Exhibit 10.1

 

FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

This Fourth Amendment to Loan and Security Agreement (this “Amendment”) is
entered into as of December 22, 2005, by and between COMERICA BANK (“Bank”) and
WJ COMMUNICATIONS, INC. (“Borrower”).

 

RECITALS

 

Borrower and Bank are parties to that certain Amended and Restated Loan and
Security Agreement dated as of September 23, 2003, as amended from time to time
including by that certain First Amendment to Loan and Security Agreement dated
as of June 13, 2005, that certain Second Amendment to Loan and Security
Agreement dated as of July 12, 2005 and that certain Third Amendment to Loan and
Security Agreement dated as of September 28, 2005 (the “Agreement”).  The
parties desire to amend the Agreement in accordance with the terms of this
Amendment.

 

NOW, THEREFORE, the parties agree as follows:

 

1.             The following defined terms in Section 1.1 of the Agreement
hereby are amended or restated as follows:

 

Credit Card Services Sublimit” means a sublimit for corporate credit cards under
the Revolving Line not to exceed One Hundred Thousand Dollars ($200,000).

 

“Revolving Line” means a credit extension of up to Ten Million Dollars
($10,000,000).

 

“Revolving Maturity Date” means December 21, 2006

 

2.             Section 2.1.1(c) of the Agreement is hereby amended and restated
in its entirety to read as follows:

 

“Prime Rate Advances.  Each Prime Rate Advance shall be in an amount of not less
than Five Hundred Thousand Dollars ($500,000).  The outstanding principal
balance of each Prime Rate Advance shall bear interest until principal is due
(computed daily on the basis of a 360 day year and actual days elapsed), at a
floating rate per annum equal to the Prime Rate.  Borrower shall pay the entire
outstanding principal amount of each Prime Rate Advance on the Revolving
Maturity Date.”

 

3.             Section 2.1.1(d) of the Agreement is hereby amended and restated
in its entirety to read as follows:

 

“LIBOR Rate Advances.  Each LIBOR Rate Advance shall be in an amount of not less
than One Million Dollars ($1,000,000).  The outstanding principal balance of
each LIBOR Rate Advance shall bear interest until principal is due (computed
daily on the basis of a 360 day year and actual days elapsed) at a rate per
annum equal to the LIBOR Rate plus Two

 

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Percent (2.0%) for such LIBOR Rate Advance.  Unless converted or continued
pursuant to Section 2.6, the entire outstanding principal amount of each LIBOR
Rate Advance shall be due and payable on the earlier of (i) the last day of the
LIBOR Rate Interest Period for such LIBOR Rate Advance, and (ii) the Revolving
Maturity Date.  At no time may the outstanding LIBOR Rate Advances be subject to
more than three LIBOR Rate Interest Periods.”

 

4.             The first sentence of Section 2.1.2(a) of the Agreement is hereby
amended and restated in its entirety to read as follows:

 

“Subject to the terms and conditions of this Agreement, at any time until ten
(10) days prior to the Revolving Maturity Date, Bank agrees to issue or cause to
be issued standby, documentary, or performance Letters of Credit for the account
of Borrower in an aggregate outstanding amount of undrawn Letters of Credit not
to exceed the Revolving Line minus the then outstanding principal balance of the
Advances (including Advances that arise by virtue of amounts paid by Bank under
Letters of Credit) ACH Reserves, Credit Card Services and the FX Amount;
provided the aggregate face amount of such Letters of Credit shall not in any
case exceed Five Million Dollars ($5,000,000) in aggregate.”

 

5.             Section 2.1.5 of the Agreement is hereby amended and restated in
its entirety to read as follows:

 

“Credit Card Services Sublimit.  Subject to the terms and conditions of this
Agreement, Borrower may request corporate credit cards from Bank (collectively,
the “Credit Card Services”).  The aggregate limit of the corporate credit cards
and merchant credit card processing reserves shall not exceed the Credit Card
Services Sublimit, provided that availability under the Revolving Line shall be
reduced by the aggregate limits of the corporate credit cards issued to Borrower
and merchant credit card processing reserves.  In addition, Bank may, in its
sole discretion, charge as Advances any amounts that become due or owing to Bank
in connection with the Credit Card Services.  The terms and conditions
(including repayment and fees) of such Credit Card Services shall be subject to
the terms and conditions of the Bank’s standard forms of application and
agreement for the Credit Card Services, which Borrower hereby agrees to execute.

 

6.             A new Section 2.1.6 is hereby added to the Agreement as follows:

 

“Foreign Exchange Sublimit.  Subject to and upon the terms and conditions of
this Agreement and any other agreement that Borrower may enter into with the
Bank in connection with foreign exchange transactions (“FX Contracts”), Borrower
may request Bank to enter into FX Contracts with Borrower due not later than the
Revolving Maturity Date.  Borrower shall pay any standard issuance and other
fees that Bank notifies Borrower will be charged for issuing and processing FX
Contracts for Borrower.  The FX Amount shall at all times be equal to or less
than Two Hundred Fify Thousand Dollars ($250,000).  The “FX Amount” shall equal
the amount determined by multiplying (i) the aggregate amount, in United States
Dollars, of FX Contracts between Borrower and Bank remaining outstanding as of
any date of determination by (ii) the applicable Foreign Exchange Reserve
Percentage as of such date.  The “Foreign Exchange Reserve Percentage” shall be
a percentage as determined by Bank,

 

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in its sole discretion from time to time.  The initial Foreign Exchange Reserve
Percentage shall be ten percent (10%).”

 

7.             A new Section 2.1.7 is hereby added to the Agreement as follows:

 

“Collateralization of Obligations Extending Beyond Maturity.  If Borrower has
not secured to Bank’s satisfaction its obligations with respect to any Letters
of Credit, Credit Card Services, ACH origination services, or Foreign Exchange
Contracts by the Revolving Maturity Date, then, effective as of such date, the
balance in any deposit accounts held by Bank and the certificates of deposit or
time deposit accounts issued by Bank in Borrower’s name (and any interest paid
thereon or proceeds thereof, including any amounts payable upon the maturity or
liquidation of such certificates or accounts), shall automatically secure such
obligations to the extent of the then continuing or outstanding and undrawn
Letters of Credit, Credit Card Services, ACH origination services, or Foreign
Exchange Contracts.  Borrower authorizes Bank to hold such balances in pledge
and to decline to honor any drafts thereon or any requests by Borrower or any
other Person to pay or otherwise transfer any part of such balances for so long
as the Letters of Credit, Credit Card Services, ACH origination services, or
Foreign Exchange Contracts are outstanding or continue.”

 

8.             A new Section 5.18 is hereby added to the Agreement as follows:

 

“Collateral.  Borrower has rights in or the power to transfer the Collateral,
and its title to the Collateral is free and clear of Liens, adverse claims, and
restrictions on transfer or pledge except for Permitted Liens.  Except as set
forth in the Schedule, none of the Collateral is maintained or invested with a
Person other than Bank or Bank’s Affiliates.”

 

9.             Section 6.7 of the Agreement is hereby amended and restated in
its entirety to read as follows:

 

“Tangible Net Worth.    Borrower shall maintain a Tangible Net Worth of Not Less
than Eight Million Dollars ($8,000,000) plus an amount equal to fifty percent
(50%) of Borrower’s net income for each fiscal quarter, calculated in accordance
with GAAP, plus an amount equal to seventy-five percent (75%) of the proceeds
received after December 31, 2005 from the sale or issuance by Borrower of its
equity securities or Subordinated Debt.”

 

10.           Section 6.8 of the Agreement is hereby amended and restated in its
entirety to read as follows:

 

“DOMESTIC CASH BALANCE.  THE AGGREGATE BALANCE OF BORROWER’S UNRESTRICTED CASH
AND CASH EQUIVALENTS LOCATED IN THE UNITED STATES MINUS THE AGGREGATE BALANCE OF
ALL INDEBTEDNESS (INCLUDING WITHOUT LIMITATION ANY ISSUED AND DRAWN LETTERS OF
CREDIT AND OTHER CONTINGENT OBLIGATIONS) OWING FROM BORROWER TO BANK, SHALL BE
AT LEAST TWELVE MILLION DOLLARS ($12,000,000) AT ALL TIMES.

 

11.           Section 7.12 of the Agreement is hereby amended and restated in
its entirety to read as follows:

 

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“CAPITAL EXPENDITURES.  MAKE OR BECOME COMMITTED TO MAKE CAPITAL EXPENDITURES
(EXCLUDING ANY CAPITAL EXPENDITURES FOR MERGER AND ACQUISITION ACTIVITIES) IN
EXCESS OF FIVE MILLION DOLLARS ($5,000,000) IN THE AGGREGATE DURING ANY CALENDAR
YEAR.”

 

12.           All references in the Loan Documents to Bank’s address at 2321
Rosecrans Ave., Suite 5000, El Segundo, CA  90245 shall mean and refer to 75
East Trimble Road, M/C 4770, San Jose, California  95131, Attn:  Manager, FAX:
(408) 556-5091.

 

13.           Section 11 of the Agreement hereby is amended and restated in its
entirety to read as follows:

 

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

 

This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of California, without regard to principles of
conflicts of law.  Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Clara, State of California.  THE UNDERSIGNED ACKNOWLEDGE THAT THE RIGHT TO TRIAL
BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN
CIRCUMSTANCES.  TO THE EXTENT PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR
HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS, HIS OR HER CHOICE,
KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, WAIVES ANY
RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR ANY OTHER DOCUMENT, INSTRUMENT OR AGREEMENT BETWEEN THE
UNDERSIGNED PARTIES.”

 

14.           Section 12 of the Agreement hereby is amended and restated in its
entirety to read as follows:]

 

“12          REFERENCE PROVISION.

 

In the event the Jury Trial Waiver set forth above is not enforceable, the
parties elect to proceed under this Judicial Reference Provision.

 

13.1         Mechanics.

 

(a)           With the exception of the items specified in clause (c), below,
any controversy, dispute or claim (each, a “Claim”) between the parties arising
out of or relating to this Agreement or any other document, instrument or
agreement between the undersigned parties (collectively in this Section, the
“Comerica Documents”), will be resolved by a reference proceeding in California
in accordance with the provisions of Sections 638 et seq. of the California Code
of Civil Procedure (“CCP”), or their successor sections, which shall constitute
the exclusive remedy for the resolution of any Claim, including whether the
Claim is subject to the reference proceeding. Except as otherwise provided in
the Comerica Documents, venue for the reference proceeding will be in the state
or federal court in the county or district where the real property

 

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involved in the action, if any, is located or in the state or federal court in
the county or district where venue is otherwise appropriate under applicable law
(the “Court”).

 

(b)           The matters that shall not be subject to a reference are the
following: (i) nonjudicial foreclosure of any security interests in real or
personal property, (ii) exercise of self-help remedies (including, without
limitation, set-off), (iii) appointment of a receiver and (iv) temporary,
provisional or ancillary remedies (including, without limitation, writs of
attachment, writs of possession, temporary restraining orders or preliminary
injunctions). This reference provision does not limit the right of any party to
exercise or oppose any of the rights and remedies described in clauses (i) and
(ii) or to seek or oppose from a court of competent jurisdiction any of the
items described in clauses (iii) and (iv). The exercise of, or opposition to,
any of those items does not waive the right of any party to a reference pursuant
to this reference provision as provided herein.

 

(c)           The referee shall be a retired judge or justice selected by mutual
written agreement of the parties. If the parties do not agree within ten
(10) days of a written request to do so by any party, then, upon request of any
party, the referee shall be selected by the Presiding Judge of the Court (or his
or her representative). A request for appointment of a referee may be heard on
an ex parte or expedited basis, and the parties agree that irreparable harm
would result if ex parte relief is not granted.  Pursuant to CCP § 170.6, each
party shall have one peremptory challenge to the referee selected by the
Presiding Judge of the Court (or his or her representative).

 

(d)           The parties agree that time is of the essence in conducting the
reference proceedings. Accordingly, the referee shall be requested, subject to
change in the time periods specified herein for good cause shown, to (i) set the
matter for a status and trial-setting conference within fifteen (15) days after
the date of selection of the referee, (ii) if practicable, try all issues of law
or fact within one hundred twenty (120) days after the date of the conference
and (iii) report a statement of decision within twenty (20) days after the
matter has been submitted for decision.

 

(e)           The referee will have power to expand or limit the amount and
duration of discovery.  The referee may set or extend discovery deadlines or
cutoffs for good cause, including a party’s failure to provide requested
discovery for any reason whatsoever. Unless otherwise ordered based upon good
cause shown, no party shall be entitled to “priority” in conducting discovery,
depositions may be taken by either party upon seven (7) days written notice, and
all other discovery shall be responded to within fifteen (15) days after
service. All disputes relating to discovery which cannot be resolved by the
parties shall be submitted to the referee whose decision shall be final and
binding.

 

13.2         Procedures.  Except as expressly set forth herein, the referee
shall determine the manner in which the reference proceeding is conducted
including the time and place of hearings, the order of presentation of evidence,
and all other questions that arise with respect to the course of the reference
proceeding.  All proceedings and hearings conducted before the referee, except
for trial, shall be conducted without a court reporter, except that when any
party so requests, a court reporter will be used at any

 

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hearing conducted before the referee, and the referee will be provided a
courtesy copy of the transcript. The party making such a request shall have the
obligation to arrange for and pay the court reporter. Subject to the referee’s
power to award costs to the prevailing party, the parties will equally share the
cost of the referee and the court reporter at trial.

 

13.3         Application of Law.  The referee shall be required to determine all
issues in accordance with existing case law and the statutory laws of the State
of California. The rules of evidence applicable to proceedings at law in the
State of California will be applicable to the reference proceeding. The referee
shall be empowered to enter equitable as well as legal relief, enter equitable
orders that will be binding on the parties and rule on any motion which would be
authorized in a court proceeding, including without limitation motions for
summary judgment or summary adjudication. The referee shall issue a decision at
the close of the reference proceeding which disposes of all claims of the
parties that are the subject of the reference.  Pursuant to CCP § 644, such
decision shall be entered by the Court as a judgment or an order in the same
manner as if the action had been tried by the Court and any such decision will
be final, binding and conclusive.  The parties reserve the right to appeal from
the final judgment or order or from any appealable decision or order entered by
the referee.  The parties reserve the right to findings of fact, conclusions of
laws, a written statement of decision, and the right to move for a new trial or
a different judgment, which new trial, if granted, is also to be a reference
proceeding under this provision.

 

13.4         Repeal.  If the enabling legislation which provides for appointment
of a referee is repealed (and no successor statute is enacted), any dispute
between the parties that would otherwise be determined by reference procedure
will be resolved and determined by arbitration.   The arbitration will be
conducted by a retired judge or justice, in accordance with the California
Arbitration Act §1280 through §1294.2 of the CCP as amended from time to time.
The limitations with respect to discovery set forth above shall apply to any
such arbitration proceeding.

 

13.5         THE PARTIES RECOGNIZE AND AGREE THAT ALL CONTROVERSIES, DISPUTES
AND CLAIMS RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE
AND NOT BY A JURY. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT)
WITH COUNSEL OF ITS, HIS OR HER OWN CHOICE, EACH PARTY KNOWINGLY AND
VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, AGREES THAT THIS
REFERENCE PROVISION WILL APPLY TO ANY CONTROVERSY, DISPUTE OR CLAIM BETWEEN OR
AMONG THEM ARISING OUT OF OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE OTHER
COMERICA DOCUMENTS.”

 

15.           Exhibit C to the Agreement is hereby replaced with Exhibit C
attached hereto.

 

16.           No course of dealing on the part of Bank or its officers, nor any
failure or delay in the exercise of any right by Bank, shall operate as a waiver
thereof, and any single or partial exercise of any such right shall not preclude
any later exercise of any such right.  Bank’s failure at any time to require
strict performance by a Borrower of any provision shall not affect any right

 

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of Bank thereafter to demand strict compliance and performance.  Any suspension
or waiver of a right must be in writing signed by an officer of Bank.

 

17.           Unless otherwise defined, all initially capitalized terms in this
Amendment shall be as defined in the Agreement.  The Agreement, as amended
hereby, shall be and remain in full force and effect in accordance with its
respective terms and hereby is ratified and confirmed in all respects.  Except
as expressly set forth herein, the execution, delivery, and performance of this
Amendment shall not operate as a waiver of, or as an amendment of, any right,
power, or remedy of Bank under the Agreement, as in effect prior to the date
hereof.

 

18.           Borrower represents and warrants that the Representations and
Warranties contained in the Agreement are true and correct as of the date of
this Amendment, and that no Event of Default has occurred and is continuing.

 

19.           As a condition to the effectiveness of this Amendment, Bank shall
have received, in form and substance satisfactory to Bank, the following:

 

(a)           this Amendment, duly executed by Borrower;

 

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

 

(c)           all reasonable Bank Expenses incurred through the date of this
Amendment, which may be debited from any of Borrower’s accounts; and

 

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

 

20.           This Amendment may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one instrument.

 

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IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first
date above written.

 

 

WJ COMMUNICATIONS, INC.

 

 

 

 

 

 

 

By:

 /s/ RAINER N. GROWITZ

 

 

 

Title:

 VP Finance and Interim CFO

 

 

 

 

 

 

 

COMERICA BANK

 

 

 

 

 

 

 

By:

 /s/ GUY SIMPSON

 

 

 

Title:

 Vice President

 

 

[Signature Page to Fourth Amendment to Loan & Security Agreement]

 

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EXHIBIT C
COMPLIANCE CERTIFICATE

 

TO:                         COMERICA BANK

 

FROM:                   WJ COMMUNICATIONS, INC.

 

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

 

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

 

Reporting Covenant

 

Required

 

Complies

 

 

 

 

 

 

 

 

 

Quarterly 10Q/financial statements

 

Quarterly within 45 days

 

 

 

Yes

 

No

Annual (CPA Audited)/10K

 

FYE within 90 days

 

 

 

Yes

 

No

Compliance Cert.

 

Quarterly within 45 days

 

 

 

Yes

 

No

IP Report

 

Quarterly within 30 days

 

 

 

Yes

 

No

 

Financial Covenant

 

Required

 

Actual

 

Complies

 

 

 

 

 

 

 

 

 

Minimum Unrestricted Cash

 

$12,000,000 plus bank debt

 

$

 

Yes

 

No

Minimum Tangible Net Worth

 

$8,000,000

 

$

 

Yes

 

No

 

Comments Regarding Exceptions: See Attached.

 

BANK USE ONLY

 

 

 

 

 

 

 

 

Received by:

 

 

Sincerely,

 

 

AUTHORIZED SIGNER

 

 

 

Date:

 

 

 

 

 

 

 

 

 

 

 

 

 

Verified:

 

 

 

 

SIGNATURE

 

 

 

 

AUTHORIZED SIGNER

 

 

 

 

 

Date:

 

 

 

TITLE

 

 

 

 

 

 

 

 

 

Compliance Status

Yes

No

 

 

 

 

 

 

 

 

DATE

 

 

 

 

 

 

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