any successor thereto. To the extent necessary to comply with Rule 16b-3
under the Exchange Act,

                                       10
<PAGE>
Section 423 of the Code, or any other applicable law or regulation), the Company
shall obtain shareholder approval of any such amendment.

         19. Termination of the Plan.

         The Plan and all rights of Employees hereunder shall terminate on the
earliest of:

                  (a) the Exercise Date that Participants become entitled to
purchase a number of shares greater than the number of reserved shares remaining
available for purchase under the Plan;

                  (b) such date as is determined by the Board in its discretion;
or

                  (c) the last Exercise Date immediately preceding the tenth
(10th) anniversary of the Plan's effective date.

         In the event that the Plan terminates under circumstances described in
Section 19(a) above, reserved shares remaining as of the termination date shall
be sold to Participants on a pro rata basis.

         20. Notices. All notices or other communications by a Participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.

         21. Effective Date. Subject to adoption of the Plan by the Board, the
Plan shall become effective on the First Offering Date. The Board shall submit
the Plan to the shareholders of the Company for approval within twelve months
after the date the Plan is adopted by the Board.

         22. Conditions Upon Issuance of Shares.

                  (a) The Plan, the grant and exercise of options to purchase
shares under the Plan, and the Company's obligation to sell and deliver shares
upon the exercise of options to purchase shares shall be subject to compliance
with all applicable federal, state and foreign laws, rules and regulations and
the requirements of any stock exchange on which the shares may then be listed.

                  (b) The Company may make such provisions as it deems
appropriate for withholding by the Company pursuant to federal or state tax laws
of such amounts as the Company determines it is required to withhold in
connection with the purchase or sale by a Participant of any Common Stock
acquired pursuant to the Plan. The Company may require a Participant to satisfy
any relevant tax requirements before authorizing any issuance of Common Stock to
such Participant.

         23. Expenses of the Plan. All costs and expenses incurred in
administering the Plan shall be paid by the Company, except that any stamp
duties or transfer taxes applicable to participation in the Plan may be charged
to the account of such Participant by the Company.

         24. No Employment Rights. The Plan does not, directly or indirectly,
create any right for the benefit of any employee or class of employees to
purchase any shares under the Plan, or create in any employee or class of
employees any right with respect to continuation of employment by the

                                       11
<PAGE>
Company, and it shall not be deemed to interfere in any way with the Company's
right to terminate, or otherwise modify, an employee's employment at any time.

         25. Applicable Law. The laws of the State of California shall govern
all matter relating to this Plan except to the extent (if any) superseded by the
laws of the United States.

         26. Additional Restrictions of Rule 16b-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.

                                       12<PAGE>
                                                                   EXHIBIT 10.16

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

                           LOAN AND SECURITY AGREEMENT
                             SYNAPTICS INCORPORATED

================================================================================
<PAGE>
                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

1     ACCOUNTING AND OTHER TERMS...............................................4

2     LOAN AND TERMS OF PAYMENT................................................4
      2.1   Promise to Pay.....................................................4
      2.2   Overadvances.......................................................5
      2.3   Interest Rate, Payments............................................5
      2.4   Fees...............................................................5

3     CONDITIONS OF LOANS......................................................5
      3.1   Conditions Precedent to Initial Credit Extension...................5
      3.2   Conditions Precedent to all Credit Extensions......................6

4     CREATION OF SECURITY INTEREST............................................6
      4.1   Grant of Security Interest.........................................6
      4.2   Authorization of File..............................................6

5     REPRESENTATIONS AND WARRANTIES...........................................6
      5.1   Due Organization and Authorization.................................7
      5.2   Collateral.........................................................7
      5.3   Litigation.........................................................7
      5.4   No Material Adverse Change in Financial Statements.................7
      5.5   Solvency...........................................................7
      5.6   Regulatory Compliance..............................................8
      5.7   Subsidiaries.......................................................8
      5.8   Full Disclosure....................................................8

6     AFFIRMATIVE COVENANTS....................................................8
      6.1   Government Compliance..............................................8
      6.2   Financial Statements, Reports, Certificates........................8
      6.3   Inventory; Returns.................................................9
      6.4   Taxes..............................................................9
      6.5   Insurance..........................................................9
      6.6   Primary Accounts...................................................9
      6.7   Financial Covenants...............................................10
      6.8   Registration of Intellectual Property Rights......................10
      6.9   Further Assurances................................................10

7     NEGATIVE COVENANTS......................................................10
      7.1   Dispositions......................................................10
      7.2   Changes in Business, Ownership, Management or Locations of
            Collateral........................................................10
      7.3   Mergers or Acquisitions...........................................11
      7.4   Indebtedness......................................................11
      7.5   Encumbrance.......................................................11
      7.6   Distributions; Investments........................................11
      7.7   Transactions with Affiliates......................................11
      7.8   Subordinated Debt.................................................11
      7.9   Compliance........................................................11

8     EVENTS OF DEFAULT.......................................................12

                                       2
<PAGE>
      8.1   Payment Default...................................................12
      8.2   Covenant Default..................................................12
      8.3   Material Adverse Change...........................................12
      8.4   Attachment........................................................12
      8.5   Insolvency........................................................12
      8.6   Other Agreements..................................................12
      8.7   Judgments.........................................................13
      8.8   Misrepresentations................................................13

9     BANK'S RIGHTS AND REMEDIES..............................................13
      9.1   Rights and Remedies...............................................13
      9.2   Power of Attorney.................................................13
      9.3   Accounts Collection...............................................14
      9.4   Bank Expenses.....................................................14
      9.5   Bank's Liability for Collateral...................................14
      9.6   Remedies Cumulative...............................................14
      9.7   Demand Waiver.....................................................14

10    NOTICES.................................................................14

11    CHOICE OF LAW , VENUE AND JURY TRIAL WAIVER.............................15

12    GENERAL PROVISIONS......................................................15
      12.1  Successors and Assigns............................................15
      12.2  Indemnification...................................................15
      12.3  Time of Essence...................................................15
      12.4  Severability of Provision.........................................15
      12.5  Amendments in Writing, Integration................................15
      12.6  Counterparts......................................................16
      12.7  Survival..........................................................16
      12.8  Confidentiality...................................................16
      12.9  Attorneys' Fees, Costs and Expenses...............................16

13    DEFINITIONS.............................................................16
      13.1  Definitions.......................................................16

                                       3
<PAGE>
         THIS LOAN AND SECURITY AGREEMENT dated August 30, 2001, between SILICON
VALLEY BANK ("Bank"), whose address is 3003 Tasman Drive, Santa Clara,
California 95054 and SYNAPTICS INCORPORATED ("Borrower"), whose address is 2381
Bering Drive, San Jose, California 95131 provides the terms on which Bank will
lend to Borrower and Borrower will repay Bank. The parties agree as follows:

1        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.

2        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.

         (a) Bank will make Advances not exceeding (i) the lesser of (A) the
Committed Revolving Line or (B) the Borrowing Base, minus (ii) the amount of all
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit), minus (iii) the FX Reserve, and minus (iv) all amounts for services
utilized under the Cash Management Services Sublimit. Amounts borrowed under
this Section may be repaid and reborrowed during the term of this Agreement.

         (b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 12:00 p.m. Pacific time on the Business Day the Advance is to be
made. 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
reasonably believes is a Responsible Officer or designee. Borrower will
indemnify Bank for any loss Bank suffers due to such reliance.

         (c) The Committed Revolving Line terminates on the Revolving Maturity
Date, when all Advances are immediately payable.

2.1.2    LETTERS OF CREDIT SUBLIMIT.

         Bank will issue or have issued Letters of Credit for Borrower's account
not exceeding (i) the lesser of the Committed Revolving Line or the Borrowing
Base minus (ii) the outstanding principal balance of the Advances minus all
amounts for services utilized under the Cash Management Services Sublimit, minus
the FX Reserve; however, the face amount of outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit) may not exceed $4,200,000.
Each Letter of Credit will have an expiry date of no later than 180 days after
the Revolving Maturity Date, but Borrower's reimbursement obligation will be
secured by cash on terms acceptable to Bank at any time after the Revolving
Maturity Date if the term of this Agreement is not extended by Bank. Borrower
agrees to execute any further documentation in connection with the Letters of
Credit as Bank may reasonably request.

                                       4
<PAGE>
2.1.3    FOREIGN EXCHANGE SUBLIMIT.

         If there is availability under the Committed Revolving Line and the
Borrowing Base, then Borrower may enter in foreign exchange forward contracts
with the Bank under which Borrower commits to purchase from or sell to Bank a
set amount of foreign currency more than one business day after the contract
date (the "FX Forward Contract"). Bank will subtract 10% of each outstanding FX
Forward Contract from the foreign exchange sublimit which is a maximum of
$4,200,000 (the "FX Reserve"). The total FX Forward Contracts at any one time
may not exceed 10 times the amount of the FX Reserve. Bank may terminate the FX
Forward Contracts if an Event of Default occurs and is continuing.

2.1.4    CASH MANAGEMENT SERVICES SUBLIMIT.

         Borrower may use up to $4,200,000 for Bank's business credit card
services identified in various cash management services agreements related to
such services (the "Cash Management Services"). All amounts Bank pays for any
Cash Management Services will be treated as Advances under the Committed
Revolving Line.

2.2      OVERADVANCES.

         If Borrower's Obligations under Section 2.1.1, 2.1.2, 2.1.3 and 2.1.4
exceed the lesser of either (i) the Committed Revolving Line or (ii) the
Borrowing Base, Borrower must immediately pay Bank the excess.

2.3      INTEREST RATE, PAYMENTS.

         (a) Interest Rate. Advances accrue interest on the outstanding
principal balance at a per annum rate of 0.5 percentage points above the Prime
Rate. After an Event of Default and during the continuance of an Event of
Default, Obligations accrue interest at 5 percent above the 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.

         (b) Payments. Interest due on the Committed Revolving Line is payable
on the 14th of each month. Bank may debit any of Borrower's deposit accounts
including Account Number 1601512-70 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 12:00 noon 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:

         (a) Facility Fee. A fully earned, non-refundable Facility Fee of
$20,000 due on the Closing Date; and

         (b) 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.

3        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:

                                       5
<PAGE>
         (a) It receive the agreements, documents and fees it requires; and

         (b) Bank completes a Collateral audit with results satisfactory to
Bank.

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:

         (a) timely receipt of any Payment/Advance Form; and

         (b) 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 materially true.

4        CREATION OF SECURITY INTEREST

4.1      GRANT OF SECURITY INTEREST.

         Borrower 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. Except for Permitted
Liens, any security interest will be a first priority security interest in the
Collateral. After an Event of Default and continuance of an Event of Default,
Bank may place a "hold" on any deposit account pledged as Collateral.
Notwithstanding the foregoing, the security interest granted herein does not
extend to and the term "Collateral" does not include any license or contract
rights to the extent (i) the granting of a security interest in it would be
contrary to applicable law, or (ii) that such rights are nonassignable by their
terms (but only to the extent such prohibition is enforceable under applicable
law, including, without limitation, Section 9318(4) of the Code) without the
consent of the licensor or other party (but only to the extent such consent has
not been obtained). Except as disclosed on the Schedule, Borrower is not a party
to, nor is bound by, any license or other agreement that prohibits or otherwise
restricts Borrower from granting a security interest in Borrower's interest in
such license or agreement or any other property. Without prior notice to Bank,
Borrower shall not enter into, or become bound by, any such license or agreement
which is reasonably likely to have a material impact on Borrower's business or
financial condition. Borrower shall take such steps as Bank reasonably requests
to obtain the consent of, or waiver by, any person whose consent or waiver is
necessary for such licenses or contract rights to be deemed "Collateral" and for
Bank to have a security interest in it that might otherwise be restricted or
prohibited by law or by the terms of any such license or agreement, whether now
existing or entered into in the future. If this Agreement is terminated, Bank's
lien and security interest in the Collateral will continue until Borrower fully
satisfies its Obligations.

4.2      AUTHORIZATION OF FILE.

         Borrower authorizes Bank to file financing statements without notice to
Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in
order to perfect or protect Bank's interest in the Collateral.

5        REPRESENTATIONS AND WARRANTIES

         Borrower represents and warrants as follows:

                                       6
<PAGE>
5.1      DUE ORGANIZATION AND AUTHORIZATION.

         Borrower and each Subsidiary 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. Borrower has not
changed its state of formation or its organizational structure or type or any
organizational number (if any) assigned by its jurisdiction of formation.

         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. Borrower has no other deposit account, other than the deposit
accounts described in the Schedule. 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. The Collateral is not in the possession of any
third party bailee (such as at a warehouse). In the event that Borrower, after
the date hereof, intends to store or otherwise deliver the Collateral to such a
bailee, then Borrower will provide notice to the Bank. 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. Borrower is the sole owner of the Intellectual Property,
except for licenses granted to its customers in the ordinary course of business.
Each Patent is valid and enforceable and no part of the Intellectual Property
has been judged invalid or unenforceable, in whole or in part, and to the
Borrower's knowledge no claim has been made that any part of the Intellectual
Property violates the rights of any third party, except to the extent such claim
could not reasonably be expected to cause a Material Adverse Change.

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 and legal
counsel, 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; the Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.

                                       7
<PAGE>
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.

6        AFFIRMATIVE COVENANTS

         Borrower will do all of the following for so long as Bank has an
obligations 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.

         (a) Borrower will deliver to Bank: (i) as soon as available, but no
later than 30 days after the last day of each month, a company prepared
consolidated balance sheet and income statement 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 opinion
which is unqualified or otherwise consented to by Bank on the financial

                                       8
<PAGE>
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 $250,000 or more; (iv) budgets, sales
projections, operating plans or other financial information Bank reasonably
requests; and (v) prompt notice of any material change in the composition of the
Intellectual Property, including any subsequent ownership right of Borrower in
or to any Copyright, Patent or Trademark not shown in any intellectual property
security agreement between Borrower and Bank or knowledge of an event that
materially adversely affects the value of the Intellectual Property.

         (b) Within 30 days after the last day of each month, 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 by due date,
including payment terms, and accounts payable by due date, including payment
terms.

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

         (d) Allow Bank to audit Borrower's Collateral at Borrower's expense,
provided each audit shall not exceed $1,500. Such audits will be conducted no
more often than every year 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. 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 and will deliver
to Bank, on demand, appropriate certificates attesting to the payment except
those being contested in good faith with adequate reserves under GAAP.

6.5      INSURANCE.

         Borrower will keep its business and the Collateral insured for risks
and in amounts, 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. If no Event of Default has occurred and is continuing,
proceeds payable under any casualty policy will, at Borrower's option, be
payable to Borrower to replace the property subject to the claim, provided that
any such replacement property shall be deemed Collateral in which Bank has been
granted a first priority security interest. If an Event of Default has occurred
and is continuing, then, at Bank's option, proceeds payable under any policy
will be payable to Bank on account of the Obligations.

6.6      PRIMARY ACCOUNTS.

         Borrower will maintain its primary banking relationship with Bank,
which relationship shall include Borrower maintaining account balances in any
accounts at or through Bank representing at least 50% of all account balances of
Borrower at any financial institution.

                                       9
<PAGE>
6.7      FINANCIAL COVENANTS.

         Borrower will maintain as of the last day of each month:

                  (i)      QUICK RATIO. A ratio of Quick Assets to Current
Liabilities of at least 1.25 to 1.00.

                  (ii)     PROFITABILITY. Borrower will have a minimum net
profit on a three month rolling average of $1 for each month.

6.8      REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.

         Borrower will register with the United States Patent and Trademark
Office or the United States Copyright Office its Intellectual Property which the
Board of Directors of Borrower deems, in good faith, appropriate for the
development of Borrower's business and additional Intellectual Property rights
developed or acquired including revisions or additions with any product before
the sale or licensing of the product to any third party.

         Borrower will (i) protect, defend and maintain the validity and
enforceability of the Intellectual Property and promptly advise Bank in writing
of material infringements and (ii) allow any Intellectual Property to be
abandoned, forfeited or dedicated to the public with notification to Bank.

6.9      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.

7        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 and 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 licenses and similar arrangements for the use of the
property of Borrower or its Subsidiaries in the ordinary course of business; or
(iii) of worn-out or obsolete Equipment; and (iv) other Transfers which in the
aggregate do not exceed $250,000 in any fiscal year.

7.2      CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR LOCATIONS OF COLLATERAL.

         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 of greater than
25% of Borrower's Board of Directors (other than by the sale of Borrower's
equity securities in a public offering or to venture capital investors so long
as Borrower identifies the venture capital investors prior to the closing of the
investment). Borrower will not, without at least 30 days prior written notice,
relocate its chief executive office, change its state of formation (including
reincorporation), change its organizational number or name or add any new
offices or business locations (such as warehouses) in which Borrower maintains
or stores over $5,000 in Collateral.

                                       10
<PAGE>
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; (ii) such transactions do not in the aggregate exceed $ 10,000,000;
or (iii) 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 property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, 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 except for repurchases of stock
from former employees or directors of Borrower under the terms of applicable
repurchase agreements in an aggregate amount not to exceed $250,000 in the
aggregate in any fiscal year, provided that no Event of Default has occurred, is
continuing or would exist after giving effect to the repurchases.

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, except under the
terms of the Subordinated Debt, or amend any provision in any document relating
to the 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.

                                       11
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8        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 5 days after
their due date. 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 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 20
days after it occurs, or if the default cannot be cured within 20 days or cannot
be cured after Borrower's attempts within 20 day period, and the default may be
cured within a reasonable time, then Borrower has an additional period (of not
more than 45 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 45 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 $250,000 or that could cause a Material Adverse Change;

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<PAGE>
8.7      JUDGMENTS.

         If a money judgment(s) in the aggregate of at least $250,000 is
rendered against Borrower and is unsatisfied and unstayed for 30 days (but no
Credit Extensions will be made before the judgment is stayed or satisfied); or

8.8      MISREPRESENTATIONS.

         In the Bank's reasonable judgement, 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
communication delivered to Bank or to induce Bank to enter this Agreement or any
Loan Document.

9        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:

         (a) 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);

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

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

         (d) 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;

         (e) 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;

         (f) 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

         (g) Dispose of the Collateral according to the Code.

9.2      POWER OF ATTORNEY.

         Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's name
on any checks or other forms of payment or

                                       13
<PAGE>
security; (ii) sign Borrower'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 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 permits. Bank may exercise the power of
attorney to sign Borrower'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 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 money of Bank's security interest in the funds and verify
the amount of the Account. Borrower 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 Section 9-207 of
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 bears 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, by 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 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 is
liable.

10       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. Bank will use its good faith efforts to make sure notices are
directed to the attention of

                                       14
<PAGE>
the Chief Executive Officer and Chief Financial Officer. A party may change its
notice address by giving the other party written notice.

11       CHOICE OF LAW , VENUE AND JURY TRIAL WAIVER

         California law governs the Loan Documents without regard to principles
of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in Santa Clara County, California.

BORROWER AND BANK 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.

12       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 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 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.

                                       15
<PAGE>
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 present or prospective business relations 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 written 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 in 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 through no fault of Bank; or (b) is
disclosed to Bank by a third party, if Bank does reasonably 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.

13       DEFINITIONS

13.1     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, as such definition may be amended from time to time according to the
Code.

         "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.

                                       16
<PAGE>
         "BANK EXPENSES" are all 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 75% of Eligible Accounts as determined by Bank from
Borrower's most recent Borrowing Base Certificate; provided, however, that Bank
may lower the percentage of the Borrowing Base after performing an audit of
Borrower's Collateral.

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

         "CASH MANAGEMENT SERVICES" are defined in Section 2.1.4.

         "CLOSING DATE" is the date of this Agreement.

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

         "COLLATERAL" is the property described on Exhibit A.

         "COMMITTED REVOLVING LINE" is $4,200,000 outstanding at any one time.

         "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, Letter of Credit, Exchange
Contract, or any other extension of credit by Bank for Borrower's benefit.

         "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 reasonably change eligibility standards by giving Borrower 30 days
prior written notice. Unless Bank agrees otherwise in writing, Eligible Accounts
will not include:

         (a) Accounts that the account debtor has not paid within 90 days (105
         days for Accounts from Quanta) of invoice date;

                                       17
<PAGE>
         (b) Accounts for an account debtor, 50% or more of whose Accounts have
         not been paid within 90 days of invoice date;

         (c)  Credit balances over 90 days from invoice date;

         (d) Accounts for an account debtor, including Affiliates, whose total
         obligations to Borrower exceed 25% of all Accounts, except for Quanta
         for which the percentage may be 45% for the amounts that exceed that
         percentage, unless the Bank approves in writing.

         (e) Accounts for which the account debtor does not have its principal
         place of business in the United States; except Accounts owing from
         Samsung, LG Electronics, Compal, Acer, Quanta, Inventec, Panasonic,
         Arima and Foxconn and those pre-approved by Bank on a case by case
         basis

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

         (g) 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);

         (h) 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;

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

         (j) 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;

         (k) Accounts for which Bank reasonably determines after inquiry and
         consultation with Borrower 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.

         "FX FORWARD CONTRACT" is defined in Section 2.1.3.

         "FX RESERVE " is defined in Section 2.1.3.

         "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.

                                       18
<PAGE>
         "INTELLECTUAL PROPERTY" is all of Borrower's:

         (a) 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;

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

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

         (d) 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.

         "LETTER OF CREDIT" is defined in Section 2.1.2.

         "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 defined 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:

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

                                       19
<PAGE>
         (b) Indebtedness existing on the Closing Date and shown on the
Schedule;

         (c) Subordinated Debt;

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

         (e) Indebtedness secured by Permitted Liens;

         (f) Indebtedness of Borrower to any Subsidiary and Contingent
Obligations of any Subsidiary with respect to obligations of Borrower (provided
that the primary obligations are not prohibited hereby), and Indebtedness of any
Subsidiary to any other Subsidiary and Contingent Obligations of any Subsidiary
with respect to obligations of any other Subsidiary (provided that the primary
obligations are not prohibited hereby);

         (g) Other Indebtedness not otherwise permitted by Section 7.4 not
exceeding Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate
outstanding at any time; and

         (h) Extensions, refinancings, modifications, amendments and
restatements of any items of Permitted Indebtedness (a) through (f) above,
provided that the principal amount thereof is not increased or the terms thereof
are not modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be.

         "PERMITTED INVESTMENTS" are:

         (a) Investments shown on the Schedule and existing on the Closing Date;
and

         (b) (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, and (iv) any
Investments permitted by Borrower's investment policy, as amended from time to
time, provided that such investment policy (and any such amendment thereto) has
been approved by Bank;

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

         (d) Investments accepted in connection with Transfers permitted by
Section 7.1;

         (e) Investments of Subsidiaries in or to other Subsidiaries or Borrower
and Investments by Borrower in Subsidiaries not to exceed $250,000 in the
aggregate in any fiscal year

         (f) Investments consisting of (i) travel advances and employee
relocation loans and other employee loans and advances in the ordinary course of
business, and (ii) loans to employees, officers or directors relating to the
purchase of equity securities of Borrower or its Subsidiaries pursuant to
employee stock purchase plans or agreements approved by Borrower's Board of
Directors

         (g) Investments (including debt obligations) received in connection
with the bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with, customers or
suppliers arising in the ordinary course of business;

         (h) Investments consisting of notes receivable of, or prepaid royalties
and other credit extensions, to customers and suppliers who are not Affiliates,
in the ordinary course of business; provided that this paragraph (h) shall not
apply to Investments of Borrower in any Subsidiary; and

                                       20
<PAGE>
         (i) Joint ventures or strategic alliances in the ordinary course of
Borrower's business consisting of the licensing of technology, the development
of technology or the providing of technical support, provided that any cash
investments by Borrower do not exceed $250,000 in the aggregate in any fiscal
year;

         "PERMITTED LIENS" are:

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

         (b) 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;

         (c) 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;

         (d) 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;

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

         (f) 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.

         (g) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 8.4 or 8.7;

         (h) Liens in favor of other financial institutions arising in
connection with Borrower's deposit accounts held at such institutions, provided
that Bank has a perfected security interest in the amounts held in such deposit
accounts; and

         (i) Other Liens not described above arising in the ordinary course of
business and not having or not reasonably likely to have a material adverse
effect on Borrower and its Subsidiaries taken as a whole.

         "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 Bank's most recently announced "prime rate," even if it
is not Bank's lowest rate.

         "QUICK ASSETS" is, on any date, the Borrower's consolidated,
unrestricted cash, cash equivalents, net billed accounts receivable and
investments with maturities of fewer than 12 months determined according to
GAAP.

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

         "REVOLVING MATURITY DATE" is August 29, 2002.

         "SCHEDULE" is any attached schedule of exceptions.

                                       21
<PAGE>
         "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, and current portion Subordinated Debt allowed to be paid, but
excluding all other Subordinated Debt.

         "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:

SYNAPTICS INCORPORATED

By: /s/ R. J. Knittel
    -------------------------------------------------

Title: VP & CFO
       ----------------------------------------------

BANK:

SILICON VALLEY BANK

By: /s/ Amy L. Drake
    -------------------------------------------------

Title: VP
       ----------------------------------------------

                                       22
<PAGE>
                                    EXHIBIT A

         The Collateral consists of all of Borrower's right, title and interest
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 (as such definitions may be
amended from time to time according to the Code), 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
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower (as such definitions may be amended from time
to time according to the Code) whether or not earned by performance, and any and
all credit insurance, insurance (including refund) claims and proceeds,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by Borrower;

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

         All copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any of
the foregoing; and

         All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.

                                       23
<PAGE>

                                    EXHIBIT B

<TABLE>
<S>                                                           <C>
LOAN PAYMENT/ADVANCE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 12:00 P.S.T.
FAX TO:                                                                         DATE: _____________________________
____________________________________________________________________________________________________________________________________
[ ] LOAN PAYMENT:

                                                      SYNAPTICS INCORPORATED

    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 #_________________________________________
                           (Loan Account #)                                          (Deposit Account #)

    Amount of Advance $______________________________

    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 12:00 pm, 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).
</TABLE>
<PAGE>
<TABLE>
<S>                                                                    <C>
   Authorized Signature: _____________________________________         2nd Signature (If Required): ________________________________

   Print Name/Title:__________________________________________         Print Name/Title:____________________________________________

   Telephone # _______________________________________________         Telephone # _________________________________________________
</TABLE>

                                       2
<PAGE>
                     Schedule to Loan and Security Agreement

The exact correct corporate name of Borrower is (attach a copy of the formation
documents, e.g., articles, partnership agreement): _____________________________

Borrower's State of formation: _________________________________

Borrower has operated under only the following other names (if none, so state):
________________________________________________________________________

All other address at which the Borrower does business are as follows (attach
additional sheets if necessary and include all warehouse addresses):
_____________________________________________________________________________

Borrower has deposit accounts and/or investment accounts located only at the
following institutions:

_____________________________________________________________________________
List Acct. Numbers:__________________________________________________________

Liens existing on the Closing Date and disclosed to and accepted by Bank in
writing:
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________

Investments existing on the Closing Date and disclosed to and accepted by Bank
in writing:
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________

SUBORDINATED DEBT:

Indebtedness on the Closing Date and disclosed to and consented to by Bank in
writing:
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________

The following is a list of the Borrower's copyrights (including copyrights of
software) which are registered with the United States Copyright Office. (Please
include name of the copyright and registration number ):
_____________________________________________________________________________
_____________________________________________________________________________

The following is a list of all software which the Borrower sells, distributes or
licenses to others, which is not registered with the United States Copyright
Office. (Please include versions which are not registered:
_____________________________________________________________________________

The following is a list of all of the Borrower's patents which are registered
with the United States Patent Office. (Please include name of the patent and
registration number .):
_____________________________________________________________________________
_____________________________________________________________________________

The following is a list of all of the Borrower's patents which are pending with
the United States Patent Office. (Please include name of the patent .):
______________________________________________________________

                                       3
<PAGE>
The following is a list of all of the Borrower's registered trademarks. (Please
include name of the trademark and a copy of the registration.):
_____________________________________________________________________________

Borrower is not currently aware of any litigation which would have a material
adverse effect on the Borrower's financial condition, except the following
(attach additional comments, if needed):
_____________________________________________________________________________
_____________________________________________________________________________

Tax ID Number ______________________________________________

Organizational Number, if any:______________________________

                                       4
<PAGE>
                                    EXHIBIT C
                           BORROWING BASE CERTIFICATE
________________________________________________________________________________

Borrower:  SYNAPTICS INCORPORATED              Bank:       Silicon Valley Bank
                                                           3003 Tasman Drive
                                                           Santa Clara, CA 95054
Commitment Amount:  $4,200,000
________________________________________________________________________________

<TABLE>
<S>                                                                       <C>                  <C>
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 90 days due**                                     $_______________
5.         Balance of 50% over 90 day accounts                            $_______________
6.         Credit balances over 90 days                                   $_______________
7.         Concentration Limits***                                        $_______________
8.         Foreign Accounts*                                              $_______________
9.         Governmental Accounts                                          $_______________
10.        Contra Accounts                                                $
11.        Promotion or Demo Accounts                                     $_______________
12.        Intercompany/Employee Accounts                                 $_______________
13.        Other (please explain on reverse)                              $_______________
14.        TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS                                                $_______________
15.        Eligible Accounts (#3 minus #14)                                                    $_______________
16.        LOAN VALUE OF ACCOUNTS (75% of #15)                                                 $_______________
</TABLE>

* The borrowing base includes Accounts owing from Samsung, LG Electronics,
Compal, Acer, Quanta, Inventec, Panasonic, Arima, Foxconn and those pre-approved
by Bank on a case by case basis.
** 105 days for Quanta
*** 45% for Quanta

<TABLE>
<S>                                                                       <C>                  <C>
BALANCES
17.        Maximum Loan Amount                                            $_______________
18.        Total Funds Available [Lesser of #17 or #16]                                        $_______________
19.        Present balance owing on Line of Credit                        $_______________
20.        Outstanding under Sublimits (LC or FX or CM)                   $_______________
21.        RESERVE POSITION (#18 minus #19 and #20)                                            $_______________
</TABLE>

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 Silicon Valley Bank.

COMMENTS:
                                                       _________________________

                                                             BANK USE ONLY

                                                       Rec'd By: ___________
                                                                 Auth. Signer
                                                       Date: ______________

                                                       Verified: ___________
                                                                 Auth. Signer
                                                       Date: ______________
                                                       ____________________

                                       5
<PAGE>
SYNAPTICS INCORPORATED

By: _________________________________________________
         Authorized Signer

                                       6
<PAGE>

                                    EXHIBIT D
                             COMPLIANCE CERTIFICATE

TO:               SILICON VALLEY BANK
                  3003 Tasman Drive
                  Santa Clara, CA 95054

FROM:             SYNAPTICS INCORPORATED

         The undersigned authorized officer on behalf of SYNAPTICS INCORPORATED
("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.

<TABLE>
<CAPTION>
REPORTING COVENANT                            REQUIRED                                        COMPLIES
------------------                            --------                                        --------
<S>                                           <C>                                             <C>
Monthly financial statements                  Monthly within 30 days                          Yes   No
and Compliance Certificate
Annual (Audited)                              FYE within 120 days                             Yes   No
A/R & A/P Agings (by invoice date)            Monthly within 30 days                          Yes   No
Borrowing Base Certificate                    Monthly within 30 days                          Yes   No
</TABLE>

<TABLE>
<CAPTION>
FINANCIAL COVENANT                            REQUIRED                  ACTUAL                COMPLIES
------------------                            --------                  ------                --------
<S>                                           <C>                       <C>                   <C>
Maintain on a Monthly Basis:
  Minimum Quick Ratio                         1.25:1.00                 _____:1.00            Yes   No

Profitability:                                *$1.00                    $__________           Yes   No
</TABLE>

*on a three month rolling average

Have there been updates to Borrower's intellectual property, if appropriate?
 Yes / No
<PAGE>
<TABLE>
<S>                                                     <C>
                                                        ______________________________________________
COMMENTS REGARDING EXCEPTIONS:  See Attached.                           BANK USE ONLY

                                                        Received by: _________________________________
Sincerely,                                                                AUTHORIZED SIGNER

                                                        Date: ________________________________________
SYNAPTICS INCORPORATED

                                                        Verified: ____________________________________
_____________________________________________                             AUTHORIZED SIGNER
SIGNATURE

                                                        Date: ________________________________________
_____________________________________________
TITLE
                                                        Compliance Status:                    Yes   No
                                                        ______________________________________________
_____________________________________________
DATE
</TABLE>

                                       2
<PAGE>
[SILICON VALLEY BANK LOGO]

                               SILICON VALLEY BANK

                       PRO FORMA INVOICE FOR LOAN CHARGES

<TABLE>
<S>                        <C>                                        <C>
BORROWER:                  SYNAPTICS INCORPORATED

LOAN OFFICER:              DIANE THOMPSON

DATE:                      AUGUST 15, 2001

                           REVOLVING LOAN FEE                         $20,000.00
                           CREDIT REPORT                                   35.00
                           UCC SEARCH FEE                                 200.00
                           UCC FILING FEE                                  75.00
                           INTELLECTUAL PROPERTY FILING FEES              550.00
                           DOCUMENTATION FEE                            1,500.00

                           TOTAL FEE DUE                              $22,360.00
                                                                      ==========
</TABLE>

PLEASE INDICATE THE METHOD OF PAYMENT:

         [ ] A CHECK FOR THE TOTAL AMOUNT IS ATTACHED.

         [ ] DEBIT DDA # __________________ FOR THE TOTAL AMOUNT.

         [X] LOAN PROCEEDS

BORROWER:

BY:/S/ R. J. KNITTEL, VP & CFO
   -----------------------------------------
     (AUTHORIZED SIGNER)

/S/ AMY L. DRAKE, 9/4/01
--------------------------------------------
SILICON VALLEY BANK                  (DATE)
ACCOUNT OFFICER'S SIGNATURE
<PAGE>

                    INTELLECTUAL PROPERTY SECURITY AGREEMENT

         This Intellectual Property Security Agreement is entered into as of
August 30, 2001 by and between SILICON VALLEY BANK ("Bank") and SYNAPTICS
INCORPORATED ("Grantor").

                                    RECITALS

         A.       Bank has agreed to make certain advances of money and to
extend certain financial accommodation to Grantor (the "Loans") in the amounts
and manner set forth in that certain Loan and Security Agreement by and between
Bank and Grantor dated August 30, 2001 (as the same may be amended, modified or
supplemented from time to time, the "Loan Agreement"; capitalized terms used
herein are used as defined in the Loan Agreement). Bank is willing to make the
Loans to Grantor, but only upon the condition, among others, that Grantor shall
grant to Bank a security interest in certain Copyrights, Trademarks, Patents,
and Mask Works to secure the obligations of Grantor under the Loan Agreement.

         B.       Pursuant to the terms of the Loan Agreement, Grantor has
granted to Bank a security interest in all of Grantor's right, title and
interest, whether presently existing or hereafter acquired, in, to and under all
of the Collateral.

         NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, and intending to be legally bound, as collateral
security for the prompt and complete payment when due of its obligations under
the Loan Agreement, Grantor hereby represents, warrants, covenants and agrees as
follows:

                                    AGREEMENT

         To secure its obligations under the Loan Agreement, Grantor grants and
pledges to Bank a security interest in all of Grantor's right, title and
interest in, to and under its Intellectual Property Collateral (including
without limitation those Copyrights, Patents, Trademarks and Mask Works listed
on Schedules A, B, C, and D hereto), and including without limitation all
proceeds thereof (such as, by way of example but not by way of limitation,
license royalties and proceeds of infringement suits), the right to sue for
past, present and future infringements, all rights corresponding thereto
throughout the world and all re-issues, divisions continuations, renewals,
extensions and continuations-in-part thereof.

         This security interest is granted in conjunction with the security
interest granted to Bank under the Loan Agreement. The rights and remedies of
Bank with respect to the security interest granted hereby are in addition to
those set forth in the Loan Agreement and the other Loan Documents, and those
which are now or hereafter available to Bank as a matter of law or equity. Each
right, power and remedy of Bank provided for herein or in the Loan Agreement or
any of the Loan Documents, or now or hereafter existing at law or in equity
shall be cumulative and concurrent and shall be in addition to every right,
power or remedy provided for herein and the exercise by Bank of any one or more
of the rights, powers or remedies provided for in this Intellectual Property
Security Agreement, the Loan Agreement or any of the other Loan Documents, or
now or hereafter existing at law or in equity, shall not preclude the
simultaneous or later exercise by any Bank designee, including Bank, of any or
all other rights, powers or remedies.

         IN WITNESS WHEREOF, the parties have cause this Intellectual Property
Security Agreement to be duly executed by its officers thereunto duly authorized
as of the first date written above.
<PAGE>
                                        GRANTOR:

Address of Grantor:                     SYNAPTICS INCORPORATED

2381 Bering Drive                       By:  R. J. Knittel
-----------------------------------          -----------------------------------
San Jose, CA 95131
-----------------------------------
                                        Title:  VP & CFO
                                                --------------------------------
Attn: CFO
      -----------------------------

                                        BANK:

Address of Bank:                        SILICON VALLEY BANK

3003 Tasman Drive                       By:  /s/ Amy L. Drake
                                             -----------------------------------
Santa Clara, CA 95054-1191
                                        Title:  VP
                                                --------------------------------
Attn:
      -----------------------------

                                       2
<PAGE>
                                    EXHIBIT A

                                   Copyrights

Description                                   Registration/        Registration/
-----------                                   Application          Application
                                              Number               Date
                                              ------               ----
<PAGE>
                                    EXHIBIT B

                                     Patents

Description                                   Registration/        Registration/
-----------                                   Application          Application
                                              Number               Date
                                              ------               ----
<PAGE>
                                    EXHIBIT C

                                   Trademarks

Description                                   Registration/        Registration/
-----------                                   Application          Application
                                              Number               Date
                                              ------               ----
<PAGE>
                                    EXHIBIT D

                                   Mask Works

Description                                   Registration/        Registration/
-----------                                   Application          Application
                                              Number               Date
                                              ------               ----
<PAGE>
                         CORPORATE BORROWING RESOLUTION

BORROWER:   SYNAPTICS INCORPORATED        BANK:   SILICON VALLEY BANK
            2381 BERING DRIVE                     3003 TASMAN DRIVE
            SAN JOSE, CA 95131                    SANTA CLARA, CA 95054-1191

I, THE SECRETARY OR ASSISTANT SECRETARY OF SYNAPTICS INCORPORATED ("BORROWER"),
CERTIFY that Borrower is a corporation existing under the laws of the State of
California.

I certify that at a meeting of Borrower's Directors (or by other authorized
corporate action) duly held the following resolutions were adopted.

It is resolved that ANY ONE of the following officers of Borrower, whose name,
title and signature is below:

<TABLE>
<CAPTION>
                NAMES                                 POSITIONS                      ACTUAL SIGNATURES
                -----                                 ---------                      -----------------
<S>                                     <C>                                    <C>
Francis Lee                             President & CEO                        /s/ Francis Lee
--------------------------------------  -------------------------------------  ------------------------------
Russell J. Knittel                      VP & CFO                               /s/ R. J. Knittel
--------------------------------------  -------------------------------------  ------------------------------

--------------------------------------  -------------------------------------  ------------------------------

--------------------------------------  -------------------------------------  ------------------------------
</TABLE>

may act for Borrower and:

         BORROW MONEY. Borrow money from Silicon Valley Bank ("Bank").

         EXECUTE LOAN DOCUMENTS. Execute any loan documents Bank requires.

         GRANT SECURITY. Grant Bank a security interest in any of Borrower's
         assets.

         NEGOTIATE ITEMS. Negotiate or discount all drafts, trade acceptances,
         promissory notes, or other indebtedness in which Borrower has an
         interest and receive cash or otherwise use the proceeds.

         LETTERS OF CREDIT. Apply for letters of credit from Bank.

         FOREIGN EXCHANGE CONTRACTS. Execute spot or forward foreign exchange
         contracts.

         FURTHER ACTS. Designate other individuals to request advances, pay fees
         and costs and execute other documents or agreements (including
         documents or agreement that waive Borrowers right to a jury trial) they
         think necessary to effectuate these Resolutions.

Further resolved that all acts authorized by these Resolutions and performed
before they were adopted are ratified. These Resolutions remain in effect and
Bank may rely on them until Bank receives written notice of their revocation.

I certify that the persons listed above are Borrower's officers with the titles
and signatures shown following their names and that these resolutions have not
been modified are currently effective.
<PAGE>
CERTIFIED TO AND ATTESTED BY:

X /s/ R. J. Knittel
  ------------------------------------------------------
  *Secretary or Assistant Secretary

X /s/ Federico Faggin, Chairman of the Board
  ------------------------------------------------------
*NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, this resolution should
also be signed by a second Officer or Director of Borrower.

                                       2

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