Document:

exv10w16

 

Exhibit 10.16

LOAN AND SECURITY AGREEMENT

SYNAPTICS INCORPORATED

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	 	Page
	 
	1 ACCOUNTING AND OTHER TERMS
	 	 	1	 
	2 LOAN AND TERMS OF PAYMENT
	 	 	1	 
	2.1 Promise to Pay
	 	 	1	 
	2.2 Overadvances
	 	 	2	 
	2.3 Interest Rate, Payments
	 	 	2	 
	2.4 Fees
	 	 	3	 
	3 CONDITIONS OF LOANS
	 	 	3	 
	3.1 Conditions Precedent to initial Credit Extension
	 	 	3	 
	3.2 Conditions Precedent to all Credit Extensions
	 	 	3	 
	4 CREATION OF SECURITY INTEREST
	 	 	3	 
	4.1 Grant of Security Interest
	 	 	3	 
	4.2 Authorization of File
	 	 	4	 
	5 REPRESENTATIONS AND WARRANTIES
	 	 	4	 
	5.1 Due Organization and Authorization
	 	 	4	 
	5.2 Collateral
	 	 	4	 
	5.3 Litigation
	 	 	5	 
	5.4 No Material Adverse Change in Financial Statements
	 	 	5	 
	5.5 Solvency
	 	 	5	 
	5.6 Regulatory Compliance
	 	 	5	 
	5.7 Subsidiaries
	 	 	6	 
	5.8 Full Disclosure
	 	 	6	 
	6 AFFIRMATIVE COVENANTS
	 	 	6	 
	6.1 Government Compliance
	 	 	6	 
	6.2 Financial Statements, Reports, Certificates
	 	 	6	 
	6.3 Inventory; Returns
	 	 	7	 
	6.4 Taxes
	 	 	7	 
	6.5 Insurance
	 	 	7	 
	6.6 Primary Accounts
	 	 	8	 
	6.7 Financial Covenants
	 	 	8	 
	6.8 Registration of Intellectual Property Rights
	 	 	8	 
	6.9 Further Assurances
	 	 	8	 
	7 NEGATIVE COVENANTS
	 	 	8	 
	7.1 Dispositions
	 	 	8	 
	7.2 Changes in Business, Ownership, Management or Locations of Collateral
	 	 	9	 
	7.3 Mergers or Acquisitions
	 	 	9	 
	7.4 Indebtedness
	 	 	9	 
	7.5 Encumbrance
	 	 	9	 
	7.6 Distributions; Investments
	 	 	9	 

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	 	 	 	Page
	 
	7.7 Transactions with Affiliates
	 	 	10	 
	7.8 Subordinated Debt
	 	 	10	 
	7.9 Compliance
	 	 	10	 
	8 EVENTS OF DEFAULT
	 	 	10	 
	8.1 Payment Default
	 	 	10	 
	8.2 Covenant Default
	 	 	10	 
	8.3 Material Adverse Change
	 	 	11	 
	8.4 Attachment
	 	 	11	 
	8.5 Insolvency
	 	 	11	 
	8.6 Other Agreements
	 	 	11	 
	8.7 Judgments
	 	 	11	 
	8.8 Misrepresentations
	 	 	11	 
	9 BANK’S RIGHTS AND REMEDIES
	 	 	12	 
	9.1 Rights and Remedies
	 	 	12	 
	9.2 Power of Attorney
	 	 	12	 
	9.3 Accounts Collection
	 	 	13	 
	9.4 Bank Expenses
	 	 	13	 
	9.5 Bank’s Liability for Collateral
	 	 	13	 
	9.6 Remedies Cumulative
	 	 	13	 
	9.7 Demand Waiver
	 	 	13	 
	10 NOTICES
	 	 	14	 
	11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
	 	 	14	 
	12 GENERAL PROVISIONS
	 	 	14	 
	12.1 Successors and Assigns
	 	 	14	 
	12.2 Indemnification
	 	 	14	 
	12.3 Time of Essence
	 	 	14	 
	12.4 Severability of Provision
	 	 	15	 
	12.5 Amendments in Writing, Integration
	 	 	15	 
	12.6 Counterparts
	 	 	15	 
	12.7 Survival
	 	 	15	 
	12.8 Confidentiality
	 	 	15	 
	12.9 Attorneys’ Fees, Costs and Expenses
	 	 	15	 
	13 DEFINITIONS
	 	 	16	 
	13.1 Definitions
	 	 	16	 

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

	1	 	ACCOUNTING AND OTHER TERMS

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

	2	 	LOAN AND TERMS OF PAYMENT
	 
	2.1	 	Promise to Pay.

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

	2.1.1	 	Revolving Advances.

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

     (b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 12:00 p.m. Pacific time on the Business Day the Advance is to be
made. Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as Exhibit B. Bank will credit Advances to
Borrower’s deposit account. Bank may make Advances under this Agreement based
on instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have
become due. Bank may rely on any telephone notice given by a person whom Bank
reasonably believes is a Responsible Officer or designee. Borrower will
indemnify Bank for any loss Bank suffers due to such reliance.

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

	2.1.2	 	Letters of Credit Sublimit.

     Bank will issue or have issued Letters of Credit for Borrower’s account
not exceeding (i) the lesser of the Committed Revolving Line or the Borrowing
Base minus (ii) the outstanding principal balance of the Advances minus all
amounts for services utilized under the Cash Management Services Sublimit,
minus the FX Reserve; however, the face amount of outstanding

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Letters of Credit (including drawn but unreimbursed Letters of Credit) may
not exceed $4,200,000. Each Letter of Credit will have an expiration date of no
later than 180 days after the Revolving Maturity Date, but Borrower’s
reimbursement obligation will be secured by cash on terms acceptable to Bank at
any time after the Revolving Maturity Date if the term of this Agreement is not
extended by Bank. Borrower agrees to execute any further documentation in
connection with the Letters of Credit as Bank may reasonably request.

	2.1.3	 	Foreign Exchange Sublimit.

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

	2.1.4	 	Cash Management Services Sublimit.

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

	2.2	 	Overadvances.

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

	2.3	 	Interest Rate, Payments.

     (a) Interest Rate. Advances accrue interest on the outstanding principal
balance at a per annum rate of 0.5 percentage points above the Prime Rate.
After an Event of Default and during the continuance of an Event of Default,
Obligations accrue interest at 5 percent above the rate effective immediately
before the Event of Default. The interest rate increases or decreases when the
Prime Rate changes. Interest is computed or, a 360 day year for the actual
number of days elapsed.

     (b) Payments, Interest due on the Committed Revolving Lien. is payable on
the 14th of each month. Bank may debit any of Borrower’s deposit accounts
including Account Number                     for principal and interest payments
owing or any amounts Borrower owes Bank. Bank will promptly notify Borrower
when it debits Borrower’s accounts. These debits are not a set-off. Payments
received after 12:00 noon Pacific time are considered received at the opening
of business on the next Business Day. When a payment is due on a day that is
not a Business Day, the payment is due the next Business Day and additional
fees or interest accrue.

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	2.4	 	Fees.

     Borrower will pay:

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

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

	3	 	CONDITIONS OF LOANS
	 
	3.1	 	Conditions Precedent to initial Credit Extension.

     Banks obligation to make the initial Credit Extension is subject to the
condition precedent that:

     (a) It receive the agreements, documents and fees it requires; and

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

	3.2	 	Conditions Precedent to all Credit Extensions.

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

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

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

	4	 	CREATION OF SECURITY INTEREST
	 
	4.1	 	Grant of Security Interest.

     Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and
performance of each of Borrower’s duties under the Loan Documents, Except for
Permitted Liens, any security interest will be a first priority security
interest in the Collateral. After an Event of Default and continuance of an
Event of Default, Bank may place a “hold” on any deposit account pledged as
Collateral. Notwithstanding the foregoing, the security interest granted herein
does not extend to and the term “Collateral” does nor include any license or
contract rights to the extent (i) the granting of a security interest in it
would be contrary to applicable law, or (ii) that such rights are nonassignable
by their terms (but only to the extent such prohibition is enforceable under
applicable law, including, without

3

 

limitation, Section 9318(4) of the Code) without the consent of the
licensor or other party (but only to the extent such consent has not been
obtained). Except as disclosed on the Schedule, Borrower is not a party to, nor
is bound by any license or other agreement that prohibits or otherwise
restricts Borrower from granting a security interest in Borrower’s interest in
such license or agreement or any other property. Without prior notice to Bank,
Borrower shall not enter into, or become bound by, any such license or
agreement which is reasonably likely to have a material impact on Borrower’s
business or financial condition, Borrower shall take such steps as Bank
reasonably requests to obtain the consent of or waiver by, any person whose
consent or waiver is necessary for such licenses or contract rights to be
deemed “Collateral” and for Bank to have a security interest in it that might
otherwise be restricted or prohibited by law or by the terms of any such
license or agreement, whether now existing or entered into in the future. If
this Agreement is terminated, Bank’s lien and security interest in the
Collateral will continue until Borrower fully satisfies its Obligations.

	4.2	 	Authorization of File.

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

	5	 	REPRESENTATIONS AND WARRANTIES

     Borrower represents and warrants as follows:

	5.1	 	Due Organization and Authorization.

     Borrower and each Subsidiary is duly existing and in good standing in its
state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be qualified, except where the failure to do so could
not reasonably be expected to cause a Material Adverse Change. Borrower has not
changed its state of formation or its organizational structure or type or any
organizational number (if any) assigned by its jurisdiction of formation.

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

	5.2	 	Collateral.

     Borrower has good title to the Collateral, free of Liens except Permitted
Liens. Borrower has no other deposit account, other than the deposit accounts
described in the Schedule. The Accounts are bona fide, existing obligations,
and the service or property has been performed or delivered to the account
debtor or its agent for immediate shipment to and unconditional acceptance by
the account debtor. The Collateral is not in the possession of any third party
bailee (such as at a warehouse). In the event that Borrower, after the date
hereof, intends to store or otherwise deliver the Collateral to such a bailee,
then Borrower will provide notice to the Bank.

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Borrower has no notice of any actual imminent Insolvency Proceeding of any
account debtor whose accounts are an Eligible Account in any Borrowing Base
Certificate, All Inventory is in all material respects of good and marketable
quality, free from material defects. Borrower is the sole owner of the
Intellectual Property, except for licenses granted to its customers in the
ordinary course of business. Each Patent is valid and enforceable and no part
of the Intellectual Property has been judged invalid or unenforceable, in whole
or in part, and to the Borrower’s knowledge no claim has been made that any
part of the Intellectual Property violates the rights of any third party,
except to the extent such claim could not reasonably be expected to cause a
Material Adverse Change.

	5.3	 	Litigation.

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

	5.4	 	No Material Adverse Change in Financial Statements.

     All consolidated financial statements for Borrower, and any Subsidiary,
delivered to Bank fairly present in all material respects Borrower’s
consolidated financial condition and Borrower’s consolidated results of
operations, There has not been any material deterioration in Borrower’s
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.

	5.5	 	Solvency.

     The fair salable value of Borrower’s assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; the Borrower is
not left, with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as
they mature.

	5.6	 	Regulatory Compliance.

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

5

 

to continue its business as currently conducted, except where the failure
to do so could not reasonably be expected to cause a Material Adverse Change.

	5.7	 	Subsidiaries.

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

	5.8	 	Full Disclosure.

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

	6	 	AFFIRMATIVE COVENANTS

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

	6.1	 	Government Compliance.

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

	6.2	 	Financial Statements, Reports, Certificates.

     (a) Borrower will deliver to Bank: (i) as soon as available, but no later
than 30 days after the last day of each month, a company prepared consolidated
balance sheet and income statement covering Borrower’s consolidated operations
during the period certified by a Responsible Officer and in a form acceptable
to Bank; (ii) as soon as available, but no later than 120 days after the last
day of Borrower’s fiscal year, audited consolidated financial statements
prepared under GAAP, consistently applied, together with an opinion which is
unqualified or otherwise consented to by Bank on the financial statements from
an independent certified public accounting firm reasonably acceptable to Bank;
(iii) a prompt report of any legal actions pending or threatened against
Borrower or any Subsidiary that could result in damages or costs to Borrower or
any Subsidiary of $250,000 or more; (iv) budgets, sales projections, operating
plans or other financial information Bank reasonably requests; and (v) prompt
notice of any material change in the composition of the Intellectual Property,
including any subsequent ownership right

6

 

of Borrower in or to any Copyright, Patent or Trademark not shown in any
intellectual property security agreement between Borrower and Bank or knowledge
of an event that materially adversely affects the value of the Intellectual
Property.

     (b) Within 30 days after the last day of each month, Borrower will deliver
to Bank a Borrowing Base Certificate signed by a Responsible Officer in the
form of Exhibit C, with aged listings of accounts receivable by due date,
including payment terms, and accounts payable by due date, including payment
terms.

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

     (d) Allow Bank to audit Borrower’s Collateral at Borrower’s expense,
provided each audit shall not exceed $1,500. Such audits will be conducted no
more often than every year unless an Event of Default has occurred and is
continuing.

	6.3	 	Inventory; Returns.

     Borrower will keep all Inventory in good and marketable condition, free
from material defects. Returns and allowances between Borrower and its account
debtors will follow Borrower’s customary practices. Borrower must promptly
notify Bank of all returns, recoveries, disputes and claims, that involve more
than $250,000.

	6.4	 	Taxes.

     Borrower will make, and cause each Subsidiary to make, timely payment of
all material federal, state, and local taxes or assessments and will deliver to
Bank, on demand, appropriate certificates attesting to the payment except those
being contested in good faith with adequate reserves under GAAP.

	6.5	 	Insurance.

     Borrower will keep its business and the Collateral insured for risks and
in amounts, as Bank may reasonably request, insurance policies will be in a
form with companies, and in amounts that are satisfactory to Bank in Bank’s
reasonable discretion. All property policies will have a lender’s loss payable
endorsement showing Bank as an additional loss payee and all liability policies
will show the Bank as an additional insured and provide that the insurer must
give Bank at least 20 days notice before canceling its policy. At Bank’s
request, Borrower will deliver certified copies of policies and evidence of all
premium payments. If no Event of Default has occurred and is continuing,
proceeds payable under any casualty policy will, at Borrower’s option, be
payable to Borrower to replace the property subject to the claim, provided that
any such replacement property shall be deemed Collateral in which Bank has been
granted a first priority security interest. If an Event of Default has occurred
and is continuing, then, at Bank’s option, proceeds payable under any policy
will be payable to Bank on account of the Obligations.

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	6.6	 	Primary Accounts.

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

6.7  Financial Covenants.

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

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

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

	6.8	 	Registration of Intellectual Property Rights.

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

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

	6.9	 	Further Assurances.

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

	7	 	NEGATIVE COVENANTS

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

	7.1	 	Dispositions.

     Convey, sell, lease, transfer or otherwise dispose of (collectively
“Transfer”), or permit any of its Subsidiaries to Transfer, al or any part of
its business or property, except for Transfers (i) of inventory in the ordinary
course of business; (ii) of licenses and similar arrangements for the use of
the property of Borrower or its Subsidiaries in the ordinary course of
business; or (iii)

8

 

of worn-out or obsolete Equipment; and (iv) other Transfers which in the
aggregate do not exceed $250,000 in any fiscal year.

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

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

	7.3	 	Mergers or Acquisitions.

     Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person, except where (i) no Event of Default has occurred
and is continuing or would result from such action including the term of this
Agreement; (ii) such transactions do not in the aggregate exceed $10,000,000;
or (iii) such transaction would not result in a decrease of more than 25% of
Tangible Net Worth. A Subsidiary may merge or consolidate into another
Subsidiary or into Borrower.

	7.4	 	Indebtedness.

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

	7.5	 	Encumbrance.

     Create, incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or permit
any Collateral not to be subject to the first priority security interest
granted here, subject to Permitted Liens.

	7.6	 	Distributions; Investments.

     Directly or indirectly acquire or own any Person, or make any Investment
in any Person, other than Permitted Investments, or permit any of its
Subsidiaries to do so. Pay any dividends or make any distribution or payment or
redeem, retire or purchase any capital stock except for repurchases of stock
from former employees or directors of Borrower under the terms of applicable
repurchase agreements in an aggregate amount not to exceed $250,000 in the
aggregate in any fiscal year, provided that no Event of Default has occurred,
is continuing or would exist after giving effect to the repurchases.

9

 

	7.7	 	Transactions with Affiliates.

     Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except for transactions that are in
the ordinary course of Borrower’s business, upon fair and reasonable terms that
are no less favorable to Borrower than would be obtained in an arm’s length
transaction with a nonaffiliated Person.

	7.8	 	Subordinated Debt.

     Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any provision in any document relating
to the Subordinated Debt without Bank’s prior written consent.

	7.9	 	Compliance.

     Become an “investment company” or a company controlled by an “investment
company,” under the Investment Company Act of 1940 or undertake as one of its
important activities extending credit to purchase or carry margin stock, or use
the proceeds of any Credit Extension for that purpose; fail to meet the minimum
funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction. as defined in ERISA, to occur; fail to comply with the Federal
Fair Labor Standards Act or violate any other Jaw 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 5 days after their
due date. During the additional period the failure to cure the default is not
an Event of Default (but no Credit Extension will be made during the cure
period);

	8.2	 	Covenant Default.

     If Borrower does not perform any obligation in Section 6 or violates any
covenant in Section 7 or does not perform or observe any other material term,
condition or covenant in this Agreement, any Loan Documents, or in any
agreement between Borrower and Bank and as to any default under a term,
condition or covenant that can be cured, has not cured the default within 20
days after it occurs, or if the default cannot be cured within 20 days or
cannot be cured after Borrower’s attempts within 20 day period, and the default
may be cured within a reasonable time, then Borrower has an additional period
(of not more than 45 days) to attempt to cure the default. During the
additional time, the failure to cure the default is not an Event of Default
(but no Credit Extensions will be made during the cure period);

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	8.3	 	Material Adverse Change.

     If there (i) occurs a material adverse change in the business, operations,
or condition (financial or otherwise) of the Borrower, or (ii) is a material
impairment of the prospect of repayment of any portion of the Obligations; or
(iii) is a material impairment of the value or priority of Bank’s security
interests in the Collateral.

	8.4	 	Attachment.

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

	8.5	 	Insolvency.

     If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 45 days (but no Credit Extensions will be made
before any Insolvency Proceeding is dismissed);

	8.6	 	Other Agreements.

     If there is a default in any agreement between Borrower and a third party
that gives the third party the right to accelerate any Indebtedness exceeding
$250,000 or that could cause a Material Adverse Change;

	8.7	 	Judgments.

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

	8.8	 	Misrepresentations.

     In the Bank’s reasonable judgement, if Borrower or any Person acting for
Borrower makes any material misrepresentation or material misstatement now or
later in any warranty or representation in this Agreement or in any
communication delivered to Bank or to induce Bank to enter this Agreement or
any Loan Document.

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	9	 	BANK’S RIGHTS AND REMEDIES
	 
	9.1	 	Rights and Remedies.

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

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

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

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

     (d) Make any payments and do any acts it considers necessary or reasonable
to protect its security interest in the Collateral. Borrower will assemble the
Collateral if Bank requires and make it available as Bank designates. Bank may
enter premises where the Collateral is located, take and maintain possession of
any part of the Collateral, and pay, purchase, contest, or compromise any Lien
which appears to be prior or superior to its security interest and pay all
expenses incurred. Borrower grants Bank s 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 sate, and sell the Collateral. Bank is granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s labels, Patents, Copyrights, Mask Works, rights of use of any name,
trade secrets, trade names, Trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral. in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank’s exercise of its rights under this Section, Borrower’s
rights under all licenses and all franchise agreements inure to Bank’s benefit;
and

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

	9.2	 	Power of Attorney.

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

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continue the perfection of any security interest regardless of whether an
Event of Default has occurred. Bank’s appointment as Borrower’s attorney in
fact, and all of Bank’s rights and powers, coupled with an interest, are
irrevocable until: all Obligations have been fully repaid and performed and
Bank’s obligation to provide Credit Extensions terminates.

	9.3	 	Accounts Collection.

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

	9.4	 	Bank Expenses.

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

	9.5	 	Bank’s Liability for Collateral.

     If Bank complies with reasonable banking practices and Section 9-207 of
the Code, it is not liable for: (a) the safekeeping of the Collateral; (b) any
loss or damage to the Collateral; (c) any diminution in the value of the
Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or
other person. Borrower bear all risk of loss, damage or destruction of the
Collateral.

	9.6	 	Remedies Cumulative.

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

	9.7	 	Demand Waiver.

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

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	10	 	NOTICES

     All notices or demands by any party about this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile to the addresses set forth at the beginning of
this Agreement. Bank will use its good faith efforts to make sure notices are
directed to the attention of the Chief Executive Officer and Chief Financial
Officer. A party may change its notice address by giving the other party,
written notice.

	11	 	CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

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

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

	12	 	GENERAL PROVISIONS
	 
	12.1	 	Successors and Assigns.

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

	12.2	 	Indemnification.

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

	12.3	 	Time of Essence.

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

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	12.4	 	Severability of Provision.

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

	12.5	 	Amendments in Writing, Integration.

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

	12.6	 	Counterparts.

     This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.

	12.7	 	Survival.

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

	12.8	 	Confidentiality.

     In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank’s subsidiaries or affiliates
in connection with their present or prospective business relations with
Borrower, (ii) to prospective transferees or purchasers of any interest in the
loans (provided, however, Bank shall use commercially reasonable efforts in
obtaining such prospective transferee or purchasers written agreement of the
terms of this provision), (iii) as required by law, regulation, subpoena, or
other order, (iv) as required in connection with Bank’s examination or audit
and (v) as Bank considers appropriate in exercising remedies under this
Agreement. Confidential information does not include information that either:
(a) is in the public domain or in Bank’s possession when disclosed to Bank, or
becomes part of the public domain after disclosure to Bank through no fault of
Bank; or (b) is disclosed to Bank by a third party, if Bank does reasonably not
know that the third party is prohibited from disclosing the information.

	12.9	 	Attorneys’ Fees, Costs and Expenses.

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

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	13	 	DEFINITIONS
	 
	13.1	 	Definitions.

     In this Agreement:

     “Accounts” are all existing and later arising accounts, contract rights,
and other obligations owed Borrower in connection with its sale or lease of
goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower’s Books relating to any of the
foregoing, as such definition may be amended from time to time according to the
Code.

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

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

     “Bank Expenses” are all audit fees and expenses and reasonable costs and
expenses (including reasonable attorneys’ fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or insolvency Proceedings).

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

     “Borrowing Base” is 75% of Eligible Accounts as determined by Bank from
Borrower’s most recent Borrowing Base Certificate; provided, however, that Bank
may lower the percentage of the Borrowing Base after performing an audit of
Borrower’s Collateral.

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

     “Cash Management Services” are defined in Section 2.1.4.

     “Closing Date” is the date of this Agreement.

     “Code” is the Uniform Commercial Code, as applicable.

     “Collateral” is the property described on Exhibit A.

     “Committed Revolving Line” is $4,200,000 outstanding at any one time.

     “Contingent Obligation” is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of

16

 

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

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

     “Credit Extension” is each Advance, Letter of Credit, Exchange Contract,
or any other extension of credit by Bank for Borrower’s benefit.

     “Current Liabilities” are the aggregate amount of Borrower’s Total
Liabilities which mature within one (1) year.

     “Eligible Accounts” are Accounts in the ordinary course of Borrower’s
business that meet all Borrower’s representations and warranties in Section 5;
but Bank may reasonably change eligibility standards by giving Borrower 30 days
prior written notice. Unless Bank agrees otherwise in writing, Eligible
Accounts will not include:

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

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

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

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

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

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

17

 

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

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

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

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

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

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

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

     “FX Forward Contract” is defined in Section 2.1.3.

     “FX Reserve” is defined in Section 2.1.3.

     “GAAP” is generally accepted accounting principles.

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

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

     “Intellectual Property” is all of Borrower’s:

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

18

 

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

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

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

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

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

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

     “Letter of Credit” is defined n Section 2.1.2.

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

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

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

     “Material Adverse Change” is defined in Section 8.3.

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

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

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     “Permitted Indebtedness” is:

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

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

     (c) Subordinated Debt;

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

     (e) indebtedness secured by Permitted Liens;

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

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

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

     “Permitted Investments” are:

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

     (b) (i) marketable direct obligations issued or unconditionally guaranteed
by he United States or its agency or any State maturing within 1 year from its
acquisition, (ii) commercial paper maturing no more than 1 year after its
creation and having the highest rang from either Standard & Poor’s Corporation
or Moody’s investors Service, Inc., and (iii) Bank’s certificates of deposit
issued maturing no more than 1 year after issue, and (iv) any Investments
permitted by Borrower’s investment policy, as amended from time to time,
provided that such investment policy (and any such amendment thereto) has been
approved by Bank;

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

     (d) Investments accepted in connection with Transfers permitted by Section
7,1;

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

20

 

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

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

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

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

     “Permitted Liens” are:

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

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

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

     (d) Licenses or sublicenses granted in the ordinary course of Borrower’s
business and any interest or title of a licensor or under any license or
sublicense;

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

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

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

21

 

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

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

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

     “Prime Rate” is Bank’s most recently announced “prime rate,” even if it is
not Bank’s lowest rate.

     “Quick Assets” is, on any date, the Borrower’s consolidated, unrestricted
cash, cash equivalents, net billed accounts receivable and investments with
maturities of fewer than 12 months determined according to GAAP.

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

     “Revolving Maturity Date” is August 29, 2002.

     “Schedule” is any attached schedule of exceptions.

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

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

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

     “Total Liabilities” is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower’s consolidated balance sheet, including
all Indebtedness, and current portion Subordinated Debt allowed to be paid, but
excluding all other Subordinated Debt.

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

22

 

BORROWER:

SYNAPTICS INCORPORATED

By: /s/ Russ J. Knittel

Title: Vice President and Chief Financial Officer

BANK:

SILICON VALLEY BANK

By: /s/ Rony L. Drake

Title: Vice President

23

 

EXHIBIT A

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

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

     All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower’s custody or possession or in
transit and including any returns upon any accounts or other proceeds,
including insurance proceeds, resulting from the sale or disposition of any of
the foregoing and any documents of title representing any of the above;

     All contract rights and general intangibles (as such definitions may be
amended from time to time according to the Code), now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind,;

     All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower (as such definitions may be amended from time
to time according to the Code) whether or not earned by performance, and any
and all credit insurance. insurance (including refund) claims and proceeds,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by Borrower;

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

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

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

A-1

 

LOAN MODIFICATION AGREEMENT

This Loan Modification Agreement is entered into as of June 10, 2002, by and
between Synaptics Incorporated (the “Borrower”) and Silicon Valley Bank
(‘“Bank”).

1. DESCRIPTION OF EXISTING OBLIGATIONS: Among other Obligations which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among
other documents, a Loan and Security Agreement, dated August 30, 2001, as may
be modified or amended from time to time, (the “Loan Agreement”). The Loan
Agreement provides for, among other things, a Committed Revolving Line in the
original principal amount of Four Million Two Hundred Thousand Dollars
($4,200,000). Defined terms used but not otherwise defined herein shall have
the same meanings as set forth in the Loan Agreement.

Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the “Obligations.”

2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement and the Intellectual Property,
Security Agreement.

Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Obligations shall be
referred to as the “Security Documents”. Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Obligations shall
be referred to as the “Existing Loan Documents”.

3. DESCRIPTION OF CHANGE IN TERMS.

	 	A.	 	Modification(s) to Loan Agreement.

	 	1.	 	Effective as of this date, the first sentence of
subletter (a) under Section 2.3 entitled “Interest Rate,
Payments” is hereby amended to read as follows:
	 
	 	 	 	Advances accrue interest on the outstanding principal balance
at a per annum rate equal to the Prime Rate.
	 
	 	2.	 	Section 6.2 entitled “Financial Statements,
Reports, Certificates” is hereby deleted in their entirety and
replaced with the following:

(a) Borrower will deliver to Bank: (i) within 5 days of
filing, copies 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 and 10-Q filed
with the Securities and Exchange Commission; (ii) a prompt
report of any legal actions pending or threatened against
Borrower
or any Subsidiary that could result in damages or costs to
Borrower or any Subsidiary of $250,000 or more; (iii)
budgets, sales projections, operating plans or other
financial information Bank reasonably requests; and (iv)
prompt notice of any material change in the composition of
the Intellectual

 

 

Property 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) Effective as of the month ending June 30, 2002 and at
such times as Advances and/or Letters of Credit are
outstanding, within 30 days after the last day of each month,
Borrower will deliver to Bank a Borrower Base Certificate
signed by a Responsible Officer in the form of Exhibit C,
with aged listings of accounts receivable and accounts
payable (by invoice date).

(c) Within 50 days after the last day of each quarter,
Borrower will deliver to Bank a Compliance Certificate signed
by a Responsible Officer in the form of Exhibit D.

(d) Allow Bank to audit Borrower’s Collateral at Borrower’s
expense, provided each audit shall not exceed $1,500. Such
audits will be conducted no more often than every year unless
an Event of Default has occurred and is continuing.

	 	3.	 	Section 6.5 entitled “Primary Accounts” is hereby
amended to read as follows:
	 
	 	 	 	Borrower will maintain its primary banking relationship with
Bank, which relationship shall include Borrower maintaining
account balances in any accounts at or through Bank
representing at least 20% of all account balances of Borrower
at any financial institution.
	 
	 	4.	 	Section 6.7 entitled “Financial Covenants” is
hereby amended in its entirety to read as follows:
	 
	 	 	 	Borrower will maintain as of the last day of each quarter:
	 
	 	 	 	Quick Ratio. A ration of Quick Assets to Current Liabilities
of at least 1.25 to 1.00.
	 
	 	5.	 	The following defined term under Section 13.1
entitled “Definitions” is hereby amended to read as follows:
	 
	 	 	 	“Revolving Maturity Date” is October 31, 2002.

	 	B.	 	Waiver of Covenant Default(s).

	 	1.	 	Bank hereby waives Borrower’s existing default
under the Loan Agreement by virtue of Borrower’s failure to
(i) submit to Bank its financial reports as required by
Section 6.2 entitled “Financial Statements, Reports,
Certificates” as of the months ended December 31, 2001 through

2

 

	 	 	 	May 31, 2002 and (ii) comply with Section 6.6 entitled
“Primary Accounts”. Bank’s waiver of Borrower’s compliance of
these requirements shall apply only to the foregoing periods.
Accordingly, Borrower shall be in compliance with Section 6.2
and Section 6.6 as of the month ending June 30, 2002, as
amended herein.
	 
	 	 	 	Bank’s agreement to waive the above-described defaults (1) in
no way shall be deemed an agreement by the Bank to waive
Borrower’s compliance with the above-described covenants as
of all other dates and (2) shall not limit or impair the
Bank’s right to demand strict performance of these covenants
as of all other dates and (3) shall not limit or impair the
Bank’s right to demand strict performance of all other
covenants as of any date.

4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.

5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that, as of the date hereof, it has no defenses against paying
any of the Obligations.

6. CONCERNING REVISED ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE. The Borrower
affirms and reaffirms that notwithstanding the terms of the Security Documents
to the contrary, (i) that the definition of “Code,” “UCC” or “Uniform
Commercial Code” as set forth in the Security Documents shall be deemed to mean
and refer to “the Uniform Commercial Code as adopted by the State of
California, as may be amended and in effect from time to time and (ii) the
Collateral is all assets of the Borrower. In connection therewith, the
Collateral shall include, without limitation, the following categories of
assets as defined in the Code: goods (including inventory, equipment and any
accessions thereto), instruments (including promissory notes), documents,
accounts (including health-care-insurance receivables, and license fees),
chattel paper (whether tangible or electronic), deposit accounts,
letter-of-credit rights (whether or not the letter of credit is evidenced by a
writing), commercial tort claims, securities and all other investment property,
general intangibles (including payment intangibles and software), supporting
obligations and any and all proceeds of any thereof, wherever located, whether
now owned or hereafter acquired.

7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing below)
understands and agrees that in modifying the existing Obligations, Bank is
relying upon Borrower’s representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank’s agreement to
modifications to the existing Obligations pursuant to this Loan Modification
Agreement in no way shall obligate Bank to make any future modifications to the
Obligations. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Obligations. It is the intention of Bank and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. Unless expressly
released herein, no maker, endorser, or guarantor will be released by virtue of
this

3

 

Loan Modification Agreement. The terms of this paragraph apply not only to
this Loan Modification Agreement, but also to all subsequent loan modification
agreements.

This Loan Modification Agreement is executed as of the date first written
above.

	 	 	 
	BORROWER:

	 	BANK:
	 
	 	 
	SYNAPTICS INCORPORATED

	 	SILICON VALLEY BANK
	 
	 	 
	By: /s/ Russ J. Knittel

	 	By: /s/ Tom Smith
	Name: Russ J. Knittel

	 	Name: Tom Smith
	Title: Chief Financial Officer

	 	Title: Senior Relationship Manager

4

 

SILICON VALLEY BANK

PRO FORMA INVOICE FOR LOAN CHARGES

	 	 	 	 	 	 	 
	BORROWER:

	 	SYNAPTICS INCORPORATED	 	 	 	 
	LOAN OFFICER:

	 	Tom Smith	 	 	 	 
	DATE:

	 	June 5, 2002	 	 	 	 
	

	 	Documentation Fee
	 	$250.00 (Waived)

	
	 	TOTAL FEE DUE	 	$0.00

Please indicate the method of payment:

     {  } A check for the total amount is attached.

     {  }
Debit DDA #              for the total amount.

     {  } Loan proceeds

SYNAPTICS INCORPORATED

	 	 	 	 	 
	
	 	 
	

	 	(Date)	 	 
	 
	 	 	 	 
	/s/Tom Smith
	 	 	 	 
	Silicon Valley Bank

	 	(Date)	 	 
	Account Officer’s Signature
	 	 	 	 

5

 

LOAN MODIFICATION AGREEMENT

This Loan Modification Agreement is entered into as of October 17, 2002, by and
between Synaptics Incorporated (the “Borrower”) and Silicon Valley Bank
(‘“Bank”).

1. DESCRIPTION OF EXISTING OBLIGATIONS: Among other Obligations which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among
other documents, a Loan and Security Agreement, dated August 30, 2001, as may
be amended from time to time, (the “Loan Agreement”). The Loan Agreement
provides for, among other things, a Committed Revolving Line in the original
principal amount of Four Million Two Hundred Thousand Dollars ($4,200,000).
Defined terms used but not otherwise defined herein shall have the same
meanings as set forth in the Loan Agreement.

Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the “Obligations.”

2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement and the Intellectual Property
Security Agreement.

Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Obligations shall be
referred to as the “Security Documents”. Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Obligations shall
be referred to as the “Existing Loan Documents”.

3. DESCRIPTION OF CHANGE IN TERMS.

	 	A.	 	Modification(s) to Loan Agreement.

	 	1.	 	The following defined term under Section 13.1
entitled “Definitions” is hereby amended to read as follows:
	 
	 	 	 	“Revolving Maturity Date” is November 30, 2002.

4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.

5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that, as of the date hereof, it has no defenses against paying
any of the Obligations.

6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing below) understands and
agrees that in modifying the existing Obligations, Bank is relying upon
Borrower’s representations, warranties, and agreements, as set forth in the
Existing Loan Documents. Except as expressly modified pursuant to this Loan
Modification Agreement, the terms of the Existing Loan Documents remain
unchanged and in full force and effect. Bank’s agreement to modifications to
the existing Obligations pursuant to this Loan Modification Agreement in no way
shall obligate Bank to make any future modifications to the Obligations.
Nothing in this Loan Modification Agreement shall constitute a satisfaction of
the Obligations. It

 

 

is the intention of Bank and Borrower to retain as liable
parties all makers and endorsers of Existing Loan Documents, unless the party
is expressly released by Bank in writing. Unless expressly released herein, no
maker, endorser, or guarantor will be released by virtue of this Loan
Modification Agreement. The terms of this paragraph apply not only to this Loan
Modification Agreement, but also to all subsequent loan modification
agreements.

     This Loan Modification Agreement is executed as of the date first written
above.

	 	 	 
	BORROWER:

	 	BANK:
	 
	 	 
	SYNAPTICS INCORPORATED

	 	SILICON VALLEY BANK
	 
	 	 
	By: /s/ Russ J. Knittel

	 	By: /s/ Tom Smith
	Name: Russ J. Knittel

	 	Name: Tom Smith
	Title: Senior Vice President and Chief
Financial Officer

	 	Title: Senior Vice President

2

 

LOAN MODIFICATION AGREEMENT

This Loan Modification Agreement is entered into as of November 25, 2002, by
and between Synaptics Incorporated (the “Borrower”) and Silicon Valley Bank
(‘“Bank”).

1. DESCRIPTION OF EXISTING OBLIGATIONS: Among other Obligations which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among
other documents, a Loan and Security Agreement, dated August 30, 2001, as may
be modified or amended from time to time, (the “Loan Agreement”). The Loan
Agreement provides for, among other things, a Committed Revolving Line in the
original principal amount of Four Million Two Hundred Thousand Dollars
($4,200,000). Defined terms used but not otherwise defined herein shall have
the same meanings as set forth in the Loan Agreement.

Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the “Obligations.”

2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement and the Intellectual Property
Security Agreement.

Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Obligations shall be
referred to as the “Security Documents”. Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Obligations shall
be referred to as the “Existing Loan Documents”.

3. DESCRIPTION OF CHANGE IN TERMS.

	 	A.	 	Modification(s) to Loan Agreement.

	 	1.	 	Subletter (a) under Section 2.1.1 entitled
“Revolving Advances” is hereby deleted in its entirely and
replaced with the following:

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

	 	2.	 	Section 2.1.2 entitled “Letters of Credit
Sublimit” is hereby deleted in its entirety and replaced with
the following:
	 
	 	 	 	Bank will issue or have issued Letters of Credit for
Borrower’s account not exceeding the Committed Revolving Line
minus (i) the outstanding
principal balance of the Advances, minus (ii) all amounts for
services utilized under the Cash Management Services
Sublimit, and minus (iii) the FX Reserve; however, the face
amount of outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit) may not exceed

 

 

	 	 	 	$4,200,000.
Each Letter of Credit will have an expiry date of no later
than 180 days after the Revolving Maturity Date, but
Borrower’s reimbursement obligation will be secured by cash
on terms acceptable to Bank at any time after the Revolving
Maturity Date if the term of this Agreement is not extended
by Bank. Borrower agrees to execute any further
documentation in connection with the Letters of Credit as
Bank may reasonably request.
	 
	 	3.	 	Section 2.1.3 entitled “Foreign Exchange
Sublimit” is hereby deleted in its entirety and replaced with
the following:
	 
	 	 	 	If there is availability under the Committed Revolving Line,
then Borrower may enter in foreign exchange forward contracts
with the Bank under which Borrower commits to purchase from
or sell to Bank a set amount of foreign currency more than
one business day after the contract date (the “FX Forward
Contract”). Bank will subtract 10% of each outstanding FX
Forward Contract from the foreign exchange sublimit which is
a maximum of $4,200,000 (the “FX Reserve”). The total FX
Forward Contracts at any one time may not exceed 10 times the
amount of the FX Reserve. Bank may terminate the FX Forward
Contracts if an Event of Default occurs and is continuing.
	 
	 	4.	 	Section 2.2 entitled “Overadvances” is hereby
deleted in its entirety and replaced with the following:
	 
	 	 	 	If Borrower’s Obligations under Section 2.1.1, 2.1.2, 2.1.3
and 2.1.4 exceed the Committed Revolving Line, Borrower must
immediately pay Bank the excess.
	 
	 	5.	 	Subletter (b) under Section 6.2 entitled
“Financial Statements, Reports, Certificates” is hereby
deleted in its entirety and replaced with the words
“Intentionally Left Blank.”
	 
	 	6.	 	Subletter (d) under Section 8.2 entitled
“Financial Statements, Reports, Certificates” is hereby
deleted in its entirety and replaced with the following:

(d) Allow Bank to audit Borrower’s Collateral at Borrower’s
expense. Such audits will be conducted only at such times as
an Event of Default has occurred and is continuing.

	 	7.	 	Section 6.6 entitled “Primary Accounts” is hereby
amended to read as follows:
	 
	 	 	 	Borrower will maintain its primary banking relationship with
Bank, which relationship shall include Borrower maintaining
account balances in any accounts at or through Bank
representing at least 10% of all account balances of Borrower
at any financial institution.

2

 

	 	8.	 	Section 6.7 entitled “Financial Covenants” is
hereby deleted in its entirety and replaced with the
following:
	 
	 	 	 	Borrower will maintain as the last day of each quarter:
	 
	 	 	 	Tangible Net Worth. A Tangible Net Worth of at least,
$55,000,000
	 
	 	9.	 	The following defined terms under Section 13.1
entitled “Definitions” are hereby amended and/or deleted to
read as follows:
	 
	 	 	 	“Borrowing Base” is hereby deleted in its entirety.
	 
	 	 	 	“Eligible Accounts” is hereby deleted in its entirety.
	 
	 	 	 	“Revolving Maturity Date” is November 29, 2003.

4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.

5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that, as of the date hereof, it has no defenses against paying
any of the Obligations.

6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing below)
understands and agrees that in modifying the existing Obligations, Bank is
relying upon Borrower’s representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank’s agreement to
modifications to the existing Obligations pursuant to this Loan Modification
Agreement in no way shall obligate Bank to make any future modifications to the
Obligations. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Obligations. It is the intention of Bank and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. Unless expressly
released herein, no maker, endorser, or guarantor will be released by virtue of
this Loan Modification Agreement. The terms of this paragraph apply not only to
this Loan Modification Agreement, but also to all subsequent loan modification
agreements.

     This Loan Modification Agreement is executed as of the date first written
above.

	 	 	 
	BORROWER:

	 	BANK:
	 
	 	 
	SYNAPTICS INCORPORATED

	 	SILICON VALLEY BANK
	 
	 	 
	By: /s/Russ J. Knittel

	 	By: /s/ Tom Smith
	Name: Russ J. Knittel

	 	Name: Tom Smith
	Title: Senior Vice President and
Chief Financial Officer

	 	Title: Senior Relationship Manager

3

 

LOAN MODIFICATION AGREEMENT

This Loan Modification Agreement is entered into as of November 19, 2003, by
and between Synaptics Incorporated (the “Borrower”) and Silicon Valley Bank
(‘“Bank”).

1. DESCRIPTION OF EXISTING OBLIGATIONS: Among other Obligations which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among
other documents, a Loan and Security Agreement, dated August 30, 2001, as may
be modified or amended from time to time, (the “Loan Agreement”). The Loan
Agreement provides for, among other things, a Committed Revolving Line in the
original principal amount of Four Million Two Hundred Thousand Dollars
($4,200,000). Defined terms used but not otherwise defined herein shall have
the same meanings as set forth in the Loan Agreement.

Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the “Obligations.”

2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement and the Intellectual Property,
Security Agreement.

Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Obligations shall be
referred to as the “Security Documents”. Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Obligations shall
be referred to as the “Existing Loan Documents”.

3. DESCRIPTION OF CHANGE IN TERMS.

	 	A.	 	Modification(s) to Loan Agreement.

	 	1.	 	Section 6.7 entitled “Financial Covenants” is
hereby deleted in its entirely and replaced with the
following:
	 
	 	 	 	Borrower will maintain as of the last day of each quarter:
	 
	 	 	 	Tangible Net Worth. A Tangible Net Worth of at least
$70,000,000.
	 
	 	2.	 	Section 6.8 entitled “Registration of
Intellectual Property Rights” is hereby amended in its
entirety to read as follows:
	 
	 	 	 	Borrower shall not register any Copyrights or Mask Works with
the United States Copyright Office unless it: (i) has given
at least fifteen (15) days’ prior notice to Bank of its
intent to register such Copyrights or Mask Works and has
provided Bank with a copy of the application it intends to
file with the United States Copyright Office (excluding
exhibits thereto);
(ii) executes a security agreement or such other documents as
Bank may reasonably request in order to maintain the
perfection and priority of Bank’s security interest in the
Copyrights proposed to be registered with the United States
Copyright Office; and (iii) records such security

 

 

	 	 	 	documents
with the United States Copyright Office contemporaneously
with filing the Copyright application(s) with the United
States Copyright Office. Borrower shall promptly provide to
Bank a copy of the Copyright application(s) filed with the
United States Copyright Office, together with evidence of the
recording of the security documents necessary for Bank to
maintain the perfection and priority of its security interest
in such Copyrights or Mask Works. Borrower shall provide
written notice to Bank of any application filed by Borrower
in the United States Patent Trademark Office for a patent or
to register a Trademark or service mark within 30 days of any
such filing.
	 
	 	 	 	Borrower will (i) protect, defend and maintain the validity
and enforceability of the intellectual Property and promptly
advise Bank in writing of material infringements and (ii) not
allow any Intellectual Property material to Borrower’s
business to be abandoned, forfeited or dedicated to the
public without Bank’s written consent.
	 
	 	3.	 	Section 7.3 entitled “Mergers or Acquisitions” is
hereby amended to read as follows:
	 
	 	 	 	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 no Event of Default has occurred and is
continuing or would result from such action during the term
of this Agreement.
	 
	 	4.	 	The following defined terms under Section 13.1
entitled “Definitions” are hereby amended to read as follows:
	 
	 	 	 	“Committed Revolving Line” is an Advance of up to
$10,000,000.
	 
	 	 	 	“Revolving Maturity Date” is November 28, 2004.

4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.

5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that, as of the date hereof, it has no defenses against paying
any of the Obligations.

6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing below)
understands and agrees that in modifying the existing Obligations, Bank is
relying upon Borrower’s representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank’s agreement to
modifications to the existing Obligations pursuant to this Loan Modification
Agreement in no way shall obligate Bank to make any future modifications to the
Obligations. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Obligations. It

2

 

is the intention of Bank and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. Unless expressly
released herein, no maker, endorser, or guarantor will be released by virtue of
this Loan Modification Agreement. The terms of this paragraph apply not only to
this Loan Modification Agreement, but also to all subsequent loan modification
agreements.

     This Loan Modification Agreement is executed as of the date first written
above.

	 	 	 
	BORROWER:

	 	BANK:
	 
	 	 
	SYNAPTICS INCORPORATED

	 	SILICON VALLEY BANK
	 
	 	 
	By: /s/ Russ J. Knittel

	 	By: /s/Tom Smith
	Name: Russ J. Knittel

	 	Name: Tom Smith
	Title: Chief Financial Officer

	 	Title: Senior Vice President

3

 

SILICON VALLEY BANK

PRO FORMA INVOICE FOR LOAN CHARGES

	 	 	 	 	 	 	 
	BORROWER:

	 	SYNAPTICS INCORPORATED	 	 	 	 
	LOAN OFFICER:

	 	Tom Smith	 	 	 	 
	DATE:

	 	November 20, 2003	 	 	 	 
	

	 	Documentation Fee
	 	$250.00 (Waived)

	

	 	TOTAL FEE DUE
	 	$0.00

Please indicate the method of payment:

     {  } A check for the total amount is attached.

     {  } Debit DDA #              for the total amount.

     {  } Loan proceeds

SYNAPTICS INCORPORATED

/s/ Russ J. Knittel

	 	 	 
	

	 	(Date)
	 
	 	 
	/s/Tom Smith
	 	 
	Silicon Valley Bank

	 	(Date)
	Account Officer’s Signature
	 	 

4

 

LOAN MODIFICATION AGREEMENT

This Loan Modification Agreement is entered into as of November 28, 2004, by
and between Synaptics Incorporated (the “Borrower”) and Silicon Valley Bank
(“Bank”).

1. DESCRIPTION OF EXISTING OBLIGATIONS: Among other Obligations which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among
other documents, a Loan and Security Agreement, dated August 30, 2001, as may
be modified or amended from time to time, (the “Loan Agreement”). The Loan
Agreement provides for, among other things, a Committed Revolving Line in the
original principal amount of Four Million Two Hundred Thousand Dollars
($4,200,000). The Loan Agreement has been modified pursuant to, among other
documents, a Loan Modification Agreement dated November 19, 2003, pursuant to
which, among other things, the Committed Revolving Line was increased Ten
Million Dollars ($10,000,000). Defined terms used but not otherwise defined
herein shall have the same meanings as set forth in the Loan Agreement.

Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the “Obligations.”

2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement and the Intellectual Property
Security Agreement (the “IP Agreement”). The IP Agreement is being released
pursuant to the terms of this Agreement. Concurrently herewith, Borrower agrees
not to encumber any of its Intellectual Property.

Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Obligations shall be
referred to as the “Security Documents”. Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Obligations shall
be referred to as the “Existing Loan Documents”.

3. DESCRIPTION OF CHANGE IN TERMS.

	 	A.	 	Modification(s) to Loan Agreement.

	 	1.	 	Section 6.7 entitled “Financial Covenants” is
hereby deleted in its entirety and replaced with the
following:
	 
	 	 	 	Borrower will maintain as of the last day of each quarter:
	 
	 	 	 	Tangible Net Worth. A Tangible Net Worth of at least
$80,000,000.
	 
	 	2.	 	Borrower has notified Bank that it is in the
process of conducting a financing through a convertible note
offering in the amount of up to $130,000,000 (the
“Transaction”). Borrower has requested that Bank
approve the Transaction, the consummation of which might
otherwise constitute a default under Section 7.4 of the Loan
Agreement.

 

 

	 	 	 	This Loan Modification Agreement will serve as Bank’s consent
to the Transaction solely for the purposes of Section 7.4 of
the Loan Agreement. Bank’s consent to the Transaction: (1)
shall not limit or impair the Bank’s right to demand strict
performance of this covenant or provisions as set forth in
the Loan Agreement following consummation of the Transaction;
and (2) shall not limit or impair the Bank’s right to demand
strict performance of all other covenants and provisions set
forth in the Loan Agreement, at all times. Bank’s agreement
to consent to the Transaction solely for the purposes of the
above specifically referenced provision of the Loan Agreement
shall in no way obligate Bank to make any future consents,
waivers, or modifications to the Loan Agreement.
	 
	 	3.	 	The following defined terms under Section 13.1
entitled “Definitions” are hereby amended to read as follows:
	 
	 	 	 	“Committed Revolving Line” is an Advance of up to
$15,000,000.
	 
	 	 	 	“Revolving Maturity Date” is November 27, 2005.
	 
	 	4.	 	As of the date hereof, Bank agrees to terminate
the IP Agreement and release its filings with the United
States Patent and Trademark office and the Register of
Copyrights with respect to Borrower’s Intellectual Property
provided no Event of Default has occurred or is continuing and
provided further that Borrower has agreed not to encumber any
of its Intellectual Property.
	 
	 	5.	 	Exhibit “A” of the Loan Agreement is hereby
amended and replaced with the Exhibit “A” attached hereto and
made a part hereof.

4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.

5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that, as of the date hereof, it has no defenses against paying
any of the Obligations.

6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
below) understands and agrees that in modifying the existing Obligations, Bank
is relying upon Borrower’s representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank’s agreement to
modifications to the existing Obligations pursuant to this Loan Modification
Agreement in no way shall obligate Bank to make any future modifications to the
Obligations. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Obligations. It is the intention of Bank and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. Unless expressly
released herein, no maker, endorser, or guarantor will be released by virtue of
this Loan Modification Agreement. The terms of this paragraph apply not only to
this Loan Modification Agreement, but also to all subsequent loan modification
agreements.

2

 

     This Loan Modification Agreement is executed as of the date first written
above.

	 	 	 
	BORROWER:

	 	BANK:
	 
	 	 
	SYNAPTICS INCORPORATED

	 	SILICON VALLEY BANK
	 
	 	 
	By: /s/ Russell J. Knittel

	 	By: /s/ Tom Smith
	Name: Russell J. Knittel

	 	Name: Tom Smith
	Title: Senior Vice President and
Chief Financial Officer

	 	Title: Senior Relationship Manager

3

 

SILICON VALLEY BANK

PRO FORMA INVOICE FOR LOAN CHARGES

	 	 	 	 	 	 	 
	BORROWER:

	 	SYNAPTICS INCORPORATED	 	 	 	 
	LOAN OFFICER:

	 	Tom Smith	 	 	 	 
	DATE:

	 	November 28, 2004	 	 	 	 
	

	 	Documentation Fee
	 	$250.00 (Waived)

	

	 	TOTAL FEE DUE
	 	$0.00

Please indicate the method of payment:

     {  } A check for the total amount is attached.

     {  } Debit DDA #              for the total amount.

     {  } Loan proceeds

SYNAPTICS INCORPORATED

	 	 	 
	/s/Russ J. Knittel

	 	11-30-2004
	
 

	

	 	      (Date)
	/s/ Tom Smith
	 	 
	
 

	Silicon Valley Bank

	 	      (Date)
	Account Officer’s Signature
	 	 

4

 

EXHIBIT A

     The Collateral consists of all of Borrower’s right, title and interest in
and to the following whether owned now or hereafter arising and whether the
Borrower has rights now or hereafter has rights therein and wherever located:

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

     All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower’s custody or possession or in
transit and including any returns upon any accounts or other proceeds,
including insurance proceeds, resulting from the sale or disposition of any of
the foregoing and any documents of title representing any of the above;

     All contract rights and general intangibles (as such definitions may be
amended from time to time according to the Code), now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;

     All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower (as such definitions may be amended from time
to time according to the Code) whether or not earned by performance, and any
and all credit insurance, insurance (including refund) claims and proceeds,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by Borrower;

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

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

A-1

 

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

     Notwithstanding the foregoing, the Collateral shall not be deemed to
include any copyrights, copyright applications, copyright registration and like
protection in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; any patents, patent
applications and like protections including without limitation improvements,
divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same, trademarks, servicemarks and applications
therefor, whether registered or not, and the goodwill of the business of
Borrower 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.

     Borrower and Bank are parties to that certain loan and security agreement,
whereby Borrower, in connection with Bank’s loan or loans to Borrower, has
agreed, among other things, not to sell, transfer, assign, mortgage, pledge,
lease grant a security interest in, or encumber any of its Intellectual
Property, without Bank’s prior written consent.

A-2<PAGE>

                                                                    EXHIBIT 10.1

                                URS CORPORATION

                                 SIXTH AMENDMENT
                               TO CREDIT AGREEMENT

     This SIXTH AMENDMENT TO CREDIT AGREEMENT (this  "Amendment") is dated as of
November  29, 2004 and  entered  into by and among URS  CORPORATION,  a Delaware
corporation  ("Company"),  THE  FINANCIAL  INSTITUTIONS  LISTED ON THE SIGNATURE
PAGES HEREOF ("Lenders") and CREDIT SUISSE FIRST BOSTON, as administrative agent
for Lenders ("Administrative Agent"), and is made with reference to that certain
Credit  Agreement  dated as of August 22, 2002, as amended by that certain First
Amendment to Credit  Agreement dated as of January 30, 2003, that certain Second
Amendment to Credit  Agreement  dated as of November 6, 2003, that certain Third
Amendment to Credit Agreement dated as of December 16, 2003, that certain Fourth
Amendment to Credit  Agreement dated as of March 29, 2004 and that certain Fifth
Amendment to Credit  Agreement  dated as of June 4, 2004 (as so amended,  and as
further  amended,  modified,  restated  or  otherwise  supplemented  to the date
hereof, the "Credit Agreement"),  by and among Company,  Lenders,  CREDIT SUISSE
FIRST BOSTON, as a Co-Lead Arranger and Administrative  Agent, WELLS FARGO BANK,
NATIONAL  ASSOCIATION,  as a Co-Lead Arranger and Syndication Agent for Lenders,
and BNP PARIBAS, HARRIS TRUST & SAVINGS BANK and THE ROYAL BANK OF SCOTLAND PLC,
as  Co-Documentation  Agents for Lenders.  Capitalized terms used herein without
definition  shall  have the same  meanings  herein  as set  forth in the  Credit
Agreement.

                                    RECITALS

     WHEREAS,  Company and Lenders desire to amend the Credit  Agreement as more
particularly described below;

     NOW,  THEREFORE,  in  consideration  of the  premises  and the  agreements,
provisions and covenants herein contained, the parties hereto agree as follows:

     Section 1. AMENDMENTS TO THE CREDIT AGREEMENT

1.1  Amendments to Section 1: Definitions

     A.  Subsection  1.1 of the  Credit  Agreement  is hereby  amended by adding
thereto the following definition, which shall be inserted in proper alphabetical
order:

     "Stub  Period"  means the  fiscal  period of Company  and its  Subsidiaries
beginning November 1, 2004 and ending December 31, 2004.

     B.  Subsection  1.1 of the Credit  Agreement is hereby  further  amended by
deleting each of the  definitions  of  "Consolidated  Leverage  Ratio",  "Fiscal
Month", "Fiscal

                                       1
<PAGE>

Quarter",  "Fiscal  Year"  and  "Pricing  Certificate"  in  their  entirety  and
substituting the following therefor, respectively:

     "Consolidated  Leverage  Ratio"  means,  as at any  date,  the ratio of (i)
Consolidated  Total Funded Debt as at such date to (ii) Consolidated  EBITDA for
the  consecutive  twelve Fiscal Months (or,  solely with respect to calculations
under  subsection  2.4B(iii)(e)  relating to the  14-Fiscal  Month period ending
December 30, 2005, the consecutive 14 Fiscal Months) ending on such date.

     "Fiscal Month" means a fiscal month of Company and its Subsidiaries  ending
on the applicable date set forth on Schedule 1.1A annexed hereto.

     "Fiscal  Quarter"  means a fiscal  quarter of Company and its  Subsidiaries
ending on the applicable date set forth on Schedule 1.1A annexed hereto.

     "Fiscal Year" means a fiscal year of Company and its Subsidiaries ending on
the applicable date set forth on Schedule 1.1A annexed hereto.

     "Pricing  Certificate" means an Officer's Certificate of Company certifying
the Consolidated  Leverage Ratio as at the last day of any Fiscal Quarter or the
Stub  Period,  as the case may be, and  setting  forth the  calculation  of such
Consolidated  Leverage Ratio in reasonable detail,  which Officer's  Certificate
may be  delivered  to  Administrative  Agent at any time on or after the date of
delivery by Company of the  Compliance  Certificate  with  respect to the period
ending on the last day of such Fiscal  Quarter or the Stub  Period,  as the case
may be.

1.2   Amendments to Section 2:  Amounts and Terms of Commitments and Loans

     A.  Subsections  2.2A(i)  of the  Credit  Agreement  is hereby  amended  by
deleting it in its entirety and substituting the following therefor:

         "(i)  Subject to the  provisions  of  subsections  2.2E,  2.2G and 2.7,
the Revolving  Loans,  the  Tranche A Term Loans and the  Tranche B Term Loans
shall bear interest through maturity as follows:

               (a) if a Base  Rate  Loan,  then at the sum of the Base Rate plus
          the Base  Rate  Margin  set  forth in the  table  below  opposite  the
          Consolidated  Leverage  Ratio as at the last day of the  twelve-Fiscal
          Month period for which the  applicable  Pricing  Certificate  has been
          delivered pursuant to subsection 6.1(iii); or

               (b) if a Eurodollar  Rate Loan, then at the sum of the Eurodollar
          Rate plus the  Eurodollar  Rate  Margin  set forth in the table  below
          opposite  the  Consolidated  Leverage  Ratio as at the last day of the
          twelve-Fiscal   Month   period  for  which  the   applicable   Pricing
          Certificate has been delivered pursuant to subsection 6.1(iii):

                                       2
<PAGE>

<TABLE>
<CAPTION>

                                  Consolidated           Eurodollar Rate                Base
                                 Leverage Ratio              Margin                  Rate Margin
                                 --------------          ---------------             ------------
<S>                             <C>                         <C>                        <C>
Greater than
or equal to                        2.25:1.00                   2.25%                      1.25%

Less than                          2.25:1.00                   2.00%                      1.00%"
</TABLE>

         ; provided, that during any period beginning on any date Administrative
         Agent  receives an  Officer's  Certificate  from  Company  stating that
         Company has obtained senior secured  ratings for the Credit  Facilities
         not lower than BB from S&P and Ba2 from  Moody's and  continuing  until
         Company  fails to  maintain  such  ratings,  the Base Rate  Margin  and
         Eurodollar  Rate Margin in each case shall be 0.25% per annum less than
         the Base Rate Margin and Eurodollar  Rate Margin  otherwise  applicable
         pursuant to this subsection 2.2A(i)."

         B. Subsection  2.3A of the Credit  Agreement is hereby amended by
deleting it in its entirety and substituting the following therefor:

          "A.  Commitment  Fees.  Company  agrees to pay to  Administrative
          Agent, for distribution to each Revolving Lender in proportion to that
          Lender's Pro Rata Share of the Revolving Loan Commitments,  commitment
          fees  for the  period  from  and  including  the  Closing  Date to and
          excluding the Revolving Loan Commitment  Termination Date equal to the
          average of the daily excess of the Revolving Loan Commitments over the
          sum of (i) the aggregate  principal  amount of  outstanding  Revolving
          Loans  (excluding any Swing Line Loans) plus (ii) the Letter of Credit
          Usage  multiplied  by a rate per annum  equal to the  percentage  (the
          "Commitment Fee Percentage") set forth in the table below opposite the
          Consolidated  Leverage  Ratio as at the last day of the  twelve-Fiscal
          Month period for which the  applicable  Pricing  Certificate  has been
          delivered pursuant to subsection 6.1(iii);

<TABLE>
<CAPTION>

                                     Consolidated                 Commitment Fee
                                     Leverage Ratio                 Percentage
                                     --------------               --------------
<S>                                  <C>                           <C>
Greater than
or equal to                             2.75:1.00                      0.500%

Less than                               2.75:1.00                      0.375%
</TABLE>

         such  commitment  fees to be  calculated  on the basis of a 365/366-day
         year and the actual number of days elapsed and to be payable  quarterly
         in arrears on the last  Business Day of each January,  April,  July and
         October of each year,  commencing on the first such date to occur after
         the Closing Date,  and on the  Revolving  Loan  Commitment  Termination
         Date;  provided that until the delivery of the Pricing  Certificate for
         the Fiscal Quarter  ending January 31, 2003, the applicable  commitment
         fee percentage  shall be 0.50% per annum.  Upon delivery of the Pricing
         Certificate by Company to  Administrative  Agent pursuant to subsection
         6.1(iii),  the applicable commitment fee percentage shall automatically
         be  adjusted  in  accordance  with  such

                                       3

<PAGE>

         Pricing  Certificate,  such adjustment to become effective on the next
         succeeding Business Day following the receipt by Administrative  Agent
         of such Pricing  Certificate;  provided that, if at any time a Pricing
         Certificate  is  not  delivered  at  the  time  required  pursuant  to
         subsection  6.1(iii),  from  the time  such  Pricing  Certificate  was
         required to be delivered  until delivery of such Pricing  Certificate,
         the  applicable   commitment  fee  percentage  shall  be  the  maximum
         percentage amount set forth above."

         C. Subsection 2.4B(iii)(c),  (d) and (e) of the Credit Agreement are
hereby amended  by  deleting  them  in its  entirety  and  substituting  the
following therefor, respectively:

                  "(c)  Prepayments  and  Reductions  Due to  Issuance of Equity
Securities.  On the date of  receipt  of the Net  Securities  Proceeds  from the
issuance  of any  Capital  Stock of  Company or any of its  Subsidiaries  or any
capital contribution to Company (other than (1) issuances of Capital Stock to or
capital  contributions  by TCG Holdings,  L.L.C.,  Richard C. Blum & Associates,
L.P. or their respective  Affiliates,  (2) issuances of Capital Stock of Company
to directors and employees of Company and its Subsidiaries pursuant to a written
employee benefit plan maintained by Company or any of its Subsidiaries, approved
by Company's  Governing Body and issuances of Capital Stock of Company  pursuant
to the exercise of options or warrants issued under any such plan, (3) issuances
of Capital Stock, the Net Securities Proceeds of which are applied by Company or
its Subsidiaries to the  consideration  paid by Company or such Subsidiary for a
Permitted  Acquisition  (4) issuances of Capital Stock (other than  Disqualified
Stock), the Net Securities Proceeds of which are applied by Company to Permitted
Note Repurchases as expressly permitted by subsection 7.5A(xii)),  Company shall
prepay the Loans in an aggregate  amount equal to (A) 50% of such Net Securities
Proceeds or (B) 25% of such Net  Securities  Proceeds in the event the remaining
Net Securities  Proceeds are applied to redeem the Existing  Subordinated Notes,
the  Existing  Senior  Subordinated  Notes or the Senior  Notes as  permitted by
subsections 7.5A and 7.5B and the Consolidated Leverage Ratio as at the last day
of the immediately  preceding Fiscal Quarter or Stub Period, as the case may be,
is  less  than  2.50:1.00,  and (5)  issuances  of  Capital  Stock  (other  than
Disqualified  Stock) the Net Securities Proceeds of which are applied by Company
to any  repurchase or redemption of Existing  Senior  Subordinated  Notes and/or
Senior  Notes  and/or  Convertible  Subordinated  Notes  expressly  permitted by
subsection 7.5A(xiv),  provided that Company shall, no later than 180 days after
receipt of such Net Securities  Proceeds that have not theretofore  been applied
to such  repurchase or redemption,  make a prepayment of the Loans in the amount
of the portion of such unapplied Net Securities  Proceeds  required  pursuant to
this subsection 2.4B(iii)(c).

                  (d)   Prepayments   and   Reductions   Due  to   Issuance   of
Indebtedness.  On the date of receipt of the Net  Securities  Proceeds  from the
issuance of any  Indebtedness  of Company or any of its  Subsidiaries  after the
Closing  Date (other than (1)  Indebtedness  permitted  pursuant to  subsections
7.1(i) - (xiii), (2) issuances of Indebtedness,  the Net Securities  Proceeds of
which are applied by Company or its  Subsidiaries to the  consideration  paid by
Company or such  Subsidiary  for a Permitted  Acquisition,  and (3) issuances of
Indebtedness  permitted  pursuant  to  subsection  7.1(xiv)  the Net  Securities
Proceeds  of which are applied by Company to any  repurchase  or  redemption  of
Existing  Senior  Subordinated  Notes and/or  Senior  Notes  and/or  Convertible
Subordinated  Notes,  provided that Company

                                       4

<PAGE>

shall, no later than 180 days after receipt of such Net Securities Proceeds that
have not  theretofore  been applied to such  repurchase  or  redemption,  make a
prepayment  of the Loans in the  amount of the  portion  of such  unapplied  Net
Securities Proceeds required pursuant to this subsection 2.4B(iii)(d)),  Company
shall  prepay  the  Loans  in an  aggregate  amount  equal  to 100% of such  Net
Securities Proceeds;  provided, that such percentage shall be reduced to 50% for
the Fiscal Quarter or Stub Period, as the case may be, immediately following any
Fiscal  Quarter or Stub Period,  as the case may be, for which the  Consolidated
Leverage Ratio as at the last day of such Fiscal Quarter or Stub Period,  as the
case may be, is less than 2.50:1.00.

                  (e) Prepayments and Reductions from  Consolidated  Excess Cash
Flow. In the event that there shall be a positive amount of Consolidated  Excess
Cash Flow for the Fiscal  Year ending  October 31,  2004,  the  14-Fiscal  Month
period ending December 30, 2005 or any Fiscal Year ending  thereafter,  no later
than 100 days after the end of each such period,  Company shall prepay the Loans
in an aggregate amount equal to (1) 75% of such  Consolidated  Excess Cash Flow,
minus  (2) any  Voluntary  Prepayment  Amount  for  such  period  minus  (3) the
aggregate  amount for such period of any  repurchases or redemptions of Existing
Senior  Subordinated Notes and/or Senior Notes and/or  Convertible  Subordinated
Notes of Company pursuant to Section 7.5A(xi) (but in the case of this subclause
(3) only to the extent the funds  applied for such  purpose are  included in the
calculation of Consolidated EBITDA);  provided, that the percentage in subclause
(1) above shall be reduced to 50% of Consolidated  Excess Cash Flow for any such
period  for which  the  Consolidated  Leverage  Ratio as at the last day of such
period is less than 2.50:1.00."

1.3  Amendments to Section 6:  Company's Affirmative Covenants

     A. Subsection  6.1(i) of the Credit Agreement is hereby amended by deleting
it in its entirety and substituting the following therefor:

     "(i) Company Quarterly and Stub Period Financials: (a) as soon as available
and in any event  within 55 days after the end of each of the first three Fiscal
Quarters of each Fiscal Year and the Stub Period, the consolidated balance sheet
of Company and its Subsidiaries as at the end of such Fiscal Quarter or the Stub
Period,  as the case may be, and the related  consolidated  statements of income
and cash flows of Company and its  Subsidiaries  for such Fiscal  Quarter or the
Stub  Period,  as the case may be, and for the period from the  beginning of the
then current  Fiscal Year to the end of such Fiscal  Quarter (or, in the case of
the Stub  Period,  for the period from  December 27, 2003 to the end of the Stub
Period),  setting  forth in each  case in  comparative  form  the  corresponding
figures for the  corresponding  periods of the previous  year, all in reasonable
detail and certified by the chief financial  officer of Company that they fairly
present,  in all material respects,  the financial  condition of Company and its
Subsidiaries as at the dates  indicated and the results of their  operations and
their cash flows for the periods  indicated,  subject to changes  resulting from
audit and normal year-end  adjustments,  and (b) as soon as available and in any
event within 90 days after the end of each Fiscal Quarter or the Stub Period, as
the case may be, a summary  of such  consolidated  statements  setting  forth in
comparative  form the  corresponding  figures  from the  Financial  Plan for the
current  Fiscal  Year or the Stub  Period,  as the case may be, and a  narrative
report describing the operations of Company and its Subsidiaries in each

                                       5

<PAGE>

case in the form prepared for  presentation to the Governing Body of Company for
such Fiscal  Quarter or the Stub Period,  as the case may be, and for the period
from the  beginning  of the then  current  Fiscal Year to the end of such Fiscal
Quarter  (or, in the case of the Stub Period,  for the period from  December 27,
2003 to the end of the Stub Period)."

     B.  Subsection  6.1(iii)  of the  Credit  Agreement  is hereby  amended  by
deleting it in its entirety and substituting the following therefor:

     "(iii) Officer's  Compliance and Pricing  Certificates:  together with each
delivery of financial  statements  of Company and its  Subsidiaries  pursuant to
subdivisions (i) and (ii) above, (a) an Officer's Certificate of Company stating
that the signers have  reviewed the terms of this  Agreement  and have made,  or
caused to be made under their supervision,  a review in reasonable detail of the
transactions and condition of Company and its Subsidiaries during the accounting
period  covered  by such  financial  statements  and that  such  review  has not
disclosed the existence during or at the end of such accounting period, and that
the  signers  do not  have  knowledge  of the  existence  as at the date of such
Officer's  Certificate,  of any condition or event that  constitutes an Event of
Default  or  Potential  Event of  Default,  or, if any such  condition  or event
existed or exists,  specifying  the nature and period of  existence  thereof and
what action  Company  has taken,  is taking and  proposes  to take with  respect
thereto;  and (b) a Compliance  Certificate  demonstrating in reasonable  detail
compliance during and at the end of the applicable  accounting  periods with the
restrictions  contained in subsections  7.1(iv),  (x),  (xi),  (xii) and (xiii),
7.2A(viii), 7.3(ix), (xii) and (xiii), 7.4(x), 7.6, and 7.8, in each case to the
extent  compliance with such restrictions is required to be tested at the end of
the  applicable  accounting  period;  in  addition,  on or  before  the 55th day
following the end of each Fiscal Quarter or the Stub Period, as the case may be,
a Pricing Certificate  demonstrating in reasonable detail the calculation of the
Consolidated Leverage Ratio as at the last day of the twelve-Fiscal Month period
then ended;"

1.4  Amendments to Section 7:  Company's Negative Covenants

     A. Subsection  7.1(x) of the Credit Agreement is hereby amended by deleting
it in its entirety and substituting the following therefor:

     "(x)  Foreign  Subsidiaries  may become and remain  liable with  respect to
Indebtedness  to Persons  other than  Company or any of its  Subsidiaries  in an
aggregate principal amount (including the amount of any such Indebtedness listed
on Schedule 7.1 of the Company  Disclosure  Letter) not to exceed $44,100,000 at
any time  outstanding;  provided that such amount shall be increased by 5% as of
the  last day of each  Fiscal  Year,  commencing  with the  Fiscal  Year  ending
December 30, 2005;"

     B. Subsection 7.1(xi) of the Credit Agreement is hereby amended by deleting
it in its entirety and substituting the following therefor:

     "(xi)   Company  and  its  Domestic   Subsidiaries   (other  than  Inactive
Subsidiaries)  may  remain  liable  with  respect to  Capital  Leases  listed on
Schedule 7.1 of the Company  Disclosure  Letter and may become and remain liable
with respect to additional  Capital Leases in an aggregate  principal amount not
to exceed (a) $25,000,000 in any Fiscal Year, provided

                                       6
<PAGE>

that  such  amount  shall be  increased  by  $5,000,000  for each  Fiscal  Year,
commencing  with the Fiscal Year ending  December 30, 2005 or (b) $25,000,000 in
the 14-Fiscal Month period ending December 31, 2004;"

     C.  Subsection  7.1(xiii)  of the  Credit  Agreement  is hereby  amended by
deleting it in its entirety and substituting the following therefor:

     "(xiii)  Company  and  its  Domestic   Subsidiaries  (other  than  Inactive
Subsidiaries) may become and remain liable with respect to other Indebtedness to
Persons other than Company or any of its Subsidiaries in an aggregate  principal
amount not to exceed  $30,250,000  at any time  outstanding;  provided that such
amount  shall  be  increased  by 10% as of the  last  day of each  Fiscal  Year,
commencing with the Fiscal Year ending December 30, 2005; and"

     D.  Subsection  7.1(xiv)  of the  Credit  Agreement  is hereby  amended  by
deleting it in its entirety and substituting the following therefor:

     "(xiv)  Company  may become and remain  liable  with  respect to  unsecured
Indebtedness incurred to repurchase or redeem Existing Senior Subordinated Notes
and/or Senior Notes and/or Convertible Subordinated Notes, provided that (a) the
Consolidated  Leverage  Ratio as at the last  day of the  immediately  preceding
Fiscal Quarter or Stub Period, as the case may be (after giving pro forma effect
to the transactions relating to such repurchase or redemption and any other such
repurchase or redemption  since the end of such preceding Fiscal Quarter or Stub
Period,  as the  case may be) is less  than  2.50:1.00,  and (b) such  unsecured
Indebtedness  (1) requires no amortization  payments prior to the Tranche B Term
Loan Maturity Date and (2) has a final maturity date no earlier than the earlier
of (A) three  months after the final  maturity  date of the  Indebtedness  to be
repurchased  or redeemed and (B) one year after the Tranche B Term Loan Maturity
Date."

     E. Subsection 7.3(ix) of the Credit Agreement is hereby amended by deleting
it in its entirety and substituting the following therefor:

     "(ix) Company and its  Subsidiaries may acquire assets  (including  Capital
Stock and including Capital Stock of Subsidiaries  formed in connection with any
such  acquisition)  of any Person in the same or  similar  line of  business  as
Company and having  positive  EBITDA for the most  recently  ended  twelve-month
period  (calculated,  as  applicable,  in  accordance  with  the  definition  of
"Consolidated  EBITDA"  herein,  or such  other  definition  of EBITDA as may be
reasonably  acceptable  to  Administrative  Agent),  (a) through the issuance of
Capital  Stock of  Company,  (b) with Cash,  provided  that the  aggregate  Cash
portion  of the  purchase  price of all such  acquisitions  does not  exceed (1)
$25,000,000  in the aggregate or (2)  $50,000,000  in the aggregate in the event
that the ratio of all secured  Indebtedness of Company and its Subsidiaries on a
consolidated  basis to Consolidated  EBITDA for the  twelve-Fiscal  Month period
ended as of the most recently ended Fiscal  Quarter or Stub Period,  as the case
may be,  is less  than  1.50 to 1.0,  (c) with  the  proceeds  of not more  than
$200,000,000 of Subordinated Indebtedness of Company or (d) with any combination
of  (a)  through  (c);   provided  that  (1)(A)  after  giving  effect  to  such
acquisition,  at least  $75,000,000 is available in Revolving Loan  Commitments,
(B) any such Subordinated Indebtedness is unsecured and has no mandatory payment
of  principal  for at least one year after the  maturity

                                       7
<PAGE>

of the Tranche B Term Loans, and (C) the documentation for any such indebtedness
contains  subordination  provisions that are standard in the market for publicly
traded or privately held  subordinated  debt  securities at the time of issuance
thereof or such other subordination  provisions as may be reasonably  acceptable
to  Administrative  Agent,  and contains such other terms and  conditions as are
reasonably  satisfactory to Administrative Agent, and (D) after giving effect to
the  incurrence of any such  Subordinated  Indebtedness,  no Event of Default or
Potential  Event of Default  shall have  occurred or be  continuing  and the pro
forma  Consolidated  Leverage Ratio (after giving effect to such acquisition) is
less than the maximum Consolidated Leverage Ratio permitted as at the end of the
most  recently  ended Fiscal  Quarter or Stub Period,  as the case may be, minus
0.25 or (2) Requisite Lenders consent thereto (each a "Permitted Acquisition");"

     F.  Subsection  7.3(xiii)  of the  Credit  Agreement  is hereby  amended by
deleting it in its entirety and substituting the following therefor:

     "(xiii) Company and its Subsidiaries (other than Inactive Subsidiaries) may
make and own other Investments in an aggregate amount not to exceed  $25,000,000
at any time;  provided that such amount shall be increased to  $35,000,000 as of
the earliest of the following dates as at which the Consolidated  Leverage Ratio
is less than 3.00:1.00:  (a) October 31, 2004, (b) December 31, 2004 and (c) the
last day of any Fiscal Year ending on or after December 30, 2005."

     G. Subsection  7.4(x) of the Credit Agreement is hereby amended by deleting
it in its entirety and substituting the following therefor:

     "(x) Company and its Subsidiaries  (other than Inactive  Subsidiaries)  may
become and remain liable with respect to other Contingent Obligations;  provided
that the maximum aggregate  liability,  contingent or otherwise,  of Company and
its Subsidiaries in respect of all such other Contingent Obligations shall at no
time  exceed  $10,000,000;  provided  that such  amount  shall be  increased  to
$20,000,000  as  of  the  earliest  of  the  following  dates  as at  which  the
Consolidated  Leverage Ratio is less than  3.00:1.00:  (a) October 31, 2004, (b)
December  31,  2004 and (c) the last day of any Fiscal  Year  ending on or after
December 30, 2005."

     H. Subsection 7.5A(x) of the Credit Agreement is hereby amended by deleting
it in its entirety and substituting the following therefor:

     "(x)  Company  may  purchase  shares of Capital  Stock of  Company  and any
warrants or other rights with  respect to the Capital  Stock of Company from (a)
its  employees,  by net  exercise  or  otherwise,  pursuant  to the terms of any
employee  stock option,  restricted  stock or incentive  stock plan, and (b) its
officers and directors,  in an aggregate amount not to exceed $10,000,000 in any
Fiscal Year (or in the 14-Fiscal Month period ending December 31, 2004);"

     I.  Subsection  7.5A(xiii)  of the Credit  Agreement  is hereby  amended by
deleting it in its entirety and substituting the following therefor:

     "(xiii)  during  (a) the Fiscal  Year  ending  October  31,  2004,  (b) the
14-Fiscal  Month period ending December 30, 2005 and (c) each Fiscal Year ending
on or after December 29,

                                       8

<PAGE>

2006, Company may repurchase or redeem Existing Senior Subordinated Notes and/or
Senior Notes and/or  Convertible  Subordinated  Notes (any such redemption being
made in accordance with the terms of the Existing Senior Subordinated Indenture,
the  Senior  Indenture  and/or  the  Convertible  Subordinated  Note  Indenture,
respectively)  in an amount  equal to 25% of  Consolidated  Excess Cash Flow for
such period (the "Maximum  Repurchase  Amount");  provided that the Consolidated
Leverage Ratio as at the last day of the most recently  completed Fiscal Quarter
or Stub  Period,  as the  case  may be,  after  giving  effect  to the  proposed
repurchase or redemption and any other  repurchases  or  redemptions  previously
consummated  during the current Fiscal  Quarter or Stub Period,  as the case may
be, as though they had occurred on the last day of the most  recently  completed
Fiscal  Quarter or Stub  Period,  as the case may be, is less than 3:00 to 1:00;
provided  further  that  (1)  such  percentage  shall  be  increased  to  50% of
Consolidated  Excess Cash Flow  during any such  Fiscal  Year or such  14-Fiscal
Month period,  as the case may be, for which the Consolidated  Leverage Ratio as
at the end of such  period  is less  than  2:50  to  1:00,  and (2) the  Maximum
Repurchase  Amount for any such Fiscal Year or such 14-Fiscal  Month period,  as
the case may be, shall be increased by an amount equal to the excess, if any, of
the Maximum  Repurchase  Amount for the  previous  Fiscal Year or such  previous
14-Fiscal  Month  period,  as the  case may be  (without  giving  effect  to any
adjustment in accordance  with subclause (2) of this proviso,  and solely to the
extent that such previous  Fiscal Year or such previous  14-Fiscal Month period,
as the case may be, ended on or after  October 31, 2004) over the actual  amount
applied to repurchases or redemptions  during such previous  Fiscal Year or such
previous 14-Fiscal Month period, as the case may be; and"

     J.  Subsection  7.5A(xiv)  of the  Credit  Agreement  is hereby  amended by
deleting it in its entirety and substituting the following therefor:

     "(xiv) Company may repurchase or redeem Existing Senior  Subordinated Notes
and/or Senior Notes and/or  Convertible  Subordinated Notes (any such redemption
being made in  accordance  with the terms of the  Existing  Senior  Subordinated
Indenture,  the  Senior  Indenture  and/or  the  Convertible  Subordinated  Note
Indenture,  respectively),  provided that the Consolidated  Leverage Ratio as at
the last day of the immediately  preceding Fiscal Quarter or Stub Period, as the
case may be (after giving pro forma effect to the transactions  relating to such
repurchase or redemption and any other such  repurchase or redemption  since the
end of such preceding Fiscal Quarter or Stub Period, as the case may be) is less
than 2.50:1.00,  provided  further,  that such repurchases or redemptions may be
made with  proceeds of  Revolving  Loans only to the extent  that,  after giving
effect to the  extension of any  Revolving  Loan  proposed to be applied to such
repurchase or redemption,  the Revolving Loan  Commitments  then in effect would
exceed the Total  Utilization  of Revolving  Loan  Commitments  by not less than
$30,000,000."

     K. Subsection 7.6 of the Credit  Agreement is hereby amended by deleting it
in its entirety and substituting the following therefor:

     "A. Minimum  Consolidated  Fixed Charge Coverage  Ratio.  Company shall not
permit  the  ratio  of  (i)  Consolidated  EBITDA  minus  Consolidated   Capital
Expenditures   to  (ii)   Consolidated   Fixed  Charges  (a)  for  each  of  the
twelve-Fiscal Month periods ending on October 31, 2004, December 31, 2004, April
1, 2005,  July 1, 2005 and September 30, 2005

                                       9

<PAGE>

to be less than  1.20:1.00  and (b) for any  four-Fiscal  Quarter  period ending
during any of the periods set forth below to be less than the correlative  ratio
indicated:

<TABLE>
<CAPTION>

                                                                         Minimum Consolidated
     Period                                                          Fixed Charge Coverage Ratio
     -------                                                         ---------------------------
   <S>                                                                     <C>

     October 1, 2005 through September 28, 2007                               1.20:1.00
     September 29, 2007 and thereafter                                        1.05:1.00

</TABLE>

     B.  Maximum  Consolidated  Leverage  Ratio.  Company  shall not  permit the
Consolidated Leverage Ratio as at (i) October 31, 2004 to exceed 3.60:1.00, (ii)
December  31,  2004 to exceed  3.50:1.00  and  (iii) the last day of any  Fiscal
Quarter  ending  during  any of the  periods  set  forth  below  to  exceed  the
correlative ratio indicated:

<TABLE>
<CAPTION>

      Period                                                     Maximum Consolidated Leverage Ratio
      -------                                                    -----------------------------------

    <S>                                                                   <C>
      January 1, 2005 through April 1, 2005                                 3.50:1.00
      April 2, 2005 through September 30, 2005                              3.25:1.00
      October 1, 2005 and thereafter                                        3.00:1.00
</TABLE>

     C. Minimum  Consolidated  Current Ratio. Company shall not permit the ratio
of  Consolidated  Current Assets to Consolidated  Current  Liabilities as of (i)
October 31,  2004,  (ii)  December  31, 2004 or (iii) the last day of any Fiscal
Quarter  ending on or after April 1, 2005,  in each case to be less than 1.50 to
1.00."

     L. Subsection 7.7(iv) of the Credit Agreement is hereby amended by deleting
it in its entirety and substituting the following therefor:

     "(iv) Company and its  Subsidiaries may make Asset Sales of assets having a
fair market value not in excess of $20,000,000  during any Fiscal Year or during
the twelve-Fiscal  Month period ending December 31, 2004,  provided that (a) the
consideration  received  for such assets shall be in an amount at least equal to
the fair  market  value  thereof  and  shall be Cash or  non-Cash  consideration
permitted by subsection 7.3(xi);  and (b) the proceeds of such Asset Sales shall
be applied as required by subsection 2.4B(iii)(a);"

     M. Subsection 7.8 of the Credit  Agreement is hereby amended by deleting it
in its entirety and substituting the following therefor:

     "7.8  Consolidated Capital Expenditures.

     Company shall not, and shall not permit its  Subsidiaries to, make or incur
Consolidated  Capital  Expenditures  in (i) the Fiscal Year  ending  October 31,
2004,  (ii) the  14-Fiscal  Month period  ending  December 30, 2005 or (iii) any
Fiscal Year ending on or after  December  29, 2006,  in an  aggregate  amount in
excess of $50,000,000 (the "Maximum Consolidated Capital Expenditures  Amount");
provided that the Maximum  Consolidated Capital Expenditures Amount for any such
period shall be  increased by an amount equal to

                                       10

<PAGE>

100% of the excess,  if any, of the Maximum  Consolidated  Capital  Expenditures
Amount for the previous such period  (without giving effect to any adjustment in
accordance  with this proviso) over the actual  amount of  Consolidated  Capital
Expenditures for such previous period.

     N. Subsection 7.9 of the Credit  Agreement is hereby amended by deleting it
in its entirety and substituting the following therefor:

     "7.9 Sales and Lease-Backs.

     Company  shall  not,  and  shall not  permit  any of its  Subsidiaries  to,
directly or  indirectly,  become or remain liable as lessee or as a guarantor or
other surety with respect to any lease,  whether an Operating Lease or a Capital
Lease, of any property (whether real,  personal or mixed),  whether now owned or
hereafter  acquired,  (i) that  Company or any of its  Subsidiaries  has sold or
transferred or is to sell or transfer to any other Person (other than Company or
any of its Subsidiaries) or (ii) that Company or any of its Subsidiaries intends
to use for  substantially  that same purpose as any other property that has been
or is to be sold or  transferred  by Company or any of its  Subsidiaries  to any
Person (other than Company or any of its  Subsidiaries)  in connection with such
lease,  except to the extent that the aggregate value of all property so sold or
transferred after the Closing Date does not exceed $20,000,000."

     O. Subsection 7.13 of the Credit Agreement is hereby amended by deleting it
in its entirety and substituting the following therefor:

     "7.13 Fiscal Year.

     Company  shall  not  change  any  Fiscal  Year-end  from  that set forth on
Schedule 1.1A annexed hereto."

     1.5 Schedule 1.1A. The Credit Agreement is hereby amended by adding thereto
Schedule 1.1A in the form of Schedule 1.1A annexed to this Amendment.

     1.6 Exhibit VIII: Form of Compliance  Certificate.  The Credit Agreement is
hereby amended by deleting said Exhibit VIII in its entirety and substituting in
place thereof a new Exhibit VIII in the form of Exhibit VIII to this Amendment.

     Section 2. CONDITIONS TO EFFECTIVENESS

             Section  1  of  this  Amendment  shall  become   effective  only
upon  the satisfaction  of  all  of  the  following  conditions  precedent  (the
date  of satisfaction of such conditions being referred to herein as the "Sixth
Amendment Effective Date"):

             A.  Company  shall  deliver  to  Lenders  (or to  Administrative
Agent for Lenders) executed copies of this Amendment.

             B. Requisite Lenders shall have executed this Amendment.

                                       11

<PAGE>

             C. Company's board of directors shall approve Company's proposed
change in Fiscal Year.

             D. All other  corporate and other  proceedings  taken or to be
taken  in  connection  with  the  transactions   contemplated  hereby  shall  be
satisfactory in form and substance to Administrative Agent and such counsel, and
Administrative  Agent and such counsel shall have received all such  counterpart
originals or certified  copies of such  documents  as  Administrative  Agent may
reasonably request.

     Section 3. COMPANY'S REPRESENTATIONS AND WARRANTIES

             In order to induce Lenders to enter into this Amendment and to
amend the Credit Agreement in the manner provided herein, Company represents and
warrants to each  Lender that the  following  statements  are true,  correct and
complete as of the date of this Amendment:

              A. Corporate Power and Authority.  Company has all requisite
corporate power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Amendment (the "Amended Agreement").

              B. Authorization of Agreements.  The execution and delivery of
this Amendment and the performance of the Amended Agreement have been duly
authorized by all necessary corporate action on the part of Company.

              C. No Conflict. The execution and delivery by Company of this
Amendment and the  performance  by Company of the  Amended  Agreement  do not
and will not (i) violate  any  provision  of any  law  or any  governmental rule
or  regulation applicable to Company or any of its Subsidiaries, the Certificate
or Articles of Incorporation  or Bylaws of  Company  or any of its  Subsidiaries
or any order, judgment or decree of any court or other agency of government
binding on Company or any of its  Subsidiaries,  (ii)  conflict  with, result in
a  breach  of or constitute  (with  due  notice  or lapse of time or both) a
default  under  any Contractual Obligation of Company or any of its Subsidiaries
in any manner that would be likely  to result in a  Material  Adverse  Effect,
(iii)  result in or require the creation or  imposition  of any Lien upon any of
the  properties  or assets of Company or any of its Subsidiaries (other than
Liens created under any of the Loan Documents in favor of  Administrative  Agent
on behalf of Lenders or Permitted  Encumbrances),  or (iv) require any approval
of  stockholders  or any approval or consent of any Person under any Contractual
Obligation of Company or any of its Subsidiaries.

             D. Governmental  Consents.  The  execution and delivery by Company
of this Amendment and the performance by Company of the Amended Agreement do not
and will not require any registration with, consent or approval of, or notice
to, or other action to, with or by, any federal,  state or other governmental
authority or regulatory body.

             E. Binding Obligation.  This Amendment has been duly executed and
delivered by Company and this  Amendment  and the Amended  Agreement are the
legally valid and binding  obligations of Company,  enforceable  against Company
in accordance with

                                       12

<PAGE>

their  respective  terms,  except as may be limited by  bankruptcy,  insolvency,
reorganization,  moratorium or similar laws  relating to or limiting  creditors'
rights generally or by equitable principles relating to enforceability.

            F. Incorporation of  Representations  and Warranties From Credit
Agreement. The  representations  and  warranties  contained  in  Section  5 of
the  Credit Agreement are and will be true, correct and complete in all material
respects on and as of the date  hereof to the same  extent as though made on and
as of such date,  except to the extent such  representations  and  warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.

            G. Absence of Default.  No event has occurred  and is  continuing or
will result from the consummation of the transactions  contemplated by this
Amendment that would constitute an Event of Default or a Potential Event of
Default.

     Section 4. MISCELLANEOUS

            A.  Reference  to and  Effect on the Credit Agreement and the Other
Loan Documents.

          (i) On and after the Sixth Amendment Effective Date, each reference in
          the  Credit  Agreement  to "this  Agreement",  "hereunder",  "hereof",
          "herein" or words of like import  referring  to the Credit  Agreement,
          and  each  reference  in the  other  Loan  Documents  to  the  "Credit
          Agreement",  "thereunder", "thereof" or words of like import referring
          to the Credit  Agreement  shall mean and be a reference to the Amended
          Agreement.

          (ii)  Except as  specifically  amended by this  Amendment,  the Credit
          Agreement and the other Loan Documents  shall remain in full force and
          effect and are hereby ratified and confirmed.

          (iii) The execution,  delivery and performance of this Amendment shall
          not, except as expressly  provided herein,  constitute a waiver of any
          provision of, or operate as a waiver of any right,  power or remedy of
          Administrative  Agent or any Lender under, the Credit Agreement or any
          of the other Loan Documents.

          B.  Fees  and  Expenses. Company acknowledges that all costs, fees and
expenses as described in  subsection  10.2 of the Credit  Agreement  incurred by
Administrative  Agent and its counsel  with  respect to this  Amendment  and the
documents  and  transactions  contemplated  hereby  shall be for the  account of
Company.

          C. Headings. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.

          D. Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES  HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE

                                       13

<PAGE>

INTERNAL LAWS OF THE STATE OF NEW YORK  (INCLUDING  WITHOUT  LIMITATION  SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK),  WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.

          E.  Counterparts. This Amendment may  be  executed  in  any number  of
counterparts and by different parties hereto in separate  counterparts,  each of
which when so executed and delivered  shall be deemed an original,  but all such
counterparts  together  shall  constitute  but  one  and  the  same  instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single  counterpart so that all signature pages are physically  attached to
the same document.

         Section 5.   ACKNOWLEDGEMENT AND CONSENT BY GUARANTORS

         Each  guarantor   listed  on  the  signature  pages hereof ("Subsidiary
Guarantors") hereby acknowledges that it has read this Amendment and consents to
the terms  thereof,  and hereby  confirms and agrees that,  notwithstanding  the
effectiveness  of this Amendment,  the obligations of each Subsidiary  Guarantor
under its applicable  Subsidiary  Guaranty shall not be impaired or affected and
the applicable  Subsidiary  Guaranty is, and shall continue to be, in full force
and effect and is hereby confirmed and ratified in all respects. Each Subsidiary
Guarantor further agrees that nothing in the Credit Agreement, this Amendment or
any  other  Loan  Document  shall be  deemed  to  require  the  consent  of such
Subsidiary Guarantor to any future amendment to the Credit Agreement.

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                                       14

<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Amendment to be
duly  executed  and  delivered  by  their  respective  officers  thereunto  duly
authorized as of the date first written above.

                           URS CORPORATION, a Delaware
                           Corporation

                           By: /s/ Kent P. Ainsworth
                              --------------------------------------
                           Title: Executive Vice President and Chief
                                  Financial Officer

                           CREDIT SUISSE FIRST  BOSTON,  acting
                           through its Cayman  Islands Branch, Individually
                           and as Administrative Agent

                           By: /s/ S. William Fox
                               -------------------------------------
                           Title: Director

                           By: /s/ David J. Dodd
                              --------------------------------------
                           Title: Associate

                           AMAN ENVIRONMENTAL
                           CONSTRUCTION, INC., a California
                           Corporation

                           By: /s/ Kent P. Ainsworth
                               -------------------------------------
                           Title: Executive Vice President
                                  and Chief Financial Officer

<PAGE>

                           BANSHEE CONSTRUCTION COMPANY
                           INC., a California corporation

                           By: /s/ Rita Armstrong
                              ---------------------------------------
                           Title: Vice President and Treasurer

<PAGE>

                             CLEVELAND WRECKING COMPANY, a
                             California corporation

                             By: /s/ Rita Armstrong
                                 ------------------------------------
                             Title:   Vice President and Treasurer

<PAGE>

                             RADIAN INTERNATIONAL LLC, a
                             Delaware limited liability company

                             By: /s/ David C. Nelson
                                --------------------------------------
                             Title: Vice President and Treasurer

<PAGE>

                             SIGNET TESTING LABORATORIES, INC.,
                             a Delaware corporation

                             By: /s/ Rita Armstrong
                                --------------------------------------
                             Title: Vice President and Treasurer

<PAGE>

                             URS CONSTRUCTION SERVICES, INC., a
                             Florida corporation

                             By: /s/ Kent P. Ainsworth
                                --------------------------------------
                             Title: Executive Vice President and Chief
                                    Financial Officer

<PAGE>

                             URS CORPORATION, a Nevada corporation

                             By: /s/ David C. Nelson
                                --------------------------------------
                             Title: Vice President and Treasurer

<PAGE>

                             URS CORPORATION GREAT LAKES, a
                             Michigan corporation

                             By: /s/ Kent P. Ainsworth
                                --------------------------------------
                             Title: Executive Vice President and Chief
                                    Financial Officer

<PAGE>

                             URS CORPORATION-MARYLAND, a
                             Maryland corporation

                             By: /s/ David C. Nelson
                                --------------------------------------
                             Title: Vice President and Treasurer

<PAGE>

                             URS CORPORATION-OHIO, an Ohio
                             corporation

                             By: /s/ David C. Nelson
                                --------------------------------------
                             Title: Vice President and Treasurer

<PAGE>

                             URS CORPORATION SOUTHERN, a
                             California corporation

                             By: /s/ David C. Nelson
                                --------------------------------------
                             Title: Vice President and Treasurer

<PAGE>

                             URS GROUP, INC., a Delaware corporation

                             By: /s/ David C. Nelson
                                --------------------------------------
                             Title: Vice President and Assistant Treasurer

<PAGE>

                            URS OPERATING SERVICES, INC., a
                            Delaware corporation

                            By: /s/ Peter J. Pedalino
                                --------------------------------------
                            Title: Vice President and Controller

<PAGE>

                             URS HOLDINGS, INC., a Delaware
                             corporation

                             By: /s/ David C. Nelson
                                --------------------------------------
                             Title: Vice President and Treasurer

<PAGE>

                             URS INTERNATIONAL INC., a Delaware
                             corporation

                             By: /s/ David C. Nelson
                                --------------------------------------
                             Title: Vice President and Treasurer

<PAGE>

                            LEAR SIEGLER SERVICES, INC., a
                            Delaware corporation

                            By: /s/ Kent P. Ainsworth
                                --------------------------------------
                            Title: Executive Vice President

<PAGE>

                              EG&G DEFENSE MATERIALS, INC., a
                              Utah Corporation

                              By: /s/ William Neeb
                                --------------------------------------
                              Titel: Vice President, Chief Financial Officer
                                     and Assistant Treasurer

<PAGE>

                            EG&G TECHNICAL SERVICES, INC., a
                            Delaware corporation

                            By: /s/ Kent P. Ainsworth
                                --------------------------------------
                            Title: Executive Vice President

                            D&M CONSULTING ENGINEERS, INC., a Delaware
                            corporation

                            By: /s/ Kent P. Ainsworth
                                --------------------------------------
                            Title: Executive Vice President and Chief
                                   Financial  Officer

                            E.C. DRIVER & ASSOCIATES, INC., a
                            Florida corporation

                            By: /s/ Kent P. Ainsworth
                                --------------------------------------
                            Title: Executive Vice President and Chief
                                   Financial  Officer

                            LEAR SIEGLER LOGISTICS
                            INTERNATIONAL, INC., a Delaware
                            corporation

                            By: /s/ Kent P. Ainsworth
                                --------------------------------------
                            Title: Executive Vice President

<PAGE>

                            RADIAN ENGINEERING, INC., a New York
                            corporation

                            By: /s/ Kent P. Ainsworth
                                --------------------------------------
                            Title: Executive Vice President.
                                   Chief Financial Officer and Secretary

                            URS CORPORATION AES., a Connecticut
                            corporation

                            By: /s/ Kent P. Ainsworth
                                --------------------------------------
                            Title: Executive Vice President and Chief
                                   Financial  Officer

                            URS CORPORATION ARCHITECTURE-
                            NC, P.C., a North Carolina corporation

                            By: /s/ Kent P. Ainsworth
                                --------------------------------------
                            Title: Executive Vice President and Chief
                                   Financial  Officer

                            URS CORPORATION-NEW YORK, a New
                            York corporation

                            By: /s/ Kent P. Ainsworth
                                --------------------------------------
                            Title: Executive Vice President and Chief
                                   Financial Officer

                            URS RESOURCES, LLC, a Delaware limited
                            liability company

                            By: /s/ Kent P. Ainsworth
                                --------------------------------------
                            Title: Attorney-in-fact

<PAGE>

                            ARUM CLO 2002-LTD.
                            By: Columbia management Advisors, Inc, as
                            investment manager.

                            By: /s/ Mark Pelletier
                                --------------------------------------
                            Title: Vice President

<PAGE>

                           BANK LEUMI USA, as a Lender

                           By: /s/ Joung Hee Hong
                                --------------------------------------
                           Title: Vice President

<PAGE>

                           BANK OF AMERICA, N.A., as a Lender

                           By: /s/ Michael J. Landini
                                --------------------------------------
                           Title: Senior Vice President

<PAGE>

                           BNP PARIBAS, as a Lender

                           By: /s/ Katherine Wolfe
                                --------------------------------------
                           Title: Director

                           By: /s/ Sandy Bertram
                           Title: Vice President

<PAGE>

                           DENALI CAPITAL LLC, managing member
                           of DC Funding Partners, portfolio manager for
                           DENALI CAPITAL CLO I, LTD., or an affiliate

                           By: /s/ David A. Tanny
                                --------------------------------------
                           Title: Vice President

<PAGE>

                           DENALI CAPITAL LLC, managing member
                           of DC Funding Partners, portfolio manager for
                           DENALI CAPITAL CLO II, LTD., or an
                           affiliate

                           By: /s/ David A. Tanny
                                --------------------------------------
                           Title: Vice President

<PAGE>

                           DENALI CAPITAL LLC, managing member
                           of DC Funding Partners, portfolio manager for
                           DENALI CAPITAL CLO III, LTD., or an
                           affiliate

                           By: /s/ David A. Tanny
                                --------------------------------------
                           Title: Vice President

<PAGE>

                           ERSTE BANK DER
                           OESTERREICHISCHEN SPARKASSEN
                           AG, as a Lender

                           By: /s/ John Fay
                                --------------------------------------
                           Title: Director

                           By: /s/ Bryan Lynch
                                --------------------------------------
                           Title: First Vice President

<PAGE>

                           FLAGSHIP CAPITAL CLO III
                           By: flagship Capital Management, Inc., as a
                           Lender

                           By: /s/ Mark Pelletier
                                --------------------------------------
                           Title: Director

<PAGE>

                           GENERAL ELECTRIC CAPITAL
                           CORPORATION, as a Lender

                           By: /s/ Brian Schwinn
                                --------------------------------------
                           Title: Duly Authorized Signatory

<PAGE>

                           HARRIS TRUST & SAVINGS BANK,B as a
                           Lender

                           By: /s/ Joann Holmann
                                --------------------------------------
                           Title: Vice President

<PAGE>

                           IKB CAPITAL CORPORATION, as a Lender

                           By: /s/ David Snyder
                                --------------------------------------
                           Title: President

<PAGE>

                           NATIONAL CITY BANK, as a Lender

                           By: /s/ Frank Byrne
                                --------------------------------------
                           Title: Account Officer

<PAGE>

                           NORTH FORK BUSINESS CAPITAL
                           CORP., as a Lender

                           By: /s/ Stephen K. Goetschius
                                --------------------------------------
                           Title: Senior Vice President-Bank Loan
                                  Manager

<PAGE>

                           THE ROYAL BANK OF SCOTLAND PLC,
                           as a Lender

                           By: /s/ Curt Lueker
                                --------------------------------------
                           Title: Vice President

<PAGE>

                           SRF 2000, INC., as a Lender

                           By: /s/ Meredith J. Koslick
                                --------------------------------------
                           Title: Assistant Vice President

<PAGE>

                           STANWICH LOAN FUNDING LLC, as a
                           Lender

                           By: /s/ Meredith J. Koslick
                                --------------------------------------
                           Title: Assistant Vice President

<PAGE>

                           TORONTO DOMINION (New York), INC.,
                           as a Lender

                           By: /s/ Masood Fikree
                                --------------------------------------
                           Title: Authorized Agent

<PAGE>

                           TRANSAMERICA BUSINESS CAPITAL
                           CORPORATION, as a Lender

                           By: /s/ Brian Schwinn
                                --------------------------------------
                           Title: Duly Authorized Signatory

<PAGE>

                           TRUMBULL THC, LTD., as a Lender

                           By: /s/ Janet Haack
                                --------------------------------------
                           Title: As Attorney-in-Fact

<PAGE>

                           UNION BANK OF CALIFORNIA, N.A., as a
                           Lender

                           By: /s/ David M. Jackson
                                --------------------------------------
                           Title: Vice President

<PAGE>

                           WACHOVIA BANK, N.A., as a Lender

                           By: /s/ John G. Taylor
                                --------------------------------------
                           Title: Vice President

<PAGE>

                           WELLS FARGO BANK, N.A., as a Lender

                           By: /s/ Peter D. Gruebele
                                --------------------------------------
                           Title: Senior vice President

<PAGE>

                           WHITNEY PRIVATE DEBT FUND L.P., as
                           a Lender

                           By: /s/ Kevin J. Curlby
                                --------------------------------------
                           Title: Authorized Signatory

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