Document:

Exhibit 10.1

 

 

 

SECOND AMENDED AND RESTATED LOAN
AND SECURITY AGREEMENT

between

SILICON
VALLEY BANK

and

QUICKLOGIC CORPORATION

June 30,
2006

 

 

TABLE
OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  ACCOUNTING AND OTHER TERMS

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  LOAN AND TERMS OF PAYMENT

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  CONDITIONS OF LOANS

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  CREATION OF SECURITY INTEREST

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  AFFIRMATIVE COVENANTS

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  NEGATIVE COVENANTS

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  EVENTS OF DEFAULT

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  BANK’S RIGHTS AND REMEDIES

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  NOTICES

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL
  REFERENCE

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
   

  	
  GENERAL PROVISIONS

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
   

  	
  DEFINITIONS

  	
   

  	
  20

  

 

 i

 

This SECOND AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT (the “Agreement”) dated June 30, 2006, between
SILICON VALLEY BANK (“Bank”), whose address is 3003 Tasman Drive, Santa Clara,
California 95054 and QUICKLOGIC CORPORATION, a Delaware 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.

RECITALS

A.            Borrower and Bank have
previously entered into that certain Loan and Security Agreement dated as of
June 28, 2002, as amended and restated by that certain Amended and Restated
Loan and Security Agreement dated June 20, 2003, and as further amended by that
certain Loan Modification Agreement dated as of June 28, 2004, and as further amended
by that certain Loan Modification Agreement dated as of June 27, 2005
(collectively, the “Original Agreement”).

B.            Borrower and Bank
desire to amend and restate the Original Agreement, as modified, as set forth
herein.

C.            Immediately prior to the amendment
and restatement of the Original Agreement in accordance with the terms and
conditions hereof, certain loans and advances remain outstanding under the
Original Agreement, as modified (collectively, the “Outstanding Debt”).

D.            In connection with the
Outstanding Debt, Bank made equipment advances in the amount of $4,500,000, of
which (i) $148,928.62 is currently outstanding as of the Closing Date for the
equipment line “B” advances; (ii) $648,279.25 is currently outstanding as of
the Closing Date for the equipment line “C” advances; and (iii) $877,303.26 is
outstanding as of the Closing Date for the equipment line “D” advances
(collectively, the “Outstanding Equipment Advances”).  The Outstanding Equipment Advances are
payable in accordance with the terms and amortization schedules currently
governing such Outstanding Equipment Advances, and no other advances thereunder
may be made.

E.             It is not the intention of
the Bank or the Borrower that this Agreement constitute a novation of the
indebtedness governed by the Original Agreement, as modified, and from and
after the effective date of this Agreement, the Outstanding Debt and the
Outstanding Equipment Advances shall remain owing to Bank on terms set forth
under the Original Agreement, as modified, and the Original Agreement shall be
further amended and restated in accordance with the terms and provisions
hereof.

NOW, THEREFORE, Borrower and Bank hereby 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.

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2.             LOAN
AND TERMS OF PAYMENT.

2.1           Promise
to Pay.

Borrower will pay Bank the unpaid principal amount of
all Credit Extensions and interest due on the unpaid principal amount of the
Credit Extensions.

2.1.1                                        Non-Formula
Revolving Advances.

(a)           Availability.  Subject to the terms and conditions of this
Agreement, Bank will make Advances on a non-formula basis (the “Non-Formula
Advances”) in an aggregate amount not to exceed the amount calculated
as the Committed Non-Formula Revolving Line minus the sum of: (x)
FX Reserve, plus, (y) the aggregate amounts deemed outstanding under the
sublimit described in Section 2.1.5, plus, (z) the amount of
all outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit). Amounts borrowed under this Section may be repaid and reborrowed
during the term of this Agreement.

(b)           Termination.  The Committed Non-Formula Revolving Line
terminates on the Revolving Maturity Date, when all outstanding Advances are
immediately payable.

2.1.2                                        Requesting
Advances.

To obtain an Advance, Borrower must notify Bank by
facsimile or telephone by 12:00 noon 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 unless such loss is due to Bank’s gross negligence or willful
misconduct.

2.1.3                                        Letters of
Credit Sublimit.

(a)           Bank will issue letters
of credit for Borrower’s account not exceeding the Availability (“Letters of
Credit”).

(b)           Each Letter of Credit
will have an expiry date of no later than one hundred eighty (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.

2.1.4                                        Foreign
Exchange Sublimit.

Subject to the limits set forth below in this Section
2.1.4, Borrower may enter into 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”) (the amount equal to 10% of the aggregate outstanding FX
Forward 

 2
 

 

Contracts is hereinafter referred to as the “FX
Reserve”).  The FX Reserve may not
exceed the Availability.  The total FX
Forward Contracts at any one time may not exceed the amount calculated as 10
multiplied by the FX Reserve.  Bank may
terminate the FX Forward Contracts if an Event of Default occurs and continues.

2.1.5                                        Cash
Management Services Sublimit.

Borrower may use for Bank’s Cash Management Services
up to an amount equal to the Availability (“Cash Management Services
Sublimit”).  Such services may
include merchant services, direct deposit of payroll, business credit card,
clearing house services, control disbursement accounts and check cashing
services identified in various cash management services agreements related to
such services (the “Cash Management Services”).  The aggregate amount of the credit limits under all such agreements with
respect to Cash Management Services shall be deemed to be the amount of the
Cash Management Services for the purposes of calculating the Cash Management
Services Sublimit.  All amounts
Bank pays for any Cash Management Services will be treated as Advances under
Section 2.1.1.  Bank will advise Borrower
of any amounts that would affect the Cash Management Services Sublimit.

2.1.6                                        Prepayment.

Borrower may prepay any or all amounts owing under the
Committed Non-Formula Revolving Line, without penalty or premium, by paying all
principal and accrued interest as of the date of prepayment.

2.1.7                                        Equipment
Advances.

(a)           Availability.  Between the effective date of this Agreement
and June 28, 2007 (the “Equipment Availability End Date”), Bank will make
advances (“Equipment Advance” and, collectively, “Equipment Advances”) not to
exceed the Committed Equipment Line.  The
Equipment Advances may only be used to finance the acquisition of Eligible
Equipment.  Lender shall advance to
Borrower 100% of the documented cost of Eligible Equipment.  Unless otherwise agreed to by Bank, not more
than 75% of the Committed Equipment Line may be used to finance Eligible
Equipment comprised of software licenses, mask sets, foreign domiciled
equipment, leasehold improvements, sales tax, shipping, warranty charges,
freight, and installation expenses (“Soft Costs”).  Unless otherwise agreed to by Bank, not less
than 25% of the proceeds of the Committed Equipment Line shall be used to
finance Eligible Equipment other than Soft Costs (“Hard Costs”).  Eligible Equipment may include new and/or
used equipment and furniture, purchased within 90 days (determined based upon
the applicable invoice date of such Eligible Equipment) before the date of each
Equipment Advance and may not exceed 100% of the Equipment invoice.  Each Equipment Advance must be for a minimum
of $50,000 and only one Equipment Advance per month shall be available.

(b)           Repayment.  Interest accrues from the date of each
Equipment Advance at the rate in Section 2.3(a).  Each Equipment Advance for Soft Costs shall
immediately amortize and be 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 Advance of such Soft Costs.  Each Equipment Advance for Hard Costs shall
immediately amortize and be 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 Advance for such Hard Costs.  After repayment, no Equipment Advance may be
reborrowed.

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(c)           To obtain an Equipment
Advance, Borrower must notify Bank (the notice is irrevocable) by facsimile no
later than 12:00 noon 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.

(d)           Prepayment.  Borrower may prepay any or all amounts owing
under any Equipment Advance; provided that prepayments for any Fixed
Rate Advances after the Closing Date are subject to a prepayment fee of 1% of
the aggregate amount of principal outstanding on any such Equipment Advance.

(e)           Prepayment Upon an
Event of Loss.  Borrower shall bear
the risk of any loss, theft, destruction, or damage of or to the Financed
Equipment.  If, during the term of this
Agreement, any item of Financed Equipment becomes obsolete or is lost, stolen,
destroyed, damaged beyond repair, rendered permanently unfit for use, or seized
by a governmental authority for any reason for a period equal to at least the
remainder of the term of this Agreement (an “Event of Loss”), then, if no Event
of Default has occurred or is continuing, within ten (10) days following such
Event of Loss, at Borrower’s option, Borrower shall (i) pay to Bank on account
of the Obligations all accrued interest to the date of the prepayment, plus all
outstanding principal owing with respect to the Financed Equipment subject to
the Event of Loss; or (ii) repair or replace any Financed Equipment subject to
an Event of Loss provided the repaired or replaced Financed Equipment is of
equal or like value to the Financed Equipment subject to an Event of Loss and
provided further that Bank has a first priority perfected security interest in
such repaired or replaced Financed Equipment.

2.2           Overadvances.

If Borrower’s Obligations under Section 2.1.1,
2.1.2, 2.1.3, 2.1.4 and 2.1.5 at any time exceed the Committed Non-Formula
Revolving Line, Borrower must immediately pay Bank the excess.

2.3           Interest
Rate, Payments.

(a)           Interest Rate.

(i)            Non-Formula Advances
accrue interest on the outstanding principal balance at a per annum rate equal
to the greater of (A) 50 basis points (.5%) above the Prime Rate or (B) 8.5%.

(ii)           Equipment Advances
after the Closing Date accrue interest on the outstanding principal balance at
(y) a per annum rate of 100 basis points (1.00%) above the Prime Rate or (z) a
fixed rate equal to 400 basis points (4%) above the Treasury Rate.  After an Event of Default, Obligations accrue
interest at 5% 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.

 4
 

 

(b)           Payments.  Interest due on the Committed Non-Formula
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 for principal and
interest payments owing under this Agreement 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, however solely making such payment on the next Business Day
shall not result in an Event of Default.

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 Line of
Credit Fee.  On or before the Closing
Date, a Committed Non-Formula Revolving Line fee equal to $25,000 due, payable
and fully earned on the Closing Date; and on the one year anniversary of the
Closing Date, a fee equal to $17,500 due, payable and fully earned on the such
date.

(c)           Equipment Line Fee.  On or before the Closing Date, an equipment
line fee (the “Equipment Line Fee”) equal to $5,000 due, payable and fully
earned on the Closing Date; provided that the Equipment Line Fee shall
be waived if 50% of the Committed Equipment Line is drawn on the Closing Date.

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, in form and substance
satisfactory to Bank, such documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate, including, without
limitation:

(a)           Borrower shall have delivered duly executed original signatures to the
Loan Documents to which it is a party;

(b)            Borrower shall have delivered its Operating Documents and a good
standing certificate of Borrower certified by the Secretary of State of the
State of California as of a date no later than thirty (30) days after the
effective date of this Agreement, unless waived by Bank; and

(c)           Borrower shall have
delivered duly executed original signatures to the completed Borrowing
Resolutions for Borrower.

 5
 

 

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 except for
representations and warranties made as of a specified earlier date, which must
be materially true as of such earlier date.

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.  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: (A) 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) and (B) pledges of more
than 65% of foreign subsidiaries’ stock. 
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.

 6
 

 

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, net of inventory reserves, 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.

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 

 7
 

 

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           Tax
Returns and Payments; Pension Contributions.

To the best of Borrower’s knowledge, Borrower has
timely filed all required tax returns and reports, and Borrower has timely paid
all federal, state and local taxes, assessments, deposits and contributions
owed by Borrower.  Borrower may defer
payment of any contested taxes, provided that Borrower (a) in good faith
contests its obligation to pay the taxes by appropriate proceedings promptly
and diligently instituted and conducted, (b) notifies Bank in writing of the
commencement of, and any material development in, the proceedings, (c) posts
bonds or takes any other steps required to prevent the governmental authority
levying such contested taxes from obtaining a Lien upon any of the Collateral
that is other than a “Permitted Lien”. 
Borrower is unaware of any claims or adjustments proposed for any of
Borrower’s prior tax years which could result in additional taxes becoming due
and payable by Borrower.  To the best of
Borrower’s knowledge, Borrower has paid all amounts necessary to fund all
present pension, profit sharing and deferred compensation plans in accordance
with their terms, and Borrower has not withdrawn from participation in, and has
not permitted partial or complete termination of, or permitted the occurrence
of any other event with respect to, any such plan which could reasonably be
expected to result in any liability of Borrower, including any liability to the
Pension Benefit Guaranty Corporation or its successors or any other
governmental agency.

5.9           Use
of Proceeds.

Borrower shall use the proceeds of the Credit
Extensions to fund its equipment purchases and for general corporate purposes,
and not for personal, family, household or agricultural purposes.

5.10         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.

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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, without footnotes and subject to year-end adjustments,
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 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 (“SEC”) unless such 10-K, 10-Q,
and 8-K reports are available in the SEC’s EDGAR database in which case
Borrower shall not be required to deliver the same; (iv) as soon as available
but in no event after December 20 of every year, Borrower’s budget and
financial projections as approved by the Borrower’s Board of Directors; (v)
such other financial information Bank reasonably requests; and (vi) 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.

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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 older than 30
days and claims, that  involve more than
$200,000, excluding “ship from stock and debit transactions” and 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           Access
to Collateral; Books and Records.

At reasonable times, on one Business Day’s notice
(provided no notice is required if an Event of Default has occurred and is
continuing), Bank, or its agents, shall have the right, upon one week’s notice
to Borrower, to inspect the Collateral and the right to audit and copy Borrower’s
Books.

6.6           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.

6.7           Deposit
and Investment Accounts.

Borrower will maintain 60% of its cash and cash
equivalents in depository, investment and operating accounts with Bank and Bank’s
affiliates 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.

6.8           Financial
Covenants.

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

 10
 

 

(i)            Tangible Net
Worth.  A Tangible Net Worth
of at least $31,000,000.

(ii)           Quick Ratio
(Adjusted).  A ratio of Quick
Assets to Current Liabilities minus Deferred Revenue of at least 1.55 to 1.00.

6.9           Protection
of Intellectual Property Right.

Borrower shall:  (a) protect, defend and maintain the validity
and enforceability of its material intellectual property; (b) promptly advise
Bank in writing of material infringements of its intellectual property; and (c)
not allow any intellectual property material to Borrower’s business to be
abandoned, forfeited or dedicated to the public without Bank’s written
consent.  Notwithstanding anything to the contrary contained in this section,
Borrower confirms that on June 28, 2004, Bank and Borrower entered into (i) a
Negative Pledge Agreement in which Borrower agreed, subject to certain
exceptions, not to encumber its Intellectual Property and (ii) a Loan
Modification Agreement dated June 28, 2004 in which the definition of
Collateral was amended to reflect that Intellectual Property created, modified
acquired or obtained on or after June 28, 2004 (but not before such date) shall
not be deemed as part of the Collateral.

 

6.10         Control Agreements.

With respect to deposit
accounts or investment accounts maintained at domestic 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 30,
2003.

6.11         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 and Equipment 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 $200,000 in any fiscal year; or (v) other Transfers
otherwise permitted pursuant to Section 7 hereof.

 11

 

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.

7.3           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, including guaranties of non-Borrower obligations, 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, or (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.

 12
 

 

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.             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.

 13
 

 

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);

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           Subordinated
Debt.

A default or breach occurs under any agreement between
Borrower and any creditor of Borrower that signed a subordination,
intercreditor, or other similar agreement with Bank, or any creditor that has
signed such an agreement with Bank breaches any terms of such agreement.

 14
 

 

8.10         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.

 15
 

 

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 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.

 16
 

 

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, JURY TRIAL WAIVER AND
JUDICIAL REFERENCE.

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; provided, however, that
nothing in this Agreement shall be deemed to operate to preclude Bank from
bringing suit or taking other legal action in any other jurisdiction to realize
on the Collateral or any other security for the Obligations, or to enforce a
judgment or other court order in favor of Bank. 
Borrower expressly submits and consents in advance to such jurisdiction
in any action or suit commenced in any such court, and Borrower hereby waives
any objection that it may have based upon lack of personal jurisdiction,
improper venue, or forum non conveniens and hereby consents to the granting of
such legal or equitable relief as is deemed appropriate by such court.  Borrower hereby waives personal service of
the summons, complaints, and other process issued in such action or suit and
agrees that service of such summons, complaints, and other process may be made
by registered or certified mail addressed to Borrower at the address set forth
in Section 10 of this Agreement and that service so made shall be deemed
completed upon the earlier to occur of Borrower’s actual receipt thereof or
three (3) days after deposit in the U.S. mails, proper postage prepaid.

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, 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.

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’
AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above
waiver of the right to a trial by jury is not enforceable, the parties hereto
agree that any and all disputes or 

 17
 

 

controversies of any nature between them arising at
any time shall be decided by a reference to a private judge, mutually selected
by the parties (or, if they cannot agree, by the Presiding Judge of the Santa
Clara County, California Superior Court) appointed in accordance with
California Code of Civil Procedure Section 638 (or pursuant to comparable provisions
of federal law if the dispute falls within the exclusive jurisdiction of the
federal courts), sitting without a jury, in Santa Clara County, California; and
the parties hereby submit to the jurisdiction of such court.  The reference proceedings shall be conducted
pursuant to and in accordance with the provisions of California Code of Civil
Procedure §§ 638 through 645.1, inclusive. 
The private judge shall have the power, among others, to grant
provisional relief, including without limitation, entering temporary
restraining orders, issuing preliminary and permanent injunctions and
appointing receivers.  All such
proceedings shall be closed to the public and confidential and all records
relating thereto shall be permanently sealed. 
If during the course of any dispute, a party desires to seek provisional
relief, but a judge has not been appointed at that point pursuant to the
judicial reference procedures, then such party may apply to the Santa Clara
County, California Superior Court for such relief.  The proceeding before the private judge shall
be conducted in the same manner as it would be before a court under the rules
of evidence applicable to judicial proceedings. 
The parties shall be entitled to discovery which shall be conducted in
the same manner as it would be before a court under the rules of discovery
applicable to judicial proceedings.  The
private judge shall oversee discovery and may enforce all discovery rules and
order applicable to judicial proceedings in the same manner as a trial court
judge.  The parties agree that the
selected or appointed private judge shall have the power to decide all issues
in the action or proceeding, whether of fact or of law, and shall report a
statement of decision thereon pursuant to the California Code of Civil
Procedure § 644(a).  Nothing in this
paragraph shall limit the right of any party at any time to exercise self-help
remedies, foreclose against collateral, or obtain provisional remedies.  The private judge shall also determine all
issues relating to the applicability, interpretation, and enforceability of
this paragraph.

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.

 18
 

 

12.3         Limitation
of Actions.

Any claim or cause of action by Borrower against Bank,
its directors, officers, employees, agents, accountants, attorneys, or any
other Person affiliated with or representing Bank based upon, arising from, or
relating to this Loan Agreement or any other Loan Document, or any other
transaction contemplated hereby or thereby or relating hereto or thereto, or
any other matter, cause or thing whatsoever, occurred, done, omitted or
suffered to be done by Bank, its directors, officers, employees, agents,
accountants or attorneys, shall be barred unless asserted by Borrower by the
commencement of an action or proceeding in a court of competent jurisdiction by
(a) the filing of a complaint within one year from the earlier of (i) the date
any of Borrower’s officers or directors had knowledge of the first act, the
occurrence or omission upon which such claim or cause of action, or any part
thereof, is based, or (ii) the date this Agreement is terminated, and (b) the
service of a summons and complaint on an officer of Bank, or on any other
person authorized to accept service on behalf of Bank, within thirty (30) days
thereafter.  Borrower agrees that such
one-year period is a reasonable and sufficient time for Borrower to investigate
and act upon any such claim or cause of action. 
The one-year period provided herein shall not be waived, tolled, or
extended except by the written consent of Bank in its sole discretion.  This provision shall survive any termination
of this Loan Agreement or any other Loan Document.

12.4         Time
of Essence.

Time is of the essence for the performance of all
obligations in this Agreement.

12.5         Severability
of Provision.

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

12.6         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.

12.7         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.

12.8         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.

 19
 

 

12.9         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 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.

12.10       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 any Non-Formula Advance.

“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.

“Availability”
means, as of any date of determination, the amount that Borrower is entitled to
borrow as Advances under Section 2.1.1 (after giving effect to all then
outstanding Advances and all sublimit reserves applicable thereunder).

“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).

 20
 

 

“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 Resolutions” of the Borrower
shall be in substantially the form set forth as Exhibit D hereto.

“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 2.1.5.

“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 $2,000,000.

“Committed Non-Formula
Revolving Line” is Non-Formula Advances of up to $5,000,000.

“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 Non-Formula Advance, Equipment 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, including Letters of Credit (including drawn but unreimbursed
Letters of Credit).

“Deferred Revenue”
means deferred revenue as defined by GAAP.

 21

 

“Disclosure Letter”
means the disclosure letter from Borrower to Bank of even date herewith.

“Eligible Equipment”
is all present and future machinery, equipment, tenant improvements, furniture,
fixtures, vehicles, tools, parts and attachments in which Lender has a valid
security interest and Soft Costs.

“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 2.1.7.

“Equipment Availability End
Date” is defined in Section 2.1.7.

“Equipment Advance(s)”
is defined in Section 2.1.7.

“Equipment Line Fee”
is defined in Section 2.4(c).

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

“Event of Loss”
is defined in Section 2.1.7(e).

“Financed Equipment”
is all present and future Eligible Equipment in which Borrower has any
interest, the purchase of which is financed by an Equipment Advance.

“Fixed Rate Advance”
is any Equipment Advance subject to interest under the fixed Treasury Rate.

“FX Forward Contract”
is defined in Section 2.1.4.

“FX Reserve “ is
defined in Section 2.1.4.

“GAAP” is
generally accepted accounting principles.

“Guarantor” is
any present or future guarantor of the Obligations.

“Hard Costs” is
defined in Section 2.1.7(a).

“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.

 22
 

 

“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;

(e)           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 2.1.3.

“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.

“Non-Formula Advance”
or “Non-Formula Advances” is a loan advance
(or advances) under the Committed Non-Formula Revolving Line.

 23
 

 

“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:

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

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

(h)           Subordinated Debt including, but not
limited to Subordinated Debt associated with Borrower’s future investment of up
to $3,666,900 in Tower Semiconductor;

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

(j)            Indebtedness secured by Permitted Liens;

(k)           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);

(l)            Other Indebtedness not otherwise
permitted by Section 7.4 not exceeding $250,000 in the aggregate outstanding at
any time;

(m)          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; and

(g)           Indebtedness
of Borrower to (i) finance directors’ and officers’ liability insurance and
(ii) to finance Borrower’s “Cadence” and “Mentor Graphics” software licensing.

“Permitted Investments”
are:

Investments shown on the Disclosure Letter and
existing on the Closing Date; and

(a)           (i) marketable direct
obligations issued or unconditionally guaranteed by the United States or its
agency or any state maturing within one 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)  certificates of deposit issued
maturing no more than one year after issue.

 24
 

 

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

(c)           Investments accepted in connection with
Transfers permitted by Section 7.1, 7.3 and 7.6;

(d)           Investments by Borrower in
Subsidiaries in the form of: (A) capital stock of Subsidiaries not to
exceed $500,000 in the aggregate in any fiscal year and (B) all other
advancements, so long as any such investment is made for the purpose of funding
operational requirements of the relevant Subsidiary and so long as no
Subsidiary maintains cash and cash equivalents at any time in excess of: (i)
$250,000 for Quicklogic India; (ii) $750,000 for Quicklogic Canada; and (iii)
$75,000 for each subsidiary other than Quicklogic India and Quicklogic
Canada.  In the event that any Subsidiary
does maintain cash and cash equivalents in excess of the aforementioned
limitation, any transfer of cash by Borrower to any Subsidiary shall not be
permitted under the terms of this Agreement.

(e)           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;

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

(g)           Investments 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;

(h)           Investments made pursuant to Borrower’s
investment policy, as approved by Bank from time to time;

(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 $250,000 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 on or after
May 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;

 25
 

 

(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 or software acquired or held by Borrower or its Subsidiaries incurred
for financing the acquisition of the Equipment (including Liens arising in
connection with capital leases), or (ii) existing on equipment when
acquired, if the Lien is confined to the property, attachments 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 and capital leases of Equipment or software;

(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 approved by Bank in writing,
granted to lenders to secure Permitted Indebtedness;

(i)            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;

(j)            Liens arising from Indebtedness of
Borrower in connection with financing Borrower’s directors’ and officers’
liability insurance and Borrower’s “Cadence” or “Mentor Graphics” software
licensing.

(k)           Liens
on insurance proceeds securing the payment of financed insurance premiums;

(k)           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.

 26
 

 

“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 and cash and cash
equivalents, accounts receivable, investments with maturities of fewer than 12
months and long-term investments with maturities of more than 12 months held at
Bank or its affiliates, determined according to GAAP.

“Quicklogic Canada”
means QuickLogic Canada Company.

“Quicklogic India”
means QuickLogic (India) Private Limited.

“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 June 28, 2008.

“Revolving Obligations” is the
sum of : (i) any amounts deemed outstanding under the Cash Management Services
Sublimit, plus (ii) the amount of all outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit), plus (iii) the FX
Reserve, plus (iv) outstanding Advances.

“Soft Costs” is
defined in Section 2.1.7(a).

“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, and Copyrights, 
(ii) Total Liabilities; plus realized or unrealized write
downs relating to Borrower’s investment in Tower Semiconductor that are charged
on or after January 1, 2003.

“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.

“Treasury Rate”
is the per annum rate of interest (based on a year of 360- days) equal to the
sum of the U.S. Treasury note yield to maturity for a term equal to the
Treasury Note Maturity date as quoted in The Wall Street Journal on the date of
the applicable Advance.

“Treasury Note Maturity”
is the term of 36 months.

[Signature Page to
Follow]

 27
 

 

IN WITNESS WHEREOF, the undersigned parties have
executed this Second Amended and Restated Loan and Security Agreement as of the
date first set forth above.

	
  

  	
  BORROWER:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  QUICKLOGIC
  CORPORATION

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Carl M.
  Mills

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  VP Finance and
  CFO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BANK:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SILICON VALLEY
  BANK

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Rick Freeman

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Relationship Manager

  	
   

  
						

 

 28

 

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 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
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 shall not include any of the following created,
modified or amended (to the extent of the modification or amendment), acquired
or obtained on or after June 28, 2004: Any copyrights, copyright applications,
copyright registration and like protection in each work of authorship and
derivative work thereof, whether published or unpublished, now owned or
hereafter acquired; any patents, patent applications and like protections
including without limitation improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same, trademarks,
servicemarks and applications therefor, whether registered or not, and the
goodwill of the business of Borrower connected with and symbolized by such
trademarks, any trade secret rights, including any rights to unpatented
inventions, know-how, operating manuals, license rights and agreements and
confidential information, now owned or hereafter acquired; or any claims for
damage by way of any past, present and future infringement of any of the
foregoing (collectively, the “Intellectual Property”), except that the
Collateral shall include the proceeds of all the Intellectual Property that are
accounts, (i.e. accounts receivable) of Borrower, or general intangibles
consisting of rights to payment, if a judicial authority (including a U.S.
Bankruptcy Court) holds that a security interest in the underlying Intellectual
Property is necessary to have a security interest in such accounts and general
intangibles of Borrower that are proceeds of the Intellectual Property, then
the Collateral shall automatically, and effective as of the Closing Date,
include the Intellectual Property to the extent necessary to permit perfection
of Bank’s security interest in such accounts and general intangibles of
Borrower that are proceeds of the Intellectual Property.

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).

 

EXHIBIT B

LOAN PAYMENT/ADVANCE
TELEPHONE REQUEST FORM

DEADLINE FOR PROCESSING IS 12 NOON, 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)

  
						

 

 

EXHIBIT C

COMPLIANCE CERTIFICATE

	
  TO:

  	
  SILICON VALLEY BANK

  
	
   

  	
  3003 Tasman
  Drive

  
	
   

  	
  Santa Clara, CA
  95054

  
	
   

  	
   

  
	
  FROM:

  	
  QUICKLOGIC CORPORATION

  
	
   

  	
  1227 Orleans
  Drive

  
	
   

  	
  Sunnyvale, CA
  94089-1138

  

 

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)

  	
   

  	
  Annual within 120 of FYE

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Board Approved
  Projections

  	
   

  	
  Prior to December 20th

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Accounts Payable
  and Accounts Receivable Listings

  	
   

  	
  Within 30 days of the end of each month

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  10-Q, 10-K
  and 8-K

  	
   

  	
  Within 5 days after filing with SEC

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Minimum Tangible
  Net Worth

  	
   

  	
  Monthly; $31,000,000

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Quick Ratio
  (Adjusted)

  	
   

  	
  1.55to 1.00

  	
   

  	
  Yes

  	
   

  	
  No

  

 

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

  	
  Yes

  	
  No

  

 

Comments Regarding Exceptions: See Attached. 

 

Sincerely, 

 

QuickLogic Corporation 

 

 

	
  

  	
   

  
	
  Signature 

  
	
   

  
	
   

  	
   

  
	
  Title 

  
	
   

  
	
   

  	
   

  
	
  Date

  

 

 

	
  BANK USE ONLY

  	 

	
   

  	 

	
  Received by:

  	
   

  	
   

  	 

	
   

  	
  authorized signer

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  Date:

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  Verified:

  	
   

  	
   

  	 

	
   

  	
  authorized signer 

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  Date:

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  Compliance
  Status:

  	
  Yes

  	
  No

  	
   

  
									

 

 

EXHIBIT D

 

CORPORATE BORROWING RESOLUTION

	
  Borrower:

  	
  QuickLogic Corporation

  1227 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 duly organized and existing under the laws of the
State of Delaware.

I certify
that at a meeting of Borrower’s Board of 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

  	
   

  
	
  E. Thomas Hart

  	
   

  	
  Chairman, President
  & CEO

  	
   

  	
   

  	
   

  
	
  Carl M. Mills

  	
   

  	
  Vice President, Finance
  & CFO

  	
   

  	
   

  	
   

  
	
  David F.
  Peterson

  	
   

  	
  Corporate Controller

  	
   

  	
   

  	
   

  
	
  Timothy Saxe

  	
   

  	
  Vice President, Engineering

  	
   

  	
   

  	
   

  

 

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.Exhibit 4.5

 

	
  

  	
  NUMBER NY 01158 [ILLEGIBLE] SPECIMEN COMMON
  STOCK CUSIP 91307C 10 2  UNITED THERAPEUTICS CORPORATION

   

  INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

   

  This certifies
  that

   

  SPECIMEN

   

  is the
  registered holder of

   

  fully paid and non-assessable shares of common stock,
  with a par value of $0.01, of

   

  UNITED THERAPEUTICS CORPORATION

   

  COMMON

   

  transferable on the books of the Company by such
  registered holder in person or by attorney duly authorized in writing upon
  surrender of this certificate properly endorsed.  This certificate is not valid until
  countersigned and registered by the Transfer Agent and Registrar.

   

  In Witness Whereof the said Company has caused this certificate
  to be signed by its duly authorized officer.

      Dated
    Countersigned and Registered  

  The Bank of New
  York  New York  Transfer Agent and Registrar  SPECIMEN Authorized
  Officer  PRESIDENT  SECRETARY This certificate is
  transferable at the offices of The Bank of New York, in New York City.

  

 

 

NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.

 

 

For value received                 hereby
sell, assign and transfer unto

 

 

(PLEASE PRINT OR TYPEWRITE NAME, ADDRESS AND
S.I.N OF ASSIGNEE)

 

 

SOCIAL INSURANCE NUMBER

 

 

                                                                                       Shares
of the Capital Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint

 

 

                                                                                       Attorney
to transfer the said stock on the Books of the within-named Corporation with
full power of substitution in the premises.

 

Dated

 

 

	
   

  	
  X

  
	
   

  	
  NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
  NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR,
  WITHOUT ALTERATION, OR ENLARGEMENT, OR ANY CHANGE WHATEVER.

  

 

 

In the
presence of

 

	
   

  	
   

  
	
  Signature Guaranteed by:

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