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Exhibit 10.14    
    

www.ikanos.com

	Ikanos Communications      47669 Fremont Blvd.      Fremont, CA 94538      +1.510.979.0400
phone      +1.510.979.0500 fax

  

January
29, 2005 

Mr.
Dean Grumlose 

Dear
Dean: 

        I
am pleased to offer you a position with Ikanos Communications, Inc. (the "Company") as Vice President of Marketing, reporting to me, commencing January 31, 2005. As an Executive
Officer of the Company, you are expected to go above and beyond your functional responsibilities to help and assist the Company. 

        You
will receive an annual salary of $165,000.00, which will be paid semi-monthly in accordance with the Company's normal payroll procedures and a bonus of up to 15% per year based on
individual and company goals attainment. As a Company employee, you are also eligible to receive certain employee benefits including health benefits. You should note that the Company might modify
salaries and benefits from time to time, as it deems necessary. This offer will expire on January 31, 2005. 

        We
will recommend to the Board of Directors of the Company that, at the next Board meeting, you be granted an incentive stock option entitling you to purchase up to 1,800,000 shares of
Common Stock of the Company at the then current fair market value as determined by the Board at that meeting. 

        You
should be aware that your employment with the Company is for no specified period and constitutes at will employment. As a result, you are free to resign at any time, for any reason
or for no reason. Similarly, the Company is free to conclude its employment relationship with you at any time, with or without cause, and with or without notice. 

        For
purposes of federal immigration law, you will be required to provide to the Company documentary evidence of your identity and eligibility for employment in the United States. Such
documentation must be provided to us within three (3) business days of your date of hire, or our employment relationship with you may be terminated. 

        You
agree that, during the term of your employment with the Company, you will not engage in any other employment, occupation, consulting or other business activity directly related to
the business in which the Company is now involved or becomes involved during the term of your employment, nor will you engage in any other activities that conflict with your obligations to the
Company. 

        As
a Company employee, you will be expected to abide by company rules and regulations. You will be specifically required to sign an acknowledgment that you have read and understand the
company rules of conduct, which will be included in a handbook, which the company will soon complete and distribute. You will be expected to sign and comply with an Employment, Confidential
Information, Invention Assignment and Arbitration Agreement which requires, among other provisions, the assignment of patent rights to any invention made during your employment at the Company and non-
disclosure of proprietary information. 

        To
indicate your acceptance of the Company's offer, please sign and date this letter in the space provided below and return it to me. A duplicate original is enclosed for your records.
This letter, along with the agreement relating to proprietary rights between you and the Company, set forth the terms of your employment with the Company and supersede any prior representations or
agreements, whether 

written
or oral. This letter may not be modified or amended except by a written agreement, signed by an officer of the Company and by you. 

        We
look forward to working with you at Ikanos Communications. 

Sincerely,

	

 	
 	

 
	/s/  RAJESH VASHIST      
 Rajesh Vashist

Chairman and CEO	 	 
	

 	
 	

 
	ACCEPTED AND AGREED TO this

1 day of January, 2005	 	 
	

 	
 	

 
	/s/  DEAN GRUMLOSE      
 Dean Grumlose	 	 
	 	 	 

	Enclosures:	1.	Duplicate Original Letter
	 	2.	Employment, Confidential Information, Invention Assignment and Arbitration Agreement

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Exhibit 10.16    
    

 

 
 

   
  LOAN AND SECURITY AGREEMENT
  
  by and between
  
  SILICON VALLEY BANK, AS LENDER
  
  and
  
  IKANOS COMMUNICATIONS, AS BORROWER    
    

 

  

 
 

TABLE OF CONTENTS    
    

	 
	 	 
	 	 
	 	Page

	1.	 	ACCOUNTING AND OTHER TERMS	 	1
	

2.	
 	

LOAN AND TERMS OF PAYMENT	
 	

1
	

 	
 	

2.1	
 	

Promise to Pay	
 	

1
	

 	
 	

2.2	
 	

Termination of Commitment to Lend	
 	

3
	

 	
 	

2.3	
 	

Overadvances	
 	

3
	

 	
 	

2.4	
 	

Interest Rates	
 	

3
	

 	
 	

2.5	
 	

General Provisions	
 	

3
	

 	
 	

2.6	
 	

Fees	
 	

4
	

3.	
 	

Conditions Of Credit Extensions	
 	

4
	

 	
 	

3.1	
 	

Conditions Precedent to Initial Credit Extension	
 	

4
	

 	
 	

3.2	
 	

Conditions Precedent to all Credit Extensions	
 	

4
	

4.	
 	

CREATION OF SECURITY INTEREST	
 	

5
	

 	
 	

4.1	
 	

Grant of Security Interest	
 	

5
	

 	
 	

4.2	
 	

Authorization to File Financing Statements	
 	

5
	

5.	
 	

REPRESENTATIONS AND WARRANTIES	
 	

5
	

 	
 	

5.1	
 	

Due Organization and Authorization	
 	

5
	

 	
 	

5.2	
 	

Collateral	
 	

6
	

 	
 	

5.3	
 	

Litigation	
 	

7
	

 	
 	

5.4	
 	

No Material Deterioration in Financial Statements	
 	

7
	

 	
 	

5.5	
 	

Solvency	
 	

7
	

 	
 	

5.6	
 	

Regulatory Compliance	
 	

7
	

 	
 	

5.7	
 	

Subsidiaries	
 	

7
	

 	
 	

5.8	
 	

Full Disclosure	
 	

7
	

6.	
 	

AFFIRMATIVE COVENANTS	
 	

8
	

 	
 	

6.1	
 	

Government Compliance	
 	

8
	

 	
 	

6.2	
 	

Financial Statements, Reports, Certificates	
 	

8
	

 	
 	

6.3	
 	

Inventory; Returns	
 	

9
	

 	
 	

6.4	
 	

Taxes	
 	

9
	

 	
 	

6.5	
 	

Insurance	
 	

9
	

 	
 	

6.6	
 	

Primary Accounts	
 	

9
	

 	
 	

6.7	
 	

Financial Covenants	
 	

10
	 	 	 	 	 	 	 

i

 

	

 	
 	

6.8	
 	

Protection of Intellectual Property Rights	
 	

10
	

 	
 	

6.9	
 	

Further Assurances	
 	

10
	

7.	
 	

NEGATIVE COVENANTS	
 	

10
	

 	
 	

7.1	
 	

Dispositions	
 	

10
	

 	
 	

7.2	
 	

Changes in Ownership, Management, Business, Locations of Collateral	
 	

10
	

 	
 	

7.3	
 	

Dissolution	
 	

11
	

 	
 	

7.4	
 	

Mergers; Consolidations	
 	

11
	

 	
 	

7.5	
 	

Indebtedness	
 	

11
	

 	
 	

7.6	
 	

Encumbrance	
 	

11
	

 	
 	

7.7	
 	

Distributions; Investments	
 	

11
	

 	
 	

7.8	
 	

Transactions with Affiliates	
 	

11
	

 	
 	

7.9	
 	

Subordinated Debt	
 	

12
	

 	
 	

7.10	
 	

Compliance	
 	

12
	

8.	
 	

EVENTS OF DEFAULT	
 	

12
	

 	
 	

8.1	
 	

Payment Default	
 	

12
	

 	
 	

8.2	
 	

Covenant Default	
 	

12
	

 	
 	

8.3	
 	

Attachment	
 	

12
	

 	
 	

8.4	
 	

Insolvency	
 	

12
	

 	
 	

8.5	
 	

Other Agreements	
 	

13
	

 	
 	

8.6	
 	

Judgments	
 	

13
	

 	
 	

8.7	
 	

Misrepresentations	
 	

13
	

 	
 	

8.8	
 	

Material Adverse Change	
 	

13
	

 	
 	

8.9	
 	

Change of Control	
 	

13
	

9.	
 	

RIGHTS AND REMEDIES	
 	

13
	

 	
 	

9.1	
 	

Rights and Remedies	
 	

13
	

 	
 	

9.2	
 	

Power of Attorney	
 	

14
	

 	
 	

9.3	
 	

Accounts, Notification and Collection	
 	

14
	

 	
 	

9.4	
 	

Bank Expenses	
 	

14
	

 	
 	

9.5	
 	

Bank's Liability for Collateral	
 	

15
	

 	
 	

9.6	
 	

Remedies Cumulative	
 	

15
	

 	
 	

9.7	
 	

Demand Waiver	
 	

15
	

10.	
 	

NOTICES	
 	

15
	

11.	
 	

CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER	
 	

16
	 	 	 	 	 	 	 

ii

 

	

12.	
 	

GENERAL PROVISIONS	
 	

16
	

 	
 	

12.1	
 	

Successors and Assigns	
 	

16
	

 	
 	

12.2	
 	

Indemnification	
 	

16
	

 	
 	

12.3	
 	

Attorneys' Fees, Costs and Expenses	
 	

16
	

 	
 	

12.4	
 	

Right of Set-Off	
 	

16
	

 	
 	

12.5	
 	

Time of Essence	
 	

17
	

 	
 	

12.6	
 	

Severability of Provisions	
 	

17
	

 	
 	

12.7	
 	

Amendments in Writing, Integration	
 	

17
	

 	
 	

12.8	
 	

Counterparts	
 	

17
	

 	
 	

12.9	
 	

Survival	
 	

17
	

 	
 	

12.10	
 	

Confidentiality	
 	

17
	

13.	
 	

DEFINITIONS	
 	

18
	

 	
 	

13.1	
 	

Definitions	
 	

18

iii

  

 
 

LOAN AND SECURITY AGREEMENT    
    

        THIS LOAN AND SECURITY AGREEMENT (as amended, restated, or otherwise modified from time to time, this
"Agreement") dated the Effective Date, between SILICON VALLEY BANK
("Bank") and IKANOS COMMUNICATIONS, a California corporation, whose address is 47669 Fremont
Boulevard, Fremont, California 94538 ("Borrower"), provides the terms on which Bank will lend to Borrower, and Borrower will repay Bank. 

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. The term "financial
statements" includes the notes and schedules. The terms "including" and "includes" always mean "including (or includes) without limitation," in this or any Loan Document. Capitalized terms in this
Agreement shall have the meanings as set forth in Section 13. All other terms contained in this Agreement, unless otherwise indicated, shall have
the meanings 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 unpaid principal amount of all Credit Extensions hereunder with all interest, fees, and finance charges due thereon as and when
due in accordance with this Agreement. 

	2.1.1
	 Revolving Advances.

         (a)   Subject to the terms and conditions hereof, so long as Borrower meets the Cash Requirement, Bank shall make Advances to Borrower from
time to
time until the Revolving Maturity Date not exceeding the Committed Revolving Line minus the Sublimit Utilization Amount. Subject to the terms and
conditions hereof, if Borrower does not meet the Cash Requirement, Bank shall make Advances to Borrower from time to time until the Revolving Maturity Date not exceeding the lesser of the Committed
Revolving Line or the Borrowing Base minus the Sublimit Utilization Amount. Until the Revolving Maturity Date and subject to the terms hereof and the
applicable terms and conditions precedent in Sections 3.1 and 3.2, Borrower may borrow, repay,
and reborrow under this Section 2.1.1. The proceeds of the Advances shall be used solely for working capital requirements of Borrower. 

         (b)   Pursuant to the terms of Section 2.4(a), interest on each Advance shall be paid in
arrears
on the first day of each month. The outstanding principal amount of and all accrued but unpaid interest on the Advances shall be due and payable on the Revolving Maturity Date. 

        (c)   To obtain an Advance, Borrower must follow the procedures set forth in Section 3.2.

	2.1.2
	 Letters of Credit Sublimit.

        So
long as Borrower meets the Cash Requirement, Bank will issue Letters of Credit for Borrower's account not exceeding the Committed Revolving Line  minus the sum of (a) all amounts for services
utilized under the Cash Management Services Sublimit, (b) the FX Reserve, and (c) the
sum of the outstanding principal balance of the Advances. If Borrower does not meet the Cash Requirement, Bank will issue Letters of Credit for Borrower's account not exceeding the lesser of the
Committed Revolving Line or the Borrower Base minus the sum of (x) all amounts for services utilized under the Cash Management Services Sublimit,
(y) the FX Reserve, and (z) the sum of the outstanding principal balance of the Advances. Each Letter of Credit will have an expiry date of no later than 180 days after the
Revolving Maturity Date, but Borrower's reimbursement obligation will be secured by cash on 

1

 

terms
acceptable to Bank on or before the Revolving Maturity Date if the term of this Agreement is not extended by Bank. Borrower agrees to execute any further documentation in connection with the
Letters of Credit as Bank may reasonably request. 

	2.1.3
	 FX Forward Contracts.

        If
there is availability under the Committed Revolving Line, then Borrower may enter into foreign exchange forward contracts with the Bank under which Borrower commits to purchase from
or sell to Bank a set amount of foreign currency more than one business day after the contract date (the "FX Forward Contract"). Bank will subtract ten
percent (10%) of each outstanding FX Forward Contract from the foreign exchange sublimit (the "FX Reserve"). If Borrower meets the Cash Requirement, the
foreign exchange sublimit shall be the Committed Revolving Line minus the sum of (a) all amounts for services utilized under the Cash Management
Services Sublimit, (b) the amount of all outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit), and (c) the sum of the outstanding principal balance of the
Advances. If Borrower does not meet the Cash Requirement, the foreign exchange sublimit shall be the lesser of the Committed Revolving Line or the Borrowing Base  minus the sum of (x) all amounts
for services utilized under the Cash Management Services Sublimit, (y) the amount of all outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit), and (z) the sum of the outstanding principal balance of the Advances. The total 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.

        If
Borrower meets the Cash Requirement, Borrower may use amounts up to the Committed Revolving Line minus the sum of (a) the amount
of all outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit), (b) the FX Reserve, and (c) the sum of the outstanding principal balance of the Advances (the
"Cash Management Services Sublimit") for Bank's Cash Management Services, which may include merchant services, direct deposit of payroll, business
credit card, and check cashing services identified in various cash management services agreements related to such services (the "Cash Management
Services"). If Borrower does not meet the Cash Requirement, the Cash Management Services Sublimit shall equal the lesser of the Committed Revolving Line or the Borrowing Base  minus the sum of (x) the amount of all outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit), (y) the FX
Reserve, and (z) the sum of the outstanding principal balance of the Advances. Such aggregate amounts utilized under the Cash Management Services Sublimit will at all times reduce the amount
otherwise available to be borrowed under the Committed Revolving Line. 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 Committed Revolving Line and will accrue interest at the rate for Advances. 

         2.1.5   Equipment Advances.    Subject to the terms and conditions hereof, through the earlier to occur of (a) the
occurrence and continuance of an Event of Default or if there exists any event, condition, or act which with notice or lapse of time, or both, would constitute an Event of Default or (b) the
Equipment Availability Termination Date, Bank will make advances not exceeding the Committed Equipment Line; provided,  however, that Borrower may receive
only one Equipment Advance each month, and the minimum amount drawn by Borrower for each Equipment Advance shall be
$100,000. If the aggregate amount of the Equipment Advances exceeds the Committed Equipment Line at any time, Borrower must immediately pay Bank the excess. Except as otherwise provided below, the
proceeds of each Equipment Advance may only be used to finance Eligible Equipment purchased on or 90 days after the date of the Equipment Advance and may not exceed one hundred percent (100%)
of the invoice for such Eligible Equipment excluding taxes, shipping, warranty charges, freight discounts and installation expenses unless such taxes, shipping, warranty charges, freight discounts,
and installation expenses constitute Other Equipment. If the initial Equipment 

2

 

Advance
is funded on the Effective Date, the proceeds of such initial Equipment Advance may be used to purchase or finance Eligible Equipment purchased on or after January 1, 2003. Subject to
the terms of Section 2.4(b), Borrower shall repay the aggregate principal amount of each Equipment Advance in thirty-six
(36) equal, consecutive monthly installments of principal and interest on the first day of each month commencing with the first month after such Equipment Advance is made, and ending on the
Equipment Loan Maturity Date for such Equipment Advance. At any time, Borrower may prepay amounts due and owing under the Committed Equipment Line without premium or penalty. Prepayments shall be
applied to scheduled principal repayments in inverse order of their maturity. No payment with respect to an Equipment Advance may be reborrowed. 

	2.2
	 Termination of Commitment to Lend.

        Bank's
obligation to make Advances under the Committed Revolving Line shall terminate on the earlier of (a) the occurrence and continuance of an Event of Default or if there
exists any event, condition, or act which with notice or lapse of time, or both, would constitute an Event of Default or (b) the Revolving Maturity Date. 

	2.3
	 Overadvances.

        If
(a) at any time the Cash Requirement is satisfied and Borrower's aggregate obligations under Sections 2.1.1,  2.1.2, 2.1.3, and 2.1.4, exceed the Committed Revolving
Line, Borrower shall pay Bank the excess within two (2) Business Days of receipt by Borrower of written notice from Bank or (b) at any time the Cash Requirement is not satisfied and
Borrower's aggregate obligations under Sections 2.1.1,  2.1.2, 2.1.3, and 2.1.4, exceed the lesser of the
Committed Revolving Line or the Borrowing Base, Borrower shall immediately pay Bank the excess. 

	2.4
	 Interest Rates.

         (a)   Each Advance shall bear interest on the outstanding principal amount thereof from the date when made until paid in full at a floating
rate  per annum equal to the Prime Rate plus one-half percent (0.50%). 

        (b)   Each Equipment Advance shall bear interest on the outstanding principal amount thereof from the date when made until paid in full at a
fixed rate  per annum equal to the Prime Rate plus one percent (1.00%). 

         (c)   Interest on the Credit Extensions and all fees payable hereunder shall be computed on the basis of a 360-day year and the actual
number of days elapsed in the period during which such interest accrues. In computing interest on any Credit Extension, the date of the making of such Credit Extension shall be included and the date
of payment shall be excluded; provided, however, that if any Credit Extension is repaid on the same day on which it is made, such day shall be included
in computing interest on such Credit Extension. Each change in the interest rate of the Credit Extensions based on changes in the Prime Rate shall be effective on the effective date of such change and
to the extent of such change. 

	2.5
	 General Provisions.

        Bank
may debit any of Borrower's deposit accounts maintained with Bank for principal and interest payments owing or any amounts Borrower owes Bank pursuant to the Loan Documents,
including the Designated Deposit Account. These debits are not a set-off. Payments received after 12:00 noon Pacific time are considered received at the opening of business on the next
Business Day. When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and additional fees or interest accrue. 

3

 

	2.6
	 Fees.

        Borrower
shall pay to Bank:

        (a)   all Bank's Expenses (including payment of one-half of the aggregate amount of reasonable attorneys' fees and expenses (collectively,
"Attorneys' Fees") so long as the aggregate amount of such Attorneys' Fees shall not exceed $9,000, and Bank and Borrower shall mutually agree upon
Borrower's payment of such Attorneys' Fees if the aggregate amount thereof exceeds $9,000) incurred through and after the Effective Date, when due; and 

         (b)   on each anniversary of the Effective Date until and including the Revolving Maturity Date, a fully-earned, non-refundable loan fee
(the "Loan Fee") equal to either of the following amounts to be selected by Borrower: (i) so long as Borrower has met the Investment Requirement
at all times for the preceding year, $10,000, or (ii) $25,000; and 

         (c)   if, after the date hereof, any law or regulation increases Bank's costs or reduces Bank's income for any loan, the increase in cost or
reduction
in income or additional expense immediately upon Borrower's receipt of an invoice therefor from Bank. 

3.    CONDITIONS OF CREDIT EXTENSIONS  

	3.1
	 Conditions Precedent to Initial Credit Extension.

        Bank's
obligation to make the initial Credit Extension is subject to the condition precedent that the following have been satisfied, all in form and substance reasonably satisfactory to
Bank:

         (a)   the parties shall have executed and delivered the Loan Documents; 

        (b)   Borrower shall have delivered one or more executed Control Agreement(s), in form and substance satisfactory to Bank, by and among Borrower,
 Bank,
and any bank or financial institution as is necessary for Bank to perfect its security interest in any Collateral Accounts; 

         (c)   Borrower shall have delivered its Operating Documents and a good standing certificate of Borrower from the Secretary of State of
Borrower's
jurisdiction of organization; 

        (d)   Borrower shall have delivered resolutions of its Board of Directors authorizing the Credit Extensions and transactions contemplated
herein; 

         (e)   Bank shall have received the certificates of insurance described in Section 6.5
hereof; 

         (f)    Bank shall have completed its due diligence with Borrower's investors; 

        (g)   Borrower shall have paid all costs and fees, including Bank Expenses, then due; and 

         (h)   Borrower shall have delivered to Bank, in addition to the documents required in  Section 3.2, all documents, certificates, and other assurances that Bank or its counsel may reasonably request. 

	3.2
	 Conditions Precedent to all Credit Extensions.

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

         (a)   To obtain an Advance or an Equipment Advance, Borrower must notify Bank by facsimile or telephone by 12:00 noon Pacific time on the
Borrower's
desired Funding Date (which shall be a Business Day). If such notification is by telephone, Borrower must promptly confirm the notification by delivering to Bank a completed Payment/Advance Form in
the form attached as Exhibit B. On the Funding Date, Bank shall credit and/or transfer (as applicable to the Designated Deposit Account) an
amount equal to the Advance or 

4

 

Equipment
Advance requested. Bank may make Advances or Equipment Advances under this Agreement based on instructions from a Responsible Officer or his or her designee (or without instructions if a
Credit Extension is necessary to meet Obligations which have become due). Bank may rely on any telephone notice given by a person whom Bank believes is a Responsible Officer or designee. Borrower
shall indemnify Bank for any loss Bank suffers due to such reliance. 

         (b)   The representations and warranties in Section 5 shall be true and correct in all
material
respects, except those representations and warranties expressly referring to another date shall be true and correct in all material respect as of such date on the date of the Payment/Advance Form and
on the Funding Date, and no Event of Default shall have occurred and be continuing, or result from, an Advance, an Equipment Advance, and/or Credit Extension. Borrower's receipt of an Advance and/or
Equipment Advance is Borrower's representation and warranty on that date that the representations and warranties in Section 5 remain true and
correct in all material respects, except those representations and warranties expressly referring to another date shall be true and correct in all material respect as of such date. 

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 and the performance of each of Borrower's duties under the Loan Documents, a
continuing security interest in the Collateral and all proceeds and products thereof. Except for Permitted Liens, Borrower warrants and represents that the security interest granted herein shall be a
first priority security interest in the Collateral. During the existence of an Event of Default, Bank may place a "hold" on any deposit account pledged as Collateral. 

        Borrower
agrees that any disposition of the Collateral in violation of this Agreement, by either Borrower or any other Person, shall be deemed to violate the rights of Bank under the
Code. If the Agreement is terminated, Bank's lien and security interest in the Collateral shall continue until Borrower fully satisfies its Obligations (other than inchoate indemnity obligations). If,
at any time, Borrower has knowledge that it shall have acquired a commercial tort claim in excess of $750,000, Borrower shall promptly provide written notice thereof to Bank by reference to a specific
case caption or by describing such commercial tort claim in a manner sufficient to satisfy Section 9-108 of the Code and grant to Bank in 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 satisfactory to Bank. 

	4.2
	 Authorization to File Financing Statements.

        Borrower
hereby authorizes Bank to file financing statements with all appropriate jurisdictions, to perfect or protect Bank's security interest or rights hereunder. 

5.    REPRESENTATIONS AND WARRANTIES  

        Borrower represents and warrants as follows:

	5.1
	 Due Organization and Authorization.

        Borrower
and each Subsidiary is duly existing and in good standing in its state of formation and qualified and licensed to do business in, and in good standing in, any state in which the
conduct of its business or its ownership of property requires that it be qualified, except where the failure to do so could not reasonably be expected to cause a Material Adverse Change. In connection
with this Agreement, Borrower has delivered to Bank a certificate signed by Borrower and entitled "Collateral Information Certificate". Borrower represents and warrants to Bank that:
(a) Borrower's exact legal 

5

 

name
is that indicated on the Collateral Information 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 Collateral Information Certificate; (c) the Collateral Information Certificate accurately sets forth Borrower's organizational identification number or accurately states that Borrower
has none; and (d) the Collateral Information 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; and (e) all other information set forth on the Collateral Information Certificate pertaining to Borrower is accurate and complete in all material respects. If Borrower
does not now have an organizational identification number, but later obtains one, Borrower shall promptly notify Bank of such organizational identification number. Borrower may modify, supplement, or
amend the Collateral Information Certificate at any time by delivering to Bank an amendment certificate entitled "Amendment to Collateral Information Certificate" signed by Borrower. 

        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 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. Except as set forth in the Collateral Information Certificate, Borrower has no Deposit Accounts or
Securities Accounts other than the Deposit Accounts and Securities Accounts with Bank and Bank's Affiliates. The Accounts are bona fide, existing obligations, and the service or property has been
performed or delivered to the account debtor or its agent for immediate shipment to and unconditional acceptance by the account debtor. Except as set forth in the Collateral Information Certificate,
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 Collateral Information Certificate. All Inventory is in all material respects of good and marketable quality, free from material defects. Borrower
has no notice of any actual or imminent Insolvency Proceeding of any account debtor whose accounts are an Eligible Account or an Eligible Foreign Account in any Borrowing Base Certificate. Borrower is
the licensee or sole owner of its Intellectual Property (or, if commercially available in the marketplace, could license upon
commercially reasonable terms), except for non-exclusive licenses and exclusive licenses limited to a geographic area or field of use granted in the ordinary course of business. 

        Except
as otherwise noted on the Collateral Information Certificate, Borrower is not a party to, nor is bound by, any material license or other material agreement with respect to which
Borrower is the licensee that prohibits or otherwise restricts Borrower from granting a security interest in Borrower's right or interest in such license, agreement, or any other property. Borrower
shall provide written notice to Bank within ten (10) days of entering or becoming bound by any such license or agreement which is reasonably likely to have a material impact on Borrower's
business or financial condition (other than over-the-counter software that is commercially available to the public). Borrower shall take such steps as Bank reasonably requests
to obtain the consent of, authorization by, or waiver of, any person whose consent, authorization, or waiver is necessary for all such licenses or contract rights to be deemed "Collateral" and for
Bank to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such license or agreement (such consent or authorization may include a licensor's
agreement to a contingent assignment of the license to Bank if Bank determines that it is necessary in its good faith judgment), whether now existing or entered into in the future. 

6

 

	5.3
	 Litigation.

        Except
as shown in the Collateral Information Certificate, there are no actions or proceedings pending or, to the knowledge of Borrower's Responsible Officers, threatened by or against
Borrower or any Subsidiary in which a decision could reasonably be expected to cause a Material Adverse Change. 

	5.4
	 No Material Deterioration in Financial Statements.

        All
consolidated financial statements for Borrower, including information reported to Bank in connection with the delivery of any Compliance Certificate pursuant to  Section 6.2, and any Subsidiary,
delivered to Bank fairly present in all material respects Borrower's consolidated financial condition and
Borrower's consolidated results of operations. There has not been any material deterioration in Borrower's consolidated financial condition since the date of the most recent financial statements
submitted to Bank. 

	5.5
	 Solvency.

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

	5.6
	 Regulatory Compliance.

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

	5.7
	 Subsidiaries.

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

	5.8
	 Full Disclosure.

        No
written representation, warranty or other statement of Borrower in any certificate or written statement given to Bank (taken together with all such written certificates and written
statements 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. 

7

 

6.    AFFIRMATIVE COVENANTS  

        Borrower shall, and shall cause each of its Subsidiaries to, do all of the following for so long as Bank has an obligation to lend or there are outstanding
Obligations (other than inchoate indemnity obligations):

	6.1
	 Government Compliance.

         (a)   Except as otherwise permitted under this Agreement, 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 could reasonably be expected to cause a Material Adverse Change; and 

         (b)   Comply, and have each of its Subsidiaries comply, with all laws, ordinances and regulations to which it is subject, for which
noncompliance would
reasonably be expected to cause a Material Adverse Change. 

	6.2
	 Financial Statements, Reports, Certificates.

        (a)   Deliver to Bank: (i) prior to completion of the IPO, as soon as available, but no later than thirty (30) days after the last day
of
each month, a company prepared consolidated balance sheet and income statement covering Borrower's consolidated operations during the period certified by a Responsible
Officer and in a form reasonably acceptable to Bank; provided however, Borrower shall not have to deliver copies of the foregoing financial statements if they are otherwise publicly available through
the Securities and Exchange Commission's EDGAR system; (ii) after completion of the IPO, as soon as available, but no later than forty-five (45) days after the last day of
each quarter, a company prepared consolidated balance sheet and income statement covering Borrower's consolidated operations during the period certified by a Responsible Officer and in a form
reasonably acceptable to Bank; provided however, Borrower shall not have to deliver copies of the foregoing financial statements if they are otherwise publicly available through the Securities and
Exchange Commission's EDGAR system; (iii) except as otherwise provided below, as soon as available, but no later than one hundred twenty (120) days after the last day of Borrower's
fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an opinion on the financial statements from a nationally-recognized, independent,
certified public accounting firm; (iv) a prompt report of any legal actions pending or threatened in writing against Borrower or any Subsidiary that could reasonably be expected to result in
damages or costs to Borrower or any Subsidiary of One Million Dollars ($1,000,000) or more; and (vi) budgets, sales projections, operating plans or other financial information reasonably
requested by Bank. In addition to the foregoing, Bank shall have the right to subscribe to an email notification service selected by Bank for the purpose of receiving email notifications of all
reports on Forms 8-K, 10-K and 10-Q filed by Borrower with the Securities and Exchange Commission. Borrower shall be obligated to reimburse Bank for all costs and
expenses incurred by Bank in connection with such email notification service immediately upon Borrower's receipt of an invoice therefor from Bank. 

         (b)   If an Advance is requested under the Borrowing Base, within thirty (30) days after the last day of each month and one Business Day
prior
to the delivery of a Payment/Advance Form, Borrower will deliver to Bank a Borrowing Base Certificate in the form of Exhibit C, with aged
listings of accounts receivable and accounts payable. 

         (c)   Borrower shall deliver to Bank, together with the monthly or quarterly financial statements set forth in clauses (a)(i) and
(a)(ii) above and the annual financial statements set forth in clause (a)(iii) above, a Compliance Certificate in the form of  Exhibit D signed by a 

8

 

Responsible
Officer. If the financial statements are deemed delivered via internet posting through EDGAR, the Compliance Certificate shall continue to be delivered via paper copies. 

         (d)   Borrower shall, during normal business hours, from time to time upon three (3) days prior notice: (i) provide Bank and any of
its
officers, employees and agents access to its properties, facilities, advisors, officers and employees of Borrower and to the Collateral, (ii) permit Bank, and any of its officers, employees and
agents, to inspect, audit, conduct field examinations, and make extracts from Borrower's books and records, and (iii) permit Bank, and its officers, employees and agents, to inspect, review,
evaluate and make test verifications and counts of the Accounts, Inventory and other Collateral of Borrower. So long as no Default or Event of Default shall have occurred and be continuing, Bank shall
not be entitled to be reimbursed for more than two (2) field examinations in any calendar year. If an Event of Default has occurred and is continuing, Borrower shall provide access to
(x) its properties, facilities, advisors, officers and employees of Borrower and to the Collateral at all times and without
advance notice, and (y) its suppliers and customers upon request from Bank. Borrower shall promptly make available to Bank and its counsel originals or copies of all books and records that Bank
may reasonably request. 

	6.3
	 Inventory; Returns.

        Keep
all Inventory in good and marketable condition, free from material defects. Returns and allowances between Borrower and its account debtors shall follow Borrower's customary
practices as they exist on the Effective Date. 

	6.4
	 Taxes.

        Make,
and cause each Subsidiary to make, timely payment of all material federal, state, and local taxes or assessments (other than taxes and assessments which Borrower is contesting in
good faith, with adequate reserves maintained in accordance with GAAP) and will deliver to Bank, on demand, appropriate certificates attesting to such payments. 

	6.5
	 Insurance.

        Keep
its business and the Collateral insured for risks and in amounts of the type customarily maintained in its industry. Insurance policies shall be in a form, with companies, and in
amounts of the type customarily maintained in its industry. All property policies shall have a lenders' loss payable endorsement showing Bank as an additional loss payee; all liability policies shall
show Bank as an additional insured; all policies shall provide that the insurer must give Bank at least twenty (20) days notice before canceling its policy. At Bank's request, Borrower shall
deliver certified copies of policies and evidence of all premium payments. During the existence of an Event of Default, proceeds payable under any policy shall, at Bank's option, be payable to Bank on
account of the Obligations, and in all other instances proceeds shall be payable to Borrower. 

	6.6
	 Primary Accounts.    At all times,

         (a)   Maintain Borrower's primary operating accounts with Bank; and 

         (b)   Provide Bank five (5) Business Days advance written notice before establishing any Deposit Account, Securities Account or Commodity
Account (collectively, the "Collateral Accounts") at or with any bank or financial institution (other than Bank). In addition, for each Collateral
Account that Borrower at any time maintains, Borrower shall cause each 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 security interest in such Collateral Account. 

9

  

	6.7
	 Financial Covenants.

         (a)   As of the last calendar day of each month, Borrower shall maintain a Quick Ratio of not less than 1.15:1.00; and 

        (b)   For each date that is a quarter-end, Borrower's losses for the quarter then-ended shall not exceed the amount set forth
in opposite each time period set forth below: 

	Period
 
	 	Maximum Quarterly Losses

	For the quarter ending 6/30/04	 	$	4,000,000
	For the quarter ending 9/30/04	 	$	2,000,000
	For the quarter ending 12/31/04	 	$	1,000,000
	For the quarter ending 3/31/05 and each quarter thereafter	 	$	0

	6.8
	 Protection of Intellectual Property Rights.

        Protect,
defend and maintain the validity and enforceability of the Intellectual Property, except to the extent that the protection, defense, maintenance, validity or enforceability of
such Intellectual Property is no longer in the best interest of Borrower as determined in good faith by Borrower and is not likely to result in a Material Adverse Change; promptly advise Bank in
writing of material infringements of all material Intellectual Property; and not allow any Intellectual Property material to Borrower's business to be abandoned, forfeited or dedicated to the public
unless Borrower, in its good faith, deems it to be in the best interest of Borrower and such abandonment, forfeiture or dedication is not likely to result in a Material Adverse Change. 

	6.9
	 Further Assurances.

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

7.    NEGATIVE COVENANTS  

        Borrower shall not, and shall not permit any of its Subsidiaries to, do any of the following without Bank's prior written consent, for so long as Bank has an
obligation to lend or there are any outstanding Obligations (other than inchoate indemnity obligations):

	7.1
	 Dispositions.

        Convey,
sell, lease, transfer or otherwise dispose of (collectively a "Transfer"), or permit any of its Subsidiaries to Transfer, all or
any part of its business or property, except for (a) Transfers (i) of Inventory in the ordinary course of business, (ii) of non-exclusive licenses, exclusive licenses
limited to a geographic area or field of use, and similar arrangements for the use of the property of Borrower or its Subsidiaries in the ordinary course of business, (iii) of
worn-out, damaged, or obsolete Equipment, (iv) associated with the making or disposition of a Permitted Investment; (b) dispositions of cash or Permitted Investments in a
manner not prohibited by this Agreement; and (c) the transfer by Borrower to its Subsidiaries of Equipment with an aggregate value of not more than $4,000,000. 

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

        Engage
in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower or reasonably related thereto, permit a Change of Control
other than as a result of the sale of Borrower's securities pursuant to the IPO or suffer any change in any Responsible Officer as a result of an act of fraud or other violation of law by such Person
the result of which has caused or is reasonably likely to cause a Material Adverse Change. Borrower shall not, without ten (10) days prior written notice to Bank: (a) relocate its chief
executive office, or add any new offices or business locations, including warehouses (unless such new offices or business locations 

10

 

contain
less than $500,000 in Borrower's assets or property), (b) change its jurisdiction of organization, (c) change its organizational structure or type, (d) change its legal
name, or (e) change any organizational number (if any) assigned by its jurisdiction of organization. Notwithstanding the foregoing, if Borrower changes its legal name and/or its jurisdiction of
organization (such successor corporation, "Ikanos Delaware") from California to Delaware (such transaction, the "Delaware
Reincorporation") in connection with the IPO, in addition to providing ten (10) days' prior written notice thereof to Bank, Borrower shall provide Bank within twenty
(20) Business Days after the Delaware Reincorporation is consummated, (1) the certificate of merger of Borrower certified by the Secretary of State of the State of Delaware,
(2) the agreement of merger of Borrower certified by the Secretary of State of the State of California, (3) resolutions of the Board of Directors of Ikanos Delaware authorizing the
Credit Extensions and transactions contemplated herein, (4) the Operating Documents of Ikanos Delaware and a good standing certificate of Ikanos Delaware from the Secretary of State of the
State of Delaware, (5) any amendment to this Agreement or any other Loan Document Bank deems necessary to reflect that the Obligations hereunder have been assigned to and assumed by Ikanos
Delaware. So long as Borrower complies with this Section 7.2, no provision of this Agreement shall be construed as to prohibit or require Bank's
consent to the Delaware Reincorporation, the IPO, or any stock split of Borrower or Ikanos Delaware in connection therewith. 

	7.3
	 Dissolution.

        Permit
any Subsidiary to dissolve or discontinue operations unless no Material Adverse Change could reasonably result. 

	7.4
	 Mergers; Consolidations.

        Merge
or consolidate with another corporation or entity (except that a Subsidiary may merge or consolidate with or into another Subsidiary or Borrower), or acquire all or substantially
all of the capital stock or property of a Person other than a Subsidiary; provided that Borrower or any of its Subsidiaries may merge or consolidate with another corporation or entity or acquire all
or substantially all of the capital stock or property of a Person other than a Subsidiary, if (a) a Default or Event of Default shall not have occurred and be continuing and would not occur as
a result of such transaction and Borrower survives such transaction, or (b) in connection with any merger effected to change Borrower's legal name and/or jurisdiction of formation, Borrower
complies with Section 7.2. 

	7.5
	 Indebtedness.

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

	7.6
	 Encumbrance.

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

	7.7
	 Distributions; Investments.

        Directly
or indirectly acquire or own any Person, or make any Investment in any Person, other than Permitted Investments, or permit any of its Subsidiaries to do so; or pay any dividends
or make any distribution or payment or redeem, retire or purchase any of Borrower's capital stock except for Permitted Distributions. 

	7.8
	 Transactions with Affiliates.

        Directly
or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower except for (a) transactions that are in the ordinary course of
Borrower's business, upon fair and reasonable terms (when viewed in the context of any series of transactions of which it may be a 

11

 

part,
if applicable), and (b) transactions among Borrower and its Subsidiaries and among Borrower's Subsidiaries so long as such transactions are not otherwise prohibited by this Agreement. 

	7.9
	 Subordinated Debt.

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

	7.10
	 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, or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a
material adverse effect on Borrower's business or operations or would reasonably be expected to cause a Material Adverse Change, or permit any of its Subsidiaries to do so. 

8.    EVENTS OF DEFAULT  

        Any one of the following is an Event of Default:

	8.1
	 Payment Default.

        If
Borrower fails to pay (a) the principal or interest portion of any Credit Extension when due, or (b) any other monetary Obligations within three (3) days after
written notice to Borrower. During any 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)   If Borrower fails to perform any obligation under Sections 6.2 or  6.7 or violates any of the covenants contained in Section 7 of this Agreement, or 

        (b)   If Borrower fails or neglects to perform, keep, or observe any other material term, provision, condition, covenant, or agreement contained
in
this Agreement, in any other Loan Document, or in any other present or future agreement between Borrower and Bank and as to any default under such other term, provision, condition, covenant or
agreement that can be cured, has failed to cure such default within thirty (30) days after the occurrence thereof. 

	8.3
	 Attachment.

        If
(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 Borrower seeking to attach, by trustee or similar process, any funds of Borrower on deposit with Bank, or any entity under the
control of Bank (including a subsidiary); (c) Borrower is enjoined, restrained, or prevented by court order from conducting a material part of its business; (d) a judgment or other claim
becomes a Lien on a material portion 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 (but no Credit Extensions shall be made during the
cure period). 

	8.4
	 Insolvency.

        If
(a) Borrower is unable to pay its debts (including trade debts) as they mature; (b) Borrower begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is
begun against Borrower and not 

12

 

dismissed
or stayed within thirty (30) days (but no Credit Extensions shall be made before any Insolvency Proceeding is dismissed). 

	8.5
	 Other Agreements.

        If
there is a default in any agreement to which Borrower is a party with a third party or parties resulting in the acceleration of the maturity of any Indebtedness in an amount in excess
of Five Hundred Thousand Dollars ($500,000) or that could result in a Material Adverse Change. 

	8.6
	 Judgments.

        If
a judgment or judgments for the payment of money (not covered by insurance) in an amount, individually or in the aggregate, of at least One Million Dollars ($1,000,000) shall be
rendered against Borrower and shall remain unsatisfied and unstayed for a period of ten (10) days (provided that no Credit Extensions will be made prior to the satisfaction or stay of such
judgment). 

	8.7
	 Misrepresentations.

        If
Borrower or any Person acting for Borrower makes any material misrepresentation or material misstatement (when read together with Borrower's filings with the Securities and Exchange
Commission) now or later in any warranty or representation in this Agreement or in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document. 

	8.8
	 Material Adverse Change.

        If
a Material Adverse Change occurs. 

	8.9
	 Change of Control.

        If,
other than as a result of the sale of Borrower's securities pursuant to the IPO, a Change of Control occurs. 

9.    RIGHTS AND REMEDIES  

	9.1
	 Rights and Remedies.

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

        (a)   declare all Obligations immediately due and payable (but if an Event of Default described in  Section 8.4 occurs, all Obligations are immediately due and payable without any action by Bank); 

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

         (c)   settle or adjust disputes and claims directly with account debtors for amounts, on terms and in any order that Bank considers advisable
and
notify any Person owing Borrower money of Bank's security interest in such funds and verify the amount of such account. Borrower shall collect all payments in trust for Bank and, if requested by Bank,
immediately deliver the payments to Bank in the form received from the account debtor, with proper endorsements for deposit; 

         (d)   make any payments and do any acts it considers necessary or reasonable to protect 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; 

13

 

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

        (f)    ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Bank is
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; 

        (g)   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, and Bank agrees that it will not deliver a notice of exclusive control, any entitlement order,
or other direction of instructions pursuant to any control agreement providing control of any Collateral unless an Event of Default occurs and continues; 

         (h)   require Borrower to provide cash collateral in the face amount of all undrawn Letters of Credit; 

        (i)    terminate any FX Forward Contracts; and 

	(j)
	dispose of the Collateral according to the Code.  

 
	9.2
	 Power of
Attorney.

        Borrower
hereby irrevocably appoints Bank as its lawful attorney-in-fact, to be effective 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; and (e) 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) 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) have been
fully repaid and performed and Bank's obligation to provide Credit Extensions terminates. 

	9.3
	 Accounts, Notification and Collection.

        In
the event that an Event of Default occurs and is continuing, Bank may notify any Person owing Borrower money of Bank's security interest in the funds and verify and/or collect the
amount of the Account. After the occurrence and during the continuance of an Event of Default, any amounts received by Borrower shall be held in trust by Borrower for Bank, and, if requested by Bank,
Borrower shall immediately deliver such receipts to Bank in the form received from the account debtor, with proper endorsements for deposit. 

	9.4
	 Bank Expenses.

        Any
amounts paid by Bank as provided herein are Bank Expenses and are immediately due and payable and shall bear interest at the highest applicable default rate and be secured by the
Collateral. 

14

 

No
payments by Bank shall be deemed an agreement to make similar payments in the future or Bank's waiver of any Event of Default. 

	9.5
	 Bank's Liability for Collateral.

        So
long as Bank complies with reasonable banking practices regarding the safekeeping of Collateral, 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
	 Remedies Cumulative.

        Bank's
rights and remedies under this Agreement, the other Loan Documents, and all other agreements among Borrower and Bank, 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 enforcing its
rights is not a waiver, election, or acquiescence. No waiver hereunder by Bank shall be effective unless signed by Bank and then is only effective for the specific instance and purpose for which it
was given. 

	9.7
	 Demand Waiver.

        Except
for any notices expressly required herein, 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  

        Notices or demands by either party about this Agreement must be in writing and personally delivered or sent by an overnight delivery service, or by certified
mail, postage prepaid, return receipt requested, or by facsimile at the addresses and facsimile numbers listed below. A party may change its notice address by written notice to the other party. 

	If to Borrower:	 	Ikanos Communications

47669 Fremont Boulevard

Fremont, California 94538

Attn: Daniel Atler, Vice President

          and Chief Financial Officer

Fax: (510) 979-0500
	

If to Bank:	
 	

Silicon Valley Bank

39141 Civic Center Drive, Suite 220

Fremont, California 94538

Attn: Kevin Zeidan, Vice President

Fax: (510) 608-4787
	

with a copy to:	
 	

Bingham McCutchen LLP

1900 University Circle

East Palo Alto, California 94303

Attn: Pamela J. Martinson, Esq.

Fax: (650) 849-4800

15

 

11.    CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER  

        California law governs the Loan Documents without regard to principles of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of the
State and Federal courts in California, and Borrower accepts jurisdiction of the courts and venue in Santa Clara County, California. NOTWITHSTANDING THE FOREGOING, BANK SHALL HAVE THE RIGHT TO BRING
ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH BANK DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE
ENFORCE BANK'S RIGHTS AGAINST BORROWER OR ITS PROPERTY. 

        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. 

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 sole discretion; provided, however, subject to the terms of Section 7.2,
Borrower may assign this Agreement and the rights and obligations under it to Ikanos Delaware without Bank's consent. 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, the Loan Documents or any other related agreement
to any other bank or financial institution. 

	12.2
	 Indemnification.

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

	12.3
	 Attorneys' Fees, Costs and Expenses.

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

	12.4
	 Right of Set-Off.

        Borrower
hereby grants to Bank, a lien, security interest and right of set-off as security for all Obligations to Bank hereunder, whether now existing or hereafter arising
upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Bank or any entity under the control of Bank (including a Bank
subsidiary) or in transit to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Bank may set-off the same or any
part thereof and apply the same to any liability or obligation of Borrower and any guarantor even though unmatured and regardless of the adequacy of any other collateral securing the Obligations. ANY
AND ALL RIGHTS TO REQUIRE BANK TO 

16

 

EXERCISE
ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF
BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED. 

	12.5
	 Time of Essence.

        Time
is of the essence for the payment and performance of all Obligations in this Agreement. 

	12.6
	 Severability of Provisions.

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

	12.7
	 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 are superceded by this Agreement and the Loan Documents. 

	12.8
	 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. 

	12.9
	 Survival.

        All
covenants, representations and warranties made in this Agreement continue in full force while any Obligations (other than inchoate indemnity obligations) remain outstanding. The
obligation of Borrower in Section 12.2 to indemnify Bank shall survive until the statute of limitations with respect to such claim or cause of
action shall have run. 

	12.10
	 Confidentiality.

        In
handling any confidential information or non-public information concerning the Borrower and its Subsidiaries, Bank will maintain the confidentiality of such information,
but disclosure of information may be made: (a) to Bank's subsidiaries or affiliates in connection with their business with Borrower; (b) to prospective transferees or purchasers of any
interest in the Credit Extensions, provided, they are bound by confidentiality obligations similar to those set forth herein; (c) as required by law, regulation, subpoena, or other order;
(d) as required in connection with Bank's examination or audit, provided that any Person receiving confidential or non-public information is bound by confidentiality obligations
similar to those set forth herein, or similar regulations; and (e) as Bank considers appropriate in exercising remedies under this Agreement, provided that any Person receiving confidential or
non-public information is bound by confidentiality obligations similar to those set forth herein, or similar regulations. Confidential information or non-public information
does not include information that either: (x) is in the public domain or in Bank's possession when disclosed to Bank, or becomes part of the public domain after disclosure to Bank; or
(y) is disclosed to Bank by a third party, if, at the time of disclosure, Bank does not know that the third party is prohibited from disclosing the information. 

17

   13.    DEFINITIONS  

	13.1
	 Definitions.

        In
this Agreement: 

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

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

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

        "Bank Expenses" are all audit fees and expenses, any fees and expenses relating to Bank's initial and semi-annual field
examination of Borrower, and costs or expenses (including reasonable attorneys' fees and expenses) for preparing, negotiating, administering, defending and enforcing the Loan Documents (including
appeals or Insolvency Proceedings). 

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

        "Borrowing Base" is the sum of 80% of (a) the Eligible Domestic Accounts plus
(b) Eligible Foreign Accounts, in each case as determined by Bank from Borrower's most recent Borrowing Base Certificate (provided that Bank may lower the percentage of the Borrowing Base after
auditing Borrower's Collateral). 

        "Borrowing Base Certificate" is a Borrowing Base Certificate signed by a Responsible Officer in substantially the same form of  Exhibit C attached hereto.

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

        "Cash Equivalents" are (a) marketable direct obligations issued or unconditionally guaranteed by the United States or its agency or
any state maturing within one (1) year from its acquisition, (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either
Standard & Poor's Corporation or Moody's Investors Service, Inc., (c) Bank's certificates of deposit issued maturing no more than one (1) year after issue, and
(d) any other investments administered through Bank or its Affiliates. 

        "Cash Requirement" is Borrower's unrestricted cash and Cash Equivalents minus amount of
all principal owing with respect to the Advances (including drawn but unreimbursed Letters of Credit and amounts for services used under the Cash Management Services Sublimit) and Equipment Advances
exceeds $35,000,000. 

        "Change in Control" is a transaction in which any "person" or "group" (within the meaning of Section 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Act")) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Act),
directly or indirectly, of greater than 49% of the shares of all classes of stock then outstanding of a Person ordinarily entitled to vote in the election of the directors of such Person. 

        "Code" is the Uniform Commercial Code as adopted in California as amended and in effect from time to time. 

18

 

        "Collateral" is the property described on Exhibit A attached hereto. 

        "Collateral Information Certificate" means the Collateral Information Certificate of Borrower dated October 21, 2004. 

        "Committed Equipment Line" is an aggregate principal amount equal to $2,000,000 which shall be increased an additional $1,000,000 to an
aggregate principal amount equal to $3,000,000 upon Borrower's completion of the IPO. 

        "Committed Revolving Line" is an aggregate principal amount equal to $5,000,000. 

        "Commodity Account" has the meaning ascribed to it in the Code. 

        "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 the guarantee or other support arrangement. 

        "Control Agreement" means, collectively, any control agreement entered into among
Borrower, Bank and the depositary bank, securities intermediary, or commodity intermediary at which Borrower maintains a deposit account, securities account, or a commodity account, pursuant to which
Bank obtains control (within the meaning of the applicable provision of the Code) over such deposit account, securities account, or commodity account. 

        "Copyright" means any of the following now owned or hereafter acquired or created (as a work for hire for the
benefit of Borrower) by Borrower or in which Borrower now holds or hereafter acquires or receives any right or interest, in whole or in part: (a) any copyright, whether registered or
unregistered, held pursuant to the laws of the United States or of any other country or foreign jurisdiction, (b) registration, application or recording in the United States Copyright Office or
in any similar office or agency of the United States or any other country or foreign jurisdiction, (c) any continuation, renewal or extension thereof, and (d) any registration to be
issued in any pending application, and shall
include any right or interest in and to work protectable by any of the foregoing which are presently or in the future owned, created or authorized (as a work for hire for the benefit of Borrower) or
acquired by Borrower, in whole or in part. 

        "Credit Extension" is each Advance or any other extension of credit by Bank for Borrower's benefit. 

        "Current Liabilities" are amounts that under GAAP should be included on that date as current liabilities on Borrower's consolidated
balance sheet. 

        "Deposit Accounts" means all present and future "deposit accounts" 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 general and special bank accounts, demand accounts, checking accounts, savings accounts and
certificates of deposit, whether maintained with Bank or other institutions. 

        "Designated Deposit Account" means that certain deposit account maintained with Bank in the name of Borrower and identified in the
Collateral Information Certificate. 

19

 

        "Effective Date" means the date that Bank signs this Agreement as indicated on the signature page hereof. 

        "Eligible Domestic Accounts" are Accounts in the ordinary course of Borrower's business that meet all Borrower's representations and
warranties in Section 5 applicable to Accounts, and which contain selling terms and conditions acceptable to Bank; provided, that Bank may change
eligibility standards by giving Borrower notice thereof. Unless Bank agrees otherwise in writing, Eligible Domestic Accounts will not include:

         (a)   Accounts against which Bank does not have a perfected, first priority security interest; 

        (b)   Accounts that the account debtor has not paid within 90 days of invoice date; 

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

         (d)   Accounts with credit balances over 90 days from invoice date; 

         (e)   Accounts for an account debtor, including Affiliates, whose total obligations to Borrower exceed 25% of all Accounts, except for an
Eligible
Foreign Account Debtor for which the percentage may be 60%, for the amounts that exceed that percentage, unless the Bank approves otherwise in writing; 

         (f)    Accounts for which the account debtor does not have its principal place of business in the United States except for Eligible
Foreign Accounts; 

         (g)   Accounts for which the account debtor is a federal, state or local government entity or any department, agency, or instrumentality and
against
which Bank's security interest has not been perfected under the Assignment of Claims Act; 

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

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

         (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 and Bank believes there may be a basis for dispute (but only up
to the
disputed or claimed amount), or if the Account Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or goes out of business; or 

         (l)    Accounts for which Bank determines collection to be doubtful, or the Account holder to be an unacceptable business risk.

        "Eligible Equipment" is general purpose computer equipment, office equipment, test and laboratory equipment, furnishings, and, subject to
the limitations set forth below, Other Equipment that complies
with all of Borrower's representations and warranties to Bank and which is reasonably acceptable to Bank in all material respects. Equipment financed with the proceeds of Equipment Advances may be new
or used. The Bank shall have a valid security interest in all Eligible Equipment. 

        "Eligible Foreign Accounts" are Accounts in the ordinary course of Borrower's business, the account debtors of which do not have their
principal place of business in the United States, but only to the 

20

 

extent
that such foreign Accounts meet all of Borrower's representations and warranties in Section 5 applicable to Accounts, contain selling
terms and conditions acceptable to Bank in its sole discretion, and the account debtor is an Eligible Foreign Account Debtor. 

        Notwithstanding
the foregoing, Bank may change eligibility standards by giving Borrower notice thereof, and the allowance of other Eligible Foreign Accounts shall be approved by Bank in
its sole discretion on a case-by-case basis. 

        "Eligible Foreign Account Debtor" is NEC, Altima, Altima Bell NV, Altima/SEI, Alcatel Bell NV, and Uniquest. 

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

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

        "Equipment Availability Termination Date" is June 30, 2005. 

        "Equipment Maturity Date" means, with respect to each Equipment Advance, the date that is thirty-six (36) months from
the Funding Date of such Equipment Advance. 

        "Funding Date" is the date on which an Advance or an Equipment Advance is made to or on account of Borrower. 

        "GAAP" is generally accepted accounting principles in effect under the laws of the United States of America from time to time. 

        "General Intangibles" means all present and future "general intangibles" as defined in the Code in effect on the date hereof with such
additions to such term as may hereafter be made, in which Borrower has any interest and includes without limitation all Intellectual Property, payment intangibles, royalties, contract rights,
goodwill, franchise agreements, purchase orders, customer lists, route lists, telephone numbers, domain names, claims, income 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. 

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

        "Insolvency Proceeding" 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" means any intellectual property, in any medium, of any kind or nature whatsoever, now or hereafter owned or
acquired or received by Borrower or in which Borrower now holds or hereafter acquires or receives any right or interest, and shall include, in any event, any Copyright, Trademark, or Patent. 

        "Inventory" is present and future inventory in which Borrower has any interest, including merchandise, raw materials, parts, supplies,
packing and shipping materials, work in process and finished products intended for sale or lease or to be furnished under a contract of service, of every kind and description now or later owned by or
in the custody or possession, actual or constructive, of 

21

 

Borrower,
including inventory temporarily out of its custody or possession or in transit and including returns on any accounts or other proceeds (including insurance proceeds) from the sale or
disposition of any of the foregoing and any documents of title. 

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

        "Investment Property" means all present and future investment property, securities, stocks, bonds, debentures, debt securities,
partnership interests, limited liability company interests, options, security entitlements, securities accounts, commodity contracts, commodity accounts, and all financial assets held in any
securities account or otherwise, and all options and warrants to purchase any of the foregoing, wherever located, and all other securities of every kind, whether certificated or uncertificated, in
which Borrower has any interest. 

        "Investment Requirement" is the maintenance by Borrower of investment accounts with Bank or a Bank Affiliate with a minimum aggregate
balance of the lesser of $10,000,000 or one hundred percent (100%) of Borrower's total investment amounts. 

        "IPO" is the initial public offering of Borrower's common stock pursuant to an effective registration statement on Form S1 (and any
amendment thereto) filed under the Securities Act of 1933, as amended, in which the net proceeds received by Borrower equal at least $50,000,000. 

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

        "Loan Documents" are, collectively, this Agreement, any Control Agreement, any note 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, extended or restated. 

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

        "Material Adverse Change" is: (a) a material impairment in the perfection or priority of Banks' security interest 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 on a consolidated basis; or (c) a
material impairment of the prospect of repayment of any portion of the Obligations. 

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

        "Operating Documents" shall mean, for any Person, such Person's formation documents, as currently filed with the Secretary of State of
such Person's state of formation, 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), each of the foregoing with all current modifications and amendments thereto. 

        "Other Equipment" is leasehold improvements, intangible property such as computer software and transferable or
non-transferable software licenses, soft costs (including sales tax, freight, and installation expenses, as well as costs associated with the purchase and implementation of Borrower's
business management system, Enterprise Resource Planning), equipment specifically designed or manufactured for Borrower, other intangible property, limited use property and other similar property.
Unless otherwise agreed to by Bank, not more than 60% of the Eligible Equipment financed with the proceeds of each Equipment Advance shall consist of Other Equipment. 

        "Other Property" means (a) the following as defined in the Code in effect on the date hereof with such additions to such term as
may hereafter be made, and all rights relating thereto: all present and 

22

 

future
"commercial tort claims", "documents", "instruments", "promissory notes", "chattel paper", "letters of credit", "letter-of-credit rights", "fixtures", "farm products"
and "money"; and (b) all other goods and personal property of every kind, tangible and intangible, whether or not governed by the Code, but shall not include Intellectual Property. 

        "Patent" means any of the following now hereafter owned or acquired or received by Borrower or in which Borrower now holds or hereafter
acquires or receives any right or interest: (a) letters patent and right corresponding thereto, of the United States or any other country or other foreign jurisdiction, any registration and
recording thereof, and any application for letters patent, and rights corresponding thereto, of the United States or any other country or other foreign jurisdiction, including, without limitation,
registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or other
foreign jurisdiction; (b) any reissue, continuation, continuation-in-part or extension thereof; (c) any petty patent, divisional, and patent of addition; and
(d) any patent to issue in any such application. 

        "Permitted Distributions" means: 

        (a)   purchases
of capital stock from former employees, consultants and directors pursuant to repurchase agreements or other similar agreements in an amount not to exceed
$2,000,000 in the aggregate in any fiscal year so long as no Event of Default has occurred, is continuing, or would exist after giving effect to any repurchase; 

        (b)   distributions
or dividends consisting solely of Borrower's capital stock; 

        (c)   purchases
for value of any rights distributed in connection with any stockholder rights plan; 

        (d)   purchases
of Borrower's capital stock pursuant to a repurchase plan approved by the Borrower's Board of Directors and in effect on the Effective Date not to exceed an
aggregate amount of $2,000,000; 

        (e)   purchases
of capital stock in connection with the exercise of stock options or stock appreciation rights by way of cashless exercise or in connection with the
satisfaction of withholding tax obligations; 

        (f)    the
conversion of any convertible securities into other securities pursuant to the terms of such convertible securities or otherwise in exchange therefor, and payments
in cash for any fractional shares of convertible securities; provided, however, such payments in cash for any fractional shares of convertible securities shall not exceed $250,000 in the aggregate in
any fiscal year if such payments are not made in connection with the IPO; and 

        (g)   purchases
of fractional shares of capital stock arising out of stock dividends, splits or combinations or business combinations. 

        "Permitted Indebtedness" is: 

        (a)   Borrower's
indebtedness to Bank under this Agreement or the other Loan Documents; 

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

        (c)   Subordinated
Debt; 

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

        (e)   capitalized
leases and purchase money Indebtedness secured by Permitted Liens not exceeding $500,000; 

23

 

        (f)    Indebtedness
secured by Permitted Liens; 

        (g)   Indebtedness
under any performance, surety, statutory or appeal bonds or similar obligations incurred in the ordinary course of business; 

        (h)   (i) Indebtedness
of Borrower to any of its Subsidiaries to the extent it is Subordinated Debt; (ii) Indebtedness of any Subsidiary of Borrower to another
Subsidiary of Borrower; and (iii) Indebtedness of any Subsidiary to Borrower to the extent permitted under clause (h) of the definition of Permitted Investments; 

        (i)    Indebtedness
consisting of interest rate, currency, or commodity swap agreements, interest rate cap or collar agreements or arrangements designed to protect a Person
against fluctuations in interest rates, currency exchange rates, or commodity prices; 

        (j)    guaranties
of Permitted Indebtedness; 

        (k)   Indebtedness
of entities acquired in any permitted merger or acquisition transaction; 

        (l)    other
Indebtedness not otherwise permitted by Section 7.5 not exceeding $500,000 in the aggregate outstanding at
any time; and 

        (m)  extensions,
refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (l) 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, except by an amount equal to a
reasonable premium or other reasonable amount paid in connection with such refinancing and by an amount equal to any existing, but unutilized, commitment thereunder. 

        "Permitted Investments" are: 

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

        (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
accepted in connection with Transfers permitted by Section 7.1; 

        (e)   Investments
consisting of extensions of credit to Borrower's or its Subsidiaries' customers in the nature of accounts receivable, prepaid royalties or notes receivable
arising from the sale or lease of goods, provision of services or licensing activities of Borrower; 

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

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

        (h)   (i) Investments
of Subsidiaries of Borrower in or to Borrower; (ii) Investments of Subsidiaries of Borrower in or to other Subsidiaries of Borrower; and
(iii) Investments of Borrower in or to Subsidiaries of Borrower in an amount not to exceed $500,000 in any fiscal year; provided, however, that for purposes of clause (iii), all expenses
payable by Borrower in or to Subsidiaries for the purpose of funding amounts related to Subsidiary operations, 

24

 

including
without limitation, employee salaries, general and administrative expenses, and taxes, shall be Permitted Investments so long as no Event of Default exists or would result therefrom; 

        (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 (i) shall not apply to Investments of Borrower in any Subsidiary; 

        (j)    Investments
received in satisfaction or partial satisfaction of obligations owed by financially troubled obligors; 

        (k)   Investments
acquired as a result of a foreclosure with respect to any secured Investment; 

        (l)    deposits,
prepayment and other credits to suppliers made in the ordinary course of business; 

        (m)  Investments
approved pursuant to an investment policy approved by the Borrower's Board of Directors and delivered to Bank; 

        (n)   subject
to Section 6.6 hereof, Investments consisting of deposit and securities accounts; 

        (o)   Investments
consisting of interest rate, currency, or commodity swap agreements, interest rate cap or collar agreements or arrangements which constitute Permitted
Indebtedness designed to protect a Person against fluctuations in interest rates, currency exchange rates, or commodity prices; 

        (p)   joint
ventures and strategic alliances 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 in connection therewith do not exceed $500,000 in the aggregate in any fiscal year; and 

        (q)   Investments
in connection with any transaction that is otherwise permitted by Section 7.4 of this Agreement,
including the creation of any Subsidiary necessary to consummate a transaction that is otherwise permitted by Section 7.4 of this Agreement. 

        "Permitted Liens" are: 

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

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

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

        (d)   leases
or subleases and non-exclusive licenses or sublicenses granted in the ordinary course of Borrower's business, if the leases, subleases, licenses and
sublicenses permit granting Bank a security interest; 

        (e)   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 

25

 

limited
to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase; 

        (f)    Liens
arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under  Section 8.3 or 8.6; 

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

        (h)   carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue or which are being
contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the applicable Person; 

        (i)    pledges
or deposits in the ordinary course of business in connection with workers' compensation, unemployment insurance and other social security legislation, other than
any Lien imposed by ERISA; 

        (j)    deposits
to secure the performance of bids, trade contracts (other than for borrowed money), contracts for the purchase of property, leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like nature, in each case, incurred in the ordinary course of business and not representing an obligation for borrowed money; 

        (k)   easements,
rights-of-way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in
amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person; 

        (l)    Liens
on assets acquired in transactions otherwise permitted by Section 7.4 of this Agreement, provided that such
Liens were not created in connection with such transactions; 

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

        (n)   other
Liens not described above arising in the ordinary course of Borrower's business and not having or not reasonably likely to have a material adverse effect on
Borrower's and its Subsidiaries' business or operations taken as a whole or not reasonably likely to result in a Material Adverse Change. 

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

        "Prime Rate" is Bank's most recently announced "prime rate," even if it is not the lowest rate offered by Bank. 

        "Quick Ratio" means the ratio of (a) the sum of unrestricted cash and Cash Equivalents  plus accounts receivable to (b) Current Liabilities. 

        "Responsible Officer" is any of the Chief Executive Officer, President, Chief Financial Officer, or the Controller of Borrower. 

        "Revolving Maturity Date" is October 21, 2006; provided, however, on each anniversary of the Effective Date, Bank may, in its sole
discretion and subject to the completion of due diligence, the results of which shall be satisfactory to Bank in its sole discretion, decide to extend the then-existing Revolving Maturity
Date an additional 364 days. 

26

 

        "Securities Accounts" means, collectively, all present and future "securities accounts" as defined in the Code in
effect on the date hereof with such additions to such term as may hereafter be made, whether maintained with Bank or other institutions. 

        "Subordinated Debt" is debt incurred by Borrower subordinated to Borrower's debt to Bank (pursuant to a subordination agreement entered
into among Bank, Borrower and the subordinated creditor), on terms reasonably acceptable to Bank. 

        "Subsidiary" is any Person, corporation, partnership, limited liability company, joint venture, or any other business entity of which more
than fifty percent (50%) of the voting stock or other equity interests is owned or controlled, directly or indirectly, by the Person or one or more Affiliates of the Person. Without further
attribution, "Subsidiary" means a Subsidiary of Borrower. 

        "Sublimit Utilization Amount" means the sum of (a) all amounts for services
utilized under the Cash Management Services Sublimit, (b) the amount of all outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit), and (c) the FX Reserve. 

        "Trademark" means any of the following now or hereafter owned or acquired or received by Borrower or in which Borrower now holds or
hereafter acquires or receives any right or interest: (a) any trademark, trade name, corporate name, business name, trade style, service mark, logo, other source or business identifier, print
or label on which any of the foregoing have appeared or appear, design or other general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings
thereof, and any applications in connection therewith, including registration, recording and application in the United States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or other foreign jurisdiction and (b) any reissue, extension or renewal of any of the foregoing. 

27

 

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

	BORROWER	 	IKANOS COMMUNICATIONS	 	 
	

 	
 	

By:	

/s/  DAN K ATLER      
	
 	

 
	

 	
 	

Name:	

Daniel Atler
	
 	

 
	

 	
 	

Title:	

CFO
	
 	

 
	
BANK	
 	
SILICON VALLEY BANK	
 	

 
	

 	
 	

By:	

/s/  KEVIN ZEIDAN      
	
 	

 
	

 	
 	

Name:	

Kevin Zeidan
	
 	

 
	

 	
 	

Title:	

Vice President
	
 	

 
	

 	
 	

Effective Date:	

October 21, 2004
	
 	

 

28

 
 

EXHIBIT A    
    

        "Collateral" means of all of Borrower's right, title and interest in and to the following whether owned now or
hereafter acquired or arising, and wherever located: all its Accounts; all its Inventory; all its Equipment; all its Deposit Accounts; all its General Intangibles (not including its Intellectual
Property); all its Investment Property; all its Other Property; and any and all claims, rights and interests in any of the foregoing, and all guaranties and security for any of the foregoing, and all
substitutions and replacements for, additions, accessions, attachments, accessories, and improvements to, and proceeds (including proceeds of any insurance policies, proceeds of proceeds and claims
against third parties) of, all of the foregoing, and Borrower's Books relating to any of the foregoing. 

        Notwithstanding
the foregoing, the Collateral shall include all Accounts, license and royalty fees and other revenues, proceeds, or income arising out of or relating to any of Borrower's
Intellectual Property. To the extent a court of competent jurisdiction holds that a security interest in any Intellectual Property is necessary to have a security interest in any Accounts, license and
royalty fees and other revenues, proceeds, or income arising out of or relating to any of such Intellectual Property, then the Collateral shall, effective as of the Effective Date, include the
Intellectual Property, to the extent necessary to permit perfection of Bank's security interest in such Accounts, license and royalty fees and other revenues, proceeds, or income arising out of or
relating to any of the Intellectual Property. 

        Notwithstanding
the foregoing, the Collateral shall not include (a) to the extent the pledge thereof would result in increased United States income tax liability to Borrower or
any Subsidiary, more than 65% of the issued and outstanding voting capital stock of any Subsidiary of Borrower that is incorporated or organized in a jurisdiction other than the United States or any
state or territory thereof or the District of Columbia, and (b) any cash delivered in the ordinary course of business by Borrower or its Subsidiaries to their landlords in connection with
security deposits required to be paid under lease agreements. 

QuickLinks

Exhibit 10.16

LOAN AND SECURITY AGREEMENT by and between SILICON VALLEY BANK, AS LENDER and IKANOS COMMUNICATIONS, AS BORROWER

TABLE OF CONTENTS

LOAN AND SECURITY AGREEMENT

EXHIBIT A

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