Exhibit 10.1

 

MODIFICATION NO. 5 TO

LOAN AND SECURITY AGREEMENT

 

This Fifth Modification No. 5 to Loan and Security Agreement (this “Fifth
Modification”) is entered into as of January 31, 2020 (the “Fifth Modification
Effective Date”), by and between Partners for Growth V, L.P. (“PFG”),
Giga-tronics Incorporated, a California corporation, and Microsource, Inc., a
California corporation (individually and collectively, jointly and severally,
“Borrower”). Capitalized terms used but not defined in this Fifth Modification
shall have the meanings given them in the Loan Agreement.

 

Recitals

 

WHEREAS, PFG and Borrower entered into that certain Loan and Security Agreement
dated as of April 27, 2017 (as amended by that certain Waiver and Modification
No. 1 to Loan and Security Agreement entered into on March 26, 2018 (the “First
Modification”, that certain Modification No. 2 to Loan and Security Agreement
dated as of December 12, 2018 (the “Second Modification”, that certain
Modification No. 3 to Loan and Security Agreement dated as of March 11, 2019
(the “Third Modification”), and that certain Modification No. 4 to Loan and
Security Agreement dated as of July 2, 2019 (the “Forth Modification”, and
together with the First Modification, Second Modification and Third
Modification, the “Prior Modifications”), and as otherwise amended or restated,
the “Loan Agreement”) and certain other Security Documents (as defined below),
pursuant to which PFG has made available to Borrower the original principal
amount of $1,500,000, $825,000 of which is outstanding on the Fifth Modification
Effective Date, prior to giving effect to a principal payment in the amount of
$75,000 due on February 1, 2020;

 

WHEREAS, the parties desire to modify and update the financial covenants set
forth in the Loan Agreement to reflect Borrower’s new Plan;

 

WHEREAS, Borrower is in default under the Loan Agreement for its failure to
comply with the Minimum Revenues financial covenant set forth in Section 5 of
the Schedule for the measurement period ending December 31, 2019 (the “Current
Default”) and would, but for the modification of the financial covenants set
forth in this Fifth Modification, be in default of the financial covenants for
the period ending March 31, 2020 (the “Anticipated Default” and, collectively
with the Current Default, the “Specified Defaults”) and;

 

WHEREAS PFG and Borrower mutually desire to waive the Current Default and amend
the financial covenants under the Loan Agreement, inter alia to moot the
Anticipated Default;

 

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

 

 

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Agreement

 

1.     EFFECTIVENESS. The Loan Agreement modifications, terms and agreements
made in this Fifth Modification shall become effective on the Fifth Modification
Effective Date, notwithstanding that certain conditions set forth in Section 7
hereof may be conditions to be satisfied subsequent to the Fifth Modification
Effective Date.

 

2.     DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral, as described in the Loan Agreement, in that certain Intellectual
Property Security Agreement and related Collateral Agreements and Notices of
even date with the Loan Agreement (the “IPSA”) and the other Loan Documents
entered into on the dates of the Loan Agreement and the Loan Agreement. The
above-described security documents, together with all other documents securing
and/or perfecting security interests in the repayment of the Obligations, shall
be referred to herein as the “Security Documents”. Hereinafter, the Security
Documents, together with all other documents evidencing or securing the
Obligations are referred to as the “Existing Loan Documents”.

 

3.     DESCRIPTION OF CHANGES IN TERMS. Effective automatically upon the
Modification Effective Date:

 

(a)     Definitions. The definition of “Plan” set forth in Section 7 of the Loan
Agreement is amended to read as follows (with quotation marks and special
formatting for convenience of reading only):

 

“ “Plan” means Borrower’s Board-approved financial plan as delivered to PFG on
Jan 22, 2020 in Excel format in the file entitled “PFG FORECAST FY21.xlsx” for
the period April 1, 2020 through March 30, 2021.”

 

(b)     Schedule Restatement. The Schedule is amended and restated to read in
their entirety as set forth in Exhibit A to this Fifth Modification.

 

(c)     Compliance Certificate. The Compliance Certificate is amended and
restated in the form set forth in Exhibit B.

 

4.     ACKNOWLEDGMENT OF SPECIFIED DEFAULTS; CONDITIONAL WAIVER. Borrower
acknowledges that it is currently in default under the Loan Agreement due to the
Specified Defaults. If no Default or Event of Default has occurred and is
continuing under the Loan Agreement, other than the Specified Defaults and
Borrower timely satisfies the conditions set forth in Section 7 hereof, PFG
shall be deemed to have forever waived the Specified Defaults. Borrower hereby
acknowledges and agrees that except as specifically provided herein, nothing in
this Section or anywhere in this Fifth Modification shall be deemed or otherwise
construed as a waiver by PFG of any of its rights and remedies pursuant to the
Existing Loan Documents, applicable law or otherwise. The waiver of Specified
Defaults set forth in this Fifth Modification shall be limited precisely as
written and shall not be deemed (a) to be a forbearance, waiver or modification
of any other term or condition of the Loan Agreement or of any other instrument
or agreement referred to therein or to prejudice any right or remedy which PFG
may now have or may have in the future under or in connection with the Loan
Agreement, the Existing Loan Documents or any instrument or agreement referred
to therein; (b) to be a consent to any future amendment or modification,
forbearance or waiver to any instrument or agreement the execution and delivery
of which is consented to hereby, or to any waiver of any of the provisions
thereof; or (c) to limit or impair PFG’s right to demand strict performance of
all terms and covenants as of any date, subject to this Fifth Modification. The
Loan Agreement, as amended, shall continue in full force and effect.

 

 

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5.     CONTINUING VALIDITY. Borrower understands and agrees that in
conditionally modifying the existing Obligations, PFG is relying upon Borrower's
representations, warranties and agreements as set forth in the Existing Loan
Documents. Except as expressly modified pursuant to this Fifth Modification, the
terms of the Existing Loan Documents remain unchanged and in full force and
effect. PFG's agreement to modify the existing Obligations in no way shall
obligate PFG to give any future consents or waivers or make any future
modifications to the Obligations. Nothing in this Fifth Modification shall
constitute a satisfaction of the Obligations or a waiver of any Default or Event
of Default under the Existing Loan Documents. It is the intention of PFG and
Borrower to retain as liable parties all makers and endorsers, if any, of the
Existing Loan Documents, unless the party is expressly released by PFG in
writing. Unless expressly released herein, no maker, endorser, or guarantor will
be released by virtue of this Fifth Modification. The terms of this paragraph
apply not only to this Fifth Modification, but also to all subsequent loan
modification agreements.

 

6.     Borrower’s Representations And Warranties. Borrower represents and
warrants that:

 

(a)     immediately upon giving effect to this Fifth Modification (i) the
representations and warranties contained in the Existing Loan Documents are
true, accurate and complete in all material respects as of the date hereof
(except to the extent qualified in the updated Representations deliverable to
PFG on or before the Fifth Modification Effective Date), and (ii) no Event of
Default (other than the Specified Defaults) has occurred and is continuing;

 

(b)     Borrower has the corporate power and authority to execute and deliver
this Fifth Modification and to perform its obligations under the Existing Loan
Documents, in each case as contemplated by this Fifth Modification;

 

(c)     the Constitutional Documents of Borrower delivered to PFG remain true,
accurate and complete and have not been amended, supplemented or restated and
are and continue to be in full force and effect;

 

(d)     this Fifth Modification has been duly authorized, executed and delivered
by Borrower and (i) constitutes the binding obligation of Borrower, enforceable
against Borrower in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or
other similar laws of general application and equitable principles relating to
or affecting creditors’ rights; (ii) does not conflict with any law or
regulation or judgment or the Constitutional Documents of Borrower, or any
agreement or document to which Borrower is a party or which is binding upon it
or any of this assets; and (iii) does not require any authorization, approval,
consent (including stockholder or member consent) of any Person, or any license
or registration in any jurisdiction, for its lawful authorization, execution,
performance, validity or enforceability, except to the extent such
authorization, approval, consent (including stockholder or member consent) of
any Person, license or registration is secured on or prior to the Fifth
Modification Effective Date and provided to PFG;

 

 

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(e)     as of the date hereof, with Knowledge that PFG is relying on Borrower’s
representations and warranties herein (including the Representations) as a basis
for entering into this Fifth Modification at Borrower’s request, Borrower has no
defenses against its obligation to repay the Obligations and it has no claims of
any kind against PFG. Borrower acknowledges that PFG has acted in good faith and
has conducted its relationship with Borrower in a commercially reasonable
manner, including in connection with this Fifth Modification and in connection
with the Existing Loan Documents;

 

(f)     with respect to any Loan Documents binding upon a Person not party to
this Fifth Modification, each such Person has been apprised of this Fifth
Modification, has consented to Borrower’s execution and delivery of this Fifth
Modification and, to the extent not executed concurrently with this Fifth
Modification (or as a condition subsequent hereto), has agreed if so requested
by PFG to promptly execute and deliver to PFG a reaffirmation of its obligations
under any Existing Loan Documents to which it is a party or is bound;

 

(g)     the IPSA and associated Collateral Agreements and Notices disclose an
accurate, complete and current listing of all Collateral that consists of
Intellectual Property (as defined in said IP Security Agreement) or Borrower has
included revised and updated Intellectual Property schedules as part of an
update to the Representations required in Section 7(e) of this Fifth
Modification and as part of the Intellectual Property and Domain Rights update
and, as required, the Reaffirmation of IPSA under Section 7(f) of this Fifth
Modification;

 

(h)     Borrower hereby ratifies, confirms and reaffirms, all and singular, the
terms and disclosures contained in the Representations dated as of the Fifth
Modification Effective Date;

 

(i)     as of the Fifth Modification Effective Date, Borrower has not asserted
any commercial tort claims against any Person and has no Knowledge of any basis
for so doing; and

 

(j)     Except as expressly stated in this Fifth Modification, neither PFG nor
any agent, employee or representative of PFG has made any statement or
representation to Borrower regarding any fact relied upon by Borrower in
entering into this Fifth Modification, (ii) Borrower has made such investigation
of the facts pertaining to this Fifth Modification and all of the matters
appertaining thereto, as it deems necessary, and (iii) the terms of this Fifth
Modification are contractual and not a mere recital.

 

 

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Borrower understands and acknowledges that PFG is entering into this Fifth
Modification in reliance upon, and in partial consideration for, the above
representations and warranties, and agrees that such reliance is reasonable and
appropriate.

 

7.      CONDITIONS. The effectiveness of this Fifth Modification is conditioned
upon satisfaction of each of the following, with the consequence of a failure to
meet the following conditions as set forth in the proviso at the end of this
Section 7:

 

(a)     Execution and Delivery. Borrower shall have duly executed and delivered
to PFG a counterpart of this Fifth Modification and such other documents and
instruments as are otherwise required in this Section 7.

 

(b)     Constitutional and Authority Documents. Applicable only to the extent
the same may have been modified or superseded or are no longer accurate since
the date of the Loan Agreement, PFG shall have received copies, certified by a
duly authorized officer of Borrower, to be true and complete as of the Fifth
Modification Effective Date, of each of (i) the governing documents of Borrower
as in effect on the date hereof, and (ii) any necessary resolutions of Borrower
authorizing the execution and delivery of this Fifth Modification, the other
documents executed in connection herewith and Borrower’s performance of all of
the transactions contemplated hereby, and (iii) an incumbency certificate giving
the name and bearing a specimen signature of each individual who shall be so
authorized on behalf of Borrower.

 

(c)     Modification Fee. Borrower shall pay PFG a fee in consideration of this
Fifth Modification in the amount of $16,500, fully-earned on the Fifth
Modification Effective Date and due within two (2) Business Days following the
Fifth Modification Effective Date.

 

(d)     Lender Expenses. Borrower shall have paid, upon PFG invoice, all unpaid
fees and Lender Expenses incurred pursuant to or in connection with this Fifth
Modification.

 

(e)     Updates to Representations. Borrower shall have concurrently delivered
an update to the Representations as last delivered to PFG, with the information
and disclosures contained therein true, correct, accurate and complete as of the
Fifth Modification Effective Date, appended hereto as Exhibit C.

 

(f)     IPSA Update / Reaffirmation. To the extent that Borrower has created,
acquired or amended any Intellectual Property or Domain Rights or made
application with any Governmental Body in relation thereto since the date of the
First Modification, Borrower shall disclose such created, acquired or amended
Intellectual Property and/or Domain Rights in Exhibit D (which if left blank
shall constitute that no such acquired, new or amended IP is applicable) and
shall promptly execute and deliver supplemental Collateral Agreements and
Notices in respect of the same in substantially the same form as those appended
to the Intellectual Property Security Agreement delivered on the original
Effective Date of the Loan Agreement.

 

 

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Any failure to timely satisfy any of the foregoing conditions shall constitute
an immediate Event of Default under the Loan Agreement.

 

8.     CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary or appropriate to reflect the modifications and other
transactions contemplated by this Fifth Modification.

 

9.     RATIFICATION OF EXISTING LOAN DOCUMENTS. Borrower hereby ratifies,
confirms, and reaffirms all terms and conditions of the Existing Loan Documents
and all security and other collateral granted to PFG thereunder, and confirms
that the Indebtedness secured thereby includes, without limitation, the
Obligations.

 

10.     Further Assurances. Borrower agrees to execute such further documents
and instruments and to take such further actions as PFG may request in its good
faith business judgment to carry out the purposes and intent of this Fifth
Modification.

 

11.     ADVICE OF COUNSEL. PFG and Borrower have prepared this Agreement and all
documents, instruments, and agreements incidental hereto with the aid and
assistance of their respective counsel. Accordingly, all of them shall be deemed
to have been drafted by PFG and Borrower and shall not be construed against
either PFG or Borrower.

 

12.     ILLEGALITY OR UNENFORCEABILITY. Any determination that any provision or
application of this Agreement is invalid, illegal, or unenforceable in any
respect, or in any instance, shall not affect the validity, legality, or
enforceability of any such provision in any other instance, or the validity,
legality, or enforceability of any other provision of this Agreement.

 

13.     INTEGRATION; CONSTRUCTION; ETC. This Fifth Modification, the Prior
Modifications (to the extent not inconsistent with the terms hereof), the Loan
Agreement and the Existing Loan Documents (as modified) and any documents
executed in connection herewith or pursuant hereto contain the entire agreement
between the parties with respect to the subject matter hereof and supersede all
prior agreements, understandings, offers and negotiations, oral or written, with
respect thereto and no extrinsic evidence whatsoever may be introduced in any
judicial or arbitration proceeding, if any, involving this Fifth Modification;
provided, however, that any financing statements or other agreements or
instruments filed by PFG with respect to Borrower shall remain in full force and
effect. The quotation marks around modified clauses set forth herein and any
differing font styles in which such clauses are presented herein are for ease of
reading only and shall be ignored for purposes of construing and interpreting
this Fifth Modification. This Fifth Modification is subject to the General
Provisions of Section 8 of the Loan Agreement. The Existing Loan Documents are
hereby amended wherever necessary to reflect the modifications set forth in this
Fifth Modification. The Recitals are incorporated herein by reference.

 

 

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14.     Governing Law; Venue. THIS FIFTH MODIFICATION SHALL BE GOVERNED BY AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA. Borrower and PFG submit to the exclusive jurisdiction of the State
and Federal courts in Santa Clara County, California, in connection with any
proceeding or dispute arising in connection herewith.

 

 

[Signature Page Follows]

 

 

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PFG

BORROWER

Partners for Growth V, L.P.

 

By:                                                       

Name:  Phil Lawson, Manager

Title:  Partners for Growth V, LLC, its

General Partner

GIGA-TRONICS INCORPORATED

 

 

 

By: ______________________________

 

Name: ____________________________

 

Title: _____________________________

 

 

 

MICROSOURCE, INC.

 

 

 

By: ______________________________

 

Name: ____________________________

 

Title: _____________________________

   

 

Modification No. 5 to Loan and Security Agreement Signature Page

 

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EXHIBIT A TO FIFTH MODIFICATION

 

 

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Partners For Growth 

Schedule to

Loan and Security Agreement

 

Borrower:

Giga-tronics Incorporated, a California corporation

Address:

5990 Gleason Dr, Dublin, CA 94568

 

Borrower:

Microsource, Inc., a California corporation

Address:

5990 Gleason Dr, Dublin, CA 94568

 

Date:     Fifth Modification

Effective

Date: January 31, 2020

 

This Schedule forms an integral part of the Loan and Security Agreement between
PARTNERS FOR GROWTH V, L.P., as this Schedule is amended and restated as of the
Fifth Modification Effective Date referenced above.

 

1. LOAN (Section 1.1):

 

 

The Loan: The Loan consists of a term loan in the amount of $825,000 (prior to
the making of the principal payment scheduled on February 1, 2020 as specified
under “Repayment”, below), all of which has previously been disbursed and is
outstanding and unpaid on the Fifth Modification Effective Date.     Repayment:
Borrower shall make a principal payment in the amount of $75,000 on February 1,
2020 and, commencing with a principal payment due March 1, 2020, shall make
monthly principal payments on the first day of each calendar month in the amount
of $57,700 each, together in each case plus any and all accrued and unpaid
interest (other than Deferred Interest (as defined below)), until the Maturity
Date, on which date the entire unpaid principal balance of the Loan, any unpaid
fees and costs and any and all accrued and unpaid monetary Obligations shall be
paid.     Prepayment: The principal amount of the Loan may be prepaid in whole
in part at any time without fee or penalty, provided that prepaid principal may
not be reborrowed.

 

 

 

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Partners for Growth V, L.P.

Schedule to Loan and Security Agreement

 

2. Interest.

 

Interest Rate and Payment (Section 1.2):     

 

Effective February 1, 2020, the Loan shall bear interest at an aggregate per
annum rate equal to 16% per annum, fixed, which shall be comprised of Cash
Interest (as defined below) reflecting a 9.5% per annum rate and Deferred
Interest (as defined below) reflecting a 6.5% per annum rate, payable as
follows:

 

Cash Interest. Borrower shall pay monthly interest payments in cash (“Cash
Interest”) as specified in Section 1.2 of the Loan Agreement on the unpaid
principal amount of the Loan outstanding from time to time in an amount
reflecting an interest rate of 9.5% per annum.

 

Deferred Interest. In addition to Cash Interest, interest shall accrue on the
unpaid principal amount of the Loan outstanding from time to time and not be
payable in cash on a current monthly basis as contemplated in Section 1.2 of the
Loan Agreement (such accrued and unpaid interest, “Deferred Interest”) at an
interest rate of 6.5% per annum, which Deferred Interest shall be due and
payable at the Maturity Date or such earlier date as principal Obligations are
repaid or otherwise due and payable.

 

  

 

 

3. Fees (Section 1.3):

 

      Back-End Fee: $100,000, due and payable upon the Maturity Date or such
earlier date as principal Obligations are repaid or otherwise due and payable.

 

 

4.  Maturity Date

       (Section 5.1): March 1, 2021.

 

 

5.  Financial Covenants

 

       (Section 4.1): Borrower shall comply with each of the following
covenants. Compliance shall be determined as of the end of each month, except as
otherwise specifically provided below:    

(a) Minimum TNW:

Effective at all times but measured on the last day of each calendar month on a
consolidated basis with its Subsidiaries and reported monthly, Borrower shall
maintain Tangible Net Worth of not less than $3,000,000.

 

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Partners for Growth V, L.P.

Schedule to Loan and Security Agreement

 

 

(b) Minimum Revenues:

On a consolidated basis with its Subsidiaries and measured quarterly as of the
last day of each calendar quarter, Borrower shall maintain Revenues (as defined
in clause (c), below, but determined under ASC-606) on a cumulative basis of not
less than the minimum thresholds set forth below for the corresponding periods:

 

Quarterly Period End Threshold  Months in Calc.

March 31, 2020

$11,000,000

12

June 30, 2020

$ 3,150,000

3

September 30, 2020

$ 6,200,000

6

December 31, 2020

$11,000,000

9

March 31, 2021

$15,000,000

12

 

 

Definitions.

For purposes of the foregoing financial covenants, the following term shall have
the following meaning:

 

“Tangible Net Worth” shall mean Total Assets less Total Liabilities, determined
in accordance with GAAP. In determining Tangible Net Worth, the following
adjustments may be made: (i) the amount of a material one-time adjustment to
Inventory required by Borrower’s auditors due to obsolescence or similar causes
may be added back to Total Assets; and (ii) any material charge required by
Borrower’s auditors to be taken for non-cash stock compensation that adversely
affects Tangible Net Worth may be added or subtracted, as the case may be, in
the calculation of Tangible Net Worth. A “one-time” adjustment would not include
a monthly, quarterly or annually-recurring adjustment. The term “material” as
used above means an adjustment that would be required to be disclosed in an
annual or quarterly filing (10K or 10Q) with the Securities and Exchange
Commission.     

 

“Total Assets” is on any day, the total assets, tangible and intangible of
Borrower and its Subsidiaries on a consolidated basis, as determined in
accordance with GAAP.

 

“Total Liabilities” is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower’s consolidated balance sheet, including
all Indebtedness.

 

“Revenues” means receipts from customers in the ordinary course of business for
the sale of goods and services and required to be recognized as revenues in
accordance with GAAP, net of discounts and refunds. For purposes of the
foregoing definition, if Borrower (with the consent of PFG) sells (or acquires)
a revenue-generating entity, business unit or product line, the parties shall
equitably adjust the Revenue thresholds set forth above to reflect the loss of
(or accretive gain in) the associated Revenues generated by such entity,
business unit or product line.

 

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Partners for Growth V, L.P.

Schedule to Loan and Security Agreement

 

 

6.  Reporting.

      (Section 4.4):

 

Borrower shall provide PFG with the following; provided, however, at any time,
from time to time, on a permanent or temporal basis, PFG shall have the right to
require Borrower to redact any information (or categories of information) that
might constitute material non-public information under SEC rules and
regulations, such requirement to be notified by PFG in writing to Borrower:

 

  (d) Monthly accounts payable, accounts receivable and deferred Revenue
schedules, aged by invoice date, and held check registers, if any, within 30
days after the end of each month.        

(e)

Monthly unaudited consolidated and consolidating Financial Statements, as soon
as available, and in any event within 30 days after the end of each month.

 

 

(f)

Monthly Compliance Certificates within 30 days after the end of each month and
at each Loan request, signed by the Chief Financial Officer of Borrower,
certifying that as of the end of such month or as at such date of Loan request
Borrower was in compliance with all of the terms and conditions of this
Agreement and setting forth calculations showing compliance with the financial
covenants set forth in this Schedule and such other information as PFG shall
reasonably request.

 

 

(g)

Updates to the Representations, as and when required to render the information
therein true, correct, accurate and complete as of the date of such date: (i) in
all respects as to matters addressed in Part A of the Representations (except
for the Collateral values set forth in Part A, Section 3(g), which must be true
and correct in all material respects) and Part B, Section 11, and (ii) in all
material respects with respect to all other sections of the Representations
Letter.

 

 

(h)

Annual Borrower Board-approved Budgets and Forecasts, within the earlier of
thirty (30) days of approval by Borrower’s Board or when available.

 

 

(i)

Annual consolidated and consolidating Financial Statements, as soon as
available, and in any event within 120 days following the end of Borrower's
fiscal year, certified by, and with an unqualified opinion of, independent
certified public accountants reasonably acceptable to PFG. If Borrower is
required to file and is current in its filings of Form 10-K with the Securities
and Exchange Commission and the same is available within said period through
EDGAR, this requirement will be deemed satisfied.

 

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Partners for Growth V, L.P.

Schedule to Loan and Security Agreement

 

 

(j)

Copies of all reports and statements provided by Borrower to the Senior Lender.

 

 

(k)

Such other reports and statements as PFG may reasonably request from time to
time.

 

 

7.  Borrower Information:

 

Borrower represents and warrants that the information set forth in the
Representations and Warranties of Borrower dated as of the Fifth Modification
Effective Date (the “Representations”) is true, correct, accurate and complete
as of such date.

 

 

8. ADDITIONAL PROVISIONS

 

 

(a)

Senior Lender.

 

 

(1)

Senior Lender. As used herein, “Senior Lender” means Western Alliance Bank, and
“Senior Loan Documents” means all present and future documents instruments and
agreements entered into between Borrower and Senior Lender or by third parties
relating to Borrower and Senior Lender.

 

 

(2)

Senior Debt Limit. Borrower shall not permit the total Indebtedness of Borrower
to Senior Lender, other than Non-Overdue Senior Monetary Obligations, to exceed
$2,500,000 at any time outstanding (the “Senior Debt Limit”), including, but not
limited to, monies borrowed by Borrower, interest on loans due from Borrower,
fees and expenses for which Borrower is obligated, sums due from Borrower in
connection with issuance of commercial letters of credit, issuance of forward
contracts for foreign exchange reserve, and any other direct or indirect
financial accommodation Senior Lender may provide to Borrower. Any increase in
the Senior Debt Limit shall be at PFG’s sole discretion.

 

 

(3)

Senior Loan Documents. Borrower represents and warrants that it has provided PFG
with true and complete copies of all existing Senior Loan Documents, and
Borrower covenants that it will, in the future, provide PFG with true and
complete copies of any future Senior Loan Documents, including without
limitation any amendments to any existing Senior Loan Documents.

 

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Partners for Growth V, L.P.

Schedule to Loan and Security Agreement

 

 

(b)

Collateral Accounts. Concurrently, Borrower shall cause the banks and other
institutions where its Collateral Accounts are maintained to enter into Control
Agreements with PFG, in form and substance legally sufficient and otherwise
reasonably satisfactory to PFG in its good faith business judgment and
sufficient to perfect PFG’s security interest in said Collateral Accounts,
subject to the security interest of the Senior Lender. Said Control Agreements
shall permit PFG, upon a Default or an Event of Default and for so long as such
Default or Event of Default is continuing, to exercise exclusive control over
said Collateral Accounts and proceeds thereof (subject to the rights of the
Senior Lender). As a continuing obligation, all primary operating accounts and
excess Cash of Borrower shall be maintained with the Senior Lender and its
affiliates.

 

 

(c)

Subordination of Inside Debt. All present and future indebtedness of Borrower to
its officers, directors and shareholders (“Inside Debt”) shall, at all times, be
subordinated to the Lien of PFG in respect of and prior payment of Obligations.
Borrower represents and warrants that there is no Inside Debt presently
outstanding, except as set forth in Appendix I hereto. Prior to incurring any
Inside Debt in the future, Borrower shall cause the person to whom such Inside
Debt will be owed to execute and deliver to PFG a subordination agreement on
PFG’s standard form.

 

 

 

[Signature Page Follows]

 

-6-

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

 

 

Borrower:

 

GIGA-TRONICS INCORPORATED

 

 

 

By /s/ John R. Regazzi________________

Chief Executive Officer

 

By /s/ Lutz P. Henckels________________

Chief Financial Officer or Secretary

 

 

MICROSOURCE, INC.

 

 

 

By /s/ John R. Regazzi_______________

           Chief Executive Officer

 

By__/s/ Lutz P. Henckels_____________

Chief Financial Officer or Secretary

PFG:

 

PARTNERS FOR GROWTH V, L.P.

 

 

 

By____/s/ Philip Lawson _________________

 

Name: Philip Lawson______________________ 

 

Title: Manager, Partners for Growth V, LLC

Its General Partner

 

 

- Signature Page to Schedule to Loan and Security Agreement -

 

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

 

 

APPENDIX I

 

Additional “Inside Indebtedness” -                

 

-2-

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

 

 

EXHIBIT B

 

RESTATED COMPLIANCE CERTIFICATE

 

 

 

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

 

 

EXHIBIT C

 

REPRESENTATIONS

 

 

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

 

 

EXHIBIT D

 

IPSA UPDATES (if any)

 

Trademarks

 

Serial Number -

Registration Number

Date

Mark

Owner

       

 

 

Patents

 

FULL APPLICATION

TITLE

APP. NO.

FILING DATE

PATENT NO.

Owner

         

 

 

Copyrights

 

Copyright Number

Date

Title / Work

Owner

       

 

 

Domains

 

Domain Name

Domain Host

Owner

Administrative Contact of Record

Expiry Date of Domain