Amended and Restated Credit and Security Agreement



 
Exhibit
10.80 
 

 

 
AMENDED AND RESTATED

CREDIT AND SECURITY AGREEMENT 
 
BY AND BETWEEN 
 
RF MONOLITHICS, INC. 
 
AND 
 
WELLS FARGO BANK MINNESOTA, N.A. 
 
Dated as of: February 3, 2003 
 

 

 
Export-Import Bank of the United States 
 
Working Capital Guarantee No.: APO77025XX 
 
Master Guarantee Agreement No.: MN-MGA-99-001 
 
Delegated Authority Letter Agreement No.: MN-DA-99-001 







 
TABLE OF
CONTENTS 
 

	 	 	 	  	 	  	 Page


	 ARTICLE I
	  	 Definitions
	  	 1

	
	 	 	 Section 1.1
	  	 Definitions
	  	 1

	 	 	 Section 1.2
	  	 Other Definitional Terms; Rules of Interpretation
	  	 15

	
	 ARTICLE II
	  	 Amount and Terms of the Credit Facility
	  	 15

	
	 	 	 Section 2.1
	  	 Revolving Advances
	  	 15

	 	 	 Section 2.2
	  	 Interest; Minimum Charge; Default Interest; Participations; Usury
	  	 16

	 	 	 Section 2.3
	  	 Fees.
	  	 17

	 	 	 Section 2.4
	  	 Computation of Interest and Fees; When Interest Due and Payable
	  	 17

	 	 	 Section 2.5
	  	 Capital Adequacy
	  	 18

	 	 	 Section 2.6
	  	 Voluntary Prepayment; Reduction of the Maximum Line; Termination of the Credit
Facility by the Borrower
	  	 18

	 	 	 Section 2.7
	  	 Termination and Line Reduction Fees; Waiver of Termination Fees.
	  	 19

	 	 	 Section 2.8
	  	 Mandatory Prepayment
	  	 19

	 	 	 Section 2.9
	  	 Payment
	  	 19

	 	 	 Section 2.10
	  	 Payment on Non-Banking Days
	  	 19

	 	 	 Section 2.11
	  	 Use of Proceeds
	  	 19

	 	 	 Section 2.12
	  	 Liability Records
	  	 20

	 	 	 Section 2.13
	  	 Automatic Renewal
	  	 20

	 	 	 Section 2.14
	  	 Facility Subject to Eximbank Rules
	  	 20

	
	 ARTICLE III
	  	 Security Interest; Occupancy; Setoff
	  	 20

	
	 	 	 Section 3.1
	  	 Grant of Security Interest
	  	 20

	 	 	 Section 3.2
	  	 Notification of Account Debtors and Other Obligors
	  	 20

	 	 	 Section 3.3
	  	 Assignment of Insurance
	  	 21

	 	 	 Section 3.4
	  	 Occupancy
	  	 21

	 	 	 Section 3.5
	  	 License
	  	 22

	 	 	 Section 3.6
	  	 Financing Statement
	  	 22

	 	 	 Section 3.7
	  	 Setoff
	  	 22

	
	 ARTICLE IV
	  	 Conditions of Lending
	  	 23

	
	 	 	 Section 4.1
	  	 Conditions Precedent to the Initial Revolving Advance
	  	 23

	 	 	 Section 4.2
	  	 Conditions Precedent to All Revolving Advances
	  	 24

	
	 ARTICLE V
	  	 Representations and Warranties
	  	 25

	
	 	 	 Section 5.1
	  	 Corporate Existence and Power; Name; Chief Executive Office; Inventory and Equipment Locations; Tax Identification
Number
	  	 25

	 	 	 Section 5.2
	  	 Authorization of Borrowing; No Conflict as to Law or Agreements
	  	 25

	 	 	 Section 5.3
	  	 Legal Agreements
	  	 26

	 	 	 Section 5.4
	  	 Subsidiaries
	  	 26









TABLE OF CONTENTS 
(continued) 
 

	 	 	 	  	 	  	 Page


	 	 	 Section 5.5
	  	 Financial Condition; No Adverse Change
	  	 26

	 	 	 Section 5.6
	  	 Litigation
	  	 26

	 	 	 Section 5.7
	  	 Regulation U
	  	 26

	 	 	 Section 5.8
	  	 Taxes
	  	 26

	 	 	 Section 5.9
	  	 Titles and Liens
	  	 26

	 	 	 Section 5.10
	  	 Plans
	  	 27

	 	 	 Section 5.11
	  	 Default
	  	 27

	 	 	 Section 5.12
	  	 Environmental Matters
	  	 27

	 	 	 Section 5.13
	  	 Submissions to Lender
	  	 28

	 	 	 Section 5.14
	  	 Financing Statements
	  	 28

	 	 	 Section 5.15
	  	 Rights to Payment
	  	 28

	 	 	 Section 5.16
	  	 Financial Solvency
	  	 28

	 	 	 Section 5.17
	  	 Suspension and Debarment, etc
	  	 29

	 	 	 Section 5.18
	  	 Ownership of Borrower
	  	 29

	 	 	 Section 5.19
	  	 Intellectual Property
	  	 30

	
	 ARTICLE VI
	  	 Borrower’s Affirmative Covenants
	  	 31

	
	 	 	 Section 6.1
	  	 Reporting Requirements
	  	 31

	 	 	 Section 6.2
	  	 Books and Records; Inspection and Examination
	  	 34

	 	 	 Section 6.3
	  	 Account Verification
	  	 34

	 	 	 Section 6.4
	  	 Compliance with Laws.
	  	 34

	 	 	 Section 6.5
	  	 Payment of Taxes and Other Claims
	  	 34

	 	 	 Section 6.6
	  	 Maintenance of Properties
	  	 35

	 	 	 Section 6.7
	  	 Insurance
	  	 35

	 	 	 Section 6.8
	  	 Preservation of Existence
	  	 35

	 	 	 Section 6.9
	  	 Delivery of Instruments, etc
	  	 35

	 	 	 Section 6.10
	  	 Chattel Paper
	  	 35

	 	 	 Section 6.11
	  	 Lockbox; Collateral Account; Alternate Collateral Account
	  	 35

	 	 	 Section 6.12
	  	 Performance by the Lender
	  	 37

	 	 	 Section 6.13
	  	 Control Agreements
	  	 37

	 	 	 Section 6.14
	  	 Minimum Tangible Net Worth
	  	 37

	 	 	 Section 6.15
	  	 Minimum Book Net Worth
	  	 37

	 	 	 Section 6.16
	  	 Quarterly Minimum Net Income
	  	 38

	 	 	 Section 6.17
	  	 Monthly Minimum Net Income
	  	 38

	 	 	 Section 6.18
	  	 [Intentionally Omitted.]
	  	 38

	 	 	 Section 6.19
	  	 Quarterly Inspection and Review
	  	 38

	 	 	 Section 6.20
	  	 Assembly of Export Order Summaries
	  	 38

	 	 	 Section 6.21
	  	 Perfection of Intellectual Property Security Interest
	  	 38

	 	 	 Section 6.22
	  	 Location of Collateral; Acknowledgment from Bailees
	  	 39

	
	 ARTICLE VII
	  	 Negative Covenants
	  	 39

	
	 	 	 Section 7.1
	  	 Liens
	  	 39

	 	 	 Section 7.2
	  	 Indebtedness
	  	 40









TABLE OF CONTENTS 
(continued) 
 

	 	 	 	  	 	  	 Page


	 	 	 Section 7.3
	  	 Guaranties
	  	 40

	 	 	 Section 7.4
	  	 Investments and Subsidiaries
	  	 41

	 	 	 Section 7.5
	  	 Dividends
	  	 41

	 	 	 Section 7.6
	  	 Sale or Transfer of Assets; Suspension of Business Operations
	  	 41

	 	 	 Section 7.7
	  	 Consolidation and Merger; Asset Acquisitions
	  	 41

	 	 	 Section 7.8
	  	 Sale and Leaseback
	  	 42

	 	 	 Section 7.9
	  	 Restrictions on Nature of Business
	  	 42

	 	 	 Section 7.10
	  	 Capital Expenditures
	  	 42

	 	 	 Section 7.11
	  	 Accounting
	  	 42

	 	 	 Section 7.12
	  	 Discounts, etc
	  	 42

	 	 	 Section 7.13
	  	 Defined Benefit Pension Plans
	  	 42

	 	 	 Section 7.14
	  	 Other Defaults
	  	 42

	 	 	 Section 7.15
	  	 Place of Business; Name
	  	 42

	 	 	 Section 7.16
	  	 Organizational Documents
	  	 42

	 	 	 Section 7.17
	  	 Salaries
	  	 43

	
	 ARTICLE VIII
	  	 Events of Default, Rights and Remedies
	  	 43

	
	 	 	 Section 8.1
	  	 Events of Default
	  	 43

	 	 	 Section 8.2
	  	 Rights and Remedies
	  	 45

	 	 	 Section 8.3
	  	 Certain Notices
	  	 45

	
	 ARTICLE IX
	  	 Miscellaneous
	  	 46

	
	 	 	 Section 9.1
	  	 No Waiver; Cumulative Remedies
	  	 46

	 	 	 Section 9.2
	  	 Amendments, Etc
	  	 46

	 	 	 Section 9.3
	  	 Addresses for Notices, Etc
	  	 46

	 	 	 Section 9.4
	  	 Further Documents
	  	 47

	 	 	 Section 9.5
	  	 Collateral
	  	 47

	 	 	 Section 9.6
	  	 Costs and Expenses
	  	 47

	 	 	 Section 9.7
	  	 Indemnity
	  	 47

	 	 	 Section 9.8
	  	 Participants
	  	 49

	 	 	 Section 9.9
	  	 Execution in Counterparts
	  	 49

	 	 	 Section 9.10
	  	 Binding Effect; Assignment; Complete Agreement; Exchanging
Information
	  	 49

	 	 	 Section 9.11
	  	 Severability of Provisions
	  	 49

	 	 	 Section 9.12
	  	 Entire Agreement
	  	 49

	 	 	 Section 9.13
	  	 Headings
	  	 49

	 	 	 Section 9.14
	  	 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial
	  	 50

	 	 	 Section 9.15
	  	 Confidentiality
	  	 50

	 	 	 Section 9.16
	  	 Retention of Borrower’s Records
	  	 50

	 	 	 Section 9.17
	  	 Amendment and Restatement
	  	 50









 
CREDIT AND
SECURITY AGREEMENT 
 
Dated as of February 3,
2003 
 
RF MONOLITHICS, INC., a Delaware
corporation (the “Borrower”), and WELLS FARGO BANK MINNESOTA, N.A. a national banking association (the “Lender”), hereby agree as follows: 
 
R E C I T A L S 
 
A. The Borrower and the Lender have entered into that certain Credit and Security Agreement dated as of
December 8, 2000, as amended by (a) that certain First Amendment to Credit and Security Agreement and Waiver of Defaults dated as of March 30, 2001, (b) that certain Second Amendment to Credit and Security Agreement dated as of August 23, 2001, (c)
that certain Third Amendment to Credit and Security Agreement dated as of November 29, 2001, (d) that certain Fourth Amendment to Credit and Security Agreement dated as of April 12, 2002, and (e) that certain Fifth Amendment to Credit and Security
Agreement dated as of December 12, 2002 (as amended, the “Existing Credit Agreement”). 
 
B. The Borrower has requested and the Lender has agreed to amend and modify the Existing Credit Agreement upon the terms and conditions hereinafter set forth. 
 
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows: 
 
ARTICLE I 
 
Definitions

 
Section 1.1 Definitions. For all purposes
of this Agreement, except as otherwise expressly provided, the following terms shall have the meanings assigned to them in this Section or in the Section referenced after such term: 
 
“Accounts” means all of the Borrower’s accounts, as such term is defined in the UCC, including
each and every right of the Borrower to the payment of money, whether such right to payment now exists or hereafter arises, whether such right to payment arises out of a sale, lease or other disposition of goods or other property, out of a rendering
of services, out of a loan, out of the overpayment of taxes or other liabilities, or otherwise arises under any contract or agreement, whether such right to payment is created, generated or earned by the Borrower or by some other person who
subsequently transfers such person’s interest to the Borrower, whether such right to payment is or is not already earned by performance, and howsoever such right to payment may be evidenced, together with all other rights and interests
(including all Liens) which the Borrower may at any time have by law or agreement against any account debtor or other obligor obligated to make any such payment or against any property of such account debtor or other obligor; all including but not
limited to all present and future accounts, contract rights, 

 

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loans and obligations receivable, chattel papers, bonds, notes and other debt instruments, tax refunds and rights to payment in the nature of
general intangibles. 
 
“Affiliate” or
“Affiliates” means any Person controlled by, controlling or under common control with another Person. For purposes of this definition, “control,” when used with respect to any specified Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. For avoidance of doubt, each Subsidiary of the Borrower is an Affiliate of the Borrower. 
 
“Agreement” means this Amended and Restated Credit
and Security Agreement, as amended, supplemented or restated from time to time. 
 
“Alternate Collateral Account” means an account owned by Wells Fargo Bank, N.A., the Lender, or any of their Affiliates or subsidiaries used to process Accounts receivable due from foreign
account debtors to the Borrower. 
 
“Availability” means the lesser of: 
 
(a) the difference between (i) Borrowing Base and (ii) the outstanding principal balance of the Revolving Advances; or 
 
(b) the difference between (i) $13,500,000 and (ii) the outstanding principal balance of the WFBCI Revolving Advances. 
 
“Banking Day” means a day other than a Saturday,
Sunday or other day on which banks are generally not open for business in Dallas, Texas. 
 
“Book Net Worth” means the aggregate of the common and preferred stockholders’ equity of the Borrower, determined in accordance with GAAP on a consolidated basis. 
 
“Borrower Agreement” means the Borrower Agreement
dated as of December 8, 2000, executed by the Borrower in favor of Eximbank and acknowledged by the Lender a copy of which is attached hereto as Exhibit B. 
 
“Borrowing Base” means, at any time the lesser of: 
 
(a) the Maximum Line; or 
 
(b) subject to change from time to time in the Lender’s sole discretion, the sum of:

 
(i) 90% of Eligible
Export-Related Accounts, provided that such rate will be reduced by 1% for each percentage point by which Dilution exceeds 5%, plus 
 

2 








(ii) the lesser of (A) $3,000,000 or (B) 60% of Eligible Export Inventory,
provided that on December 1, 2003, and on the first day of each month thereafter, such rate will be reduced by 1% per month until equal to 50%; 
 
provided, however, at no time shall the outstanding principal balance of the Revolving Advances supported by Eligible Export
Inventory exceed 60% of the aggregate amount of all outstanding Revolving Advances. 
 
“Capital Expenditures” for a period means any expenditure of money for the lease, purchase or other acquisition of any capital asset, or the lease of any other asset whether payable currently
or in the future. 
 
“Charges” means all
fees, charges, and/or other items of value, if any, contracted for, charged, taken, received or reserved by Lender in connection with the transactions contemplated hereunder, which are treated as interest under applicable law. 
 
“Chattel Paper” means all of the Borrower’s
Chattel Paper, as such term may be defined from time to time in the UCC, whether now owned or hereafter acquired. 
 
“Collateral” means all of the Borrower’s assets, including Accounts, Chattel Paper, deposit accounts, documents, Equipment,
General Intangibles, fixtures, goods, Instruments, Intellectual Property, Inventory, Investment Property, letter-of-credit rights, letters of credit, Receivables, all sums on deposit in any Collateral Account or any Alternate Collateral Account, any
items in any Lockbox, and the Real Property; together with (i) all substitutions and replacements for and products of any of the foregoing; (ii) in the case of all goods, all accessions; (iii) all accessories, attachments, parts, equipment and
repairs now or hereafter attached or affixed to or used in connection with any goods; (iv) all warehouse receipts, bills of lading and other documents of title now or hereafter covering such goods; (v) all collateral subject to the Lien of any
Security Document; (vi) any money, or other assets of the Borrower that now or hereafter come into the possession, custody, or control of the Lender; (vii) all sums on deposit in the Special Account; and (viii) proceeds of any and all of the
foregoing. 
 
“Collateral Account” means
the Lender Account, as such term is defined in the Lockbox Agreement. 
 
“Commitments” means the Lender’s commitments to make Revolving Advances to or for the Borrower’s account pursuant to Article II. 
 
“Compliance Certificate” means a certificate substantially in the form of Exhibit C attached
hereto. 
 
“Country Limitation Schedule”
means the most recent schedule published by Eximbank and provided to the Borrower by the Lender which sets forth on a country-by-country basis whether and under what conditions Eximbank will provide coverage for the financing of export transactions
to countries listed therein. 
 
“Credit
Facility” means the credit facility being made available to the Borrower by the Lender pursuant to Article II. 
 

3 








 
“Current
Maturities of Long Term Debt” means as of a given date, the amount of the Borrower’s long-term debt and capitalized leases which became due during the applicable period ending on the designated date. 
 
“Debt” of any Person means all items of indebtedness
or liability which in accordance with GAAP would be included in determining total liabilities as shown on the liabilities side of a balance sheet of that Person as at the date as of which Debt is to be determined. For purposes of determining a
Person’s aggregate Debt at any time, “Debt” shall also include the aggregate payments required to be made by such Person at any time under any lease that is considered a capitalized lease under GAAP. 
 
“Deed of Trust” means that certain Deed of Trust,
Security Agreement, Assignment of Rents and Fixture Financing Statement executed by the Borrower dated as of even date herewith in favor of Michael W. Hilliard, trustee for the benefit of the Lender, covering the Real Property more particularly
described herein. 
 
“Default” means an
event that, with giving of notice or passage of time or both, would constitute an Event of Default. 
 
“Default Period” means any period of time beginning on the first day of any month during which a Default or Event of Default has
occurred and ending on the date the Lender notifies the Borrower in writing that such Default or Event of Default has been cured or waived. 
 
“Default Rate” means the lesser of (a) the Maximum Rate, or (b) with respect to the Revolving Advances, an annual rate equal to
three percent (3%) over the Revolving Floating Rate, which rate shall change when and as the Revolving Floating Rate changes. 
 
“Dilution” means the gross amount of all returns, allowances, discounts, credits, write-offs, and similar items relating to the
Borrower’s Accounts (but excluding any non-diluting items) computed as a percentage of the Borrower’s gross sales, calculated on a three month rolling average, as determined by WFBCI in its sole discretion during routine collateral audits.

 
“ERISA” means the Employee Retirement
Income Security Act of 1974, as amended. 
 
“Eligibility Certificate” means a certificate substantially in the form attached hereto as Exhibit E, executed by the Borrower and accepted by the Lender. 
 
“Eligible Export-Related Accounts” means all unpaid Export Related Accounts owed by account debtors
located outside the United States for the sale or provision of Items, net of any credits, but in no event shall Eligible Export-Related Accounts include any Export Related Account: 
 
(i) that does not arise from the sale of Items in the ordinary course of Borrower’s
business; 
 
(ii) that is not
subject to a valid, perfected first priority Lien in favor of Lender; 
 

4 








 
(iii) as to which any covenant, representation or warranty contained in the Loan Documents with respect to such Account has been breached; 
 
(iv) that is not owned by Borrower or is subject to any right, claim or interest of another Person other than the Lien in
favor of Lender and the junior Lien in favor of WFBCI; 
 
(v) with respect to which an invoice has not been sent; 
 
(vi) that arises from the sale of defense articles or defense services; 
 
(vii) that is due and payable from an account
debtor located in a Prohibited Country; 
 
(viii) that does not comply with the requirements of the Country Limitation Schedule; 
 
(ix) that is due and payable more than 90 days from the earlier of the shipment date or the date of the invoice;

 
(x) that is not paid within 60
calendar days from its original due date, unless it is insured through Eximbank export credit insurance for comprehensive commercial and political risk, or through Eximbank approved private insurers for comparable coverage, in which case it is not
paid within 90 calendar days from its due date; 
 
(xi) that arises from a sale of goods to or performance of services for an employee of Borrower, a stockholder of Borrower, a Subsidiary of Borrower, a Person with a controlling interest in Borrower or a Person which shares common
controlling ownership with Borrower; 
 
(xii) that is backed by a letter of credit unless the Items covered by the subject letter of credit have been shipped; 
 
(xiii) that Lender or Eximbank, in its reasonable judgment, deems uncollectible for any reason; 
 
(xiv) that is due and payable in a currency
other than U.S. dollars, (a) except as may be approved in writing by Eximbank, (b) except for up to an aggregate of $500,000 in accounts receivable payable by customers of the Borrower in British Pounds Sterling, and (c) except for up to an
aggregate of $500,000 in accounts receivable payable by customers of the Borrower in Euros which must be supported by forward dollar contracts; 
 
(xv) that is due and payable from a military account debtor, except as may be approved in writing by Eximbank;

 

5 








 
(xvi) that does not comply with the terms of sale set forth in Section 7 of the Loan Authorization Notice; 
 
(xvii) that is due and payable from an account debtor who (a) applies for, suffers, or consents to the appointment of, or
the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or calls a meeting of its creditors, (b) admits in writing its inability, or is generally unable, to pay its debts as
they become due or ceases operations of its present business, (c) makes a general assignment for the benefit of creditors, (d) commences a voluntary case under any state or federal bankruptcy laws (as now or hereafter in effect), (e) is adjudicated
as bankrupt or insolvent, (f) files a petition seeking to take advantage of any other law providing for the relief of debtors, (g) acquiesces to, or fails to have dismissed, any petition which is filed against it in any involuntary case under such
bankruptcy laws, or (h) takes any action for the purpose of effecting any of the foregoing; 
 
(xviii) that arises from a bill-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment or any other
repurchase or return basis or is evidenced by Chattel Paper; 
 
(xix) for which the Items giving rise to such Account have not been shipped and delivered to and accepted by the account debtor or the services giving rise to such Account have not been performed by
Borrower and accepted by the account debtor or the Account otherwise does not represent a final sale; 
 
(xx) that is subject to any offset, deduction, defense, dispute, or counterclaim or the account debtor is also a creditor
or supplier of Borrower or the Account is contingent in any respect or for any reason; 
 
(xxi) for which Borrower has made any agreement with the account debtor for any deduction therefrom, except for discounts
or allowances made in the ordinary course of business for prompt payment, all of which discounts or allowances are reflected in the calculation of the face value of each respective invoice related thereto; 
 
(xxii) for which any of the Items giving rise
to such Account have been returned, rejected or repossessed; 
 
(xxiii) to the extent it includes any finance charges, service charges, taxes, discounts, credits, allowances and Retainages; 
 
(xxiv) that portion of the Export-Related Accounts arising from Foreign Content incorporated
into the Items sold; 
 
(xxv) that
arise from the sale of any Items to be used in the construction, alteration, operation or maintenance of nuclear power, enrichment, reprocessing, research or heavy water production facilities; or 
 

6 








 
(xxvi) that are otherwise deemed ineligible for any reason by the Lender or Eximbank in its discretion. 
 
“Eligible Export Inventory” means the Items including raw materials, components and work-in-process that has been purchased,
manufactured or otherwise acquired by the Borrower for resale pursuant to Export Orders and for which the Lender has received an Eligibility Certificate certifying that such Inventory will be used for export purposes only, at the lower of cost or
market value as determined in accordance with GAAP with market value as of the date of any Inventory appraisal completed pursuant to the provisions of Section 6.15 being established pursuant to such appraisal; provided, however, that in no event
shall Eligible Export Inventory include any Inventory: 
 
(i) that is not subject to a valid, perfected first priority Lien in favor of Lender and subject to no other Liens except those Liens in favor of WFBCI to secure repayment of WFBCI Credit Agreement; 
 
(ii) that is located at an address that has
not been disclosed to Lender in writing; 
 
(iii) that is placed by Borrower on consignment or held by Borrower on consignment from another Person; 
 
(iv) that is in-transit; covered by any negotiable or non-negotiable warehouse receipt, bill of lading or other document
of title; that is in the possession of a processor or bailee, or located on premises leased or subleased to Borrower, or on premises subject to a mortgage in favor of a Person other than Lender, unless such processor or bailee or mortgagee or the
lessor or sublessor of such premises, as the case may be, has executed and delivered all documentation which Lender shall require to evidence the subordination or other limitation or extinguishment of such Person’s rights with respect to such
Inventory and Lender’s right to gain access thereto; 
 
(v) that is produced in violation of the Fair Labor Standards Act or subject to the “hot goods” provisions contained in 29 U.S.C. § 215 or any successor statute or section; 
 
(vi) as to which any covenant, representation
or warranty with respect to such Inventory contained in the Loan Documents has been breached; 
 
(vii) that is not located in the United States; 
 
(viii) that is sample or demonstration Inventory; 
 
(ix) that consists of proprietary software
(i.e. software designed solely for Borrower’s internal use and not intended for resale); 
 

7 








 
(x) that is damaged, slow moving, obsolete, returned, defective, recalled or unfit for further processing or not currently saleable in the normal course of the Borrower’s operations; 
 
(xi) that has been previously exported from
the United States; 
 
(xii) that
constitutes defense articles or defense services; 
 
(xiii) that is to be incorporated into Items destined for shipment to a Prohibited Country, unless and only to the extent that such Items are to be sold to such Prohibited Country on terms of a letter of credit confirmed by
a bank acceptable to Eximbank; or 
 
(xiv) that is to be incorporated into Items whose sale would result in an Account which would not be an Eligible Export-Related Account; 
 
(xv) that the Borrower has returned, has attempted to return, is in the process of returning or intends to return to the
vendor thereof; 
 
(xvi) with
respect to raw materials and work-in-process Inventory, that portion of such Inventory in excess of an amount equal to (1) the total value of total raw materials and work-in-process Inventory not otherwise ineligible minus the value of that portion
of such Inventory representing Foreign Content, multiplied by (2) the Foreign Sales Percentage; 
 
(xvii) with respect to finished goods Inventory (A) for the period from December 1, 2002 through May 1, 2003, that portion
of such Inventory in excess of an amount equal to (1) the total value of finished goods Inventory not otherwise ineligible minus the value of that portion of such Inventory representing Foreign Content, multiplied by (2) the Foreign Sales
Percentage; and (B) after May 1, 2003, that portion of such Inventory in excess of an amount equal to (1) the total value of finished goods Inventory not otherwise ineligible multiplied by (2) the US Shipped Foreign Sales Percentage, multiplied by
(3) the US Content Cost Percentage; and 
 
(xviii) Inventory otherwise deemed ineligible by the Lender in its sole discretion. 
 
“Environmental Indemnity Agreement” means the Environmental Indemnity Agreement executed by the Borrower in favor of the Lender
dated as of even date herewith, as the same may be amended, modified or supplemented from time to time. 
 
“Environmental Law” means any federal, state, local or other governmental statute, regulation, law or ordinance dealing with the
protection of human health and the environment. 
 
“Equipment” means all of the Borrower’s equipment, as such term may be defined from time to time in the UCC, whether now owned or hereafter acquired, including but not limited to all present and future machinery,
vehicles, furniture, fixtures, manufacturing equipment, shop 

 

8 









equipment, office and recordkeeping equipment, parts, tools, supplies, and including specifically (without limitation) the goods described in
any equipment schedule or list herewith or hereafter furnished to the Lender by the Borrower. 
 
“Event of Default” has the meaning specified in Section 8.1. 
 
“Exceptions Approval Letter” means a letter from Eximbank approving any and all applicable exceptions from the rules and
regulations of Eximbank governing the Working Capital Guaranty Program. 
 
“Excess Cash Flow” means Net Income plus depreciation and amortization minus Current Maturities of Long Term Debt minus unfinanced Capital Expenditures. 
 
“Eximbank” means the Export-Import Bank of the United States. 
 
“Export Collateral” means that portion of Collateral
consisting of Export Related Accounts and the Items. 
 
“Export Related Accounts” means all Accounts of the Borrower owed by account debtors located outside the United States other than the WFBCI Export Related Accounts. 
 
“Export Order” means a written export order or
contract for the purchase from the Borrower of Items from a customer outside the United States. 
 
“Extension” means the date to which the Original Maturity Date has been extended in a written notice from the Lender to the Borrower, but in no event shall such date extend beyond December
31, 2005. 
 
“First Amendment to Patent
Security Agreement” means that certain First Amendment to Patent and Trademark Security Agreement executed by the Borrower in favor of the Lender dated as of the date hereof amending the Patent Security Agreement. 
 
“Foreign Content” means that portion of the cost of
Inventory arising from materials which are not of United States origin or from labor and services not performed in the United States. 
 
“Foreign Sales Percentage” means the level of export sales of Items as a percent of the Borrower’s total Inventory sales
during the twelve (12) month period preceding the date of determination plus the projected sales in the next ninety (90) days, determined as at the end of each fiscal quarter. 
 
“Funding Date” has the meaning given in Section 2.1. 
 
“FYE” means the last day of the Borrower’s
fiscal year, which is August 31. 
 
“GAAP” means generally accepted accounting principles, applied on a basis consistent with the accounting practices applied in the audited financial statements described in Section 6.1(a), except for any change in accounting
practices to the extent that, due to a 

 

9 









promulgation of the Financial Accounting Standards Board changing or implementing any new accounting standard, the Borrower either (i) is
required to implement such change, or (ii) for future periods will be required to and for the current period may in accordance with generally accepted accounting principles implement such change, for its financial statements to be in conformity with
generally accepted accounting principles (any such change is herein referred to as a “Required GAAP Change”), provided that (x) the Borrower shall fully disclose in such financial statements any such Required GAAP Change and the effects of
the Required GAAP Change on the Borrower’s income, retained earnings or other accounts, as applicable, and (y) the Borrower’s financial covenants set forth in Section 6.14 and 7.10 shall be adjusted as necessary to reflect the effects of
such Required GAAP Change. 
 
“General
Intangibles” means all of the Borrower’s general intangibles, as such term may be defined from time to time in the UCC, whether now owned or hereafter acquired, including (without limitation) all present and future patents, patent
applications, copyrights, trademarks, trade names, trade secrets, customer or supplier lists and contracts, manuals, operating instructions, permits, franchises, the right to use the Borrower’s name, and the goodwill of the Borrower’s
business. 
 
“Guaranty” means any
Guaranty executed by a guarantor in favor of and in form and substance acceptable to the Lender. 
 
“Hazardous Substances” means pollutants, contaminants, hazardous substances, hazardous wastes, petroleum and fractions thereof, and all other chemicals, wastes, substances and materials
listed in, regulated by or identified in any Environmental Law. 
 
“Instruments” means all of the Borrower’s instruments, as such term may be defined from time to time in the UCC, whether now owned or hereafter acquired. 
 
“Intellectual Property” means all rights, priorities and privileges relating to intellectual
property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, any now owned or hereafter arising copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses,
service marks, trade dress, trade secrets, mask works, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom. 
 
“Interest Payment Date” has the meaning given in
Section 2.2. 
 
“Inventory” means all of
the Borrower’s inventory, as such term may be defined from time to time in the UCC, whether now owned or hereafter acquired, whether consisting of whole goods, spare parts or components, supplies or materials, whether acquired, held or
furnished for sale, for lease or under service contracts or for manufacture or processing, and wherever located. 
 
“Investment Property” means all of the Borrower’s investment property, as such term may be defined from time to time in the
UCC, whether now owned or hereafter acquired, including but not limited to all securities, security entitlements, securities accounts, commodity contracts, commodity accounts, stocks, bonds, mutual fund shares, money market shares and U.S.
Government securities. 
 

10 








 
“Items” means all Inventory of the Borrower to be sold by the Borrower to customers outside the United States. 
 
“Letter of Credit Rights” means a right to payment or performance under a letter of credit, whether or not the Borrower has
demanded or is at the time entitled to demand payment or performance but does not include the right to demand payment or performance. 
 
“Lien” means any security interest, mortgage, deed of trust, pledge, lien, charge, encumbrance, title retention agreement or
analogous instrument or device, including the interest of each lessor under any capitalized lease and the interest of any bondsman under any payment or performance bond, in, of or on any assets or properties of a Person, whether now owned or
hereafter acquired and whether arising by agreement or operation of law. 
 
“Loan Authorization Notice” means that certain Loan Authorization Notice submitted to the Eximbank by Lender in connection with this Agreement. 
 
“Loan Documents” means this Agreement, the Revolving Note, the Borrower Agreement, any Swap
Contract, the Environmental Indemnity Agreement, the Security Documents and any other documents executed by the Borrower in relation to any of the foregoing. 
 
“Lockbox” has the meaning given in the Lockbox Agreement. 
 
“Lockbox Agreement” means the Lockbox and Collection Account Agreement by and among the Borrower,
Regulus West LLC, Wells Fargo Bank Texas, N.A. and, the Lender, dated as of December 13, 2002. 
 
“Master Guaranty” means that certain Master Guarantee Agreement No. MN-MGA-99-001 dated July 20, 1999, by and between the Lender and Eximbank, as supplemented by a Delegated Authority Letter
Agreement No. MN-DA-99-001 dated September 30, 1999. 
 
“Maturity Date” has the meaning given in Section 2.13. 
 
“Maximum Line” means $5,000,000, unless said amount is reduced pursuant to Section 2.6, in which event it means the amount to which said amount is reduced. 
 
“Maximum Rate” means the maximum lawful rate of
interest which may be contracted for, charged, taken, received or reserved by Lender in accordance with the applicable laws of the State of Texas (or applicable United States federal law to the extent that such law permits Lender to contract for,
charge, take, receive or reserve a greater amount of interest than under Texas law), taking into account all Charges made in connection with the transaction evidenced by the Loan Documents. To the extent, if any, that Chapter 303 of the Texas
Finance Code, as amended, establishes the Maximum Rate, the Maximum Rate shall be the “weekly ceiling” as defined therein. 
 
“Minimum Charge” has the meaning given in Section 2.2(c). 
 

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“Net
Income” means fiscal year-to-date after-tax consolidated net income of a Person, decreased by the sum of any extraordinary, non-operating or non-cash income recorded by such Person as determined in accordance with GAAP. 
 
“Obligations” means the Revolving Note and each and
every other debt, liability and obligation of every type and description which the Borrower may now or at any time hereafter owe to the Lender or any Affiliates of Lender, whether such debt, liability or obligation now exists or is hereafter created
or incurred, whether it arises in a transaction involving the Lender alone, or any Affiliates of Lender or in a transaction involving other creditors of the Borrower, and whether it is direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or sole, joint, several or joint and several, and including specifically, but not limited to, all indebtedness of the Borrower arising under this Agreement, the Revolving Note, any Swap
Contract, the Loan Documents, or any other loan or credit agreement or guaranty between the Borrower and the Lender or any Affiliates of Lender, whether now in effect or hereafter entered into. 
 
“Original Maturity Date” means the later of December
31, 2004 or the Extension. 
 
“Patent Security
Agreement” means the Patent and Trademark Security Agreement executed by the Borrower in favor of the Lender dated as of December 8, 2000, as the same may be amended, supplemented or restated from time to time. 
 
“Permitted Lien” has the meaning given in Section
7.1. 
 
“Person” means any individual,
corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. 
 
“Plan” means an employee benefit plan or other plan
maintained for the Borrower’s employees and covered by Title IV of ERISA. 
 
“Premises” means all premises where the Borrower conducts its business and has any rights of possession, including the premises legally described in Exhibit D attached hereto. 
 
“Prime Rate” means the rate of interest publicly
announced from time to time by Wells Fargo Bank, N.A.-San Francisco, as its “prime rate” or, if such bank ceases to announce a rate so designated, any similar successor rate designated by the Lender. 
 
“Prohibited Country” means any country in which
Eximbank coverage is not available for commercial reasons or in which Eximbank is legally prohibited from doing business, as designated in the Country Limitation Schedule. 
 
“Real Property” means the Borrower’s real property located at 4441-4445 Sigma Road, Dallas,
Dallas County, Texas, as more particularly described in the Deed of Trust. 
 
“Receivables” means each and every right of the Borrower to the payment of money, whether such right to payment now exists or hereafter arises, whether such right to payment arises out of a
sale, lease or other disposition of goods or other property, out of a rendering of 

 

12 









services, out of a loan, out of the overpayment of taxes or other liabilities, or otherwise arises under any contract or agreement, whether
such right to payment is created, generated or earned by the Borrower or by some other person who subsequently transfers such person’s interest to the Borrower, whether such right to payment is or is not already earned by performance, and
howsoever such right to payment may be evidenced, together with all other rights and interests (including all liens and security interests) which the Borrower may at any time have by law or agreement against any account debtor or other obligor
obligated to make any such payment or against any property of such account debtor or other obligor; all including but not limited to all present and future Accounts, tax refunds and rights to payment not constituting General Intangibles.

 
“Reportable Event” shall have the
meaning assigned to that term in Title IV of ERISA. 
 
“Retainage” means that portion of an Account that an account debtor is not obligated to pay until the end of a specified period of time following satisfactory performance by the Borrower. 
 
“Revolving Advance” has the meaning given in Section
2.1. 
 
“Revolving Floating Rate” means
an annual rate equal to the sum of the Prime Rate plus one and one-half percent (1.50%), which annual rate shall change when and as the Prime Rate changes. 
 
“Revolving Note” means the Borrower’s revolving promissory note, payable to the order of the Lender in substantially the
form of Exhibit A hereto and any note or notes issued in substitution therefor, as the same may hereafter be amended, supplemented or restated from time to time. 
 
“Security Documents” means this Agreement, the Lockbox Agreement, the Patent Security
Agreement, the Deed of Trust, any Guaranty and any other document delivered to the Lender from time to time to secure the Obligations, as the same may hereafter be amended, supplemented or restated from time to time. 
 
“Security Interest” has the meaning given in Section
3.1. 
 
“Subsidiary” means any
corporation of which more than 50% of the outstanding shares of capital stock having general voting power under ordinary circumstances to elect a majority of the board of directors of such corporation, irrespective of whether or not at the time
stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency, is at the time directly or indirectly owned by the Borrower, by the Borrower and one or more other Subsidiaries, or by one or
more other Subsidiaries. 
 
“Swap
Contract” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or
bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency
swap transactions, cross-currency rate swap 

 

13 









transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any
options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement,
together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement. 
 
“Tangible Net Worth” means the difference between (i) the tangible assets of the Borrower, which, in accordance with GAAP are
tangible assets, after deducting adequate reserves in each case where, in accordance with GAAP, a reserve is proper and (ii) all Debt of the Borrower; provided, however, that notwithstanding the foregoing in no event shall there be
included as such tangible assets patents, trademarks, trade names, copyrights, licenses, goodwill, receivables from Affiliates, directors, officers or employees, prepaid expenses, deposits, deferred charges or treasury stock or any securities or
Debt of the Borrower or any other securities unless the same are readily marketable in the United States of America or entitled to be used as a credit against federal income tax liabilities, and any other assets designated from time to time by the
Lender, in its sole discretion, in each case computed on a consolidated basis. 
 
“Termination Date” means the earliest of (i) the Maturity Date, (ii) the date the Borrower terminates the Credit Facility, or (iii) the date the Lender demands payment of the Obligations
after an Event of Default pursuant to Section 8.2. 
 
“UCC” means the Uniform Commercial Code as in effect from time to time in the State of Texas. 
 
“US Content” means that portion of the cost of an Item arising from materials which are of United States origin or from labor
and services performed in the United States. 
 
“US Content Cost Percentage” means a percentage representing the cost of the Eligible Export Inventory that is finished goods (exclusive of the Borrower’s mark-up) that is derived from US Content of the Items destined
for export determined as at the end of and for each month. 
 
“US Shipped Foreign Sales Percentage” means the level of export sales of finished goods Inventory located in the United States as a percentage of the Borrower’s total sales of its finished goods Inventory located in
the United States, determined (i) as of May 31, 2003, for the previous two fiscal quarters, (ii) as of August 31, 2003, for the previous three fiscal quarters, and (iii) as of November 30, 2003 and thereafter, at the end of each fiscal quarter for
the twelve (12) month period preceding the date of determination. 
 
“WFBCI” means Wells Fargo Business Credit, Inc., a Minnesota corporation. 
 
“WFBCI Credit Agreement” means that certain Amended and Restated Credit and Security Agreement of even date herewith by and
between the Borrower and WFBCI, as the same may hereafter be amended, supplemented or restated from time to time. 
 

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“WFBCI
Export Related Accounts” means all Accounts of the Borrower owed by account debtors located outside the United States that are included in the “Borrowing Base” as such term is defined in the WFBCI Credit Agreement. 
 
“WFBCI Revolving Advances” means the Revolving
Advances as defined in WFBCI Credit Agreement. 
 
Section 1.2 Other Definitional Terms; Rules of Interpretation. The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as
a whole and not to any particular provision of this Agreement. All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP. All terms defined in the UCC and not otherwise defined herein have the
meanings assigned to them in the UCC. References to Articles, Sections, subsections, Exhibits, Schedules and the like, are to Articles, Sections and subsections of, or Exhibits or Schedules attached to, this Agreement unless otherwise expressly
provided. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. Unless the context in which used herein otherwise clearly requires, “or”
has the inclusive meaning represented by the phrase “and/or”. Defined terms include in the singular number the plural and in the plural number the singular. Reference to any agreement (including the Loan Document), document or instrument
means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof (and, if applicable, in accordance with the terms hereof and the other Loan Documents), except where otherwise
explicitly provided, and reference to any promissory note includes any promissory note which is an extension or renewal thereof or a substitute or replacement therefor. Reference to any law, rule, regulation, order, decree, requirement, policy,
guideline, directive or interpretation means as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect on the determination date, including rules and regulations promulgated thereunder. 
 
ARTICLE II 
 
Amount and Terms of the Credit Facility 
 
Section 2.1 Revolving Advances. The Lender agrees, on
the terms and subject to the conditions herein set forth, to make advances to the Borrower from time to time from the date all of the conditions set forth in Section 4.1 are satisfied (the “Funding Date”) to the Termination Date, on the
terms and subject to the conditions herein set forth (the “Revolving Advances”). In no event shall the provisions of Chapter 346 of the Texas Finance Code (which regulates certain revolving credit loan accounts) apply to this Agreement or
the Revolving Note or other Loan Documents. The Lender shall have no obligation to make a Revolving Advance if, after giving effect to such requested Revolving Advance, the sum of the outstanding and unpaid Revolving Advances would exceed
Availability. In addition, at no time shall the outstanding Revolving Advances supported by Eligible Export Inventory exceed 60% of all Revolving Advances. The Borrower’s obligation to pay the Revolving Advances shall be evidenced by the
Revolving Note and shall be secured by the Collateral as provided in Article III and in the Security Documents. Within the limits set forth in this Section 2.1, the Borrower may borrow, prepay pursuant to Section 2.6 and reborrow. On the Termination
Date, the entire unpaid principal balance of the Revolving Note, and all unpaid interest accrued thereon, shall be due and payable. The 

 

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Borrower agrees to comply with the following procedures in requesting Revolving Advances under this Section 2.1: 
 
(a) The Borrower shall make each request for
a Revolving Advance to the Lender before 11:00 a.m. (Central time) of the day of the requested Revolving Advance. Requests may be made in writing or by telephone, specifying the date of the requested Revolving Advance and the amount thereof. Each
request shall be by (i) any officer of the Borrower; or (ii) any person designated as the Borrower’s agent by any officer of the Borrower in a writing delivered to the Lender; or (iii) any person whom the Lender reasonably believes to be an
officer of the Borrower or such a designated agent. 
 
(b) Upon fulfillment of the applicable conditions set forth in Article IV, the Lender shall disburse the proceeds of the requested Revolving Advance by crediting the same to the Borrower’s demand deposit account
maintained with Wells Fargo Bank Texas, N.A. unless the Lender and the Borrower shall agree in writing to another manner of disbursement. Upon the Lender’s request, the Borrower shall promptly confirm each telephonic request for a Revolving
Advance by executing and delivering an appropriate confirmation certificate to the Lender. The Borrower shall repay all Revolving Advances even if the Lender does not receive such confirmation and even if the person requesting a Revolving Advance
was not in fact authorized to do so. Any request for a Revolving Advance, whether written or telephonic, shall be deemed to be a representation by the Borrower that the conditions set forth in Section 4.2 have been satisfied as of the time of the
request. 
 
Section 2.2 Interest; Minimum
Charge; Default Interest; Participations; Usury. Interest accruing on the Revolving Note shall be due and payable in arrears on the first day of each month (each an “Interest Payment Date”). 
 
(a) Revolving Note. Except as
set forth in Sections 2.2(c) and 2.2(e), the outstanding principal balance of the Revolving Note shall bear interest at the Revolving Floating Rate. 
 
(b) Minimum Charge. Subject to Section 2.2(e), in addition to the provisions of Section 2.2(a) and 2.2(c),
the Borrower shall pay to the Lender on each Interest Payment Date an additional commitment fee equal to the difference, if any, between (i) $10,000.00 per calendar month during the term of this Agreement, and (ii) the amount of interest calculated
under Sections 2.2(a) and 2.2(c) of this Agreement and Section 2.8 of the WFBCI Credit Agreement. 
 
(c) Default Interest Rate. At any time during any Default Period, in the Lender’s sole discretion and
without waiving any of its other rights and remedies, the principal of the Revolving Advances outstanding from time to time shall bear interest at the Default Rate, effective for any periods designated by the Lender from time to time during that
Default Period. 
 
(d)
Participations. The Lender may sell participations to one or more Persons in all or a portion of its rights and obligations under this Agreement. If any Person shall 

 

16 









acquire a participation in the Revolving Advances under this Agreement, the Borrower shall be obligated to the Lender to pay the full amount
of all interest calculated under, along with all other fees, charges and other amounts due under this Agreement, regardless if such Person elects to accept interest with respect to its participation at a lower rate than the Revolving Floating Rate,
or otherwise elects to accept less than its pro rata share of such fees, charges and other amounts due under this Agreement. 
 
(e) Usury. In any event no rate change shall be put into effect which would result in a rate greater than
the Maximum Rate. It is not the intention of the parties to this Agreement to make an agreement in violation of the laws of any applicable jurisdiction relating to usury. Regardless of any provision in any Loan Documents, the Lender shall never be
entitled to charge, receive, collect or apply, as interest on the Obligations, any amount in excess of Maximum Rate. If the Lender receives, collects or applies, as interest, any such excess, such amount which would be excessive interest shall be
deemed a partial repayment of principal and treated hereunder as such; and if principal is paid in full, any remaining excess shall be paid to the Borrower. All sums constituting interest under applicable law shall be, to the extent permitted by
applicable law, amortized or spread, using the actuarial method, throughout the stated term of the Revolving Note. 
 
Section 2.3 Fees. 
 
(a) Facility Fee. The Borrower hereby agrees to pay the Lender a fully earned and non-refundable facility
fee of 1.5% of the Maximum Line, due and payable upon the execution of this Agreement and on each anniversary hereof. 
 
(b) Unused Line Fee. For the purposes of this Section 2.3(b), “Unused Amount” means the Maximum
Line reduced by outstanding Revolving Advances. At such time, if any, as this Agreement is in effect but the WFBCI Credit Agreement is not in effect, the Borrower agrees to pay to the Lender an unused line fee at the rate of one-quarter percent
(0.25%) per annum on the average daily Unused Amount from the date of this Agreement to and including the Termination Date, due and payable monthly in arrears on each Interest Payment Date and on the Termination Date. 
 
(c) Audit Fees. The Borrower
hereby agrees to pay the Lender, on demand, audit fees in connection with any audits or inspections conducted by the Lender of any Collateral or the Borrower’s operations or business at the rates established from time to time by the Lender as
its audit fees (which fees are currently $750 per day per auditor), together with all actual out-of-pocket costs and expenses incurred in conducting any such audit or inspection. 
 
Section 2.4 Computation of Interest and Fees; When Interest Due and Payable. Interest accruing on the
outstanding principal balance of the Revolving Advances and fees hereunder outstanding from time to time shall be computed on the basis of actual number of days elapsed in a year of 360 days. 
 

17 








 
Section 2.5
Capital Adequacy. If any Related Lender determines at any time that its Return has been reduced as a result of any Rule Change, such Related Lender may require the Borrower to pay it the amount necessary to restore its Return to what it would
have been had there been no Rule Change. For purposes of this Section 2.5: 
 
(a) “Capital Adequacy Rule” means any law, rule, regulation, guideline, directive, requirement or request regarding capital adequacy, or the interpretation or administration thereof by any
governmental or regulatory authority, central bank or comparable agency, whether or not having the force of law, that applies to any Related Lender. Such rules include rules requiring financial institutions to maintain total capital in amounts based
upon percentages of outstanding loans, binding loan commitments and letters of credit. 
 
(b) “Return”, for any period, means the return as determined by such Related Lender on the Revolving Advances
based upon its total capital requirements and a reasonable attribution formula that takes account of the Capital Adequacy Rules then in effect. Return may be calculated for each calendar quarter and for the shorter period between the end of a
calendar quarter and the date of termination in whole of this Agreement. 
 
(c) “Rule Change” means any change in any Capital Adequacy Rule occurring after the date of this Agreement, but the term does not include any changes in applicable requirements that at the
Closing Date are scheduled to take place under the existing Capital Adequacy Rules or any increases in the capital that any Related Lender is required to maintain to the extent that the increases are required due to a regulatory authority’s
assessment of the financial condition of such Related Lender. 
 
(d) “Related Lender” includes (but is not limited to) the Lender, WFBCI, any parent corporation of the Lender and any assignee of any interest of the Lender hereunder and any participant in
the loans made hereunder. 
 
Certificates of any Related Lender
sent to the Borrower from time to time claiming compensation under this Section 2.5, stating the reason therefor and setting forth in reasonable detail the calculation of the additional amount or amounts to be paid to the Related Lender hereunder to
restore its Return shall be conclusive absent manifest error. In determining such amounts, the Related Lender may use any reasonable averaging and attribution methods. 
 
Section 2.6 Voluntary Prepayment; Reduction of the Maximum Line; Termination of the Credit Facility by the
Borrower. Except as otherwise provided herein, the Borrower may prepay the Revolving Advances in whole at any time or from time to time in part. The Borrower may terminate the Credit Facility or reduce the Maximum Line at any time if it (i)
gives the Lender at least 30 days’ prior written notice and (ii) pays the Lender the termination or line reduction fees in accordance with Section 2.7. Any reduction in the Maximum Line must be in an amount not less than $100,000 or an integral
multiple thereof. If the Borrower reduces the Maximum Line to zero, all Obligations shall be immediately due and payable. Upon termination of the Credit Facility and payment and performance of all Obligations, the Lender shall release 

 

18 









or terminate the Security Interest and the Security Documents to which the Borrower is entitled by law. 
 
Section 2.7 Termination and Line Reduction Fees; Waiver of
Termination Fees. 
 
(a)
Termination and Line Reduction Fees. If the Credit Facility is terminated for any reason as of a date other than the Maturity Date, or the Borrower reduces the Maximum Line, the Borrower shall pay to the Lender a fee in an amount equal
to a percentage of the Maximum Line (or the reduction, as the case may be) as follows: (i) one and one-quarter percent (1.25%) if the termination or reduction occurs after December 31, 2002 but on or before December 31, 2003; and (ii) one percent
(1%) if the termination or reduction occurs after December 31, 2003. 
 
(b) Waiver of Termination Fees. The Borrower will not be required to pay the termination and line reduction fees otherwise due under this Section 2.7 if such termination or line reduction
is made because of increased cash flow generated from the Borrower’s operations or refinancing by an Affiliate of the Lender. 
 
Section 2.8 Mandatory Prepayment. Without notice or demand, if the outstanding principal balance of the Revolving Advances shall at
any time exceed the Borrowing Base, the Borrower shall immediately prepay the Revolving Advances to the extent necessary to eliminate such excess. Any payment received by the Lender under this Section 2.8 or under Section 2.7 may be applied to the
Obligations, in such order and in such amounts as the Lender, in its discretion, may from time to time determine. 
 
Section 2.9 Payment. All payments to the Lender shall be made in immediately available funds and shall be applied to the
Obligations two (2) Banking Days after receipt by the Lender. The Lender may hold all payments not constituting immediately available funds for three (3) additional Banking Days before applying them to the Obligations. Notwithstanding anything in
Section 2.1, the Borrower hereby authorizes the Lender, in its discretion at any time or from time to time without the Borrower’s request and even if the conditions set forth in Section 4.2 would not be satisfied, to make a Revolving Advance in
an amount equal to the portion of the Obligations from time to time due and payable. 
 
Section 2.10 Payment on Non-Banking Days. Whenever any payment to be made hereunder shall be stated to be due on a day which is not a Banking Day, such payment may be made on the next succeeding
Banking Day, and such extension of time shall in such case be included in the computation of interest on the Revolving Advances or the fees hereunder, as the case may be. 
 
Section 2.11 Use of Proceeds. The Borrower shall use the proceeds of Revolving Advances only as a
source of working capital to fulfill Export Orders and to finance the manufacture, production or purchase and subsequent export sale of Items. Without limiting the generality of the foregoing, the Borrower shall not use any proceeds of Revolving
Advances for any purpose prohibited by the Borrower Agreement or (i) to service or repay any of Borrower’s pre-existing or future indebtedness unrelated to the Credit Facility, (ii) to acquire fixed assets or capital goods for use in the
Borrower’s business, (iii) to acquire, equip or rent commercial space 

 

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outside the United States, (iv) to employ non-United States citizens or non-U.S. permanent residents located outside of the United States, or
(v) to serve as a retainage or warranty bond. 
 
Section 2.12 Liability Records. The Lender may maintain from time to time, at its discretion, liability records as to the Obligations. All entries made on any such record shall be presumed correct absent manifest error or
unless the Borrower establishes the contrary. Upon the Lender’s demand, the Borrower will admit and certify in writing the exact principal balance of the Obligations that the Borrower then asserts to be outstanding. Any billing statement or
accounting rendered by the Lender shall be conclusive and fully binding on the Borrower unless the Borrower gives the Lender specific written notice of exception within 30 days after receipt absent manifest error. 
 
Section 2.13 Automatic Renewal. Unless terminated (a)
by the Lender (i) by giving written notice to the Borrower no less than ninety (90) days prior to the Maturity Date or (ii) in accordance with Section 8.2, or (b) by the Borrower (i) by giving written notice to the Lender no less than ninety (90)
days prior to the Maturity Date or (ii) in accordance with Section 2.6, the Credit Facility shall remain in effect until the Original Maturity Date, and, thereafter, shall automatically renew for successive one-year periods; provided, however that
the Credit Facility shall not renew unless all applicable conditions set forth in the rules and regulations of Eximbank governing the Working Capital Guaranty Program for such renewal are satisfied and the Eximbank guaranty with respect to the
Credit Facility pursuant to the Master Guaranty shall remain in full force and effect for the renewal term. “Maturity Date” shall initially mean the Original Maturity Date; provided, however, that if at any time the Credit Facility has
been automatically renewed, “Maturity Date” shall mean the one-year anniversary of the date that was formerly the Maturity Date. 
 
Section 2.14 Facility Subject to Eximbank Rules. The Borrower acknowledges that the Lender is willing to make the Credit Facility
available to the Borrower because the Eximbank is willing to guaranty payment of a significant portion of the Obligations pursuant to the Master Guaranty. Accordingly, in the event of any inconsistency among the Loan Documents and the Master
Guaranty or related documents and the rules and regulations of the Eximbank governing the Working Capital Guaranty Program, the provision that is the more stringent on the Borrower shall control. Compliance with any such applicable rule or
regulation shall constitute an additional covenant of the Borrower incorporated herein by reference. 
 
ARTICLE III 
 
Security Interest; Occupancy; Setoff 
 
Section 3.1 Grant of Security Interest. The Borrower hereby pledges, assigns and grants to the Lender a security interest (collectively referred to as the “Security Interest”) in the
Collateral, as security for the payment and performance of the Obligations. Upon request by the Lender, the Borrower will grant the Lender a security interest in all commercial tort claims it may have against any Person. 
 
Section 3.2 Notification of Account Debtors and Other
Obligors. The Lender may at any time during a Default Period notify any account debtor or other person obligated to pay the 

 

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amount due that such right to payment has been assigned or transferred to the Lender for security and shall be paid directly to the Lender.
The Borrower will join in giving such notice if the Lender so requests. At any time after the Borrower or the Lender gives such notice to an account debtor or other obligor, the Lender may, but need not, in the Lender’s name or in the
Borrower’s name, (a) demand, sue for, collect or receive any money or property at any time payable or receivable on account of, or securing, any such right to payment, or grant any extension to, make any compromise or settlement with or
otherwise agree to waive, modify, amend or change the obligations (including collateral obligations) of any such account debtor or other obligor; and (b) as the Borrower’s agent and attorney-in-fact, notify the United States Postal Service to
change the address for delivery of the Borrower’s mail to any address designated by the Lender, otherwise intercept the Borrower’s mail, and receive, open and dispose of the Borrower’s mail, applying all Collateral as permitted under
this Agreement and holding all other mail for the Borrower’s account or forwarding such mail to the Borrower’s last known address. 
 
Section 3.3 Assignment of Insurance. As additional security for the payment and performance of the Obligations, the Borrower hereby
assigns to the Lender any and all monies (including, without limitation, proceeds of insurance and refunds of unearned premiums) due or to become due under, and all other rights of the Borrower with respect to, any and all policies of insurance now
or at any time hereafter covering the Collateral or any evidence thereof or any business records or valuable papers pertaining thereto, and the Borrower hereby directs the issuer of any such policy to pay all such monies directly to the Lender. At
any time, whether or not a Default Period then exists, the Lender may (but need not), in the Lender’s name or in the Borrower’s name, execute and deliver proof of claim, receive all such monies, endorse checks and other instruments
representing payment of such monies, and adjust, litigate, compromise or release any claim against the issuer of any such policy. 
 
Section 3.4 Occupancy. 
 
(a) The Borrower hereby irrevocably grants to the Lender the right to take possession of the Premises at any time during a
Default Period. 
 
(b) The Lender
may use the Premises only to hold, process, manufacture, sell, use, store, liquidate, realize upon or otherwise dispose of goods that are Collateral and for other purposes that the Lender may in good faith deem to be related or incidental purposes.

 
(c) The Lender’s right to
hold the Premises shall cease and terminate upon the earlier of (i) payment in full and discharge of all Obligations and termination of the Commitments, and (ii) final sale or disposition of all goods constituting Collateral and delivery of all such
goods to purchasers. 
 
(d) The
Lender shall not be obligated to pay or account for any rent or other compensation for the possession, occupancy or use of any of the Premises; provided, however, that if the Lender does pay or account for any rent or other compensation for the
possession, occupancy or use of any of the Premises, the Borrower shall reimburse the Lender promptly for the full amount thereof. In addition, the Borrower will pay, or reimburse the Lender for, all taxes, fees, duties, imposts, charges and
expenses at any 

 

21 









	 	 
time incurred by or imposed upon the Lender by reason of the execution, delivery, existence, recordation, performance or enforcement of this
Agreement or the provisions of this Section 3.4. 


 
Section 3.5 License. The Borrower hereby grants to the Lender a non-exclusive, worldwide and royalty-free license to use or otherwise exploit all trademarks, franchises, trade names, copyrights and patents of the
Borrower for the purpose of selling, leasing or otherwise disposing of any or all Collateral during any Default Period. 
 
Section 3.6 Financing Statement. The Borrower authorizes the Lender to file from time to time where permitted by law, such
financing statements against the Collateral described as “all personal property” as the Lender deems necessary or useful to perfect the Security Interest. A carbon, photographic or other reproduction of this Agreement or of any financing
statements signed by the Borrower is sufficient as a financing statement and may be filed as a financing statement in any state to perfect the security interests granted hereby. For this purpose, the following information is set forth: 
 
Name and address of Debtor: 
RF Monolithics, Inc. 
4347 Sigma Road 
Farmers Branch, TX 75244 
Federal Tax Identification No.: 75-1638027 
 
On July 1, 2003, the address of Debtor will change to 4445 Sigma Road, Farmers 
Branch, Texas 75244. 
 
Name and address of Secured Party: 
Wells Fargo Bank Minnesota, N.A. 
Wells Fargo Center 
Sixth and Marquette Avenue 
Minneapolis, Minnesota 55479

 
The Borrower hereby (i) authorizes the Lender to file one or
more UCC financing statements describing the Collateral and/or an “all personal property” description and (ii) agrees to execute UCC financing statements covering the Collateral when and as requested by the Lender from time to time.

 
Section 3.7 Setoff. The Borrower agrees
that the Lender may at any time or from time to time, at its sole discretion and without demand and without notice to anyone, setoff any liability owed to the Borrower by the Lender, whether or not due, against any Obligation, whether or not due. In
addition, each other Person holding a participating interest in any Obligations shall have the right to appropriate or setoff any deposit or other liability then owed by such Person to the Borrower, whether or not due, and apply the same to the
payment of said participating interest, as fully as if such Person had lent directly to the Borrower the amount of such participating interest. 
 

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ARTICLE IV

 
Conditions of Lending 
 
Section 4.1 Conditions Precedent to the Initial Revolving
Advance. The Lender’s obligation to make the initial Revolving Advances hereunder shall be subject to the condition precedent that the Borrower shall have satisfied and/or the Lender shall have received all of the following, each in form
and substance satisfactory to the Lender: 
 
(a) This Agreement, properly executed by the Borrower. 
 
(b) The Revolving Note, properly executed by the Borrower. 
 
(c) A true and correct copy of any and all leases pursuant to which the Borrower is leasing the Premises, together with a
landlord’s disclaimer and consent with respect to each such lease. 
 
(d) The First Amendment to Patent Security Agreement, properly executed by the Borrower. 
 
(e) The IP Supplement. 
 
(f) The Borrower has simultaneously entered into the WFBCI Credit Agreement and all conditions precedent to the initial
Advance set forth therein have been satisfied or waived by WFBCI. 
 
(g) The Lockbox Agreement, properly executed by the Borrower, Regulus West LLC and Wells Fargo Bank Texas, N.A. 
 
(h) The Borrower Agreement, properly executed by the Borrower. 
 
(i) The SBA/Eximbank Joint Application,
properly completed and executed by the Borrower. 
 
(j) Current searches of appropriate filing offices showing that (i) no state or federal tax liens have been filed and remain in effect against the Borrower, (ii) no financing statements have been filed and remain in effect
against the Borrower except those financing statements relating to Permitted Liens or to liens held by Persons who have agreed in writing that upon receipt of proceeds of the Revolving Advances, they will deliver UCC releases and/or terminations
satisfactory to the Lender, and (iii) the Lender has duly filed all financing statements necessary to perfect the Security Interest as first in priority to all other perfected security interests, to the extent the Security Interest is capable of
being perfected by filing. Within 90 days after of the date of this Agreement the Borrower shall provide searches of appropriate filing offices showing that no assignments of patents, trademarks or copyrights have been filed and remain in effect
against the Borrower. 
 

23 








 
(k) A certificate of the Borrower’s Secretary or Assistant Secretary certifying as to (i) the resolutions of the Borrower’s directors and, if required, shareholders, authorizing the execution, delivery and performance of
the Loan Documents, (ii) the Borrower’s articles of incorporation and bylaws, and (iii) the signatures of the Borrower’s officers or agents authorized to execute and deliver the Loan Documents and other instruments, agreements and
certificates, including Revolving Advance requests, on the Borrower’s behalf. 
 
(l) A certificate of an officer of Borrower confirming the representations and warranties set forth in Article V.

 
(m) A current certificate
issued by the Secretary of State of Delaware, certifying that the Borrower is in compliance with all applicable organizational requirements of the State of Delaware and is in existence in good standing. 
 
(n) A current certificate issued by the
Secretary of State of Texas, certifying that the Borrower is duly licensed and qualified to transact business in the State of Texas. 
 
(o) An opinion of counsel to the Borrower, addressed to the Lender, and in form and substance reasonably acceptable to the
Lender. 
 
(p) Certificates of the
insurance required hereunder, with all hazard insurance and the foreign credit insurance containing a lender’s loss payable endorsement in the Lender’s favor and with all liability insurance naming the Lender as an additional insured.

 
(q) A Certificate of Completion
issued by the State of Texas with respect to the Real Property. 
 
(r) Payment of the fees and commissions due through the date hereof under Section 2.3 and expenses incurred by the Lender through such date and required to be paid by the Borrower under Section 9.6,
including all legal expenses incurred through the date of this Agreement. 
 
(s) The Environmental Indemnity Agreement, properly executed by the Borrower. 
 
(t) The Deed of Trust, properly executed by the Borrower. 
 
(u) Certificates of flood insurance for the Real Property. 
 
(v) Such other documents as the Lender may
reasonably require. 
 
Section 4.2 Conditions
Precedent to All Revolving Advances. The Lender’s obligation to make each Revolving Advance shall be subject to the further conditions precedent that on such date: 
 
(a) the Lender has received an Eligibility Certificate submitted no less than one month
before the requested day of the Revolving Advance and copies of the Export 

 

24 









	 	 
Orders (or a written summary thereof) against which the Borrower is requesting such Revolving Advance. 


 
(b) the representations and warranties
contained in Article V are correct on and as of the date of such Revolving Advance as though made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date; and 
 
(c) no event has occurred and is continuing,
or would result from such Revolving Advance, which constitutes a Default or an Event of Default. 
 
ARTICLE V 
 
Representations and Warranties 
 
The Borrower represents and warrants to the Lender as follows: 
 
Section 5.1 Corporate Existence and Power; Name; Chief Executive Office; Inventory and Equipment Locations; Tax Identification Number. The Borrower is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Delaware and is duly licensed or qualified to transact business in all jurisdictions where the character of the property owned or leased or the nature of the business transacted by it
makes such licensing or qualification necessary. The Borrower has all requisite power and authority, corporate or otherwise, to conduct its business, to own its properties and to execute and deliver, and to perform all of its obligations under, the
Loan Documents. During its existence, the Borrower has done business solely under the names set forth in Schedule 5.1 hereto. The Borrower’s chief executive office and principal place of business is located at the address set forth in Schedule
5.1 hereto, and all of the Borrower’s records relating to its business or the Collateral are kept at that location. All Inventory and Equipment is located at that location or the other locations set forth in Schedule 5.1 hereto. 
 
Section 5.2 Authorization of Borrowing; No Conflict as to
Law or Agreements. The execution, delivery and performance by the Borrower of the Loan Documents and the borrowings from time to time hereunder have been duly authorized by all necessary corporate action and do not and will not (i) require any
consent or approval of the Borrower’s stockholders; (ii) require any authorization, consent or approval by, or registration, declaration or filing with, or notice to, any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or any third party, except Eximbank; (iii) violate any provision of any law, rule or regulation (including, without limitation, Regulation T, U or X of the Board of Governors of the Federal Reserve System) or of
any order, writ, injunction or decree presently in effect having applicability to the Borrower or of the Borrower’s articles of incorporation or bylaws; (iv) result in a breach of or constitute a default under any indenture or loan or credit
agreement or any other material agreement, lease or instrument to which the Borrower is a party or by which it or its properties may be bound or affected; or (v) result in, or require, the creation or imposition of any mortgage, deed of trust,
pledge, lien, security interest or other charge or encumbrance of any nature (other than the Security Interest) upon or with respect to any of the properties now owned or hereafter acquired by the Borrower. 
 

25 








 
Section 5.3
Legal Agreements. This Agreement constitutes and, upon due execution by the Borrower, the other Loan Documents will constitute the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their
respective terms. 
 
Section 5.4
Subsidiaries. The Borrower has no Subsidiaries. 
 
Section 5.5 Financial Condition; No Adverse Change. The Borrower has heretofore furnished to the Lender its audited financial statements for its fiscal year ended August 31, 2002 and its unaudited financial statements for the
month ended December 31, 2002 and those statements fairly present in all material respects the Borrower’s financial condition on the dates thereof and the results of its operations and cash flows for the periods then ended and were prepared in
accordance with generally accepted accounting principles. Since the date of the most recent financial statements, there has been no material adverse change in the Borrower’s business, properties or condition (financial or otherwise).

 
Section 5.6 Litigation. There are no
actions, suits or proceedings pending or, to the Borrower’s knowledge, threatened against or affecting the Borrower or any of its Affiliates or the properties of the Borrower or any of its Affiliates before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which, if determined adversely to the Borrower or any of its Affiliates, would have a material adverse effect on the financial condition, properties or operations of the
Borrower or any of its Affiliates. 
 
Section 5.7
Regulation U. The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System), and no part of
the proceeds of any Revolving Advance will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. 
 
Section 5.8 Taxes. The Borrower and its Affiliates have paid or caused to be paid to the proper
authorities when due all federal, state and local taxes required to be withheld by each of them. The Borrower and its Affiliates have filed all federal, state and local tax returns which to the knowledge of the officers of the Borrower or any
Affiliate, as the case may be, are required to be filed, and the Borrower and its Affiliates have paid or caused to be paid to the respective taxing authorities all taxes as shown on said returns or on any assessment received by any of them to the
extent such taxes have become due other than any tax the amount of which, applicability, or validity is being contested in good faith by appropriate proceedings and (x) for which proper reserves have been made, (y) there is no risk of forfeiture of
Collateral during the pendency of such action, and (z) any lien arising as a result of such tax is at all times junior in priority to the Lender’s security interest in the Collateral. 
 
Section 5.9 Titles and Liens. The Borrower has good and indefeasible title to the Real Property, all
Collateral described in the collateral reports provided to the Lender and all other Collateral, properties and assets reflected in the latest financial statements referred to in Section 5.5 and all proceeds thereof, free and clear of all mortgages,
security interests, liens and encumbrances, except for Permitted Liens. No financing statement naming the Borrower as debtor is on file in any office except to perfect only Permitted Liens. Upon the proper filing of a 

 

26 









UCC financing statements in Delaware describing the Collateral (other than fixtures), and a fixture financing statement in Dallas County,
Texas, the Lender’s Security Interest in the Collateral will constitute a valid, perfected security interest in the Collateral capable of being perfected by filing, prior to all other security interests of any other Person except for the
security interest of WFBCI in Collateral not constituting Export Collateral. 
 
Section 5.10 Plans. Except as disclosed to the Lender in writing prior to the date hereof, neither the Borrower nor any of its Affiliates maintains or has maintained any Plan. Neither the
Borrower nor any Affiliate has received any notice or has any knowledge to the effect that it is not in compliance with any of the material requirements of ERISA. No Reportable Event or other fact or circumstance which may have an adverse effect on
the Plan’s tax qualified status exists in connection with any Plan. Neither the Borrower nor any of its Affiliates has: 
 
(a) Any accumulated funding deficiency within the meaning of ERISA; or 
 
(b) Any liability or knows of any fact or
circumstances which could result in any liability to the Pension Benefit Guaranty Corporation, the Internal Revenue Service, the Department of Labor or any participant in connection with any Plan (other than accrued benefits which or which may
become payable to participants or beneficiaries of any such Plan). 
 
Section 5.11 Default. The Borrower is in compliance with all provisions of all agreements, instruments, decrees and orders to which it is a party or by which it or its property is bound or affected, the breach or
default of which could have a material adverse effect on the Borrower’s financial condition, properties or operations. 
 
Section 5.12 Environmental Matters. 
 
(a) To the Borrower’s best knowledge, there are not present in, on or under the Premises any Hazardous Substances in
such form or quantity as to create any liability or obligation for either the Borrower or the Lender under common law of any jurisdiction or under any Environmental Law, and no Hazardous Substances have ever been stored, buried, spilled, leaked,
discharged, emitted or released in, on or under the Premises in such a way as to create any such liability. 
 
(b) To the Borrower’s best knowledge, the Borrower has not disposed of Hazardous Substances in such a manner as to
create any liability under any Environmental Law, except for liabilities in the aggregate amount of less than $25,000 and with respect to which no liens have attached to any of the Collateral. 
 
(c) There are not and there never have been
any requests, claims, notices, investigations, demands, administrative proceedings, hearings or litigation, relating in any way to the Premises or the Borrower, alleging liability under, violation of, or noncompliance with any Environmental Law or
any license, permit or other authorization issued pursuant thereto. To the Borrower’s best knowledge, no such matter is threatened or impending. 
 

27 








 
(d) To the Borrower’s best knowledge, the Borrower’s businesses are and have in the past always been conducted in compliance in all material respects with all Environmental Laws and all licenses, permits and other
authorizations required pursuant to any Environmental Law and necessary for the lawful and efficient operation of such businesses are in the Borrower’s possession and are in full force and effect. No permit required under any Environmental Law
is scheduled to expire within 12 months for which renewal is not expected to be obtained and there is no threat that any such permit will be withdrawn, terminated, limited or materially changed. 
 
(e) To the Borrower’s best knowledge,
the Premises are not and never have been listed on the National Priorities List, the Comprehensive Environmental Response, Compensation and Liability Information System or any similar federal, state or local list, schedule, log, inventory or
database. 
 
(f) The Borrower has
delivered to Lender all environmental assessments, audits, reports, permits, licenses and other documents describing or relating in any way to the Premises or Borrower’s businesses. 
 
Section 5.13 Submissions to Lender. All financial and other information provided to the Lender by or
on behalf of the Borrower in connection with the Borrower’s request for the credit facilities contemplated hereby is true and correct in all material respects and, as to projections, valuations or proforma financial statements, present a good
faith opinion as to such projections, valuations and proforma condition and results. 
 
Section 5.14 Financing Statements. The Borrower has provided to the Lender signed financing statements sufficient when filed to perfect the Security Interest and the other security interests
created by the Security Documents. When such financing statements are filed in the offices noted therein, the Lender will have a valid and perfected security interest in all Collateral and all other collateral described in the Security Documents
which is capable of being perfected by filing financing statements. None of the Collateral or other collateral covered by the Security Documents is or will become a fixture on real estate, unless a sufficient fixture filing is in effect with respect
thereto. 
 
Section 5.15 Rights to Payment.
Each right to payment and each Instrument, document, Chattel Paper and other agreement constituting or evidencing Collateral or other collateral covered by the Security Documents is (or, in the case of all future Collateral or such other collateral,
will be when arising or issued) the valid, genuine and legally enforceable obligation, subject to no defense, setoff or counterclaim, of the account debtor or other obligor named therein or in the Borrower’s records pertaining thereto as being
obligated to pay such obligation. 
 
Section 5.16
Financial Solvency. Both before and after giving effect to the transactions contemplated in the Loan Documents, none of the Borrower or its Affiliates: 
 
(a) was or will be insolvent, as that term is used and defined in Section 101(32) of the United States Bankruptcy Code and
Section 2 of the Uniform Fraudulent Transfer Act; 
 

28 








 
(b) has unreasonably small capital or is engaged or about to engage in a business or a transaction for which any remaining assets of the Borrower or such Affiliate are unreasonably small; 
 
(c) by executing, delivering or performing
its obligations under the Loan Documents or other documents to which it is a party or by taking any action with respect thereto, intends to, nor believes that it will, incur debts beyond its ability to pay them as they mature; 
 
(d) by executing, delivering or performing
its obligations under the Loan Documents or other documents to which it is a party or by taking any action with respect thereto, intends to hinder, delay or defraud either its present or future creditors; and 
 
(e) at this time contemplates filing a
petition in bankruptcy or for an arrangement or reorganization or similar proceeding under any law any jurisdiction, nor, to the best knowledge of the Borrower, is the subject of any actual, pending or threatened bankruptcy, insolvency or similar
proceedings under any law of any jurisdiction. 
 
Section 5.17 Suspension and Debarment, etc. Neither the Borrower nor any of its Principals (as defined below) are (A) debarred, suspended, proposed for debarment with a final determination still pending, declared ineligible or
voluntarily excluded (as such terms are defined under any of the Debarment Regulations referred to below) from participating in procurement or nonprocurement transactions with any US federal government department or agency pursuant to any of the
Debarment Regulations (as defined below) or (B) indicted, convicted or had a civil judgment rendered against the Borrower or any of its Principals for any of the offenses listed in any of the Debarment Regulations. Unless authorized by Eximbank, the
Borrower will not knowingly enter into any transactions in connection with the Items with any person who is debarred, suspended, declared ineligible or voluntarily excluded from participation in procurement or nonprocurement transactions with any US
federal government department or agency pursuant to any of the Debarment Regulations. The Borrower will provide immediate written notice to the Lender if at any time it learns that the certification set forth in this Section 5.17 was erroneous when
made or has become erroneous by reason of changed circumstances. For the purposes hereof, (1) ”Principals” shall mean any officer, director, owner, partner, key employee, or other person with primary management or supervisory
responsibilities with respect to the Borrower; or any other person (whether or not an employee) who has critical influence on or substantive control over the transaction covered by this Agreement and (2) the Debarment Regulations shall mean (x) the
Government wide Debarment and Suspension (Nonprocurement) regulations (Common Rule), 53 Fed. Reg. 19204 (May 26, 1988), (y) Subpart 9.4 (Debarment, Suspension and Ineligibility) of the Federal Acquisition Regulations, 48 C.F.R. 9.400-9.409 and
(z) the revised Government wide Debarment and Suspension (Nonprocurement) regulations (Common Rule), 60 Fed. Reg. 33037 (June 26, 1995). The Borrower acknowledges that any statement, certification or representation made by it in connection with the
Credit Facility is subject to the penalties provided in Article 18 U.S.C. Section 1001. 
 
Section 5.18 Ownership of Borrower. No Person or affiliated Persons owns or controls the right to vote more than 20% of the outstanding capital stock of the Borrower. 
 

29 








 
Section 5.19
Intellectual Property. 
 
(a) Owned Intellectual Property. Contemporaneously with the execution of this Agreement the Borrower has delivered to the Lender a complete list (the “IP Supplement”) of all patents, applications for patents,
trademarks, applications for trademarks, service marks, applications for service marks, mask works, trade dress and copyrights for which the Borrower is the registered owner (the “Owned Intellectual Property”). Except as disclosed on the
IP Supplement, (i) the Borrower owns the Owned Intellectual Property free and clear of all restrictions (including covenants not to sue a third party), court orders, injunctions, decrees, writs or Liens, whether by written agreement or otherwise,
(ii) no Person other than the Borrower owns or has been granted any right in the Owned Intellectual Property, (iii) all Owned Intellectual Property is valid, subsisting and enforceable and (iv) the Borrower has taken all commercially reasonable
action necessary to maintain and protect the Owned Intellectual Property. 
 
(b) Agreements with Employees and Contractors. The Borrower has entered into a legally enforceable agreement with each of its employees and subcontractors obligating each such Person to
assign to the Borrower, without any additional compensation, any Intellectual Property created, discovered or invented by such Person in the course of such Person’s employment or engagement with the Borrower (except to the extent prohibited by
law), and further requiring such Person to cooperate with the Borrower, without any additional compensation, in connection with securing and enforcing any Intellectual Property therein; provided, however, that the foregoing shall not apply with
respect to employees and subcontractors whose job descriptions are of the type such that no such assignments are reasonably foreseeable. 
 
(c) Intellectual Property Rights Licensed from Others. The IP Supplement is a complete list of all
agreements under which the Borrower has licensed Intellectual Property from another Person (“Licensed Intellectual Property”) other than readily available, non-negotiated licenses of computer software and other intellectual property
used solely for performing accounting, word processing and similar administrative tasks (“Off-the-shelf Software”) and a summary of any ongoing payments the Borrower is obligated to make with respect thereto. Except as disclosed on the IP
Supplement and in written agreements copies of which have been given to the Lender, the Borrower’s licenses to use the Licensed Intellectual Property are free and clear of all restrictions, Liens, court orders, injunctions, decrees, or writs,
whether by written agreement or otherwise. Except as disclosed on the IP Supplement, the Borrower is not obligated or, to the Borrower’s knowledge upon reasonably diligent inquiry under any liability whatsoever, to make any payments of a
material nature by way of royalties, fees or otherwise to any owner of, licensor of, or other claimant to, any Intellectual Property. 
 
(d) Other Intellectual Property Needed for Business. Except for Off-the-shelf Software and as disclosed on
the IP Supplement, the Owned Intellectual Property and the Licensed Intellectual Property constitute all Intellectual Property used or necessary to conduct the Borrower’s business as it is presently conducted or as the Borrower reasonably
foresees conducting it. 
 

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(e) Infringement. Except as disclosed on the IP Supplement, the Borrower has no knowledge of, and has not received any written claim or notice alleging, any Infringement of another Person’s Intellectual Property
rights (including any written claim that the Borrower must license or refrain from using the Intellectual Property rights of any third party) nor, to the Borrower’s knowledge, is there any threatened claim or any reasonable basis for any such
claim. 
 
ARTICLE VI 
 
Borrower’s Affirmative Covenants 
 
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrower will comply with the following requirements, unless the Lender shall otherwise consent in writing: 
 
Section 6.1 Reporting Requirements. The Borrower will deliver, or cause to be delivered, to the Lender each of the following, which
shall be in form and detail acceptable to the Lender: 
 
(a) as soon as available, and in any event on the earlier of (x) the date the Borrower files its Annual Report on SEC form 10-K and (y) 90 days after the end of each fiscal year of the Borrower, the Borrower’s audited
financial statements with the unqualified opinion of independent certified public accountants selected by the Borrower and acceptable to the Lender, which annual financial statements shall include the Borrower’s balance sheet as at the end of
such fiscal year and the related statements of the Borrower’s income, retained earnings and cash flows for the fiscal year then ended, prepared, on a consolidating and consolidated basis to include any other Subsidiaries, all in reasonable
detail and prepared in accordance with GAAP, together with (i) copies of all management letters prepared and delivered by such accountants; (ii) a report signed by such accountants stating that in making the investigations necessary for said opinion
they obtained no knowledge, except as specifically stated, of any Default or Event of Default hereunder and all relevant facts in reasonable detail to evidence, and the computations as to, whether or not the Borrower is in compliance with the
requirements set forth in Sections 6.14, 6.15, 6.16, 6.17 and 7.10; and (iii) a certificate of the Borrower’s chief financial officer stating that such financial statements have been prepared in accordance with GAAP and whether or not such
officer has knowledge of the occurrence of any Default or Event of Default hereunder and, if so, stating in reasonable detail the facts with respect thereto; 
 
(b) as soon as available and in any event within 20 days after the end of each month, an unaudited/internal balance sheet
and statements of income and retained earnings of the Borrower as at the end of and for such month and for the year to date period then ended, prepared, on a consolidating and consolidated basis to include any Subsidiaries, in reasonable detail and
stating in comparative form the figures for the corresponding date and periods in the previous year, all prepared in accordance with GAAP, subject to year-end audit adjustments; and accompanied by a Compliance Certificate signed by the
Borrower’s chief financial officer stating (i) that such financial 

 

31 









	 	 
statements have been prepared in accordance with GAAP, subject to normal year-end audit adjustments, (ii) whether or not such officer has
knowledge of the occurrence of any Default or Event of Default hereunder not theretofore reported and remedied and, if so, stating in reasonable detail the facts with respect thereto, and (iii) all relevant facts in reasonable detail to evidence,
and the computations as to, whether or not the Borrower is in compliance with the requirements set forth in Sections 6.14, 6.15, 6.16, 6.17 and 7.10; 


 
(c) within 15 days after the end of each month or more frequently if the Lender so requires,
agings of the Borrower’s accounts receivable, Eligible Export-Related Accounts, inventory, Eligible Export Inventory and its accounts payable, an inventory certification report, an accounts receivable certification as of the end of such month
or shorter time period and such information as the Lender shall require to establish the sales percentage of the Items to total Inventory sales for such periods as the Lender may request; 
 
(d) as soon as available and in any event within 15 days after the end of each month, a
properly completed Eligibility Certificate as of the end of such month, signed by the Borrower’s chief financial officer. 
 
(e) at least 10 days before the beginning of each fiscal year of the Borrower, the projected balance sheets and income
statements for each month of such year, each in reasonable detail, representing the Borrower’s good faith projections and certified by the Borrower’s chief financial officer as having been prepared in good faith and no more positive as to
the Borrower’s operating results or financial condition than the projections used by the Borrower for internal planning purposes, together with such supporting schedules and information as the Lender may in its reasonable discretion require;

 
(f) within 5 Banking Days after
the commencement thereof, notice in writing of all litigation and of all proceedings before any governmental or regulatory agency affecting the Borrower of the type described in Section 5.12 or which seek a monetary recovery against the Borrower in
excess of $10,000; 
 
(g) as
promptly as practicable (but in any event not later than five business days) after an officer of the Borrower obtains knowledge of the occurrence of any breach, default or event of default under any Security Document or any event which constitutes a
Default or Event of Default hereunder, notice of such occurrence, together with a detailed statement by a responsible officer of the Borrower of the steps being taken by the Borrower to cure the effect of such breach, default or event; 
 
(h) as soon as possible and in any event
within 30 days after the Borrower knows or has reason to know that any Reportable Event with respect to any Plan has occurred, the statement of the Borrower’s chief financial officer setting forth details as to such Reportable Event and the
action which the Borrower proposes to take with respect thereto, together with a copy of the notice of such Reportable Event to the Pension Benefit Guaranty Corporation; 
 

32 








 
(i) as soon as possible, and in any event within 10 days after the Borrower fails to make any quarterly contribution required with respect to any Plan under Section 412(m) of the Internal Revenue Code of 1986, as amended, the
statement of the Borrower’s chief financial officer setting forth details as to such failure and the action which the Borrower proposes to take with respect thereto, together with a copy of any notice of such failure required to be provided to
the Pension Benefit Guaranty Corporation; 
 
(j) promptly upon knowledge thereof, notice of (i) any disputes or claims by the Borrower’s customers exceeding $10,000 individually or $25,000 in the aggregate during any fiscal year; (ii) credit memos; (iii) any goods returned
to or recovered by the Borrower; and (iv) any change in the persons constituting the Borrower’s officers and directors; provided, however, that events described in clauses (ii) and (iii) may be reported using the daily collateral report
provided to the Lender; 
 
(k)
promptly upon knowledge thereof, notice of any loss of or material damage to any Collateral or other collateral covered by the Security Documents or of any substantial adverse change in any Collateral or such other collateral or the prospect of
payment thereof; 
 
(l) promptly
upon their distribution, copies of all financial statements, reports and proxy statements which the Borrower shall have sent to its stockholders; 
 
(m) promptly after the sending or filing thereof, copies of all regular and periodic reports which the Borrower shall file
with the Securities and Exchange Commission or any national securities exchange; 
 
(n) as soon as possible, and in any event by not later than five Banking Days after the earlier of the due date or filing
date thereof each year, copies of the franchise and federal and state income tax returns of the Borrower and all schedules thereto and any and all other state tax returns of the Borrower no later than five Banking Days of the Lender’s request
for the same; 
 
(o) promptly upon
knowledge thereof, notice of the Borrower’s violation of any law, rule or regulation, the non-compliance with which could materially and adversely affect the Borrower’s business or its financial condition; 
 
(p) within 5 days after knowledge thereof,
notice of a change in ownership of the Premises or any parcel thereof; 
 
(q) from time to time, with reasonable promptness, any and all receivables schedules, collection reports, deposit records, equipment schedules, copies of invoices to account debtors, shipment documents
and delivery receipts for goods sold, and such other material, reports, records or information as the Lender may reasonably request; and 
 
(r) promptly upon knowledge thereof, the Borrower will deliver to the Lender notice of any commercial tort claims it may
bring against any person, including the name and address of such defendant, a summary of the facts, an estimate of the Borrower’s 

 

33 









	 	 
damages, copies of any complaint or demand letter submitted by the Borrower, and such other information as the Lender may request.



 
Section 6.2 Books and
Records; Inspection and Examination. The Borrower will keep accurate books of record and account for itself pertaining to the Collateral and pertaining to the Borrower’s business and financial condition and such other matters as the Lender
may from time to time request in which true and complete entries will be made in accordance with GAAP and, upon the Lender’s request, will permit any officer, employee, attorney or accountant for the Lender to audit, review, make extracts from
or copy any and all corporate and financial books and records of the Borrower at all times during ordinary business hours, to send and discuss with account debtors and other obligors requests for verification of amounts owed to the Borrower, and to
discuss the Borrower’s affairs with any of its directors, officers, employees or agents. The Borrower will permit the Lender, or its employees, accountants, attorneys or agents, to examine and inspect any Collateral, other collateral covered by
the Security Documents or any other property of the Borrower at any time during ordinary business hours. The Borrower hereby irrevocably authorizes all accountants and third parties to disclose and deliver to the Lender, at the Borrower’s
expense, all financial information, books and records, work papers, management reports and other information in their possession regarding the Borrower. 
 
Section 6.3 Account Verification. The Lender may at any time and from time to time send or require the Borrower to send requests
for verification of accounts or notices of assignment to account debtors and other obligors. The Lender may also at any time and from time to time telephone account debtors and other obligors to verify accounts. 
 
Section 6.4 Compliance with Laws. 
 
(a) The Borrower will (i) comply with the
requirements of applicable laws and regulations, the non-compliance with which would materially and adversely affect its business or its financial condition and (ii) use and keep the Collateral, and require that others use and keep the Collateral,
only for lawful purposes, without violation of any federal, state or local law, statute or ordinance. 
 
(b) Without limiting the foregoing undertakings, the Borrower specifically agrees that it will comply in all material
respects with all applicable Environmental Laws and obtain and comply in all material respects with all permits, licenses and similar approvals required by any Environmental Laws, and will not generate, use, transport, treat, store or dispose of any
Hazardous Substances in such a manner as to create any liability or obligation under the common law of any jurisdiction or any Environmental Law. 
 
Section 6.5 Payment of Taxes and Other Claims. The Borrower will pay or discharge, when due, (a) all taxes, assessments and
governmental charges levied or imposed upon it or upon its income or profits, upon any properties belonging to it (including, without limitation, the Collateral) or upon or against the creation, perfection or continuance of the Security Interest,
prior to the date on which penalties attach thereto, (b) all federal, state and local taxes required to be withheld by it, and (c) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien or charge upon any
properties of the Borrower; provided, that the 

 

34 









Borrower shall not be required to pay any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings and for which proper reserves have been made. 
 
Section 6.6 Maintenance of Properties. The Borrower will: (a) keep and maintain the Collateral, the other collateral covered by the Security Documents and all of its other properties necessary
or useful in its business in good condition, repair and working order (normal wear and tear excepted) and will from time to time replace or repair any worn, defective or broken parts; provided, however, that nothing in this Section 6.6 shall prevent
the Borrower from discontinuing the operation and maintenance of any of its properties if such discontinuance is, in the Lender’s judgment, desirable in the conduct of the Borrower’s business and not disadvantageous in any material respect
to the Lender; (b) defend the Collateral against all claims or demands of all persons (other than the Lender) claiming the Collateral or any interest therein; and (c) keep all Collateral and other collateral covered by the Security Documents free
and clear of all security interests, liens and encumbrances except Permitted Liens. 
 
Section 6.7 Insurance. The Borrower will obtain and at all times maintain insurance with insurers believed by the Borrower to be responsible and reputable, in such amounts and against such risks
as may from time to time be required by the Lender, but in all events in such amounts and against such risks as is usually carried by companies engaged in similar business and owning similar properties in the same general areas in which the Borrower
operates. Without limiting the generality of the foregoing, the Borrower will at all times maintain business interruption insurance including coverage for force majeure, keep all tangible Collateral insured against risks of fire (including so-called
extended coverage), theft, collision (for Collateral consisting of motor vehicles), insure its foreign receivables with foreign credit insurance, and insurance for such other risks and in such amounts as the Lender may reasonably request, with any
loss payable to the Lender to the extent of its interest, and all policies of such insurance shall contain a lender’s loss payable endorsement for the Lender’s benefit acceptable to the Lender. All policies of liability insurance required
hereunder shall name the Lender as an additional insured. 
 
Section 6.8 Preservation of Existence. The Borrower will preserve and maintain its existence and all of its rights, privileges and franchises necessary or desirable in the normal conduct of its business and shall conduct its
business in an orderly, efficient and regular manner. 
 
Section 6.9 Delivery of Instruments, etc. The Borrower will promptly deliver to the Lender in pledge all Instruments payable to it or any Subsidiary. In addition, the Borrower will deliver to the Lender all Chattel Paper
evidencing a right to payment in excess of $5,000. 
 
Section 6.10 Chattel Paper. The Borrower will shall place the following legend in conspicuous type on all Chattel Paper (including electronic Chattel Paper) it creates: 
 
“This Chattel Paper has been assigned to Wells Fargo
Bank Minnesota, N.A. (the “Secured Party”). Further assignment of this Chattel Paper violates the rights of the Secured Party.” 
 
Section 6.11 Lockbox; Collateral Account; Alternate Collateral Account. 
 

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(a) For so long as the Credit Facility is in existence or any Obligations are outstanding, the Borrower shall irrevocably direct all present and future account debtors of Export Related Accounts and other Persons obligated to make
payments constituting Export Collateral to make such payments directly to the Lockbox or to an Alternate Collateral Account. All of the Borrower’s invoices, account statements and other written or oral communications directing, instructing,
demanding or requesting payment of any Account or any other amount constituting Export Collateral shall conspicuously direct that all payments be made (i) to the Lockbox and shall include the Lockbox address, or (ii) to an Alternate Collateral
Account and shall include appropriate payment instructions. All payments received in the Lockbox shall be processed to the Collateral Account. 
 
(b) The Borrower agrees to deposit in the Collateral Account, an Alternate Collateral Account or, at the Lender’s
option, to deliver to the Lender all collections on Accounts, contract rights, chattel paper and other rights to payment constituting Export Collateral, and all other cash proceeds of Export Collateral, which the Borrower may receive directly
notwithstanding its direction to account debtors and other obligors to make payments to the Lockbox or to an Alternate Collateral Account, immediately upon receipt thereof, in the form received, except for the Borrower’s endorsement when deemed
necessary. Until delivered to the Lender or deposited in the Collateral Account or an Alternate Collateral Account, all proceeds or collections of Export Collateral shall be held in trust by the Borrower for and as the property of the Lender and
shall not be commingled with any funds or property of the Borrower. 
 
(c) Amounts deposited in the Collateral Account or any Alternate Collateral Account shall not bear interest and shall not be subject to withdrawal by the Borrower, except after full payment and
discharge of all Obligations. 
 
(d) All deposits in the Collateral Account or any Alternate Collateral Account shall constitute proceeds of Collateral and shall not constitute payment of the Obligations. The Lender from time to time at its discretion may, after
allowing one (1) Banking Day, apply deposited funds in the Collateral Account or an Alternate Collateral Account to the payment of the Obligations, in any order or manner of application satisfactory to the Lender, by transferring such funds to the
Lender’s general account. 
 
(e) All items deposited in the Collateral Account or an Alternate Collateral Account shall be subject to final payment. If any such item is returned uncollected, the Borrower will immediately pay the Lender, or, for items deposited
in the Collateral Account or an Alternate Collateral Account, the bank maintaining such account, the amount of that item, or such bank at its discretion may charge any uncollected item to the Borrower’s commercial account or other account. The
Borrower shall be liable as an endorser on all items deposited in the Collateral Account or any Alternate Collateral Account, whether or not in fact endorsed by the Borrower. 
 
(f) For the proceeds of collection on any Account deposited in the Collateral Account or any
Alternate Collateral Account, a portion of which Account constitutes Export Collateral supporting the Revolving Advances and a portion of which constitutes Domestic Collateral (as defined in the WFBCI Credit Agreement) supporting the WFBCI 

 

36 









Revolving Advances, the Lender shall retain the portion of such Account in an amount based on the percentage of the actual cost of the Items
consisting of US Content (prior to the Borrower’s mark-up) for those Items sold and billed to the buyer(s) on the applicable invoice(s), and the Lender shall allocate and credit or remit the remaining portion (corresponding to the percentage of
the cost of the Items consisting of Foreign Content) of such Account proceeds to WFBCI. All amounts retained by the Lender hereunder are subject to the other terms of this Section 6.11. 
 
Section 6.12 Performance by the Lender. If the Borrower at any time fails to perform or observe any of
the foregoing covenants contained in this Article VI or elsewhere herein, and if such failure shall continue for a period of ten calendar days after the Lender gives the Borrower written notice thereof (or in the case of the agreements contained in
Sections 6.5, 6.7 and 6.11, immediately upon the occurrence of such failure, without notice or lapse of time), the Lender may, but need not, perform or observe such covenant on behalf and in the name, place and stead of the Borrower (or, at the
Lender’s option, in the Lender’s name) and may, but need not, take any and all other actions which the Lender may reasonably deem necessary to cure or correct such failure (including, without limitation, the payment of taxes, the
satisfaction of security interests, liens or encumbrances, the performance of obligations owed to account debtors or other obligors, the procurement and maintenance of insurance, the execution of assignments, security agreements and financing
statements, and the endorsement of instruments); and the Borrower shall thereupon pay to the Lender on demand the amount of all monies expended and all costs and expenses (including reasonable attorneys’ fees and legal expenses) incurred by the
Lender in connection with or as a result of the performance or observance of such agreements or the taking of such action by the Lender, together with interest thereon from the date expended or incurred at the Floating Rate. To facilitate the
Lender’s performance or observance of such covenants of the Borrower, the Borrower hereby irrevocably appoints the Lender, or the Lender’s delegate, acting alone, as the Borrower’s attorney in fact (which appointment is coupled with
an interest) with the right (but not the duty) from time to time to create, prepare, complete, execute, deliver, endorse or file in the name and on behalf of the Borrower during any Default Period any and all instruments, documents, assignments,
security agreements, financing statements, applications for insurance and other agreements and writings required to be obtained, executed, delivered or endorsed by the Borrower under this Section 6.12. 
 
Section 6.13 Control Agreements. Upon request by the
Lender, the Borrower hereby agrees to cooperate with the Lender in obtaining a control agreement in form and substance reasonably satisfactory to the Lender with respect to Collateral consisting of deposit accounts, letter of credit rights and
Investment Property sufficient to perfect the Lender’s Security Interest in such Collateral. 
 
Section 6.14 Minimum Tangible Net Worth. The Borrower will maintain its Tangible Net Worth as of the end of each month at an amount
not less than $1.00. 
 
Section 6.15 Minimum
Book Net Worth. The Borrower will maintain, during each period described below, its Book Net Worth in an amount not less than the amount set forth below: 
 

37 








 
(a) From September 1 through November 30 of each year, a minimum Book Net Worth of not less than an amount equal to $250,000 less than the Book Net Worth as at the prior FYE; 
 
(b) From December 1 through February 28 of
each year, a minimum Book Net Worth of not less than an amount equal to $500,000 less than the Book Net Worth as at the prior FYE; 
 
(c) From March 1 through May 31 of each year, a minimum Book Net Worth of not less than an amount equal to $250,000 less
than the Book Net Worth as at the prior FYE; and 
 
(d) From June 1 through August 31 of each year, a minimum Book Net Worth of not less than an amount equal to $100,000 less than the Book Net Worth as at the prior FYE. 
 
Section 6.16 Quarterly Minimum Net Income. The Borrower
will achieve at all times: (a) during the three month fiscal period ending on November 30 of each year, a minimum Net Income of greater than <$250,000>; (b) during the six month fiscal period ending February 28 or 29 of each year, a minimum
Net Income of greater than <$500,000>; (c) during the nine month fiscal period ending on May 31 of each year, a minimum Net Income of greater than <$250,000>; (d) during the fiscal year ending August 31, a minimum Net Income of greater
than <$100,000>. 
 
Section 6.17 Monthly
Minimum Net Income. The Borrower will achieve, as of the end of each month, a minimum Net Income of greater than <$300,000>. 
 
Section 6.18 [Intentionally Omitted.] 
 
Section 6.19 Quarterly Inspection and Review. The Borrower shall cooperate with and assist the Lender and its agents in conducting
a field examination, audit and appraisal of the Collateral once every quarter while any Obligations remain outstanding for the purpose of determining the value of the Collateral, verification of the Borrowing Base and Borrower’s compliance with
the Loan Documents. The field examination shall include an inspection and valuation of the Inventory, a book audit of Borrower’s Accounts and a review of the accounts receivable aging report. During any Default Period, the Lender may require
more frequent exams. The costs of such field exams shall be paid by the Borrower. 
 
Section 6.20 Assembly of Export Order Summaries. In the event the Borrower has furnished summaries of Export Orders to the Lender pursuant to Section 4.2(a), the Borrower shall at least once
each calendar quarter make a sampling of such Export Orders selected by the Lender representing at least 10% of the aggregate U.S. dollar volume of all Export Orders and 10% of the number of Export Orders supporting Revolving Advances made during
the preceding calendar quarter available for the Lender’s review and inspection. 
 
Section 6.21 Perfection of Intellectual Property Security Interest. No later than 90 days after the date of this Agreement, the Borrower shall execute and file in all appropriate filing offices
such instruments as may be required to properly perfect the security interests granted 

 

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pursuant to the Patent Security Agreement as the Lender requests. The Borrower shall provide the Lender with updates on its progress in
obtaining the perfection of such security interests in all foreign jurisdictions every thirty days after the date of this Agreement until all such security interests are properly perfected as first priority security interests. 
 
Section 6.22 Location of Collateral; Acknowledgment from
Bailees. The Debtor will not permit the Collateral to be kept at any location not set forth on Schedule 5.1 hereto. In the event Collateral is in the possession of a third party, upon request of the Lender, Debtor will join with Secured Party in
notifying the third party of Secured Party’s security interest and obtaining an acknowledgment from the third party that it is holding the Collateral for the benefit of the Secured Party. 
 
ARTICLE VII 
 
Negative Covenants 
 
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrower agrees that, without the Lender’s prior written consent: 
 
Section 7.1 Liens. The Borrower will not create, incur or suffer to exist any mortgage, deed of trust, pledge, lien, security
interest, assignment or transfer upon or of any of its assets, now owned or hereafter acquired, to secure any indebtedness; excluding, however, from the operation of the foregoing, the following (collectively, “Permitted
Liens”): 
 
(a) in the case
of any of the Borrower’s property which is not Collateral or other collateral described in the Security Documents, covenants, restrictions, rights, easements and minor irregularities in title which do not materially interfere with the
Borrower’s business or operations as presently conducted; 
 
(b) mortgages, deeds of trust, pledges, liens, security interests and assignments in existence on the date hereof and listed in Schedule 7.1 hereto, securing indebtedness for borrowed money permitted
under Section 7.2; 
 
(c) the
Security Interest and Liens created by the Security Documents; 
 
(d) the Liens in favor of WFBCI provided such Liens are subordinate to the Security Interest in Export Collateral; 
 
(e) purchase money security interests (including capital leases) relating to permitted
Capital Expenditures under Section 7.10 not exceeding the lesser of cost or fair market value thereof so long as no Default Period is then in existence and none would exist immediately after such acquisition; 
 
(f) liens for taxes not then delinquent or
the amount, applicability or validity of which is being contested in good faith by appropriate proceedings for which proper reserves have been made and (x) which do not materially interfere with the Borrower’s business or operations as
presently conducted, (y) there is no risk of forfeiture of 

 

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Collateral during the pendency of such action, and (z) any lien arising as a result of such tax is at all times junior in priority to the
Lender’s security interest in the Collateral; 
 
(g) any landlord’s lien on fixtures or personal property arising by operation of law to the extent such lien is subordinate to the security interest of the Lender in the Collateral and the rent secured thereby is not in
default; 
 
(h) any judgment lien
which is subordinate to the security interest of the Lender in the Collateral in an amount not exceeding $25,000 so long as (x) the finality of such judgment is being contested in good faith by appropriate proceedings, (y) for which proper reserves
have been made and (z) such proceedings or such lien does not materially interfere with the Borrower’s business or operations as presently conducted; and 
 
(i) “Permitted Exceptions” as defined in the Deed of Trust. 
 
The Borrower will not amend any financing statements in favor of the Lender
except as permitted by law. Any authorization by the Lender to any Person to amend financing statements in favor of the Lender shall be in writing. 
 
Section 7.2 Indebtedness. The Borrower will not incur, create, assume or permit to exist any indebtedness or liability on account
of deposits or advances or any indebtedness for borrowed money or letters of credit issued on the Borrower’s behalf, or any other indebtedness or liability evidenced by notes, bonds, debentures or similar obligations, except: 
 
(a) indebtedness arising hereunder;

 
(b) indebtedness of the
Borrower in existence on the date hereof and listed in Schedule 7.2 hereto including any renewals or extensions thereof; 
 
(c) indebtedness relating to liens permitted in accordance with Section 7.1; and 
 
(d) obligations (contingent or otherwise) of
the Borrower existing or arising under any Swap Contract, provided that (i) such obligations are (or were) entered into by the Borrower in relation to the Real Estate Term Loan under and as defined in the WFBCI Credit Agreement and not for purposes
of speculation or taking a “market view;” and (ii) such Swap Contract does not contain any provision exonerating the non-defaulting party from its obligation to make payments on outstanding transactions to the defaulting party.

 
Section 7.3 Guaranties. The Borrower will
not assume, guarantee, endorse or otherwise become directly or contingently liable in connection with any obligations of any other Person, except: 
 
(a) the endorsement of negotiable instruments by the Borrower for deposit or collection or similar transactions in the
ordinary course of business; and 
 

40 








 
(b) guaranties, endorsements and other direct or contingent liabilities in connection with the obligations of other Persons, in existence on the date hereof and listed in Schedule 7.2 hereto. 
 
Section 7.4 Investments and Subsidiaries. 
 
(a) The Borrower will not purchase or hold
beneficially any stock or other securities or evidences of indebtedness of, make or permit to exist any loans or advances to, or make any investment or acquire any interest whatsoever in, any other Person, including specifically but without
limitation any partnership or joint venture, except: 
 
(i) investments in direct obligations of the United States of America or any agency or instrumentality thereof whose obligations constitute full faith and credit obligations of the United States of America having a maturity
of one year or less, commercial paper issued by U.S. corporations rated “A-1” or “A-2” by Standard & Poors Corporation or “P-1” or “P-2” by Moody’s Investors Service or certificates of deposit or
bankers’ acceptances having a maturity of one year or less issued by members of the Federal Reserve System having deposits in excess of $100,000,000 (which certificates of deposit or bankers’ acceptances are fully insured by the Federal
Deposit Insurance Corporation); 
 
(ii) travel advances or loans to the Borrower’s officers and employees not exceeding at any one time an aggregate of $50,000; and 
 
(iii) advances in the form of progress payments for the purchase of capital assets permitted pursuant to Section 7.10,
prepaid rent not exceeding one month and security deposits maintained in the ordinary course of business. 
 
(b) The Borrower will not create or permit to exist any Subsidiary. 
 
Section 7.5 Dividends. The Borrower will not declare or
pay any dividends (other than dividends payable solely in stock of the Borrower) on any class of its stock or make any payment on account of the purchase, redemption or other retirement of any shares of such stock or make any distribution in respect
thereof, either directly or indirectly. 
 
Section
7.6 Sale or Transfer of Assets; Suspension of Business Operations. The Borrower will not sell, lease, assign, transfer or otherwise dispose of (i) the stock of any Subsidiary, (ii) all or a substantial part of its assets, or (iii) any
Collateral or any interest therein (whether in one transaction or in a series of transactions) to any other Person other than the sale of Inventory in the ordinary course of business and will not liquidate, dissolve or suspend business operations.
The Borrower will not in any manner transfer any property other than obsolete or worn-out Equipment in the aggregate value of $25,000 or less during any fiscal year without prior or present receipt of full and adequate consideration. 
 
Section 7.7 Consolidation and Merger; Asset
Acquisitions. The Borrower will not dissolve, consolidate with or merge into any Person, or permit any other Person to merge into it, or acquire (in a transaction analogous in purpose or effect to a consolidation or merger) all or substantially
all the assets of any other Person. 
 

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Section 7.8
Sale and Leaseback. The Borrower will not enter into any arrangement, directly or indirectly, with any other Person whereby the Borrower shall sell or transfer any real or personal property, whether now owned or hereafter acquired, and then
or thereafter rent or lease as lessee such property or any part thereof or any other property which the Borrower intends to use for substantially the same purpose or purposes as the property being sold or transferred. 
 
Section 7.9 Restrictions on Nature of Business. The
Borrower will not engage in any line of business materially different from that presently engaged in by the Borrower and will not purchase, lease or otherwise acquire assets not related to its business. 
 
Section 7.10 Capital Expenditures. The Borrower will
not incur or contract to incur Capital Expenditures of more than (a) $3,500,000 in the aggregate during the fiscal year ending August 31, 2003, and (b) for each fiscal year thereafter, the sum of $1,000,000 plus the lesser of (i) 50% of Net Income
for the current fiscal year, or (ii) 50% of Excess Cash Flow for the current fiscal year. 
 
Section 7.11 Accounting. The Borrower will not adopt any material change in accounting principles other than as required by GAAP. The Borrower will not adopt, permit or consent to any change in
its fiscal year. 
 
Section 7.12 Discounts,
etc. The Borrower will not, after notice from the Lender, grant any discount, credit or allowance to any customer of the Borrower or accept any return of goods sold, or at any time (whether before or after notice from the Lender) modify, amend,
subordinate, cancel or terminate the obligation of any account debtor or other obligor of the Borrower. 
 
Section 7.13 Defined Benefit Pension Plans. The Borrower will not adopt, create, assume or become a party to any defined benefit
pension plan, unless disclosed to the Lender pursuant to Section 5.10. 
 
Section 7.14 Other Defaults. The Borrower will not permit any breach, default or event of default to occur under any note, loan agreement, indenture, lease, mortgage, contract for deed, security agreement or other
contractual obligation binding upon the Borrower. 
 
Section 7.15 Place of Business; Name. The Borrower will not transfer its chief executive office or principal place of business, or move, relocate, close or sell any business location; provided, however, that the Borrower may
change its mailing address as of July 1, 2003, to 4445 Sigma Road, Dallas, Texas 75244. The Borrower will not permit any tangible Collateral or any records pertaining to the Collateral to be located in any state or area in which, in the event of
such location, a financing statement covering such Collateral would be required to be, but has not in fact been, filed in order to perfect the Security Interest. The Borrower will not change its name or place of incorporation. 
 
Section 7.16 Organizational Documents. The Borrower
will not amend its certificate of incorporation or bylaws except to permit the issuance of additional equity securities provided such amendment does not adversely affect the Lender’s rights or remedies. 
 

42 








 
Section 7.17
Salaries. The Borrower will not pay excessive or unreasonable salaries, bonuses, commissions, consultant fees or other compensation; or, without the prior approval of the independent members of the Borrower’s Board of Directors, increase
the salary, bonus, commissions, consultant fees or other compensation of any director, officer or consultant, or any member of their families, by more than 10% in any one year, either individually or for all such persons in the aggregate, or pay any
such increase from any source other than profits earned in the year of payment or improvements in operating results compared to the preceding period or periods. 
 
ARTICLE VIII 
 
Events of Default, Rights and Remedies 
 
Section 8.1 Events of Default. “Event of Default”, wherever used herein, means any one of the following events:

 
(a) Default in the payment of
the Obligations when they become due and payable; 
 
(b) Default in the payment of any fees, commissions, costs or expenses required to be paid by the Borrower under this Agreement; 
 
(c) Default in the performance, or breach, of any covenant or agreement of the Borrower contained in this Agreement;

 
(d) The Borrower shall be or
become insolvent (as such term is defined in Section 5.16(a) hereof), or admit in writing its or his inability to pay its or his debts as they mature, or make an assignment for the benefit of creditors; or the Borrower shall apply for or consent to
the appointment of any receiver, trustee, or similar officer for it or him or for all or any substantial part of its or his property; or such receiver, trustee or similar officer shall be appointed without the application or consent of the Borrower,
as the case may be; or the Borrower shall institute (by petition, application, answer, consent or otherwise) any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding relating to it
or him under the laws of any jurisdiction; or any such proceeding shall be instituted (by petition, application or otherwise) against the Borrower; or any judgment, writ, warrant of attachment or execution or similar process shall be issued or
levied against a substantial part of the property of the Borrower for an amount in excess of $25,000 at any one time in the aggregate; 
 
(e) A petition shall be filed by or against the Borrower under the United States Bankruptcy Code naming the Borrower as
debtor; 
 
(f) Any representation
or warranty made by the Borrower in this Agreement, or by the Borrower (or any of its officers) in any agreement, certificate, instrument or financial statement or other statement contemplated by or made or delivered pursuant to or in connection
with this Agreement shall prove to have been incorrect in any material respect when deemed to be effective; 
 

43 








 
(g) The rendering against the Borrower of a final judgment, decree or order for the payment of money in excess of $25,000 and the continuance of such judgment, decree or order unsatisfied and in effect for any period of 30
consecutive days without a stay of execution; 
 
(h) A default under any bond, debenture, note or other evidence of indebtedness of the Borrower owed to any Person other than the Lender, or under any indenture or other instrument under which any such evidence of indebtedness has
been issued or by which it is governed, or under any lease of any of the Premises, and the expiration of the applicable period of grace, if any, specified in such evidence of indebtedness, indenture, other instrument or lease; 
 
(i) Any Reportable Event, which the Lender
determines in good faith constitutes grounds for the termination of any Plan or for the appointment by the appropriate United States District Court of a trustee to administer any Plan, shall have occurred and be continuing 30 days after written
notice to such effect shall have been given to the Borrower by the Lender; or a trustee shall have been appointed by an appropriate United States District Court to administer any Plan; or the Pension Benefit Guaranty Corporation shall have
instituted proceedings to terminate any Plan or to appoint a trustee to administer any Plan; or the Borrower shall have filed for a distress termination of any Plan under Title IV of ERISA; or the Borrower shall have failed to make any quarterly
contribution required with respect to any Plan under Section 412(m) of the Internal Revenue Code of 1986, as amended, which the Lender determines in good faith may by itself, or in combination with any such failures that the Lender may determine are
likely to occur in the future, result in the imposition of a lien on the Borrower’s assets in favor of the Plan; 
 
(j) An event of default shall occur under any Security Document or under any other security agreement, mortgage, deed of
trust, assignment or other instrument or agreement securing any obligations of the Borrower hereunder or under any note; 
 
(k) The Borrower shall liquidate, dissolve, terminate or suspend its business operations or otherwise fail to operate its
business in the ordinary course, or sell all or substantially all of its assets, without the Lender’s prior written consent; 
 
(l) The Borrower shall fail to pay, withhold, collect or remit any tax or tax deficiency when assessed or due (other than
any tax deficiency which is being contested in good faith and by proper proceedings and for which it shall have set aside on its books adequate reserves therefor) or notice of any state or federal tax liens shall be filed or issued; 
 
(m) Default in the payment of any amount owed
by the Borrower to the Lender other than any indebtedness arising hereunder; 
 
(n) An Event of Default shall occur under the Borrower Agreement; 
 
(o) Any of David M. Kirk, James P. Farley, Darrell Ash or Jon Prokop cease to be actively involved in the day-to-day
management of the Borrower; 
 

44 








 
(p) The Borrower fails to deliver a new landlord’s waiver acceptable to the Lender within 30 days following a change in ownership of the Premises; 
 
(q) An Event of Default shall occur under the WFBCI Credit Agreement; or 
 
(r) Any breach, default or event of default
by or attributable to any Affiliate under any agreement between such Affiliate and the Lender. 
 
Section 8.2 Rights and Remedies. During any Default Period, the Lender may exercise any or all of the following rights and remedies: 
 
(a) the Lender may, by notice to the Borrower, declare the Commitments to be terminated,
whereupon the same shall forthwith terminate; 
 
(b) the Lender may, by notice to the Borrower, declare the Obligations to be forthwith due and payable, whereupon all Obligations shall become and be forthwith due and payable, without presentment, notice of dishonor, protest or
further notice of any kind, all of which the Borrower hereby expressly waives; 
 
(c) the Lender may, without notice to the Borrower and without further action, apply any and all money owing by the Lender or any affiliate of the Lender to the Borrower to the payment of the
Obligations; 
 
(d) the Lender may
exercise and enforce any and all rights and remedies available upon default to a secured party under the UCC, including, without limitation, the right to take possession of Collateral, or any evidence thereof, proceeding without judicial process or
by judicial process (without a prior hearing or notice thereof, which the Borrower hereby expressly waives) and the right to sell, lease or otherwise dispose of any or all of the Collateral, and, in connection therewith, the Borrower will on demand
assemble the Collateral and make it available to the Lender at a place to be designated by the Lender which is reasonably convenient to both parties; 
 
(e) the Lender may exercise and enforce its rights and remedies under the Loan Documents; and 
 
(f) the Lender may exercise any other rights
and remedies available to it by law or agreement. 
 
Notwithstanding the foregoing, upon the occurrence of an Event of Default described in subsections (d) or (e) of Section 8.1, the Obligations shall be immediately due and payable automatically without presentment, demand, protest or
notice of any kind. 
 
Section 8.3 Certain
Notices. If notice to the Borrower of any intended disposition of Collateral or any other intended action is required by law in a particular instance, such notice shall be deemed commercially reasonable if given (in the manner specified in
Section 9.3) at least ten calendar days before the date of intended disposition or other action. 
 

45 








 
ARTICLE IX

 
Miscellaneous 
 
Section 9.1 No Waiver; Cumulative Remedies. No failure
or delay by the Lender in exercising any right, power or remedy under the Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy under the Loan Documents. The remedies provided in the Loan Documents are cumulative and not exclusive of any remedies provided by law. 
 
Section 9.2 Amendments, Etc. No amendment, modification, termination or waiver of any provision of any
Loan Document or consent to any departure by the Borrower therefrom or any release of a Security Interest shall be effective unless the same shall be in writing and signed by the Lender, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances. 
 
Section 9.3 Addresses for Notices, Etc. Except as
otherwise expressly provided herein, all notices, requests, demands and other communications provided for under the Loan Documents shall be in writing and shall be (a) personally delivered, (b) sent by first class United States mail, (c) sent by
overnight courier of national reputation, or (d) transmitted by telecopy, in each case addressed or telecopied to the party to whom notice is being given at its address or telecopier number as set forth below: 
 
If to the Borrower: 
RF Monolithics, Inc. 
4347 Sigma Road 
Farmers Branch, Texas 75244 
Telecopier: (972) 404-9476 
Attention: Chief Accounting Officer 
 
Commencing July 1, 2003, the Borrower’s mailing address will change to 4445 Sigma Road, Farmers Branch, Texas

          75244. 
 
If to the Lender: 
Wells Fargo Bank Minnesota, N.A.

333 South Grand Avenue, Suite 800 
Los Angeles, CA 90071 
Attention: Brett Marschall 
 
or, as to each party, at such other address or telecopier number as may hereafter be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section. All such notices, requests,
demands and other communications shall be deemed to have been given on (a) the date received if personally delivered, (b) when deposited in the mail if delivered by mail, (c) the date sent if sent by overnight courier, or (d) the date of
transmission if 

 

46 









delivered by telecopy, except that notices or requests to the Lender pursuant to any of the provisions of Article II shall not be effective
until received by the Lender. All requests under Section 9-210 of the UCC (i) shall be made in a writing signed by a person authorized under Section 2.1(a), (ii) shall be personally delivered, sent by registered or certified mail, return receipt
requested, or by overnight courier of national reputation, (iii) shall be deemed to be sent when received by the Lender, and (iv) shall otherwise comply with the requirements of Section 9-210. The Borrower requests that the Lender respond to all
such requests which on their face appear to come from an authorized individual and releases the Lender from any liability for so responding. The Borrower shall pay the Lender the maximum amount allowed by law for responding to such requests.

 
Section 9.4 Further Documents. The
Borrower will from time to time execute and deliver or endorse any and all instruments, documents, conveyances, assignments, security agreements, financing statements and other agreements and writings that the Lender may reasonably request in order
to secure, protect, perfect or enforce the Security Interest or the Lender’s rights under the Loan Documents (but any failure to request or assure that the Borrower executes, delivers or endorses any such item shall not affect or impair the
validity, sufficiency or enforceability of the Loan Documents and the Security Interest, regardless of whether any such item was or was not executed, delivered or endorsed in a similar context or on a prior occasion). 
 
Section 9.5 Collateral. This Agreement does not
contemplate a sale of accounts, contract rights or Chattel Paper, and, as provided by law, the Borrower is entitled to any surplus and shall remain liable for any deficiency. The Lender’s duty of care with respect to Collateral in its
possession (as imposed by law) shall be deemed fulfilled if it exercises reasonable care in physically keeping such Collateral, or in the case of Collateral in the custody or possession of a bailee or other third person, exercises reasonable care in
the selection of the bailee or other third person, and the Lender need not otherwise preserve, protect, insure or care for any Collateral. The Lender shall not be obligated to preserve any rights the Borrower may have against prior parties, to
realize on the Collateral at all or in any particular manner or order or to apply any cash proceeds of the Collateral in any particular order of application. 
 
Section 9.6 Costs and Expenses. The Borrower agrees to pay on demand all costs and expenses, including (without limitation)
reasonable attorneys’ fees, incurred by the Lender in connection with the Obligations, this Agreement, the Loan Documents, and any other document or agreement related hereto or thereto, and the transactions contemplated hereby, including
without limitation all such costs, expenses and fees incurred in connection with the negotiation, preparation, execution, amendment, administration, performance, collection and enforcement of the Obligations and all such documents and agreements and
the creation, perfection, protection, satisfaction, foreclosure or enforcement of the Security Interest. 
 
Section 9.7 Indemnity. IN ADDITION TO THE PAYMENT OF EXPENSES PURSUANT TO SECTION 9.6, THE BORROWER AGREES TO INDEMNIFY, DEFEND
AND HOLD HARMLESS THE LENDER, AND ANY OF ITS PARTICIPANTS, PARENT CORPORATIONS, SUBSIDIARY CORPORATIONS, AFFILIATED CORPORATIONS, SUCCESSOR CORPORATIONS, AND ALL PRESENT AND FUTURE OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS AND AGENTS OF

 
 

47 









THE FOREGOING (THE “INDEMNITEES”) FROM AND AGAINST ANY OF THE FOLLOWING (COLLECTIVELY, “INDEMNIFIED LIABILITIES”):

 
(i) ANY AND ALL TRANSFER
TAXES, DOCUMENTARY TAXES, ASSESSMENTS OR CHARGES MADE BY ANY GOVERNMENTAL AUTHORITY BY REASON OF THE EXECUTION AND DELIVERY OF THE LOAN DOCUMENTS OR THE MAKING OF THE ADVANCES; 
 
(ii) ANY CLAIMS, LOSS OR DAMAGE TO WHICH ANY INDEMNITEE MAY BE SUBJECTED IF ANY
REPRESENTATION OR WARRANTY CONTAINED IN SECTION 5.12 PROVES TO BE INCORRECT IN ANY RESPECT OR AS A RESULT OF ANY VIOLATION OF THE COVENANT CONTAINED IN SECTION 6.4(B); AND 
 
(iii) ANY AND ALL OTHER LIABILITIES, LOSSES, DAMAGES, PENALTIES, JUDGMENTS, SUITS, CLAIMS,
COSTS AND EXPENSES OF ANY KIND OR NATURE WHATSOEVER (INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL) IN CONNECTION WITH THE FOREGOING AND ANY OTHER INVESTIGATIVE, ADMINISTRATIVE OR JUDICIAL PROCEEDINGS, WHETHER OR
NOT SUCH INDEMNITEE SHALL BE DESIGNATED A PARTY THERETO, WHICH MAY BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST ANY SUCH INDEMNITEE, IN ANY MANNER RELATED TO OR ARISING OUT OF OR IN CONNECTION WITH THE MAKING OF THE ADVANCES AND THE LOAN DOCUMENTS
OR THE USE OR INTENDED USE OF THE PROCEEDS OF THE ADVANCES (INCLUDING ANY OF THE FOREGOING ARISING FROM THE NEGLIGENCE OF THE INDEMNITEE), EXCEPT TO THE EXTENT SUCH LIABILITY, LOSS, DAMAGE, PENALTY, JUDGMENT, SUIT, CLAIM, COST OR EXPENSE IS FOUND IN
A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED FROM THE INDEMNITEE’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. 
 
IF ANY INVESTIGATIVE, JUDICIAL OR ADMINISTRATIVE PROCEEDING ARISING FROM ANY OF THE FOREGOING IS BROUGHT AGAINST ANY INDEMNITEE, UPON SUCH
INDEMNITEE’S REQUEST, THE BORROWER, OR COUNSEL DESIGNATED BY THE BORROWER AND SATISFACTORY TO THE INDEMNITEE, WILL RESIST AND DEFEND SUCH ACTION, SUIT OR PROCEEDING TO THE EXTENT AND IN THE MANNER DIRECTED BY THE INDEMNITEE, AT THE
BORROWER’S SOLE COSTS AND EXPENSE. EACH INDEMNITEE WILL USE ITS BEST EFFORTS TO COOPERATE IN THE DEFENSE OF ANY SUCH ACTION, SUIT OR PROCEEDING. IF THE FOREGOING UNDERTAKING TO INDEMNIFY, DEFEND AND HOLD HARMLESS MAY BE HELD 
 

48 









TO BE UNENFORCEABLE BECAUSE IT VIOLATES ANY LAW OR PUBLIC POLICY, THE BORROWER SHALL NEVERTHELESS MAKE THE MAXIMUM CONTRIBUTION TO THE
PAYMENT AND SATISFACTION OF EACH OF THE INDEMNIFIED LIABILITIES WHICH IS PERMISSIBLE UNDER APPLICABLE LAW. THE BORROWER’S OBLIGATION UNDER THIS SECTION 9.7 SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT AND THE DISCHARGE OF THE BORROWER’S
OTHER OBLIGATIONS HEREUNDER. THE BORROWER AGREES NOT TO ASSERT ANY CLAIM AGAINST THE LENDER OR ANY OF ITS AFFILIATES OR ITS OR THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS AND ADVISORS, ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT,
CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING OUT OF OR OTHERWISE RELATING TO THE LOAN DOCUMENTS. 
 
Section 9.8 Participants. The Lender and its participants, if any, are not partners or joint venturers, and the Lender shall not
have any liability or responsibility for any obligation, act or omission of any of its participants. All rights and powers specifically conferred upon the Lender may be transferred or delegated to any of the Lender’s participants, successors or
assigns. 
 
Section 9.9 Execution in
Counterparts. This Agreement and other Loan Documents may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which counterparts, taken together, shall constitute
but one and the same instrument. 
 
Section 9.10
Binding Effect; Assignment; Complete Agreement; Exchanging Information. The Loan Documents shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns, except that the Borrower
shall not have the right to assign its rights thereunder or any interest therein without the Lender’s prior written consent. To the extent permitted by law, the Borrower waives and will not assert against any assignee any claims, defenses or
setoffs which the Borrower could assert against the Lender. 
 
Section 9.11 Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining
provisions hereof. 
 
Section 9.12 Entire
Agreement. THIS AGREEMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES REGARDING THE SUBJECT MATTER HEREIN AND THEREIN AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 
 
Section 9.13 Headings. Article and Section headings in this Agreement are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose. 
 

49 








 
Section 9.14
Governing Law; Jurisdiction, Venue; Waiver of Jury Trial. This Agreement and the Loan Documents shall be governed by and construed in accordance with the substantive laws (other than conflict laws) of the State of Texas. The parties hereto
hereby (i) consents to the personal jurisdiction of the state and federal courts located in the State of Texas in connection with any controversy related to this Agreement; (ii) waives any argument that venue in any such forum is not convenient,
(iii) agrees that any litigation initiated by the Lender or the Borrower in connection with this Agreement or the other Loan Documents shall be venued in either the District Court of Collin County, Texas, or the United States District Court for the
Northern District of Texas; and (iv) agrees that a final judgment in any such suit, action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. THE PARTIES
WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT. 
 
Section 9.15 Confidentiality. Lender shall use its best efforts to hold in confidence all information, memoranda, or extracts
furnished to Lender by Borrower hereunder or in connection with the negotiation hereof, including without limitation, the information provided to Lender by Borrower pursuant to Section 6.1 hereof; provided that the Lender may disclose such
information (i) to its Affiliates, accountants or counsel, (ii) to any regulatory agency having the authority to examine the Lender, (iii) as required by any legal or governmental process or otherwise by law (iv) to any Person to which the Lender
sells or proposes to sell an assignment or participation hereunder in accordance herewith, and (v) to the extent that such information shall be publicly available or shall have been known to the Lender independently of any disclosure by the Borrower
hereunder or in connection herewith. 
 
Section
9.16 Retention of Borrower’s Records. The Lender shall have no obligation to maintain any electronic records or any documents, schedules, invoices, agings, or other papers delivered to the Lender by the Borrower or in connection with the
Loan Documents for more than four months after receipt by the Lender. 
 
Section 9.17 Amendment and Restatement. This Agreement amends and restates in its entirety the Existing Credit Agreement. The execution of this Agreement and the other Loan Documents executed in connection herewith
does not extinguish the indebtedness outstanding in connection with the Existing Credit Agreement nor does it constitute a novation with respect to such indebtedness. 
 
[Remainder of page intentionally left blank.] 
 

50 








 
IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written. 
 

	 WELLS FARGO BANK MINNESOTA, N.A.

	
	 By:
	 	 /s/ Brett A. Marshall


	 	 	 Brett A. Marschall
 Vice President



 

	 RF MONOLITHICS, INC.

	
	 By:
	 	 /s/ David M. Kirk


	 	 	 David M. Kirk
 President



 
 
 
(Signature Page to Amended and Restated Credit and Security
Agreement) 
 







Table of Exhibits and Schedules 
 

	 Exhibit A

	  	 Form of Revolving Note

	
	 Exhibit B
	  	 Borrower Agreement

	
	 Exhibit C
	  	 Compliance Certificate

	
	 Exhibit D
	  	 Premises

	
	 Exhibit E
	  	 Eligibility Certificate

	
	  	 
	 Schedule 5.1
	  	 Trade Names, Chief Executive Office, Principal
Place of Business, and Locations of Collateral

	
	 Schedule 7.1
	  	 Permitted Liens

	
	 Schedule 7.2
	  	 Permitted Indebtedness and Guaranties









 
Exhibit A to
Amended and Restated Credit and Security Agreement 
 
AMENDED AND RESTATED REVOLVING NOTE 
 

	 $5,000,000.00
	    	 February 3, 2003


 
For
value received, the undersigned, RF Monolithics, Inc., a Delaware corporation (the “Borrower”), hereby promises to pay on the Termination Date under the Credit Agreement (defined below), to the order of WELLS FARGO BANK MINNESOTA, N.A., a
national banking association (the “Lender”), at its main office in Minneapolis, Minnesota, or at any other place designated at any time by the holder hereof, in lawful money of the United States of America and in immediately available
funds, the principal sum of FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00) or, if less, the aggregate unpaid principal amount of all Revolving Advances made by the Lender to the Borrower under the Credit Agreement (defined below) together with
interest on the principal amount hereunder remaining unpaid from time to time, computed on the basis of the actual number of days elapsed and a 360-day year, from the date hereof until this Revolving Note is fully paid at the rate from time to time
in effect under the Amended and Restated Credit and Security Agreement of even date herewith (as the same may hereafter be amended, supplemented or restated from time to time, the “Credit Agreement”) by and between the Lender and the
Borrower. The principal hereof and interest accruing thereon shall be due and payable as provided in the Credit Agreement. This Revolving Note may be prepaid only in accordance with the Credit Agreement. 
 
This Revolving Note is issued pursuant, and is subject, to the
Credit Agreement, which provides, among other things, for acceleration hereof. This Revolving Note is the Revolving Note referred to in the Credit Agreement. This Revolving Note is secured, among other things, pursuant to the Credit Agreement and
the Security Documents as therein defined, and may now or hereafter be secured by one or more other security agreements, mortgages, deeds of trust, assignments or other instruments or agreements. 
 
The Borrower hereby agrees to pay all costs of collection,
including attorneys’ fees and legal expenses in the event this Revolving Note is not paid when due, whether or not legal proceedings are commenced. 
 
Presentment or other demand for payment, notice of acceleration, notice of intent to accelerate, notice of dishonor and protest and all
other notices of any kind are expressly waived. 







 
This Note is
given in amendment, restatement and modification, but not in extinguishment or novation, of the indebtedness evidenced by that certain Revolving Note in the principal amount of $8,500,000.00, dated December 8, 2000, executed by the Borrower and
payable to the order of the Lender. 
 

	 RF MONOLITHICS, INC.

	
	 By
	 	  


	 	 	 David M. Kirk, President










 
Exhibit B to
Amended and Restated Credit and Security Agreement 
 
BORROWER AGREEMENT 







 
Exhibit C to
Amended and Restated Credit and Security Agreement 
 
COMPLIANCE CERTIFICATE 







 
Exhibit D to
Amended and Restated Credit and Security Agreement 
 
PREMISES 
 
The Premises
referred to in the Amended and Restated Credit and Security Agreement are described as follows: 
 
4343 Sigma Road, Farmers Branch, Texas 75244 
 
4441-45 Sigma Road, Farmers Branch, Texas 75244 
 
4345-47 Sigma Road, Farmers Branch, Texas 75244 
 
As of July 1, 2003, the Borrower’s principal address will be 4445 Sigma Road, Farmers Branch, Texas 75244. 4341 and 4345 (but not 4347) Sigma Road will be vacated on or about June 30, 2003.








 
Exhibit E to
Amended and Restated Credit and Security Agreement 
 
ELIGIBILITY CERTIFICATE 







 
Schedule 5.1
to Amended and Restated Credit and Security Agreement 
 
TRADE NAMES, CHIEF EXECUTIVE OFFICE, 
PRINCIPAL PLACE OF BUSINESS, AND LOCATIONS OF COLLATERAL

 
Prior Legal Names 
 
None 
 
Trade Names 
 
None 
 
Chief Executive Office/Principal Place of Business

 
4347 Sigma Road 
Farmers Branch, Texas 75244 
 
As of July 1, 2003, the Borrower’s principal address will be 4445 Sigma Road, Farmers Branch, Texas 75244. 4341 and 4345 (but not 4347) Sigma Road
will be vacated on or about June 30, 2003. 
 
Other Inventory and Equipment Locations 
 
4343 Sigma Road, Farmers Branch, Texas 75244 
 
4441-45 Sigma Road, Farmers Branch, Texas 75244 
 
4345-47 Sigma Road, Farmers Branch, Texas 75244 
 
See attached charts. 







 
Schedule 7.1
to Amended and Restated Credit and Security Agreement 
 
PERMITTED LIENS 
 
Liens in
favor of WFBCI 







 
Schedule 7.2
to Amended and Restated Credit and Security Agreement 
 
PERMITTED INDEBTEDNESS AND GUARANTIES 
 
Indebtedness to WFBCI 
pursuant to the WFBCI Credit Agreement. 
 
Also, see attached.