Document:

QuickLinks
 -- Click here to rapidly navigate through this document

 
 

Exhibit 10.22    
  

LOAN AND SECURITY AGREEMENT  

  

between  

SILICON VALLEY BANK  

and  

QUICKLOGIC CORPORATION  

  

June 28, 2002  

$12,000,000  

 
 TABLE OF CONTENTS  

	 
	 	 
	 	Page

	1.	 	ACCOUNTING AND OTHER TERMS	 	1
	

2.	
 	

LOAN AND TERMS OF PAYMENT	
 	

1
	

3.	
 	

CONDITIONS OF LOANS	
 	

3
	

4.	
 	

CREATION OF SECURITY INTEREST	
 	

3
	

5.	
 	

REPRESENTATIONS AND WARRANTIES	
 	

4
	

6.	
 	

AFFIRMATIVE COVENANTS	
 	

5
	

7.	
 	

NEGATIVE COVENANTS	
 	

7
	

8.	
 	

EVENTS OF DEFAULT	
 	

9
	

9.	
 	

BANK'S RIGHTS AND REMEDIES	
 	

10
	

10.	
 	

NOTICES	
 	

11
	

11.	
 	

CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER	
 	

11
	

12.	
 	

GENERAL PROVISIONS	
 	

12
	

13.	
 	

DEFINITIONS	
 	

13

i

   This LOAN AND SECURITY AGREEMENT dated June 28, 2002, between SILICON VALLEY BANK ("Bank"), whose address is 3003 Tasman Drive, Santa Clara,
California 95054 and QUICKLOGIC CORPORATION, a California corporation ("Borrower"), whose address is 1277 New Orleans Drive, Sunnyvale, CA 94089-1138, 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    Credit Extensions.

        Borrower
will 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 the Committed Revolving Line minus (i) the Cash Management Services Sublimit, minus (ii) the amount of all
outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit), and minus (iii) the FX Reserve. 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 3:00 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 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 Committed Revolving Line, minus (ii) the outstanding principal balance of the
Advances minus the Cash Management Sublimit, minus the FX Reserve; however, the face amount of outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit) may not exceed
$500,000. 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. 

2.1.3    Foreign Exchange Sublimit.

        If
there is availability under the Committed Revolving Line, 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 

1

 

foreign exchange sublimit which is a maximum of $500,000 (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. 

2.1.4    Cash Management Services Sublimit.

        Borrower
may use up to $500,000 for Bank's Cash Management Services, which may include merchant services, direct deposit of payroll, business credit card, and check cashing services
identified in various cash management services agreements related to such services (the "Cash Management Services"). Such aggregate credit limit shall reduce the amount otherwise available to be
borrowed under the Committed Revolving Line. All amounts Bank pays for any Cash Management Services will be treated as Advances under the Committed Revolving Line. 

2.1.5    Equipment Soft Cost Advances.

        (a)  Through
December 31, 2002 (the "Equipment Soft Cost Availability End Date"), Bank will make advances ("Equipment Soft Cost Advance" and, collectively, "Equipment
Soft Cost Advances") not exceeding forty percent (40%) of the Committed Equipment Line. The Equipment Soft Cost Advances may only be used to finance the acquisition of software, third party licensed
intellectual property and mask sets and in any event shall exclude taxes, shipping, warranty charges, freight discounts and installation expense ("Soft Cost Equipment"). Through March 31, 2003
(the "Equipment Hardware Availability End Date"), Bank will make advances ("Equipment Hardware Advance" and, collectively, "Equipment Hardware Advances"; together with Equipment Soft Cost Advances,
"Equipment Advances") not exceeding the Committed Equipment Line (reduced by the amount of any Equipment Soft Cost Advances). The Equipment Hardware Advances may only be used to finance the
acquisition of hardware and shall exclude taxes, shipping, warranty charges, freight discounts and installation expense ("Hardware Equipment"). Soft Cost Equipment and Hardware Equipment shall be
limited to that purchased on or after 90 days before the Closing Date or within 90 days of the date of the requested Equipment Soft Cost Advance. Each Equipment Advance must be for a
minimum of $50,000 and only one Equipment Advance per month shall be available. 

        (b)  Interest
accrues from the date of each Equipment Advance at the rate in Section 2.3(a) and is payable monthly until the Equipment Soft Cost Availability End Date
or Equipment Hardware Availability End Date, as applicable, occurs. Each Equipment Soft Cost Advance is payable in 30 equal monthly installments of principal, plus accrued interest, beginning on the
first day of each month following the date of the Equipment Soft Cost Advance. Each Equipment Hardware Advance is payable in 36 equal monthly installments of principal, plus accrued interest,
beginning on the first day of each month following the date of the Equipment Hardware Advance. Equipment Advances when repaid may not be reborrowed. 

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

2.2    Overadvances.

        If
Borrower's Obligations under Section 2.1.1, 2.1.2, 2.1.3 exceed the Committed Revolving Line, Borrower must immediately pay Bank the excess. 

2.3    Interest Rate, Payments.

        (a)  Interest
Rate. (i) Advances accrue interest on the outstanding principal balance at a per annum rate equal to the Prime Rate; (ii) Equipment Advances
accrue interest on the outstanding principal balance at a per annum rate of three quarters (0.75) of a percentage points above the Prime 

2

 

Rate. After 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. 

        Payments.
Interest due on the Committed Revolving Line is payable on the first day of each month. Interest due on the Equipment Advances is payable on the first day of each month. Bank
may debit any of Borrower's deposit accounts including Account Number 502429370 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)  Bank
Expenses. All Bank Expenses (including reasonable attorneys' fees and reasonable expenses) incurred through and after the date of this Agreement, payable when due. 

        (b)  Revolving
Advances Loan Fee. On or before the Closing Date, a loan fee equal to $60,000 with respect to the Revolving Advances facility. 

        (c)  Equipment
Advances Loan Fee. On or before the Closing Date, a loan fee equal to $40,000 with respect to the Equipment Advances facility 50% of which has been previously
paid. 

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 it receive the agreements, documents and fees it requires. 

3.2    Conditions Precedent to all Credit Extensions.

        Bank's
obligations to make each Credit Extension, including the initial Credit Extension, is subject to the following: 

        (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
except for representations and warranties made as of a specified earlier date, which must be materially true as of such earlier date and no Event of Default may have occurred and be continuing, or
result from the Credit Extension. Each Credit Extension is Borrower's representation and warranty on that date that the representations and warranties of Section 5 remain true. 

4.    CREATION OF SECURITY INTEREST

4.1    Grant of Security Interest.

        (a)  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. 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) without the consent of the licensor or 

3

 

other party (but only to the extent such consent has not been obtained). If this Agreement is terminated, Bank's lien and security interest in the Collateral will continue until Borrower fully
satisfies its Obligations. 

5.    REPRESENTATIONS AND WARRANTIES

        Borrower
represents and warrants as follows: 

5.1    Due Organization and Authorization.

        Borrower
and each material 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. 

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

5.2    Collateral.

        Borrower
has good title to the Collateral, free of Liens except Permitted Liens. The Accounts are bona fide, existing obligations, and the service or property has been performed or
delivered to the account debtor or its agent for immediate shipment to and unconditional acceptance by the account debtor. All Inventory is in all material respects of good and marketable quality,
free from material defects. To the best of Borrower's knowledge, Borrower is the sole owner of the Intellectual Property, except for non-exclusive licenses granted to its customers in the
ordinary course of business. To the best of Borrower's knowledge, 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 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 Disclosure Letter, there are no actions or proceedings pending or, to the knowledge of Borrower's Responsible Officers, threatened by or against Borrower or any
material 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 delivered to Bank fairly present in all material respects Borrower's consolidated financial condition and Borrower's consolidated
results of operations as of the date of such financial statements. There has not been any material adverse change 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. 

4

 

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 and Borrower's filings with the Securities & Exchange Commission) 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: 

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 45 days after the last day of each month, a company prepared consolidated
balance sheet and income statement, prepared under GAAP, consistently applied, covering Borrower's consolidated operations during the period, in a form and certified by a Responsible Officer
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 as is otherwise consented to by Bank on the financial statements from an independent certified public accounting firm reasonably
acceptable to Bank; (iii) within 5 days of filing, notice to Bank of the filing 

5

 

of all statements, reports and notices made available to Borrower's security holders or to any holders of Subordinated Debt and all reports on Form 10-K, 10-Q and
8-K filed with the Securities and Exchange Commission; (iv) once per year, the budget as approved by the Borrower's Board of Directors, and such 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
45 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 C. 

        (c)  Bank
has the right to audit Borrower's Collateral at Borrower's expense, but the 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 as they exist at execution of this Agreement. Borrower must promptly notify Bank of all returns, recoveries, disputes and claims, that involve more than $100,000, excluding any
returns from distributors of unprogrammed Inventory which involve less than $500,000. 

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. 

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    Deposit and Investment Accounts.

        Borrower
will maintain depository, investment and operating accounts with Bank and Bank's affiliates with a minimum aggregate balance at all times of $15,000,000 which shall be held in
the form of cash and such other investments as are consistent with Borrower's investment policy as approved by its Board of Directors. 

6.7    Financial Covenants.

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

          (i)  Tangible Net Worth. A Tangible Net Worth of at least $49,000,000. 

6

 

6.8    Notice of Registration of Intellectual Property Rights.

        Borrower
will promptly notify Bank upon Borrower's filing of any application or registration of any Intellectual Property rights with the United States Patent and Trademark Office and
Borrower will execute and deliver any and all instruments and documents as Bank may require to evidence or perfect Bank's security interest in such application or registration. 

        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) not allow any Intellectual Property to be abandoned, forfeited or dedicated to the public without Bank's written consent. 

6.9    Control Agreements. 

        With
respect to deposit accounts or investment accounts maintained at financial institutions other than Bank, within 10 Business Days of the opening of any such deposit account or
investment account, Borrower will execute and deliver to Bank, control agreements in form satisfactory to Bank in order for Bank to perfect its security interest in Borrower's deposit accounts or
investment accounts; provided that with respect to deposit accounts existing as of the Closing Date, Borrower shall provide such control agreements with respect to all such accounts as are reasonably
deemed material by Bank on or before July 31, 2002. 

6.10    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: 

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, other than
Transfers (i) of Inventory in the ordinary course of business; (ii) of non-exclusive licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries in the ordinary course of business; (iii) of worn-out or obsolete Equipment; (iv) other Transfers which in the aggregate do not exceed $50,000 in any fiscal
year; or (v) other Transfers otherwise permitted pursuant to Section 7 hereof. 

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

          (i)  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,
(ii) direct or indirect acquisition by any persons (as such term is used in Section 13(d) and Section 14(d) (2) of the Exchange Act) or related persons constituting a group
(as such term is used in Rule 13d-5 under the Exchange Act), of beneficial ownership of the issued and outstanding shares of voting stock of the Borrower, the result of which
acquisition is that such person or group possesses in excess of 35% of the combined voting power of all then issued and outstanding stock of the Borrower, (iii) without contemporaneous written
notice, relocate its chief executive office, or add any new offices or business locations, or (iv) without at least 30 days written notice, change the jurisdiction of its incorporation. 

7

   
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) such transactions do not in the aggregate result in a decrease of more than 25% of Tangible Net Worth and (ii) no
Event of Default has occurred, is continuing or would exist after giving effect to the transactions. 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 (A) repurchases of stock from former employees, consultants or directors of Borrower provided no
Default or Event of Default has occurred and is continuing, or would be caused by such repurchase, and provided that the aggregate amount of such repurchases shall not exceed $100,000 in the aggregate
in any fiscal year,
(B) distributions payable solely in Borrower's capital stock, (C) conversion of any convertible debt into capital stock of Borrower. 

7.7    Transactions with Affiliates.

        Directly
or indirectly enter into or permit any material transaction with any Affiliate except transactions that are in the ordinary course of Borrower's business, on terms less
favorable to Borrower than would be obtained in an arm's length transaction with a non-affiliated 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. 

8

 

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 3 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 10
business days after it occurs, or if the default cannot be cured within 10 business days or cannot be cured after Borrower's attempts within 10 business day period, and the default may be cured within
a reasonable time, then Borrower has an additional period (of not more than 30 days) to attempt to cure the default. During the additional time, the failure to cure the default is not an Event
of Default (but no Credit Extensions will be made during the cure period); 

8.3    Material Adverse Change.

          (i)  A
material impairment in the perfection or priority of Bank's security interest in the Collateral or in the value of such Collateral {other than normal depreciation}
which is not covered by adequate insurance occurs; or (ii) Bank determines, based upon information available to it and in its reasonable judgment, that there is a reasonable likelihood that
Borrower will fail to comply with one or more of the financial covenants in Section 6 during the next succeeding financial reporting period. 

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
business 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 business 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 reasonably
be expected to cause a Material Adverse Change; 

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 10 Business Days (but no Credit Extensions will be made
before the judgment is stayed or satisfied); 

9

 

8.8    Misrepresentations.

        If
Borrower or any Responsible Officer of Borrower makes any material misrepresentation or material misstatement (when taken together with Borrower's filings with the Securities &
Exchange Commission) 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; or 

8.9    Guaranty.

        Any
guaranty of any Obligations ceases for any reason to be in full force or any Guarantor does not perform any obligation under any guaranty of the Obligations, or any material
misrepresentation or material misstatement exists now or later in any warranty or representation in any guaranty of the Obligations or in any certificate delivered to Bank in connection with the
guaranty, or any circumstance described in Sections 8.4, 8.5 or 8.7 occurs to any Guarantor. 

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 and 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 until Borrower pays the Obligations in full, Borrower irrevocably appoints Bank as its lawful attorney to: (i) endorse
Borrower's name on any checks or other forms of payment or 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 

10

 

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 due and payable within 10 Business Days of written notice to Borrower,
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. 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. 

11

 

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), and in each case of (a) and (b) above, except for any such obligations, claims, liabilities and 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. 

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 

12

 

Borrower, (ii) to prospective transferees or purchasers of any interest in the loans so long as such transfer or purchase is subject to a confidentiality agreement reasonably acceptable to
Borrower, (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; or (b) is disclosed to Bank by a third party, if Bank does not know that the third party is prohibited from disclosing the information. 

12.9    Attorneys' Fees, Costs and Expenses.

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

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. 

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

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

        "Bank Expenses" are all audit fees and expenses and reasonable costs and reasonable 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. 

        "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 California Uniform Commercial Code. 

        "Collateral" is the property described on Exhibit A. 

        "Committed Equipment Line" is a Credit Extension of up to $4,000,000. 

        "Committed Revolving Line" is an Advance of up to $8,000,000. 

13

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

        "Disclosure Letter" means the disclosure letter from Borrower to Bank. 

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

        "Equipment Advance" is defined in Section 2.1.5. 

        "Equipment Hardware Availability End Date" is defined in Section 2.1.5. 

        "Equipment Hardware Advance(s)" is defined in Section 2.1.5. 

        "Equipment Soft Cost Advance(s)" is defined in Section 2.1.5. 

        "Equipment Soft Costs Availability End Date" is defined in Section 2.1.5. 

        "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. 

        "Guarantor" is any present or future guarantor of the Obligations. 

        "Hardware Equipment" is defined in Section 2.1.5. 

        "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. 

14

 

        "Intellectual Property" is: 

        (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; 

        (b)  Indebtedness
existing on the Closing Date and shown on the Disclosure Letter; 

        (c)  Subordinated
Debt; 

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

        (e)  Indebtedness
secured by Permitted Liens; 

15

 

        (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 $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 Disclosure Letter 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. 

        (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, 7.3 and 7.6; 

        (e)  Investments
of Subsidiaries in or to other Subsidiaries or Borrower and Investments by Borrower in Subsidiaries not to exceed $50,000 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; 

        (i)    Joint
ventures or strategic alliances in the ordinary course of Borrower's business consisting of the non-exclusive licensing of technology, the development
of technology or the providing of technical support, provided that any cash investments by Borrower do not exceed $50,000 in the aggregate in any fiscal year; and 

        (j)    Investments
in Tower Semiconductor (Israel) of $3,666,900 in October of 2002 and of $3,666,900 in May of 2003. 

        "Permitted Liens" are: 

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

16

 

        (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,  if the licenses and sublicenses permit granting Bank a
security interest; 

        (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. 

        "Responsible Officer" is each of the Chief Executive Officer, the President, the Chief Financial Officer, the Controller and the
in-house general counsel of Borrower. 

        "Revolving Maturity Date" is 364 days from the date hereof. 

        "Soft Cost Equipment" is defined in Section 2.1.5. 

        "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 reasonably 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.

17

 

        "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 service mark 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:	 	 
	

QUICKLOGIC CORPORATION	
 	

 
	

By:	

/s/  ARTHUR O. WHIPPLE      
	
 	

 
	Title:	CFO
	 	 
	

BANK:	
 	

 
	

SILICON VALLEY BANK	
 	

 
	

By:	

/s/  MATT MALONEY      
	
 	

 
	Title:	Senior Vice President
	 	 

18

   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 held for sale or lease, or to be furnished under a contract of service or is temporarily out of Borrower's custody or possession or in transit and
including any returns or repossession upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title
representing any of the above; 

        All
contract rights and general intangibles now owned or hereafter acquired, including, without limitation, goodwill, trademarks, service marks, 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, payment intangibles, and rights to payment of any kind; 

        All
now existing and hereafter arising accounts (including health-care insurance receivables), contract rights, royalties, license rights and all other forms of obligations
owing to Borrower arising out of the sale or lease of goods, the licensing of technology or the rendering of services by Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Borrower; 

        All
documents (including negotiable documents), cash, deposit accounts, securities, securities entitlements, securities accounts, investment property, financial assets, letters of
credit, letter of credit rights, money, certificates of deposit, instruments (including promissory notes) and chattel paper
(including tangible 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 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 the computers and equipment containing said books and records, and any and all claims, rights and interests in any of the above and
all substitutions for, additions and accessions to and proceeds thereof. 

        Notwithstanding
the foregoing, the collateral 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) without the consent of the licensor or
other party (but only to the extent such consent has not been obtained). 

19

 
EXHIBIT B

LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM

DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.  

	TO: CENTRAL CLIENT SERVICE DIVISION	 	DATE:	    

	

FAX #: (408) 496-2426	
 	

TIME:	

    

	FROM:	QuickLogic Corporation

	 	CLIENT NAME (BORROWER)
	

REQUESTED BY:	

    
 AUTHORIZED SIGNER'S NAME
	

AUTHORIZED SIGNATURE:	

	

PHONE NUMBER:	

   

   

FROM ACCOUNT #                             TO ACCOUNT #
                                         
        

	REQUESTED TRANSACTION TYPE
	 	REQUESTED DOLLAR AMOUNT

	

PRINCIPAL INCREASE (ADVANCE)	
 	

$

	PRINCIPAL PAYMENT (ONLY)	 	$

	INTEREST PAYMENT (ONLY)	 	$

	PRINCIPAL AND INTEREST (PAYMENT)	 	$

	

OTHER INSTRUCTIONS:	
 	

 
	

	

   

   

All Borrower's representations and warranties in the Loan and Security Agreement are true, correct and complete in all material respects on the date of the telephone request for and Advance confirmed
by this Borrowing Certificate; but those representations and warranties expressly referring to another date shall be true, correct and complete in all material respects as of that date. 

BANK
USE ONLY 

TELEPHONE REQUEST:  

The
following person is authorized to request the loan payment transfer/loan advance on the advance designated account and is known to me. 

	

 Authorized Requester	
 	

 Phone #
	

 Received By (Bank)	
 	

 Phone #

	 	 	
 Authorized Signature (Bank)	 	 

20

 
EXHIBIT C  

 COMPLIANCE CERTIFICATE  

	TO:	 	SILICON VALLEY BANK

3003 Tasman Drive

Santa Clara, CA 95054
	

FROM:	
 	

QUICKLOGIC CORPORATION

        The
undersigned authorized officer of QuickLogic Corporation ("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, except for representations and warranties made as of a specific earlier date, which are to be true and correct in all
material respects as of such earlier 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, footnotes or year end adjustments. The Officer acknowledges that no
borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this
certificate is delivered. 

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

	Reporting and Financial Covenants
 
	 	Required
	 	Complies

	Monthly financial statements + CC	 	Monthly within 45 days	 	Yes	 	No
	Annual (Audited)	 	FYE within 120 days	 	Yes	 	No
	10-Q, 10-K and 8-K	 	Within 5 days after filing with SEC	 	Yes	 	No
	Minimum Tangible Net Worth	 	Monthly; $49,000,000	 	Yes	 	No
	

Have there been updates to Borrower's intellectual property, if appropriate?	
 	

Yes	
 	

No

	Comments Regarding Exceptions: See Attached.	 	BANK USE ONLY
	

Sincerely,

  

QuickLogic Corporation	
 	

Received by:	

    
 AUTHORIZED SIGNER
	

 	
 	

Date:	

    

	

 SIGNATURE	
 	

Verified:	

    
 AUTHORIZED SIGNER
	

 TITLE	
 	

Date:	

    

	

 DATE	
 	

Compliance
Status:                                        
                Yes    No

21

   INTELLECTUAL PROPERTY SECURITY AGREEMENT  

        This Intellectual Property Security Agreement is entered into as of June    , 2002 by and between SILICON VALLEY BANK ("Bank") and QUICKLOGIC
CORPORATION ("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 June    , 2002 (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 person, including Bank,
of any or all other rights, powers or remedies. 

22

 

        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. 

	 	 	 	 	GRANTOR:
	

Address of Grantor:	
 	

QUICKLOGIC CORPORATION
	

1277 Orleans Drive

Sunnyvale, CA 94089-1138	
 	

By:	
 	

    

	Attn:	 	    
	 	Title:	 	    

	

 	
 	

 	
 	

BANK:
	

Address of Bank:	
 	

SILICON VALLEY BANK
	

3003 Tasman Drive

Santa Clara, CA 95054-1191	
 	

By:	
 	

    

	Attn:	 	    
	 	Title:	 	    

23

 
EXHIBIT A  

 Copyrights  

	Description
 
	 	Registration/

Application

Number
	 	Registration/

Application

Date

	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 

24

 
EXHIBIT B  

 Patents  

	Description
 
	 	Registration/

Application

Number
	 	Registration/

Application

Date

	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 

25

 
EXHIBIT C  

 Trademarks  

	Description
 
	 	Registration/

Application

Number
	 	Registration/

Application

Date

	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 

26

 
EXHIBIT D  

 Mask Works  

	Description
 
	 	Registration/

Application

Number
	 	Registration/

Application

Date

	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 
	    	 	 	 	 

27

 
CORPORATE BORROWING RESOLUTION  

	Borrower:	 	QuickLogic Corporation

1277 Orleans Drive

Sunnyvale, CA 94089-1138	 	Bank:	 	Silicon Valley Bank

3003 Tasman Drive

Santa Clara, CA 95054-1191

I, the Secretary or Assistant Secretary of QuickLogic Corporation ("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: 

	NAMES
	 	POSITIONS
	 	ACTUAL SIGNATURES

	    	 	 	 	 
	
	 	
	 	

	    	 	 	 	 
	
	 	
	 	

	    	 	 	 	 
	
	 	
	 	

	    	 	 	 	 
	
	 	
	 	

	    	 	 	 	 
	
	 	
	 	

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. 

	CERTIFIED TO AND ATTESTED BY:	 	 
	

X	
 	

    
	
 	

 
	 	 	*Secretary or Assistant Secretary	 	 
	

X	
 	

    
	
 	

 
	*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.

28

QuickLinks

Exhibit 10.22QuickLinks
 -- Click here to rapidly navigate through this document

 
 

EXHIBIT 10.23    
  

Date:
May 28, 2002 

	To:
	Tower
Semiconductor Ltd.

P.O. Box 619

Migdal Haemek 23105

Israel

Attention: Co-Chief Executive Officer

	cc:
	Yigal
Arnon & Co.

One Azrieli Center

Tel-Aviv 67021

Israel

Attention: David H. Schapiro, Adv.

	Re:
	Amendment to Payment Schedule of Series A-3 and Series A-4 Additional Purchase Obligations

Dear
Sirs, 

        With
regard to our obligation to exercise the Series A-3 and Series A-4 Additional Purchase Obligations, as provided for in our Fab 2 Share Purchase Agreement dated
December 12, 2002, all capitalized terms as defined therein, we hereby agree that our agreements shall be amended as follows: 

	1.
	QuickLogic Undertaking. We hereby confirm that in accordance with the terms set forth hereunder, we will advance the payment of the
entire Series A-3 Additional Purchase Obligation by no later than May 31, 2002, without regard to whether the Series A-3 Mandatory Exercise Events occurs, and we will advance the
payment of the entire Series A-4 Additional Purchase Obligation by no later than October 1, 2002, without regard to whether the Series A-4 Mandatory Exercise Events occurs.

	2.
	Tower Undertaking:

	a.
	In
consideration of our undertaking to advance the Series A-3 Additional Purchase Obligation, by no later than May 31, 2002 without regard to whether the
Series A-3 Mandatory Exercise Events occurs, (i) Tower will issue 357,166 shares fully-paid and non-assessable ordinary shares of Tower equivalent to sixty percent of the amount
of the payment made in connection with the Series A-3 Additional Purchase Obligation, divided by $6.16, and (ii) our Pre-Paid Credit Account will be increased by the amount equivalent to
forty percent of the amount of the payment made in connection with the Series A-3 Additional Purchase Obligation, which will be applicable against Fab 2 production purchases as soon as
such production commences at Fab 2, provided that until July 1, 2005 such amounts added to the Pre-Paid Credit Account may be applied towards only 7.5% of Fab 2 wafer purchases
made by us.

	b.
	In
consideration of our undertaking to advance the Series A-4 Additional Purchase Obligation, by no later than October 1, 2002, without regard to whether the
Series A-4 Mandatory Exercise Events occurs, (i) Tower will issue fully-paid and non-assessable ordinary shares of Tower equivalent to sixty percent of the amount of the payment made in
connection with the Series A-4 Additional Purchase Obligation, divided by the average trading price for the ordinary shares during the 30 days preceding the date of actual payment,
provided that such average trading price will not exceed $12.50, and (ii) the undersigned's Pre-Paid Credit Accounts will be increased by the amount equivalent to forty percent of the amount of
the payment made in connection with the Series A-4 Additional Purchase Obligation, which will be applicable against Fab 2 production purchases as soon as such production commences at
Fab 2, provided that until July 1, 2005 such amounts added to the Pre-Paid Credit Account may be applied towards only 7.5% of Fab 2 wafer purchases made by the undersigned. 

	3.
	Entire Agreement. All other provisions of our Fab 2 Share Purchase Agreement shall remain substantially unchanged. 

	 	 	QuickLogic Corp.
	

 	
 	

By:	
 	

/s/ Arthur O. Whipple

	 	 	Name:	 	Arthur O. Whipple

	 	 	Title:	 	CFO

	 	 	Date:	 	30 May 2002

	

 	
 	
Tower Semiconductor
	

 	
 	

By:	
 	

/s/ Yoav Nissan-Cohen

	 	 	Name:	 	Yoav Nissan-Cohen

	 	 	Title:	 	Co-CEO

	 	 	Date:	 	30, May 2002

QuickLinks

EXHIBIT 10.23

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00042-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00042-of-00352.parquet"}]]