EXHIBIT 10.33
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "AGREEMENT") dated _December 8,
2005, 2005 but effective only as of the Effective Date by and among SILICON
VALLEY BANK, a California corporation, with its principal place of business at
0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 and with a loan production
office at 0000 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, XX 00000 ("BANK"), QUALMARK
CORPORATION, a Colorado corporation, with its chief executive office at 0000
Xxxxxxxx Xxxxxx, Xxxxxx XX 00000 ("QUALMARK ") and each of the other Persons
executing this Agreement as a Borrower (together with QUALMARK, each a
"BORROWER" and collectively and jointly and severally, the "BORROWERS"),
provides the terms on which Bank shall lend to Borrowers and Borrowers shall
repay Bank.
QUALMARK and Bank entered into a Loan and Security Agreement which was effective
as of November 9, 2004 (as it has been and may from time to time be further
amended, modified, supplemented or restated, the "Prior Loan Agreement") which
will continue to govern the Term Loan Advance (as defined therein) made
thereunder but not the Committed Revolving Line (as defined therein) provided
for therein (herein called the "Revolving Line"), but this Agreement shall
govern the terms of the Revolving Line and upon execution hereof the terms of
the Prior Loan Agreement which apply to the Committed Revolving Line thereunder
are hereby terminated.
The parties agree as follows:
ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement shall be construed following
GAAP. Calculations and determinations must be made following GAAP. Capitalized
terms not otherwise defined in this Agreement shall have the meanings set forth
in Section 13. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meaning provided by the Code to the extent such terms
are defined therein. QUALMARK will act as the agent for each Borrower for
purposes of this Agreement.
LOAN AND TERMS OF PAYMENT
Promise to Pay. BORROWERS HEREBY JOINTLY AND SEVERALLY UNCONDITIONALLY
PROMISE TO PAY BANK THE OUTSTANDING PRINCIPAL AMOUNT OF ALL CREDIT EXTENSIONS
AND ACCRUED AND UNPAID INTEREST THEREON AS AND WHEN DUE IN ACCORDANCE WITH THIS
AGREEMENT.
REVOLVING ADVANCES.
Availability. Subject to the terms and conditions of this Agreement,
Bank shall make Advances to each Borrower not exceeding the Availability Amount.
Amounts borrowed under the Revolving Line may be repaid and, prior to the
Revolving Line Maturity Date, reborrowed, subject to the applicable terms and
conditions precedent herein.
Termination; Repayment. The Revolving Line terminates on the Revolving
Line Maturity Date, when the principal amount of all Advances, the unpaid
interest thereon, and all other Obligations relating to the Revolving Line shall
be immediately due and payable.
LETTERS OF CREDIT SUBLIMIT.
As part of the Revolving Line, Bank shall issue or have issued Letters of
Credit for each Borrower's account. The face amount of all Borrowers'
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve) may not exceed $200,000.00. Such
aggregate amounts utilized hereunder shall at all times reduce the amount
otherwise available for Advances under the Revolving Line. If, on the Revolving
Maturity Date, there are any outstanding Letters of Credit, then on such date
each Borrower shall provide to Bank cash
collateral in an amount equal to 105% of the face amount of all such Letters of
Credit issued for such Borrower plus all interest, fees, and costs due or to
become due in connection therewith (as estimated by Bank in its good faith
business judgment), to secure all of the Obligations relating to said Letters of
Credit. All Letters of Credit shall be in form and substance acceptable to Bank
in its sole discretion and shall be subject to the terms and conditions of
Bank's standard Application and Letter of Credit Agreement (the "LETTER OF
CREDIT APPLICATION"). Each Borrower agrees to execute any further documentation
in connection with the Letters of Credit issued for such Borrower as Bank may
reasonably request.
The obligation of each Borrower to immediately reimburse Bank for
drawings made under Letters of Credit issued for such Borrower shall be
absolute, unconditional, and irrevocable, joint and several with all other
Borrowers and shall be performed strictly in accordance with the terms of this
Agreement, such Letters of Credit issued for such Borrower, and all related
Letter of Credit Applications.
Borrower may request that Bank issue a Letter of Credit payable in a
Foreign Currency. If a demand for payment is made under any such Letter of
Credit, Bank shall treat such demand as an Advance to Borrower of the equivalent
of the amount thereof (plus fees and charges in connection therewith such as
wire, cable, SWIFT or similar charges) in Dollars at the then-prevailing rate of
exchange in San Francisco, California, for sales of the Foreign Currency for
transfer to the country issuing such Foreign Currency.
To guard against fluctuations in currency exchange rates, upon the
issuance of any Letter of Credit payable in a Foreign Currency, Bank shall
create a reserve (the "LETTER OF CREDIT RESERVE") under the Revolving Line in an
amount equal to ten percent (10%) of the face amount of such Letter of Credit.
The amount of the Letter of Credit Reserve may be adjusted by Bank from time to
time to account for fluctuations in the exchange rate. The availability of funds
under the Revolving Line shall be reduced by the amount of such Letter of Credit
Reserve for as long as such Letter of Credit remains outstanding.
FOREIGN EXCHANGE SUBLIMIT. As part of the Revolving Line, each Borrower may
enter into foreign exchange contracts with Bank under which such Borrower
commits to purchase from or sell to Bank a specific amount of Foreign Currency
(each, a "FX FORWARD Contract") on a specified date (the "SETTLEMENT DATE"). FX
Forward Contracts shall have a Settlement Date of at least one (1) FX Business
Day after the contract date and shall be subject to a reserve of ten percent
(10%) of each outstanding FX Forward Contract in a maximum aggregate amount for
all Borrowers equal to $200,000.00 (the "FX RESERVE"). The aggregate amount of
FX Forward Contracts at any one time may not exceed ten (10) times the amount of
the FX Reserve. The obligations of each Borrower relating to this section may
not exceed the Availability Amount.
CASH MANAGEMENT SERVICES SUBLIMIT. Borrowers may use up to $200,000.00 (the
"CASH MANAGEMENT SERVICES SUBLIMIT") of the Revolving Line for Bank's cash
management services which may include merchant services, direct deposit of
payroll, business credit card, and check cashing services identified in Bank's
various cash management services agreements (collectively, the "CASH MANAGEMENT
SERVICES"). Any amounts Bank pays on behalf of any Borrower or any amounts that
are not paid by any Borrower for any Cash Management Services will be treated as
Advances to the relevant Borrower under the Revolving Line and will accrue
interest at the interest rate applicable to Advances.
2.1.5 TERM LOAN.
(a) AVAILABILITY. Bank shall make a term loan available to QualMark Ling
Corporation in an amount up to $2,000,000.00 (the "Term Loan") on or promptly
after the Effective Date upon the closing of the acquisition of assets of Ling
Electronics from SATCON Power Systems, Inc. by QualMark Ling Corporation,
subject to the satisfaction of the terms and conditions of this Agreement. When
repaid the Term Loan may not be reborrowed.
(B) REPAYMENT. Borrowers shall repay the Term Loan in thirty six (36) equal
monthly installments of principal, each in the amount that will fully and evenly
amortize the principal amount of the such Term Loan actually advanced, plus
interest (each, a "Loan Payment"). Loan Payments on the Term Loan shall commence
on January 1, 2006 and thereafter shall be payable on the first day of each
month to and including December 1, 2008 (the "Term Loan Maturity Date").
Interest shall be payable on the Term Loan, payable monthly, beginning on the
first day of the month following the month in which the Funding Date occurs.
Borrower's final Loan Payment on the Term Loan, due on the Term Loan Maturity
Date, shall include all outstanding principal and accrued and unpaid interest
under the Term Loan.
(C) PREPAYMENT. At Borrowers' option, so long as an Event of Default has
not occurred and is not continuing, Borrowers shall have the option to prepay
all, but not less than all, of the principal amount of the Term Loan advanced by
Bank under this Agreement, provided QUALMARK, (a) provides written notice to
Bank of the election to prepay such Term Loan at least thirty (30) days prior to
such prepayment, and (b) pays, on the date of the prepayment (i) all accrued and
unpaid interest with respect to the Term Loan through the date the prepayment is
made; (ii) all unpaid principal with respect to the Term Loan; (iii) a premium
equal to the Make-Whole Premium, provided that a one-time prepayment of
$500,000.00 may be made without payment of a Make-Whole Premium; and (iv) all
other sums, including Bank Expenses, if any, that have become due and payable
hereunder with respect to the Term Loan as of the date of such prepayment.
Overadvances. IF, AT ANY TIME, THE CREDIT EXTENSIONS TO ANY BORROWER UNDER
SECTIONS 2.1.1, 2.1.2, 2.1.3 AND 2.1.4 EXCEED THE AVAILABILITY AMOUNT FOR SUCH
BORROWER, SUCH BORROWER SHALL IMMEDIATELY PAY TO BANK IN CASH SUCH EXCESS.
Payment of Interest on the Credit Extensions.
Interest Rate.
(i) Advances. Subject to Section 2.3(b), the principal amount
outstanding under the Revolving Line shall accrue interest at a floating per
annum rate equal to one percentage point (1.00%) above the Prime Rate, which
interest shall be payable monthly in accordance with Section 2.3(f) below, but
such rate shall not be less than 5.5% per annum.
(ii) Term Loan. Subject to Section 2.3(b), the principal amount
outstanding under the Term Loan shall accrue interest at a per annum rate equal
to the Term Loan Basic Rate, which interest shall be payable monthly.
Default Rate. Immediately upon the occurrence and during the
continuance of an Event of Default, Obligations shall bear interest at a rate
per annum which is three percentage points above the rate effective immediately
before the Event of Default (the "DEFAULT RATE"). Payment or acceptance of the
increased interest rate provided in this Section 2.3(b) is not a permitted
alternative to timely payment and shall not constitute a waiver of any Event of
Default or otherwise prejudice or limit any rights or remedies of Bank.
Adjustment to Interest Rate. Changes to the interest rate of any
Credit Extension based on changes to the Prime Rate shall be effective on the
effective date of any change to the Prime Rate and to the extent of any such
change.
360-Day Year. Interest shall be computed on the basis of a 360-day
year for the actual number of days elapsed.
Debit of Accounts. Bank may debit any of Borrowers' deposit accounts,
including the Designated Deposit Account, for principal and interest payments or
any other amounts Borrowers owe Bank when due. These debits shall not constitute
a set-off.
Payments. Unless otherwise provided, interest is payable monthly on
the first calendar day of each month. Payments of principal and/or interest
received after 12:00 p.m. Pacific time are considered received at the opening of
business on the next Business Day. When a payment is due on a day that is not a
Business Day, the payment is due the next Business Day and additional fees or
interest, as applicable, shall continue to accrue.
Fees. BORROWERS SHALL PAY TO BANK:
Loan Commitment Fee. A fully earned, non-refundable loan commitment
fee of $15,000.00, on the Effective Date;
Letter of Credit Fees. Bank's customary fees and expenses for the
issuance or renewal of Letters of Credit, upon the issuance, each anniversary of
the issuance, and the renewal of such Letter of Credit; and
Bank Expenses. All Bank Expenses (including reasonable attorneys' fees
and expenses for documentation and negotiation of this Agreement) incurred
through and after the Effective Date, when due.
CONDITIONS OF LOANS
Conditions Precedent to Initial Credit Extension. BANK'S OBLIGATION TO MAKE
THE INITIAL CREDIT EXTENSION IS SUBJECT TO THE CONDITION PRECEDENT THAT BANK
SHALL HAVE RECEIVED, IN FORM AND SUBSTANCE SATISFACTORY TO BANK, SUCH DOCUMENTS,
AND COMPLETION OF SUCH OTHER MATTERS, AS BANK MAY REASONABLY DEEM NECESSARY OR
APPROPRIATE, INCLUDING, WITHOUT LIMITATION:
Each Borrower shall have delivered duly executed original signatures
to the Loan Documents to which it is a party, including an IP Agreement;
Each Borrower shall have delivered its Operating Documents and a good
standing certificate of such Borrower certified by the Secretary of State of the
State of its formation as of a date no earlier than thirty (30) days prior to
the Effective Date;
Each Borrower shall have delivered duly executed original signatures
to the completed Borrowing Resolutions for such Borrower;
Bank shall have received certified copies, dated as of a recent date,
of financing statement searches, as Bank shall request, accompanied by written
evidence (including any UCC termination statements) that the Liens indicated in
any such financing statements either constitute Permitted Liens or have been or,
in connection with the initial Credit Extension, will be terminated or released;
QUALMARK shall have delivered the Perfection Certificate for itself
and each Borrower, executed by QUALMARK;
Each Borrower which leases real property shall have delivered a
landlord's consent executed by such Borrower's landlord as to each lease of real
property in favor of Bank;
QUALMARK shall have delivered evidence satisfactory to Bank that the
insurance policies required by Section 6.5 hereof are in full force and effect,
together with appropriate evidence showing loss payable and/or additional
insured clauses or endorsements in favor of Bank; and
Borrowers shall have paid the fees and Bank Expenses then due as
specified in Section 2.4 hereof.
Conditions Precedent to all Credit Extensions. BANK'S OBLIGATIONS TO MAKE
EACH CREDIT EXTENSION, INCLUDING THE INITIAL CREDIT EXTENSION, IS SUBJECT TO THE
FOLLOWING:
except as otherwise provided in Section 3.4, timely receipt of an
executed Payment/Advance Form;
the representations and warranties in Section 5 shall be true in all
material respects on the date of the Payment/Advance Form and on the Funding
Date of each Credit Extension; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects
as of such date, and no Default or Event of Default shall have occurred and be
continuing or result from the Credit Extension. Each Credit Extension is the
relevant Borrower's representation and warranty on that date that the
representations and warranties in Section 5 remain true in all material
respects; provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date; and
in Bank's good faith business judgment, there has not been a Material
Adverse Change.
Covenant to Deliver.
Borrowers agree to deliver to Bank each item required to be delivered to
Bank under this Agreement as a condition to any Credit Extension. Borrowers
expressly agree that the extension of a Credit Extension prior to the receipt by
Bank of any such item shall not constitute a waiver by Bank of Borrowers'
obligation to deliver such item, and any such extension in the absence of a
required item shall be in Bank's sole discretion.
Procedures for Borrowing.
Subject to the prior satisfaction of all other applicable conditions to the
making of an Advance set forth in this Agreement, to obtain an Advance (other
than Advances under Sections 2.1.2 or 2.1.4), QUALMARK, on behalf of the
relevant Borrower, shall notify Bank (which notice shall be irrevocable) by
electronic mail, facsimile, or telephone by 12:00 p.m. Pacific time on the
Funding Date of the Advance. Together with any such electronic or facsimile
notification, QUALMARK, on behalf of the relevant Borrower, shall deliver to
Bank by electronic mail or facsimile a completed Payment/Advance Form executed
by a Responsible Officer or his or her designee. Bank may rely on any telephone
notice given by a person whom Bank reasonably believes is a Responsible Officer
or designee. Bank shall credit each Advance to the Borrower requesting such
Advance. Bank may make Advances under this Agreement based on instructions from
a Responsible Officer or his or her designee or without instructions if the
Advances are necessary to meet Obligations which have become due.
CREATION OF SECURITY INTEREST
Grant of Security Interest. EACH BORROWER HEREBY GRANTS BANK, TO SECURE THE
PAYMENT AND PERFORMANCE IN FULL OF ALL OF THE OBLIGATIONS, A CONTINUING SECURITY
INTEREST IN, AND PLEDGES TO BANK, THE COLLATERAL OF SUCH BORROWER, WHEREVER
LOCATED, WHETHER NOW OWNED OR HEREAFTER ACQUIRED OR ARISING, AND ALL PROCEEDS
AND PRODUCTS THEREOF. EACH BORROWER REPRESENTS, WARRANTS, AND COVENANTS THAT THE
SECURITY INTEREST GRANTED HEREIN IS AND SHALL AT ALL TIMES CONTINUE TO BE A
FIRST PRIORITY PERFECTED SECURITY INTEREST IN THE COLLATERAL OF SUCH BORROWER
(SUBJECT ONLY TO PERMITTED LIENS THAT MAY HAVE SUPERIOR PRIORITY TO BANK'S LIEN
UNDER THIS AGREEMENT). IF ANY BORROWER SHALL ACQUIRE A COMMERCIAL TORT CLAIM,
SUCH BORROWER SHALL PROMPTLY NOTIFY BANK IN A WRITING SIGNED BY SUCH BORROWER OF
THE GENERAL DETAILS THEREOF AND GRANT TO BANK IN SUCH WRITING A SECURITY
INTEREST THEREIN AND IN THE PROCEEDS THEREOF, ALL UPON THE TERMS OF THIS
AGREEMENT, WITH SUCH WRITING TO BE IN FORM AND SUBSTANCE REASONABLY SATISFACTORY
TO BANK.
If this Agreement is terminated, Bank's Lien in the Collateral shall
continue until the Obligations (other than inchoate indemnity obligations)
are repaid in full in cash. Upon payment in full in cash of the Obligations
and at such time as Bank's obligation to make Credit Extensions has
terminated, Bank shall, at Borrowers' sole cost and expense, release its
Liens in the Collateral and all rights therein shall revert to Borrowers.
Authorization to File Financing Statements. EACH BORROWER HEREBY AUTHORIZES
BANK TO FILE FINANCING STATEMENTS, WITHOUT NOTICE TO SUCH BORROWER, WITH ALL
APPROPRIATE JURISDICTIONS, AS BANK REASONABLY DEEMS APPROPRIATE, TO PERFECT OR
PROTECT BANK'S INTEREST OR RIGHTS HEREUNDER, INCLUDING A NOTICE THAT ANY
DISPOSITION OF THE COLLATERAL, BY EITHER SUCH BORROWER OR ANY OTHER PERSON,
SHALL BE DEEMED TO VIOLATE THE RIGHTS OF BANK UNDER THE CODE.
REPRESENTATIONS AND WARRANTIES
Borrowers represent and warrant as follows:
Due Organization and Authorization. EACH BORROWER AND EACH OF ITS
SUBSIDIARIES ARE DULY EXISTING AND IN GOOD STANDING IN THEIR RESPECTIVE
JURISDICTIONS OF FORMATION AND ARE QUALIFIED AND LICENSED TO DO BUSINESS IN AND
ARE IN GOOD STANDING IN ANY JURISDICTION IN WHICH THE CONDUCT OF THEIR BUSINESS
OR THEIR OWNERSHIP OF PROPERTY REQUIRES THAT THEY BE QUALIFIED EXCEPT WHERE THE
FAILURE TO DO SO COULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE
EFFECT ON SUCH BORROWER'S BUSINESS. IN CONNECTION WITH THIS AGREEMENT, QUALMARK,
ON BEHALD OF ALL BORROWERS, HAS DELIVERED TO BANK A COMPLETED CERTIFICATE
SUBSTANTIALLY IN THE FORM ATTACHED HERETO AS EXHIBIT E SIGNED BY QUALMARK,
ENTITLED "PERFECTION CERTIFICATE". EACH BORROWER
REPRESENTS AND WARRANTS TO BANK THAT (A) SUCH BORROWER'S EXACT LEGAL NAME IS
THAT INDICATED ON THE PERFECTION CERTIFICATE AND ON THE SIGNATURE PAGE HEREOF;
(B) SUCH BORROWER IS AN ORGANIZATION OF THE TYPE AND IS ORGANIZED IN THE
JURISDICTION SET FORTH IN THE PERFECTION CERTIFICATE; (C) THE PERFECTION
CERTIFICATE ACCURATELY SETS FORTH SUCH BORROWER'S ORGANIZATIONAL IDENTIFICATION
NUMBER OR ACCURATELY STATES THAT BORROWER HAS NONE; (D) THE PERFECTION
CERTIFICATE ACCURATELY SETS FORTH SUCH BORROWER'S PLACE OF BUSINESS, OR, IF MORE
THAN ONE, ITS CHIEF EXECUTIVE OFFICE AS WELL AS SUCH BORROWER'S MAILING ADDRESS
(IF DIFFERENT THAN ITS CHIEF EXECUTIVE OFFICE); (E) SUCH BORROWER (AND EACH OF
ITS PREDECESSORS) HAS NOT, IN THE PAST FIVE (5) YEARS, CHANGED ITS STATE OF
FORMATION, ORGANIZATIONAL STRUCTURE OR TYPE, OR ANY ORGANIZATIONAL NUMBER
ASSIGNED BY ITS JURISDICTION; AND (F) ALL OTHER INFORMATION SET FORTH ON THE
PERFECTION CERTIFICATE PERTAINING TO SUCH BORROWER AND EACH OF ITS SUBSIDIARIES
IS ACCURATE AND COMPLETE. IF ANY BORROWER IS NOT NOW A REGISTERED ORGANIZATION
BUT LATER BECOMES ONE, SUCH BORROWER SHALL PROMPTLY NOTIFY BANK OF SUCH
OCCURRENCE AND PROVIDE BANK WITH SUCH BORROWER'S ORGANIZATIONAL IDENTIFICATION
NUMBER.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with any Borrower's organizational
documents, nor constitute an event of default under any material agreement by
which any Borrower is bound. Each Borrower is not in default under any agreement
to which it is a party or by which it is bound in which the default could
reasonably be expected to have a material adverse effect on such Borrower's
business.
Collateral. EACH BORROWER HAS GOOD TITLE TO, HAS RIGHTS IN, AND THE POWER
TO TRANSFER EACH ITEM OF ITS COLLATERAL UPON WHICH IT PURPORTS TO XXXXX X XXXX
HEREUNDER, FREE AND CLEAR OF ANY AND ALL LIENS EXCEPT PERMITTED LIENS. EACH
BORROWER HAS NO DEPOSIT ACCOUNTS OTHER THAN THE DEPOSIT ACCOUNTS WITH BANK, THE
DEPOSIT ACCOUNTS, IF ANY, DESCRIBED IN THE PERFECTION CERTIFICATE DELIVERED TO
BANK IN CONNECTION HEREWITH, OR OF WHICH SUCH BORROWER HAS GIVEN BANK NOTICE AND
TAKEN SUCH ACTIONS AS ARE NECESSARY TO GIVE BANK A PERFECTED SECURITY INTEREST
THEREIN. THE ACCOUNTS ARE BONA FIDE, EXISTING OBLIGATIONS OF THE ACCOUNT
DEBTORS.
THE COLLATERAL IS NOT IN THE POSSESSION OF ANY THIRD PARTY BAILEE (SUCH AS A
WAREHOUSE) EXCEPT AS OTHERWISE PROVIDED IN THE PERFECTION CERTIFICATE. NONE OF
THE COMPONENTS OF ANY COLLATERAL SHALL BE MAINTAINED AT LOCATIONS OTHER THAN AS
PROVIDED IN THE PERFECTION CERTIFICATE OR AS THE RELEVANT BORROWER HAS GIVEN
BANK NOTICE PURSUANT TO SECTION 7.2. IN THE EVENT THAT ANY BORROWER, AFTER THE
DATE HEREOF, INTENDS TO STORE OR OTHERWISE DELIVER ANY PORTION OF THE COLLATERAL
TO A BAILEE, THEN SUCH BORROWER WILL FIRST RECEIVE THE WRITTEN CONSENT OF BANK
AND SUCH BAILEE MUST EXECUTE AND DELIVER A BAILEE AGREEMENT IN FORM AND
SUBSTANCE SATISFACTORY TO BANK IN ITS SOLE DISCRETION.
ALL INVENTORY IS IN ALL MATERIAL RESPECTS OF GOOD AND MARKETABLE QUALITY, FREE
FROM MATERIAL DEFECTS.
EACH BORROWER IS THE SOLE OWNER OF ITS INTELLECTUAL PROPERTY, EXCEPT AS NOTED ON
THE PERFECTION CERTIFICATE AND EXCEPT FOR NON-EXCLUSIVE LICENSES GRANTED TO ITS
CUSTOMERS IN THE ORDINARY COURSE OF BUSINESS. EACH PATENT IS VALID AND
ENFORCEABLE, AND NO PART OF THE INTELLECTUAL PROPERTY HAS BEEN JUDGED INVALID OR
UNENFORCEABLE, IN WHOLE OR IN PART, AND TO THE BEST OF THE RELEVANT BORROWER'S
KNOWLEDGE, NO CLAIM HAS BEEN MADE THAT ANY PART OF THE INTELLECTUAL PROPERTY
VIOLATES THE RIGHTS OF ANY THIRD PARTY EXCEPT TO THE EXTENT SUCH CLAIM COULD NOT
REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT ON SUCH BORROWER'S
BUSINESS. EXCEPT AS NOTED ON THE PERFECTION CERTIFICATE, EACH BORROWER IS NOT A
PARTY TO, NOR IS BOUND BY, ANY MATERIAL LICENSE OR OTHER AGREEMENT WITH RESPECT
TO WHICH SUCH BORROWER IS THE LICENSEE THAT PROHIBITS OR OTHERWISE RESTRICTS
SUCH BORROWER FROM GRANTING A SECURITY INTEREST IN SUCH BORROWER'S INTEREST IN
SUCH LICENSE OR AGREEMENT OR ANY OTHER PROPERTY. EACH BORROWER SHALL PROVIDE
WRITTEN NOTICE TO BANK WITHIN THIRTY (30) DAYS OF ENTERING OR BECOMING BOUND BY
ANY SUCH LICENSE OR AGREEMENT WHICH IS REASONABLY LIKELY TO HAVE A MATERIAL
IMPACT ON SUCH BORROWER'S BUSINESS OR FINANCIAL CONDITION (OTHER THAN
OVER-THE-COUNTER SOFTWARE THAT IS COMMERCIALLY AVAILABLE TO THE PUBLIC). EACH
BORROWER SHALL TAKE SUCH STEPS AS BANK REQUESTS TO OBTAIN THE CONSENT OF, OR
WAIVER BY, ANY PERSON WHOSE CONSENT OR WAIVER IS NECESSARY FOR ALL SUCH LICENSES
OR CONTRACT RIGHTS TO BE DEEMED "COLLATERAL" AND FOR BANK TO HAVE A SECURITY
INTEREST IN IT THAT MIGHT OTHERWISE BE RESTRICTED OR PROHIBITED BY LAW OR BY THE
TERMS OF ANY SUCH LICENSE OR AGREEMENT (SUCH CONSENT OR AUTHORIZATION MAY
INCLUDE A LICENSOR'S AGREEMENT TO A CONTINGENT ASSIGNMENT OF THE LICENSE TO BANK
IF BANK DETERMINES THAT IS NECESSARY IN ITS GOOD FAITH JUDGMENT), WHETHER NOW
EXISTING OR ENTERED INTO IN THE FUTURE.
Accounts Receivable. FOR ANY ELIGIBLE ACCOUNT IN ANY BORROWING BASE
CERTIFICATE, ALL STATEMENTS MADE AND ALL UNPAID BALANCES APPEARING IN ALL
INVOICES, INSTRUMENTS AND OTHER DOCUMENTS EVIDENCING SUCH ACCOUNTS ARE AND SHALL
BE TRUE AND CORRECT AND ALL SUCH INVOICES, INSTRUMENTS AND OTHER DOCUMENTS, AND
ALL OF EACH BORROWER'S BOOKS ARE 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. EACH BORROWER HAS NO KNOWLEDGE OF ANY ACTUAL
OR IMMINENT
INSOLVENCY PROCEEDING OF ANY ACCOUNT DEBTOR WHOSE ACCOUNTS ARE ELIGIBLE ACCOUNTS
IN ANY BORROWING BASE CERTIFICATE. TO THE BEST OF EACH BORROWER'S KNOWLEDGE, ALL
SIGNATURES AND ENDORSEMENTS ON ALL DOCUMENTS, INSTRUMENTS, AND AGREEMENTS
RELATING TO ALL ACCOUNTS ARE GENUINE, AND ALL SUCH DOCUMENTS, INSTRUMENTS AND
AGREEMENTS ARE LEGALLY ENFORCEABLE IN ACCORDANCE WITH THEIR TERMS.
Litigation. THERE ARE NO ACTIONS OR PROCEEDINGS PENDING OR, TO THE
KNOWLEDGE OF THE RESPONSIBLE OFFICERS, THREATENED IN WRITING BY OR AGAINST ANY
BORROWER OR ANY OF ITS SUBSIDIARIES INVOLVING MORE THAN ONE HUNDRED THOUSAND
DOLLARS ($100,000.00), EXCEPT AS SHOWN IN THE PERFECTION CERTIFICATE.
No Material Deviation in Financial Statements. ALL CONSOLIDATED FINANCIAL
STATEMENTS FOR QUALMARK AND ANY OF ITS SUBSIDIARIES DELIVERED TO BANK FAIRLY
PRESENT IN ALL MATERIAL RESPECTS QUALMARK'S CONSOLIDATED FINANCIAL CONDITION AND
QUALMARK'S CONSOLIDATED RESULTS OF OPERATIONS. THERE HAS NOT BEEN ANY MATERIAL
DETERIORATION IN QUALMARK'S CONSOLIDATED FINANCIAL CONDITION SINCE THE DATE OF
THE MOST RECENT FINANCIAL STATEMENTS SUBMITTED TO BANK.
Solvency. THE FAIR SALABLE VALUE OF EACH BORROWER'S ASSETS (INCLUDING
GOODWILL MINUS DISPOSITION COSTS) EXCEEDS THE FAIR VALUE OF ITS LIABILITIES;
EACH BORROWER IS NOT LEFT WITH UNREASONABLY SMALL CAPITAL AFTER THE TRANSACTIONS
IN THIS AGREEMENT; AND BORROWERS ARE ABLE TO PAY THEIR DEBTS (INCLUDING TRADE
DEBTS) AS THEY MATURE.
Regulatory Compliance. EACH BORROWER IS NOT AN "INVESTMENT COMPANY" OR A
COMPANY "CONTROLLED" BY AN "INVESTMENT COMPANY" UNDER THE INVESTMENT COMPANY
ACT. EACH BORROWER IS NOT ENGAGED AS ONE OF ITS IMPORTANT ACTIVITIES IN
EXTENDING CREDIT FOR MARGIN STOCK (UNDER REGULATIONS T AND U OF THE FEDERAL
RESERVE BOARD OF GOVERNORS). EACH BORROWER HAS COMPLIED IN ALL MATERIAL RESPECTS
WITH THE FEDERAL FAIR LABOR STANDARDS ACT. EACH BORROWER HAS NOT VIOLATED ANY
LAWS, ORDINANCES OR RULES, THE VIOLATION OF WHICH COULD REASONABLY BE EXPECTED
TO HAVE A MATERIAL ADVERSE EFFECT ON ITS BUSINESS. NO BORROWER'S OR ANY OF ITS
SUBSIDIARIES' PROPERTIES OR ASSETS HAS BEEN USED BY ANY BORROWER OR ANY
SUBSIDIARY OR, TO THE BEST OF EACH BORROWER'S KNOWLEDGE, BY PREVIOUS PERSONS, IN
DISPOSING, PRODUCING, STORING, TREATING, OR TRANSPORTING ANY HAZARDOUS SUBSTANCE
OTHER THAN LEGALLY. EACH BORROWER AND EACH OF ITS SUBSIDIARIES HAVE OBTAINED ALL
CONSENTS, APPROVALS AND AUTHORIZATIONS OF, MADE ALL DECLARATIONS OR FILINGS
WITH, AND GIVEN ALL NOTICES TO, ALL GOVERNMENT AUTHORITIES THAT ARE NECESSARY TO
CONTINUE ITS BUSINESS AS CURRENTLY CONDUCTED.
Subsidiaries; Investments. EACH BORROWER DOES NOT OWN ANY STOCK,
PARTNERSHIP INTEREST OR OTHER EQUITY SECURITIES EXCEPT FOR PERMITTED
INVESTMENTS.
Tax Returns and Payments; Pension Contributions. EACH BORROWER HAS TIMELY
FILED ALL REQUIRED TAX RETURNS AND REPORTS, AND SUCH BORROWER HAS TIMELY PAID
ALL FOREIGN, FEDERAL, STATE AND LOCAL TAXES, ASSESSMENTS, DEPOSITS AND
CONTRIBUTIONS OWED BY SUCH BORROWER. EACH BORROWER MAY DEFER PAYMENT OF ANY
CONTESTED TAXES, PROVIDED THAT SUCH BORROWER (A) IN GOOD FAITH CONTESTS ITS
OBLIGATION TO PAY THE TAXES BY APPROPRIATE PROCEEDINGS PROMPTLY AND DILIGENTLY
INSTITUTED AND CONDUCTED, (B) NOTIFIES BANK IN WRITING OF THE COMMENCEMENT OF,
AND ANY MATERIAL DEVELOPMENT IN, THE PROCEEDINGS, (C) POSTS BONDS OR TAKES ANY
OTHER STEPS REQUIRED TO PREVENT THE GOVERNMENTAL AUTHORITY LEVYING SUCH
CONTESTED TAXES FROM OBTAINING A LIEN UPON ANY OF THE COLLATERAL THAT IS OTHER
THAN A "PERMITTED LIEN". EACH BORROWER IS UNAWARE OF ANY CLAIMS OR ADJUSTMENTS
PROPOSED FOR ANY OF SUCH BORROWER'S PRIOR TAX YEARS WHICH COULD RESULT IN
ADDITIONAL TAXES BECOMING DUE AND PAYABLE BY SUCH BORROWER. EACH BORROWER HAS
PAID ALL AMOUNTS NECESSARY TO FUND ALL PRESENT PENSION, PROFIT SHARING AND
DEFERRED COMPENSATION PLANS IN ACCORDANCE WITH THEIR TERMS, AND SUCH BORROWER
HAS NOT WITHDRAWN FROM PARTICIPATION IN, AND HAS NOT PERMITTED PARTIAL OR
COMPLETE TERMINATION OF, OR PERMITTED THE OCCURRENCE OF ANY OTHER EVENT WITH
RESPECT TO, ANY SUCH PLAN WHICH COULD REASONABLY BE EXPECTED TO RESULT IN ANY
LIABILITY OF SUCH BORROWER, INCLUDING ANY LIABILITY TO THE PENSION BENEFIT
GUARANTY CORPORATION OR ITS SUCCESSORS OR ANY OTHER GOVERNMENTAL AGENCY.
Use of Proceeds. QUALMARK LING CORPORATION SHALL USE THE PROCEEDS OF THE
TERM LOAN TO ACQUIRE ASSETS OF LING ELECTRONICS FROM SATCON POWER SYSTEMS, INC.
OTHERWISE, EACH BORROWER SHALL USE THE PROCEEDS OF THE CREDIT EXTENSIONS MADE TO
IT SOLELY AS WORKING CAPITAL, AND TO FUND ITS GENERAL BUSINESS REQUIREMENTS AND
NOT FOR PERSONAL, FAMILY, HOUSEHOLD OR AGRICULTURAL PURPOSES.
Full Disclosure. NO WRITTEN REPRESENTATION, WARRANTY OR OTHER STATEMENT OF
ANY BORROWER IN ANY CERTIFICATE OR WRITTEN STATEMENT GIVEN TO BANK, AS OF THE
DATE SUCH REPRESENTATIONS, WARRANTIES, OR OTHER STATEMENTS WERE MADE, TAKEN
TOGETHER WITH ALL SUCH WRITTEN CERTIFICATES AND WRITTEN STATEMENTS GIVEN TO
BANK, CONTAINS ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMITS TO STATE A
MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS CONTAINED IN THE CERTIFICATES OR
STATEMENTS NOT MISLEADING (IT BEING RECOGNIZED BY BANK THAT THE PROJECTIONS AND
FORECASTS PROVIDED BY BORROWERS IN GOOD FAITH AND BASED UPON REASONABLE
ASSUMPTIONS ARE NOT VIEWED AS FACTS AND THAT ACTUAL RESULTS DURING THE PERIOD OR
PERIODS COVERED BY SUCH PROJECTIONS AND FORECASTS MAY DIFFER FROM THE PROJECTED
OR FORECASTED RESULTS).
AFFIRMATIVE COVENANTS
Each Borrower shall do all of the following as long as this Agreement has
not been terminated:
Government Compliance. MAINTAIN ITS AND ALL ITS SUBSIDIARIES' LEGAL
EXISTENCE AND GOOD STANDING IN THEIR RESPECTIVE JURISDICTIONS OF FORMATION AND
MAINTAIN QUALIFICATION IN EACH JURISDICTION IN WHICH THE FAILURE TO SO QUALIFY
WOULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT ON SUCH
BORROWER'S BUSINESS OR OPERATIONS. EACH BORROWER SHALL COMPLY, AND HAVE EACH
SUBSIDIARY COMPLY, WITH ALL LAWS, ORDINANCES AND REGULATIONS TO WHICH IT IS
SUBJECT, NONCOMPLIANCE WITH WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON SUCH
BORROWER'S BUSINESS.
Financial Statements, Reports, Certificates.
Deliver to Bank: (i) as soon as available, but no later than fifteen
(15) days after the last day of each month, a company prepared consolidated
balance sheet and income statement covering the consolidated operations of
QUALMARK and its Subsidiaries during the period certified by a Responsible
Officer and in a form acceptable to Bank; (ii) as soon as available, but no
later than ninety (90) days after the last day of QUALMARK's fiscal year,
QUALMARK's audited consolidated financial statements prepared under GAAP,
consistently applied, together with an unqualified opinion on the consolidated
financial statements from an independent certified public accounting firm
acceptable to Bank in its reasonable discretion; (iii) within five (5) days of
delivery, copies of all statements, reports and notices made available to
QUALMARK's security holders or to any holders of Subordinated Debt; (iv) in the
event that such Borrower becomes subject to the reporting requirements under the
Securities Exchange Act of 1934, as amended, within five (5) days of filing, all
reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange
Commission or a link thereto on such Borrower's or another website on the
Internet; (v) a prompt report of any legal actions pending or threatened against
such Borrower or any of its Subsidiaries that could result in damages or costs
to such Borrower or any of its Subsidiaries of One Hundred Thousand Dollars
($100,000.00) or more; (vi) prompt notice of any material change in the
composition of its intellectual property, including any subsequent ownership
right of such Borrower in or to any copyright, patent or trademark not shown in
any intellectual property security agreement between such Borrower and Bank or
knowledge of an event that materially and adversely affects the value of its
intellectual property; and (vii) budgets, sales projections, operating plans and
other financial information reasonably requested by Bank.
Within fifteen (15) days after the last day of each month, cause
QUALMARK deliver to Bank a duly completed Borrowing Base Certificate of such
Borrower signed by a Responsible Officer, with aged listings of accounts
receivable and accounts payable (by invoice date) of such Borrower.
Within fifteen (15) days after the last day of each month, cause
QUALMARK to deliver to Bank with the monthly financial statements, a duly
completed Compliance Certificate signed by a Responsible Officer setting forth
calculations showing compliance with the financial covenants set forth in this
Agreement.
Prior to the occurrence of an Event of Default, at reasonable times
and upon reasonable notice, and, after an Event of Default has occurred and is
continuing, at any time, allow Bank to audit any and all Borrower's Collateral
at Borrowers' expense for Bank's customary costs of such audits. Subsequent
audits shall be conducted no more often than annually, unless a Default or an
Event of Default has occurred and is continuing.
(e) Within 30 days prior to the beginning of each fiscal year of
QUALMARK, cause QUALMARK to deliver to Bank a copy of QUALMARK's board of
director's approved financial projections for the coming fiscal year, including
income statements, balance sheets and cash flow statements on a consolidated and
consolidating basis.
Inventory; Returns. KEEP ALL INVENTORY IN GOOD AND MARKETABLE CONDITION,
FREE FROM MATERIAL DEFECTS. RETURNS AND ALLOWANCES BETWEEN EACH BORROWER AND ITS
ACCOUNT DEBTORS SHALL FOLLOW SUCH BORROWER'S CUSTOMARY PRACTICES AS THEY EXIST
AT THE EFFECTIVE DATE. EACH BORROWER MUST PROMPTLY NOTIFY BANK OF ALL RETURNS,
RECOVERIES, DISPUTES AND CLAIMS THAT INVOLVE MORE THAN ONE HUNDRED THOUSAND
DOLLARS ($100,000.00).
Taxes; Pensions. MAKE, AND CAUSE EACH OF ITS SUBSIDIARIES TO MAKE, TIMELY
PAYMENT OF ALL FOREIGN, FEDERAL, STATE, AND LOCAL TAXES OR ASSESSMENTS (OTHER
THAN TAXES AND ASSESSMENTS WHICH SUCH BORROWER IS CONTESTING PURSUANT TO THE
TERMS OF SECTION 5.9 HEREOF) AND SHALL DELIVER TO BANK, ON DEMAND, APPROPRIATE
CERTIFICATES ATTESTING TO SUCH PAYMENTS, AND PAY ALL AMOUNTS NECESSARY TO FUND
ALL PRESENT PENSION, PROFIT SHARING AND DEFERRED COMPENSATION PLANS IN
ACCORDANCE WITH THEIR TERMS.
Insurance. KEEP ITS BUSINESS AND ITS COLLATERAL INSURED FOR RISKS AND IN
AMOUNTS STANDARD FOR COMPANIES IN SUCH BORROWER'S INDUSTRY AND LOCATION AND AS
BANK MAY REASONABLY REQUEST. INSURANCE POLICIES SHALL BE IN A FORM, WITH
COMPANIES, AND IN AMOUNTS THAT ARE SATISFACTORY TO BANK. ALL PROPERTY POLICIES
SHALL HAVE A LENDER'S LOSS PAYABLE ENDORSEMENT SHOWING BANK AS A LENDER LOSS
PAYEE AND WAIVE SUBROGATION AGAINST BANK, AND ALL LIABILITY POLICIES SHALL SHOW,
OR HAVE ENDORSEMENTS SHOWING, BANK AS AN ADDITIONAL INSURED. ALL POLICIES (OR
THE LOSS PAYABLE AND ADDITIONAL INSURED ENDORSEMENTS) SHALL PROVIDE THAT THE
INSURER MUST GIVE BANK AT LEAST TWENTY (20) DAYS NOTICE BEFORE CANCELING,
AMENDING, OR DECLINING TO RENEW ITS POLICY. AT BANK'S REQUEST, EACH BORROWER
SHALL DELIVER CERTIFIED COPIES OF POLICIES AND EVIDENCE OF ALL PREMIUM PAYMENTS.
PROCEEDS PAYABLE UNDER ANY POLICY SHALL, AT BANK'S OPTION, BE PAYABLE TO BANK ON
ACCOUNT OF THE OBLIGATIONS. IF ANY BORROWER FAILS TO OBTAIN INSURANCE AS
REQUIRED UNDER THIS SECTION 6.5 OR TO PAY ANY AMOUNT OR FURNISH ANY REQUIRED
PROOF OF PAYMENT TO THIRD PERSONS AND BANK, BANK MAY MAKE ALL OR PART OF SUCH
PAYMENT OR OBTAIN SUCH INSURANCE POLICIES REQUIRED IN THIS SECTION 6.5, AND TAKE
ANY ACTION UNDER THE POLICIES BANK DEEMS PRUDENT IN ITS GOOD FAITH BUSINESS
JUDGMENT.
Operating Accounts.
Maintain its and its Subsidiaries' depository and operating accounts
and securities accounts with Bank and Bank's affiliates which accounts,
commencing 30 days after the Effective Date, shall represent at least 85% of the
dollar value of such Borrower's and its Subsidiaries accounts at all financial
institutions located in the United States of America.
Provide Bank five (5) days prior written notice before establishing
any Collateral Account at or with any bank or financial institution other than
Bank or its Affiliates. In addition, for each Collateral Account that such
Borrower at any time maintains, such Borrower shall cause the applicable bank or
financial institution (other than Bank) at or with which any Collateral Account
is maintained to execute and deliver a Control Agreement or other appropriate
instrument with respect to such Collateral Account to perfect Bank's Lien in
such Collateral Account in accordance with the terms hereunder. The provisions
of the previous sentence shall not apply to deposit accounts exclusively used
for payroll, payroll taxes and other employee wage and benefit payments to or
for the benefit of Borrower's employees and identified to Bank by such Borrower
as such.
Financial Covenants.
Cause QUALMARK to maintain at all times, to be tested as of the last
day of each month, unless otherwise noted, on a consolidated basis with respect
to QUALMARK and its Subsidiaries:
(a) Minimum Quick Ratio. A ratio of Quick Assets to Current
Liabilities of at least 1.10 to 1.00 as of the end of each of the first two
months of each fiscal quarter, and of at least 1.25 to 1.00 as of the end of the
third month of each fiscal quarter; and
(b) Minimum Debt Service Coverage Ratio. A ratio, measured on a
rolling three-month basis, of (a) EBITDA to (b) the required principal payments
on the Term Loan plus interest expense on all Indebtedness of Borrowers owing to
Bank, of at least 2.00 to 1.00.
Protection and Registration of Intellectual Property Rights. (A) PROTECT,
DEFEND AND MAINTAIN THE VALIDITY AND ENFORCEABILITY OF ITS INTELLECTUAL
PROPERTY; (B) PROMPTLY ADVISE BANK IN WRITING OF MATERIAL INFRINGEMENTS OF ITS
INTELLECTUAL PROPERTY; AND (C) NOT ALLOW ANY INTELLECTUAL PROPERTY MATERIAL TO
SUCH BORROWER'S BUSINESS TO BE ABANDONED, FORFEITED OR DEDICATED TO THE PUBLIC
WITHOUT BANK'S WRITTEN CONSENT. IF ANY BORROWER DECIDES TO REGISTER ANY
COPYRIGHTS OR MASK WORKS IN THE UNITED STATES COPYRIGHT OFFICE, BORROWER SHALL:
(X) PROVIDE BANK WITH AT LEAST FIFTEEN (15) DAYS PRIOR WRITTEN NOTICE OF ITS
INTENT TO REGISTER SUCH COPYRIGHTS OR MASK WORKS TOGETHER WITH A COPY OF THE
APPLICATION IT INTENDS TO FILE WITH THE UNITED STATES COPYRIGHT OFFICE
(EXCLUDING EXHIBITS THERETO); (Y) EXECUTE AN INTELLECTUAL PROPERTY SECURITY
AGREEMENT OR SUCH OTHER DOCUMENTS AS BANK MAY REASONABLY REQUEST TO MAINTAIN THE
PERFECTION AND PRIORITY OF BANK'S SECURITY INTEREST IN THE COPYRIGHTS OR MASK
WORKS INTENDED TO BE REGISTERED WITH THE UNITED STATES COPYRIGHT OFFICE; AND (Z)
RECORD SUCH INTELLECTUAL PROPERTY SECURITY AGREEMENT WITH THE UNITED STATES
COPYRIGHT OFFICE CONTEMPORANEOUSLY WITH FILING THE COPYRIGHT OR MASK WORK
APPLICATION(S) WITH THE UNITED STATES COPYRIGHT OFFICE. EACH BORROWER SHALL
PROMPTLY PROVIDE TO BANK A COPY OF THE APPLICATION(S) FILED WITH THE UNITED
STATES COPYRIGHT OFFICE TOGETHER WITH EVIDENCE OF THE RECORDING OF THE
INTELLECTUAL PROPERTY SECURITY AGREEMENT NECESSARY FOR BANK TO MAINTAIN THE
PERFECTION AND PRIORITY OF ITS SECURITY INTEREST IN SUCH COPYRIGHTS OR MASK
WORKS. EACH BORROWER SHALL PROVIDE WRITTEN NOTICE TO BANK OF ANY APPLICATION
FILED BY SUCH BORROWER IN THE UNITED STATES PATENT AND TRADEMARK OFFICE FOR A
PATENT OR TO REGISTER A TRADEMARK OR SERVICE XXXX WITHIN 30 DAYS AFTER ANY SUCH
FILING.
Litigation Cooperation. FROM THE DATE HEREOF AND CONTINUING THROUGH THE
TERMINATION OF THIS AGREEMENT, MAKE AVAILABLE TO BANK, WITHOUT EXPENSE TO BANK,
THE RELEVANT BORROWER AND ITS OFFICERS, EMPLOYEES AND AGENTS AND SUCH BORROWER'S
BOOKS AND RECORDS, TO THE EXTENT THAT BANK MAY DEEM THEM REASONABLY NECESSARY TO
PROSECUTE OR DEFEND ANY THIRD-PARTY SUIT OR PROCEEDING INSTITUTED BY OR AGAINST
BANK WITH RESPECT TO ANY COLLATERAL OR RELATING TO SUCH BORROWER.
Further Assurances. EXECUTE ANY FURTHER INSTRUMENTS AND TAKE FURTHER ACTION
AS BANK REASONABLY REQUESTS TO PERFECT OR CONTINUE BANK'S LIEN IN THE COLLATERAL
OR TO EFFECT THE PURPOSES OF THIS AGREEMENT.
NEGATIVE COVENANTS
Each Borrower shall not do any of the following without Bank's prior
written consent (which shall be a matter of its good faith business judgment,
unless otherwise stated) as long as this Agreement has not been terminated:
Dispositions. CONVEY, SELL, LEASE, TRANSFER OR OTHERWISE DISPOSE OF
(COLLECTIVELY, "Transfer"), OR PERMIT ANY OF ITS SUBSIDIARIES TO TRANSFER, ALL
OR ANY PART OF ITS BUSINESS OR PROPERTY, EXCEPT FOR TRANSFERS (A) OF INVENTORY
IN THE ORDINARY COURSE OF BUSINESS; (B) OF NON-EXCLUSIVE LICENSES AND SIMILAR
ARRANGEMENTS FOR THE USE OF THE PROPERTY OF SUCH BORROWER OR ITS SUBSIDIARIES IN
THE ORDINARY COURSE OF BUSINESS; (C) OF WORN-OUT OR OBSOLETE EQUIPMENT; (D) IN
CONNECTION WITH PERMITTED LIENS AND PERMITTED INVESTMENTS; AND (E)OF OTHER
ASSETS NOT EXCEEDING $50,000 IN ANY ONE INSTANCE.
Changes in Business, Management, Ownership, or Business Locations. (A)
ENGAGE IN OR PERMIT ANY OF ITS SUBSIDIARIES TO ENGAGE IN ANY BUSINESS OTHER THAN
THE BUSINESSES CURRENTLY ENGAGED IN BY SUCH BORROWER AND SUCH SUBSIDIARY, AS
APPLICABLE, OR REASONABLY RELATED THERETO AND TO BE ENGAGED IN FOLLOWING THE
ACQUISITION OF ASSETS OF LING ELECTRONICS FROM SATCON POWER SYSTEMS, INC.; (B)
LIQUIDATE OR DISSOLVE; OR (C) (I) HAVE A CHANGE IN MANAGEMENT OR (II) ENTER INTO
ANY TRANSACTION OR SERIES OF RELATED TRANSACTIONS IN WHICH THERE IS A CHANGE IN
OWNERSHIP OF MORE THAN 25% (OTHER THAN BY THE SALE OF BORROWER'S EQUITY
SECURITIES IN A PUBLIC OFFERING OR TO VENTURE CAPITAL INVESTORS SO LONG AS
BORROWER IDENTIFIES TO BANK THE VENTURE CAPITAL INVESTORS PRIOR TO THE CLOSING
OF THE TRANSACTION). EACH BORROWER SHALL NOT, WITHOUT AT LEAST THIRTY (30) DAYS
PRIOR WRITTEN NOTICE TO BANK: (1) ADD ANY NEW OFFICES OR BUSINESS LOCATIONS,
INCLUDING WAREHOUSES (UNLESS SUCH NEW OFFICES OR BUSINESS LOCATIONS CONTAIN LESS
THAN TEN THOUSAND DOLLARS ($10,000.00) IN SUCH BORROWER'S ASSETS OR PROPERTY)
EXCEPT SUCH NEW OFFICES AND BUSINESS LOCATIONS ACQUIRED IN THE ACQUISITION OF
ASSETS OF LING ELECTRONICS FROM SATCON POWER SYSTEMS, INC., (2) CHANGE ITS
JURISDICTION OF ORGANIZATION, (3) CHANGE ITS ORGANIZATIONAL STRUCTURE OR TYPE,
(4) CHANGE ITS LEGAL NAME, OR (5) CHANGE ANY ORGANIZATIONAL NUMBER (IF ANY)
ASSIGNED BY ITS JURISDICTION OF ORGANIZATION.
Mergers or Acquisitions. MERGE OR CONSOLIDATE, OR PERMIT ANY OF ITS
SUBSIDIARIES TO MERGE OR CONSOLIDATE, WITH ANY OTHER PERSON, OR ACQUIRE, OR
PERMIT ANY OF ITS SUBSIDIARIES TO ACQUIRE, ALL OR SUBSTANTIALLY ALL OF THE
CAPITAL STOCK OR PROPERTY OF ANOTHER PERSON, EXCEPT THAT QUALMARK LING
CORPORATION MAY ACQUIRE ASSETS OF LING ELECTRONICS FROM SATCON POWER SYSTEMS,
INC. AND EXCEPT (I) WHERE (A) SUCH TRANSACTION WOULD NOT RESULT IN A DECREASE OF
MORE THAN 25% OF TANGIBLE NET WORTH OF QUALMARK, (B) NO EVENT OF DEFAULT HAS
OCCURRED AND IS CONTINUING OR WOULD EXIST AFTER GIVING EFFECT TO THE
TRANSACTION, AND (C) EITHER SUCH BORROWER OR QUALMARK IS THE SURVIVING LEGAL
ENTITY. A SUBSIDIARY MAY MERGE OR CONSOLIDATE INTO ANOTHER SUBSIDIARY OR INTO
ANY BORROWER.
Indebtedness. CREATE, INCUR, ASSUME, OR BE LIABLE FOR ANY INDEBTEDNESS, OR
PERMIT ANY SUBSIDIARY TO DO SO, OTHER THAN PERMITTED INDEBTEDNESS.
Encumbrance. CREATE, INCUR, OR ALLOW ANY LIEN ON ANY OF ITS PROPERTY, OR
ASSIGN OR CONVEY ANY RIGHT TO RECEIVE INCOME, INCLUDING THE SALE OF ANY OF ITS
ACCOUNTS, OR PERMIT ANY OF ITS SUBSIDIARIES TO DO SO, EXCEPT FOR PERMITTED
LIENS, OR PERMIT ANY COLLATERAL NOT TO BE SUBJECT TO THE FIRST PRIORITY SECURITY
INTEREST GRANTED HEREIN, OR ENTER INTO ANY AGREEMENT, DOCUMENT, INSTRUMENT OR
OTHER ARRANGEMENT (EXCEPT WITH OR IN FAVOR OF BANK) WITH ANY PERSON WHICH
DIRECTLY OR INDIRECTLY PROHIBITS OR HAS THE EFFECT OF PROHIBITING SUCH BORROWER
OR ANY SUBSIDIARY FROM ASSIGNING, MORTGAGING, PLEDGING, GRANTING A SECURITY
INTEREST IN OR UPON, OR ENCUMBERING ANY OF SUCH BORROWER'S OR ANY SUBSIDIARY'S
INTELLECTUAL PROPERTY, EXCEPT AS IS OTHERWISE PERMITTED IN SECTION 7.1 HEREOF
AND THE DEFINITION OF "PERMITTED LIEN" HEREIN.
Maintenance of Collateral Accounts. MAINTAIN ANY COLLATERAL ACCOUNT EXCEPT
PURSUANT TO THE TERMS OF SECTION 6.6.(B) HEREOF.
Investments; Distributions. (A) DIRECTLY OR INDIRECTLY MAKE ANY INVESTMENT
EXCEPT IN CONNECTION WITH THE ACQUISITION OF ASSETS OF LING ELECTRONICS FROM
SATCON POWER SYSTEMS, INC. AND OTHER THAN PERMITTED INVESTMENTS, OR PERMIT ANY
OF ITS SUBSIDIARIES TO DO SO; OR (B) PAY ANY DIVIDENDS OR MAKE ANY DISTRIBUTION
OR PAYMENT OR REDEEM, RETIRE OR PURCHASE ANY MEMBER INTEREST OR CAPITAL STOCK.
Transactions with Affiliates. DIRECTLY OR INDIRECTLY ENTER INTO OR PERMIT
TO EXIST ANY MATERIAL TRANSACTION WITH ANY AFFILIATE OF SUCH BORROWER, EXCEPT
FOR TRANSACTIONS THAT ARE IN THE ORDINARY COURSE OF SUCH BORROWER'S BUSINESS,
UPON FAIR AND REASONABLE TERMS THAT ARE NO LESS FAVORABLE TO SUCH BORROWER THAN
WOULD BE OBTAINED IN AN ARM'S LENGTH TRANSACTION WITH A NON-AFFILIATED PERSON.
Subordinated Debt. (A) MAKE OR PERMIT ANY PAYMENT ON ANY SUBORDINATED DEBT,
EXCEPT UNDER THE TERMS OF THE SUBORDINATION, INTERCREDITOR, OR OTHER SIMILAR
AGREEMENT TO WHICH SUCH SUBORDINATED DEBT IS SUBJECT, OR (B) AMEND ANY PROVISION
IN ANY DOCUMENT RELATING TO THE SUBORDINATED DEBT WHICH WOULD INCREASE THE
AMOUNT THEREOF OR ADVERSELY AFFECT THE SUBORDINATION THEREOF TO OBLIGATIONS OWED
TO BANK.
Compliance. BECOME AN "INVESTMENT COMPANY" OR A COMPANY CONTROLLED BY AN
"INVESTMENT COMPANY", UNDER THE INVESTMENT COMPANY ACT OF 1940 OR UNDERTAKE AS
ONE OF ITS IMPORTANT ACTIVITIES EXTENDING CREDIT TO PURCHASE OR CARRY MARGIN
STOCK (AS DEFINED IN REGULATION U OF THE BOARD OF GOVERNORS OF THE FEDERAL
RESERVE SYSTEM), OR USE THE PROCEEDS OF ANY CREDIT EXTENSION FOR THAT PURPOSE;
FAIL TO MEET THE MINIMUM FUNDING REQUIREMENTS OF ERISA, PERMIT A REPORTABLE
EVENT OR PROHIBITED TRANSACTION, AS DEFINED IN ERISA, TO OCCUR; FAIL TO COMPLY
WITH THE FEDERAL FAIR LABOR STANDARDS ACT OR VIOLATE ANY OTHER LAW OR
REGULATION, IF THE VIOLATION COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL
ADVERSE EFFECT ON SUCH BORROWER'S BUSINESS, OR PERMIT ANY OF ITS SUBSIDIARIES TO
DO SO; WITHDRAW OR PERMIT ANY SUBSIDIARY TO WITHDRAW FROM PARTICIPATION IN,
PERMIT PARTIAL OR COMPLETE TERMINATION OF, OR PERMIT THE OCCURRENCE OF ANY OTHER
EVENT WITH RESPECT TO, ANY PRESENT PENSION, PROFIT SHARING AND DEFERRED
COMPENSATION PLAN WHICH COULD REASONABLY BE EXPECTED TO RESULT IN ANY LIABILITY
OF SUCH BORROWER, INCLUDING ANY LIABILITY TO THE PENSION BENEFIT GUARANTY
CORPORATION OR ITS SUCCESSORS OR ANY OTHER GOVERNMENTAL AGENCY.
EVENTS OF DEFAULT
Any one of the following shall constitute an event of default (an "EVENT OF
DEFAULT") under this Agreement:
Payment Default. ANY BORROWER FAILS TO (A) MAKE ANY PAYMENT OF PRINCIPAL OR
INTEREST ON ANY CREDIT EXTENSION ON ITS DUE DATE, OR (B) PAY ANY OTHER
OBLIGATIONS WITHIN THREE (3) BUSINESS DAYS AFTER SUCH OBLIGATIONS ARE DUE AND
PAYABLE. DURING THE CURE PERIOD, THE FAILURE TO CURE THE PAYMENT DEFAULT IS NOT
AN EVENT OF DEFAULT (BUT NO CREDIT EXTENSION WILL BE MADE DURING THE CURE
PERIOD);
Covenant Default.
(a) Any Borrower fails or neglects to perform any obligation in
Sections 6.2 or 6.7, or violates any covenant in Section 7; or
(B) ANY BORROWER FAILS OR NEGLECTS TO PERFORM, KEEP, OR OBSERVE ANY
OTHER TERM, PROVISION, CONDITION, COVENANT OR AGREEMENT CONTAINED IN THIS
AGREEMENT, ANY LOAN DOCUMENTS, AND AS TO ANY DEFAULT (OTHER THAN THOSE SPECIFIED
IN SECTIONS 8.1 OR 8.2(A) ABOVE) UNDER SUCH OTHER TERM, PROVISION, CONDITION,
COVENANT OR AGREEMENT THAT CAN BE CURED, HAS FAILED TO CURE THE DEFAULT WITHIN
TEN (10) DAYS AFTER THE OCCURRENCE THEREOF; PROVIDED, HOWEVER, THAT IF THE
DEFAULT CANNOT BY ITS NATURE BE CURED WITHIN THE TEN (10) DAY PERIOD OR CANNOT
AFTER DILIGENT ATTEMPTS BY BORROWER BE CURED WITHIN SUCH TEN (10) DAY PERIOD,
AND SUCH DEFAULT IS LIKELY TO BE CURED WITHIN A REASONABLE TIME, THEN BORROWER
SHALL HAVE AN ADDITIONAL PERIOD (WHICH SHALL NOT IN ANY CASE EXCEED THIRTY (30)
DAYS) TO ATTEMPT TO CURE SUCH DEFAULT, AND WITHIN SUCH REASONABLE TIME PERIOD
THE FAILURE TO CURE THE DEFAULT SHALL NOT BE DEEMED AN EVENT OF DEFAULT (BUT NO
CREDIT EXTENSIONS SHALL BE MADE DURING SUCH CURE PERIOD). GRACE PERIODS PROVIDED
UNDER THIS SECTION SHALL NOT APPLY, AMONG OTHER THINGS, TO FINANCIAL COVENANTS
OR ANY OTHER COVENANTS SET FORTH IN SUBSECTION (A) ABOVE;
Material Adverse Change. A MATERIAL ADVERSE CHANGE OCCURS;
Attachment. (A) ANY MATERIAL PORTION OF ANY BORROWER'S ASSETS IS ATTACHED,
SEIZED, LEVIED ON, OR COMES INTO POSSESSION OF A TRUSTEE OR RECEIVER AND THE
ATTACHMENT, SEIZURE OR LEVY IS NOT REMOVED IN TEN (10) DAYS; (B) THE SERVICE OF
PROCESS UPON BANK SEEKING TO ATTACH, BY GARNISHMENT OR TRUSTEE OR SIMILAR
PROCESS, ANY FUNDS OF ANY BORROWER ON DEPOSIT WITH BANK, OR ANY ENTITY UNDER
CONTROL OF BANK (INCLUDING A SUBSIDIARY); (C) ANY BORROWER IS ENJOINED,
RESTRAINED, OR PREVENTED BY COURT ORDER FROM CONDUCTING A MATERIAL PART OF ITS
BUSINESS; (D) A JUDGMENT OR OTHER CLAIM IN EXCESS OF $100,000.00 BECOMES A LIEN
ON ANY OF ANY BORROWER'S ASSETS; OR (E) A NOTICE OF LIEN, LEVY, OR ASSESSMENT IS
FILED AGAINST ANY OF ANY BORROWER'S ASSETS BY ANY GOVERNMENT AGENCY AND NOT PAID
WITHIN TEN (10) DAYS AFTER SUCH BORROWER RECEIVES NOTICE. THESE ARE NOT EVENTS
OF DEFAULT IF STAYED OR IF A BOND IS POSTED PENDING CONTEST BY ANY BORROWER (BUT
NO CREDIT EXTENSIONS SHALL BE MADE DURING THE CURE PERIOD);
Insolvency. ANY BORROWER IS UNABLE TO PAY ITS DEBTS (INCLUDING TRADE DEBTS)
AS THEY BECOME DUE OR OTHERWISE BECOMES INSOLVENT; (B) ANY BORROWER BEGINS AN
INSOLVENCY PROCEEDING; OR (C) AN INSOLVENCY PROCEEDING IS BEGUN AGAINST ANY
BORROWER AND NOT DISMISSED OR STAYED WITHIN THIRTY (30) DAYS (BUT NO CREDIT
EXTENSIONS SHALL BE MADE WHILE OF ANY OF THE CONDITIONS DESCRIBED IN CLAUSE (A)
EXIST AND/OR UNTIL ANY INSOLVENCY PROCEEDING IS DISMISSED);
Other Agreements. THERE IS A DEFAULT IN ANY AGREEMENT TO WHICH ANY BORROWER
OR ANY GUARANTOR IS A PARTY WITH BANK OR WITH A THIRD PARTY OR PARTIES RESULTING
IN A RIGHT BY BANK OR SUCH THIRD PARTY OR PARTIES, WHETHER OR NOT EXERCISED, TO
ACCELERATE THE MATURITY OF ANY INDEBTEDNESS IN AN AMOUNT IN EXCESS OF ONE
HUNDRED THOUSAND DOLLARS ($100,000.00) OR THAT COULD CAUSE A MATERIAL ADVERSE
CHANGE IN SUCH BORROWER'S OR ANY GUARANTOR'S BUSINESS;
Judgments. A JUDGMENT OR JUDGMENTS FOR THE PAYMENT OF MONEY IN AN AMOUNT,
INDIVIDUALLY OR IN THE AGGREGATE, OF AT LEAST ONE HUNDRED THOUSAND DOLLARS
($100,000.00) (NOT COVERED BY INDEPENDENT THIRD-PARTY INSURANCE) SHALL BE
RENDERED AGAINST ANY BORROWER AND SHALL REMAIN UNSATISFIED AND UNSTAYED FOR A
PERIOD OF TEN (10) DAYS AFTER THE ENTRY THEREOF (PROVIDED THAT NO CREDIT
EXTENSIONS WILL BE MADE PRIOR TO THE SATISFACTION OR STAY OF SUCH JUDGMENT);
Misrepresentations. ANY BORROWER OR ANY PERSON ACTING FOR BORROWER MAKES
ANY REPRESENTATION, WARRANTY, OR OTHER STATEMENT NOW OR LATER IN THIS AGREEMENT,
ANY LOAN DOCUMENT OR IN ANY WRITING DELIVERED TO BANK OR TO INDUCE BANK TO ENTER
THIS AGREEMENT OR ANY LOAN DOCUMENT, AND SUCH REPRESENTATION, WARRANTY, OR OTHER
STATEMENT IS INCORRECT IN ANY MATERIAL RESPECT WHEN MADE;
Subordinated Debt. A DEFAULT OR BREACH OCCURS UNDER ANY AGREEMENT BETWEEN
ANY BORROWER AND ANY CREDITOR OF SUCH BORROWER THAT SIGNED A SUBORDINATION,
INTERCREDITOR, OR OTHER SIMILAR AGREEMENT WITH BANK, OR ANY CREDITOR THAT HAS
SIGNED SUCH AN AGREEMENT WITH BANK BREACHES ANY TERMS OF SUCH AGREEMENT; OR
Guaranty. (A) ANY GUARANTY OF ANY OBLIGATIONS TERMINATES OR CEASES FOR ANY
REASON TO BE IN FULL FORCE AND EFFECT; (B) ANY GUARANTOR DOES NOT PERFORM ANY
OBLIGATION OR COVENANT UNDER ANY GUARANTY OF THE OBLIGATIONS; OR (C) ANY
CIRCUMSTANCE DESCRIBED IN SECTIONS 8.3, 8.4, 8.5, 8.7, OR 8.8 OCCURS WITH
RESPECT TO ANY GUARANTOR.
BANK'S RIGHTS AND REMEDIES
Rights and Remedies. WHILE AN EVENT OF DEFAULT OCCURS AND CONTINUES BANK
MAY, WITHOUT NOTICE OR DEMAND, DO ANY OR ALL OF THE FOLLOWING:
declare all Obligations immediately due and payable (but if an Event
of Default described in Section 8.5 occurs all Obligations are immediately due
and payable without any action by Bank);
stop advancing money or extending credit for Borrower's benefit under
this Agreement or under any other agreement between any Borrower and Bank;
demand that any Borrower (i) deposits cash with Bank in an amount
equal to the aggregate amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under such Letters
of Credit, and such Borrower shall forthwith deposit and pay such amounts, and
(ii) pay in advance all Letter of Credit fees scheduled to be paid or payable
over the remaining term of any Letters of Credit;
terminate any FX Contracts;
settle or adjust disputes and claims directly with Account Debtors for
amounts on terms and in any order that Bank considers advisable in its good
faith business judgment, notify any Person owing any Borrower money of Bank's
security interest in such funds, and verify the amount of such account;
make any payments and do any acts it considers necessary or reasonable
to protect the Collateral and/or its security interest in the Collateral. Each
Borrower shall assemble the Collateral if Bank requests and make it available as
Bank designates. Bank may enter premises where the Collateral is located, take
and maintain possession of any part of the Collateral, and pay, purchase,
contest, or compromise any Lien which appears to be prior or superior to its
security interest and pay all expenses incurred. Each Borrower grants Bank a
license to enter and occupy any of its premises, without charge, to exercise any
of Bank's rights or remedies;
apply to the Obligations any (i) balances and deposits of any Borrower
it holds, or (ii) any amount held by Bank owing to or for the credit or the
account of any Borrower;
ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell the Collateral. Bank is hereby granted a
non-exclusive, royalty-free license or other right to use, without charge, each
Borrower's labels, patents, copyrights, mask works, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section, each
Borrower's rights under all licenses and all franchise agreements inure to
Bank's benefit;
place a "hold" on any account maintained with Bank and/or deliver a
notice of exclusive control, any entitlement order, or other directions or
instructions pursuant to any Control Agreement or similar agreements providing
control of any Collateral;
demand and receive possession of each Borrower's Books; and
exercise all rights and remedies available to Bank under the Loan
Documents or at law or equity, including all remedies provided under the Code
(including disposal of the Collateral pursuant to the terms thereof).
Power of Attorney. EACH BORROWER HEREBY IRREVOCABLY APPOINTS BANK AS ITS
LAWFUL ATTORNEY-IN-FACT WITH RESPECT TO THE COLLATERAL, EXERCISABLE UPON THE
OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, TO: (A) ENDORSE
SUCH BORROWER'S NAME ON ANY CHECKS OR OTHER FORMS OF PAYMENT OR SECURITY; (B)
SIGN SUCH BORROWER'S NAME ON ANY INVOICE OR XXXX OF LADING FOR ANY ACCOUNT OR
DRAFTS AGAINST ACCOUNT DEBTORS; (C) SETTLE AND ADJUST DISPUTES AND CLAIMS ABOUT
THE ACCOUNTS DIRECTLY WITH ACCOUNT DEBTORS, FOR AMOUNTS AND ON TERMS BANK
DETERMINES REASONABLE; (D) MAKE, SETTLE, AND ADJUST ALL CLAIMS UNDER SUCH
BORROWER'S INSURANCE POLICIES; (E) PAY, CONTEST OR SETTLE ANY LIEN, CHARGE,
ENCUMBRANCE, SECURITY INTEREST, AND ADVERSE CLAIM IN OR TO THE COLLATERAL, OR
ANY JUDGMENT BASED THEREON, OR OTHERWISE TAKE ANY ACTION TO TERMINATE OR
DISCHARGE THE SAME; AND (F) TRANSFER THE COLLATERAL INTO THE NAME OF BANK OR A
THIRD PARTY AS THE CODE PERMITS. EACH BORROWER HEREBY APPOINTS BANK AS ITS
LAWFUL ATTORNEY-IN-FACT TO SIGN SUCH BORROWER'S NAME ON ANY DOCUMENTS NECESSARY
TO PERFECT OR CONTINUE THE PERFECTION OF ANY SECURITY INTEREST CREATED HEREUNDER
REGARDLESS OF WHETHER AN EVENT OF DEFAULT HAS OCCURRED UNTIL ALL OBLIGATIONS
HAVE BEEN SATISFIED IN FULL AND BANK IS UNDER NO FURTHER OBLIGATION TO MAKE
CREDIT EXTENSIONS HEREUNDER. BANK'S FOREGOING APPOINTMENT AS EACH BORROWER'S
ATTORNEY IN FACT, AND ALL OF BANK'S RIGHTS AND POWERS, COUPLED WITH AN INTEREST,
ARE IRREVOCABLE UNTIL ALL OBLIGATIONS HAVE BEEN FULLY REPAID AND PERFORMED AND
BANK'S OBLIGATION TO PROVIDE CREDIT EXTENSIONS TERMINATES.
Accounts Verification; Collection. WHETHER OR NOT AN EVENT OF DEFAULT HAS
OCCURRED AND IS CONTINUING, BANK MAY NOTIFY ANY PERSON OWING ANY BORROWER MONEY
OF BANK'S SECURITY INTEREST IN SUCH FUNDS AND VERIFY THE AMOUNT OF SUCH ACCOUNT.
AFTER THE OCCURRENCE OF AN EVENT OF DEFAULT, ANY AMOUNTS RECEIVED BY ANY
BORROWER SHALL BE HELD IN TRUST BY SUCH BORROWER FOR BANK, AND, IF REQUESTED BY
BANK, SUCH BORROWER SHALL IMMEDIATELY DELIVER SUCH RECEIPTS TO BANK IN THE FORM
RECEIVED FROM THE ACCOUNT DEBTOR, WITH PROPER ENDORSEMENTS FOR DEPOSIT.
Protective Payments. IF ANY BORROWER FAILS TO OBTAIN THE INSURANCE CALLED
FOR BY SECTION 6.5 OR FAILS TO PAY ANY PREMIUM THEREON OR FAILS TO PAY ANY OTHER
AMOUNT WHICH SUCH BORROWER IS OBLIGATED TO PAY UNDER THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT, BANK MAY OBTAIN SUCH INSURANCE OR MAKE SUCH PAYMENT, AND ALL
AMOUNTS SO PAID BY BANK ARE BANK EXPENSES AND IMMEDIATELY DUE AND PAYABLE,
BEARING INTEREST AT THE THEN HIGHEST APPLICABLE RATE, AND SECURED BY THE
COLLATERAL. BANK WILL MAKE REASONABLE EFFORTS TO PROVIDE SUCH BORROWER WITH
NOTICE OF BANK OBTAINING SUCH INSURANCE AT THE TIME IT IS OBTAINED OR WITHIN A
REASONABLE TIME THEREAFTER. NO PAYMENTS BY BANK ARE DEEMED AN AGREEMENT TO MAKE
SIMILAR PAYMENTS IN THE FUTURE OR BANK'S WAIVER OF ANY EVENT OF DEFAULT.
Application of Payments and Proceeds. UNLESS AN EVENT OF DEFAULT HAS
OCCURRED AND IS CONTINUING, BANK SHALL APPLY ANY FUNDS IN ITS POSSESSION,
WHETHER FROM ANY BORROWER'S ACCOUNT BALANCES, PAYMENTS, OR PROCEEDS REALIZED AS
THE RESULT OF ANY COLLECTION OF ACCOUNTS OR OTHER DISPOSITION OF THE COLLATERAL,
FIRST, TO BANK EXPENSES, INCLUDING WITHOUT LIMITATION, THE REASONABLE COSTS,
EXPENSES, LIABILITIES, OBLIGATIONS AND ATTORNEYS' FEES INCURRED BY BANK 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 AND ANY
APPLICABLE FEES AND OTHER CHARGES, IN SUCH ORDER AS BANK SHALL DETERMINE IN ITS
SOLE DISCRETION. ANY SURPLUS SHALL BE PAID TO THE RELEVANT BORROWER OR OTHER
PERSONS LEGALLY ENTITLED THERETO; BORROWER SHALL REMAIN LIABLE TO BANK FOR ANY
DEFICIENCY. IF AN EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING, BANK MAY
APPLY ANY FUNDS IN ITS POSSESSION, WHETHER FROM ANY BORROWER'S ACCOUNT BALANCES,
PAYMENTS, PROCEEDS REALIZED AS THE RESULT OF ANY COLLECTION OF ACCOUNTS OR OTHER
DISPOSITION OF THE COLLATERAL, OR OTHERWISE, TO THE OBLIGATIONS IN SUCH ORDER AS
BANK SHALL DETERMINE IN ITS SOLE DISCRETION. ANY SURPLUS SHALL BE PAID TO THE
RELEVANT BORROWER OR OTHER PERSONS LEGALLY ENTITLED THERETO; BORROWERS SHALL
REMAIN LIABLE TO BANK FOR ANY DEFICIENCY. IF BANK, IN ITS GOOD FAITH BUSINESS
JUDGMENT, DIRECTLY OR INDIRECTLY ENTERS INTO A DEFERRED PAYMENT OR OTHER CREDIT
TRANSACTION WITH ANY PURCHASER AT ANY SALE OF COLLATERAL, BANK SHALL HAVE THE
OPTION, EXERCISABLE AT ANY TIME, OF EITHER REDUCING THE OBLIGATIONS BY THE
PRINCIPAL AMOUNT OF THE PURCHASE PRICE OR DEFERRING THE REDUCTION OF THE
OBLIGATIONS UNTIL THE ACTUAL RECEIPT BY BANK OF CASH THEREFOR.
Bank's Liability for Collateral. SO LONG AS BANK COMPLIES WITH REASONABLE
BANKING PRACTICES REGARDING THE SAFEKEEPING OF THE COLLATERAL IN THE POSSESSION
OR UNDER THE CONTROL OF BANK, BANK SHALL NOT BE LIABLE OR RESPONSIBLE FOR: (A)
THE SAFEKEEPING OF THE COLLATERAL; (B) ANY LOSS OR DAMAGE TO THE COLLATERAL; (C)
ANY DIMINUTION IN THE VALUE OF THE COLLATERAL; OR (D) ANY ACT OR DEFAULT OF ANY
CARRIER, WAREHOUSEMAN, BAILEE, OR OTHER PERSON. EACH BORROWER BEARS ALL RISK OF
LOSS, DAMAGE OR DESTRUCTION OF THE COLLATERAL.
No Waiver; Remedies Cumulative. BANK'S FAILURE, AT ANY TIME OR TIMES, TO
REQUIRE STRICT PERFORMANCE BY ANY BORROWER OF ANY PROVISION OF THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT SHALL NOT WAIVE, AFFECT, OR DIMINISH ANY RIGHT OF BANK
THEREAFTER TO DEMAND STRICT PERFORMANCE AND COMPLIANCE HEREWITH OR THEREWITH. NO
WAIVER HEREUNDER SHALL BE EFFECTIVE UNLESS SIGNED BY BANK AND THEN IS ONLY
EFFECTIVE FOR THE SPECIFIC INSTANCE AND PURPOSE FOR WHICH IT IS GIVEN. BANK'S
RIGHTS AND REMEDIES UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ARE
CUMULATIVE. BANK HAS ALL RIGHTS AND REMEDIES PROVIDED UNDER THE CODE, BY LAW, OR
IN EQUITY. BANK'S EXERCISE OF ONE RIGHT OR REMEDY IS NOT AN ELECTION, AND BANK'S
WAIVER OF ANY EVENT OF DEFAULT IS NOT A CONTINUING WAIVER. BANK'S DELAY IN
EXERCISING ANY REMEDY IS NOT A WAIVER, ELECTION, OR ACQUIESCENCE.
Demand Waiver. BORROWER WAIVES DEMAND, NOTICE OF DEFAULT OR DISHONOR,
NOTICE OF PAYMENT AND NONPAYMENT, NOTICE OF ANY DEFAULT, NONPAYMENT AT MATURITY,
RELEASE, COMPROMISE, SETTLEMENT, EXTENSION, OR RENEWAL OF ACCOUNTS, DOCUMENTS,
INSTRUMENTS, CHATTEL PAPER, AND GUARANTEES HELD BY BANK ON WHICH ANY BORROWER IS
LIABLE.
NOTICES, JOINT AND SEVERAL LIABILITY, WAIVERS
10.1 NOTICES. All notices, consents, requests, approvals, demands, or other
communication (collectively, "COMMUNICATION") by any party to this Agreement or
any other Loan Document must be in writing and shall be deemed to have been
validly served, given, or delivered: (a) upon the earlier of actual receipt and
three (3) Business Days after deposit in the U.S. mail, first class, registered
or certified mail return receipt requested, with proper postage prepaid; (b)
upon transmission, when sent by electronic mail or facsimile transmission; (c)
one (1) Business Day after deposit with a reputable overnight courier with all
charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of
which shall be addressed to the party to be notified and sent to the address,
facsimile number, or email address indicated below. Bank or any Borrower may
change its address or facsimile number by giving the other party written notice
thereof in accordance with the terms of this Section 10.
If to any Borrower: QUALMARK CORPORATION
0000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: __________________________________________
Fax: ___________________________________________
Email: _________________________________________
If to Bank: Silicon Valley Bank
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000-0000
Attn: Xxxxx Xxxxxxxx
Fax: 000-000-0000
Email: xxxxxxx@xxxxxx.xxx
10.2 BORROWER JOINT AND SEVERAL LIABILITY. Notwithstanding anything to the
contrary contained in this Agreement, all of Borrowers' representations and
warranties, indebtedness, liabilities, and other Obligations of any kind
described in this Agreement and any other Loan Document shall be joint and
several in nature and affect their jointly and/or severally owned property. Any
Borrower may, acting singly through QUALMARK , request Advances. Each Borrower
hereby appoints QUALMARK as agent for such Borrower for all purposes hereunder,
including with respect to requesting Advances. Each Borrower shall be jointly
and severally obligated to repay all Advances made, regardless of which Borrower
actually receives said Advance, as if each Borrower directly received all
Advances.
10.3 SUBROGATION AND SIMILAR RIGHTS. Notwithstanding any other provision of
this Agreement or any other Loan Document, until payment to Bank in full and
performance of all Obligations, each Borrower irrevocably waives all rights that
it may have at law or in equity (including, without limitation, any law
subrogating such Borrower to the rights of Bank under the Loan Documents) to
seek contribution, indemnification, or any other form of reimbursement from any
other Borrower, or any other Person now or hereafter primarily or secondarily
liable for
any of the Obligations, for any payment made by such Borrower with respect to
the Obligations in connection with the Loan Documents or otherwise and all
rights that it might have to benefit from, or to participate in, any security
for the Obligations as a result of any payment made by such Borrower with
respect to the Obligations in connection with the Loan Documents or otherwise,
in each case until the Obligations are indefeasibly paid in full. Any agreement
providing for indemnification, reimbursement or any other arrangement prohibited
under this Section 10.3 shall be null and void, in each case until the
Obligations are indefeasibly paid in full. If any payment is made to any
Borrower in contravention of this Section 10.3, such Borrower shall hold such
payment in trust for Bank and such payment shall be promptly delivered to Bank
for application to the Obligations, whether matured or unmatured.
10.4 WAIVERS OF NOTICE. Each Borrower waives notice of acceptance hereof by
the other Borrowers and by Bank. Each Borrower also waives notice, with respect
to the Obligations of the other Borrowers, of the following: notice of the
existence, creation or acquisition of any of the Obligations; notice of an Event
of Default; notice of the amount of the Obligations outstanding at any time;
notice of intent to accelerate; notice of acceleration; notice of any adverse
change in the financial condition of any other Borrower or of any other fact
that might increase such Borrower's risk; presentment for payment; demand;
protest and notice thereof as to any instrument; default; and all other notices
and demands as to any other Borrower to which such Borrower would otherwise be
entitled. Each Borrower waives any defense arising from any defense of any other
Borrower, or by reason of the cessation from any cause whatsoever of the
liability of any other Borrower. Bank's failure at any time to require strict
performance by any Borrower of any provision of the Loan Documents shall not
waive, alter or diminish any right of Bank thereafter to demand strict
compliance and performance therewith. Nothing contained herein shall prevent
Bank from foreclosing on the Lien of any deed of trust, mortgage or other
security instrument, or exercising any rights available thereunder, and the
exercise of any such rights shall not constitute a legal or equitable discharge
of any Borrower. Each Borrower also waives any defense arising from any act or
omission of Bank that changes the scope of such Borrower's risks as a joint
obligor hereunder. Each Borrower hereby waives any right to assert against Bank
any defense (legal or equitable), setoff, counterclaim, or claims that such
Borrower individually may now or hereafter have against another Borrower or any
other Person liable to such Borrower with respect to the Obligations in any
manner or whatsoever until the Obligations are indefeasibly paid in full to
Bank.
10.5 SUBROGATION DEFENSES. Each Borrower waives the benefits, if any, of
any statutory or common law rule that may permit a borrower to assert any
defenses of a surety or guarantor, or that may give a borrower the right to
require a senior creditor to marshal assets, and such Borrower agrees that it
shall not assert any such defenses or rights.
10.6 RIGHT TO SETTLE, RELEASE.
(a) The liability of each Borrower hereunder shall not be diminished by (i)
any agreement, understanding or representation that any of the Obligations is or
was to be guaranteed by another Person or secured by other property, or (ii) any
release or unenforceability of any of the Obligations, whether partial or total,
or of rights, if any, which such Borrower may now or hereafter have against any
other Person, including another Borrower, or property with respect to any of the
Obligations.
(b) Without notice to any Borrower and without affecting the liability of
any Borrower as a joint obligor hereunder, Bank may (i) compromise, settle,
renew, extend the time for payment, change the manner or terms of payment,
discharge the performance of, decline to enforce, or release all or any of the
Obligations with respect to any Borrower, (ii) grant other indulgences to any
Borrower in respect of the Obligations, (iii) modify in any manner any
documents, relating to the Obligations with respect to any Borrower, (iv)
release, surrender or exchange any deposits or other property securing the
Obligations, whether pledged by any Borrower or any other Person, or (v)
compromise, settle renew, or extend the time for payment, discharge the
performance of, decline to enforce, or release all or any obligations of any
guarantor, endorser or other Person who is now or may hereafter be liable with
respect to any of the Obligations.
CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
Colorado law governs the Loan Documents without regard to principles of
conflicts of law. Borrowers and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in City and County of Denver, State of Colorado;
provided, however, that nothing in this Agreement shall be deemed to operate to
preclude Bank from
bringing suit or taking other legal action in any other jurisdiction to realize
on the Collateral or any other security for the Obligations, or to enforce a
judgment or other court order in favor of Bank. Each Borrower expressly submits
and consents in advance to such jurisdiction in any action or suit commenced in
any such court, and each Borrower hereby waives any objection that it may have
based upon lack of personal jurisdiction, improper venue, or forum non
conveniens and hereby consents to the granting of such legal or equitable relief
as is deemed appropriate by such court. Each Borrower hereby waives personal
service of the summons, complaints, and other process issued in such action or
suit and agrees that service of such summons, complaints, and other process may
be made by registered or certified mail addressed to such Borrower at the
address set forth in Section 10 of this Agreement and that service so made shall
be deemed completed upon the earlier to occur of such Borrower's actual receipt
thereof or three (3) days after deposit in the U.S. mails, proper postage
prepaid.
GENERAL PROVISIONS
Successors and Assigns. THIS AGREEMENT BINDS AND IS FOR THE BENEFIT OF THE
SUCCESSORS AND PERMITTED ASSIGNS OF EACH PARTY. EACH BORROWER MAY NOT ASSIGN
THIS AGREEMENT OR ANY RIGHTS OR OBLIGATIONS UNDER IT WITHOUT BANK'S PRIOR
WRITTEN CONSENT (WHICH MAY BE GRANTED OR WITHHELD IN BANK'S DISCRETION). BANK
HAS THE RIGHT, WITHOUT THE CONSENT OF OR NOTICE TO ANY BORROWER, TO SELL,
TRANSFER, NEGOTIATE, OR GRANT PARTICIPATION IN ALL OR ANY PART OF, OR ANY
INTEREST IN, BANK'S OBLIGATIONS, RIGHTS, AND BENEFITS UNDER THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS.
Indemnification. EACH BORROWER AGREES TO INDEMNIFY, DEFEND AND HOLD BANK
AND ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS, OR ANY OTHER PERSON
AFFILIATED WITH OR REPRESENTING BANK HARMLESS AGAINST: (A) ALL OBLIGATIONS,
DEMANDS, CLAIMS, AND LIABILITIES (COLLECTIVELY, "CLAIMS") ASSERTED BY ANY OTHER
PARTY IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS;
AND (B) ALL LOSSES OR BANK EXPENSES INCURRED, OR PAID BY BANK FROM, FOLLOWING,
OR ARISING FROM TRANSACTIONS BETWEEN BANK AND BORROWERS (INCLUDING REASONABLE
ATTORNEYS' FEES AND EXPENSES), EXCEPT FOR CLAIMS AND/OR LOSSES DIRECTLY CAUSED
BY BANK'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
Limitation of Actions. ANY CLAIM OR CAUSE OF ACTION BY ANY BORROWER AGAINST
BANK, ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ACCOUNTANTS, ATTORNEYS, OR ANY
OTHER PERSON AFFILIATED WITH OR REPRESENTING BANK 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 BANK, ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ACCOUNTANTS OR
ATTORNEYS, SHALL BE BARRED UNLESS ASSERTED BY SUCH 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 SUCH BORROWER HAS KNOWLEDGE OF THE FIRST ACT,
OCCURRENCE OR OMISSION UPON WHICH SUCH CLAIM OR CAUSE OF ACTION, OR ANY PART
THEREOF, IS BASED, AND THE SERVICE OF A SUMMONS AND COMPLAINT ON AN OFFICER OF
BANK, OR ON ANY OTHER PERSON AUTHORIZED TO ACCEPT SERVICE ON BEHALF OF BANK,
WITHIN THIRTY (30) DAYS THEREAFTER. EACH BORROWER AGREES THAT SUCH ONE-YEAR
PERIOD IS A REASONABLE AND SUFFICIENT TIME FOR SUCH 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 BANK
IN ITS SOLE DISCRETION. THIS PROVISION SHALL SURVIVE ANY TERMINATION OF THIS
LOAN AGREEMENT OR ANY OTHER LOAN DOCUMENT.
Time of Essence. TIME IS OF THE ESSENCE FOR THE PERFORMANCE OF ALL
OBLIGATIONS IN THIS AGREEMENT.
Severability of Provisions. EACH PROVISION OF THIS AGREEMENT IS SEVERABLE
FROM EVERY OTHER PROVISION IN DETERMINING THE ENFORCEABILITY OF ANY PROVISION.
Amendments in Writing; Integration. ALL AMENDMENTS TO THIS AGREEMENT MUST
BE IN WRITING SIGNED BY BOTH BANK AND BORROWERS. THIS AGREEMENT AND THE LOAN
DOCUMENTS REPRESENT THE ENTIRE AGREEMENT ABOUT THIS SUBJECT MATTER AND SUPERSEDE
PRIOR NEGOTIATIONS OR AGREEMENTS. ALL PRIOR AGREEMENTS, UNDERSTANDINGS,
REPRESENTATIONS, WARRANTIES, AND NEGOTIATIONS BETWEEN THE PARTIES ABOUT THE
SUBJECT MATTER OF THIS AGREEMENT AND THE LOAN DOCUMENTS MERGE INTO THIS
AGREEMENT AND THE LOAN DOCUMENTS.
Counterparts. THIS AGREEMENT MAY BE EXECUTED IN ANY NUMBER OF COUNTERPARTS
AND BY DIFFERENT PARTIES ON SEPARATE COUNTERPARTS, EACH OF WHICH, WHEN EXECUTED
AND DELIVERED, ARE AN ORIGINAL, AND ALL TAKEN TOGETHER, CONSTITUTE ONE
AGREEMENT.
Survival. ALL COVENANTS, REPRESENTATIONS AND WARRANTIES MADE IN THIS
AGREEMENT CONTINUE IN FULL FORCE UNTIL THIS AGREEMENT HAS TERMINATED PURSUANT TO
ITS TERMS AND ALL OBLIGATIONS (OTHER THAN INCHOATE INDEMNITY OBLIGATIONS AND ANY
OTHER OBLIGATIONS WHICH, BY THEIR TERMS, ARE TO SURVIVE THE TERMINATION OF THIS
AGREEMENT) HAVE BEEN SATISFIED. THE OBLIGATION OF BORROWERS IN SECTION 12.2 TO
INDEMNIFY BANK SHALL SURVIVE UNTIL THE STATUTE OF LIMITATIONS WITH RESPECT TO
SUCH CLAIM OR CAUSE OF ACTION SHALL HAVE RUN.
Confidentiality. IN HANDLING ANY CONFIDENTIAL INFORMATION, BANK SHALL
EXERCISE THE SAME DEGREE OF CARE THAT IT EXERCISES FOR ITS OWN PROPRIETARY
INFORMATION, BUT DISCLOSURE OF INFORMATION MAY BE MADE: (A) TO BANK'S
SUBSIDIARIES OR AFFILIATES IN CONNECTION WITH THEIR BUSINESS WITH BORROWERS; (B)
TO PROSPECTIVE TRANSFEREES OR PURCHASERS OF ANY INTEREST IN THE CREDIT
EXTENSIONS (PROVIDED, HOWEVER, BANK SHALL USE COMMERCIALLY REASONABLE EFFORTS TO
OBTAIN SUCH PROSPECTIVE TRANSFEREE'S OR PURCHASER'S AGREEMENT TO THE TERMS OF
THIS PROVISION); (C) AS REQUIRED BY LAW, REGULATION, SUBPOENA, OR OTHER ORDER;
(D) TO BANK'S REGULATORS OR AS OTHERWISE REQUIRED IN CONNECTION WITH BANK'S
EXAMINATION OR AUDIT; AND (E) AS BANK CONSIDERS APPROPRIATE IN EXERCISING
REMEDIES UNDER THIS AGREEMENT. CONFIDENTIAL INFORMATION DOES NOT INCLUDE
INFORMATION THAT EITHER: (I) IS IN THE PUBLIC DOMAIN OR IN BANK'S POSSESSION
WHEN DISCLOSED TO BANK, OR BECOMES PART OF THE PUBLIC DOMAIN AFTER DISCLOSURE TO
BANK; OR (II) IS DISCLOSED TO BANK BY A THIRD PARTY, IF BANK DOES NOT KNOW THAT
THE THIRD PARTY IS PROHIBITED FROM DISCLOSING THE INFORMATION.
Attorneys' Fees, Costs and Expenses. IN ANY ACTION OR PROCEEDING BETWEEN
ANY BORROWER AND BANK ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS, THE
PREVAILING PARTY SHALL BE ENTITLED TO RECOVER ITS REASONABLE ATTORNEYS' FEES AND
OTHER COSTS AND EXPENSES INCURRED, IN ADDITION TO ANY OTHER RELIEF TO WHICH IT
MAY BE ENTITLED.
DEFINITIONS
Definitions. AS USED IN THIS AGREEMENT, THE FOLLOWING TERMS HAVE THE
FOLLOWING MEANINGS:
"ACCOUNT" is any "account" as defined in the Code with such additions to
such term as may hereafter be made, and includes, without limitation, all
accounts receivable and other sums owing to such Borrower.
"ACCOUNT DEBTOR" is any "account debtor" as defined in the Code with such
additions to such term as may hereafter be made.
"ADVANCE" or "ADVANCES" means an advance (or advances) under the Revolving
Line.
"AFFILIATE" of any Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"AGREEMENT" is defined in the preamble hereof.
"AVAILABILITY AMOUNT" is (a) the lesser of (i) the Revolving Line, less the
aggregate outstanding principal amount of Letters of Credit issued for the
account of, FX Reserve maintained for, Cash Management Services utilized by, and
Advances made to all the other Borrowers or (ii) the Borrowing Base of such
Borrower, minus (b) the amount of all outstanding Letters of Credit (including
drawn but unreimbursed Letters of Credit) issued for such Borrower plus an
amount equal to any Letter of Credit Reserves for such Borrower, minus (c) the
FX Reserve maintained for such Borrower, minus (d) any amounts of Cash
Management Services utilized by such Borrower, and (e) minus the outstanding
principal balance of any Advances made to such Borrower.
"BANK" is defined in the preamble hereof.
"BANK EXPENSES" are all reasonable audit fees and expenses, and reasonable
costs, and expenses (including reasonable attorneys' fees and expenses) for
preparing, negotiating, administering, defending and enforcing the Loan
Documents (including, without limitation, those incurred in connection with
appeals or Insolvency Proceedings) or otherwise incurred with respect to any
Borrower.
"BANKRUPTCY-RELATED DEFAULTS" is defined in Section 9.1.
"BORROWER" is defined in the preamble hereof
"BORROWER'S BOOKS" are all of each Borrower's books and records including
ledgers, federal and state tax returns, records regarding Borrower's assets or
liabilities, the Collateral of such Borrower, business operations or financial
condition, and all computer programs or storage or any equipment containing such
information.
"BORROWING BASE" is 80% of Eligible Accounts plus Eligible Foreign Accounts
of such Borrower, as determined by Bank from such Borrower's most recent
Borrowing Base Certificate; provided, however, that Bank may decrease the
foregoing percentage in its good faith business judgment after performing any
audit of such Borrower's Collateral or based on events, conditions,
contingencies, or risks which, as determined by Bank, may adversely affect
Collateral.
"BORROWING BASE CERTIFICATE" is that certain certificate in the form
attached hereto as Exhibit C, or in such other form as is acceptable to Bank.
"BORROWING RESOLUTIONS" are, with respect to any Person, those resolutions
substantially in the form attached hereto as Exhibit E.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on which
Bank is closed.
"CASH EQUIVALENTS" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor's Ratings
Group or Xxxxx'x Investors Service, Inc., (c) Bank's certificates of deposit
issued maturing no more than one (1) year after issue; and (d) money market
funds at least ninety-five percent (95%) of the assets of which constitute Cash
Equivalents of the kinds described in clauses (a) through (c) of this
definition.
"CASH MANAGEMENT SERVICES" is defined in Section 2.1.4.
"CASH MANAGEMENT SERVICES SUBLIMIT" is defined in Section 2.1.4.
"CODE" is the Uniform Commercial Code, as the same may, from time to time,
be enacted and in effect in the State of Colorado; provided, that, to the extent
that the Code is used to define any term herein or in any Loan Document and such
term is defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern;
provided further, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection, or priority of, or remedies with
respect to, Bank's Lien on any Collateral is governed by the Uniform Commercial
Code in effect in a jurisdiction other than the State of Colorado, the term
"CODE" shall mean the Uniform Commercial Code as enacted and in effect in such
other jurisdiction solely for purposes on the provisions thereof relating to
such attachment, perfection, priority, or remedies and for purposes of
definitions relating to such provisions.
"COLLATERAL" is any and all properties, rights and assets of the relevant
Borrower described on Exhibit A.
"COLLATERAL ACCOUNT" is any Deposit Account, Securities Account, or
Commodity Account.
"COMMODITY ACCOUNT" is any "commodity account" as defined in the Code with
such additions to such term as may hereafter be made.
"COMMUNICATION" is defined in Section 10.
"COMPLIANCE CERTIFICATE" is that certain certificate in the form attached
hereto as Exhibit D.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (a) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (b) any obligations for undrawn letters of credit for the account of
that Person; and (c) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under any guarantee or other support arrangement.
"CONTROL AGREEMENT" is any control agreement entered into among the
depository institution at which any Borrower maintains a Deposit Account or the
securities intermediary or commodity intermediary at which such Borrower
maintains a Securities Account or a Commodity account, Borrower, and Bank
pursuant to which Bank obtains control (within the meaning of the Code) over
such Deposit Account, Securities Account, or Commodity Account.
"CREDIT EXTENSION" is any Advance, Term Loan, Letter of Credit, FX Forward
Contract, amount utilized for Cash Management Services, or any other extension
of credit by Bank for any Borrower's benefit.
"CURRENT LIABILITIES" are all obligations and liabilities of Borrowers to
Bank, plus, without duplication, the aggregate amount of QUALMARK's consolidated
Total Liabilities that mature within one (1) year, minus the amount of the
reserve for warranty obligations that is shown as a liability on Borrowers'
books.
"DEFAULT" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"DEFAULT RATE" is defined in Section 2.3(b).
"DEFERRED REVENUE" is all amounts received or invoiced in advance of
performance under contracts and not yet recognized as revenue.
"DEPOSIT ACCOUNT" is any "deposit account" as defined in the Code with such
additions to such term as may hereafter be made.
"DESIGNATED DEPOSIT ACCOUNT" is QUALMARK's deposit account, account number
_____________, maintained with Bank.
"DOLLARS," "DOLLARS" and "$" each mean lawful money of the United States.
"EBITDA" shall mean (a) Net Income, plus (b) Interest Expense, plus (c) to
the extent deducted in the calculation of Net Income, depreciation expense and
amortization expense and other non-cash charges, plus (d) income tax expense.
"EFFECTIVE DATE" is the date Bank executes this Agreement and as indicated
on the signature page hereof.
"ELIGIBLE ACCOUNTS" are Accounts which arise in the ordinary course of the
relevant Borrower's business that meet all such Borrower's representations and
warranties in Section 5.3. Bank reserves the right at any time and from time to
time after the Effective Date, to adjust any of the criteria set forth below and
to establish new criteria in its good faith business judgment by giving such
Borrower notice. Unless Bank agrees otherwise in writing, Eligible Accounts
shall not include:
(a) Accounts that the Account Debtor has not paid within ninety (90) days
of invoice date;
(b) Accounts owing from an Account Debtor, fifty percent (50%) or more of
whose Accounts have not been paid within ninety (90) days of invoice date;
(c) Credit balances over ninety (90) days from invoice date;
(d) Accounts owing from an Account Debtor, including Affiliates, whose
total obligations to such Borrower exceed twenty-five (25%) of all Accounts, for
the amounts that exceed that percentage, unless Bank approves in writing;
(e) Accounts owing from an Account Debtor which does not have its principal
place of business in the United States except for Eligible Accounts;
(f) Accounts owing from an Account Debtor which is a federal, state or
local government entity or any department, agency, or instrumentality thereof,
except for Accounts of the United States if such Borrower has assigned its
payment rights to Bank and the assignment has been acknowledged under the
Federal Assignment of Claims Act of 1940, as amended;
(g) Accounts owing from an Account Debtor to the extent that such Borrower
is indebted or obligated in any manner to the Account Debtor (as creditor,
lessor, supplier or otherwise - sometimes called "contra" accounts, accounts
payable, customer deposits or credit accounts), with the exception of customary
credits, adjustments and/or discounts given to an Account Debtor by such
Borrower in the ordinary course of its business;
(h) Accounts for demonstration or promotional equipment, or in which goods
are consigned, or sold on a "sale guaranteed", "sale or return", "sale on
approval", "xxxx and hold", or other terms if Account Debtor's payment may be
conditional;
(i) Accounts for which the Account Debtor is such Borrower's Affiliate
(including any other Borrower), officer, employee, or agent;
(j) Accounts in which the Account Debtor disputes liability or makes any
claim and Bank believes, in its good faith business judgment, there may be a
basis for dispute (but only up to the disputed or claimed amount), or if the
Account Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or
goes out of business; and
(k) Accounts for which Bank in its good faith business judgment determines
collection to be doubtful.
"ELIGIBLE FOREIGN ACCOUNTS" are Accounts which are otherwise Eligible
Accounts and at QUALMARK's option, exercisable once on the Effective Date, are
either (a) Accounts for which the account debtor is one of Samsung, Chroma ATE
or MB Electronique up to an aggregate of $375,000; or (b) Accounts which are
insured by an export credit insurance policy issued by the Export-Import Bank of
the United States or other insurance company acceptable to Bank and the proceeds
of such policy have been duly assigned to Bank and subject to reserves for any
applicable deductibles.
"EQUIPMENT" is all "equipment" as defined in the Code 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.
"ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.
"EVENT OF DEFAULT" is defined in Section 8.
"FOREIGN CURRENCY" means lawful money of a country other than the United
States.
"FUNDING DATE" is any date on which a Credit Extension is made to or on
account of such Borrower which shall be a Business Day.
"FX BUSINESS DAY" is any day when (a) Bank's Foreign Exchange Department is
conducting its normal business and (b) the Foreign Currency being purchased or
sold by such Borrower is available to Bank from the entity from which Bank shall
buy or sell such Foreign Currency.
"FX FORWARD CONTRACT" is defined in Section 2.1.3.
"FX RESERVE" is defined in Section 2.1.3.
"GAAP" is generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other Person as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"GENERAL INTANGIBLES" is all "general intangibles" as defined in the Code
in effect on the date hereof with such additions to such term as may hereafter
be made, and includes without limitation, all copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any patents,
trademarks, service marks and, to the extent permitted under applicable law, any
applications therefor, whether registered or not, any trade secret rights,
including any rights to unpatented inventions, payment intangibles, royalties,
contract rights, goodwill, franchise agreements, purchase orders, customer
lists, route lists, telephone numbers, domain names, claims, income and other
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.
"GUARANTOR" is any future guarantor of the Obligations.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred price
of property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, and (d)
Contingent Obligations.
"INSOLVENCY PROCEEDING" is any proceeding by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions or extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"INTEREST EXPENSE" means for any fiscal period, interest expense (whether
cash or non-cash) determined in accordance with GAAP for the relevant period
ending on such date, including, in any event, interest expense with respect to
any Credit Extension and other Indebtedness of each Borrower and its
Subsidiaries, including, without limitation or duplication, all commissions,
discounts, or related amortization and other fees and charges with respect to
letters of credit and bankers' acceptance financing and the net costs associated
with interest rate swap, cap, and similar arrangements, and the interest portion
of any deferred payment obligation (including leases of all types).
"INVENTORY" is all "inventory" as defined in the 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" is any beneficial ownership interest in any Person (including
stock, partnership interest or other securities), and any loan, advance or
capital contribution to any Person.
"IP AGREEMENT" is that certain Intellectual Property Security Agreement
executed and delivered by each Borrower to Bank dated as of the Effective Date.
"LETTER OF CREDIT" means a letter of credit issued by Bank or another
institution based upon an application, guarantee, indemnity or similar agreement
on the part of Bank as set forth in Section 2.1.2.
"LETTER OF CREDIT APPLICATION" is defined in Section 2.1.2(a).
"LETTER OF CREDIT RESERVE" has the meaning set forth in Section 2.1.2(d).
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN DOCUMENTS" are, collectively, this Agreement, the Perfection
Certificate, the IP Agreements, any note, or notes or guaranties executed by any
Borrower or any Guarantor, and any other present or future agreement between any
Borrower, any Guarantor and/or for the benefit of Bank in connection with this
Agreement, all as amended, restated, or otherwise modified.
"MAKE-WHOLE PREMIUM" is an amount equal to 3% of the outstanding Term Loan
if the prepayment is made on or before the first anniversary of the date hereof;
2% of the outstanding Term Loan if the prepayment is made on or after the first
anniversary hereof but before the second anniversary hereof; 1% of outstanding
Term Loan if the prepayment is made on or after the second anniversary hereof
but before the Term Loan Maturity Date.
"MATERIAL ADVERSE CHANGE" is (a) a material impairment in the perfection or
priority of Bank's Lien in the Collateral or in the value of such Collateral;
(b) a material adverse change in the business, operations, or condition
(financial or otherwise) of Borrowers; (c) a material impairment of the prospect
of repayment of any portion of the Obligations; or (d) Bank determines, based
upon information available to it and in its reasonable judgment, that there is a
reasonable likelihood that QUALMARK shall fail to comply with one or more of the
financial covenants in Section 6.7 during the next succeeding financial
reporting period.
"NET INCOME" means, as calculated on a consolidated basis for QUALMARK and
its Subsidiaries for any period as at any date of determination, the net profit
(or loss), after provision for taxes, of each Borrower and its Subsidiaries for
such period taken as a single accounting period.
"OBLIGATIONS" are Borrowers' obligation to pay when due any debts,
principal, interest, Bank Expenses and other amounts Borrowers owe Bank now or
later, whether under this Agreement, the Loan Documents, the Prior Loan
Agreement, or otherwise, including, without limitation, all obligations relating
to letters of credit, cash management services, and foreign exchange contracts,
if any, and including interest accruing after Insolvency Proceedings begin and
debts, liabilities, or obligations of any Borrower assigned to Bank, and the
performance of each Borrower's duties under the Loan Documents.
"OPERATING DOCUMENTS" are, for any Person, such Person's formation
documents, as certified with the Secretary of State of such Person's state of
formation on a date that is no earlier than 30 days prior to the Effective Date,
and, (a) if such Person is a corporation, its bylaws in current form, (b) if
such Person is a limited liability company, its limited liability company
agreement (or similar agreement), and (c) if such Person is a partnership, its
partnership agreement (or similar agreement), each of the foregoing with all
current amendments or modifications thereto.
"PAYMENT/ADVANCE FORM" is that certain form attached hereto as Exhibit B.
"PERFECTION CERTIFICATE" is defined in Section 5.1.
"PERMITTED INDEBTEDNESS" is:
(a) Such Borrower's Indebtedness to Bank under this Agreement and the other
Loan Documents;
(b) Indebtedness existing on the Effective Date and shown on the Perfection
Certificate;
(c) Subordinated Debt;
(d) unsecured Indebtedness to trade creditors incurred in the ordinary
course of business;
(e) Indebtedness incurred as a result of endorsing negotiable instruments
received in the ordinary course of business;
(f) Indebtedness secured by Permitted Liens; and
(g) extensions, refinancings, modifications, amendments and restatements of
any items of Permitted Indebtedness (a) through (f) above, provided that the
principal amount thereof is not increased or the terms thereof are not modified
to impose more burdensome terms upon Borrower or its Subsidiary, as the case may
be.
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Perfection Certificate and existing on the
Effective Date;
(b) (i) Cash Equivalents, and (ii) any Investments permitted by Borrower's
investment policy, as amended from time to time, provided that such investment
policy (and any such amendment thereto) has been approved by Bank;
(c) Investments consisting of the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of such
Borrower;
(d) Investments consisting of deposit accounts in which Bank has a
perfected security interest;
(e) Investments accepted in connection with Transfers permitted by Section
7.1;
(f) Investments consisting of (i) travel advances and employee relocation
loans and other employee loans and advances in the ordinary course of business,
and (ii) loans to employees, officers or directors relating to the purchase of
equity securities of such Borrower or its Subsidiaries pursuant to employee
stock purchase plans or agreements approved by such Borrower's Board of
Directors;
(g) Investments (including debt obligations) received in connection with
the bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of business;
(h) Investments consisting of notes receivable of, or prepaid royalties and
other credit extensions, to customers and suppliers who are not Affiliates, in
the ordinary course of business; provided that this paragraph (h) shall not
apply to Investments of such Borrower in any Subsidiary; and
(i) joint ventures or strategic alliances in the ordinary course of
Borrower's business consisting of the non-exclusive licensing of technology, the
development of technology or the providing of technical support, provided that
any cash investments by Borrower do not exceed $100,000.00 in the aggregate in
any fiscal year.
"PERMITTED LIENS" are:
(a) Liens existing on the Effective Date and shown on the Perfection
Certificate or arising under this Agreement and the other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
such Borrower maintains adequate reserves on its Books, if they have no priority
over any of Bank's Liens;
(c) purchase money Liens (i) on Equipment acquired or held by such Borrower
incurred for financing the acquisition of the Equipment, or (ii) existing on
Equipment when acquired, if the Lien is confined to the property and
improvements and the proceeds of the Equipment;
(d) statutory Liens securing claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other Persons imposed without action of
such parties, provided, they have no priority over any of Bank's Lien and the
aggregate amount of such Liens does not at any time exceed $50,000.00;
(e) Liens to secure payment of workers' compensation, employment insurance,
old-age pensions, social security and other like obligations incurred in the
ordinary course of business, provided, they have no priority over any of Bank's
Liens and the aggregate amount of the Indebtedness secured by such Liens does
not at any time exceed $50,000.00;
(f) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase;
(g) leases or subleases of real property granted in the ordinary course of
business, and leases, subleases, non-exclusive licenses or sublicenses of
property (other than real property or intellectual property) granted in the
ordinary course of such Borrower's business, if the leases, subleases, licenses
and sublicenses do not prohibit granting Bank a security interest;
(h) non-exclusive license of intellectual property granted to third parties
in the ordinary course of business,and licenses of intellectual property that
could not result in a legal transfer of title of the licensed property that may
be exclusive in respects other than territory and that may be exclusive as to
territory only as to discreet geographical areas outside of the United States;
(i) Liens arising from judgments, decrees or attachments in circumstances
not constituting an Event of Default under Section 8.4 or 8.7; and
(j) Liens in favor of other financial institutions arising in connection
with such Borrower's deposit and/or securities accounts held at such
institutions, provided that Bank has a perfected security interest in the
amounts held in such deposit and/or securities accounts.
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.
"PRIME RATE" is Bank's most recently announced "prime rate," even if it is
not Bank's lowest rate.
"QUICK ASSETS" is, on any date, QUALMARK's consolidated, unrestricted cash
and Cash Equivalents maintained with Bank, plus Accounts.
"REGISTERED ORGANIZATION" is any "registered organization" as defined in
the Code with such additions to such term as may hereafter be made
"RESPONSIBLE OFFICER" is any of the Chief Executive Officer, President,
Chief Financial Officer and Controller of QUALMARK.
"REVOLVING LINE" is an Advance or Advances in an aggregate amount of up to)
$1,500,000.00 outstanding at any time.
"REVOLVING LINE MATURITY DATE" is the earliest of (a) November 7, 2006, or
(b) the occurrence of an Event of Default.
"SECURITIES ACCOUNT" is any "securities account" as defined in the Code
with such additions to such term as may hereafter be made.
"SETTLEMENT DATE" is defined in Section 2.1.3.
"SUBORDINATED DEBT" is indebtedness incurred by any Borrower subordinated
to all of Borrowers' now or hereafter indebtedness to Bank (pursuant to a
subordination, intercreditor, or other similar agreement in form and substance
satisfactory to Bank in its good faith business judgment and entered into
between Bank and the other creditor), on terms acceptable to Bank, including,
without limitation, debt incurred or to be incurred by Borrowers to Partners for
Growth, L.P. up to a maximum aggregate amount of $2,000,000.
"SUBSIDIARY" means, with respect to any Person, any Person of which more
than 50% of the voting stock or other equity interests or member interests is
owned or controlled, directly or indirectly, by such Person or one or more
Affiliates of such Person.
"TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
QUALMARK and its Subsidiaries minus, (i) any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized debt discount and expense,
patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, and (ii) Total Liabilities.
"TERM LOAN " is defined in Section 2.1.5.
"TERM LOAN BASIC RATE" is, as of the date of the Term Loan, the per annum
rate of interest equal to the sum of (a) the U.S. Treasury note yield to
maturity for a term equal of 36 months as quoted in The Wall Street Journal on
the day the Term Loan is advanced, plus (b) 350 basis points.
"TERM LOAN MATURITY DATE" is the later of December 1, 2008 or the date 36
months after the date the Term Loan is advanced.
"TOTAL LIABILITIES" is on any day, obligations that should, under GAAP, be
classified as liabilities on QUALMARK's consolidated balance sheet, including
all Indebtedness, and the current portion of Subordinated Debt permitted by Bank
to be paid by any Borrower, but excluding all other Subordinated Debt.
"TRANSFER" is defined in Section 7.1.
BORROWERS AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the Effective Date.
Borrower:
QUALMARK CORPORATION, a Colorado corporation
By /s/ Xxxxxxx Xxxxxxx
----------------------------------
Name: Xxxxxxx Xxxxxxx
Title: CFO
Borrower:
QualMark ACG Corporation, a Colorado corporation
By /s/ Xxxxxxx Xxxxxxx
----------------------------------
Name: Xxxxxxx Xxxxxxx
Title: CFO
Borrower:
QualMark Ling Corporation, a Colorado corporation
By /s/ Xxxxxxx Xxxxxxx
----------------------------------
Name: Xxxxxxx Xxxxxxx
Title: CFO
Bank:
SILICON VALLEY BANK
By /s/ Xxxxx Xxxxx
----------------------------------
Name: Xxxxx Xxxxx
Title:
------------------------------
Effective Date: December 8, 2005
