exv10w1



 





Exhibit 10.1



					
	 
	 	Silicon Valley Bank
	 	Loan and Security Agreement
	 	 	








LOAN AND SECURITY AGREEMENT DATED JUNE 21, 2004 BETWEEN

SILICON VALLEY BANK AND GIGA-TRONICS INCORPORATED




Silicon Valley Bank



Loan and Security Agreement




	 	 	 
	Borrower:

	 	GIGA-TRONICS INCORPORATED, a California corporation
(“GIGA-TRONICS”); ASCOR, INC., a California corporation
(“ASCOR”); and MICROSOURCE, INC., a California corporation
(“MICROSOURCE”)
	 
	 	 
	Address:

	 	4650 Norris Canyon Road

San Ramon, CA 94583
	 
	 	 
	Date:

	 	June 21, 2004






THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) is entered into on the
above date between SILICON VALLEY BANK (“Silicon”), whose address is 3003
Tasman Drive, Santa Clara, California 95054 and the borrower(s) named above
(individually and collectively, and jointly and severally, the “Borrower”),
whose chief executive office is located at the above address (“Borrower’s
Address”). The Schedule to this Agreement (the “Schedule”) shall for all
purposes be deemed to be a part of this Agreement, and the same is an integral
part of this Agreement. (Definitions of certain terms used in this Agreement
are set forth in Section 8 below.)1. LOANS.




     1.1 Loans. Subject to the terms and conditions of this Agreement,
Silicon will make loans to Borrower (the “Loans”) up to the amounts (the
“Credit Limit”) shown in Section 1 of the Schedule, provided no Default or
Event of Default has occurred and is continuing, and subject to deduction of
Reserves for accrued interest and such other Reserves as Silicon deems proper
from time to time in its good faith business judgment.



     1.2 Interest. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement. Interest shall be payable monthly, on the last
day of the month. Interest may, in Silicon’s discretion, be charged to
Borrower’s loan account, and the same shall thereafter bear interest at the
same rate as the other Loans. Silicon may, in its discretion, charge interest
to Borrower’s Deposit Accounts maintained with Silicon. Regardless of the
amount of Obligations that may be outstanding from time to time, Borrower shall
pay Silicon minimum monthly interest during the term of this Agreement in the
amount set forth on the Schedule (the “Minimum Monthly Interest”).



     1.3 Overadvances. If at any time or for any reason the total of all
outstanding Loans and all other monetary Obligations exceeds the Credit Limit
(an “Overadvance”), Borrower shall * immediately pay the amount of the excess
to Silicon, without notice or demand. Without limiting Borrower’s obligation
to repay to Silicon the amount of any Overadvance, Borrower agrees to pay
Silicon interest on the outstanding amount of any Overadvance, on demand, at
the Default Rate.



     * promptly (and subject to the cure period (if applicable) set forth in
Section 7.1(c) hereof)



     1.4 Fees. Borrower shall pay Silicon the fees shown on the Schedule,
which are in addition to all interest and other sums payable to Silicon and are
not refundable.



     1.5 Loan Requests. To obtain a Loan, Borrower shall make a request to
Silicon by facsimile or telephone. Loan requests received after 12:00 Noon
(California time) will not be considered by Silicon until the next Business
Day. Silicon may rely on



 









 





					
	 
	 	Silicon Valley Bank
	 	Loan and Security Agreement
	 	 	







any telephone request for a Loan given by a person whom Silicon * believes is
an authorized representative of Borrower, and Borrower will indemnify Silicon
for any loss Silicon suffers as a result of that reliance **.



* in its good faith business judgment



** (except if and to the extent such loss is the proximate result of the
gross negligence or willful misconduct of Silicon)




     1.6 Letters of Credit. [Not Applicable]


2. SECURITY INTEREST. To secure the payment and performance of all of the
Obligations when due, Borrower hereby grants to Silicon continuing security
interests in all of the following (collectively, the “Collateral”): all right,
title and interest of Borrower in and to all of the following, whether now
owned or hereafter arising or acquired and wherever located: all Accounts; all
Inventory; all Equipment; all Deposit Accounts; all General Intangibles
(including without limitation all Intellectual Property); all Investment
Property; all Other Property; and any and all claims, rights and interests in
any of the above, and all guaranties and security for any of the above, and all
substitutions and replacements for, additions, accessions, attachments,
accessories, and improvements to, and proceeds (including proceeds of any
insurance policies, proceeds of proceeds and claims against third parties) of,
any and all of the above, and all Borrower’s books relating to any and all of
the above.



3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.




     In order to induce Silicon to enter into this Agreement and to make Loans,
Borrower represents and warrants to Silicon as follows, and Borrower covenants
that the following representations will continue to be true, and that Borrower
will at all times comply with all of the following covenants, throughout the
term of this Agreement and until all Obligations * have been paid and performed
in full:



     * , other than contingent indemnification Obligations under Section 9.8
hereof or any comparable provision of this Agreement or any other Loan Document
(collectively, “Contingent Indemnification Obligations”) not yet due,



     3.1 Corporate Existence and Authority. Borrower is and will continue to
be, duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Borrower is and will continue to be
qualified and licensed to do business in all jurisdictions in which any failure
to do so could reasonably be expected to result in a Material Adverse Change.
The execution, delivery and performance by Borrower of this Agreement, and all
other documents contemplated hereby (i) have been duly and validly authorized,
(ii) are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors’
rights generally), and (iii) do not violate Borrower’s articles or certificate
of incorporation, or Borrower’s by-laws, or any law or any material agreement
or instrument which is binding upon Borrower or its property, and (iv) do not
constitute grounds for acceleration of any material indebtedness or obligation
under any agreement or instrument which is binding upon Borrower or its
property.



     3.2 Name; Trade Names and Styles. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed in the Representations
are all prior names of Borrower and all of Borrower’s present and prior trade
names. Borrower shall give Silicon 30 days’ prior written notice before
changing its name or doing business under any other name. Borrower has
complied, and will in the future comply, in all material respects, with all
laws relating to the conduct of business under a fictitious business name,
except where the failure to so comply could not reasonably be expected to
result in a Material Adverse Change.



     3.3 Place of Business; Location of Collateral. The address set forth in
the heading to this Agreement is Borrower’s chief executive office. In
addition, Borrower has places of business and Collateral is located only at the
locations set forth in the Representations. Borrower will give Silicon at
least 30 days prior written notice before opening any additional place of
business, changing its chief executive office, or moving any of the Collateral
to a location other than Borrower’s Address or one of the locations set forth
in the Representations, except that Borrower may maintain sales offices in the
ordinary course of business at which not more than a total of $10,000 fair
market value of Equipment is located.



     3.4 Title to Collateral; Perfection; Permitted Liens.



          (a) Borrower is now, and will at all times in the future be, the sole owner of all the Collateral, except for items of Equipment which are leased to
Borrower. The Collateral now is and will remain free and clear of any and all
liens, charges, security interests, encumbrances and adverse claims, except for
Permitted Liens. Silicon now has, and will continue to have, a first-priority
perfected and enforceable security interest in all of the Collateral, subject
in lien priority only to those Permitted Liens that are expressly entitled to
such priority over the security interests of Silicon by operation of law or by
written



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	 	Silicon Valley Bank
	 	Loan and Security Agreement
	 	 	







subordination agreement duly executed and delivered by Silicon in favor of the
holders of such Permitted Liens, and Borrower will at all times defend Silicon
and the Collateral against all claims of others.




          (b) Borrower has set forth in the Representations all of Borrower’s
Deposit Accounts, and Borrower will give Silicon five Business Days advance
written notice before establishing any new Deposit Accounts and, in accordance
with Section 8(1) of the Schedule, will cause the institution where any such
new Deposit Account is maintained to execute and deliver to Silicon a control
agreement in form sufficient to perfect Silicon’s security interest in the
Deposit Account and otherwise satisfactory to Silicon in its good faith
business judgment. Nothing herein limits any requirements which may be set
forth in the Schedule as to where Deposit Accounts will be maintained.



          (c) In the event that Borrower shall at any time after the date hereof
have any commercial tort claims against others, which it is asserting or
intends to assert, and in which the potential recovery exceeds $100,000,
Borrower shall promptly notify Silicon thereof in writing and provide Silicon
with such information regarding the same as Silicon * shall request (unless
providing such information would waive the Borrower’s attorney-client
privilege). Such notification to Silicon shall constitute a grant of a
security interest in the commercial tort claim and all proceeds thereof to
Silicon, and Borrower shall execute and deliver all such documents and take all
such actions as Silicon * shall request in connection therewith.



          * in its good faith business judgment may



          (d) None of the Collateral now is or will be affixed to any real property
in such a manner, or with such intent, as to become a fixture. Borrower is not
and will not become a lessee under any real property lease pursuant to which
the lessor may obtain any rights in any of the Collateral and no such lease now
prohibits, restrains, impairs or will prohibit, restrain or impair Borrower’s
right to remove any Collateral from the leased premises. Whenever any
Collateral is located upon premises in which any third party has an interest,
Borrower shall, whenever requested by Silicon, use its * best efforts to cause
such third party to execute and deliver to Silicon, in form acceptable to
Silicon, such waivers and subordinations as Silicon shall specify in its good
faith business judgment. Borrower will keep in full force and effect, and will
comply with all material terms of, any lease of real property where any of the
Collateral now or in the future may be located.



          * commercially reasonable



     3.5 Maintenance of Collateral. Borrower will maintain the Collateral in
good working condition (ordinary wear and tear excepted), and Borrower will not
use the Collateral for any unlawful purpose. Borrower will immediately advise
Silicon in writing of any material loss or damage to the Collateral.



     3.6 Books and Records. Borrower has maintained and will maintain at
Borrower’s Address complete and accurate books and records, comprising an
accounting system in accordance with GAAP.



     3.7 Financial Condition, Statements and Reports. All * financial
statements ** now or in the future delivered to Silicon have been, and will be,
prepared in conformity with GAAP *** and now and in the future will fairly
present **** the * results of operations and * financial condition of Borrower,
in accordance with GAAP, at the times and for the periods therein stated.
Between the last date covered by any such statement provided to Silicon and the
date hereof, there has been no Material Adverse Change.



     * consolidated



     ** of Borrower



     *** (except that interim financial statements may be subject to normal
year-end audit adjustments and need not contain footnote disclosures required
by GAAP)



     **** in all material respects



     3.8 Tax Returns and Payments; Pension Contributions. Borrower has timely
filed, and will timely file, all required tax returns and reports, and Borrower
has timely paid, and will timely pay, all foreign, federal, state and local
taxes, assessments, deposits and contributions now or in the future owed by
Borrower. Borrower may, however, defer payment of any contested taxes,
provided that Borrower (i) in good faith contests Borrower’s obligation to pay
the taxes by appropriate proceedings promptly and diligently instituted and
conducted, (ii) notifies Silicon in writing of the commencement of, and any
material development in, the proceedings, and (iii) posts bonds or takes any
other steps required to keep the contested taxes from becoming a lien upon any
of the Collateral. Borrower is unaware of any claims or adjustments proposed
for any of Borrower’s prior tax years which could result in additional taxes
becoming due and payable by Borrower. Borrower has paid, and shall continue to
pay all amounts necessary to fund all present and future pension, profit
sharing and deferred compensation plans in accordance with their terms, and
Borrower has not and will not withdraw from participation in, permit partial or
complete termination of, or permit the occurrence of any other event with
respect to, any such plan which could



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	 	Silicon Valley Bank
	 	Loan and Security Agreement
	 	 	







reasonably be expected to result in any liability * of Borrower, including
any liability to the Pension Benefit Guaranty Corporation or its successors or
any other governmental agency.




     * (other than such liabilities that, individually or in the aggregate, are
immaterial)



     3.9 Compliance with Law. Borrower has, to the best of its knowledge,
complied, and will comply, in all material respects, with all provisions of all
foreign, federal, state and local laws and regulations applicable to Borrower,
including, but not limited to, those relating to Borrower’s ownership of real
or personal property, the conduct and licensing of Borrower’s business, and all
environmental matters.



     3.10 Litigation. There is no claim, suit, litigation, proceeding or
investigation pending or (to best of Borrower’s knowledge) threatened against
or affecting Borrower in any court or before any governmental agency (or any
basis therefor known to Borrower) which could reasonably be expected to result,
either separately or in the aggregate, in any Material Adverse Change.
Borrower will promptly inform Silicon in writing of any claim, proceeding,
litigation or investigation in the future threatened or instituted against
Borrower involving any single claim of $50,000 or more, or involving $100,000
or more in the aggregate.



     3.11 Use of Proceeds. All proceeds of all Loans shall be used solely for
lawful business purposes. Borrower is not purchasing or carrying any “margin
stock” (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan 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.”


4. Accounts.




     4.1 Representations Relating to Accounts. Borrower represents and
warrants to Silicon as follows: Each Account with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made, (i)
represent an undisputed bona fide existing unconditional obligation of the
Account Debtor created by the sale, delivery, and acceptance of goods or the
rendition of services, or the non-exclusive licensing of Intellectual Property,
in the ordinary course of Borrower’s business, and (ii) meet the Minimum
Eligibility Requirements set forth in Section 8 below.



     4.2 Representations Relating to Documents and Legal Compliance. Borrower
represents and warrants to Silicon as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Accounts are and shall be true and correct and all such
invoices, instruments and other documents and all of Borrower’s books and
records are and shall be genuine and in all respects what they purport to be.
All sales and other transactions underlying or giving rise to each Account
shall comply in all material respects with all applicable laws and governmental
rules and regulations. To the best of Borrower’s knowledge, all signatures and
endorsements on all documents, instruments, and agreements relating to all
Accounts are and shall be genuine, and all such documents, instruments and
agreements are and shall be legally enforceable in accordance with their terms.



     4.3 Schedules and Documents relating to Accounts. Borrower shall deliver
to Silicon transaction reports and schedules of collections, as provided in the
Schedule, on Silicon’s standard forms; provided, however, that Borrower’s
failure to execute and deliver the same shall not affect or limit Silicon’s
security interest and other rights in all of Borrower’s Accounts, nor shall
Silicon’s failure to advance or lend against a specific Account affect or limit
Silicon’s security interest and other rights therein. If requested by Silicon
*, Borrower shall furnish Silicon with copies (or, at Silicon’s request,
originals) of all contracts, orders, invoices, and other similar documents, and
all shipping instructions, delivery receipts, bills of lading, and other
evidence of delivery, for any goods the sale or disposition of which gave rise
to such Accounts, and Borrower warrants the genuineness of all of the
foregoing. Borrower shall also furnish to Silicon an aged accounts receivable
trial balance as provided in the Schedule. In addition, Borrower shall deliver
to Silicon, on its request, the originals of all instruments, chattel paper,
security agreements, guarantees and other documents and property evidencing or
securing any Accounts, in the same form as received, with all necessary
indorsements, and copies of all credit memos.



     * in its good faith business judgment



     4.4 Collection of Accounts. Borrower shall have the right to collect all
Accounts, unless and until a Default or an Event of Default has occurred and is
continuing. Whether or not an Event of Default has occurred and is continuing,
Borrower shall hold all payments on, and proceeds of, Accounts in trust for
Silicon, and * Borrower shall immediately deliver all such payments and
proceeds to Silicon in their original form, duly endorsed, to be applied to the
Obligations in such order as Silicon shall determine. ** Silicon may, in its
good faith business judgment, require that all proceeds of Collateral be
deposited by Borrower into a lockbox account, or such other “blocked account”
as Silicon may specify, pursuant to a blocked account agreement in such form as
Silicon may specify in its good faith business judgment.



     * , subject to the Streamline Provisions,



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	 	Silicon Valley Bank
	 	Loan and Security Agreement
	 	 	








     ** As soon as practicable (and in any event no later than 60 days
following the date of this Agreement), Borrower shall establish a lockbox
account, or such other “blocked account” as Silicon may specify, pursuant to a
lockbox agreement or blocked account agreement (as the case may be) in such
form as Silicon may specify in its good faith business judgment, and, subject
to the Streamline Provisions, at all times thereafter all proceeds of
Collateral shall be deposited by Borrower into such lockbox account or other
blocked account (as the case may be).



     4.5. Remittance of Proceeds. All proceeds arising from the disposition
of any Collateral shall be delivered, in kind, by Borrower to Silicon in the
original form in which received by Borrower not later than the following
Business Day after receipt by Borrower, to be applied to the Obligations in
such order as Silicon shall determine; provided that, if no Default or Event of
Default has occurred and is continuing, Borrower shall not be obligated to
remit to Silicon the proceeds of the sale of worn out or obsolete Equipment
disposed of by Borrower in good faith in an arm’s length transaction for an
aggregate purchase price of $25,000 or less (for all such transactions in any
fiscal year). Borrower agrees that it will not commingle proceeds of
Collateral with any of Borrower’s other funds or property, but will hold such
proceeds separate and apart from such other funds and property and in an
express trust for Silicon. Nothing in this Section limits the restrictions on
disposition of Collateral set forth elsewhere in this Agreement.



     4.6 Disputes. Borrower shall notify Silicon promptly of all disputes or
claims * relating to Accounts. Borrower shall not forgive (completely or
partially), compromise or settle any Account for less than payment in full, or
agree to do any of the foregoing, except that Borrower may do so, provided
that: (i) Borrower does so in good faith, in a commercially reasonable manner,
in the ordinary course of business, and in arm’s length transactions, which are
reported to Silicon on the regular reports provided to Silicon; (ii) no Default
or Event of Default has occurred and is continuing; and (iii) taking into
account all such discounts, settlements and forgiveness, the total outstanding
Loans will not exceed the Credit Limit.



     * , in excess of $25,000 individually or in the aggregate at any one time,



     4.7 Returns. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower, Borrower
shall promptly determine the reason for such return and promptly issue a credit
memorandum to the Account Debtor in the appropriate amount. In the event any
attempted return occurs after the occurrence and during the continuance of any
Event of Default, Borrower shall hold the returned Inventory in trust for
Silicon, and immediately notify Silicon of the return of the Inventory.



     4.8 Verification. Silicon may, from time to time, verify directly with
the respective Account Debtors the validity, amount and other matters relating
to the Accounts, by means of mail, telephone or otherwise, either in the name
of Borrower or Silicon or such other name as Silicon may choose.



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



5. ADDITIONAL DUTIES OF BORROWER.



     5.1 Financial and Other Covenants. Borrower shall at all times comply
with the financial and other covenants set forth in the Schedule.



     5.2 Insurance. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require and that are customary and in accordance with standard
practices for Borrower’s industry and locations, and Borrower shall provide
evidence of such insurance to Silicon. All such insurance policies shall name
Silicon as an additional insured and loss payee, and shall contain a lenders
(or mortgagee) loss payee endorsement in form reasonably acceptable to Silicon.
Upon receipt of the proceeds of any such insurance, Silicon shall apply such
proceeds in reduction of the Obligations as Silicon shall determine in its good
faith business judgment, except that, provided no Default or Event of Default
has occurred and is continuing, Silicon shall release to Borrower insurance
proceeds with respect to Equipment totaling less than $100,000, which shall be
utilized by Borrower for the replacement of the Equipment with respect to which
the insurance proceeds were paid. Silicon may require reasonable assurance
that the insurance proceeds so released will be so used. If Borrower fails to
provide or pay for any insurance, Silicon may, but is not obligated to, obtain
the same at Borrower’s expense. Borrower shall promptly deliver to Silicon
copies of all material reports made to insurance companies.



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	 	Silicon Valley Bank
	 	Loan and Security Agreement
	 	 	








     5.3 Reports. Borrower, at its expense, shall provide Silicon with the
written reports set forth in the Schedule, and such other written reports with
respect to Borrower (including budgets, sales projections, operating plans and
other financial documentation), as Silicon shall from time to time specify in
its good faith business judgment.



     5.4 Access to Collateral, Books and Records. At reasonable times, and on
at least one Business Day’s notice, Silicon, or its agents, shall have the
right to inspect the Collateral, and the right to audit and copy Borrower’s
books and records *. Silicon shall take reasonable steps to keep confidential
all information obtained in any such inspection or audit, but Silicon shall
have the right to disclose any such information to its auditors, regulatory
agencies, and attorneys, and pursuant to any subpoena or other legal process.
The foregoing inspections and audits shall be at Borrower’s expense and the
charge therefor shall be $750 per person per day (or such higher amount as
shall represent Silicon’s then current standard charge for the same), plus
reasonable out-of-pocket expenses. In the event Borrower and Silicon schedule
an audit more than 10 days in advance, and Borrower seeks to reschedules the
audit with less than 10 days written notice to Silicon, then (without limiting
any of Silicon’s rights or remedies), Borrower shall pay Silicon a cancellation
fee of $1,000 plus any out-of-pocket expenses incurred by Silicon, to
compensate Silicon for the anticipated costs and expenses of the cancellation.



     * ; provided, however, that the number of separate inspections and audits
(it being understood that inspections and audits taking place at one or more
locations of Borrower during substantially the same overall examination period
shall constitute but a single inspection and audit for purposes of the
foregoing proviso) conducted by Silicon, in the absence of any Event of
Default, shall not exceed 4 in any 12-month period commencing from and after
the date of this Agreement



     5.5 Negative Covenants. Except as may be permitted in the Schedule,
Borrower shall not, without Silicon’s prior written consent (which shall be a
matter of its good faith business judgment), do any of the following: (i)
merge or consolidate with another corporation or entity; (ii) acquire any
assets †, except in the ordinary course of business; (iii) enter into any other
transaction outside the ordinary course of business; (iv) sell or transfer any
Collateral, except for the sale of finished Inventory in the ordinary course of
Borrower’s business, and except for the sale of obsolete or unneeded Equipment
in the ordinary course of business; (v) store any Inventory or other Collateral
with any warehouseman or other third party; (vi) sell any Inventory on a
sale-or-return, guaranteed sale, consignment, or other contingent basis; (vii)
make any loans of any money or other assets; (viii) incur any debts, outside
the ordinary course of business, which could reasonably be expected to result
in a Material Adverse Change; (ix) guarantee or otherwise become liable with
respect to the obligations of another party or entity *; (x) pay or declare any
dividends on Borrower’s stock (except for dividends ** payable solely in stock
of Borrower); (xi) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of Borrower’s stock or other equity securities ***; (xii) make
any change in Borrower’s capital structure which could reasonably be expected
to result in a Material Adverse Change; or (xiii) engage, directly or
indirectly, in any business other than the businesses currently engaged in by
Borrower or reasonably related thereto; or (xiv) dissolve or elect to dissolve.
Transactions permitted by the foregoing provisions of this Section 5.5 are
only permitted if no Default or Event of Default would occur as a result of
such transaction.



     † (other than assets that are immaterial, individually or in the
aggregate)



     * (except, with respect to each Borrower, a guaranty by such Borrower in
favor of Silicon relative to each other Borrower)



     ** : (a) dividends paid to any Borrower by any subsidiary of such
Borrower; and (b)



     *** , except for the repurchases of stock from former employees, officers,
directors, and contractors, of Borrower under the terms of applicable
repurchase or similar agreements between Borrower and such employees, officers,
directors, and contractors, all in an aggregate amount not to exceed $250,000
in any 12-month period



     5.6 Litigation Cooperation. Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or relating to
Borrower, Borrower shall, without expense to Silicon, make available Borrower
and its officers, employees and agents and Borrower’s books and records, to the
extent that Silicon may deem them reasonably necessary in order to prosecute or
defend any such suit or proceeding.



     5.7 Further Assurances. Borrower agrees, at its expense, on request by
Silicon, to execute all documents and take all actions, as Silicon, may, in its
good faith business judgment, deem necessary or useful in order to perfect, and
maintain the first-lien-priority of, Silicon’s security interests in the
Collateral (subject in lien priority only to those Permitted Liens that are
expressly entitled to such priority over the security interests of Silicon by
operation of law or by written subordination agreement duly executed and
delivered by Silicon in favor of the holders of such Permitted Liens), and in
order to fully consummate the transactions contemplated by this Agreement.



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	 	Silicon Valley Bank
	 	Loan and Security Agreement
	 	 	








6. TERM.



     6.1 Maturity Date. This Agreement shall continue in effect until the
maturity date set forth in Section 4 of the Schedule (the “Maturity Date”),
subject to Section 6.3 below.



     6.2 Early Termination. This Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective three Business Days after
written notice of termination is given to Silicon; or (ii) by Silicon at any
time after the occurrence and during the continuance of an Event of Default,
without notice, effective immediately. If this Agreement is terminated by
Borrower or by Silicon under this Section 6.2, Borrower shall pay to Silicon a
termination fee in an amount equal to * two percent (2.0%) of the Maximum
Credit Limit, provided that no termination fee shall be charged if the credit
facility hereunder is replaced with a new facility from another division of
Silicon Valley Bank. The termination fee shall be due and payable on the
effective date of termination and thereafter shall bear interest at a rate
equal to the highest rate applicable to any of the Obligations.



     * one percent (1.0%)



     6.3 Payment of Obligations. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether
or not all or any part of such Obligations are otherwise then due and payable.
Without limiting the generality of the foregoing, if on the Maturity Date, or
on any earlier effective date of termination, there are any outstanding Letters
of Credit issued by Silicon or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Silicon,
then on such date Borrower shall provide to Silicon cash collateral in an
amount equal to 105% of the face amount of all such Letters of Credit plus all
interest, fees and cost due or to become due in connection therewith (as
estimated by Silicon in its good faith business judgment), to secure all of the
Obligations relating to said Letters of Credit, pursuant to Silicon’s then
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, all of Silicon’s security interests in all of the Collateral and all
of the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations * have been paid and performed in full; provided
that Silicon may, in its sole discretion, refuse to make any further Loans and
other extensions of credit after termination. No termination shall in any way
affect or impair any right or remedy of Silicon, nor shall any such termination
relieve Borrower of any Obligation to Silicon, until all of the Obligations *
have been paid and performed in full. Upon payment and performance in full of
all the Obligations * and termination of this Agreement, Silicon shall
promptly terminate its financing statements with respect to the Borrower and
deliver to Borrower such other documents as may be required to fully terminate
Silicon’s security interests.



     * (other than Contingent Indemnification Obligations not yet due)



7. EVENTS OF DEFAULT AND REMEDIES.



     7.1 Events of Default. The occurrence of any of the following events
shall constitute an “Event of Default” under this Agreement, and Borrower shall
give Silicon immediate written notice thereof: (a) Any warranty,
representation, statement, report or certificate made or delivered to Silicon
by Borrower or any of Borrower’s officers, employees or agents, now or in the
future, shall be untrue or misleading in a material respect when made or deemed
to be made; or (b) Borrower shall fail to pay when due any Loan or any interest
thereon or any other monetary Obligation; or (c) * the total Loans and other
Obligations outstanding at any time shall exceed the Credit Limit; or (d)
Borrower (i) shall fail to comply with any of the financial covenants set forth
in the Schedule, or (ii) shall fail to perform any other non-monetary
Obligation which by its nature cannot be cured, or (iii) shall fail to permit
Silicon to conduct an inspection or audit as specified in Section 5.4 hereof;
or (e) Borrower shall fail to perform any other non-monetary Obligation, which
failure is not cured within five Business Days after the date due; or (f) any
levy, assessment, attachment, seizure, lien or encumbrance (other than a
Permitted Lien) is made on all or any part of the Collateral which is not cured
within 10 days after the occurrence of the same; or (g) any default or event of
default occurs under any obligation secured by a Permitted Lien, which is not
cured within any applicable cure period or waived in writing by the holder of
the Permitted Lien; or (h) Borrower breaches any material contract or
obligation, which has resulted or could reasonably be expected to result in a
Material Adverse Change; or (i) Dissolution, termination of existence,
insolvency or business failure of Borrower or any guarantor of the Obligations;
or appointment of a receiver, trustee or custodian, for all or any part of the
property of, assignment for the benefit of creditors by, or the commencement of
any proceeding by Borrower or any guarantor of the Obligations under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or (j) the commencement of any proceeding against Borrower or
any guarantor of any of the Obligations under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law
or statute of any jurisdiction, now or in the future in effect, which is not
cured by the dismissal thereof within † 30 days after the date commenced; or
(k) revocation or termination of, or limitation or denial of liability upon,
any guaranty of the Obligations or any attempt to do any of the foregoing; or
(l) revocation or termination of, or limitation or denial of liability upon,
any pledge



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     of any certificate of deposit, securities or other property or asset of any
kind pledged by any third party to secure any or all of the Obligations,
or any attempt to do any of the foregoing, or commencement of proceedings
by or against any such third party under any bankruptcy or insolvency law;
or (m) Borrower makes any payment on account of any indebtedness or
obligation which has been subordinated to the Obligations other than as
permitted in the applicable subordination agreement, or if any Person who
has subordinated such indebtedness or obligations terminates or in any way
limits his subordination agreement; or (n) ** there shall be a change in
the record or beneficial ownership of an aggregate of more than 20% of the
outstanding shares of stock of Borrower, in one or more transactions,
compared to the ownership of outstanding shares of stock of Borrower in
effect on the date hereof, without the prior written consent of Silicon;
or (o) Borrower shall generally not pay its debts as they become due, or
Borrower shall conceal, remove or transfer any part of its property, with
intent to hinder, delay or defraud its creditors, or make or suffer any
transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or (p) a Material
Adverse Change shall occur; or (q) an event of default has occurred and is
continuing under any other Loan Document (after giving effect (without
duplication hereof) of all applicable cure periods, if any). Silicon may
cease making any Loans and other extensions of credit hereunder during any
of the above cure periods, and thereafter if an Event of Default has
occurred and is continuing.



     * an Overadvance exists and Borrower shall fail to repay the same to
Silicon in accordance with Section 1.3 hereof; provided, however, if an
Overadvance results directly from a change by Silicon of the amount of
Reserves, the Advance Rate, or what constitutes the Minimum Eligibility
Requirements, or directly from an adverse change by Silicon in the
determination of eligibility of Accounts that meet the Minimum Eligibility
Requirements, then if Borrower fails to repay such Overadvance within 3
Business Days of such Overadvance occurring



     † 45 days



     ** without the prior written consent of Silicon, (1) a “person” or “group”
(within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934, as amended) becomes, after the date of this Agreement, the
“beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934, as amended), directly or indirectly, of more than 20% of the total
voting power of all classes of capital stock then outstanding of GIGA-TRONICS,
or (2) a majority of the members of the Board of Directors of GIGA-TRONICS
shall not constitute Continuing Directors, or (3) GIGA-TRONICS shall cease to
own and control, beneficially and of record, 100% of the issued and outstanding
capital stock of each other Borrower



     7.2 Remedies. Upon the occurrence and during the continuance of any
Event of Default, and at any time thereafter, Silicon, at its option, and
without notice or demand of any kind (all of which are hereby expressly waived
by Borrower), may do any one or more of the following: (a) Cease making Loans
or otherwise extending credit to Borrower under this Agreement or any other
Loan Document; (b) Accelerate and declare all or any part of the Obligations to
be immediately due, payable, and performable, notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
Obligation; (c) Take possession of any or all of the Collateral wherever it may
be found, and for that purpose Borrower hereby authorizes Silicon without
judicial process to enter onto any of Borrower’s premises without interference
to search for, take possession of, keep, store, or remove any of the
Collateral, and remain on the premises or cause a custodian to remain on the
premises in exclusive control thereof, without charge for so long as Silicon
deems it necessary, in its good faith business judgment, in order to complete
the enforcement of its rights under this Agreement or any other Loan Document;
provided, however, that should Silicon seek to take possession of any of the
Collateral by court process, Borrower hereby irrevocably waives: (i) any bond
and any surety or security relating thereto required by any statute, court rule
or otherwise as an incident to such possession; (ii) any demand for possession
prior to the commencement of any suit or action to recover possession thereof;
and (iii) any requirement that Silicon retain possession of, and not dispose
of, any such Collateral until after trial or final judgment; (d) Require
Borrower to assemble any or all of the Collateral and make it available to
Silicon at places designated by Silicon which are reasonably convenient to
Silicon and Borrower, and to remove the Collateral to such locations as Silicon
may deem advisable; (e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Silicon shall have the right to use Borrower’s premises,
vehicles, hoists, lifts, cranes, and other Equipment and all other property
without charge; (f) Sell, lease or otherwise dispose of any of the Collateral,
in its condition at the time Silicon obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private
sales, in lots or in bulk, for cash, exchange or other property, or on credit,
and to adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. Silicon shall have the right to
conduct such disposition on Borrower’s premises without charge, for such time
or times as Silicon deems reasonable, or on Silicon’s premises, or elsewhere
and the Collateral need not be located at the place of disposition. Silicon
may directly or through any affiliated company purchase or lease any Collateral
at any such public disposition, and if permissible under applicable law, at any
private disposition. Any sale or other disposition of Collateral shall not
relieve Borrower of any liability Borrower may have if any Collateral is
defective as to title or physical condition or otherwise at the time of sale;
(g) Demand payment of, and collect any Accounts and General Intangibles
comprising Collateral and, in connec-



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tion therewith, Borrower irrevocably authorizes Silicon to endorse or sign
Borrower’s name on all collections, receipts, instruments and other documents,
to take possession of and open mail addressed to Borrower and remove therefrom
payments made with respect to any item of the Collateral or proceeds thereof,
and, in Silicon’s good faith business judgment, to grant extensions of time to
pay, compromise claims and settle Accounts and the like for less than face
value; (h) Effect an administrative “hold” or offset against any sums in any of
Borrower’s general, special or other Deposit Accounts with Silicon against any
or all of the Obligations; and (i) Demand and receive possession of any of
Borrower’s federal and state income tax returns and the books and records
utilized in the preparation thereof or referring thereto. All reasonable
attorneys’ fees, expenses, costs, liabilities and obligations incurred by
Silicon with respect to the foregoing shall be added to and become part of the
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations. Without
limiting any of Silicon’s rights and remedies, from and after the occurrence
and during the continuance of any Event of Default, the interest rate
applicable to the Obligations shall be increased by an additional four percent
per annum (the “Default Rate”).




     7.3 Standards for Determining Commercial Reasonableness. Borrower and
Silicon agree that a sale or other disposition (collectively, “sale”) of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least ten days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least ten days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Silicon, with or without the Collateral being present; (iv) The sale commences
at any time between 8:00 a.m. and 6:00 p.m; (v) Payment of the purchase price
in cash or by cashier’s check or wire transfer is required; (vi) With respect
to any sale of any of the Collateral, Silicon may (but is not obligated to)
direct any prospective purchaser to ascertain directly from Borrower any and
all information concerning the same. Silicon shall be free to employ other
methods of noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.



     7.4 Power of Attorney. Upon the occurrence and during the continuance of
any Event of Default, without limiting Silicon’s other rights and remedies,
Borrower grants to Silicon an irrevocable power of attorney coupled with an
interest, authorizing and permitting Silicon (acting through any of its
employees, attorneys or agents) at any time, at its option, but without
obligation, with or without notice to Borrower, and at Borrower’s expense, to
do any or all of the following, in Borrower’s name or otherwise, but Silicon
agrees that if it exercises any right hereunder, it will do so in good faith
and in a commercially reasonable manner: (a) Execute on behalf of Borrower any
documents that Silicon may, in its good faith business judgment, deem advisable
in order to perfect and maintain Silicon’s security interest in the Collateral,
or in order to exercise a right of Borrower or Silicon, or in order to fully
consummate all the transactions contemplated under this Agreement, and all
other Loan Documents; (b) Execute on behalf of Borrower, any invoices relating
to any Account, any draft against any Account Debtor and any notice to any
Account Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of
mechanic’s, materialman’s or other lien, or assignment or satisfaction of
mechanic’s, materialman’s or other lien; (c) Take control in any manner of any
cash or non-cash items of payment or proceeds of Collateral; endorse the name
of Borrower upon any instruments, or documents, evidence of payment or
Collateral that may come into Silicon’s possession; (d) Endorse all checks and
other forms of remittances received by Silicon; (e) Pay, contest or settle any
lien, charge, encumbrance, security interest and adverse claim in or to any of
the Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; (f) Grant extensions of time to pay,
compromise claims and settle Accounts and General Intangibles for less than
face value and execute all releases and other documents in connection
therewith; (g) Pay any sums required on account of Borrower’s taxes or to
secure the release of any liens therefor, or both; (h) Settle and adjust, and
give releases of, any insurance claim that relates to any of the Collateral and
obtain payment therefor; (i) Instruct any third party having custody or control
of any books or records belonging to, or relating to, Borrower to give Silicon
the same rights of access and other rights with respect thereto as Silicon has
under this Agreement; and (j) Take any action or pay any sum required of
Borrower pursuant to this Agreement and any other Loan Documents. Any and all
reasonable sums paid and any and all reasonable costs, expenses, liabilities,
obligations and * attorneys’ fees incurred by Silicon with respect to the
foregoing shall be added to and become part of the Obligations, shall be
payable on demand, and shall bear interest at a rate equal to the highest
interest rate applicable to any of the Obligations. In no event shall
Silicon’s rights under the foregoing power of attorney or any of Silicon’s
other rights under this Agreement be deemed to indicate that Silicon is in
control of the business, management or properties of Borrower.



     * reasonable



     7.5 Application of Proceeds. All proceeds realized as the result of any
sale of the Collateral shall be applied by Silicon first to the reasonable
costs, expenses, liabilities, obligations and * attorneys’ fees incurred by
Silicon in the exercise of its rights under this Agreement, second to the
interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as Silicon shall determine in its ** sole
discretion. Any surplus shall be paid to Borrower or other persons legally
entitled thereto; Borrower shall remain liable to Silicon for any deficiency.
If, Silicon, in its good faith



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business judgment, directly or indirectly enters into a deferred payment or
other credit transaction with any purchaser at any sale of Collateral, Silicon
shall have the option, exercisable at any time, in its good faith business
judgment, of either reducing the Obligations by the principal amount of
purchase price or deferring the reduction of the Obligations until the actual
receipt by Silicon of the cash therefor.


* reasonable


** good faith business judgment



     7.6 Remedies Cumulative. In addition to the rights and remedies set
forth in this Agreement, Silicon shall have all the other rights and remedies
accorded a secured party under the California Uniform Commercial Code and under
all other applicable laws, and under any other instrument or agreement now or
in the future entered into between Silicon and Borrower, and all of such rights
and remedies are cumulative and none is exclusive. Exercise or partial
exercise by Silicon of one or more of its rights or remedies shall not be
deemed an election, nor bar Silicon from subsequent exercise or partial
exercise of any other rights or remedies. The failure or delay of Silicon to
exercise any rights or remedies shall not operate as a waiver thereof, but all
rights and remedies shall continue in full force and effect until all of the
Obligations have been fully paid in cash and otherwise performed and this
Agreement has been terminated.



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



     “Account Debtor” means the obligor on an Account.



     “Accounts” means all present and future “accounts” as defined in the
California Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without
limitation all accounts receivable and other sums owing to Borrower.



     “Affiliate” means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.



     “Bankruptcy Code” means the United States Bankruptcy Code (11 U.S.C.
Sections 101 et seq.), as amended, and any successor statute.



     “Business Day” means a day on which Silicon is open for business.



     “Code” means the Uniform Commercial Code as adopted and in effect in the
State of California from time to time.



     “Collateral” has the meaning set forth in Section 2 above.



     “continuing” and “during the continuance of” when used with reference to a
Default or Event of Default means that the Default or Event of Default has
occurred and has not been either waived in writing by Silicon or cured within
any applicable cure period.



     "Continuing Director” means (a) any member of the Board of Directors who
was a director (or comparable manager) of Borrower on the date of this
Agreement, and (b) any individual who becomes a member of the Board of
Directors after the date of this Agreement if such individual was appointed or
nominated for election to the Board of Directors by a majority of the
Continuing Directors, but excluding any such individual originally proposed for
election in opposition to the Board of Directors in office at the date of this
Agreement in an actual or threatened election contest relating to the election
of the directors (or comparable managers) of Borrower (as such terms are used
in Rule 14a-11 under the Securities Exchange Act of 1934, as amended) and whose
initial assumption of office resulted from such contest or the settlement
thereof.



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



     “Deposit Accounts” means all present and future “deposit accounts” as
defined in the California Uniform Commercial Code in effect on the date hereof
with such additions to such term as may hereafter be made, and includes without
limitation all general and special bank accounts, demand accounts, checking
accounts, savings accounts and certificates of deposit.



     “Eligible Accounts” means Accounts arising in the ordinary course of
Borrower’s business from the sale of goods or the rendition of services, or the
non-exclusive licensing of Intellectual Property, which Silicon, in its good
faith business judgment, shall deem eligible for borrowing. Without limiting
the fact that the determination of which Accounts are eligible for borrowing is
a matter of Silicon’s good faith business judgment, the requirements in the
remainder of this definition (the “Minimum Eligibility Requirements”) are the
minimum requirements for an Account to be an Eligible Account: (i) the Account
must not be outstanding for more than 90 days from its invoice date (the
“Eligibility Period”); (ii) the Account must not represent progress billings,
or be due under a fulfillment or requirements contract with the Account Debtor;
(iii) the



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	 	 	Account must not be subject to any contingencies (including Accounts
arising from sales on consignment, guaranteed sale or other terms pursuant to
which payment by the Account Debtor may be conditional); (iv) the Account must
not be owing from an Account Debtor with whom Borrower has any dispute (whether
or not relating to the particular Account); (v) the Account must not be owing
from an Affiliate of Borrower; (vi) the Account must not be owing from an
Account Debtor which is subject to any insolvency or bankruptcy proceeding, or
whose financial condition is not acceptable to Silicon †, or which, fails or
goes out of a material portion of its business; (vii) the Account must not be
owing from the United States or any department, agency or instrumentality
thereof (unless there has been compliance, to Silicon’s satisfaction †, with
the United States Assignment of Claims Act); (viii) the Account must not be
owing from an Account Debtor located outside the United States or those
provinces or territories of Canada that have adopted the Personal Property
Security Act (unless pre-approved by Silicon in its discretion in writing, or
backed by a letter of credit satisfactory to Silicon, or FCIA insured
satisfactory to Silicon); (ix) the Account must not be owing from an Account
Debtor to whom Borrower is or may be liable for goods or services purchased by
Borrower, or third-party intellectual property licensed by Borrower (as
licensee), from such Account Debtor or otherwise (but, in such case, the
Account will be deemed not eligible only to the extent of any amounts owed by
Borrower to such Account Debtor) *. Accounts owing from one Account Debtor will
not be deemed Eligible Accounts to the extent they exceed 25% of the total
Accounts outstanding. In addition, if more than 50% of the Accounts owing from
an Account Debtor are outstanding for a period longer than their Eligibility
Period (without regard to unapplied credits) or are otherwise not eligible
Accounts, then all Accounts owing from that Account Debtor will be deemed
ineligible for borrowing. Silicon may, from time to time, in its good faith
business judgment, revise the Minimum Eligibility Requirements, upon ** written
notice to Borrower.





     † in its good faith business judgment



     * ; (x) the Account must not be owing by an Account Debtor as to whom
Borrower has recognized or can recognize deferred revenue, unless and in which
case the portion of such Account that is equal to such deferred revenue amount
shall be ineligible under this clause (x); (xi) the Account must not arise from
the sale, lease, licensing, assignment, or other disposition of any Registered
Copyright of Borrower, unless Borrower is in full compliance with Section 8(3)
of the Schedule with respect to such Account and the underlying Registered
Copyright; and (xii) the Account must have been billed to the Account Debtor.



     ** at least 3 Business Days prior



     “Eligible Inventory” means Inventory that Silicon, in its good faith
business judgment, deems eligible for borrowing. Without limiting the fact
that the determination of which Inventory is eligible for borrowing is a matter
of Silicon’s good faith business judgment, the requirements in the remainder of
this definition (the “Minimum Inventory Eligibility Requirements”) are the
minimum requirements for Inventory to be Eligible Inventory: the Inventory
must (i) consist of * finished goods, in good, new and salable condition, not
be perishable, not be obsolete or unmerchantable, and not be comprised of raw
materials, work in process, packaging materials or supplies; (ii) meet all
applicable governmental standards; (iii) have been manufactured in compliance
with the Fair Labor Standards Act; (iv) conform in all respects to the
warranties and representations set forth in this Agreement and the other Loan
Documents; (v) be at all times subject to Silicon’s duly perfected, first
priority security interest; (vi) be situated at Borrower’s Address or at one of
the locations within the United States that are set forth in the
Representations; and (vii) are not the subject of any lien or other interest of
any landlord or bailee that has priority over the security interests of
Silicon, unless such landlord or bailee (as the case may be) has executed and
delivered in favor of Silicon a landlord agreement or bailee agreement (as the
case may be), in form and substance acceptable to Silicon in its good faith
business judgment and in full force and effect **. Silicon may, from time to
time, in its good faith business judgment, revise the Minimum Inventory
Eligibility Requirements, upon *** written notice to Borrower.



     * raw materials or



     ** , or unless satisfactory Reserves, in respect of such liens or other
interests of such landlord or bailee, are established and maintained by Silicon
in its good faith business judgment



     *** at least 3 Business Days prior



     “Equipment” means all present and future “equipment” as defined in the
California Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without
limitation all machinery, fixtures, goods, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing.



     “Event of Default” means any of the events set forth in Section 7.1 of
this Agreement.



     “GAAP” means generally accepted accounting principles consistently
applied.



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“General Intangibles” means all present and future “general intangibles” as
defined in the California Uniform Commercial Code in effect on the date hereof
with such additions to such term as may hereafter be made, and includes without
limitation all Intellectual Property, payment intangibles, royalties, contract
rights, goodwill, franchise agreements, purchase orders, customer lists, route
lists, telephone numbers, domain names, claims, income tax refunds, security
and other deposits, options to purchase or sell real or personal property,
rights in all litigation presently or hereafter pending (whether in contract,
tort or otherwise), insurance policies (including without limitation key man,
property damage, and business interruption insurance), payments of insurance
and rights to payment of any kind.




     “good faith business judgment” means honesty in fact and good faith (as
defined in Section 1201 of the Code) in the exercise of Silicon’s business
judgment.



     “including” means including (but not limited to).



     “Intellectual Property” means all present and future (a) copyrights,
copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof, whether
published or unpublished, (b) trade secret rights, including all rights to
unpatented inventions and know-how, and confidential information; (c) mask work
or similar rights available for the protection of semiconductor chips; (d)
patents, patent applications and like protections including without limitation
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same; (e) trademarks, servicemarks, trade styles,
and trade names, whether or not any of the foregoing are registered, and all
applications to register and registrations of the same and like protections,
and the entire goodwill of the business of Borrower connected with and
symbolized by any such trademarks; (f) computer software and computer software
products; (g) designs and design rights; (h) technology; (i) all claims for
damages by way of past, present and future infringement of any of the rights
included above; (j) all licenses or other rights to use any property or rights
of a type described above.



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



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



     “Loan Documents” means, collectively, this Agreement, the Representations,
and all other present and future documents, instruments and agreements between
Silicon and Borrower (or any guarantor of the Obligations), including, but not
limited to those relating to this Agreement, and all amendments and
modifications thereto and replacements therefor.



     “Material Adverse Change” means any of the following: (i) a material
adverse change in the business, operations, or financial or other condition of
the Borrower *, or (ii) a material impairment of the prospect of repayment of
any portion of the Obligations; or (iii) a material impairment of the value or
priority of Silicon’s security interests in the Collateral.



     * taken as a whole



     “Obligations” means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Silicon, whether evidenced by this Agreement or any
note or other instrument or document, or otherwise, whether arising from an
extension of credit, opening of a letter of credit, banker’s acceptance, loan,
guaranty, indemnification or otherwise, whether direct or indirect (including,
without limitation, those acquired by assignment and any participation by
Silicon in Borrower’s debts owing to others), absolute or contingent, due or to
become due, including, without limitation, all interest, charges, expenses,
fees, * attorney’s fees, expert witness fees, audit fees, letter of credit
fees, collateral monitoring fees, closing fees, facility fees, termination
fees, minimum interest charges and any other sums chargeable to Borrower under
this Agreement or under any other Loan Documents (including any interest and
other amounts that, but for the provisions of the Bankruptcy Code, would have
accrued).



     * reasonable



     “Other Property” means the following as defined in the California Uniform
Commercial Code in effect on the date hereof with such additions to such term
as may hereafter be made, and all rights relating thereto: all present and
future “commercial tort claims” (including without limitation any commercial
tort claims identified in the Representations), “documents”, “instruments”,
“promissory notes”, “chattel paper”, “letters of credit”, “letter-of-credit
rights”, “fixtures”, “farm products” and



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“money”; and all other goods and personal property of every kind, tangible and
intangible, whether or not governed by the California Uniform Commercial
Code.



     “Payment” means all checks, wire transfers and other items of payment
received by Silicon (including proceeds of Accounts and payment of the
Obligations in full) for credit to Borrower’s outstanding Loans or, if the
balance of the Loans have been reduced to zero, for credit to its Deposit
Accounts.



     “Permitted Liens” means the following: (i) purchase money security
interests in specific items of Equipment; (ii) leases of specific items of
Equipment; (iii) liens for taxes not yet payable *; (iv) additional security
interests and liens consented to in writing by Silicon, which consent may be
withheld in its good faith business judgment; (v) security interests being
terminated substantially concurrently with this Agreement; (vi) liens of
materialmen, mechanics, warehousemen, carriers, or other similar liens arising
in the ordinary course of business and securing obligations which are not
delinquent **; (vii) liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by liens of the type described above
in clauses (i) or (ii) above, provided that any extension, renewal or
replacement lien is limited to the property encumbered by the existing lien and
the principal amount of the indebtedness being extended, renewed or refinanced
does not increase; (viii) Liens in favor of customs and revenue authorities
which secure payment of customs duties in connection with the importation of
goods. Silicon will have the right to require, as a condition to its consent
under subparagraph (iv) above, that the holder of the additional security
interest or lien sign an intercreditor agreement on Silicon’s then standard
form, acknowledge that the security interest is subordinate to the security
interest in favor of Silicon, and agree not to take any action to enforce its
subordinate security interest so long as any Obligations remain outstanding,
and that Borrower agree that any uncured default in any obligation secured by
the subordinate security interest shall also constitute an Event of Default
under this Agreement.



     * (A) inchoate liens for taxes not yet payable; and (B) liens for taxes
(other than payroll taxes or taxes that are the subject of a United States
federal tax lien) being diligently contested by Borrower in good faith,
provided that (1) a reserve with respect to such obligation is established on
the books of Borrower in accordance with GAAP (or, if higher, in an amount that
Silicon in its good faith business judgment believes to be appropriate under
the circumstances), and (2) Silicon is satisfied that, while any such protest
is pending, there will be no impairment of the enforceability, validity, or
priority of any of the security interests of Silicon in and to the Collateral



     ** (A) owing to such lienholders that: (A) are not yet delinquent; or (B)
are being diligently contested by Borrower in good faith, provided that (1) a
reserve with respect to such obligation is established on the books of Borrower
in accordance with GAAP (or, if higher, in an amount that Silicon in its good
faith business judgment believes to be appropriate under the circumstances),
and (2) Silicon is satisfied that, while any such protest is pending, there
will be no impairment of the enforceability, validity, or priority of any of
the security interests of Silicon in and to the Collateral



     “Person” means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.



     "Registered Copyright” means any software, maskwork, work of authoriship,
or other copyright that is registered (or is the subject of an application for
registration) with the United States Copyright Office (a “Registered
Copyright”).



     “Representations” means the written Representations and Warranties
provided by Borrower to Silicon referred to in the Schedule.



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



     "Streamline Provisions” means the set of provisions set forth in Section 9
of the Schedule.



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     Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP, consistently applied. All other terms contained in this Agreement,
unless otherwise indicated, shall have the meanings provided by the Code, to
the extent such terms are defined therein.


9. GENERAL PROVISIONS.




     9.1 Interest Computation; Float Charge. In computing interest on the
Obligations, all Payments received after 12:00 Noon on any day shall be deemed
received on the next Business Day. In addition, Silicon shall be entitled to
charge Borrower a “float” charge in an amount equal to three Business Days
interest, at the interest rate applicable to the Loans, on all Payments *
received by Silicon. Said float charge is not included in interest for
purposes of computing Minimum Monthly Interest (if any) under this Agreement.
The float charge for each month shall be payable on the last day of the month.
Bank shall not be required to credit Borrower’s account for the amount of any
item of payment which is unsatisfactory to Bank in its good faith business
judgment, and Bank may charge Borrower’s loan account for the amount of any
item of payment which is returned to Bank unpaid.



     * (other than wire transfers, which shall be credited as a Payment as of
the date of receipt or deemed receipt)



     9.2 Application of Payments. All payments with respect to the
Obligations may be applied, and in Silicon’s good faith business judgment
reversed and re-applied, to the Obligations, in such order and manner as
Silicon shall determine in its good faith business judgment.



     9.3 Charges to Accounts. Silicon may, in its discretion, require that
Borrower pay monetary Obligations in cash to Silicon, or charge them to
Borrower’s Loan account, in which event they will bear interest at the same
rate applicable to the Loans. Silicon may also, in its discretion, charge any
monetary Obligations to any one or more of Borrower’s Deposit Accounts
maintained with Silicon.



     9.4 Monthly Accountings. Silicon shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. * Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Silicon), unless Borrower
notifies Silicon in writing to the contrary within 60 days after such account
is rendered, describing the nature of any alleged errors or omissions.



     * In the absence of manifest error, such



     9.5 Notices. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, addressed as follows: (a) if to Borrower, * at the address for
Borrower shown in the heading to this Agreement; or (b) if to Silicon, at the
address for Silicon shown in the introductory paragraph of this Agreement; or
(c) at any other address designated in writing by one party to the other party
in accordance with this Section 9.5. Notices to Silicon shall be directed to
the Commercial Finance Division, to the attention of the Division Manager or
the Division Credit Manager. All notices shall be deemed to have been given
upon delivery in the case of notices personally delivered, or at the expiration
of one Business Day following delivery to the private delivery service, or two
Business Days following the deposit thereof in the United States mail, with
postage prepaid.



     * (in care of GIGA-TRONICS with respect to any and all Borrowers)



     9.6 Severability. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.



     9.7 Integration. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Silicon and supersede
all prior and contemporaneous negotiations and oral representations and
agreements, all of which are merged and integrated in this Agreement. There
are no oral understandings, representations or agreements between the parties
which are not set forth in this Agreement or in other written agreements signed
by the parties in connection herewith.



     9.8 Waivers; Indemnity. The failure of Silicon at any time or times to
require Borrower to strictly comply with any of the provisions of this
Agreement or any other Loan Document shall not waive or diminish any right of
Silicon later to demand and receive strict compliance therewith. Any waiver of
any default shall not waive or affect any other default, whether prior or
subsequent, and whether or not similar. None of the provisions of this
Agreement or any other Loan Document shall be deemed to have been waived by any
act or knowledge of Silicon or its agents or employees, but only by a specific
written waiver signed by an authorized officer of Silicon and delivered to
Borrower. * Borrower waives the benefit of all statutes of limitations
relating to any of the Obligations or this Agreement or any other Loan
Document, and Borrower waives demand, protest, notice of protest and notice of
default or dishonor, notice of payment and nonpayment, release, compromise,



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settlement, extension or renewal of any commercial paper, instrument, account,
General Intangible, document or guaranty at any time held by Silicon on which
Borrower is or may in any way be liable, and notice of any action taken by
Silicon, unless expressly required by this Agreement or any other Loan
Document. Borrower hereby agrees to indemnify Silicon and its affiliates,
subsidiaries, parent, directors, officers, employees, agents, and attorneys,
and to hold them harmless from and against any and all claims, debts,
liabilities, demands, obligations, actions, causes of action, penalties, costs
and expenses (including reasonable attorneys’ fees), of every kind, which they
may sustain or incur based upon or arising out of any of the Obligations, or
any relationship or agreement between Silicon and Borrower, or any other
matter, relating to Borrower or the Obligations; provided that, with respect to
any indemnitee, this indemnity shall not extend to damages proximately caused
by such indemnitee’s own gross negligence or willful misconduct.
Notwithstanding any provision in this Agreement to the contrary, the indemnity
agreement set forth in this Section shall survive any termination of this
Agreement and shall for all purposes continue in full force and effect.




     * To the maximum extent permitted by applicable law,



     9.9 No Liability for Ordinary Negligence. Neither Silicon, nor any of
its directors, officers, employees, agents, attorneys or any other Person
affiliated with or representing Silicon shall be liable for any claims,
demands, losses or damages, of any kind whatsoever, made, claimed, incurred or
suffered by Borrower or any other party through the ordinary negligence of
Silicon, or any of its directors, officers, employees, agents, attorneys or any
other Person affiliated with or representing Silicon, but nothing herein shall
relieve Silicon from liability for its own gross negligence or willful
misconduct.



     9.10 Amendment. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Silicon.



     9.11 Time of Essence. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.



     9.12 Attorneys Fees and Costs. Borrower shall reimburse Silicon for all
reasonable attorneys’ fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys’ fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and all present and future documents relating to this Agreement;
obtain legal advice in connection with this Agreement or Borrower; enforce, or
seek to enforce, any of its rights; prosecute actions against, or defend
actions by, Account Debtors; commence, intervene in, or defend any action or
proceeding; initiate any complaint to be relieved of the automatic stay in
bankruptcy; file or prosecute any probate claim, bankruptcy claim, third-party
claim, or other claim; examine, audit, copy, and inspect any of the Collateral
or any of Borrower’s books and records; protect, obtain possession of, lease,
dispose of, or otherwise enforce Silicon’s security interest in, the
Collateral; and otherwise represent Silicon in any litigation relating to
Borrower. In satisfying Borrower’s obligation hereunder to reimburse Silicon
for attorneys fees, Borrower may, for convenience, issue checks directly to
Silicon’s attorneys, Levy, Small & Lallas, but Borrower acknowledges and agrees
that Levy, Small & Lallas is representing only Silicon and not Borrower in
connection with this Agreement. If either Silicon or Borrower files any
lawsuit against the other predicated on a breach of this Agreement, the
prevailing party in such action shall be entitled to recover its reasonable
costs and attorneys’ fees, including (but not limited to) reasonable attorneys’
fees and costs incurred in the enforcement of, execution upon or defense of any
order, decree, award or judgment. All attorneys’ fees and costs to which
Silicon may be entitled pursuant to this Section shall immediately become part
of Borrower’s Obligations, shall be due on demand, and shall bear interest at a
rate equal to the highest interest rate applicable to any of the Obligations.



     9.13 Benefit of Agreement. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and Silicon; provided,
however, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Silicon, and any prohibited
assignment shall be void. No consent by Silicon to any assignment shall
release Borrower from its liability for the Obligations.



     9.14 Joint and Several Liability. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.



     9.15 Limitation of Actions. Any claim or cause of action by Borrower
against Silicon, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Loan Agreement, or any
other Loan Document, or any other transaction contemplated hereby or thereby or
relating hereto or thereto, or any other matter, cause or thing whatsoever,
occurred, done, omitted or suffered to be done by Silicon, its directors,
officers, employees, agents, accountants or attorneys, shall be barred unless
asserted by Borrower by the commencement of an action or proceeding in a court
of competent jurisdiction by the filing of a complaint within *
one year after
the first act, occurrence or omission upon which



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     such claim or cause of action, or any part thereof, is based, and the service
of a summons and complaint on an officer of Silicon, or on any other person
authorized to accept service on behalf of Silicon, within thirty (30) days
thereafter. Borrower agrees that such ** one-year period is a reasonable and
sufficient time for Borrower to investigate and act upon any such claim or
cause of action. The ** one-year period provided herein shall not be waived,
tolled, or extended except by the written consent of Silicon in its sole
discretion. This provision shall survive any termination of this Loan
Agreement or any other Loan Document.



     * two years



     ** two-year



     9.16 Section Headings; Construction. Section headings are only used in
this Agreement for convenience. Borrower and Silicon acknowledge that the
headings may not describe completely the subject matter of the applicable
section, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. This Agreement has
been fully reviewed and negotiated between the parties and no uncertainty or
ambiguity in any term or provision of this Agreement shall be construed
strictly against Silicon or Borrower under any rule of construction or
otherwise.



     9.17 Governing Law; Jurisdiction; Venue. This Agreement and (except to
the extent expressly provided to the contrary) the other Loan Documents and all
acts and transactions hereunder and (except to the extent expressly provided to
the contrary) thereunder and all rights and obligations of Silicon and Borrower
shall be governed by the laws of the State of California. As a material part
of the consideration to Silicon to enter into this Agreement and the other Loan
Documents, Borrower (i) agrees that all actions and proceedings relating
directly or indirectly to this Agreement and the other Loan Documents shall, at
Silicon’s option, be litigated in courts located within California, and that
the exclusive venue therefor shall be Santa Clara County; (ii) consents to the
jurisdiction and venue of any such court and consents to service of process in
any such action or proceeding by personal delivery or any other method
permitted by law; and (iii) waives any and all rights Borrower may have to
object to the jurisdiction of any such court, or to transfer or change the
venue of any such action or proceeding.



     9.18 Mutual Waiver of Jury Trial. BORROWER AND SILICON EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR
BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.



     [remainder of page intentionally left blank; signature page follows]



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



	 	 	 	 	 	 	 	 	 	 	 	 
	Borrower:	 	Borrower:
	

	 	 	 	 	 	 	 	 	 	 
	

	 	GIGA-TRONICS INCORPORATED	 	 	 	ASCOR, INC.
	

	 	 	 	 	 	 	 	 	 	 
	

	 	By
	 	/s/ Mark H. Cosmez II
	 	 	 	By
	 	/s/ Mark H. Cosmez II
	

	 	 	 	
 
	 	 	 	 	 	
 
	

	 	 	 	President or Vice President
	 	 	 	 	 	President or Vice President
	

	 	 	 	 	 	 	 	 	 	 
	

	 	By
	 	/s/ G.H. Bruns, Jr.
	 	 	 	By
	 	/s/ G.H. Bruns, Jr.
	

	 	 	 	
 
	 	 	 	 	 	
 
	

	 	 	 	Secretary or Assistant Secretary
	 	 	 	 	 	Secretary or Assistant Secretary
	

	 	 	 	 	 	 	 	 	 	 
	Borrower:	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	 
	

	 	MICROSOURCE, INC.	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	 
	

	 	By
	 	/s/ Mark H. Cosmez II	 	 	 	 	 	 
	

	 	 	 	
 	 	 	 	 	 	 
	

	 	 	 	President or Vice President	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	 
	

	 	By
	 	/s/ G.H. Bruns, Jr.	 	 	 	 	 	 
	

	 	 	 	
 	 	 	 	 	 	 
	

	 	 	 	Secretary or Assistant Secretary	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	 
	Silicon:	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	 
	SILICON VALLEY BANK	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	 
	By

	 	/s/ Tim Walsh	 	 	 	 	 	 
	

	 	 	 	
 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	 
	Title

	 	Senior V. P.	 	 	 	 	 	 
	

	 	 	 	
 	 	 	 	 	 	 








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Silicon Valley Bank



Schedule to




Loan and Security Agreement




	 	 	 
	Borrower:

	 	GIGA-TRONICS INCORPORATED, a California corporation
(“GIGA-TRONICS”); ASCOR, INC., a California corporation
(“ASCOR”); and MICROSOURCE, INC., a California corporation
(“MICROSOURCE”)
	 
	 	 
	Address:

	 	4650 Norris Canyon Road

San Ramon, CA 94583
	 
	 	 
	Date:

	 	June 21, 2004






This Schedule forms an integral part of the Loan and Security Agreement between
Silicon Valley Bank and the above-borrower of even date.




 




	 	 	 	 	 	 	 	 	 
	1.	 	CREDIT LIMIT

(Section 1.1):	 	
Subject to the terms and conditions of the Agreement and this
Schedule, and during the period commencing on the date of this
Agreement and ending on the Business Day immediately preceding the
Maturity Date, Silicon will make revolving advances in an aggregate
outstanding amount not to exceed the lesser of the Maximum Credit Limit
(as defined below) and the Borrowing Base (as defined below).

As used herein, the term “Maximum Credit Limit”
means $2,500,000.
	 	 	 	 	As used herein, the term “Borrowing Base” means, as
of any date of determination, the result of:
	

	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(1) 80%(the “Accounts Advance Rate” and also an
“Advance Rate”) of the amount of Borrower’s
Eligible Accounts (as defined in Section 8
above), plus
	

	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(2) an amount not to exceed the lowest of:
	

	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	(a) 25% (the “Inventory Advance Rate” and
also an “Advance Rate”) of the value of
Borrower’s Eligible Inventory (as defined in
Section 8 above), calculated at the lower of
cost or market value and determined on a
first-in, first-out basis, or







 









 






					
	 
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	 	 	 	 	 	 	 	(b) $500,000, or.
	

	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	(c) 50% (the “Inventory/Accounts
Availability Ratio” and also an
“Advance Rate”) of the amount of
credit availability created by
clause (1) above of this
definition of “Borrowing Base”.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	Silicon may, from time to time, modify the Advance
Rates, in its good faith business judgment, upon at
least 3 Business Days prior written notice to the
Borrower, based on changes in collection experience
with respect to Accounts, its evaluation of the
Inventory, or other issues or factors relating to the
Accounts, Inventory or other Collateral.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	Loans and other extensions of credit will be made to each
Borrower based on the Eligible Accounts and Eligible
Inventory of such Borrower, subject to the Maximum Credit
Limit for all Loans and other extensions of credit to all
Borrowers combined.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	FX Sublimit: $100,000; provided, however, that the sum
of the FX Reserve, plus the aggregate amount of
Obligations in respect of Cash Management Services,
shall not at any time exceed $100,000.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	Borrower may enter into foreign exchange forward
contracts with Silicon, on its standard forms, under
which Borrower commits to purchase from or sell to
Silicon a set amount of foreign currency more than one
Business Day after the contract date (the “FX Forward
Contracts”); provided that (1) at the time the FX
Forward Contract is entered into, Borrower has credit
availability under this Agreement in an amount at least
equal to 10% of the amount of the FX Forward Contract;
(2) the total FX Forward Contracts at any one time
outstanding may not exceed 10 times the amount of the FX
Sublimit set forth above. Silicon shall have the right
to withhold, from the Loans or other extensions of
credit otherwise available to Borrower under this
Agreement, a reserve (which shall be in addition to all
other reserves) in an amount equal to 10% of the total
FX Forward Contracts from time to time outstanding (the
“FX Reserve”), and in the event at any time there are
insufficient Loans and other extensions of credit
available to Borrower for such reserve, Borrower shall
deposit and maintain with Silicon cash collateral in an
amount at all times equal to such deficiency, which
shall be held as Collateral for all purposes of this
Agreement. Silicon may, in its discretion, terminate the
FX Forward Contracts at any time that an Event of
Default occurs and is continuing. The FX Forward
Contracts shall terminate upon the earlier of (a) the
Maturity Date, or (b) any earlier effective date of
termination of this Agreement (or such later date
requested by Borrower as Silicon may agree in writing in
its sole discretion if and to the extent Borrower’s
Obligations in respect of the FX Forward Contracts are
secured by cash in amounts and on terms and conditions







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	 	 	 	 	acceptable to Silicon in its good faith business
judgment). Borrower shall execute all standard
form applications and agreements of Silicon in
connection with the FX Forward Contracts, and
without limiting any of the terms of such
applications and agreements, Borrower shall pay
all standard fees and charges of Silicon in
connection with the FX Forward Contracts. All
amounts that Silicon pays or expends in respect of
any FX Forward Contracts shall constitute
Obligations hereunder.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	Cash Management Services and Reserves: Borrower
may use up to $100,000 of Loans available
hereunder for Silicon’s Cash Management Services
(as defined below) identified in the cash
management services agreement related to such
services (the “Cash Management Services”);
provided, however, that the sum of the FX Reserve,
plus the aggregate amount of Obligations in
respect of Cash Management Services, shall not at
any time exceed $100,000. Silicon will reserve
against Loans and other extensions of credit which
would otherwise be available hereunder such sums
as Silicon shall determine in its good faith
business judgment in connection with the Cash
Management Services, and Silicon may charge to
Borrower’s Loan account any amounts that may
become due or owing to Silicon in connection with
the Cash Management Services. Borrower agrees to
execute and deliver to Silicon all standard form
applications and agreements of Silicon in
connection with the Cash Management Services, and,
without limiting any of the terms of such
applications and agreements, Borrower will pay all
standard fees and charges of Silicon in connection
with the Cash Management Services. The Cash
Management Services shall terminate upon the
earlier of (a) the Maturity Date, or (b) any
earlier effective date of termination of this
Agreement (or such later date requested by
Borrower as Silicon may agree in writing in its
sole discretion if and to the extent Borrower’s
Obligations in respect of the Cash Management
Services are secured by cash in amounts and on
terms and conditions acceptable to Silicon in its
sole discretion). Upon the occurrence and during
the continuation of an Event of Default, Silicon
shall have the right to require the Obligations in
respect of the Cash Management Services to be
secured by cash in amounts and on terms and
conditions acceptable to Silicon in its good faith
business judgment.







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	2.

	 	INTEREST.	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 
	 	 	Interest Rate
(Section 1.2):	 	
An annual rate equal to the sum of the “Prime Rate”
in effect from time to time, plus 1.50% per annum.
Interest shall be calculated on the basis of a
360-day year for the actual number of days elapsed.
As used in this Agreement, “Prime Rate” means the
interest rate announced from time to time by Silicon
as its “prime rate” (which is a base rate upon which
other rates charged by Silicon are based, and it is
not necessarily the best rate available at Silicon).
The interest rate applicable to the Obligations
shall change on each date there is a change in the
Prime Rate.
	

	 	 	 	 	 	 	 	 
	 	 	Minimum
Monthly
Interest
(Section 1.2):	 	
n/a per month.
	

	 	 	 	 	 	 	 	 
	

	3.

	 	FEES
(Section 1.4):	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 
	 	 	Loan Fee:	 	$25,000, payable concurrently herewith.
	

	 	 	 	 	 	 	 	 
	 	 	Collateral

Monitoring

Fee:	 	

n/a
	

	 	 	 	 	 	 	 	 
	 	 	Unused Line

Fee:	 	
Borrower shall pay to Bank, monthly in arrears, an
unused line fee equal to the product of 0.50% per annum multiplied
by the amount by which the Maximum Credit Limit exceeds the average
daily principal balance of the outstanding Loans during the
immediately preceding month (or part thereof), during the period
commencing on the date of this Agreement and ending on the Maturity
Date, and for so long thereafter as any of the Obligations relative
to Loans are outstanding, which fee shall be payable on the 1st day
following the end of each month.
	

	 	 	 	 	 	 	 	 
	

	4.	 	MATURITY DATE
(Section 6.1)	 	
364 days following the date of this Agreement.
	

	 	 	 	 	 	 	 	 
	

	5.	 	FINANCIAL
COVENANTS
(Section 5.1):	 	

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







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	 	Silicon Valley Bank
	 	Loan and Security Agreement
	 	 	







	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 
	 	 	Minimum

Liquidity:	 	
At all times, Borrower shall maintain Liquidity of not less than $800,000.
	

	 	 	 	 	 	 	 	 
	 	 	Minimum
Tangible

Net Worth:	 	
Borrower shall maintain, on a consolidated basis, a Tangible Net Worth of not less than the sum of
clauses (i) and (ii) below (the “Required TNW Amount”): (i) the TNW Base Amount (as defined below); plus
(ii) 75% of all consideration (net of reasonable, customary expenses of such sale and issuance) received
by or for the account of Borrower after the date hereof for the issuance and sale of equity securities of
GIGA-TRONICS and subordinated debt of Borrower (other than such consideration received upon the exercise
of stock options by employees, consultants, and advisors of Borrower not in excess of $100,000 in the
aggregate).
	

	 	 	 	 	 	 	 	 
	 	 	 	 	As used herein, the term “TNW Base Amount” means, as of any date of determination: (a) $7,500,000 during
the period prior to October 1, 2004; (b) $7,000,000 during the period commencing on October 1, 2004 and
ending on December 31, 2004; and (c) $6,500,000 at all times from and after January 1, 2005.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	Increases in the Required TNW Amount based on such consideration received for the issuance and sale of
such equity securities and subordinated debt shall be effective as of the end of the month in which such
consideration is received, and shall continue effective thereafter. In no event shall the Required TNW
Amount be decreased (except as a result of step-downs in the TNW Base Amount as set forth in the
definition thereof).
	

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

	 	 	 	 	 	 	 	 
	 	 	 	 	“Liabilities” shall have the meaning ascribed thereto by GAAP.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	“Liquidity” means, as of any date of determination, the sum of (i) the aggregate amount of Borrower’s
unrestricted cash maintained on deposit with Silicon, plus (ii) the amount of Loans and other extensions
of credit then available to Borrower under Section 1 of this Schedule (after giving effect to all such
Loans and other extensions of credit outstanding and, without duplication, all applicable reserves).
	

	 	 	 	 	 	 	 	 
	 	 	 	 	“Tangible Net Worth” shall mean the excess of total assets less total liabilities, determined in
accordance with GAAP, with the following adjustments:







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	 	Silicon Valley Bank
	 	Loan and Security Agreement
	 	 	







	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(A) there shall be excluded from assets: (i)
notes, accounts receivable and other obligations
owing to Borrower from its officers or other
Affiliates, and (ii) all assets which would be
classified as intangible assets under GAAP,
including without limitation goodwill, licenses,
patents, trademarks, trade names, copyrights,
capitalized software and organizational costs,
licenses and franchises.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(B) there shall be excluded from liabilities:
all indebtedness which is subordinated to the
Obligations under a subordination agreement in
form specified by Silicon or by language in the
instrument evidencing the indebtedness which
Silicon agrees in writing is acceptable to
Silicon in its good faith business judgment.
	

	 	 	 	 	 	 	 	 
	6.

	 	REPORTING.
(Section 5.3):	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 
	 	 	 	 	Borrower shall provide Silicon with the following:
	

	 	 	 	 	 	 	 	 
	 	 	 	 	1.	 	Subject to the
Streamline Provisions, transaction reports and
schedules of collections, each week and at the
time of each Loan request, on Silicon’s
standard form
	

	 	 	 	 	 	 	 	 
	 	 	 	 	2.	 	Monthly accounts
receivable agings, aged by invoice date, within
fifteen days after the end of each month.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	3.	 	Monthly accounts
payable agings, aged by invoice date, within
fifteen days after the end of each month.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	4.	 	Subject to the
Streamline Provisions, monthly reconciliations
of accounts receivable agings (aged by invoice
date), deferred revenue report, transaction
reports, outstanding or held check registers
(if any), and general ledger, within fifteen
days after the end of each month.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	5.	 	Subject to the
Streamline Provisions, monthly perpetual
inventory reports for the Inventory valued on a
first-in, first-out basis at the lower of cost
or market (in accordance with GAAP) or such
other inventory reports as are requested by
Silicon in its good faith business judgment,
all within fifteen days after the end of each
month.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	6.	 	Monthly unaudited
financial statements, as soon as available, and
in any event within thirty days after the end
of each month.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	7.	 	Monthly Compliance
Certificates, within thirty days after the end
of each month, in such form as Silicon shall
reasonably specify,







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	 	Silicon Valley Bank
	 	Loan and Security Agreement
	 	 	







	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	signed by the Chief Financial Officer of Borrower,
certifying that as of the end of such month Borrower was in
full compliance with all of the terms and conditions of this
Agreement, and setting forth calculations showing compliance
with the financial covenants set forth in this Agreement and
such other information as Silicon shall reasonably request,
including, without limitation, a statement that at the end
of such month there were no held checks.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	8.	 	Annual operating budgets (including
income statements, balance sheets and cash flow
statements, by month) for the upcoming fiscal year of
Borrower within thirty days prior to the end of each
fiscal year of Borrower.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	9.	 	Annual financial statements, as soon as
available, and in any event within 120 days following the
end of Borrower’s fiscal year, certified by, and with an
unqualified opinion of, independent certified public
accountants reasonably acceptable to Silicon.
	

	 	 	 	 	 	 	 	 
	With respect to the financial statements referred to above, Borrower agrees to
deliver financial statements prepared on both a consolidated and consolidating basis and agrees that no
subsidiary of Borrower will have a fiscal year different from that of Borrower.
	

	 	 	 	 	 	 	 	 
	

	7.	 	BORROWER

INFORMATION:
	

	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Borrower represents and warrants that the information set
forth in the Representations and Warranties of the Borrower
dated June 4, 2004 previously submitted to Silicon (the
“Representations”) is true and correct as of the date
hereof.
	

	8.	 	ADDITIONAL

PROVISIONS
	

	 	 	 	 	 	 	 	 
	 	 	 	 	(1)	 	Banking Relationship. Borrower shall at all
times maintain its primary banking relationship with Silicon.
Without limiting the generality of the foregoing, Borrower
shall, at all times, maintain not less than 85% of its total
cash and investments on deposit with Silicon. As to any
Deposit Accounts and investment accounts maintained with
another institution, Borrower shall cause such institution,
within 30 days after the date of this Agreement, to enter
into a control agreement in form acceptable to Silicon in its
good faith business judgment in order to perfect Silicon’s
first-priority security interest in said Deposit Accounts and
investment accounts. Thereafter, Borrower shall not maintain
any Deposit Accounts or investment accounts with any







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	 	Silicon Valley Bank
	 	Loan and Security Agreement
	 	 	







	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	bank, securities intermediary, or other
institution unless Silicon has received such a
control agreement duly executed by such party in
favor of Silicon covering such Deposit Account
or investment account, as the case may be.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	(2)	 	Subordination of Inside Debt. All
present and future indebtedness of Borrower to
its officers, directors and shareholders
(“Inside Debt”) shall, at all times, be
subordinated to the Obligations pursuant to a
subordination agreement on Silicon’s standard
form. Borrower represents and warrants that
there is no Inside Debt presently outstanding,
except for the following: NONE. Prior to
incurring any Inside Debt in the future,
Borrower shall cause the person to whom such
Inside Debt will be owed to execute and deliver
to Silicon a subordination agreement on
Silicon’s standard form.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	(3)	 	Copyrights, Patents,
and Trademarks
	

	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(a) Concurrently
herewith, Borrower shall execute and
deliver to Silicon a security agreement
relative to Borrower’s Intellectual
Property, in form and substance
satisfactory to Silicon (the “IP Security
Agreement”). Exhibit A attached to the IP
Security Agreement identifies, as of the
date of this Agreement, any and all
Registered Copyrights of Borrower
(collectively, the “Existing Registered
Copyrights”). Except for the Existing
Copyright Registrations, Borrower will NOT
register with the United States Copyright
Office (or apply for such registration of)
any of Borrower’s maskworks, computer
software, or other copyrights, unless
Borrower has provided Silicon not less than
30 days prior written notice of the
commencement of such
registration/application and Borrower has
executed and delivered to Silicon such
security agreement(s) and other
documentation (in form and substance
reasonably satisfactory to Silicon) which
Silicon in its good faith business judgment
may require for filing with the United
States Copyright Office with respect to
such registration or application.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(b) Borrower
will identify to Silicon in writing any and
all patents and trademarks of Borrower that
are registered (or the subject of any
application for registration) with the
United States Patent and Trademark Office
and, upon Silicon’s request therefor,
promptly execute and deliver to Silicon
such security agreement(s) and other
documentation (in form and substance
reasonably satisfactory to Silicon) which
Silicon in its good faith business judgment
may require for filing with the United
States Patent and Trademark Office with
respect to such registration or
application.







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	 	Silicon Valley Bank
	 	Loan and Security Agreement
	 	 	







	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(c) Borrower
will: (i) protect, defend and maintain the
validity and enforceability of Borrower’s
respective copyrights, patents, and
trademarks; (ii) promptly advise Silicon in
writing of material infringements of
Borrower’s copyrights, patents, or
trademarks of which Borrower is or becomes
aware; and (iii) not allow any material
item of Borrower’s copyrights, patents, or
trademarks to be abandoned, forfeited or
dedicated to the public without Silicon’s
written consent.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	(4)	 	Landlord Agreement.
With respect to any leased premises of
Borrower, Borrower shall, promptly upon
Silicon’s request therefor, use commercially
reasonable efforts to deliver to Silicon a
landlord agreement (in form and substance
satisfactory to Silicon) duly executed by the
lessor of such leased premises. In the event
that Silicon requests such a landlord agreement
and Borrower uses such efforts but does not
succeed in delivering such a landlord
agreement, Silicon may (in its good faith
business judgment) maintain a Reserve with
respect to such leased premises.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	(5)	 	Bailee Agreement.
Borrower hereby represents and warrants that,
as of the date of execution and deliver of this
Agreement, no goods of Borrower are in the
possession of any warehouseman or other bailee
(other than as expressly identified in Section
3(f) of the Representations), and hereby
covenants that Borrower promptly shall deliver
written notice to Silicon of any goods of
Borrower being in the possession of any other
warehouseman or other bailee. With respect to
any goods or other Collateral of Borrower in
the possession of any warehouseman or other
bailee, Borrower shall, promptly upon Silicon’s
request therefor, use commercially reasonable
efforts to deliver to Silicon a bailee
agreement (in form and substance satisfactory
to Silicon) duly executed by such warehouseman
or other bailee. In the event that Silicon
requests such a bailee agreement and Borrower
uses such efforts but does not succeed in
delivering such a bailee agreement, Silicon may
(in its good faith business judgment) maintain
a Reserve with respect to such warehouse or
other bailee location.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	(6)	 	Ultracision & Viking
Subsidiaries. Borrower hereby represents and
warrants that: (y) each of ULTRACISION, INC., a
California corporation (“Ultracision”); and
VIKING SEMICONDUCTOR EQUIPMENT, INC., a
California corporation (“Viking”), is a
wholly-owned Subsidiary of GIGA-TRONICS; and (z)
each of Ultracision and Viking does not conduct
any material business activity and does not own
any material assets. Borrower hereby covenants
and agrees that: (a)







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	 	Silicon Valley Bank
	 	Loan and Security Agreement
	 	 	







	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Borrower shall not transfer any funds or
assets (including Collateral) to any one or more
of Ultracision and Viking; (b) GIGA-TRONICS
shall not cause, suffer, or permit any one or
more of Ultracision and Viking conduct any
material business activity or own any material
assets; and (c) on or before the date 120 days
following the date of this Agreement, Borrower
shall either (i) deliver to Silicon evidence
(satisfactory to Silicon in its good faith
business judgment) that each of Ultracision and
Viking has wound up and dissolved in accordance
with applicable law, or (ii) cause Ultracision
and Viking, if and to the extent not timely
wound up and dissolved pursuant to the foregoing
clause (i), to execute and deliver such
joinders, supplements, or other Loan Documents
(in each case, in form and substance
satisfactory to Silicon in its good faith
business judgment) as Silicon requires in order
that Ultracision and Viking become additional
Borrowers under this Agreement and additional
obligors under the other Loan Documents in the
same capacity as the respective Borrowers’
capacities hereunder and thereunder. Without
limiting the generality of the foregoing clause
(i), a date-stamped copy of the Certificate of
Dissolution as-filed with the applicable
Secretary of State shall constitute satisfactory
evidence of the winding up and dissolution of
the applicable entity for purposes of the
foregoing clause (i).
	

	 	 	 	 	 	 	 	 
	

	9.	 	STREAMLINE
PROVISIONS
	

	 	 	 	 	 	 	 	 
	 	 	 	 	So long as no Default or Event of Default has occurred
and is continuing and the Zero Loan Balance Condition
(as defined below) is satisfied, the following
provisions in this Section 9 of this Schedule
(collectively, the “Streamline Provisions”) shall be in
effect notwithstanding anything herein to the contrary:
	

	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(1) (a) Delivery of the items set forth in Item
#1 of Section 6 of this Schedule will not be
required more frequently than on a monthly basis;
and (b) delivery of the items set forth in Items
#4 and #5 of Section 6 of this Schedule will not
be required with respect to any month during
which at all times the Streamline Provisions are
in effect.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(2) Silicon will not request, pursuant to Section
4.3 of this Agreement, copies of credit memos (if
at all) more frequently than on a monthly basis.







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	 	Silicon Valley Bank
	 	Loan and Security Agreement
	 	 	







	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(3) Borrower shall not be required to deliver
payments on, and proceeds of, Accounts to Silicon
upon receipt as required by Section 4.4 of this
Agreement.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(4) So long as the Zero Loan Balance Condition is
satisfied, Borrower shall provide Silicon with at
least 30 days’ prior written notice of Borrower’s
desire to have Silicon make any future Loan or
other extension of credit to Borrower. Prior to
Silicon making such Loans or other extensions of
credit, if any, Silicon shall have received the
results, satisfactory to Silicon in its good
faith business judgment, of an audit as provided
for in Section 5.4 of this Agreement.
	

	 	 	 	 	 	 	 	 
	 	 	 	 	Upon (y) the Zero Loan Balance Condition not being
satisfied, or (z) the occurrence and during the
continuation of a Default or Event of Default under the
Loan Documents, all of the terms and conditions of this
Agreement that have been modified by this Section 9 of
this Schedule will immediately revert to the standard
terms and conditions as provided for in this Agreement
(without giving effect to this Section 9 of this
Schedule — but, if applicable, subject to paragraph (4)
of this Section 9 of this Schedule with respect to the
Zero Loan Balance Condition) without any further action
on the part of Silicon or Borrower.
	 
	 	 	 	 	As used herein, the term “Zero Loan Balance Condition”
means, as of any date of determination, that no Loans
or other extensions of credit have been outstanding,
and no requests for Loans or other extensions of credit
have been made by Borrower, during the consecutive
30-day period ending on such date of determination.
	

	 	 	 	 	 	 	 	 
	

	10.	 	CONDITIONS     PRECEDENT	 	 
	

	 	 	 	 	 	 	 	 
	 	 	 	 	In addition to the other conditions precedent set forth
in this Agreement, the making of the initial Loan(s) or
other extension(s) of credit hereunder is subject to
the following additional conditions:
	

	 	 	 	 	 	 	 	 
	 	 	 	 	(A) Silicon shall have received lien searches listing
all effective financing statements which name Borrower
(or any predecessor corporation, prior name, or
tradename thereof or any seller of assets acquired by
any Borrower outside of the ordinary course of
business) as debtor that are filed in the applicable
filing offices with respect to Borrower, none of which
financing statements shall cover any of the Collateral
of Borrower, except (1) financing statements perfecting
Permitted Liens, (2) financing statements as to which
Silicon has received duly executed authorization by the
applicable secured party to file executed termination
statements or partial release statements in form and
substance satisfactory to Silicon in







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	 	Silicon Valley Bank
	 	Loan and Security Agreement
	 	 	







	 	 	 	 	 	 	 	 	 
	 	 	 	 	its good faith business judgment, or (3) as otherwise
agreed in writing by Silicon.







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	 	Silicon Valley Bank
	 	Loan and Security Agreement
	 	 	






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



	 	 	 	 	 	 	 	 	 	 	 	 
	Borrower:	 	Borrower:
	

	 	 	 	 	 	 	 	 	 	 
	 	 	GIGA-TRONICS INCORPORATED	 	 	 	ASCOR, INC.
	

	 	 	 	 	 	 	 	 	 	 
	

	 	By
	 	/s/ Mark H. Cosmez II
	 	 	 	By
	 	/s/ Mark H. Cosmez II
	

	 	 	 	
 
	 	 	 	 	 	
 
	

	 	 	 	President or Vice President
	 	 	 	 	 	President or Vice President
	

	 	 	 	 	 	 	 	 	 	 
	

	 	By
	 	/s/ G.H. Bruns, Jr.
	 	 	 	By
	 	/s/ G.H. Bruns, Jr.
	

	 	 	 	
 
	 	 	 	 	 	
 
	

	 	 	 	Secretary or Assistant Secretary
	 	 	 	 	 	Secretary or Assistant Secretary
	

	 	 	 	 	 	 	 	 	 	 
	Borrower:	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	 
	 	 	MICROSOURCE, INC.	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	 
	

	 	By
	 	/s/ Mark H. Cosmez II	 	 	 	 	 	 
	

	 	 	 	
 	 	 	 	 	 	 
	

	 	 	 	President or Vice President	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	 
	

	 	By
	 	/s/ G.H. Bruns, Jr.	 	 	 	 	 	 
	

	 	 	 	
 	 	 	 	 	 	 
	

	 	 	 	Secretary or Assistant Secretary	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	 
	Silicon:	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	 
	SILICON VALLEY BANK	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	 
	By

	 	 	 	/s/ Tim Walsh	 	 	 	 	 	 
	

	 	 	 	
 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	 
	Title

	 	 	 	Senior V. P.