Document:

ex_116273.htm

Exhibit 10.24

 

CONDITIONAL WAIVER & MODIFICATION NO. 1 TO 

LOAN AND SECURITY AGREEMENT

 

This Conditional Waiver & Modification No. 1 to Loan and Security Agreement (this “Modification”) is entered into as of March 26, 2018 (the “Stated Modification Date”), by and between Partners for Growth V, L.P. (“PFG”), Giga-tronics Incorporated, a California corporation, and Microsource, Inc., a California corporation (individually and collectively, jointly and severally, “Borrower”). Capitalized terms used but not defined in this Modification shall have the meanings given them in the Loan Agreement.

 

Recitals

 

WHEREAS, PFG and Borrower entered into that certain Loan and Security Agreement dated as of April 27, 2017 (the “Loan Agreement”) and certain other Security Documents (as defined below), pursuant to which PFG has made available to Borrower the principal amount of $1,500,000, all of which is outstanding on the Stated Modification Date, in addition to $89,375 in accumulated deferred interest (calculated as of March 23, 2018) which is due and payable on the Maturity Date.

 

WHEREAS, PFG and Borrower entered into that certain Forbearance under Loan and Security Agreement dated as of August 2, 2017, pursuant to which PFG agreed to forbear from exercising remedies under the Loan Agreement due to Borrower’s “Specified Defaults” as defined therein until the earlier to occur of August 31, 2017 and certain therein-specified Termination Events, which forbearance was extended under that certain Forbearance Extension under Loan and Security Agreement dated as of September 1, 2017, pursuant to which PFG agreed to extend the fixed Forbearance expiration date forbear from exercising remedies under the Loan Agreement due to Borrower’s “Specified Defaults” as defined therein until the earlier to occur of October 15, 2017 and certain therein-specified Termination Events, which forbearance extension was further extended pursuant to that certain Forbearance Extension under Loan and Security Agreement dated as of February 16, 2018, pursuant to which PFG agreed to extend the fixed Forbearance expiration date before exercising remedies under the Loan Agreement due to Borrower’s “Specified Defaults” as defined therein (the “Pending Defaults”) until the earlier to occur of March 31, 2018 and certain therein-specified Termination Events (the “Currently Effective Forbearance”);

 

WHEREAS, the Currently Effective Forbearance contemplates a restructuring of (inter alia) the financial covenants applicable under the Loan Agreement in connection with the satisfaction of an equity (or convertible debt) financing condition set forth in Section 9(d) of the Currently Effective Forbearance and Section 7(c) hereof (the “Financing Condition”);

 

WHEREAS, the parties desire to modify the Loan Agreement to waive the Pending Defaults and to anticipate and facilitate the satisfaction of the Financing Condition, the waiver and modification set forth herein to be expressly conditional upon and automatically effective upon the satisfaction of the conditions set forth in Section 7 (including the Financing Condition);

 

 

 

 

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

 

Agreement

 

1.     EFFECTIVENESS. Notwithstanding the execution and delivery of this Modification by the parties as of the Stated Modification Date, the modifications, agreements and terms of this Modification shall not be become effective until, but shall automatically become effective upon and as of the date the conditions set forth in Section 7 hereof are satisfied by Borrower (the “Modification Effective Date”).

 

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

 

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

 

(a)     Financial Covenants - TNW. Section 5(a) of the Schedule (Minimum TNW) is amended and restated to read in its entirety as follows (italicized for convenience of reading only):

 

	
			“ (a) Minimum TNW:

				
			Measured on the last day of each calendar month from April 30, 2018 though and including March 31, 2019, on a consolidated basis with its Subsidiaries, Borrower shall maintain Tangible Net Worth of not less than $250,000 through December 31, 2018 and $500,000 at all times thereafter.”

			

 

(b)     Financial Covenants - Revenues. Section 5(b) of the Schedule (Minimum Revenues) is amended and restated to read in its entirety as follows (italicized for convenience of reading only):

 

	
			(b) Minimum Revenues:

				
			On a consolidated basis with its Subsidiaries and measured quarterly as of the last day of each calendar quarter, Borrower shall maintain Revenues on a cumulative basis of not less than the minimum thresholds set forth below for the corresponding periods:

			

 

	Period Ending 	Threshold 	Months in Period Calc
	
			March 31, 2018

				
			$2,000,000

				
			3

			
	
			June 30, 2018

				
			$3,700,000

				
			6

			
	
			September 30, 2018

				
			$6,300,000

				
			9

			
	
			December 31, 2018

				
			$9,200,000

				
			12

			
	
			March 31, 2019

				
			$12,700,000

				
			15

			

 

 

 

 

(c)     Future Periods. Section 5(c) of the Schedule (Future Periods) is deleted, with all other provisions of Section 5 not superseded in clauses (a) through (c) of this Modification Section 3 remaining in full force and effect.

 

(d)     Definition of “Plan”. The definition of “Plan set forth in Section 7 of the Loan Agreement is amended and restated to read in its entirety as follows (italicized for convenience of reading only):

 

“ “Plan” means Borrower’s financial plan as delivered to PFG on March 7, 2018 in that certain Excel format file entitled “PFG covenants 3-7-18.xlsx” for the period ending March 31, 2020, to be replaced by a final Board-approved financial plan on or before April 30, 2018 which shall be consistent in all material respects with the financial plan delivered to PFG.” 

 

(e)     Interest Rate and Terms. The interest rate applicable to monetary Obligations and the payment terms thereof (cash and deferred payment) shall revert to the terms stated in the Loan Agreement from the Default Rate applicable under the Currently Effective Forbearance.

 

(f)     Borrower Address. The address of Borrower for purposes of the Loan Documents is, henceforth: 5990 Gleason Drive, Dublin CA, 94568.

 

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

 

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

 

 

 

 

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

 

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

 

(b)     Borrower has the corporate power and authority to execute and deliver this Modification, to amend the PFG Warrants and to perform its obligations under the Existing Loan Documents and PFG Warrants, as contemplated by this Modification;

 

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

 

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

 

 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

 

 

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

 

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

 

(c)     Financing Condition. Borrower shall have (i) consummated, substantially concurrently with the effectiveness of this Modification (which shall be on or before March 26, 2018, unless PFG agrees in its discretion to an extension), an equity or subordinated debt investor financing providing not less than $1,000,000 in gross cash proceeds to Borrower, and (ii) provided true and correct copies of the fully-executed agreements and/or instruments that demonstrate satisfaction of the requirement of Section 7(c) (the Financing Condition);

 

(d)     Restatement of PFG Warrants. Borrower shall have executed and delivered Second Amended and Restated Warrants to each of Partners for Growth IV, L.P., PFG Equity Investors, LLC and SVB Financial Group, in the form set forth in Exhibit A hereto (the “PFG Warrants”);

 

(e)     Lender Expenses. Borrower shall have paid, upon PFG invoice, all unpaid fees and Lender Expenses incurred pursuant to or in connection with the Currently Expiring Forbearance and this Modification;

 

(f)     Updates to Representations. Borrower shall have delivered within one (1) Business Day prior to the Stated Modification Date an update to the Representations delivered to PFG on the date of the Loan Agreement, with the information and disclosures contained therein true, correct, accurate and complete as of the Stated Modification Date and the date delivered, appended hereto as Exhibit B;

 

(g)     Landlord Consent. Within thirty (30) days of the Stated Modification Date, Borrower shall use all reasonable commercial efforts to procure in PFG’s favor a landlord consent for the landlord of its principal premises at: 5990 Gleason Drive, Dublin CA, 94568.

 

(g)     Authority Documents. Borrower shall have promptly provided such documentation of the authorization of this Modification and the restatement of the PFG Warrants as PFG may reasonably require;

 

 

 

 

(h)      Stock Issuance. Within fifteen days, Borrower (Parent) shall have issued one hundred fifty thousand (150,000) common shares to PFG and its designees in consideration of the elimination of the “put” mechanism under the PFG Warrants.

 

(i)     IPSA Reaffirmation. Borrower shall have executed and delivered the Reaffirmation of IPSA appended hereto as Exhibit C, together with any updates to the Intellectual Property and Domain Rights since the original Effective Date of the Loan Agreement (or later update of information, as applicable);

 

provided, however, any material failure of any of the conditions set forth in this Section 7 (as determined in PFG’s good faith and reasonable judgment) shall mean that this Modification has not become (or if such failure is in relation to a condition subsequent, is no longer) effective and that the terms of the Currently Effective Forbearance remain in effect (or if such failure is in relation to a condition subsequent, such terms are reinstated).

 

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

 

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

 

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

 

 

 

 

11.     RELEASE. FOR AND IN CONSIDERATION OF PFG’S AGREEMENTS CONTAINED HEREIN, BORROWER, TOGETHER WITH ITS, SUCCESSORS AND ASSIGNS (INDIVIDUALLY AND COLLECTIVELY, “RELEASORS”) HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER WAIVES AND DISCHARGES PFG AND EACH OF ITS RESPECTIVE PARENTS, DIVISIONS, SUBSIDIARIES, AFFILIATES, MEMBERS, MANAGERS, PARTICIPANTS, PREDECESSORS, SUCCESSORS, AND ASSIGNS, AND EACH OF THEIR RESPECTIVE CURRENT AND FORMER DIRECTORS, OFFICERS, SHAREHOLDERS, MEMBERS, MANAGERS, PARTNERS, AGENTS, AND EMPLOYEES, AND EACH OF THEIR RESPECTIVE PREDECESSORS, SUCCESSORS, HEIRS, AND ASSIGNS (INDIVIDUALLY AND COLLECTIVELY, THE “RELEASED PARTIES”) FROM ALL POSSIBLE CLAIMS, COUNTERCLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES AND LIABILITIES WHATSOEVER, WHETHER KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT OR CONDITIONAL, OR AT LAW OR IN EQUITY, IN ANY CASE ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE EFFECTIVE DATE THAT ANY OF THE RELEASORS MAY NOW OR HEREAFTER HAVE AGAINST THE RELEASED PARTIES, IF ANY, IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, INCLUDING WITHOUT LIMITATION ARISING DIRECTLY OR INDIRECTLY FROM THE LAWSUIT, ANY PRIOR OR EXISTING LOANS BETWEEN RELEASORS AND RELEASED PARTIES, ANY OF THE EXISTING LOAN DOCUMENTS, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER ANY OF THE EXISTING LOAN DOCUMENTS, AND/OR NEGOTIATION FOR AND EXECUTION OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE. EACH OF THE RELEASORS WAIVES THE BENEFITS OF ANY LAW INCLUDING SECTION 1542 OF THE CALIFORNIA CIVIL CODE, WHICH MAY PROVIDE IN SUBSTANCE: “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN ITS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY IT MUST HAVE MATERIALLY AFFECTED ITS SETTLEMENT WITH THE DEBTOR.” EACH OF THE RELEASORS UNDERSTANDS THAT THE FACTS WHICH IT BELIEVES TO BE TRUE AT THE TIME OF MAKING THE RELEASE PROVIDED FOR HEREIN MAY LATER TURN OUT TO BE DIFFERENT THAN IT NOW BELIEVES, AND THAT INFORMATION WHICH IS NOT NOW KNOWN OR SUSPECTED MAY LATER BE DISCOVERED. EACH OF THE RELEASORS ACCEPTS THIS POSSIBILITY, AND EACH OF THEM ASSUMES THE RISK OF THE FACTS TURNING OUT TO BE DIFFERENT AND NEW INFORMATION BEING DISCOVERED; AND EACH OF THEM FURTHER AGREES THAT THE RELEASE PROVIDED FOR HEREIN SHALL IN ALL RESPECTS CONTINUE TO BE EFFECTIVE AND NOT SUBJECT TO TERMINATION OR RESCISSION BECAUSE OF ANY DIFFERENCE IN SUCH FACTS OR ANY NEW INFORMATION. By entering into this release, Borrower recognizes that no facts or representations are ever absolutely certain and it may hereafter discover facts in addition to or different from those which it presently knows or believes to be true, but that it is the intention of Borrower hereby to fully, finally and forever settle and release all matters, disputes and differences, known or unknown, suspected or unsuspected; accordingly, if Borrower should subsequently discover that any fact that it relied upon in entering into this release was untrue, or that any understanding of the facts was incorrect, Borrower shall not be entitled to set aside this release by reason thereof, regardless of any claim of mistake of fact or law or any other circumstances whatsoever. Borrower acknowledges that it is not relying upon and has not relied upon any representation or statement made by PFG with respect to the facts underlying this release or with regard to any of such party’s rights or asserted rights. Borrower acknowledges that (i) this release may be pleaded as a full and complete defense and/or as a cross-complaint or counterclaim against any action, suit, or other proceeding that may be instituted, prosecuted or attempted in breach of this release, and (ii) Borrower acknowledges that the release contained herein constitutes a material inducement to PFG to enter into this Agreement, and that PFG would not have done so but for PFG’s expectation that such release is valid and enforceable in all events. Borrower hereby represents and warrants to and covenants with PFG, and PFG is relying thereon, as follows: (u) except as expressly stated in this Agreement, neither PFG nor any agent, employee or representative of PFG has made any statement or representation to Borrower regarding any fact relied upon by Borrower in entering into this Agreement; (v) Borrower has made such investigation of the facts pertaining to this Agreement and all of the matters appertaining thereto, as it deems necessary; (w) the terms of this Agreement are contractual and not a mere recital; (x) this Agreement has been carefully read by Borrower, the contents hereof are known and understood by Borrower, and this Agreement is signed freely, and without duress, by Borrower; (y) Borrower represents and warrants that it is the sole and lawful owner of all right, title and interest in and to every claim and every other matter which it releases herein, and that it has not heretofore assigned or transferred, or purported to assign or transfer, to any person, firm or entity any claims or other matters herein released; and (z) Borrower shall indemnify PFG, defend and hold it harmless from and against all claims based upon or arising in connection with prior assignments or purported assignments or transfers of any claims or matters released herein.

 

 

 

 

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

 

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

 

14.     INTEGRATION; CONSTRUCTION; ETC. This Modification, the Loan Agreement and the Existing Loan Documents (as modified) and any documents executed in connection herewith or pursuant hereto contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements, understandings, offers and negotiations, oral or written, with respect thereto and no extrinsic evidence whatsoever may be introduced in any judicial or arbitration proceeding, if any, involving this Modification; provided, however, that any financing statements or other agreements or instruments filed by PFG with respect to Borrower shall remain in full force and effect. The quotation marks around modified clauses set forth herein and any differing font styles in which such clauses are presented herein are for ease of reading only and shall be ignored for purposes of construing and interpreting this Modification. This Modification is subject to the General Provisions of Section 8 of the Loan Agreement. The Existing Loan Documents are hereby amended wherever necessary to reflect the modifications set forth in this Modification. The Recitals are incorporated herein by reference.

 

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

 

 

[Signature Page Follows]

 

 

 

 

	
			PFG

				
			BORROWER

			
	
			Partners for Growth V, L.P.

			By:  _________________________

			Name:  Phil Lawson, Manager

			Title:    Partners for Growth V, LLC, its

			General Partner

				
			GIGA-TRONICS INCORPORATED

			 

			 

			 

			By_______________________________

			President or Vice President

			 

			By_______________________________

			Secretary or Ass't Secretary

			 

			 

			MICROSOURCE, INC.

			 

			 

			 

			By_______________________________

			President or Vice President

			 

			By_______________________________

			Secretary or Ass't Secretary

			
	 	 

 

 

Waiver and Modification No. 1 to Loan and Security Agreement Signature Page

 

 

EXHIBIT A

 

SECOND AMENDED AND RESTATED WARRANTS

 

 

 

 

EXHIBIT B

 

REPRESENTATIONS

 

 

 

 

EXHIBIT C

 

REAFFIRMATION OF IPSAex_116340.htm

Exhibit 10.25

 

Stock Option Award Agreement

 

 

Giga-tronics Incorporated, a California corporation, and the undersigned person (“Optionee”) have entered into this Stock Option Agreement effective as of the Grant Date set forth below. The Company has granted to Optionee the option (the “Option”) to purchase the number of shares (the “Shares”) of common stock, no par value, of the Company (“Stock”) set forth below at the per Share purchase price (the “Exercise Price”) set forth below, pursuant to the terms of this Award Agreement. The Option was a special inducement award and was not granted under the Company’s 2005 Equity Incentive Plan, as the same may be amended, modified, supplemented or interpreted from time to time (the “Plan”) but is intended to incorporate all of the terms of the Plan, except as otherwise provided n this Agreement.

 

	 	
			Optionee Name:

				
			Lutz Henckels

				 
	 	 	 	 
	 	
			Grant Date:

				
			March 28, 2018

				 
	 	 	 	 
	 	
			Vesting Commencement Date:

				
			100,000 shares on April 1, 2019; 8,333.3 shares on the first day of each month thereafter; fully vested on April 1, 2022

				 
	 	 	 	 
	 	
			Number of Shares:

				
			400,000 (NQ)

				 
	 	 	 	 
	 	
			Exercise Price:

				
			$0.33

				 

 

 

1.     Terms of Plan. All capitalized terms used in this Award Agreement and not otherwise defined shall have the meanings ascribed thereto in the Plan. Optionee confirms and acknowledges that shares issuable upon exercise of this Option are not registered under the Securities Act of 1933 and will be “restricted securities” for federal securities law purposes. The Plan is administered by the Committee which has complete authority to make all determinations with respect to each Award, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, to determine the terms and provisions of Award Agreements, and to make all other determinations under the Plan.

 

2.     Nature of the Option. The Option has been granted as an inducement to become an officer and employee of to Optionee’s Continuous Service, and is in all respects subject to such Continuous Service and all other terms and conditions of this Award Agreement. The Option is intended to be a Nonstatutory (Non Qualified) Option.

 

3.     Vesting, Exercise and Term of Option. The Option shall vest and become exercisable during its term in accordance with the following provisions:

 

 (a)     Vesting and Right of Exercise. 

 

(i)     The Option shall vest and become exercisable with respect to 25% of the Shares at April 1, 2019, and as to 1/48th of the number of Shares in the original grant on the first day of each month thereafter until all of the Shares have vested, subject to Optionee’s Continuous Service.

 

 

Form for Incentive Options/Nonstatutory Options/Tandem SAR’s

 

 

 

(ii)     In the event of Optionee’s death, disability or other termination of Optionee’s Continuous Service, the Option shall be exercisable in the following manner:

 

(I)     Termination of Employment: the Option ceases to be exercisable 90 days following termination of employment, during which time it shall be exercisable only to the extent exercisable at the date of termination, except that the Option shall not be exercised after its expiration date;

 

(II)     Disability: if Optionee was in Continuous Service from the Grant Date until the date of termination of service due to disability the Option ceases to be exercisable twelve months following the date of termination of Continuous Service from disability, during which time it shall be exercisable only to the extent exercisable at the date of termination due to disability, except that the Option shall not be exercised after its expiration date; and

 

(III)     Death: if the Optionee was in Continuous Service from the Grant Date until the date of death, the Option ceases to be exercisable twelve months following the date of death, during which time it shall be exercisable by the Optionee’s estate or by a person who acquired the right to exercise the Option by bequest, inheritance or otherwise as a result of the Optionee’s death only to the extent exercisable at the date of death, except that the Option shall not be exercised after its expiration date.

 

(IV)     Vesting may be accelerated in accordance with the terms of the Plan, that in the case of a Change in Control, Acceleration in accordance with the terms of Section 8.2(a) of the Plan shall be subject to the additional condition that Mr. Henckels shall have had his employment terminated or compensation and responsibilities materially reduced in contemplation of or otherwise in connection with or as a result of the Change in Control.

 

(b)     Method of Exercise. In order to exercise any vested portion of the Option, Optionee shall notify the Company in writing by executing and delivering the Notice of Exercise of Stock Option in the form attached hereto as Exhibit A (the “Exercise Notice”). The certificate or certificates representing Shares as to which the Option has been exercised shall be registered in the name of Optionee or otherwise as the Optionee may request and the Company shall permit.

 

(c)     Restrictions on Exercise; Term of Option.

 

(i)     Optionee may exercise the Option only with respect to Shares that have vested in accordance with Section 3(a) of this Award Agreement.

 

2

 

 

(ii)     Optionee may not exercise the Option if the issuance of the Shares upon such exercise or the method of payment of consideration for such Shares would constitute a violation of any applicable federal or state securities law or other law or regulation.

 

(iii)     The method and manner of payment of the Exercise Price will be subject to the prohibition on loans to directors and executive officers in Section 402 of the Sarbanes-Oxley Act of 2002, to the rules under Part 221 of Title 12 of the Code of Federal Regulations as promulgated by the Federal Reserve Board, and to any other applicable laws, rules or regulations.

 

(iv)     As a condition to the exercise of the Option, the Company may require certain representations and warranties as the Company may request pursuant to Section 9.3 of the Plan. Prior to or subsequent to exercise of the Option, the Company may require the Optionee to enter into certain lock-up arrangements as provided in Section 9.4 of the Plan.

 

(v)     Optionee may only exercise the Option upon, and the obligations of the Company under this Award Agreement to issue Shares to Optionee upon any exercise of the Option is conditioned on, satisfaction of all federal, state, local or other withholding tax obligations associated with such exercise (whether so required to secure for the Company a tax deduction or otherwise) (“Withholding Obligations”). The Company reserves the right to require Optionee to remit to the Company an amount sufficient to satisfy all Withholding Obligations prior to the issuance of any Shares upon any exercise of the Option. In addition, Optionee authorizes the Company to deduct any such Withholding Obligations from any payments of any kind due to Optionee (whether in connection with the Option or otherwise). The Optionee may elect to satisfy Withholding Obligations, in whole or in part, by having the Company withhold shares of Stock otherwise due to the Optionee upon exercise of the Option, or by submitting shares of Stock previously owned by the Optionee.

 

(vi)     No fraction of a Share shall be purchasable or deliverable upon exercise of the Option, but in the event any such Shares shall include a fraction of a Share (whether due to net exercise, payment of the Exercise Price by having Shares withheld or by submitting previously owned shares, by adjustment of the Option as provided in the Plan, or otherwise), such number of Shares shall be rounded down to the nearest smaller whole number of Shares.

 

(vii)     The Option may not be exercised more than five years after the Grant Date, and may be exercised during such term only in accordance with the terms of this Award Agreement.

 

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4.     Transferability of Option.

 

 (a)     The Option may be transferred by the Optionee through a gift or domestic relations order in settlement of marital property rights, and may be reacquired by the Optionee from, any “family member” as defined in and in a manner consistent with Section 6.4 of the Plan, provided that any such transfer is without payment of any value whatsoever and that no transfer shall be valid unless first approved by the Committee, acting in its sole discretion.

 

 (b)     The terms of this Award Agreement shall bind the Optionee and his or her spouse or domestic partner and the respective Permitted Transferees, executors, administrators, heirs, personal representatives and successors of the foregoing.                              

 

5.     Method of Payment.

 

(a)     Upon exercise, Optionee shall pay the aggregate Exercise Price of the Shares purchased and the Withholding Obligations by any of the following methods, or a combination thereof, at the election of Optionee:

 

(i)     cash;

 

(ii)     certified or bank cashier’s check;

 

(iii)     if shares of Stock are traded on an established stock market or exchange on the date of exercise, by surrender of whole shares of Stock having a Market Value equal to the portion of the Exercise Price to be paid by such surrender, provided that if such shares of Stock to be surrendered were acquired upon exercise of an Incentive Option, Optionee must have first satisfied the holding period requirements under Section 422(a)(1) of the Code;

 

(iv)     by a “net exercise” of the Option, in which the Company will not require a payment of the Exercise Price but will reduce the number of shares of Stock issued upon the exercise by the largest number of whole shares that have a Fair Market Value that does not exceed the aggregate Exercise Price of the Shares as to which the Option is being exercised. With respect to any remaining balance of the aggregate Exercise Price, the Company will accept a cash payment from the Optionee. The number of shares of Stock underlying the Option will decrease following exercise to the extent of (i) Shares used to pay the Exercise Price of an Option under the “net exercise” feature, (ii) Shares actually delivered to the Optionee as a result of such exercise and (iii) shares withheld to pay the Withholding Obligations;

 

(v)     if shares of Stock are traded on an established stock market or exchange on the date of exercise, pursuant to and under the terms and conditions of any formal cashless exercise program authorized by the Company entailing the sale of the Stock subject to an Option in a brokered transaction (other than to the Company); or

 

4

 

 

(vi)     [Stock Appreciation Right. By electing to receive in cash any excess in the Market Value of any number of shares of Stock subject to available installments of the Option on the date of exercise, over the Exercise Price and related Withholding Obligations. This Stock Appreciation Right will terminate to the extent that the Option is exercised, expires or is cancelled, and the Option will terminate to the extent that this Stock Appreciation Right is exercised, expire or is cancelled.]

 

(b)     Payment in Stock. If Optionee shall pay all or a portion of the aggregate Exercise Price and Withholding Obligations due upon an exercise of the Option by surrendering shares of Stock pursuant to Section 5(a)(iii), then Optionee:

 

(i)     shall accompany the Exercise Notice with a duly endorsed blank stock power (with an appropriate signature guarantee if requested by the Company) with respect to the number of shares of Stock to be surrendered and shall deliver the certificate(s) representing such surrendered shares to the Company at its principal offices within two business days after the date of the Exercise Notice;

 

(ii)     authorizes the Company to transfer so many whole number of Shares represented by such certificate(s) that have a Fair Market Value that does not exceed the aggregate Exercise Price for the Shares as to which the Option is being exercised. With respect to any remaining balance of the aggregate Exercise Price, the Company will accept a cash payment from the Optionee; and

 

(iii)     may not surrender any fractional share as payment of any portion of the Exercise Price.

 

6.     Adjustments to Option. Pursuant to Section 8.1 of the Plan, in certain cases the number of Shares covered by the Option and the Exercise Price will be proportionately adjusted if the outstanding number of shares of Stock are increased, decreased, or exchanged for a different number or kind of shares or other securities, or if additional shares or new or different shares or other securities are distributed with respect to the outstanding Stock, through merger, consolidation, sale of all or substantially all the property of the Company, reorganization, combination, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar distribution of the Company’s equity securities without the receipt of consideration by the Company.

 

7.     Not an Employment Contract. Nothing in the Plan or this Award Agreement shall confer upon Optionee any right to continuation of the Optionee’s employment or other association with the Company or shall interfere with or restrict in any way the rights of the Company, which are hereby expressly reserved, to modify the terms of Optionee’s employment or to terminate Optionee’s employment at any time for any reason whatsoever, with or without cause.

 

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8.     Tax Consequences Generally. Optionee acknowledges that Optionee may suffer adverse tax consequences as a result of exercise of the Option. Optionee acknowledges that the Company advises Optionee to consult with the Optionee’s tax advisers in connection with the tax implications relating to the Option including but not limited to the acquisition, disposition or transfer of the Option or of any securities or property in connection therewith, and that Optionee is not relying on the Company for any tax advice in connection therewith. Any adverse consequences incurred by an Optionee in connection with the Option, including, without limitation, from the use of shares of Stock to pay any part of the Exercise Price or any tax in connection with the exercise of the Option, and any adverse tax consequences arising from a disqualifying disposition within the meaning of Section 422 of the Code, shall be the sole responsibility of Optionee.

 

9.     Cancellation of Option For Improper Acts of Optionee. If, at any time during the course of the Optionee’s employment with the Company or any Affiliates or within six months after termination of Continuous Service, the Optionee engages in any activity in competition with any business activity of the Company or of any Affiliates, or inimical, contrary or harmful to the interests of the Company or any Affiliates, then (1) the Option and all other Awards under the Plan made to the Optionee shall terminate and be forfeited, (2) any cash, security or other property acquired by the Optionee pursuant to the Option and pursuant to all other Awards under the Plan, which cash, security or property was acquired by the Optionee during the Forfeiture Period shall be forfeited, and (3) any gain realized by the Optionee from the sale of any security acquired under the Option or any other Award during the Forfeiture Period shall be paid by the Optionee to the Company. The “Forfeiture Period” shall mean the period commencing on the Grant Date of the Option or any other Award and ending six months from termination of Continuous Service.

 

10.     Consent of Spouse/Domestic Partner. Optionee agrees that Optionee’s spouse’s or domestic partner’s interest in the Option is subject to this Award Agreement and such spouse or domestic partner is irrevocably bound by the terms and conditions of this Award Agreement. Optionee agrees that all community property interests of Optionee and Optionee’s spouse or domestic partner in the Option, if any, shall similarly be bound by this Award Agreement. Optionee agrees that this Award Agreement is binding upon Optionee’s and Optionee’s spouse’s or domestic partner’s executors, administrators, heirs and assigns. Optionee represents and warrants to the Company that Optionee has the authority to bind Optionee’s spouse/domestic partner with respect to the Option. Optionee agrees to execute and deliver such documents as may be necessary to carry out the intent of this Section 10 and the consent of Optionee’s spouse/domestic partner.

 

 

 

IN WITNESS WHEREOF, Optionee and the Company have entered into this Award Agreement as of the Grant Date.

 

	
			Optionee

				
			Giga-tronics Incorporated

			
	 	 
	 	 
	 	 
	
			_______________________________

			Lutz Henckels

				
			By: __________________________

			John R. Regazzi

			Chief Executive Officer

			

 

6

 

 

Exhibit A

 

Notice of Exercise of Stock Option/Tandem Stock Appreciation Right

 

 

 

I ________________________________________ (please print legibly) hereby elect to exercise the stock options(s) identified below (the “Option(s)”) granted to me by Giga-tronics Incorporated (the “Company”) under its 2005 Equity Incentive Plan (the “Plan”) with respect to the number of shares of Stock of the Company set forth below (the “Shares”). I acknowledge and agree that my exercise of the Option(s) is subject to the terms and conditions of the Plan and the Stock Option Award Agreement(s) governing the Option(s). Optionee confirms and acknowledges that Optionee has received and reviewed copies of the Plan and the Prospectus, dated _____________, with respect to the Plan.

 

	 	
			1.

				
			_____________ Shares at $ ________ per share (Grant date of Option): ____________

			

	 	
			2.

				
			_____________ Shares at $ ________ per share (Grant date of Option): ____________

			

	 	
			3.

				
			_____________ Shares at $ ________ per share (Grant date of Option): ____________

			

	 	
			4.

				
			_____________ Shares at $ ________ per share (Grant date of Option): ____________

			

 

	
			 

			[OPTION EXERCISE]

			 

			I choose to pay the Exercise Price of the above option(s) as follows [please complete the numbered item(s) which apply to your exercise]:

			 

			1.   Cash:  $____________________ 

			 

			2.   Check: $____________________ (please make checks payable to Giga-tronics Incorporated)

			 

			3.   Surrender of _________________ Shares

			 

			4.   Net exercise as described in Section 5(a)(iv) of the Option ☐   [if applicable check box]

			 

			 

			I choose to pay the tax withholding relating to the exercise of the above option(s) as follows:

			 

			5.  Cash: $____________________

			 

			6.  Check: $____________________ (please make checks payable to Giga-tronics Incorporated)

			 

			7.  Surrender of _________________ Shares currently owned by Optionee

			 

			8.  Withholding of _______________ Shares from Shares otherwise deliverable on exercise.

			 

			 

			

 

 

 

	Name: 	 
	 	(please print legibly)

 

	Signature:	 

 

	Date: 	 

 

	Phone No:

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