Exhibit 10.1

GIGOPTIX, INC.

CHIPX, INCORPORATED

BRIDGE BANK, NATIONAL ASSOCIATION

LOAN AND SECURITY AGREEMENT

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

This LOAN AND SECURITY AGREEMENT is entered into as of November 12, 2009, by and
between BRIDGE BANK, NATIONAL ASSOCIATION (“Bank”) and GIGOPTIX, INC.
(“GigOptix”) and CHIPX, INCORPORATED (“ChipX”) (GigOptix and ChipX sometimes are
individually referred to as a “Borrower” and, collectively, as the “Borrowers”).

RECITALS

Bank and ChipX, Incorporated are parties to a Loan and Security Agreement dated
as of December 9, 2008. GigOptix proposes to acquire ChipX. Borrowers wish to
continue to obtain credit from time to time from Bank after that acquisition,
and Bank desires to extend credit to Borrowers. This Agreement sets forth the
terms on which Bank will advance credit to Borrowers, and Borrowers will repay
the amounts owing to Bank.

AGREEMENT

The parties agree as follows:

1. DEFINITIONS AND CONSTRUCTION.

1.1 Definitions. As used in this Agreement, the following terms shall have the
following definitions:

“Accounts” means all presently existing and hereafter arising accounts, contract
rights, payment intangibles, and all other forms of obligations owing to a
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering of
services by Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower’s Books relating
to any of the foregoing.

“Advance” or “Advances” means a cash advance or cash advances under the
Revolving Facility.

“Affiliate” means, with respect to any Person, any Person that owns or controls
directly or indirectly such Person, any Person that controls or is controlled by
or is under common control with such Person, and each of such Person’s senior
executive officers, directors, and partners.

“Bank Expenses” means all: reasonable costs or expenses (including reasonable
attorneys’ fees and expenses) incurred in connection with the preparation,
negotiation, administration, and enforcement of the Loan Documents; reasonable
Collateral audit fees; and Bank’s reasonable attorneys’ fees and expenses
incurred in amending, enforcing or defending the Loan Documents (including fees
and expenses of appeal), incurred before, during and after an Insolvency
Proceeding, whether or not suit is brought.

“Borrower’s Books” means all of a Borrower’s books and records including:
ledgers; records concerning Borrower’s assets or liabilities, the Collateral,
business operations or financial condition; and all computer programs, or tape
files, and the equipment, containing such information.

“Borrowing Base” means an amount equal to the sum of (i) 75% of of Eligible
Accounts other than Eligible Foreign Accounts, plus (ii) 50% of Eligible Foreign
Accounts (provided however such amounts under this subsection (ii) shall at no
time exceed $1,500,000), as determined by Bank with reference to the most recent
Borrowing Base Certificate delivered by Borrowers.

“Business Day” means any day that is not a Saturday, Sunday, or other day on
which banks in the State of California are authorized or required to close.

“Cash” means unrestricted cash and cash equivalents.

 

1.

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

“Cash Management Sublimit” means a sublimit for cash management transactions
approved by Bank under the Revolving Line subject to the availability under the
Revolving Line and the Borrowing Base in an aggregate amount not to exceed
$1,000,000 minus, in each case, any amounts outstanding under the Letter of
Credit Sublimit and the Foreign Exchange Sublimit.

“Change in Control” shall mean a transaction in which any “person” or “group”
(within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934) becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of a sufficient number
of shares of all classes of stock then outstanding of a Borrower ordinarily
entitled to vote in the election of directors, empowering such “person” or
“group” to elect a majority of the Board of Directors of a Borrower, who did not
have such power before such transaction.

“Closing Date” means the date of this Agreement.

“Code” means the California Uniform Commercial Code.

“Collateral” means the property described on Exhibit A attached hereto.

“Contingent Obligation” means, as applied to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to (i) any
indebtedness, lease, dividend, letter of credit or other obligation of another;
(ii) any obligations with respect to undrawn letters of credit, corporate credit
cards, or merchant services issued or provided for the account of that Person;
and (iii) all obligations arising under any agreement or arrangement designed to
protect such Person against fluctuation in interest rates, currency exchange
rates or commodity prices; provided, however, that the term “Contingent
Obligation” shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by Bank in good faith; provided, however, that such amount
shall not in any event exceed the maximum amount of the obligations under the
guarantee or other support arrangement.

“Copyrights” means any and all copyright rights, copyright applications,
copyright registrations and like protections in each work or authorship and
derivative work thereof.

“Credit Extension” means each Advance, Letter of Credit, Cash Management
Services, FX Contracts, or any other extension of credit by Bank for the benefit
of a Borrower hereunder.

“Daily Balance” means the amount of the Obligations owed at the end of a given
day.

“Eligible Accounts” means those Accounts that arise in the ordinary course of a
Borrower’s business that comply with all of such Borrower’s representations and
warranties to Bank set forth in Section 5.4; provided, that standards of
eligibility may be fixed and revised from time to time by Bank in Bank’s
reasonable judgment and upon notification thereof to Borrower in accordance with
the provisions hereof. Unless otherwise agreed to by Bank, Eligible Accounts
shall not include the following:

(a) Accounts that the account debtor has failed to pay within ninety (90) days
of invoice date;

(b) Accounts with respect to an account debtor, thirty-five percent (35%) of
whose Accounts the account debtor has failed to pay within ninety (90) days of
invoice date;

(c) Accounts with respect to which the account debtor is an officer, employee,
or agent of Borrower;

(d) Accounts with respect to which goods are placed on consignment, guaranteed
sale, sale or return, sale on approval, bill and hold, or other terms by reason
of which the payment by the account debtor may be conditional;

 

2.

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

(e) Accounts with respect to which the account debtor is an Affiliate of
Borrower;

(f) Accounts with respect to which the account debtor does not have its
principal place of business in the United States or Canada;

(g) Accounts with respect to which the account debtor is the United States or
any department, agency, or instrumentality of the United States, except for
Accounts of the United States if the payee has assigned its payment rights to
Bank and the assignment has been acknowledged under the Assignment of Claims Act
of 1940 (31 U.S.C. 3727);

(h) Accounts with respect to which Borrower is liable to the account debtor for
goods sold or services rendered by the account debtor to Borrower or for
deposits or other property of the account debtor held by Borrower, but only to
the extent of any amounts owing to the account debtor against amounts owed to
Borrower;

(i) the portion of an Eligible Account held by an account debtor pending its
final acceptance of inventory sold to it by Borrower (a “Retention Account”);

(j) Accounts with respect to an account debtor, including Subsidiaries and
Affiliates, whose total obligations to Borrower exceed thirty percent (30%) of
all Accounts, to the extent such obligations exceed the aforementioned
percentage, except as approved in writing by Bank;

(k) Accounts with respect to which the account debtor disputes liability or
makes any claim with respect thereto as to which Bank believes, in its sole
discretion, that there may be a basis for dispute (but only to the extent of the
amount subject to such dispute or claim), or is subject to any Insolvency
Proceeding, or becomes insolvent, or goes out of business; and

(l) Accounts the collection of which Bank reasonably determines to be doubtful.

“Eligible Foreign Accounts” means Accounts that would be Eligible Accounts but
for the exclusion in clause (f) of the defined term “Eligible Accounts” with
respect to which the account debtor does not have its principal place of
business in the United States or Canada and that (i) are supported by one or
more letters of credit in an amount and of a tenor, and issued by a financial
institution, acceptable to Bank, or (ii) that Bank approves on a case-by-case
basis; Bank approves as Eligible Foreign Accounts any Accounts owing to a
Borrower by Alcatel-Lucent Deutschland AG (Germany), Alcatel Submarine Networks
(France), Anritsu Corporation (Japan), ZTE Corporation (China), Flextronics
Electronics (Huawei, China), Flextronics Intl (Latin America), Garmin Corp.
(Taiwan), Famar Feugina SA (Argentina), Heawei, Fujitsu (Japan), NTT (Japan),
Mitsubishi (Japan) and Thomson Multimedia (Hong Kong).

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

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and the regulations thereunder.

“Event of Default” has the meaning assigned in Article 8.

“Foreign Exchange Sublimit” means a sublimit for foreign exchange contracts
under the Revolving Line, subject to the availability under the Revolving Line
and the Borrowing Base, in an aggregate amount not to exceed $1,000,000 less, in
each case, any amounts outstanding under the Letter of Credit Sublimit and the
Cash Management Sublimit.

“GAAP” means generally accepted accounting principles as in effect from time to
time.

 

3.

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

“Indebtedness” means (a) all indebtedness for borrowed money or the deferred
purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.

“Insolvency Proceeding” means any proceeding commenced by or against any person
or entity under any provision of the United States Bankruptcy Code, as amended,
or under any other bankruptcy or insolvency law, including assignments for the
benefit of creditors, formal or informal moratoria, compositions, extension
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

“Intellectual Property Collateral” means all of a Borrower’s right, title, and
interest in and to the following: Copyrights, Trademarks and Patents; all trade
secrets, all design rights, claims for damages by way of past, present and
future infringement of any of the rights included above, all licenses or other
rights to use any of the Copyrights, Patents or Trademarks, and all license fees
and royalties arising from such use to the extent permitted by such license or
rights; all amendments, renewals and extensions of any of the Copyrights,
Trademarks or Patents; and all proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.

“Inventory” means all inventory in which a Borrower has or acquires any
interest, including 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 at any time hereafter owned by or in the custody or
possession, actual or constructive, of Borrower, including such inventory as is
temporarily out of its 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, and Borrower’s Books relating to any of
the foregoing.

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

“IRC” means the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.

“Letter of Credit” means a commercial or standby letter of credit or similar
undertaking issued by Bank at a Borrower’s request in accordance with
Section 2.1(b).

“Letter of Credit Sublimit” means a sublimit for Letters of Credit under the
Revolving Line, subject to the availability under the Revolving Line and the
Borrowing Base, in an aggregate amount not to exceed $1,000,000 less, in each
case, any amounts outstanding under the Foreign Exchange Sublimit and the Cash
Management Sublimit.

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

“Loan Documents” means, collectively, this Agreement, any note or notes executed
by a Borrower, and any other agreement entered into in connection with this
Agreement, all as amended or extended from time to time.

“Material Adverse Effect” means a material adverse effect on (i) the business
operations or condition (financial or otherwise) of a Borrower and its
Subsidiaries taken as a whole or (ii) the ability of a Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents or
(iii) the value or priority of Bank’s security interests in the Collateral.

“Negotiable Collateral” means all letters of credit of which a Borrower is a
beneficiary, notes, drafts, instruments, securities, documents of title, and
chattel paper, and Borrower’s Books relating to any of the foregoing.

“Obligations” means all debt, principal, interest, Bank Expenses and other
amounts owed to Bank by a Borrower pursuant to this Agreement or any other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding and including any debt, liability, or obligation owing
from a Borrower to others that Bank may have obtained by assignment or
otherwise.

 

4.

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

“Patents” means all patents, patent applications and like protections including
without limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.

“Periodic Payments” means all installments or similar recurring payments that
Borrower may now or hereafter become obligated to pay to Bank pursuant to the
terms and provisions of any instrument, or agreement now or hereafter in
existence between a Borrower and Bank.

“Permitted Indebtedness” means:

(a) Indebtedness of a Borrower in favor of Bank arising under this Agreement or
any other Loan Document;

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

(c) Indebtedness secured by a lien described in clause (c) of the defined term
“Permitted Liens,” provided (i) such Indebtedness does not exceed the lesser of
the cost or fair market value of the equipment financed with such Indebtedness
and (ii) such Indebtedness does not exceed $100,000 in the aggregate at any
given time;

(d) Subordinated Debt;

(e) Reimbursement obligations under corporate credit cards incurred in the
ordinary course of business;

(f) Unsecured Indebtedness to trade creditors incurred in the ordinary course of
business; and

(g) Other Indebtedness in an amount not to exceed $300,000 at any time
outstanding.

“Permitted Investment” means:

(a) Investments existing on the Closing Date disclosed in the Schedule;

(b) Investments in Borrower’s Subsidiaries in an amount up to that necessary to
cover the operating expenses of such Subsidiaries incurred in the ordinary
course of business, not in any case to exceed $450,000 per month; and

(c)(i) marketable direct obligations issued or unconditionally guaranteed by the
United States of America or any agency or any State thereof maturing within one
(1) year from the date of acquisition thereof, (ii) commercial paper maturing no
more than one (1) year from the date of creation thereof and currently having
rating of at least A-2 or P-2 from either Standard & Poor’s Corporation or
Moody’s Investors Service, (iii) certificates of deposit maturing no more than
one (1) year from the date of investment therein issued by Bank and (iv) Bank’s
money market accounts.

“Permitted Liens” means the following:

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

(b) Liens for taxes, fees, assessments or other governmental charges or levies,
either not delinquent or being contested in good faith by appropriate
proceedings, provided the same have no priority over any of Bank’s security
interests;

 

5.

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

(c) Liens (i) upon or in any equipment which was not financed by Bank acquired
or held by a Borrower or any of its Subsidiaries to secure the purchase price of
such equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment;

(d) Liens incurred in connection with the extension, renewal or refinancing of
the indebtedness secured by Liens of the type described in clauses (a) through
(c) above, provided that any extension, renewal or replacement Lien shall be
limited to the property encumbered by the existing Lien and the principal amount
of the indebtedness being extended, renewed or refinanced does not increase.

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

“Prime Rate” means the variable rate of interest, per annum, announced by Bank
form time to time as its Prime Rate on the date of measurement, whether or not
such announced rate is the lowest rate available from Bank.

“Responsible Officer” means each of the Chief Executive Officer, the Chief
Operating Officer, the Chief Financial Officer and the Controller of Borrower.

“Revolving Facility” means the facility under which a Borrower may request Bank
to issue Advances, as specified in Section 2.1(a) hereof.

“Revolving Line” means a credit extension of up to $4,000,000 ($2,200,000
pending Bank’s completion of a satisfactory field audit).

“Revolving Maturity Date” means May 12, 2011.

“Schedule” means the schedule of exceptions attached hereto and approved by
Bank, if any.

“Subordinated Debt” means any debt incurred by a Borrower that is subordinated
to the debt owing by Borrower to Bank on terms acceptable to Bank (and
identified as being such by Borrower and Bank).

“Subsidiary” means any corporation, company or partnership in which (i) any
general partnership interest or (ii) more than 50% of the stock or other units
of ownership which by the terms thereof has the ordinary voting power to elect
the Board of Directors, managers or trustees of the entity, at the time as of
which any determination is being made, is owned by Borrower, either directly or
through an Affiliate.

“Trademarks” means any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower connected with
and symbolized by such trademarks.

1.2 Accounting Terms. All accounting terms not specifically defined herein shall
be construed in accordance with GAAP and all calculations made hereunder shall
be made in accordance with GAAP. When used herein, the terms “financial
statements” shall include the notes and schedules thereto.

2. LOAN AND TERMS OF PAYMENT.

2.1 Credit Extensions.

Borrowers promise to pay to the order of Bank, in lawful money of the United
States of America, the aggregate unpaid principal amount of all Credit
Extensions made by Bank to Borrower hereunder. Borrowers shall also pay interest
on the unpaid principal amount of such Credit Extensions at rates in accordance
with the terms hereof.

 

6.

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

(a) Revolving Advances.

(i) Subject to and upon the terms and conditions of this Agreement, a Borrower
may request Advances in an aggregate outstanding amount not to exceed the lesser
of (i) the Revolving Line or (ii) the Borrowing Base, minus, in each case, the
aggregate face amount of all outstanding Letters of Credit, any amounts
outstanding under the Cash Management Sublimit and the Foreign Exchange
Sublimit. Subject to the terms and conditions of this Agreement, amounts
borrowed pursuant to this Section 2.1(a) may be repaid and reborrowed at any
time prior to the Revolving Maturity Date, at which time all Advances under this
Section 2.1(a) shall be immediately due and payable. A Borrower may prepay any
Advances without penalty or premium.

(ii) Whenever a Borrower desires an Advance, such Borrower will notify Bank by
facsimile transmission or telephone no later than 3:00 p.m. Pacific time, on the
Business Day that the Advance is to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit B hereto. Bank is authorized to make Advances under this Agreement,
based upon instructions received from a Responsible Officer or a designee of a
Responsible Officer, or without instructions if in Bank’s discretion such
Advances are necessary to meet Obligations which have become due and remain
unpaid. Bank shall be entitled to rely on any telephonic notice given by a
person who Bank reasonably believes to be a Responsible Officer or a designee
thereof, and Borrowers shall indemnify and hold Bank harmless for any damages or
loss suffered by Bank as a result of such reliance. Bank will credit the amount
of Advances made under this Section 2.1(a) to a Borrower’s deposit account.

(b) Letters of Credit Sublimit. Subject to the terms and conditions of this
Agreement and the availability under the Revolving Line and the Borrowing Base,
at any time prior to the Revolving Maturity Date, Bank agrees to issue letters
of credit for the account of Borrower (each, a “Letter of Credit” and
collectively, the “Letters of Credit”) in an aggregate outstanding face amount
not to exceed $1,000,000 less any amounts outstanding under the Cash Management
Sublimit and the Foreign Exchange Sublimit, and that availability under the
Revolving Line shall be reduced by, the Letters of Credit. All Letters of Credit
shall be, in form and substance, acceptable to Bank in its sole discretion and
shall be subject to the terms and conditions of Bank’s form of standard
application and letter of credit agreement (the “Application”), which Borrower
hereby agrees to execute, including Bank’s standard fee. On any drawn but
unreimbursed Letter of Credit, the unreimbursed amount shall be deemed an
Advance under Section 2.1(a). If at any time the Revolving Facility is
terminated or otherwise ceases to exist, Borrowers shall immediately secure in
cash all obligations under any outstanding Letters of Credit on terms acceptable
to Bank. The obligation of Borrowers to reimburse Bank for drawings made under
Letters of Credit shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement, the
Application, and such Letters of Credit, under all circumstances whatsoever.
Borrowers shall indemnify, defend, protect, and hold Bank harmless from any
loss, cost, expense or liability, including, without limitation, reasonable
attorneys’ fees, arising out of or in connection with any Letters of Credit,
except for expenses caused by Bank’s gross negligence or willful misconduct.

(c) Cash Management Sublimit. Subject to the terms and conditions of this
Agreement and the availability under the Revolving Line and the Borrowing Base,
a Borrower may request cash management services which may include merchant
services, direct deposit of payroll, business credit card, and check cashing
services identified in various cash management services agreements related to
such services (the “Cash Management Services”) by delivering to Bank such
applications on Bank’s standard forms as requested by Bank; provided, however,
that the total amount of the Cash Management Services shall not exceed
$1,000,000 less any amounts outstanding under the Letter of Credit Sublimit and
the Foreign Exchange Sublimit, and that availability under the Revolving Line
shall be reduced by the Cash Management Sublimit. In addition, Bank may, in its
sole discretion, charge as Advances any amounts that become due or owing to Bank
in connection with the Cash Management Services. If at any time the Revolving
Facility is terminated or otherwise ceases to exist, Borrower shall immediately
secure to Bank’s satisfaction its obligations with respect to any Cash
Management Services, and, effective as of such date, the balance in any deposit
accounts held by Bank and the certificates of deposit issued by Bank in
Borrower’s name (and any interest paid thereon or proceeds thereof, including
any amounts payable upon the maturity or liquidation of such certificates),
shall automatically secure such obligations to

 

7.

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

the extent of the then outstanding Cash Management Services. Borrowers authorize
Bank to hold such balances in pledge and to decline to honor any drafts thereon
or any requests by Borrower or any other Person to pay or otherwise transfer any
part of such balances for so long as the Cash Management Services continue.

(d) Foreign Exchange Sublimit. Subject to and upon the terms and conditions of
this Agreement and any other agreement that a Borrower may enter into with the
Bank in connection with foreign exchange transactions (“FX Contracts”) and
subject to the availability under the Revolving Line and the Borrowing Base, a
Borrower may request Bank to enter into FX Contracts with Borrower due not later
than the Revolving Maturity Date unless cash secured on terms satisfactory to
Bank. Borrowers shall conduct all their United States foreign currency exchange
business through Bank. Borrowers shall pay any standard issuance and other fees
that Bank notifies Borrower will be charged for issuing and processing FX
Contracts for a Borrower. The FX Amount shall at all times be equal to or less
than $1,000,000 minus any amounts outstanding under the Letter of Credit
Sublimit and the Cash Management Sublimit. The “FX Amount” shall equal the
amount determined by multiplying (i) the aggregate amount, in United States
Dollars, of FX Contracts between Borrower and Bank remaining outstanding as of
any date of determination by (ii) the applicable Foreign Exchange Reserve
Percentage as of such date. The “Foreign Exchange Reserve Percentage” shall be a
percentage as determined by Bank, in its sole discretion from time to time. If
at any time the Revolving Facility is terminated or otherwise ceases to exist,
Borrower shall immediately secure in cash all obligations under the Foreign
Exchange Sublimit on terms acceptable to Bank.

2.2 Overadvances. If the sum of aggregate amount of the outstanding Advances
plus any amounts outstanding under the Letter of Credit Sublimit, the Cash
Management Sublimit and the Foreign Exchange Sublimit exceeds the lesser of the
Revolving Line or the Borrowing Base at any time, Borrowers shall immediately
pay to Bank, in cash, the amount of such excess. Unless otherwise agreed by
Bank, such payment shall be deemed to be made on account of the Advances.

2.3 Interest Rates, Payments, and Calculations.

(a) Interest Rates. Except as set forth in Section 2.3(b), the Credit Extensions
shall bear interest, on the outstanding Daily Balance thereof, at a rate equal
to the Prime Rate plus 2.5%, provided however, that for the purpose of this
calculation, in no event shall the Prime Rate be less than 4.0% per annum.

(b) Late Fee; Default Rate. If any payment is not made within ten (10) days
after the date such payment is due, Borrowers shall pay Bank a late fee equal to
the lesser of (i) five percent (5%) of the amount of such unpaid amount or
(ii) the maximum amount permitted to be charged under applicable law. All
Obligations shall bear interest, from and after the occurrence and during the
continuance of an Event of Default, at a rate equal to five (5) percentage
points above the interest rate applicable immediately prior to the occurrence of
the Event of Default.

(c) Payments. Interest hereunder shall be due and payable on the tenth calendar
day of each month during the term hereof. Bank shall, at its option, charge such
interest, all Bank Expenses, and all Periodic Payments against any of a
Borrower’s deposit accounts or against the Revolving Line, in which case those
amounts shall thereafter accrue interest at the rate then applicable hereunder.
Any interest not paid when due shall be compounded by becoming a part of the
Obligations, and such interest shall thereafter accrue interest at the rate then
applicable hereunder. All payments shall be free and clear of any taxes,
withholdings, duties, impositions or other charges, to the end that Bank will
receive the entire amount of any Obligations payable hereunder, regardless of
source of payment.

(d) Computation. In the event the Prime Rate is changed from time to time
hereafter, the applicable rate of interest hereunder shall be increased or
decreased, effective as of the day the Prime Rate is changed, by an amount equal
to such change in the Prime Rate. All interest chargeable under the Loan
Documents shall be computed on the basis of a three hundred sixty (360) day year
for the actual number of days elapsed.

2.4 Crediting Payments. Prior to the occurrence of an Event of Default, Bank
shall credit a wire transfer of funds, check or other item of payment to such
deposit account or Obligation as Borrower specifies.

 

8.

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

After the occurrence of an Event of Default, the receipt by Bank of any wire
transfer of funds, check, or other item of payment shall be immediately applied
to conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon Pacific time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.

2.5 Fees. Borrowers shall pay to Bank the following:

(a) Facility Fee. On the Closing Date, a facility fee equal to $60,000, which
shall be nonrefundable; and

(b) Bank Expenses. On the Closing Date, all Bank Expenses incurred through the
Closing Date, including reasonable attorneys’ fees (not to exceed $15,000) and
expenses and, after the Closing Date, all Bank Expenses, including reasonable
attorneys’ fees and expenses, as and when they are incurred by Bank.

2.6 Term. This Agreement shall become effective on the Closing Date and, subject
to Section 12.7, shall continue in full force and effect for so long as any
Obligations remain outstanding or Bank has any obligation to make Credit
Extensions under this Agreement. Notwithstanding the foregoing, Bank shall have
the right to terminate its obligation to make Credit Extensions under this
Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default. Notwithstanding termination, Bank’s Lien on
the Collateral shall remain in effect for so long as any Obligations are
outstanding

2.7 Lockbox. Borrowers shall promptly establish a lockbox (the “Lockbox”) with
Bank, including execution of such agreements as Bank requests in connection with
such Lockbox. Borrowers shall place the Lockbox address billing address on all
invoices issued after the Closing Date. Within 45 days of the Closing Date,
shall direct all account debtors to make payments to the Lockbox, and at Bank’s
option it shall be an Event of Default if Borrower fails to do so. Before such
date, Borrower shall forward all payments to Bank, together with a cash receipts
journal on Friday of each week until the Lockbox is operational.

3. CONDITIONS OF LOANS.

3.1 Conditions Precedent to Initial Credit Extension. The obligation of Bank to
make the initial Credit Extension is subject to the condition precedent that
Bank shall have received, in form and substance satisfactory to Bank, the
following:

(a) this Agreement;

(b) a certificate of the Secretary of Borrower with respect to incumbency and
resolutions authorizing the execution and delivery of this Agreement;

(c) UCC National Form Financing Statement;

(d) an intellectual property security agreement executed by each Borrower;

(e) a warrant to purchase stock;

(f) insurance certificate evidencing the insurance specified in Section 6.6;

(g) unconditional secured guaranties from each of ChipX, (Israel) Ltd, ChipX, UK
Limited, Lumera Corporation, GigOptix Helix AG, GigOptix LLC, and all other
Subsidiaries of any Borrower;

 

9.

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

(h) account control agreements with respect to each of Borrower’s accounts not
maintained at Bank;

(i) lockbox agreement;

(j) payment of the fees and Bank Expenses then due specified in Section 2.5
hereof;

(k) current financial statements of Borrower; and

(l) such other documents, and completion of such other matters, as Bank may
reasonably deem necessary or appropriate.

3.2 Conditions Precedent to all Credit Extensions. The obligation of Bank to
make each Credit Extension, including the initial Credit Extension, is further
subject to the following conditions:

(a) timely receipt by Bank of the Payment/Advance Form as provided in
Section 2.1; and

(b) the representations and warranties contained in Section 5 shall be true and
correct in all material respects on and as of the date of such Payment/Advance
Form and on the effective date of each Credit Extension as though made at and as
of each such date, and no Event of Default shall have occurred and be
continuing, or would exist after giving effect to such Credit Extension. The
making of each Credit Extension shall be deemed to be a representation and
warranty by each Borrower on the date of such Credit Extension as to the
accuracy of the facts referred to in this Section 3.2.

4. CREATION OF SECURITY INTEREST.

4.1 Grant of Security Interest. Each Borrower grants and pledges to Bank a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrowers of each of
its covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof.

4.2 Delivery of Additional Documentation Required. Each Borrower shall from time
to time execute and deliver to Bank, at the request of Bank, all Negotiable
Collateral, all financing statements and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue the
perfection of Bank’s security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents. A
Borrower from time to time may deposit with Bank specific time deposit accounts
to secure specific Obligations. Such Borrower authorizes Bank to hold such
balances in pledge and to decline to honor any drafts thereon or any request by
Borrower or any other Person to pay or otherwise transfer any part of such
balances for so long as the Obligations are outstanding.

4.3 Right to Inspect. Bank (through any of its officers, employees, or agents)
shall have the right, upon reasonable prior notice, from time to time during
Borrower’s usual business hours but no more than once a year (unless an Event of
Default has occurred and is continuing), to inspect Borrower’s Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower’s financial condition or the amount, condition of, or any other
matter relating to, the Collateral.

5. REPRESENTATIONS AND WARRANTIES.

Each Borrower represents and warrants as follows:

5.1 Due Organization and Qualification. Borrower and each Subsidiary is a
corporation duly existing under the laws of its state of incorporation and
qualified and licensed to do business in any state in which the conduct of its
business or its ownership of property requires that it be so qualified.

 

10.

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

5.2 Due Authorization; No Conflict. The execution, delivery, and performance of
the Loan Documents are within Borrower’s powers, have been duly authorized, and
are not in conflict with nor constitute a breach of any provision contained in
Borrower’s Certificate of Incorporation or Bylaws, nor will they constitute an
event of default under any material agreement to which Borrower is a party or by
which Borrower is bound. Borrower is not in default under any material agreement
to which it is a party or by which it is bound.

5.3 No Prior Encumbrances. Borrower has good and marketable title to its
property, free and clear of Liens, except for Permitted Liens.

5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona fide existing
obligations of Borrower. The property and services giving rise to such Eligible
Accounts has been delivered or rendered to the account debtor or to the account
debtor’s agent for immediate and unconditional acceptance by the account debtor.
Borrower has not received notice of actual or imminent Insolvency Proceeding of
any account debtor that is included in any Borrowing Base Certificate as an
Eligible Account.

5.5 Merchantable Inventory. All Inventory is in all material respects of good
and marketable quality, free from all material defects, except for Inventory for
which adequate reserves have been made.

5.6 Intellectual Property Collateral. Borrower is the sole owner of the
Intellectual Property Collateral, except for non-exclusive licenses granted by
Borrower to its customers in the ordinary course of business. Each of the
Patents is valid and enforceable, and no part of the Intellectual Property
Collateral has been judged invalid or unenforceable, in whole or in part, and no
claim has been made that any part of the Intellectual Property Collateral
violates the rights of any third party. Except as set forth in the Schedule,
Borrower’s rights as a licensee of intellectual property do not give rise to
more than five percent (5%) of its gross revenue in any given month, including
without limitation revenue derived from the sale, licensing, rendering or
disposition of any product or service. Except as set forth in the Schedule,
Borrower is not a party to, or bound by, any material agreement that restricts
the grant by Borrower of a security interest in Borrower’s rights under such
agreement other than customary anti-assignment provisions.

5.7 Name; Location of Chief Executive Office. Except as disclosed in the
Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 10 hereof. All Borrower’s
Inventory and Equipment is located only at the location set forth in Section 10
hereof.

5.8 Litigation. Except as set forth in the Schedule, there are no actions or
proceedings pending by or against Borrower or any Subsidiary before any court or
administrative agency in which an adverse decision could have a Material Adverse
Effect, or a material adverse effect on Borrower’s interest or Bank’s security
interest in the Collateral.

5.9 No Material Adverse Change in Financial Statements. All consolidated and
consolidating financial statements related to Borrower and any Subsidiary that
Bank has received from Borrower fairly present in all material respects
Borrower’s financial condition as of the date thereof and Borrower’s
consolidated and consolidating results of operations for the period then ended.
There has not been a material adverse change in the consolidated or the
consolidating financial condition of Borrower since the date of the most recent
of such financial statements submitted to Bank.

5.10 Solvency, Payment of Debts. Borrower is solvent and able to pay its debts
(including trade debts) as they mature.

5.11 Regulatory Compliance. Borrower and each Subsidiary have met the minimum
funding requirements of ERISA with respect to any employee benefit plans subject
to ERISA, and no event has occurred resulting from Borrower’s failure to comply
with ERISA that could result in Borrower’s incurring any material liability.
Borrower is not an “investment company” or a company “controlled” by an
“investment company” within

 

11.

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

the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of the important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations T and U of the Board of Governors of the Federal Reserve
System). Borrower has complied with all the provisions of the Federal Fair Labor
Standards Act. Borrower has not violated any statutes, laws, ordinances or rules
applicable to it, violation of which could have a Material Adverse Effect.

5.12 Environmental Condition. Except as disclosed in the Schedule, none of
Borrower’s or any Subsidiary’s properties or assets has ever been used by
Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous
owners or operators, in the disposal of, or to produce, store, handle, treat,
release, or transport, any hazardous waste or hazardous substance other than in
accordance with applicable law; to the best of Borrower’s knowledge, none of
Borrower’s properties or assets has ever been designated or identified in any
manner pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.

5.13 Taxes. Borrower and each Subsidiary have filed or caused to be filed all
tax returns required to be filed, and have paid, or have made adequate provision
for the payment of, all taxes reflected therein.

5.14 Subsidiaries. Except as disclosed on the Schedule, Borrower does not own
any stock, partnership interest or other equity securities of any Person, except
for Permitted Investments.

5.15 Government Consents. Borrower and each Subsidiary have obtained all
material consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all governmental authorities that are
necessary for the continued operation of Borrower’s business as currently
conducted.

5.16 Accounts. As of the Closing Date, none of ChipX’s property is maintained or
invested with a Person other than Bank, and all of GigOptix’s property is
maintained or invested with the financial institutions as disclosed on the
Schedule. Within 30 days following the Closing Date and continuing thereafter,
none of any Borrower’s property or any of Borrower’s domestic Subsidiaries is
maintained or invested with a Person other than Bank.

5.17 Full Disclosure. No representation, warranty or other statement made by
Borrower in any certificate or written statement furnished to Bank contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained in such certificates or statements not
misleading.

6. AFFIRMATIVE COVENANTS.

Each Borrower shall do all of the following:

6.1 Good Standing. Borrower shall maintain its and each of its Subsidiaries’
corporate existence and good standing in its jurisdiction of incorporation and
maintain qualification in each jurisdiction in which it is required under
applicable law. Borrower shall maintain, and shall cause each of its
Subsidiaries to maintain, in force all licenses, approvals and agreements, the
loss of which could have a Material Adverse Effect.

6.2 Government Compliance. Borrower shall meet, and shall cause each Subsidiary
to meet, the minimum funding requirements of ERISA with respect to any employee
benefit plans subject to ERISA. Borrower shall comply, and shall cause each
Subsidiary to comply, with all statutes, laws, ordinances and government rules
and regulations to which it is subject, noncompliance with which could have a
Material Adverse Effect.

 

12.

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

6.3 Financial Statements, Reports, Certificates. Borrower shall deliver the
following to Bank: (a) as soon as available, but in any event within thirty
(30) days after the end of each calendar month, a company prepared consolidated
and consolidating balance sheet, income, and cash flow statement covering
Borrower’s consolidated and consolidating operations during such period,
prepared in accordance with GAAP, consistently applied, in a form acceptable to
Bank and certified by a Responsible Officer, together with a backlog report in
form and substance reasonably satisfactory to Bank; (b) as soon as available,
but in any event within five days of filing with the Securities and Exchange
Commission, Form 10-K, including audited consolidated financial statements of
Borrower prepared in accordance with GAAP, consistently applied, together with
an unqualified opinion (other than a going-concern opinion) on such financial
statements of an independent certified public accounting firm reasonably
acceptable to Bank; (c) copies of all statements, reports and notices sent or
made available generally by Borrower to its security holders or to any holders
of Subordinated Debt; (d) as soon as available, but in any event within five
days of filing with the Securities and Exchange Commission, all reports on Form
10-Q; (e) promptly upon receipt of notice thereof, a report of any legal actions
pending or threatened against Borrower or any Subsidiary that would reasonably
be expected to result in damages or costs to Borrower or any Subsidiary of One
Hundred Thousand Dollars ($100,000) or more; (f) as soon as available, but in
any event within thirty (30) days before the beginning of Borrower’s next fiscal
year, the Board-approved operating budget for such year in form and substance
satisfactory to Bank; and (g) such budgets, sales projections, operating plans
or other financial information as Bank may reasonably request from time to time.

On the 15th and 30th day of each month (28th day if less than 30 days in the
month), Borrower shall deliver to Bank a Borrowing Base Certificate signed by a
Responsible Officer in substantially the form of Exhibit C hereto, together with
aged listings of accounts receivable, certified by a Responsible Officer. Within
20 days of the last day of each month, Borrower shall deliver to Bank aged
listings of accounts payable, certified by a Responsible Officer.

Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit D hereto.

Bank shall have a right from time to time hereafter to audit Borrower’s Accounts
and appraise Collateral at Borrower’s expense, including an audit prior to the
first anniversary of the Closing Date, provided that such audits will be
conducted no more often than every twelve (12) months unless an Event of Default
has occurred and is continuing.

6.4 Inventory; Returns. Borrower shall keep all Inventory in good and marketable
condition, free from all material defects except for Inventory for which
adequate reserves have been made. Returns and allowances, if any, as between
Borrower and its account debtors shall be on the same basis and in accordance
with the usual customary practices of Borrower, as they exist at the time of the
execution and delivery of this Agreement. Borrower shall promptly notify Bank of
all returns and recoveries and of all disputes and claims, where the return,
recovery, dispute or claim involves more than One Hundred Thousand Dollars
($100,000) in the aggregate.

6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to make, due and
timely payment or deposit of all material federal, state, and local taxes,
assessments, or contributions required of it by law, and will execute and
deliver to Bank, on demand, appropriate certificates attesting to the payment or
deposit thereof; and Borrower will make, and will cause each Subsidiary to make,
timely payment or deposit of all material tax payments and withholding taxes
required of it by applicable laws, including, but not limited to, those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Bank with proof satisfactory to
Bank indicating that Borrower or a Subsidiary has made such payments or
deposits; provided that Borrower or a Subsidiary need not make any payment if
the amount or validity of such payment is contested in good faith by appropriate
proceedings and is reserved against (to the extent required by GAAP) by
Borrower.

6.6 Insurance.

(a) Borrower, at its expense, shall keep the Collateral insured against loss or
damage by fire, theft, explosion, sprinklers, and all other hazards and risks,
and in such amounts, as ordinarily insured against by other owners in similar
businesses conducted in the locations where Borrower’s business is conducted on
the date hereof. Borrower shall also maintain insurance relating to Borrower’s
business, ownership and use of the Collateral in amounts and of a type that are
customary to businesses similar to Borrower’s.

 

13.

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

(b) All such policies of insurance shall be in such form, with such companies,
and in such amounts as are reasonably satisfactory to Bank. All such policies of
property insurance shall contain a lender’s loss payable endorsement, in a form
satisfactory to Bank, showing Bank as an additional loss payee thereof, and all
liability insurance policies shall show the Bank as an additional insured and
shall specify that the insurer must give at least twenty (20) days notice to
Bank before canceling its policy for any reason. Upon Bank’s request, Borrower
shall deliver to Bank certified copies of such policies of insurance and
evidence of the payments of all premiums therefor. All proceeds payable under
any such policy shall, at the option of Bank, be payable to Bank to be applied
on account of the Obligations.

6.7 Accounts. Within thirty days following the Closing Date, Borrower shall
maintain and shall cause each of its domestic Subsidiaries to maintain all of
its depository, operating, and investment accounts with Bank. Notwithstanding
the foregoing, Borrower may maintain a certificate of deposit account with
Comerica Bank for so long as it is solely securing an outstanding letter of
credit for the benefit of Borrower’s leased property in Bothwell, Washington,
and the amount held in such account does not exceed $700,000. Prior to or upon
the renewal of such letter of credit on January 6, 2010, Borrower shall transfer
the letter of credit and associated deposit account arrangement to Bank.

6.8 Maximum Loss/Profitability. On a consolidated basis, Borrowers may not
suffer a quarterly GAAP loss in excess of ($4,600,000) for the quarter ended
December 31, 2009 or ($750,000) for the quarter ended March 31, 2010. Borrowers
shall have a net GAAP profit of at least $1.00 for every quarter thereafter.

6.9 Asset Coverage Ratio. On a consolidated basis, Borrowers shall maintain at
all times a ratio of (a) Cash at Bank plus 80% of Borrowers’ accounts receivable
aged less than 90 days from invoice date to (b) Indebtedness owing Bank of not
more than 1.75 to 1.00, measured as at the end of each month.

6.10 Intellectual Property Rights.

(a) Borrower shall promptly give Bank written notice of any applications or
registrations of intellectual property rights filed with the United States
Patent and Trademark Office, including the date of such filing and the
registration or application numbers, if any. Borrower shall (i) give Bank notice
no later than thirty (30) days after the filing of any applications or
registrations with the United States Copyright Office, including the title of
such intellectual property rights to be registered, as such title will appear on
such applications or registrations, and the date such applications or
registrations will be filed, and (ii) no later than thirty (30) days after the
filing of any such applications or registrations, shall promptly execute such
documents as Bank may reasonably request for Bank to maintain its perfection in
such intellectual property rights to be registered by Borrower, and upon the
request of Bank, shall file such documents simultaneously with the filing of any
such applications or registrations. Upon filing any such applications or
registrations with the United States Copyright Office, Borrower shall promptly
provide Bank with (i) a copy of such applications or registrations, without the
exhibits, if any, thereto, (ii) evidence of the filing of any documents
requested by Bank to be filed for Bank to maintain the perfection and priority
of its security interest in such intellectual property rights, and (iii) the
date of such filing.

(b) Bank may audit Borrower’s Intellectual Property Collateral to confirm
compliance with this Section, provided such audit may not occur more often than
once per year, unless an Event of Default has occurred and is continuing. Bank
shall have the right, but not the obligation, to take, at Borrower’s sole
expense, any actions that Borrower is required under this Section to take but
which Borrower fails to take, after 15 days’ notice to Borrower. Borrower shall
reimburse and indemnify Bank for all reasonable costs and reasonable expenses
incurred in the reasonable exercise of its rights under this Section.

6.11 Subsidiaries. Borrower will cause each Subsidiary to provide a secured
guaranty to Borrowers’ Obligations hereunder, and/or, at Bank’s election,
Borrower will cause each domestic Subsidiary to become a party to this Agreement
as a co-Borrower.

 

14.

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

6.12 Further Assurances. At any time and from time to time Borrower shall
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to affect the purposes of this Agreement.

7. NEGATIVE COVENANTS.

No Borrower will do any of the following:

7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of
(collectively, a “Transfer”), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, other than: (i) Transfers of Inventory
in the ordinary course of business; (ii) Transfers of non-exclusive licenses and
similar arrangements for the use of the property of Borrower or its Subsidiaries
in the ordinary course of business; or (iii) Transfers of worn-out, obsolete or
unnecessary Equipment which was not financed by Bank.

7.2 Change in Business; Change in Control or Executive Office. Engage in any
business, or permit any of its Subsidiaries to engage in any business, other
than the businesses currently engaged in by Borrower and any business
substantially similar or related thereto (or incidental thereto); or cease to
conduct business in the manner conducted by Borrower as of the Closing Date; or
suffer or permit a Change in Control; or without thirty (30) days prior written
notification to Bank, relocate its chief executive office or state of
incorporation or change its legal name; or without Bank’s prior written consent,
change the date on which its fiscal year ends.

7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.

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

7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien with respect
to any of its property, or assign or otherwise convey any right to receive
income, including the sale of any Accounts, or permit any of its Subsidiaries so
to do, except for Permitted Liens, or agree with any Person other than Bank not
to grant a security interest in, or otherwise encumber, any of its property, or
permit any Subsidiary to do so.

7.6 Distributions. Pay any dividends or make any other distribution or payment
on account of or in redemption, retirement or purchase of any capital stock, or
permit any of its Subsidiaries to do so (other than with respect to dividends
paid by a Subsidiary to Borrower) in excess of $500,000 for all such
transactions for Borrowers in each fiscal year.

7.7 Investments. Directly or indirectly acquire or own, or make any Investment
in or to any Person, or permit any of its Subsidiaries so to do, other than
Permitted Investments; or maintain or invest any of its property with a Person
other than Bank or permit any of its Subsidiaries to do so unless such Person
has entered into an account control agreement with Bank in form and substance
satisfactory to Bank; or suffer or permit any Subsidiary to be a party to, or be
bound by, an agreement that restricts such Subsidiary from paying dividends or
otherwise distributing property to Borrower.

7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to
exist any material transaction with any Affiliate of Borrower (other than a
Subsidiary 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 non-affiliated Person.

7.9 Subordinated Debt. Make any payment in respect of any Subordinated Debt, or
permit any of its Subsidiaries to make any such payment, except in compliance
with the terms of such Subordinated Debt, or amend any provision contained in
any documentation relating to the Subordinated Debt without Bank’s prior written
consent.

 

15.

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

7.10 Inventory and Equipment. Store the Inventory or the Equipment with a
bailee, warehouseman, or other third party unless the third party has been
notified of Bank’s security interest and Bank (a) has received an acknowledgment
from the third party that it is holding or will hold the Inventory or Equipment
for Bank’s benefit or (b) is in pledge possession of the warehouse receipt,
where negotiable, covering such Inventory or Equipment. Store or maintain any
Equipment or Inventory at a location other than the location set forth in
Section 10 of this Agreement.

7.11 Compliance. Become an “investment company” or be controlled by an
“investment company,” within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Credit Extension for such
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 law or
regulation, which violation could have a Material Adverse Effect, or a material
adverse effect on the Collateral or the priority of Bank’s Lien on the
Collateral, or permit any of its Subsidiaries to do any of the foregoing.

8. EVENTS OF DEFAULT.

Any one or more of the following events shall constitute an Event of Default by
Borrowers under this Agreement:

8.1 Payment Default. If a Borrower fails to pay, when due, any of the
Obligations;

8.2 Covenant Default.

(a) If a Borrower fails to perform any obligation under Article 6 or violates
any of the covenants contained in Article 7 of this Agreement; or

(b) If a Borrower fails or neglects to perform or observe any other material
term, provision, condition, covenant contained in this Agreement, in any of the
Loan Documents, or in any other present or future agreement between a Borrower
and Bank and as to any default under such other term, provision, condition or
covenant that can be cured, has failed to cure such default within twenty days
after a Borrower receives notice thereof or any officer of a Borrower becomes
aware thereof; provided, however, that if the default cannot by its nature be
cured within the twenty day period or cannot after diligent attempts by a
Borrower be cured within such twenty day period, and such default is likely to
be cured within a reasonable time, then a Borrower shall have an additional
reasonable period (which shall not in any case exceed 30 days) to attempt to
cure such default, and within such reasonable time period the failure to have
cured such default shall not be deemed an Event of Default but no Credit
Extensions will be made.

8.3 Material Adverse Effect. If there occurs any circumstance or circumstances
that could have a Material Adverse Effect;

8.4 Attachment. If any portion of a Borrower’s assets is attached, seized,
subjected to a writ or distress warrant, or is levied upon, or comes into the
possession of any trustee, receiver or person acting in a similar capacity and
such attachment, seizure, writ or distress warrant or levy has not been removed,
discharged or rescinded within ten (10) days, or if a Borrower is enjoined,
restrained, or in any way prevented by court order from continuing to conduct
all or any material part of its business affairs, or if a judgment or other
claim becomes a lien or encumbrance upon any material portion of a Borrower’s
assets, or if a notice of lien, levy, or assessment is filed of record with
respect to any of a Borrower’s assets by the United States Government, or any
department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period);

8.5 Insolvency. If a Borrower becomes insolvent, or if an Insolvency Proceeding
is commenced by Borrower, or if an Insolvency Proceeding is commenced against a
Borrower and is not dismissed or stayed within thirty (30) days (provided that
no Credit Extensions will be made prior to the dismissal of such Insolvency
Proceeding);

 

16.

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

8.6 Other Agreements. If there is a default or other failure to perform in any
agreement to which a Borrower is a party or by which it is bound resulting in a
right by a third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of Fifty Thousand Dollars
($50,000) or which could have a Material Adverse Effect;

8.7 Judgments. If a judgment or judgments for the payment of money in an amount,
individually or in the aggregate, of at least Fifty Thousand Dollars ($50,000)
shall be rendered against a Borrower and shall remain unsatisfied and unstayed
for a period of ten (10) days (provided that no Credit Extensions will be made
prior to the satisfaction or stay of such judgment); or

8.8 Misrepresentations. If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate delivered to Bank by any Responsible Officer
pursuant to this Agreement or to induce Bank to enter into this Agreement or any
other Loan Document.

8.9 Guaranty. If any guaranty of all or a portion of the Obligations (a
“Guaranty”) ceases for any reason to be in full force and effect, or any
guarantor fails to perform any obligation under any Guaranty or a security
agreement securing any Guaranty (collectively, the “Guaranty Documents”), or any
event of default occurs under any Guaranty Document or any guarantor revokes or
purports to revoke a Guaranty, or any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
in any Guaranty Document or in any certificate delivered to Bank in connection
with any Guaranty Document, or if any of the circumstances described in Sections
8.3 through 8.8 occur with respect to any guarantor or any guarantor dies or
becomes subject to any criminal prosecution, or any circumstances arise causing
Bank, in good faith, to become insecure as to the satisfaction of any of any
guarantor’s obligations under the Guaranty Documents.

9. BANK’S RIGHTS AND REMEDIES.

9.1 Rights and Remedies. Upon the occurrence and during the continuance of an
Event of Default, Bank may, at its election, without notice of its election and
without demand, do any one or more of the following, all of which are authorized
by each Borrower:

(a) Declare all Obligations, whether evidenced by this Agreement, by any of the
other Loan Documents, or otherwise, immediately due and payable (provided that
upon the occurrence of an Event of Default described in Section 8.5, all
Obligations shall become immediately due and payable without any action by
Bank);

(b) Cease advancing money or extending credit to or for the benefit of any
Borrower under this Agreement or under any other agreement between a Borrower
and Bank;

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

(d) Make such payments and do such acts as Bank considers necessary or
reasonable to protect its security interest in the Collateral. Each Borrower
agrees to assemble the Collateral if Bank so requires, and to make the
Collateral available to Bank as Bank may designate. Each Borrower authorizes
Bank to enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Bank’s determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower’s owned
premises, Borrower hereby grants Bank a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Bank’s rights or remedies provided herein, at law, in equity, or otherwise;

 

17.

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

(e) Set off and apply to the Obligations any and all (i) balances and deposits
of a Borrower held by Bank, or (ii) indebtedness at any time owing to or for the
credit or the account of a Borrower held by Bank;

(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
advertise for sale, and sell (in the manner provided for herein) the Collateral.
Bank is hereby granted a license or other right, solely pursuant to the
provisions of this Section 9.1, to use, without charge, each Borrower’s labels,
patents, copyrights, rights of use of any name, trade secrets, trade names,
trademarks, service marks, and advertising matter, or any property of a similar
nature, 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 9.1, Borrower’s rights under all
licenses and all franchise agreements shall inure to Bank’s benefit;

(g) Dispose of the Collateral by way of one or more contracts or transactions,
for cash or on terms, in such manner and at such places (including Borrower’s
premises) as Bank determines is commercially reasonable, and apply any proceeds
to the Obligations in whatever manner or order Bank deems appropriate;

(h) Bank may credit bid and purchase at any public sale; and

(i) Any deficiency that exists after disposition of the Collateral as provided
above will be paid immediately by Borrower.

9.2 Power of Attorney. Effective only upon the occurrence and during the
continuance of an Event of Default, each Borrower hereby irrevocably appoints
Bank (and any of Bank’s designated officers, or employees) as such Borrower’s
true and lawful attorney to: (a) send requests for verification of Accounts or
notify account debtors of Bank’s security interest in the Accounts; (b) endorse
Borrower’s name on any checks or other forms of payment or security that may
come into Bank’s possession; (c) sign Borrower’s name on any invoice or bill of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims
under and decisions with respect to Borrower’s policies of insurance; (f) settle
and adjust disputes and claims respecting the accounts directly with account
debtors, for amounts and upon terms which Bank determines to be reasonable; and
(g) to file, in its sole discretion, one or more financing or continuation
statements and amendments thereto, relative to any of the Collateral. The
appointment of Bank as Borrower’s attorney in fact, and each and every one of
Bank’s rights and powers, being coupled with an interest, is irrevocable until
all of the Obligations have been fully repaid and performed and Bank’s
obligation to provide Credit Extensions hereunder is terminated.

9.3 Accounts Collection. Bank may notify any Person owing funds to a Borrower of
Bank’s security interest in such funds and verify the amount of such Account.
Bank may verify Accounts in its sole discretion through one or more of the
following: proof of delivery time, time cards, matching purchase orders or
contracts to invoices, analyzing customer payment history, and direct telephone
or written confirmation with account debtors. Each Borrower shall collect all
amounts owing to such Borrower for Bank, receive in trust all payments as Bank’s
trustee, and immediately deliver such payments to Bank in their original form as
received from the account debtor, with proper endorsements for deposit.

9.4 Bank Expenses. If a Borrower fails to pay any amounts or furnish any
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may do any or all of the following after
reasonable notice to Borrower: (a) make payment of the same or any part thereof;
(b) set up such reserves under a loan facility in Section 2.1 as Bank deems
necessary to protect Bank from the exposure created by such failure; or
(c) obtain and maintain insurance policies of the type discussed in Section 6.6
of this Agreement, and take any action with respect to such policies as Bank
deems prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.

 

18.

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

9.5 Monitored Facility. After the occurrence of an Event of Default, Bank in its
discretion may cause the Revolving Facility to become a fully monitored
asset-based facility, requiring among other things weekly borrowing base
certificates, direct collection of Accounts, and application of payments from
account debtors upon receipt to outstanding Obligations.

9.6 Bank’s Liability for Collateral. So long as Bank complies with reasonable
banking practices, Bank shall not in any way or manner be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage thereto
occurring or arising in any manner or fashion from any cause; (c) any diminution
in the value thereof; or (d) any act or default of any carrier, warehouseman,
bailee, forwarding agency, or other person whomsoever. All risk of loss, damage
or destruction of the Collateral shall be borne by Borrowers.

9.7 Remedies Cumulative. Bank’s rights and remedies under this Agreement, the
Loan Documents, and all other agreements shall be cumulative. Bank shall have
all other rights and remedies not inconsistent herewith as provided under the
Code, by law, or in equity. No exercise by Bank of one right or remedy shall be
deemed an election, and no waiver by Bank of any Event of Default on a
Borrower’s part shall be deemed a continuing waiver. No delay by Bank shall
constitute a waiver, election, or acquiescence by it. No waiver by Bank shall be
effective unless made in a written document signed on behalf of Bank and then
shall be effective only in the specific instance and for the specific purpose
for which it was given.

9.8 Demand; Protest. Each Borrower waives demand, protest, notice of protest,
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 at
any time held by Bank on which Borrower may in any way be liable.

10. NOTICES.

Unless otherwise provided in this Agreement, all notices or demands by any party
relating to this Agreement or any other agreement entered into in connection
herewith shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by a recognized overnight delivery
service, certified mail, postage prepaid, return receipt requested, or by
telefacsimile to a Borrower or to Bank, as the case may be, at its addresses set
forth below:

 

If to a Borrower:    GIGOPTIX, INC.    2400 Geng Road, Suite 100    Palo Alto,
CA 94303    Attn:    Avi Katz, President & CEO       FAX:
(650)                      If to Bank:    Bridge Bank, National Association   
55 Almaden Boulevard, Suite 100    San Jose, CA 95113    Attn: Chris Hill   
FAX: (408) 282-1681

The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other.

11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of California, without regard to principles of
conflicts of law. Each Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Clara, State of California. EACH BORROWER AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT

 

19.

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

CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH
PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

If the jury waiver set forth in Section is not enforceable, then any dispute,
controversy or claim arising out of or relating to this Agreement, the Loan
Documents or any of the transactions contemplated therein shall be settled by
judicial reference pursuant to Code of Civil Procedure Section 638 et seq.
before a referee sitting without a jury, such referee to be mutually acceptable
to the parties or, if no agreement is reached, by a referee appointed by the
Presiding Judge of the California Superior Court for Santa Clara County. This
Section shall not restrict a party from exercising remedies under the Code or
from exercising pre-judgment remedies under applicable law.

12. GENERAL PROVISIONS.

12.1 Successors and Assigns. This Agreement shall bind and inure to the benefit
of the respective successors and permitted assigns of each of the parties;
provided, however, that neither this Agreement nor any rights hereunder may be
assigned by a Borrower without Bank’s prior written consent, which consent may
be granted or withheld in Bank’s sole discretion. Bank shall have the right
without the consent of or notice to a Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank’s
obligations, rights and benefits hereunder.

12.2 Indemnification. Each Borrower shall defend, indemnify and hold harmless
Bank and its officers, employees, and agents against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other party in
connection with the transactions contemplated by this Agreement; and (b) all
losses or Bank Expenses in any way suffered, incurred, or paid by Bank as a
result of or in any way arising out of, following, or consequential to
transactions between Bank and a Borrower whether under this Agreement, or
otherwise (including without limitation 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 set forth in this Agreement.

12.4 Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.

12.5 Amendments in Writing, Integration. Neither this Agreement nor the Loan
Documents can be amended or terminated orally. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties hereto with respect to the subject matter of this Agreement and the Loan
Documents, if any, are merged 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, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement.

12.7 Survival. All covenants, representations and warranties made in this
Agreement shall continue in full force and effect so long as any Obligations
remain outstanding or Bank has any obligation to make Credit Extensions to
Borrower. The obligations of Borrower to indemnify Bank with respect to the
expenses, damages, losses, costs and liabilities described in Section 12.2 shall
survive until all applicable statute of limitations periods with respect to
actions that may be brought against Bank have run.

12.8 Confidentiality. In handling any confidential information Bank and all
employees and agents of Bank, including but not limited to accountants, shall
exercise the same degree of care that it exercises with

 

20.

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

respect to its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Bank in connection with their
present or prospective business relations with Borrower, (ii) to prospective
transferees or purchasers of any interest in the Loans, provided that they have
entered into a comparable confidentiality agreement in favor of Borrower and
have delivered a copy to Borrower, (iii) as required by law, regulations, rule
or order, subpoena, judicial order or similar order, (iv) as may be required in
connection with the examination, audit or similar investigation of Bank and
(v) as Bank may determine in connection with the enforcement of any remedies
hereunder. Confidential information hereunder shall not include information that
either: (a) is in the public domain or in the knowledge or possession of Bank
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,
provided Bank does not have actual knowledge that such third party is prohibited
from disclosing such information.

12.9 Patriot Act. To help the government fight the funding of terrorism and
money laundering activities, Federal law requires all financial institutions to
obtain, verify, and record information that identifies each person who opens an
account. WHAT THIS MEANS FOR YOU: when you open an account, we will ask for
information that will allow us to identify you.

13. CO-BORROWER PROVISIONS.

13.1 Primary Obligation. This Agreement is a primary and original obligation of
each Borrower and shall remain in effect notwithstanding future changes in
conditions, including any change of law or any invalidity or irregularity in the
creation or acquisition of any Obligations or in the execution or delivery of
any agreement between Bank and any Borrower. Each Borrower shall be liable for
existing and future Obligations as fully as if all of all Credit Extensions were
advanced to such Borrower. Bank may rely on any certificate or representation
made by any Borrower as made on behalf of, and binding on, all Borrowers,
including without limitation Disbursement Request Forms, Borrowing Base
Certificates and Compliance Certificates.

13.2 Enforcement of Rights. Borrowers are jointly and severally liable for the
Obligations and Bank may proceed against one or more of the Borrowers to enforce
the Obligations without waiving its right to proceed against any of the other
Borrowers.

13.3 Borrowers as Agents. Each Borrower appoints each other Borrower as its
agent with all necessary power and authority to give and receive notices,
certificates or demands for and on behalf of all Borrowers, to act as disbursing
agent for receipt of any Credit Extensions on behalf of each Borrower and to
apply to Bank on behalf of each Borrower for Credit Extensions, any waivers and
any consents. This authorization cannot be revoked, and Bank need not inquire as
to any Borrower’s authority to act for or on behalf of any other Borrower.

13.4 Subrogation and Similar Rights. Notwithstanding any other provision of this
Agreement or any other Loan Document, each Borrower irrevocably waives all
rights that it may have at law or in equity (including, without limitation, any
law subrogating the Borrower to the rights of Bank under the Loan Documents) to
seek contribution, indemnification, or any other form of reimbursement from any
other Borrower, or any other Person now or hereafter primarily or secondarily
liable for any of the Obligations, for any payment made by the Borrower with
respect to the Obligations in connection with the Loan Documents or otherwise
and all rights that it might have to benefit from, or to participate in, any
security for the Obligations as a result of any payment made by the Borrower
with respect to the Obligations in connection with the Loan Documents or
otherwise. Any agreement providing for indemnification, reimbursement or any
other arrangement prohibited under this Section 13.4 shall be null and void. If
any payment is made to a Borrower in contravention of this Section 13.4, such
Borrower shall hold such payment in trust for Bank and such payment shall be
promptly delivered to Bank for application to the Obligations, whether matured
or unmatured.

13.5 Waivers of Notice. Except as otherwise provided in this Agreement, each
Borrower waives notice of acceptance hereof; notice of the existence, creation
or acquisition of any of the Obligations; notice of an Event of Default; notice
of the amount of the Obligations outstanding at any time; notice of intent to
accelerate; notice of acceleration; notice of any adverse change in the
financial condition of any other Borrower or of any other fact that might
increase the Borrower’s risk; presentment for payment; demand; protest and
notice

 

21.

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

thereof as to any instrument; default; and all other notices and demands to
which the Borrower would otherwise be entitled. Each Borrower waives any defense
arising from any defense of any other Borrower, or by reason of the cessation
from any cause whatsoever of the liability of any other Borrower. Bank’s failure
at any time to require strict performance by any Borrower of any provision of
the Loan Documents shall not waive, alter or diminish any right of Bank
thereafter to demand strict compliance and performance therewith. Nothing
contained herein shall prevent Bank from foreclosing on the Lien of any deed of
trust, mortgage or other security instrument, or exercising any rights available
thereunder, and the exercise of any such rights shall not constitute a legal or
equitable discharge of any Borrower. Each Borrower also waives any defense
arising from any act or omission of Bank that changes the scope of the
Borrower’s risks hereunder.

13.6 Subrogation Defenses. Each Borrower waives any defense based on impairment
or destruction of its subrogation or other rights against any other Borrower and
waives all benefits which might otherwise be available to it under any statutory
or common law suretyship defenses or marshalling rights, now and hereafter in
effect.

13.7 Right to Settle, Release.

(a) The liability of Borrowers hereunder shall not be diminished by (i) any
agreement, understanding or representation that any of the Obligations is or was
to be guaranteed by another Person or secured by other property, or (ii) any
release or unenforceability, whether partial or total, of rights, if any, which
Bank may now or hereafter have against any other Person, including another
Borrower, or property with respect to any of the Obligations.

(b) Without affecting the liability of any Borrower hereunder, Bank may
(i) compromise, settle, renew, extend the time for payment, change the manner or
terms of payment, discharge the performance of, decline to enforce, or release
all or any of the Obligations with respect to a Borrower, (ii) grant other
indulgences to a Borrower in respect of the Obligations, (iii) modify in any
manner any documents relating to the Obligations with respect to a Borrower,
(iv) release, surrender or exchange any deposits or other property securing the
Obligations, whether pledged by a Borrower or any other Person, or
(v) compromise, settle, renew, or extend the time for payment, discharge the
performance of, decline to enforce, or release all or any obligations of any
guarantor, endorser or other Person who is now or may hereafter be liable with
respect to any of the Obligations.

 

22.

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

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.

 

GIGOPTIX, INC.

By:  

/s/ Avi Katz

Title:  

CEO and Chairman of the Board

CHIPX, INCORPORATED

By:  

/s/ Avi Katz

Title:  

CEO and Chairman of the Board

BRIDGE BANK, NATIONAL ASSOCIATION

By:  

/s/ Christopher Hill

Title:  

Vice President

 

23.

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

DEBTOR:

   GIGOPTIX, INC.    CHIPX, INCORPORATED

SECURED PARTY:

   BRIDGE BANK, NATIONAL ASSOCIATION

EXHIBIT A

COLLATERAL DESCRIPTION ATTACHMENT

TO LOAN AND SECURITY AGREEMENT

All personal property of a Borrower (herein referred to as “Borrower” or
“Debtor”) whether presently existing or hereafter created or acquired, and
wherever located, including, but not limited to:

(a) all accounts (including health-care-insurance receivables), chattel paper
(including tangible and electronic chattel paper), deposit accounts, documents
(including negotiable documents), equipment (including all accessions and
additions thereto), general intangibles (including intellectual property,
payment intangibles and software), goods (including fixtures), instruments
(including promissory notes), inventory (including all goods held for sale or
lease or to be furnished under a contract of service, and including returns and
repossessions), investment property (including securities and securities
entitlements), letter of credit rights, money, and all of Debtor’s books and
records with respect to any of the foregoing, and the computers and equipment
containing said books and records;

(b) any and all cash proceeds and/or noncash proceeds of any of the foregoing,
including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment. All terms
above have the meanings given to them in the California Uniform Commercial Code,
as amended or supplemented from time to time.

Notwithstanding the foregoing, the “Collateral” does not include more than 65%
of the presently existing and hereafter arising issued and outstanding shares of
capital stock owned by Borrower of any foreign subsidiary which shares entitle
the holder thereof to vote for directors or any other matter.

 

24.

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

EXHIBIT B

ADVANCE REQUEST FORM

LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM

DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., PACIFIC TIME

 

TO:      BRIDGE BANK NATIONAL ASSOCIATION       DATE:   
                              FAX #: (408) 282-1681       TIME:   
                        

 

          FROM:     GIGOPTIX, INC. CHIPX, INCORPORATED                         
                                         
                                                        
REQUESTED BY:                                    
                                         
                                         
                                                              AUTHORIZED
SIGNER’S NAME           
AUTHORIZED SIGNATURE:                                   
                                         
                                                                               
        PHONE NUMBER:                                    
                                         
                                         
                                                                FROM ACCOUNT
#                                
TO ACCOUNT #                                    
                                                                         
REQUESTED TRANSACTION TYPE                      REQUEST DOLLAR AMOUNT          
                  $                     
                                         
                                                    
PRINCIPAL INCREASE (ADVANCE)                      $                     
                                         
                                                     PRINCIPAL PAYMENT (ONLY)   
                  $                     
                                         
                                                     INTEREST PAYMENT (ONLY)   
                  $                     
                                         
                                                    
PRINCIPAL AND INTEREST (PAYMENT)                      $                     
                                         
                                                        
OTHER INSTRUCTIONS:                                   
                                         
                                         
                                               
                                       
                                         
                                         
                                         
                                                   

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

 

  

 

    BANK USE ONLY         TELEPHONE REQUEST:                          The
following person is authorized to request the loan payment transfer/loan advance
on the advance designated account and is known to me.        

 

     

 

         Authorized Requester       Phone #             

 

     

 

             Received By (Bank)          Phone #                

 

               Authorized Signature (Bank)                                     
 

 

25.

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

EXHIBIT C

ACCOUNTS RECEIVABLE BORROWING BASE CERTIFICATE

BRIDGE BANK

Company: ChipX Incorporated and GigOptix, Inc.

 

ACCOUNTS RECEIVABLE BORROWING BASE CALCULATION:           

1.

   Add: Accounts Receivable Aged Current to 30 Days      $ 0      

2.

   Add: Accounts Receivable Aged 31 to 60 Days      $ 0      

3.

   Add: Accounts Receivable Aged 61 to 90 Days      $ 0      

4.

   Add: Accounts Receivable Aged 91 Days and Over      $ 0       5.    CHIPX
GROSS ACCOUNTS RECEIVABLE            $ 0   

6.

   Add: Accounts Receivable Aged Current to 30 Days      $ 0      

7.

   Add: Accounts Receivable Aged 31 to 60 Days      $ 0      

8.

   Add: Accounts Receivable Aged 61 to 90 Days      $ 0      

9.

   Add: Accounts Receivable Aged 91 Days and Over      $ 0       10.    GIGOPTIX
GROSS ACCOUNTS RECEIVABLE            $ 0   

11

   Less: Accounts Receivable Aged over    90 days      $ 0                     
  

12

   Less: U.S. Government Receivables (Net of > 90s)      $ 0      

13

   Less: Foreign Receivables (Net of > 90s; A/R not expressly approved by Bank)
     $ 0      

14

   Less: Affiliate or Related Accounts Receivables (Net of > 90s)      $ 0      

15

   Less: Account concentration in excess of    30 %    $ 0                     
  

16

   Less: Cross Aging    35 %    $ 0                        

17

   Less: Contra Accounts      $ 0      

18

   Less: Over 90 day A/R credits      $ 0       19    Add: Lines 11 through 18 -
Total Ineligible Accounts            $ 0   

20

   Net Eligible Accounts Receivable            $ 0   

21

   Domestic A/R Advance Rate    75 %                            22    Loan Value
of Domestic Eligible Accounts (            $ 0   

23

       Foreign Accounts      $ 0      

24

       Total Foreign Accounts Deductions      $ 0      

25

       Eligible Foreign Accounts      $ 0      

26

       Loan Value of Eligible Foreign Accounts (not to exceed $1,500,000)    50
%          $ 0                      27    TOTAL A/R BORROWING BASE   
Maximum Availability:       $ 4,000,000  *                       

28

   Less: Outstanding Loan Balance      $ 0      

29

   Less: Outstanding Amounts under Sublimits      $ 0       30    AVAILABLE FOR
DRAW/NEED TO PAY            $ 0   

 

* Maximum Availability is $2,200,000 until the satisfactory completion of Bank’s
field audit

If line #30 is a negative number, this amount must be remitted to the Bank
immediately to bring loan balance into compliance. By signing this form you
authorize the bank to deduct any overadvance amounts directly from
account                                .

The undersigned certifies that this Borrowing Base Certificate along with
accounts receivable agings are true and correct to the best of their knowledge,
all accounts receivable are eligible and in compliance with the terms and
conditions of the Loan and Security Agreement (“LSA”) previously executed by
borrower and all representations and warranties stated in the LSA are true,
correct and complete in all material respects as of the date of this Borrowing
Base Certificate; provided that those representations and warranties expressly
referring to another date shall be true, correct, and complete in all material
respects as of such date.

 

 

     

 

    Verified By (ChipX):    Date               Verified By (GigOptix):   
Date             

 

             Bank Reviewed    Date    

 

26.

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

EXHIBIT D

COMPLIANCE CERTIFICATE

 

TO:

   BRIDGE BANK, NATIONAL ASSOCIATION

FROM:

   GIGOPTIX, INC., CHIPX, INCORPORATED

The undersigned authorized officer of GigOptix, Inc., for itself and on behalf
of ChipX, Incorporated, hereby certifies that in accordance with the terms and
conditions of the Loan and Security Agreement between Borrower and Bank (the
“Agreement”), (i) Borrower is in complete compliance for the period ending
                     with all required covenants except as noted below and
(ii) all representations and warranties of Borrower stated in the Agreement are
true and correct as of the date hereof. Attached herewith are the required
documents supporting the above certification. The Officer further certifies that
these are prepared in accordance with Generally Accepted Accounting Principles
(GAAP) and are consistently applied from one period to the next except as
explained in an accompanying letter or footnotes.

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

 

Reporting Covenant

  

Required

            

Complies

    

Monthly financial statements, backlog report

   Monthly within 30 days              Yes                   No   

Annual (CPA Audited)/Form 10-K

   Within 5 days of filing              Yes       No   

Quarterly Financials/Form 10Q

   Within 5 days of filing              Yes       No   

A/R Agings and Borrowing Base Cert.

   On the 15th and 30th of month              Yes       No   

A/P Agings

   Monthly within 20 days              Yes       No   

A/R Audit

   Initial, and Annual              Yes       No   

Annual Operating Budget

   Within 30 days of FYE              Yes       No   

IP Report

   Quarterly within 30 days              Yes       No    (Since the date of the
last Compliance Certificate delivered by Borrower to Bank, the Borrower has
filed the applications and registrations with the United States Patent and
Trademark Office and the United States Library of Congress Copyright Office
listed on the attachment hereto)                     

Deposit balances with Bank

   $                                                 

Deposit balances outside Bank

   $                                                 

Compliance Certificate

                Yes       No   

Financial Covenant

  

Required

        

Actual

       

Complies

    

        Minimum Asset Coverage Ratio

   1.75:1.0                  :1.00           Yes       No   

        Minimum Profitability/Maximum Loss

   See Section 6.8              $                            Yes       No   

 

 

 

Comments Regarding Exceptions: See Attached.

     

 

BANK USE ONLY

           Received by:                                    
                                                           Sincerely,         
        AUTHORIZED SIGNER            Date:                                      
                                                                      

 

      Verified:                                      
                                                                 SIGNATURE      
        AUTHORIZED SIGNER  

 

      Date:                                      
                                                                     TITLE      
                 Compliance Status                                        
         Yes             No

 

        DATE                

 

27.