Exhibit 10.24

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of the Effective
Date between SILICON VALLEY BANK, a California corporation (“Bank”), and
ENTROPIC COMMUNICATIONS, INC., a Delaware corporation (“Borrower”), provides the
terms on which Bank shall lend to Borrower and Borrower shall repay Bank. The
parties agree as follows:

 

  1 ACCOUNTING AND OTHER TERMS

Accounting terms not defined in this Agreement shall be construed following
GAAP. Calculations and determinations must be made following GAAP (except with
respect to monthly reports which do not comply with FAS 123). Capitalized terms
not otherwise defined in this Agreement shall have the meanings set forth in
Section 13. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meaning provided by the Code to the extent such terms
are defined therein.

 

  2 LOAN AND TERMS OF PAYMENT

2.1 Promise to Pay. Borrower hereby unconditionally promises to pay Bank the
outstanding principal amount of all Credit Extensions and accrued and unpaid
interest thereon as and when due in accordance with this Agreement.

2.1.1 Revolving Advances.

(a) Availability. Subject to the terms and conditions of this Agreement and to
deduction of Reserves, Bank will make Advances to Borrower, provided that, after
giving effect to such Advances, the total of the amount of all outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit), plus an
amount equal to the Letter of Credit Reserve, plus the FX Reserve, plus amounts
used and reserved for Cash Management Services, and plus the outstanding
principal balance of all Advances shall not exceed the lesser of (i) the Maximum
Dollar Amount, or (ii) the Borrowing Base.

(b) Streamline Period. [omitted].

(c) Termination; Repayment. The Revolving Line terminates on the Revolving Line
Maturity Date, when the principal amount of all Advances, the unpaid interest
thereon, and all other Obligations relating to the Revolving Line shall be
immediately due and payable.

2.1.2 Letters of Credit Sublimit.

(a) Subject to the Overall Sublimit in Section 2.1.5 below, as part of the
Revolving Line, Bank shall issue or have issued Letters of Credit for Borrower’s
account, provided that, after giving effect to such Letters of Credit, the total
of the amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit), plus an amount equal to the Letter of Credit
Reserve, plus the FX Reserve, plus amounts used and reserved for Cash Management
Services, and plus the outstanding principal balance of all Advances shall not
exceed the lesser of (i) the Maximum Dollar Amount, or (ii) the Borrowing Base.
The aggregate amounts utilized hereunder shall at all times reduce the amount
otherwise available for Advances under the Revolving Line. If, on the Revolving
Line Maturity Date, there are any outstanding Letters of Credit, then on such
date Borrower shall provide to Bank cash collateral in an amount equal to 105%
of the face amount of all such Letters of Credit plus all interest, fees, and
costs due or to become due in connection therewith (as estimated by Bank in its
good faith business judgment), to secure all of the Obligations relating to said
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 standard Application and Letter of Credit Agreement (the
“Letter of Credit Application”). Borrower agrees to execute any further
documentation in connection with the Letters of Credit as Bank may reasonably
request. Borrower further agrees to be bound by the regulations and
interpretations of the issuer of any Letters of Credit guarantied by Bank and
opened for Borrower’s account or by Bank’s interpretations of any Letter of
Credit issued by Bank for Borrower’s account, and Borrower understands and
agrees that Bank shall not be liable for any error, negligence, or mistake,
whether of omission or commission, in following Borrower’s instructions or those
contained in the Letters of Credit or any modifications, amendments, or
supplements thereto.

 

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(b) The obligation of Borrower to immediately 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, such
Letters of Credit, and the Letter of Credit Application.

(c) Borrower may request that Bank issue a Letter of Credit payable in a Foreign
Currency. If a demand for payment is made under any such Letter of Credit, Bank
shall treat such demand as an Advance to Borrower of the equivalent of the
amount thereof (plus fees and charges in connection therewith such as wire,
cable, SWIFT or similar charges) in Dollars at the then-prevailing rate of
exchange in San Francisco, California, for sales of the Foreign Currency for
transfer to the country issuing such Foreign Currency.

(d) To guard against fluctuations in currency exchange rates, upon the issuance
of any Letter of Credit payable in a Foreign Currency, Bank shall create a
reserve (the “Letter of Credit Reserve”) under the Revolving Line in an amount
equal to ten percent (10%) of the face amount of such Letter of Credit. The
amount of the Letter of Credit Reserve may be adjusted by Bank from time to time
to account for fluctuations in the exchange rate. The availability of funds
under the Revolving Line shall be reduced by the amount of such Letter of Credit
Reserve for as long as such Letter of Credit remains outstanding.

2.1.3 Foreign Exchange Sublimit. Subject to the Overall Sublimit in
Section 2.1.5 below, as part of the Revolving Line, Borrower may enter into
foreign exchange contracts with Bank under which Borrower commits to purchase
from or sell to Bank a specific amount of Foreign Currency (each, a “FX Forward
Contract”) on a specified date (the “Settlement Date”); provided that, after
giving effect to such FX Forward Contracts and the FX Reserve applicable
thereto, the total of the amount of all outstanding Letters of Credit (including
drawn but unreimbursed Letters of Credit), plus an amount equal to the Letter of
Credit Reserve, plus the FX Reserve, plus amounts used and reserved for Cash
Management Services, and plus the outstanding principal balance of all Advances
shall not exceed the lesser of (i) the Maximum Dollar Amount, or (ii) the
Borrowing Base. FX Forward Contracts shall have a Settlement Date of at least
one (1) FX Business Day after the contract date and shall be subject to a
reserve of ten percent (10%) of each outstanding FX Forward Contract, such
reserve to be in a maximum aggregate amount equal to $5,000,000 (the “FX
Reserve”). The aggregate amount of FX Forward Contracts at any one time may not
exceed ten (10) times the amount of the FX Reserve.

2.1.4 Cash Management Services Sublimit. Subject to the Overall Sublimit in
Section 2.1.5 below, Borrower may use up to $5,000,000 (the “Cash Management
Services Sublimit”) of the Revolving Line for Bank’s cash management services
which may include merchant services, direct deposit of payroll, business credit
card, and check cashing services identified in Bank’s various cash management
services agreements (collectively, the “Cash Management Services”), provided
that, after giving effect to such utilization, the total of the amount of all
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit), plus an amount equal to the Letter of Credit Reserve, plus the FX
Reserve, plus amounts utilized and reserved for Cash Management Services, and
plus the outstanding principal balance of any Advances shall not exceed the
lesser of (i) the Maximum Dollar Amount, or (ii) the Borrowing Base. Any amounts
Bank pays on behalf of Borrower or any amounts that are not paid by Borrower for
any Cash Management Services will be treated as Advances under the Revolving
Line and will accrue interest at the interest rate applicable to Advances.

2.1.5 Overall Aggregate Sublimit. In no event shall the total amount of
(i) outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve), and (ii) the FX Reserve, and (iii) the
amount of the Revolving Line utilized for Cash Management Services, at any time
exceed $5,000,000 in the aggregate (the “Overall Sublimit”).

2.2 Overadvances. If at any time or for any reason the total of all outstanding
Advances and all other monetary Obligations exceeds the limitation set forth in
Section 2.1.l(a) (an “Overadvance”), Borrower shall immediately pay the amount
of the excess to Bank, without notice or demand. Without limiting Borrower’s
obligation to repay to Bank the amount of any Overadvance, Borrower agrees to
pay Bank interest on the outstanding amount of any Overadvance, on demand, at
the Default Rate.

2.3 Payment of Interest on the Credit Extensions.

(a) Interest Rate; Advances. Subject to Section 2.3(b), the amounts outstanding
under the Revolving Line shall accrue interest at a per annum rate based on
Borrower’s Liquidity Ratio (as defined below), as follows:

 

Liquidity Ratio as of the end of a month

  

Interest Rate

Equal to or greater than 1.75 to 1    Prime Rate plus 0.50% (the “Reduced Rate”)
Less than 1.75 to 1    Prime Rate plus 2.0% (the “Regular Rate”)

 

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Interest shall be payable monthly.

Changes in the interest rate based on the Borrower’s Liquidity Ratio as provided
above shall go into effect as of the first day of the month following the month
in which Borrower’s financial statements are received, reviewed and approved by
Bank. If, based on the Liquidity Ratio as shown in Borrower’s financial
statements there is to be an increase in the interest rate, the interest rate
increase may be put into effect by Bank as of the first day of the month closest
to the date on which the financial statements are due, even if the delivery of
the financial statements is delayed. As used above, “Liquidity Ratio” shall mean
the ratio of the following (as determined by Bank): (A) the sum of Borrower’s
unrestricted cash and Cash Equivalents and net billed Accounts to (B) all of
Borrower’s Obligations plus all Indebtedness of Borrower to Horizon Technology
Funding Company, LLC determined in accordance with GAAP.

(b) Default Rate. Immediately upon the occurrence and during the continuance of
an Event of Default, Obligations shall bear interest at a rate per annum which
is five percentage points above the rate which is otherwise applicable to the
Obligations (the “Default Rate”). Payment or acceptance of the increased
interest rate provided in this Section 2.3(b) is not a permitted alternative to
timely payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of Bank.

(c) Adjustment to Interest Rate. Changes to the interest rate of any Credit
Extension based on changes to the Prime Rate shall be effective on the effective
date of any change to the Prime Rate and to the extent of any such change.

(d) 360-Day Year. Interest shall be computed on the basis of a 360-day year for
the actual number of days elapsed.

(e) Debit of Accounts. Bank may debit any of Borrower’s deposit accounts,
including the Designated Deposit Account, for principal and interest payments or
any other amounts Borrower owes Bank when due. These debits shall not constitute
a set-off.

(f) Minimum Monthly Interest. [omitted].

(g) Payment; Interest Computation; Float Charge. Interest is payable monthly on
the last calendar day of each month. In computing interest on the Obligations,
all Payments received after 12:00 p.m. Pacific time on any day shall be deemed
received on the next Business Day. In addition, so long as any principal or
interest with respect to any Credit Extension remains outstanding, Bank shall be
entitled to charge Borrower a “float” charge in an amount equal to one
(1) Business Day interest (provided, however, while the Reduced Rate is in
effect, then the float charge will not be applicable), at the interest rate
applicable to the Advances, on all Payments received by Bank. Said float charge
is not included in interest for purposes of computing Minimum Monthly Interest
(if any) under this Agreement. The float charge for each month shall be payable
on the last day of the month. Bank shall not, however, be required to credit
Borrower’s account for the amount of any item of payment which is unsatisfactory
to Bank in its good faith business judgment, and Bank may charge Borrower’s
Designated Deposit Account for the amount of any item of payment which is
returned to Bank unpaid.

2.4 Fees. Borrower shall pay to Bank:

(a) Commitment Fee. A fully earned, non-refundable commitment fee of $35,000, on
the Effective Date, provided, however, if Borrower elects to increase the
Maximum Dollar Amount to $10,000,000 before the first anniversary of the
Effective Date, then an additional $15,000 on the date of such election
pro-rated for the remainder of the year until the first anniversary of the
Effective Date; provided, further, if Borrower elects to increase the Maximum
Dollar Amount to $10,000,000 after the first anniversary of the Effective Date,
then an additional $15,000 on the date of such election pro-rated for the
remainder of the year until the second anniversary of the Effective Date; and

 

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(b) Letter of Credit Fee. Bank’s customary fees and expenses for the issuance or
renewal of Letters of Credit, including, without limitation, a Letter of Credit
Fee of one-quarter of one percent (0.25%) per annum of the face amount of each
Letter of Credit issued, upon the issuance or renewal of such Letter of Credit
by Bank; and

(c) Termination Fee. [omitted]; and

(d) Unused Revolving Line Facility Fee. [omitted]; and

(e) Collateral Monitoring Fee. A monthly collateral monitoring fee of $750,
payable in arrears on the last day of each month (prorated for any partial month
at the beginning and upon termination of this Agreement), provided, however,
while the Reduced Rate is in effect, then the Collateral Monitoring Fee will not
be applicable; and

(f) Bank Expenses. All Bank Expenses (including reasonable attorneys’ fees and
expenses, and expenses for documentation and negotiation of this Agreement)
incurred through and after the Effective Date, when due; and

(g) Anniversary Fee. A fully earned, non-refundable commitment fee of $35,000,
on the first anniversary of the Effective Date, provided, however, if Borrower
elects, prior to the first anniversary of the Effective Date, to increase the
Maximum Dollar Amount to $10,000,000, then an additional $15,000 on the first
anniversary of the Effective Date; and

(h) Good Faith Deposit. Borrower has paid to Bank a deposit of $10,000 (the
“Good Faith Deposit”) to initiate Bank’s due diligence review process. Any
portion of the Good Faith Deposit not utilized to pay Bank Expenses will be
applied to the Commitment Fee.

 

  3 CONDITIONS OF LOANS

3.1 Conditions Precedent to Initial Credit Extension. Bank’s obligation to make
the initial Credit Extension is subject to the condition precedent that Bank
shall have received, in form and substance satisfactory to Bank, such documents,
and completion of such other matters, as Bank may reasonably deem necessary or
appropriate, including, without limitation:

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

(b) Borrower shall have delivered duly executed original signatures to the
Control Agreements;

(c) Borrower shall have delivered its Operating Documents and a good standing
certificate of Borrower certified by the Secretary of State of the State of
Delaware as of a date no earlier than thirty (30) days prior to the Effective
Date;

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

(e) If Borrower has entered or concurrently herewith Borrower enters into a loan
facility with Horizon Technology Funding Company, LLC, Borrower shall have
delivered the Subordination Agreement duly executed by Horizon Technology
Funding Company, LLC in favor of Bank;

(f) Bank shall have received certified copies, dated as of a recent date, of
financing statement searches, as Bank shall request, accompanied by written
evidence (including any UCC termination statements) that the Liens indicated in
any such financing statements either constitute Permitted Liens or have been or,
in connection with the initial Credit Extension, will be terminated or released;

(g) Borrower shall have delivered the Perfection Certificate(s) executed by
Borrower;

(h) Borrower shall have delivered the insurance policies and/or endorsements
required pursuant to Section 6.5 hereof; and

 

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(i) Borrower shall have paid the fees and Bank Expenses then due as specified in
Section 2.4 hereof.

3.2 Conditions Precedent to all Credit Extensions. Bank’s obligations to make
each Credit Extension, including the initial Credit Extension, is subject to the
following:

(a) except as otherwise provided in Section 3.4, timely receipt of an executed
Payment/Advance Form;

(b) the representations and warranties in Section 5 shall be true in all
material respects on the date of the Payment/Advance Form and on the Funding
Date of each Credit Extension; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects
as of such date, and no Default or Event of Default shall have occurred and be
continuing or result from the Credit Extension. Each Credit Extension is
Borrower’s representation and warranty on that date that the representations and
warranties in Section 5 remain true in all material respects; provided, however,
that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date; and

(c) in Bank’s good faith business judgment, there has not been a Material
Adverse Change.

3.3 Covenant to Deliver.

Borrower agrees to deliver to Bank each item required to be delivered to Bank
under this Agreement as a condition to any Credit Extension. Borrower expressly
agrees that the extension of a Credit Extension prior to the receipt by Bank of
any such item shall not constitute a waiver by Bank of Borrower’s obligation to
deliver such item, and any such extension in the absence of a required item
shall be in Bank’s sole discretion.

3.4 Procedures for Borrowing. Subject to the prior satisfaction of all other
applicable conditions to the making of an Advance set forth in this Agreement,
to obtain an Advance, Borrower shall notify Bank (which notice shall be
irrevocable) by electronic mail, facsimile, or telephone by 12:00 p.m. Pacific
time on the Funding Date of the Advance. Together with such notification,
Borrower must promptly deliver to Bank by electronic mail or facsimile a
completed Transaction Report executed by a Responsible Officer or his or her
designee. Bank shall credit Advances to the Designated Deposit Account. Bank may
make Advances under this Agreement based on instructions from a Responsible
Officer or his or her designee or without instructions if the Advances are
necessary to meet Obligations which have become due. Bank may rely on any
telephone notice given by a person whom Bank believes is a Responsible Officer
or designee.

 

  4 CREATION OF SECURITY INTEREST

4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the
payment and performance in full of all of the Obligations, a continuing security
interest in, and pledges to Bank, the Collateral, wherever located, whether now
owned or hereafter acquired or arising, and all proceeds and products thereof.
Borrower represents, warrants, and covenants that the security interest granted
herein is and shall at all times continue to be a first priority perfected
security interest in the Collateral (subject only to Permitted Liens that may
have superior priority to Bank’s Lien under this Agreement). If Borrower shall
acquire a commercial tort claim, Borrower shall promptly notify Bank in a
writing signed by Borrower of the general details thereof and grant to Bank in
such writing a security interest therein and in the proceeds thereof, all upon
the terms of this Agreement, with such writing to be in form and substance
reasonably satisfactory to Bank.

This Agreement may be terminated prior to the Revolving Line Maturity Date by
Borrower, effective three (3) Business Days after written notice of termination
is given to Bank or if Bank’s obligation to fund Credit Extensions terminates
pursuant to the terms of Section 2.1 .l(c). Notwithstanding any such
termination, Bank’s lien and security interest in the Collateral shall continue
until Borrower fully satisfies its Obligations (other than inchoate indemnity
obligations and cash-collateralized Letters of Credit following maturity). Upon
payment in full of the Obligations (other than inchoate indemnity obligations
and cash-collateralized Letters of Credit following maturity) and at such time
as Bank’s obligation to make Credit Extensions has terminated, Bank shall
release its liens and security interests in the Collateral and all rights
therein shall revert to Borrower.

 

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4.2 Authorization to File Financing Statements. Borrower hereby authorizes Bank
to file financing statements, without notice to Borrower, with all appropriate
jurisdictions to perfect or protect Bank’s interest or rights hereunder,
including a notice that any disposition of the Collateral, by either Borrower or
any other Person, shall be deemed to violate the rights of Bank under the Code.

 

  5 REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants as follows:

5.1 Due Organization and Authorization. Borrower and each of its Subsidiaries
are duly existing and in good standing in their respective jurisdictions of
formation and are qualified and licensed to do business and are in good standing
in any jurisdiction in which the conduct of their business or their ownership of
property requires that they be qualified except where the failure to do so could
not reasonably be expected to have a Material Adverse Change. In connection with
this Agreement, Borrower has delivered to Bank a completed certificate signed by
Borrower entitled “Perfection Certificate”. Borrower represents and warrants to
Bank that (a) Borrower’s exact legal name is that indicated on the Perfection
Certificate and on the signature page hereof; (b) Borrower is an organization of
the type and is organized in the jurisdiction set forth in the Perfection
Certificate; (c) the Perfection Certificate accurately sets forth Borrower’s
organizational identification number or accurately states that Borrower has
none; (d) the Perfection Certificate accurately sets forth Borrower’s place of
business, or, if more than one, its chief executive office as well as Borrower’s
mailing address (if different than its chief executive office); (e) Borrower
(and each of its predecessors) has not, in the past five (5) years, changed its
jurisdiction of formation, organizational structure or type, or any
organizational number assigned by its jurisdiction; and (f) all other
information set forth on the Perfection Certificate pertaining to Borrower and
each of its Subsidiaries as accurate and complete. If Borrower is not now a
Registered Organization but later becomes one, Borrower shall promptly notify
Bank of such occurrence and provide Bank with Borrower’s organizational
identification number.

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

5.2 Collateral. Borrower has good title to the Collateral, free of Liens except
Permitted Liens. Borrower has no deposit account other than the deposit accounts
with Bank and deposit accounts described in the Perfection Certificate delivered
to Bank in connection herewith.

The Collateral is not in the possession of any third party bailee (such as a
warehouse). Except as hereafter disclosed to Bank in writing by Borrower, none
of the components of the Collateral shall be maintained at locations other than
as provided in the Perfection Certificate. In the event that Borrower, after the
date hereof, intends to store or otherwise deliver any portion of the Collateral
greater than $50,000 per location to a bailee, then Borrower will first receive
the written consent of Bank and such bailee must acknowledge in writing that the
bailee is holding such Collateral for the benefit of Bank.

All Inventory is in all material respects of good and marketable quality, free
from material defects.

5.3 Accounts Receivable.

(a) For each Account with respect to which Advances are requested, on the date
each Advance is requested and made, such Account shall be an Eligible Account,
set forth in Section 13 below.

(b) All statements made and all unpaid balances appearing in all invoices,
instruments and other documents evidencing the Accounts are and shall be true
and correct and all such invoices, instruments and other documents, and all of
Borrower’s Books are genuine and in all respects what they purport to be. All
sales and other transactions underlying or giving rise to each Account shall
comply in all material respects with all applicable laws and governmental rules
and regulations. Borrower has and will have no knowledge of any actual or
imminent Insolvency Proceeding of any Account Debtor whose accounts are shown as
Eligible Accounts in any Transaction Report. To the best of Borrower’s
knowledge, all signatures and endorsements on all documents, instruments, and
agreements relating to all Accounts are and will be genuine, and all such
documents, instruments and agreements are and will be legally enforceable in
accordance with their terms.

 

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5.4 Litigation. There are no actions or proceedings pending or, to the knowledge
of the Responsible Officers, threatened in writing by or against Borrower or any
of its Subsidiaries involving more than $250,000 except for the potential Sonics
contract litigation identified by Borrower in the Perfection Certificate.

5.5 No Material Deviation in Financial Statements. All consolidated financial
statements for Borrower and any of its Subsidiaries delivered to Bank fairly
present in all material respects Borrower’s consolidated financial condition and
Borrower’s consolidated results of operations, it being understood that
projections and forecasts are not to be viewed as facts and actual results may
vary. There has not been any material deterioration in Borrower’s consolidated
financial condition since the date of the most recent financial statements
submitted to Bank.

5.6 Solvency. Borrower is able to pay its debts (including trade debts) as they
mature.

5.7 Regulatory Compliance. Borrower is not an “investment company” or a company
“controlled” by an “investment company” under the Investment Company Act.
Borrower is not engaged as one of its important activities in extending credit
for margin stock (under Regulations T and U of the Federal Reserve Board of
Governors). Borrower has complied in all material respects with the Federal Fair
Labor Standards Act. Borrower has not violated any laws, ordinances or rules,
the violation of which could reasonably be expected to, cause a Material Adverse
Change. None of Borrower’s or any of its Subsidiaries’ properties or assets has
been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge,
by previous Persons, in disposing, producing, storing, treating, or transporting
any hazardous substance other than legally. Borrower and each of its
Subsidiaries have obtained all consents, approvals and authorizations of, made
all declarations or filings with, and given all notices to, all government
authorities that are necessary to continue its business as currently conducted.

5.8 Subsidiaries; Investments. Borrower does not have any Subsidiaries, other
than Entropic Communications (Hong Kong) Limited and other Subsidiaries
organized with the prior written consent of Bank, and does not own any stock,
partnership interest or other equity securities in any other Person, except for
Permitted Investments.

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

5.10 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions
solely as working capital, and to fund its general business requirements and not
for personal, family, household or agricultural purposes.

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

 

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  6 AFFIRMATIVE COVENANTS

Borrower shall do all of the following:

6.1 Government Compliance. Maintain its and all its Subsidiaries’ legal
existence and good standing in their respective jurisdictions of formation and
maintain qualification in each jurisdiction in which the failure to so qualify
would reasonably be expected to cause a Material Adverse Change. Borrower shall
comply, and have each Subsidiary comply, with all laws, ordinances and
regulations to which it is subject, noncompliance with which could reasonably be
expected to cause a Material Adverse Change.

6.2 Financial Statements, Reports, Certificates.

(a) Borrower shall provide Bank with the following:

 

  (i) While the Reduced Rate is in effect, a Transaction Report monthly within
fifteen (15) days of the end of each month and at the time of each request for
an Advance; provided, however, while the Regular Rate is in effect, then weekly
and at the time of each request for an Advance;

 

  (ii) within fifteen (15) days after the end of each month,

 

  (A) monthly accounts receivable agings, aged by invoice date,

 

  (B) monthly accounts payable agings, aged by invoice date, and outstanding or
held check registers, if any,

 

  (C) monthly reconciliations of accounts receivable agings (aged by invoice
date), transaction reports, and general ledger,

 

  (D) [omitted]

 

  (iii) as soon as available, and in any event within thirty (30) days after the
end of each month, monthly unaudited financial statements;

 

  (iv) within thirty (30) days after the end of each month a monthly Compliance
Certificate signed by a Responsible Officer, certifying that as of the end of
such month, Borrower was in full compliance with all of the terms and conditions
of this Agreement, and setting forth calculations showing compliance with the
financial covenants set forth in this Agreement and such other information as
Bank shall reasonably request, including, without limitation, a statement that
at the end of such month there were no held checks;

 

  (v) [omitted];

 

  (vi) within thirty (30) days after the beginning of each fiscal year of
Borrower, (A) annual operating budgets (including income statements, balance
sheets and cash flow statements, by month) for the upcoming fiscal year of
Borrower, and (B) annual financial projections for the following fiscal year (on
a quarterly basis) as approved by Borrower’s board of directors, together with
any related business forecasts used in the preparation of such annual financial
projections; and

 

  (vii) as soon as available, and in any event within 180 days following the end
of Borrower’s fiscal year, annual financial statements certified by, and with an
unqualified opinion of, independent certified public accountants acceptable to
Bank.

(b) At all times that Borrower is subject to the reporting requirements under
the Securities Exchange Act of 1934, as amended, within five (5) days after
filing, all reports on Form 10-K, 10-Q and 8-K filed with the Securities and
Exchange Commission or a link thereto on Borrower’s or another website on the
Internet.

(c) Prompt written notice of (i) any material change in the composition of the
Intellectual Property, (ii) the registration of any Copyright, including any
subsequent ownership right of Borrower in or to any Copyright, Patent or
Trademark not previously disclosed to Bank, or (iii) Borrower’s knowledge of an
event that materially adversely affects the value of the Intellectual Property.

 

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6.3 Accounts Receivable.

(a) Schedules and Documents Relating to Accounts. Borrower shall deliver to Bank
transaction reports and schedules of collections, as provided in Section 6.2, on
Bank’s standard forms; provided, however, that Borrower’s failure to execute and
deliver the same shall not affect or limit Bank’s Lien and other rights in all
of Borrower’s Accounts, nor shall Bank’s failure to advance or lend against a
specific Account affect or limit Bank’s Lien and other rights therein. If
requested by Bank, Borrower shall furnish Bank with copies (or, at Bank’s
request based on Bank’s good faith business judgment, originals) of all
contracts, orders, invoices, and other similar documents, and all shipping
instructions, delivery receipts, bills of lading, and other evidence of
delivery, for any goods the sale or disposition of which gave rise to such
Accounts. In addition, Borrower shall deliver to Bank, on its request, the
originals of all instruments, chattel paper, security agreements, guarantees and
other documents and property evidencing or securing any Accounts, in the same
form as received, with all necessary endorsements, and copies of all credit
memos.

(b) Disputes. Borrower shall promptly notify Bank of all disputes or claims
relating to Accounts in excess of $250,000 in the aggregate. Borrower may
forgive (completely or partially), compromise, or settle any Account for less
than payment in fill, or agree to do any of the foregoing so long as
(i) Borrower does so in good faith, in a commercially reasonable manner, in the
ordinary course of business, in arm’s-length transactions, and reports the same
to Bank in the regular reports provided to Bank; and (ii) no Default or Event of
Default has occurred and is continuing; and (iii) after taking into account all
such discounts, settlements and forgiveness, the total outstanding Advances will
not exceed the lesser of the Revolving Line or the Borrowing Base.

(c) Collection of Accounts. Borrower shall have the right to collect all
Accounts, unless and until a Default or an Event of Default has occurred and is
continuing. Whether or not an Event of Default has occurred and is continuing,
Borrower shall hold all payments on, and proceeds of, Accounts in trust for
Bank, and Borrower shall immediately deliver all such payments and proceeds to
Bank in their original form, duly endorsed. While the Reduced Rate is in effect,
and provide no Default or Event of Default has occurred and is continuing, all
payments on, and proceeds of, Accounts shall be deposited by Bank into
Borrower’s operating account maintained at Bank. While the Regular Rate is in
effect, and after a Default or Event of Default has occurred and is continuing,
all payments on, and proceeds of, Accounts shall be applied to the Obligations
pursuant to the terms of Section 9.4 hereof. Bank may, in its good faith
business judgment, require that all proceeds of Accounts be deposited by
Borrower into a lockbox account, or such other “blocked account” as Bank may
specify, pursuant to a blocked account agreement in such form as Bank may
specify in its good faith business judgment.

(d) Returns. Provided no Event of Default has occurred and is continuing, if any
Account Debtor returns any Inventory to Borrower, Borrower shall promptly
(i) determine the reason for such return, (ii) issue a credit memorandum to the
Account Debtor in the appropriate amount, and (iii) provide a copy of such
credit memorandum to Bank, upon request from Bank. In the event any attempted
return occurs after the occurrence and during the continuance of any Event of
Default, Borrower shall hold the returned Inventory in trust for Bank, and
immediately notify Bank of the return of the Inventory.

(e) Verification. Bank may, from time to time, upon prior notice to Borrower
(via an invoice copy request or otherwise) verify directly with the respective
Account Debtors the validity, amount and other matters relating to the Accounts,
either in the name of Borrower or Bank or such other name as Bank may choose;
provided, however, the Bank shall not incur any liability for inadvertently or
negligently failing to provide such notice.

(f) No Liability. Bank shall not be responsible or liable for any shortage or
discrepancy in, damage to, or loss or destruction of, any goods, the sale or
other disposition of which gives rise to an Account, or for any error, act,
omission, or delay of any kind occurring in the settlement, failure to settle,
collection or failure to collect any Account, or for settling any Account in
good faith for less than the full amount thereof, nor shall Bank be deemed to be
responsible for any of Borrower’s obligations under any contract or agreement
giving rise to an Account. Nothing herein shall, however, relieve Bank from
liability for its own gross negligence or willful misconduct.

6.4 Remittance of Proceeds. Except as otherwise provided in Section 6.3(c),
deliver, in kind, all proceeds arising from the disposition of any Collateral to
Bank in the original form in which received by Borrower not later than the
following Business Day after receipt by Borrower, to be applied to the
Obligations pursuant to the terms of Section 9.4 hereof; provided that, if no
Default or Event of Default has occurred and is continuing, Borrower shall not
be obligated to remit to Bank the proceeds of the sale of worn out or obsolete
Equipment disposed of by Borrower in good faith in an arm’s length transaction
for an aggregate purchase price of

 

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$50,000 or less (for all such transactions in any fiscal year). Borrower agrees
that it will not commingle proceeds of Collateral with any of Borrower’s other
funds or property, but will hold such proceeds separate and apart from such
other finds and property and in an express trust for Bank. Nothing in this
Section limits the restrictions on disposition of Collateral set forth elsewhere
in this Agreement.

6.5 Taxes; Pensions. Timely file all required tax returns and reports and timely
pay all foreign, federal, state and local taxes, assessments, deposits and
contributions owed by Borrower except for deferred payment of any taxes
contested pursuant to the terms of Section 5.9 hereof, and pay all amounts
necessary to fund all present pension, profit sharing and deferred compensation
plans in accordance with their terms.

6.6 Access to Collateral; Books and Records. At reasonable times, on two
(2) Business Day’s notice (provided no notice is required if an Event of Default
has occurred and is continuing), Bank, or its agents, shall have the right to
inspect the Collateral and the right to audit and copy Borrower’s Books. The
parties contemplate that the initial audit will be conducted within sixty
(60) days of the Effective Date, and thereafter such audits will be performed no
more frequently than semi-annually, but nothing herein restricts Bank’s right to
conduct such audits more frequently if (i) Bank believes that it is advisable to
do so in Bank’s good faith business judgment, or (ii) Bank believes in good
faith that a Default or Event of Default has occurred. The foregoing inspections
and audits shall be at Borrower’s expense, and the charge therefor shall be $750
per person per day (or such higher amount as shall represent Bank’s then-current
standard charge for the same), plus reasonable out-of-pocket expenses; provided
that the charges for each such audit shall not exceed $2,500 (but said
limitation shall not apply if any Default or Event of Default has occurred and
is continuing). In the event Borrower and Bank schedule an audit more than ten
(10) days in advance, and Borrower cancels or seeks to reschedules the audit
with less than ten (10) days written notice to Bank and Bank incurs a fee for
such cancellation, then (without limiting any of Bank’s rights or remedies),
Borrower shall pay Bank such fee plus any out-of-pocket expenses incurred by
Bank to compensate Bank for the anticipated costs and expenses of the
cancellation or rescheduling.

6.7 Insurance. Keep its business and the Collateral insured for risks and in
amounts standard for companies in Borrower’s industry and location and as Bank
may reasonably request. Insurance policies shall be in a form, with companies,
and in amounts that are satisfactory to Bank in its good faith business
judgment. All property policies shall have a lender’s loss payable endorsement
showing Bank as an additional lender loss payee and waive subrogation against
Bank, and all liability policies shall show, or have endorsements showing, Bank
as an additional insured. All policies (or the loss payable and additional
insured endorsements) shall provide that the insurer must give Bank at least
twenty (20) days notice before canceling, amending, or declining to renew its
policy. At Bank’s request, Borrower shall deliver certified copies of policies
and evidence of all premium payments. Proceeds payable under any policy shall,
at Bank’s option, be payable to Bank on account of the Obligations.
Notwithstanding the foregoing, (a) so long as no Event of Default has occurred
and is continuing, Borrower shall have the option of applying the proceeds of
any casualty policy up to $50,000, in the aggregate, toward the replacement or
repair of destroyed or damaged property; provided that any such replaced or
repaired property (i) shall be of equal or like value as the replaced or
repaired Collateral and (ii) shall be deemed Collateral in which Bank has been
granted a first priority security interest, and (b) after the occurrence and
during the continuance of an Event of Default, all proceeds payable under such
casualty policy shall, at the option of Bank, be payable to Bank on account of
the Obligations. If Borrower fails to obtain insurance as required under this
Section 6.7 or to pay any amount or furnish any required proof of payment to
third persons and Bank, Bank may make all or part of such payment or obtain such
insurance policies required in this Section 6.7, and take any action under the
policies Bank deems prudent.

6.8 Operating Accounts.

(a) Maintain its primary depository and operating accounts and securities
accounts with Bank and Bank’s affiliates which accounts shall represent at least
85% of the dollar value of Borrower’s accounts at all financial institutions.

(b) Provide Bank five (5) days prior written notice before establishing any
Collateral Account at or with any bank or financial institution other than Bank
or its Affiliates. In addition, for each Collateral Account that Borrower at any
time maintains, Borrower shall cause the applicable bank or financial
institution (other than Bank) at or with which any Collateral Account is
maintained to execute and deliver a Control Agreement or other appropriate
instrument with respect to such Collateral Account to perfect Bank’s Lien in
such Collateral Account in accordance with the terms hereunder. The provisions
of the previous sentence shall not apply to deposit accounts exclusively used
for payroll, payroll taxes and other employee wage and benefit payments to or
for the benefit of Borrower’s employees and identified to Bank by Borrower as
such.

 

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6.9 Financial Covenants. [omitted]

6.10 Intellectual Property Rights. Borrower shall: (a) use commercially
reasonable efforts to protect, defend and maintain the validity and
enforceability of its intellectual property; (b) promptly advise Bank in writing
of material infringements of its intellectual property; and (c) not allow any
intellectual property material to Borrower’s business to be abandoned, forfeited
or dedicated to the public without Bank’s written consent. Borrower hereby
advises Bank that it will, in certain instances, deposit certain source codes
relating to Intellectual Property into escrow pursuant to arrangements entered
into in the ordinary course of business, and Borrower represents and warrants to
Bank that Borrower shall at all times retain title to such source codes so
deposited (the “Escrow Deposits”).

6.11 Litigation Cooperation. From the date hereof and continuing through the
termination of this Agreement, make available to Bank, without expense to Bank,
Borrower and its officers, employees and agents and Borrower’s books and
records, to the extent that Bank may deem them reasonably necessary to prosecute
or defend any third-party suit or proceeding instituted by or against Bank with
respect to any Collateral or relating to Borrower.

6.12 [omitted]

6.13 Further Assurances. Borrower shall execute any further instruments and take
further action as Bank reasonably requests to perfect or continue Bank’s Lien in
the Collateral or to effect the purposes of this Agreement.

 

  7 NEGATIVE COVENANTS

Borrower shall not do any of the following without Bank’s prior written consent:

7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of
(collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, except for (a) Transfers of Inventory
in the ordinary course of business; (b) Transfers of worn-out or obsolete
Equipment; and (c) Transfers consisting of Permitted Liens and Permitted
Investments; (d) Transfers of non-exclusive licenses for the use of the property
of Borrower or its Subsidiaries in the ordinary course of business; and
(e) other Transfers not to exceed $50,000 per year. For purposes of
clarification, it is understood and agreed by the parties that Borrower shall
not transfer any assets or Collateral to its Subsidiary, Entropic Communications
(Hong Kong) Limited (and ASL upon completion of the Arabella Merger (as those
terms are defined in Section 7.3 hereof)), except that Borrower may transfer
cash to the extent required to pay for such Subsidiary’s operating expenses, not
to exceed $300,000 per month per Subsidiary.

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

(a) Engage in or permit any of its Subsidiaries to engage in any business other
than the businesses currently engaged in by Borrower and such Subsidiary, as
applicable, or reasonably related thereto;

(b) liquidate or dissolve; or

(c) permit a change in the record or beneficial ownership of an aggregate of
more than 30% of the outstanding shares of stock of Borrower, in one or more
transactions, compared to the ownership of outstanding shares of stock of
Borrower in effect on the date hereof (other than by the sale of Borrower’s
equity securities in a public offering or to venture capital investors so long
as Borrower identifies to Bank the venture capital investors prior to the
closing of the transaction); or

(d) without at least fifteen (15) days prior written notice to Bank: (1) add any
new domestic offices or business locations, including warehouses (unless such
new offices or business locations contain assets and property of Borrower with
an aggregate value of less than $50,000), (2) change its jurisdiction of
organization, (3) change its organizational structure or type, (4) change its
legal name, or (5) change its organizational number (if any) assigned by its
jurisdiction of organization.

7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person, except that a Subsidiary of
Borrower may merge or consolidate into another Subsidiary of Borrower or into
Borrower. Borrower has advised Bank that Borrower intends to acquire all of the
outstanding capital stock of Arabella Software, Ltd. (“ASL”) (the “Arabella
Merger”). Bank hereby consents to the Arabella Merger on the terms previously
disclosed to Bank in writing; provided, however, that (a) Bank receive copies of
ASL’s financial statements and approves the same in its good faith business

 

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judgment, (b) the consideration used by Borrower shall be stock of Borrower and
not cash (except for cash to be utilized by Borrower for the Arabella Merger not
to exceed $550,000 for cash consideration and up to $250,000 for cash expenses
under GAAP related to such merger) and (c) Bank reserves its rights to require
that up to 65% of the ownership interests of ASL be pledged to Bank, as
determined by Bank in its discretion, and Borrower shall cause ASL to execute
all such documents required by Bank in conjunction therewith.

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

7.5 Encumbrance. Create, incur, or allow any Lien on any of its property or
assets, or assign or convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, or permit any Collateral not to be subject to the first priority security
interest granted herein (subject to Permitted Liens), or enter into any
agreement, document, instrument or other arrangement (except with or in favor of
Bank) with any Person which directly or indirectly prohibits or has the effect
of prohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging,
granting a security interest in or upon, or encumbering any of Borrower’s or any
Subsidiary’s intellectual property, except as is otherwise permitted in
Section 7.1 hereof and the definition of “Permitted Lien” herein.

7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except
pursuant to the terms of Section 6.8.(b) hereof.

7.7 Investments; Distributions. (a) Directly or indirectly make any Investment
other than Permitted Investments, or permit any of its Subsidiaries to do so; or
(b) pay any dividends or make any distribution or payment or redeem, retire or
purchase any capital stock, provided that (i) Borrower may convert any of its
convertible securities into other securities pursuant to the terms of such
convertible securities or otherwise in exchange thereof, (ii) Borrower may pay
dividends solely in common stock; and (iii) Borrower may repurchase the stock of
former employees or consultants pursuant to stock repurchase agreements so long
as no Default or Event of Default has occurred at the time of such repurchase
and would not exist after giving effect to such repurchase, provided such
repurchase does not exceed in the aggregate of $150,000 per fiscal year.

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

7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt,
except under the terms of the subordination, intercreditor, or other similar
agreement to which such Subordinated Debt is subject, or (b) amend any provision
in any document relating to the Subordinated Debt which would increase the
amount thereof or the amount of any permitted payments thereunder or adversely
affect the subordination thereof to Obligations owed to Bank.

7.10 Compliance. Become an “investment company” or a company controlled by an
“investment company”, under the Investment Company Act of 1940 or undertake as
one of its important activities extending credit to purchase or carry margin
stock (as defined in Regulation U of the Board of Governors of the Federal
Reserve System), or use the proceeds of any Credit Extension for that purpose;
fail to meet the minimum funding requirements of ERISA, permit a Reportable
Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply
with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to cause a Material
Adverse Change, or permit any of its Subsidiaries to do so; withdraw or permit
any Subsidiary to withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with respect to, any
present pension, profit sharing and deferred compensation plan which could
reasonably be expected to result in any liability of Borrower, including any
liability to the Pension Benefit Guaranty Corporation or its successors or any
other governmental agency.

7.11 Negative Pledge Re Intellectual Property. Borrower agrees as follows (the
“Negative Pledge”):

1. Except for non-exclusive licenses granted by Borrower in the ordinary course
of business, Borrower shall not sell, transfer, assign, mortgage, pledge, lease,
grant a security interest in, or encumber any of Borrower’s Intellectual
Property, including, without limitation, the following:

a. Any and all copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished and whether or not the same also constitutes a
trade secret, now or hereafter existing, created, acquired or held
(“Copyrights”);

 

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b. Any and all trade secrets, and any and all intellectual property rights in
computer software and computer software products now or hereafter existing,
created, acquired or held;

c. Any and all design rights which may be available to Borrower now or hereafter
existing, created, acquired or held;

d. All patents, patent applications and like protections including, without
limitation, improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same, including without limitation
the patents and patent applications now or hereafter existing, created, acquired
or held (“Patents”);

e. 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 now or hereafter existing, created, acquired or held (“Trademarks”);

f. Any mask works or similar rights available for the protection of
semiconductor chips, now or hereafter existing, created, acquired or held;

g. Any and all claims for damages by way of past, present and future
infringements of any of the rights included above, with the right, but not the
obligation, to sue for and collect such damages for said use or infringement of
the intellectual property rights identified above;

h. 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; and

i. All amendments, extensions, renewals and extensions of any of the Copyrights,
Trademarks or Patents; and

j. 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;

2. It shall be an event of default under the Loan Documents between Borrower and
Bank if there is a breach of any term of this Negative Pledge; provided,
however, Borrower is permitted to transfer certain source codes into the Escrow
Deposits as provided for in Section 6.10 hereof.

 

  8 EVENTS OF DEFAULT

Any one of the following shall constitute an event of default (an “Event of
Default”) under this Agreement:

8.1 Payment Default. Borrower fails to (a) make any payment of principal’ or
interest on any Credit Extension on its due date, or (b) pay any other
Obligations within three (3) Business Days after such Obligations are due and
payable. During the cure period, the failure to cure the payment default is not
an Event of Default (but no Credit Extension will be made during the cure
period);

8.2 Covenant Default.

(a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.3,
6.4, 6.6 or 6.8, or violates any covenant in Section 7; or

(b) Borrower fails or neglects to perform, keep, or observe any other term,
provision, condition, covenant or agreement contained in this Agreement or any
Loan Documents, and as to any default (other than those specified in this
Section 8) under such other term, provision, condition, covenant or agreement
that can be cured, has failed to cure the default within ten (10) days after the
occurrence thereof; provided, however, that if the default cannot by its nature
be cured within the ten (10) day period

 

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or cannot after diligent attempts by Borrower be cured within such ten (10) day
period, and such default is likely to be cured within a reasonable time, then
Borrower shall have an additional period (which shall not in any case exceed
thirty (30) days) to attempt to cure such default, and within such reasonable
time period the failure to cure the default shall not be deemed an Event of
Default (but no Credit Extensions shall be made during such cure period). Grace
periods provided under this section shall not apply, among other things, to
financial covenants or any other covenants set forth in subsection (a) above;

8.3 Material Adverse Change. A Material Adverse Change occurs;

8.4 Attachment. (a) Any material portion of Borrower’s assets is attached,
seized, levied on, or comes into possession of a trustee or receiver and the
attachment, seizure or levy is not removed in ten (10) days; (b) the service of
process upon Bank seeking to attach, by trustee or similar process, any funds of
Borrower, or any entity under control of Borrower (including a subsidiary) on
deposit with Bank; (c) Borrower is enjoined, restrained, or prevented by court
order from conducting a material part of its business; (d) a judgment or other
claim in excess of $50,000 becomes a Lien on any of Borrower’s assets; or (e) a
notice of lien, levy, or assessment is filed against any of Borrower’s assets by
any government agency and not paid within ten (10) days after Borrower receives
notice. These are not Events of Default if stayed or if a bond is posted pending
contest by Borrower within ten days after the date such events occur (but no
Credit Extensions shall be made during the cure period);

8.5 Insolvency. (a) Borrower is unable to pay its debts (including trade debts)
as they become due or otherwise becomes insolvent; (b) Borrower begins an
Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower
and not dismissed or stayed within forty-five (45) days (but no Credit
Extensions shall be made while of any of the conditions described in clause
(a) exist and/or until any Insolvency Proceeding is dismissed);

8.6 Other Agreements. There is a default in any agreement to which Borrower is a
party with a third party or parties resulting in a right by such third party or
parties, whether or not exercised, to accelerate the maturity of any
Indebtedness in an amount in excess of $150,000 or that could result in a
Material Adverse Change with respect to Borrower’s; provided, however, that the
Event of Default under this Section 8.6 caused by the occurrence of a default
under such other agreement shall be cured or waived for purposes of this
Agreement upon Bank receiving written notice from the party asserting such
default of such cure or waiver of the default under such other agreement, if at
the time of such cure or waiver under such other agreement (a) Bank has not
declared an Event of Default under this Agreement and/or exercised any rights
with respect thereto; (b) any such cure or waiver does not result in an Event of
Default under any other provision of this Agreement or any Loan Document; and
(c) in connection with any such cure or waiver under such other agreement, the
terms of any agreement with such third party are not modified or amended in any
manner which could in the good faith judgment of Bank be materially less
advantageous to Borrower;

8.7 Judgments. A judgment or judgments for the payment of money in an amount,
individually or in the aggregate, of $99,000 or more (not covered by independent
third-party insurance) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days after the entry thereof
(provided that no Credit Extensions will be made prior to the satisfaction or
stay of such judgment);

8.8 Misrepresentations. Borrower or any Person acting for Borrower makes any
representation, warranty, or other statement now or later in this Agreement, any
Loan Document or in any writing delivered to Bank or to induce Bank to enter
this Agreement or any Loan Document, and such representation, warranty, or other
statement is incorrect in any material respect when made;

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

8.10 Guaranty. [omitted].

 

  9 BANK’S RIGHTS AND REMEDIES

9.1 Rights and Remedies. If an Event of Default has occurred and is continuing,
Bank may, without notice or demand, do any or all of the following:

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

 

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

(c) demand that Borrower (i) deposit cash with Bank in an amount equal to the
aggregate amount of any Letters of Credit remaining undrawn, as collateral
security for the repayment of any future drawings under such Letters of Credit,
and Borrower shall forthwith deposit and pay such amounts, and (ii) pay in
advance all Letter of Credit fees scheduled to be paid or payable over the
remaining term of any Letters of Credit;

(d) terminate any FX Forward Contracts;

(e) demand payment of, and collect any Accounts and General Intangibles
comprising Collateral, settle or adjust disputes and claims directly with
Account Debtors for amounts, on terms, and in any order that Bank considers
advisable, notify any Account Debtor or other Person owing Borrower money of
Bank’s security interest in such funds, verify the amount of the same and
collect the same;

(f) make any payments and do any acts it considers necessary or reasonable to
protect the Collateral and/or its security interest in the Collateral. Borrower
shall assemble the Collateral if Bank requests and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank’s rights
or remedies;

(g) apply to the Obligations any (i) balances and deposits of Borrower it holds,
or (ii) any amount held by Bank owing to or for the credit or the account of
Borrower;

(h) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
advertise for sale, and sell the Collateral. Bank is hereby granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s labels, patents, copyrights, mask works, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank’s exercise of its rights under this Section, Borrower’s
rights under all licenses and all franchise agreements inure to Bank’s benefit;

(i) place a “hold on any account maintained with Bank and/or deliver a notice of
exclusive control, any entitlement order, or other directions or instructions
pursuant to any Control Agreement or similar agreements providing control of any
Collateral;

(j) demand and receive possession of Borrower’s Books; and

(k) exercise all rights and remedies available to Bank under the Loan Documents
or at law or equity, including all remedies provided under the Code (including
disposal of the Collateral pursuant to the terms thereof).

9.2 Power of Attorney. Borrower hereby irrevocably appoints Bank as its lawful
attorney-in-fact, exercisable upon the occurrence and during the continuance of
an Event of Default, to: (a) endorse Borrower’s name on any checks or other
forms of payment or security; (b) sign Borrower’s name on any invoice or bill of
lading for any Account or drafts against Account Debtors; (c) settle and adjust
disputes and claims about the Accounts directly with Account Debtors, for
amounts and on terms Bank determines reasonable; (d) make, settle, and adjust
all claims under Borrower’s insurance policies; (e) pay, contest or settle any
Lien, charge, encumbrance, security interest, and adverse claim in or to the
Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; and (f) transfer the Collateral into the name
of Bank or a third party as the Code permits. Borrower hereby appoints Bank as
its lawful attorney-in-fact to sign Borrower’s name on any documents necessary
to perfect or continue the perfection of any security interest regardless of
whether an Event of Default has occurred until all Obligations (other than
inchoate indemnity obligations and cash-collateralized Letters of Credit
following maturity) have been satisfied in full and Bank is under no further
obligation to make Credit Extensions hereunder. Bank’s foregoing appointment as
Borrower’s attorney in fact, and all of Bank’s rights and powers, coupled with
an interest, are irrevocable until all Obligations (other than inchoate
indemnity obligations and cash collateralized Letters of Credit following
maturity) have been fully repaid and performed and Bank’s obligation to provide
Credit Extensions terminates.

 

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9.3 Protective Payments. If Borrower fails to obtain the insurance called for by
Section 6.7 or fails to pay any premium thereon or fails to pay any other amount
which Borrower is obligated to pay under this Agreement or any other Loan
Document, Bank may obtain such insurance or make such payment, and all amounts
so paid by Bank are Bank Expenses and immediately due and payable, bearing
interest at the then highest applicable rate, and secured by the Collateral.
Bank will make reasonable efforts to provide Borrower with notice of Bank
obtaining such insurance at the time it is obtained or within a reasonable time
thereafter. No payments by Bank are deemed an agreement to make similar payments
in the future or Bank’s waiver of any Event of Default.

9.4 Application of Payments and Proceeds. Unless an Event of Default has
occurred and is continuing, Bank shall apply any funds in its possession,
whether from Borrower account balances, payments, or proceeds realized as the
result of any collection of Accounts or other disposition of the Collateral,
first, to Bank Expenses, including without limitation, the reasonable costs,
expenses, liabilities, obligations and attorneys’ fees incurred by Bank in the
exercise of its rights under this Agreement; second, to the interest due upon
any of the Obligations; and third, to the principal of the Obligations and any
applicable fees and other charges, in such order as Bank shall determine in its
sole discretion. Any surplus shall be paid to Borrower or other Persons legally
entitled thereto; Borrower shall remain liable to Bank for any deficiency. If an
Event of Default has occurred and is continuing, Bank may apply any funds in its
possession, whether from Borrower account balances, payments, proceeds realized
as the result of any collection of Accounts or other disposition of the
Collateral, or otherwise, to the Obligations in such order as Bank shall
determine in its sole discretion. Any surplus shall be paid to Borrower or other
Persons legally entitled thereto; Borrower shall remain liable to Bank for any
deficiency. If Bank, in its good faith business judgment, directly or indirectly
enters into a deferred payment or other credit transaction with any purchaser at
any sale of Collateral, Bank shall have the option, exercisable at any time, of
either reducing the Obligations by the principal amount of the purchase price or
deferring the reduction of the Obligations until the actual receipt by Bank of
cash therefor.

9.5 Bank’s Liability for Collateral. So long as Bank complies with reasonable
banking practices regarding the safekeeping of the Collateral in the possession
or under the control of Bank, Bank shall not be liable or responsible for:
(a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral;
(c) any diminution in the value of the collateral; or (d) any act or default of
any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of
loss, damage or destruction of the Collateral.

9.6 No Waiver; Remedies Cumulative. Bank’s failure, at any time or times, to
require strict performance by Borrower of any provision of this Agreement or any
other Loan Document shall not waive, affect, or diminish any right of Bank
thereafter to demand strict performance and compliance herewith or therewith. No
waiver hereunder shall be effective unless signed by Bank and then is only
effective for the specific instance and purpose for which it is given. Bank’s
rights and remedies under this Agreement and the other Loan Documents are
cumulative. Bank has all rights and remedies provided under the Code, by law, or
in equity. Bank’s exercise of one right or remedy is not an election, and Bank’s
waiver of any Event of Default is not a continuing waiver. Bank’s delay in
exercising any remedy is not a waiver, election, or acquiescence.

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

 

  10 NOTICES

All notices, consents, requests, approvals, demands, or other communication
(collectively, “Communication”), other than Advance requests made pursuant to
Section 3.4, by any party to this Agreement or any other Loan Document must be
in writing and be delivered or sent by facsimile at the addresses or facsimile
numbers listed below. Bank or Borrower may change its notice address by giving
the other party written notice thereof. Each such Communication shall be deemed
to have been validly served, given, or delivered: (a) upon the earlier of actual
receipt and three (3) Business Days after deposit in the U.S. mail, registered
or certified mail, return receipt requested, with proper postage prepaid;
(b) upon transmission, when sent by facsimile transmission (with such facsimile
promptly confirmed by delivery of a copy by personal delivery or United States
mail as otherwise provided in this Section 10); (c) one (1) Business Day after
deposit with a reputable overnight courier with all charges prepaid; or (d) when
delivered, if hand-delivered by messenger, all of which shall be addressed to
the party to be notified and sent to the address or facsimile number indicated
below. Advance requests made pursuant to Section 3.4 must be in writing and may
be in the form of electronic mail, delivered to Bank by Borrower at the e-mail
address of Bank provided below and shall be deemed to have been validly served,
given, or delivered when sent (with such electronic mail promptly confirmed by
delivery of a copy by personal delivery or United States mail as otherwise
provided in this Section 10). Bank or Borrower may change its address, facsimile
number, or electronic mail address by giving the other party written notice
thereof in accordance with the terms of this Section 10.

 

If to Borrower:   Entropic Communications, Inc.   9276 Scranton Road   San
Diego, CA 92121   Attn:    Kurt Noyes, VP of Finance and Administration   Fax:
   858-546-2410   Email:    knoyes@entropic.com

 

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If to Bank:   Silicon Valley Bank   38 Technology West, Suite 150   Irvine, CA
92618   Attn:    Relationship Manager   Fax:    949-789-1930   Email:   
dbrunelle@svb.com

 

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

California law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in Santa Clara County, California; provided,
however, that nothing in this Agreement shall be deemed to operate to preclude
Bank from bringing suit or taking other legal action in any other jurisdiction
to realize on the Collateral or any other security for the Obligations, or to
enforce a judgment or other court order in favor of Bank. Borrower expressly
submits and consents in advance to such jurisdiction in any action or suit
commenced in any such court, and Borrower hereby waives any objection that it
may have based upon lack of personal jurisdiction, improper venue, or forum non
conveniens and hereby consents to the granting of such legal or equitable relief
as is deemed appropriate by such court. Borrower hereby waives personal service
of the summons, complaints, and other process issued in such action or suit and
agrees that service of such summons, complaints, and other process may be made
by registered or certified mail addressed to Borrower at the address set forth
in Section 10 of this Agreement and that service so made shall be deemed
completed upon the earlier to occur of Borrower’s actual receipt thereof or
three (3) days after deposit in the U.S. mails, proper postage prepaid.

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

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial
by jury is not enforceable, the parties hereto agree that any and all disputes
or controversies of any nature between them arising at any time shall be decided
by a reference to a private judge, mutually selected by the parties (or, if they
cannot agree, by the Presiding Judge of the Santa Clara County, California
Superior Court) appointed in accordance with California Code of Civil Procedure
Section 638 (or pursuant to comparable provisions of federal law if the dispute
falls within the exclusive jurisdiction of the federal courts), sitting without
a jury, in Santa Clara County, California; and the parties hereby submit to the
jurisdiction of such court. The reference proceedings shall be conducted
pursuant to and in accordance with the provisions of California Code of Civil
Procedure 88 638 through 645.1, inclusive. The private judge shall have the
power, among others, to grant provisional relief, including without limitation,
entering temporary restraining orders, issuing preliminary and permanent
injunctions and appointing receivers. All such proceedings shall be closed to
the public and confidential and all records relating thereto shall be
permanently sealed. If during the course of any dispute, a party desires to seek
provisional relief, but a judge has not been appointed at that point pursuant to
the judicial reference procedures, then such party may apply to the Santa Clara
County, California Superior Court for such relief. The proceeding before the
private judge shall be conducted in the same manner as it would be before a
court under the rules of evidence applicable to judicial proceedings. The
parties shall be entitled to discovery which shall be conducted in the same
manner as it would be before a court under the rules of discovery applicable to
judicial proceedings. The private judge shall oversee discovery and may enforce
all discovery rules and order applicable to judicial proceedings in the same
manner as a trial court judge. The parties agree that the selected or appointed
private judge shall have the power to decide all issues in the action or
proceeding, whether of fact or of law, and shall report a statement

 

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of decision thereon pursuant to the California Code of Civil Procedure § 644(a).
Nothing in this paragraph shall limit the right of any party at any time to
exercise self-help remedies, foreclose against collateral, or obtain provisional
remedies. The private judge shall also determine all issues relating to the
applicability, interpretation, and enforceability of this paragraph.

 

  12 GENERAL PROVISIONS

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

12.2 Indemnification. Borrower agrees to indemnify, defend and hold Bank and its
directors, officers, employees, agents, attorneys, or any other Person
affiliated with or representing Bank harmless against: (a) all obligations,
demands, claims, and liabilities (collectively, “Claims”) asserted by any other
party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses incurred, or paid by Bank from, following,
or arising from transactions between Bank and Borrower (including reasonable
attorneys’ fees and expenses), except for Claims and/or losses to the extent
directly caused by Bank’s gross negligence or willful misconduct.

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

12.4 Time of Essence. Time is of the essence for the performance of all
Obligations in this Agreement.

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

12.6 Amendments in Writing; Integration. All amendments to this Agreement must
be in writing signed by both Bank and Borrower. This Agreement and the Loan
Documents represent the entire agreement about this subject matter and supersede
prior negotiations or agreements. All prior agreements, understandings,
representations, warranties, and negotiations between the parties about the
subject matter of this Agreement and the Loan Documents merge into this
Agreement and the Loan Documents.

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

12.8 Survival. All covenants, representations and warranties made in this
Agreement continue in full force until this Agreement has terminated pursuant to
its terms and all Obligations (other than inchoate indemnity obligations, cash
collateralized Letters of Credit and any other obligations which, by their
terms, are to survive the termination of this Agreement) have been satisfied.
The obligation of Borrower in Section 12.2 to indemnify Bank shall survive until
the statute of limitations with respect to all claims and causes of action with
respect to which indemnity is given to Bank shall have run.

 

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12.9 Confidentiality. In handling any confidential information, Bank shall
exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (a) to Bank’s
Subsidiaries or Affiliates; (b) to prospective transferees or purchasers of any
interest in the Credit Extensions (provided, however, Bank shall use
commercially reasonable efforts to obtain such prospective transferee’s or
purchaser’s agreement to the terms of this provision); (c) as required by law,
regulation, subpoena, or other order; (d) to Bank’s regulators or as otherwise
required in connection with Bank’s examination or audit; and (e) as Bank
considers appropriate in exercising remedies under this Agreement. Confidential
information does not include information that either: (i) is in the public
domain or in Bank’s possession when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (ii) is
disclosed to Bank by a third party, if Bank does not know that the third party
is prohibited from disclosing the information.

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

 

  13 DEFINITIONS

13.1 Definitions. As used in this Agreement, the following terms have the
following meanings:

“Account” is any “account” as defined in the Code with such additions to such
term as may hereafter be made, and includes, without limitation, all accounts
receivable and other sums owing to Borrower.

“Account Debtor” is any “account debtor” as defined in the Code with such
additions to such term as may hereafter be made.

“Advance” or “Advances” means an advance (or advances) under the Revolving Line.

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

“Agreement” is defined in the preamble hereof.

“Bank” is defined in the preamble hereof.

“Bank Expenses” are all reasonable audit fees and expenses, costs, and expenses
(including reasonable attorneys’ fees and expenses) for preparing, negotiating,
amending, administering, defending and enforcing the Loan Documents (including,
without limitation, those incurred in connection with appeals or Insolvency
Proceedings) or otherwise incurred with respect to Borrower.

“Borrower” is defined in the preamble hereof.

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

“Borrowing Base” is (a) 80% of Eligible Accounts, as determined by Bank from
Borrower’s most recent Transaction Report; provided, however, that Bank may
decrease the foregoing percentages in its good faith business judgment based on
events, conditions, contingencies, or risks which, as determined by Bank, may
adversely affect Collateral. Bank will provide Borrower with prior notice of any
such decrease provided that Bank shall have no liability for inadvertently or
negligently failing to provide such notice.

“Borrowing Base Certificate” [omitted].

“Borrowing Resolutions” are, with respect to any Person, those resolutions
adopted by such Person’s Board of Directors and delivered by such Person to Bank
approving the Loan Documents to which such Person is a party and the
transactions contemplated thereby, together with a certificate executed by its
secretary on behalf of such Person certifying that (a) such Person has the
authority to execute, deliver, and perform its obligations under each of the
Loan Documents to which it is a party, (b) sets forth the resolutions then in
full force and effect authorizing and ratifying the execution, delivery, and
performance by such Person of the Loan

 

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Documents to which it is a party, (c) the names of the Persons authorized to
execute the Loan Documents on behalf of such Person, together with a sample of
the true signatures of such Persons, and (d) that Bank may conclusively rely on
such certificate unless and until such Person shall have delivered to Bank a
further certificate canceling or amending such prior certificate.

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

“Cash Equivalents” means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor’s Ratings
Group or Moody’s Investors Service, Inc., (c) Bank’s certificates of deposit
issued maturing no more than one (I) year after issue; and (d) money market
funds at least ninety-five percent (95%) of the assets of which constitute Cash
Equivalents of the kinds described in clauses (a) through (c) of this definition
and (e) other marketable securities permitted pursuant to Borrower’s investment
policy attached hereto as Exhibit G.

“Cash Management Services” is defined in Section 2.1.4.

“Cash Management Services Sublimit” is defined in Section 2.1.4.

“Code” is the Uniform Commercial Code, as the same may, from time to time, be
enacted and in effect in the State of California; provided, that, to the extent
that the Code is used to define any term herein or in any Loan Document and such
term is defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern;
provided further, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection, or priority of, or remedies with
respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial
Code in effect in a jurisdiction other than the State of California, the term
“Code” shall mean the Uniform Commercial Code as enacted and in effect in such
other jurisdiction solely for purposes on the provisions thereof relating to
such attachment, perfection, priority, or remedies and for purposes of
definitions relating to such provisions.

“Collateral” is any and all properties, rights and assets of Borrower described
on Exhibit A.

“Collateral Account” is any Deposit Account, Securities Account, or Commodity
Account.

“Commodity Account” is any “commodity account” as defined in the Code with such
additions to such term as may hereafter be made.

“Communication” is defined in Section 10.

“Compliance Certificate” is that certain certificate in the form attached hereto
as Exhibit E.

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

“Control Agreement” is any control agreement entered into among the depository
institution at which Borrower maintains a Deposit Account or the securities
intermediary or commodity intermediary at which Borrower maintains a Securities
Account or a Commodity account, Borrower, and Bank pursuant to which Bank
obtains control (within the meaning of the Code) over such Deposit Account,
Securities Account, or Commodity Account.

“Credit Extension” is any Advance, Letter of Credit, FX Forward Contract, amount
utilized for Cash Management Services, or any other extension of credit by Bank
for Borrower’s benefit.

 

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“Default” means any event which with notice or passage of time or both, would
constitute an Event of Default.

“Default Rate” is defined in Section 2.3(b).

“Deferred Revenue” is all amounts received or invoiced in advance of performance
under contracts and not yet recognized as revenue.

“Deposit Account” is any “deposit account” as defined in the Code with such
additions to such term as may hereafter be made.

“Designated Deposit Account” is Borrower’s deposit account, account number
3300340876, maintained with Bank.

“Dollars,” “dollars” and “$” each mean lawful money of the United States.

“Effective Date” is the date Bank executes this Agreement and as indicated on
the signature page hereof.

“Eligible Accounts” are Accounts which arise in the ordinary course of
Borrower’s business that meet all Borrower’s representations and warranties in
Section 5.3. Bank reserves the right at any time and from time to time after the
Effective Date, with written notice to Borrower, to adjust any of the criteria
set forth below and to establish new criteria in its good faith business
judgment. Unless Bank agrees otherwise in writing, Eligible Accounts shall not
include:

(a) Accounts for which the Account Debtor has not been invoiced;

(b) Accounts that the Account Debtor has not paid within ninety (90) days of
invoice date;

(c) Accounts owing from an Account Debtor, fifty percent (50%) or more of whose
Accounts have not been paid within ninety (90) days of invoice date;

(d) Credit balances over ninety (90) days from invoice date;

(e) Accounts owing from an Account Debtor, including Affiliates, whose total
obligations to Borrower exceed twenty-five (25%) of all Accounts (except for
(i) Motorola, (ii) Actiontech, (iii) Tellabs, (iv) Foxconn (HonHi Precision),
(v) Alcatel and (vi) Jabil Circuits, for each of which such percentage is 60%)
for the amounts that exceed the foregoing percentages, unless Bank approves in
writing;

(f) Accounts owing from an Account Debtor which does not have its principal
place of business in the United States except for Eligible Foreign Accounts;

(g) Accounts owing from an Account Debtor which is a federal, state or local
government entity or any department, agency, or instrumentality thereof except
for Accounts of the United States if Borrower has assigned its payment rights to
Bank and the assignment has been acknowledged under the Federal Assignment of
Claims Act of 1940, as amended;

(h) Accounts owing from an Account Debtor to the extent that Borrower is
indebted or obligated in any manner to the Account Debtor (as creditor, lessor,
supplier or otherwise—sometimes called “contra” accounts, accounts payable,
customer deposits or credit accounts), with the exception of customary credits,
adjustments and/or discounts given to an Account Debtor by Borrower in the
ordinary course of its business;

(i) Accounts for demonstration or promotional equipment, or in which goods are
consigned, or sold on a “sale guaranteed”, “sale or return”, “sale on approval”,
“bill and hold”, or other terms if Account Debtor’s payment may be conditional;

(j) Accounts for which the Account Debtor is Borrower’s Affiliate, officer,
employee, or agent;

(k) Accounts in which the Account Debtor disputes liability or makes any claim
(but only up to the disputed or claimed amount), or if the Account Debtor is
subject to an Insolvency Proceeding, or becomes insolvent, or goes out of
business;

 

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(l) Accounts owing from an Account Debtor with respect to which Borrower has
received deferred revenue (but only to the extent of such deferred revenue);

(m) Accounts for which Bank in its good faith business judgment determines
collection to be doubtful; and

(n) other Accounts Bank deems ineligible in the exercise of its good faith
business judgment.

“Eligible Foreign Accounts” means Accounts arising in the ordinary course of
Borrower’s business from an Account Debtor that does not have its principal
place of business in the United States but are otherwise Eligible Accounts that
are (a) supported by letter(s) of credit acceptable to Bank in its discretion;
or (b) that Bank approves in writing including from the following Account
Debtors: (i) Motorola, (ii) Actiontech, (iii) Tellabs, (iv) Foxconn (HonHi
Precision), (v) Alcatel and (vi) Jabil Circuits.

“Eligible Inventory” [omitted].

“Equipment” is all “equipment” as defined in the Code with such additions to
such term as may hereafter be made, and includes without limitation all
machinery, fixtures, goods, vehicles (including motor vehicles and trailers),
and any interest in any of the foregoing.

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

“Event of Default” is defined in Section 8.

“Foreign Currency” means lawful money of a country other than the United States.

“Funding Date” is any date on which a Credit Extension is made to or on account
of Borrower which shall be a Business Day.

“FX Business Day” is any day when (a) Bank’s Foreign Exchange Department is
conducting its normal business and (b) the Foreign Currency being purchased or
sold by Borrower is available to Bank from the entity from which Bank shall buy
or sell such Foreign Currency.

“FX Forward Contract” is defined in Section 2.1.3.

“FX Reserve” is defined in Section 2.1.3.

“GAAP” is generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other Person as
may be approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of determination.

“General Intangibles” is all “general intangibles” as defined in the Code in
effect on the date hereof with such additions to such term as may hereafter be
made, and includes without limitation, all copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any patents,
trademarks, service marks and, to the extent permitted under applicable law, any
applications therefor, whether registered or not, any trade secret rights,
including any rights to unpatented inventions, payment intangibles, royalties,
contract rights, goodwill, franchise agreements, purchase orders, customer
lists, route lists, telephone numbers, domain names, claims, income and other
tax refunds, security and other deposits, options to purchase or sell real or
personal property, rights in all litigation presently or hereafter pending
(whether in contract, tort or otherwise), insurance policies (including without
limitation key man, property damage, and business interruption insurance),
payments of insurance and rights to payment of any kind.

“Guarantor” [omitted].

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

 

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

“Intellectual Property” is as defined in Exhibit A hereto.

“Inventory” is all “inventory” as defined in the Code in effect on the date
hereof with such additions to such term as may hereafter be made, and includes
without limitation all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products, including without
limitation such inventory as is temporarily out of Borrower’s custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.

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

“IP Agreement” [omitted].

“Letter of Credit” means a standby letter of credit issued by Bank or another
institution based upon an application, guarantee, indemnity or similar agreement
on the part of Bank as set forth in Section 2.1.2.

“Letter of Credit Application” is defined in Section 2.1.2(a).

“Letter of Credit Reserve” has the meaning set forth in Section 2.1.2(d).

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

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

“Material Adverse Change” is (a) a material impairment in the perfection or
priority of Bank’s Lien in the Collateral or in the value of such Collateral;
(b) a material adverse change in the business, operations, or condition
(financial or otherwise) of Borrower; or (c) a material impairment of the
prospect of repayment of any portion of the Obligations.

“Maximum Dollar Amount” is $7,000,000; provided, however, at Borrower’s election
(and provided no Default or Event of Default has occurred and is continuing),
upon prior written notice to Bank by Borrower, Borrower may increase the Maximum
Dollar Amount to $10,000,000.

“Obligations” are Borrower’s obligation to pay when due any debts, principal,
interest, Bank Expenses and other amounts Borrower owes Bank now or later,
whether under this Agreement or the Loan Documents, including, without
limitation, all obligations relating to letters of credit, cash management
services, and foreign exchange contracts, if any, and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank, and the performance of Borrower’s
duties under the Loan Documents. Notwithstanding anything herein to the
contrary, the term “Obligations” will not include any Warrants to Purchase
issued by Borrower in favor of Bank pursuant to that certain Venture Loan and
Security Agreement dated as of an approximate even date hereof by and between
Borrower on the one hand and Horizon Technology Funding Company LLC and Bank on
the other.

“Operating Documents” are, for any Person, such Person’s formation documents, as
certified with the Secretary of State of such Person’s state of formation on a
date that is no earlier than 30 days prior to the Effective Date, and, (a) if
such Person is a corporation, its bylaws in current form, (b) if such Person is
a limited liability company, its limited liability company agreement (or similar
agreement), and (c) if such Person is a partnership, its partnership agreement
(or similar agreement), each of the foregoing with all current amendments or
modifications thereto.

“Payment/Advance Form” [omitted].

“Perfection Certificate” is defined in Section 5.1.

 

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“Permitted Indebtedness” is:

(a) Borrower’s Indebtedness to Bank under this Agreement and the other Loan
Documents;

(b) Indebtedness existing on the Effective Date and shown on the Perfection
Certificate;

(c) Subordinated Debt;

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

(e) Indebtedness incurred as a result of endorsing negotiable instruments
received in the ordinary course of business;

(f) Indebtedness secured by Permitted Liens;

(g) capital lease obligations in the ordinary course of business;

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

“Permitted Investments” are:

(a) Investments shown on the Perfection Certificate and existing on the
Effective Date;

(b) Cash Equivalents;

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

(d) Investments consisting of deposit accounts in which Bank has a perfected
security interest;

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

(f) Investments of Subsidiaries in or to other Subsidiaries or Borrower and
Investments by Borrower in Subsidiaries not to exceed $300,000 per month per
Subsidiary as provided for in Section 7.1 hereof;

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

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

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

(j) Joint ventures or strategic alliances (in the ordinary course of Borrower’s
business) consisting of the non-exclusive licensing of technology, the
development of technology or the providing of technical support, provided that
any cash investments by Borrower do not exceed $150,000 in the aggregate in any
fiscal year, provided that no such cash investment may be made if an Event of
Default is then occurring or would otherwise occur upon the making thereof; and

(k) Investments necessary by Borrower in conjunction with the Arabella Merger.

 

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“Permitted Liens” are:

(a) Liens existing on the Effective Date and shown on the Perfection Certificate
or arising under this Agreement and the other Loan Documents;

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

(c) purchase money Liens (i) on Equipment acquired or held by Borrower incurred
for financing the acquisition of the Equipment securing no more than $50,000 in
the aggregate amount outstanding, or (ii) existing on Equipment when acquired,
if the Lien is confined to the property and improvements and the proceeds of the
Equipment;

(d) statutory Liens securing claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other Persons imposed without action of
such parties, provided, they have no priority over any of Bank’s Lien and the
aggregate amount of such Liens does not at any time exceed $50,000;

(e) Liens to secure payment of workers’ compensation, employment insurance,
old-age pensions, social security and other like obligations incurred in the
ordinary course of business, provided, they have no priority over any of Bank’s
Liens and the aggregate amount of the Indebtedness secured by such Liens does
not at any time exceed $50,000;

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

(g) leases or subleases of real property granted in the ordinary course of
business, and leases, subleases, non-exclusive licenses or sublicenses of
property (other than real property or intellectual property) granted in the
ordinary course of Borrower’s business, if the leases, subleases, licenses and
sublicenses do not prohibit granting Bank a security interest;

(h) non-exclusive license of intellectual property granted to third parties in
the ordinary course of business; and

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

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

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

“Registered Organization” is any “registered organization” as defined in the
Code with such additions to such term as may hereafter be made.

“Reserves” means, as of any date of determination, such amounts as Bank may from
time to time, with prior notice to the Borrower, establish and revise in its
good faith business judgment, reducing the amount of Advances, Letters of Credit
and other Credit Extensions which would otherwise be available to Borrower under
the lending formula(s) provided herein: (a) to reflect events, conditions,
contingencies or risks which, as determined by Bank in its good faith business
judgment, do or may adversely affect (i) the Collateral or any other property
which is security for the Obligations or its value (including without limitation
any increase in delinquencies of Accounts), (ii) the assets, business or
prospects of Borrower, or (iii) the security interests and other rights of Bank
in the Collateral (including the enforceability, perfection and priority
thereof); or (b) to reflect Bank’s good faith belief that any collateral report
or financial information furnished by or on behalf of Borrower or any Guarantor
to Bank is or may have been incomplete, inaccurate or misleading in any material
respect; or (c) in respect of any state of facts which Bank determines in good
faith constitutes an Event of Default or may, with notice or passage of time or
both, constitute an Event of Default.

 

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

“Revolving Line” is an Advance or Advances in an aggregate amount of up to the
Maximum Dollar Amount outstanding at any time.

“Revolving Line Maturity Date” is April 5, 2009.

“Securities Account” is any “securities account” as defined in the Code with
such additions to such term as may hereafter be made.

“Settlement Date” is defined in Section 2.1.3.

“Subordinated Debt” is indebtedness incurred by Borrower subordinated to all of
Borrower’s now ,or hereafter indebtedness to Bank (pursuant to a subordination,
intercreditor, or other similar agreement in form and substance satisfactory to
Bank entered into between Bank and the other creditor), on terms acceptable to
Bank.

“Subsidiary” means, with respect to any Person, any Person of which more than
50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by such Person or one or more Affiliates of such Person.

“Tangible Net Worth” [omitted].

“Total Liabilities” [omitted].

“Transaction Report” is a report in such form as Bank shall specify.

“Transfer” is defined in Section 7.1.

“Unused Revolving Line Facility Fee” [omitted].

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the Effective Date.

 

BORROWER: ENTROPIC COMMUNICATIONS, INC. By   /s/ Kurt Noyes Name:   KURT NOYES
Title:   Vice President, Finance BANK SILICON VALLEY BANK By   /s/ Derek R.
Brunelle Name:   Derek R. Brunelle Title:   Vice President Effective Date:
April 11, 2007

Exhibits

 

A “Collateral”

B [intentionally omitted]

C [intentionally omitted]

D [intentionally omitted]

E Compliance Certificate

F Transaction Report

G Investment Policy

[Signature page to Loan and Security Agreement]

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EXHIBIT A

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

All goods, Accounts (including health-care receivables), Equipment, Inventory,
contract rights or rights to payment of money, leases, license agreements,
franchise agreements, General Intangibles (except as provided below), commercial
tort claims, documents, instruments (including any promissory notes), chattel
paper (whether tangible or electronic), cash, deposit accounts, fixtures,
letters of credit rights (whether or not the letter of credit is evidenced by a
writing), securities, and all other investment property, supporting obligations,
and financial assets, whether now owned or hereafter acquired, wherever located;
and all Borrower’s Books relating to the foregoing, and any and all claims,
rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

Notwithstanding the foregoing, the Collateral does not include (i) any of the
following, whether now owned or hereafter acquired (collectively, the
“Intellectual Property”): any inbound licenses, copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any patents,
patent applications and like protections, including improvements, divisions,
continuations, renewals, reissues, extensions, and continuations-in-part of the
same, trademarks, service marks and, to the extent permitted under applicable
law, any applications therefor, whether registered or not, and the goodwill of
the business of Borrower connected with and symbolized thereby, know-how,
operating manuals, trade secret rights, rights to unpatented inventions, and any
claims for damage by way of any past, present, or future infringement of any of
the foregoing; provided, however, the Collateral shall include all Accounts,
license and royalty fees and other revenues, proceeds, or income arising out of
or relating to any of the foregoing or (ii) any ownership interests in any
foreign subsidiary of Borrower to the extent such ownership interest exceeds 65%
of the total outstanding voting interests in such foreign subsidiary, whether
now owned or hereafter acquired.

Pursuant to the terms of a certain negative pledge arrangement with Bank,
Borrower has agreed not to encumber any of its copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any patents,
patent applications and like protections, including improvements, divisions,
continuations, renewals, reissues, extensions, and continuations-in-part of the
same, trademarks, service marks and, to the extent permitted under applicable
law, any applications therefor, whether registered or not, and the goodwill of
the business of Borrower connected with and symbolized thereby, know-how,
operating manuals, trade secret rights, rights to unpatented inventions, and any
claims for damage by way of any past, present, or future infringement of any of
the foregoing, without Bank’s prior written consent.

 

1

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AMENDMENT

TO

LOAN AND SECURITY AGREEMENT

THIS AMENDMENT to Loan and Security Agreement (this “Amendment”) is entered into
this 31 day of March 2008 by and between Silicon Valley Bank (“Bank”) and
Entropic Communications, Inc., a Delaware corporation (“Borrower”) whose address
is 9276 Scranton Road, San Diego, California 92121.

RECITALS

A. Bank and Borrower have entered into that certain Loan and Security Agreement
dated as of April 11, 2007 (as the same may from time to time be amended,
modified, supplemented or restated, the “Loan Agreement”).

B. Bank has extended credit to Borrower for the purposes permitted in the Loan
Agreement.

C. Borrower has requested that Bank amend the Loan Agreement, as herein set
forth, and Bank has agreed to the same, but only to the extent, in accordance
with the terms, subject to the conditions and in reliance upon the
representations and warranties set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:

1. Definitions. Capitalized terms used but not defined in this Amendment shall
have the meanings given to them in the Loan Agreement.

2. Amendments to Loan Agreement.

2.1 Modified Dispositions. Section 7.1 of the Loan Agreement is amended in its
entirety and replaced with the following:

7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of
(collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, except for (a) Transfers of Inventory
in the ordinary course of business; (b) Transfers of worn-out or obsolete
Equipment; and (c) Transfers consisting of Permitted Liens and Permitted
Investments; (d) Transfers of non-exclusive licenses for the use of the property
of Borrower or its Subsidiaries in the ordinary course of business; and
(e) other Transfers not to exceed $50,000 per year. For purposes of
clarification, it is understood and agreed by the parties that Borrower shall
not transfer any assets or Collateral to its Subsidiaries, Entropic
Communications (Hong Kong) Ltd., Entropic Communications (Shenzhen) Ltd.,
Entropic Communications Israel Ltd., SAS RF Magic and RF Magic Ltd., except that
Borrower may transfer cash to the extent required to pay for each such
Subsidiary’s operating expenses incurred in the normal course of business.

2.2 Modified Definition of “Permitted Investments.” Subclause (f) of the term
“Permitted Investments” set forth in Section 13.1 of the Loan Agreement is
amended in its entirety and replaced with the following:

(f) Investments of Subsidiaries in or to other Subsidiaries or Borrower and
Investments by Borrower in Subsidiaries as provided for in Section 7.1 hereof.

3. Limitation of Amendments.

3.1 The amendments set forth in Section 2, above, are effective for the purposes
set forth herein and shall be limited precisely as written and shall not be
deemed to (a) be a consent to any amendment, waiver or modification of any other
term or condition of any Loan Document, or (b) otherwise prejudice any right or
remedy which Bank may now have or may have in the future under or in connection
with any Loan Document.

 

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3.2 This Amendment shall be construed in connection with and as part of the Loan
Documents and all terms, conditions, representations, warranties, covenants and
agreements set forth in the Loan Documents, except as herein amended, are hereby
ratified and confirmed and shall remain in full force and effect.

4. Representations and Warranties. To induce Bank to enter into this Amendment,
Borrower hereby represents and warrants to Bank as follows:

4.1 Immediately after giving effect to this Amendment (a) the representations
and warranties contained in the Loan Documents are true, accurate and complete
in all material respects as of the date hereof (except to the extent such
representations and warranties relate to an earlier date, in which case they are
true and correct as of such date), and (b) no Event of Default has occurred and
is continuing;

4.2 Borrower has the power and authority to execute and deliver this Amendment
and to perform its obligations under the Loan Agreement, as amended by this
Amendment;

4.3 The organizational documents of Borrower delivered to Bank on the Effective
Date remain true, accurate and complete and have not been amended, supplemented
or restated and are and continue to be in full force and effect;

4.4 The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, have been duly authorized.

4.5 The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, do not and will not contravene (a) any law or regulation binding on
or affecting Borrower, (b) any contractual restriction with a Person binding on
Borrower, (c) any order, judgment or decree of any court or other governmental
or public body or authority, or subdivision thereof, binding on borrower, or
(d) the organizational documents of Borrower;

4.6 The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, do not require any order, consent, approval, license, authorization
or validation of, or filing, recording or registration with, or exemption by any
governmental or public body or authority, or subdivision thereof, binding on
either Borrower, except as already has been obtained or made; and

4.7 This Amendment has been duly executed and delivered by Borrower and is the
binding obligation of Borrower, enforceable against Borrower in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, liquidation, moratorium or other similar laws of
general application and equitable principles relating to or affecting creditors’
rights.

5. Counterparts. This Amendment may be executed in any number of counterparts
and all of such counterparts taken together shall be deemed to constitute one
and the same instrument.

6. Effectiveness. This Amendment shall be deemed effective upon (a) the due
execution and delivery to Bank of this Amendment by each party hereto and
(b) Bank’s receipt of the Consent to Amendment and Reaffirmation of Guaranty
attached hereto, duly executed and delivered by each Guarantor (unless Bank, in
its sole discretion at any time waives in writing the receipt of any such
Consent).

[Signature page follows.]

 

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

 

BANK     BORROWER Silicon Valley Bank     Entropic Communications, Inc. By:  
/s/ Derek R. Brunelle     By:   /s/ Kurt Noyes Name:   Derek R. Brunelle    
Name:   Kurt Noyes Title:   Relationship Manager     Title:   VP Finance

 

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CONSENT AND AMENDMENT

TO

LOAN AND SECURITY AGREEMENT

THIS CONSENT AND AMENDMENT to Loan and Security Agreement (this “Amendment”) is
entered into this 3rd day of April 2008 by and between Silicon Valley Bank
(“Bank”) and Entropic Communications, Inc., a Delaware corporation (“Borrower”)
whose address is 9276 Scranton Road, San Diego, California 92121.

RECITALS

A. Bank and Borrower have entered into that certain Loan and Security Agreement
dated as of April 11, 2007 (as the same may from time to time be amended,
modified, supplemented or restated, the “Loan Agreement”). Bank has extended
credit to Borrower for the purposes permitted in the Loan Agreement.

B. Borrower has informed Bank that pursuant to the terms and conditions of that
certain Asset Purchase Agreement dated as of April 3, 2008 (the “Purchase
Agreement”) among Vativ Technologies, Inc. (the “Seller”) and Borrower and
Entropic Communications Bermuda LP (“Entropic Sub” which, together with
Borrower, is referred to herein as the “Purchasers”), Borrower will purchase
from the Seller the Domestic Assets (as defined in the Purchase Agreement) and
will assume the Assumed Liabilities (as defined in the Purchase Agreement) all
as provided for in the Purchase Agreement (the “Purchase Transaction”).
Purchasers will acquire the Transferred Assets (as defined in the Purchase
Agreement) for the price of $6,555,000 less certain amounts set forth in the
Purchase Agreement (the “Purchase Price”) payable in cash by wire transfer at
the Closing Date (as defined in the Purchase Agreement). Borrower is prohibited
from entering into the Purchase Transaction pursuant to the terms of Section 7.3
of the Loan Agreement, absent compliance with the terms thereof.

C. Borrower has requested that Bank consent to the Purchase Transaction amend
the Loan Agreement, as herein set forth, and Bank has agreed to the same, but
only to the extent, in accordance with the terms, subject to the conditions and
in reliance upon the representations and warranties set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:

1. Definitions. Capitalized terms used but not defined in this Amendment shall
have the meanings given to them in the Loan Agreement.

2. Consent and Amendments to Loan Agreement.

2.1 Consent to Purchase Transaction. Subject to the terms of Section 6 below,
Bank hereby consents to the Purchase Transaction, and Bank and Borrower agree
that the prohibitions set forth in Section 7.3 of the Loan Agreement are hereby
waived with respect to the Purchase Transaction only, and that Bank hereby
consents to the Purchase Transaction in accordance with the terms previously
disclosed to Bank, conditioned upon the following requirements: (i) the
conditions precedent (for Purchasers and Seller), if any, set forth in the
Purchase Agreement are satisfied; (ii) the Seller’s representations and
warranties set forth in the Purchase Agreement are true, accurate and complete,
(iii) the Domestic Assets are free and clear of all liens, encumbrances and
security interests except for Permitted Liens (as defined in the Loan
Agreement); and (iv) Bank has a first priority perfected security interest in
the Domestic Assets exclusive of any Intellectual Property (as defined in the
Loan Agreement), which Intellectual Property shall be subject to the Negative
Pledge as set forth in the Loan Agreement. It is understood by the parties
hereto, however, that such a waiver does not constitute a waiver of any other
provision or term of the Loan Agreement or any related document, nor an
agreement to waive in the future this covenant or any other provision or term of
the Loan Agreement or any related document.

 

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2.2 Modified Commitment Fee. Section 2.4(a) of the Loan Agreement that currently
reads as follows:

(a) Commitment Fee. A fully earned, non-refundable commitment fee of $35,000, on
the Effective Date, provided, however, if Borrower elects to increase the
Maximum Dollar Amount to $10,000,000 before the first anniversary of the
Effective Date, then an additional $15,000 on the date of such election
pro-rated for the remainder of the year until the first anniversary of the
Effective Date; provided, further, if Borrower elects to increase the Maximum
Dollar Amount to $10,000,000 after the first anniversary of the Effective Date,
then an additional $15,000 on the date of such election pro-rated for the
remainder of the year until the second anniversary of the Effective Date; and

is hereby amended in its entirety and replaced with the following:

(a) Commitment Fee. A fully earned, non-refundable commitment fee of $35,000, on
the Effective Date; and

2.3 Modified Anniversary Fee. Section 2.4(g) of the Loan Agreement that
currently reads as follows:

(g) Anniversary Fee. A fully earned, non-refundable commitment fee of $25,000,
on the first anniversary of the Effective Date, provided, however, if Borrower
elects, prior to the first anniversary of the Effective Date, to increase the
Maximum Dollar Amount to $10,000,000, then an additional $15,000 on the first
anniversary of the Effective Date; and

is hereby amended in its entirety and replaced with the following

(g) Anniversary Fee. A fully earned, non-refundable commitment fee of $25,000,
on the first anniversary of the Effective Date; and

2.4 Modified Audit Requirement for 2007. Bank and Borrower agree that,
notwithstanding the language in Section 6.6 of the Loan Agreement regarding
audits on a semi-annual basis, Bank will only require one audit for Borrower’s
fiscal year ending December 31, 2007, which audit Bank acknowledges has already
been conducted.

2.5 Modified Definition of Maximum Dollar Amount. The definition of “Maximum
Dollar Amount” set forth in Section 13.1 of the Loan Agreement is amended in its
entirety and replaced with the following

“Maximum Dollar Amount” is $10,000,000.

3. Limitation of Amendments.

3.1 The amendments set forth in Section 2, above, are effective for the purposes
set forth herein and shall be limited precisely as written and shall not be
deemed to (a) be a consent to any amendment, waiver or modification of any other
term or condition of any Loan Document, or (b) otherwise prejudice any right or
remedy which Bank may now have or may have in the future under or in connection
with any Loan Document.

3.2 This Amendment shall be construed in connection with and as part of the Loan
Documents and all terms, conditions, representations, warranties, covenants and
agreements set forth in the Loan Documents, except as herein amended, are hereby
ratified and confirmed and shall remain in full force and effect.

4. Representations and Warranties. To induce Bank to enter into this Amendment,
Borrower hereby represents and warrants to Bank as follows:

4.1 Immediately after giving effect to this Amendment (a) the representations
and warranties contained in the Loan Documents are true, accurate and complete
in all material respects as of the date hereof (except to the extent such
representations and warranties relate to an earlier date, in which case they are
true and correct as of such date), and (b) no Event of Default has occurred and
is continuing;

4.2 Borrower has the power and authority to execute and deliver this Amendment
and to perform its obligations under the Loan Agreement, as amended by this
Amendment;

 

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4.3 The organizational documents of Borrower delivered to Bank on the Effective
Date remain true, accurate and complete and have not been amended, supplemented
or restated and are and continue to be in full force and effect;

4.4 The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, have been duly authorized;

4.5 The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, do not and will not contravene (a) any law or regulation binding on
or affecting Borrower, (b) any contractual restriction with a Person binding on
Borrower, (c) any order, judgment or decree of any court or other governmental
or public body or authority, or subdivision thereof, binding on Borrower, or
(d) the organizational documents of Borrower;

4.6 The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, do not require any order, consent, approval, license, authorization
or validation of, or filing, recording or registration with, or exemption by any
governmental or public body or authority, or subdivision thereof, binding on
either Borrower, except as already has been obtained or made; and

4.7 This Amendment has been duly executed and delivered by Borrower and is the
binding obligation of Borrower, enforceable against Borrower in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, liquidation, moratorium or other similar laws of
general application and equitable principles relating to or affecting creditors’
rights.

5. Counterparts. This Amendment may be executed in any number of counterparts
and all of such counterparts taken together shall be deemed to constitute one
and the same instrument.

6. Effectiveness. This Amendment shall be deemed effective upon (a) the due
execution and delivery to Bank of this Amendment by each party hereto and
(b) Borrower’s payment of all legal fees of Bank incurred with respect to this
Amendment and (c) Bank’s receipt of the Consent to Amendment and Reaffirmation
of Guaranty attached hereto, duly executed and delivered by each Guarantor
(unless Bank, in its sole discretion at any time waives in writing the receipt
of any such Consent).

7. Governing Law. This Amendment and the rights and obligations of the parties
hereto shall be governed by and construed in accordance with the laws of the
State of California.

8. Prior Agreement. The Loan Documents are hereby ratified and reaffirmed and
shall remain in full force and effect. This Consent is not a novation and the
terms and conditions of this Consent shall be in addition to and supplemental to
all terms and conditions set forth in the Loan Documents. In the event of any
conflict or inconsistency between this Consent and the terms of such documents,
the terms of this Consent shall be controlling, but such document shall not
otherwise be affected or the rights therein impaired.

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

 

BANK     BORROWER Silicon Valley Bank     Entropic Communications, Inc. By:  
/s/ Derek R. Brunelle     By:   /s/ Patrick C. Henry Name:   Derek R. Brunelle  
  Name:   Patrick C. Henry Title:   Relationship Manager     Title:   President
and CEO

 

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AMENDMENT

TO

LOAN AND SECURITY AGREEMENT

THIS AMENDMENT to Loan and Security Agreement (this “Amendment”) is entered into
this 20th day of May 2008 by and between Silicon Valley Bank (“Bank”) and
Entropic Communications, Inc., a Delaware corporation (“Borrower”) whose address
is 9276 Scranton Road, San Diego, California 92121.

RECITALS

A. Bank and Borrower have entered into that certain Loan and Security Agreement
dated as of April 11, 2007 (as the same may from time to time be amended,
modified, supplemented or restated, the “Loan Agreement”). Bank has extended
credit to Borrower for the purposes permitted in the Loan Agreement.

B. Bank has extended credit to Borrower for the purposes permitted in the Loan
Agreement.

C. Borrower has requested that Bank amend the Loan Agreement, as herein set
forth, and Bank has agreed to the same, but only to the extent, in accordance
with the terms, subject to the conditions and in reliance upon the
representations and warranties set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:

1. Definitions. Capitalized terms used but not defined in this Amendment shall
have the meanings given to them in the Loan Agreement.

2. Amendments to Loan Agreement.

2.1 Modified Commitment Fee. Section 2.4(a) of the Loan Agreement that currently
reads as follows:

(a) Commitment Fee. A fully earned, non-refundable commitment fee of $35,000, on
the Effective Date; and

is hereby amended in its entirety and replaced with the following:

(a) Commitment Fee. A fully earned, non-refundable commitment fee of $35,000, on
the Effective Date, provided, however, if Borrower elects to increase the
Maximum Dollar Amount to $15,000,000 before the second anniversary of the
Effective Date, then an additional $15,000 on the date of such election
pro-rated for the remainder of the year until the second anniversary of the
Effective Date; and

2.2 Modified Financial Covenants. Section 6.9 of the Loan Agreement that
currently reads as follows:

6.9 Financial Covenants. [omitted]

is hereby amended in its entirety and replaced with the following

6.9 Financial Covenants.

If Borrower elects to increase the Maximum Dollar Amount to $15,000,000,
Borrower shall maintain at all times, to be tested as of the last day of each
month, unless otherwise noted, on a consolidated basis:

(a) Tangible Net Worth. A Tangible Net Worth of at least $50,000,000 (“Minimum
Tangible Net Worth”).

 

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2.3 Modified Definitions. The following terms and their respective definitions
set forth in Section 13.1 of the Loan Agreement are hereby added or amended in
their entirety, as applicable, and replaced with the following:

“Conditions Precedent to Increase” means all of the following: (i) the
Conditions Precedent set forth in Section 3.2 of this Agreement have all been
satisfied, and (ii) if required by Bank, a legal opinion from Borrower’s outside
legal counsel, in form and substance satisfactory to Bank in Bank’s good faith
business judgment, has been received by Bank.

“Maximum Dollar Amount” is $10,000,000; provided, however, at Borrower’s
election (and provided (i) no Default or Event of Default has occurred and is
continuing and (ii) the Conditions Precedent to Increase, as defined herein,
have been satisfied), upon prior written notice to Bank by Borrower, Borrower
may increase the Maximum Dollar Amount to $15,000,000.

“Tangible Net Worth” is, on any date, the consolidated total assets of Borrower
and its Subsidiaries minus (a) any amounts attributable to (i) goodwill,
(ii) intangible items including unamortized debt discount and expense, patents,
trade and service marks and names, copyrights and research and development
expenses except prepaid expenses, (iii) notes, accounts receivable and other
obligations owing to Borrower from its officers or other Affiliates, and
(iv) reserves not already deducted from assets, minus (b) Total Liabilities,
plus (c) Subordinated Debt.

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

2.4 Modified Exhibit E to Loan Agreement. Exhibit E to the Loan Agreement, the
form of Compliance Certificate, is hereby replaced with Exhibit E attached
hereto.

3. Limitation of Amendments.

3.1 The amendments set forth in Section 2, above, are effective for the purposes
set forth herein and shall be limited precisely as written and shall not be
deemed to (a) be a consent to any amendment, waiver or modification of any other
term or condition of any Loan Document, or (b) otherwise prejudice any right or
remedy which Bank may now have or may have in the future under or in connection
with any Loan Document.

3.2 This Amendment shall be construed in connection with and as part of the Loan
Documents and all terms, conditions, representations, warranties, covenants and
agreements set forth in the Loan Documents, except as herein amended, are hereby
ratified and confirmed and shall remain in full force and effect.

4. Representations and Warranties. To induce Bank to enter into this Amendment,
Borrower hereby represents and warrants to Bank as follows:

4.1 Immediately after giving effect to this Amendment (a) the representations
and warranties contained in the Loan Documents are true, accurate and complete
in all material respects as of the date hereof (except to the extent such
representations and warranties relate to an earlier date, in which case they are
true and correct as of such date), and (b) no Event of Default has occurred and
is continuing;

4.2 Borrower has the power and authority to execute and deliver this Amendment
and to perform its obligations under the Loan Agreement, as amended by this
Amendment;

4.3 The organizational documents of Borrower filed with the Delaware Secretary
of State’s Office on March 31, 2006 (the Fourth Amended and Restated Certificate
of Incorporation of Entropic Communications, Inc.) remain true, accurate and
complete and have not been amended, supplemented or restated and are and
continue to be in full force and effect;

 

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4.4 The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, have been duly authorized;

4.5 The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, do not and will not contravene (a) any law or regulation binding on
or affecting Borrower, (b) any contractual restriction with a Person binding on
Borrower, (c) any order, judgment or decree of any court or other governmental
or public body or authority, or subdivision thereof, binding on Borrower, or
(d) the organizational documents of Borrower;

4.6 The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, do not require any order, consent, approval, license, authorization
or validation of, or filing, recording or registration with, or exemption by any
governmental or public body or authority, or subdivision thereof, binding on
either Borrower, except as already has been obtained or made; and

4.7 This Amendment has been duly executed and delivered by Borrower and is the
binding obligation of Borrower, enforceable against Borrower in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, liquidation, moratorium or other similar laws of
general application and equitable principles relating to or affecting creditors’
rights.

5. Counterparts. This Amendment may be executed in any number of counterparts
and all of such counterparts taken together shall be deemed to constitute one
and the same instrument.

6. Effectiveness. This Amendment shall be deemed effective upon (a) the due
execution and delivery to Bank of this Amendment by each party hereto and
(b) Borrower’s payment of an amendment fee in an amount equal to $5,000, and
(c) Borrower’s payment of all legal fees of Bank incurred with respect to this
Amendment and (d) Bank’s receipt of the Consent to Amendment and Reaffirmation
of Guaranty attached hereto, duly executed and delivered by each Guarantor
(unless Bank, in its sole discretion at any time waives in writing the receipt
of any such Consent).

[Signature page follows.]

 

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

 

BANK     BORROWER Silicon Valley Bank     Entropic Communications, Inc. By:  
/s/ Derek R. Brunelle     By:   /s/ Kurt Noyes Name:   Derek R. Brunelle    
Name:   Kurt Noyes Title:   Relationship Manager     Title:   VP Finance

 

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