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EXHIBIT 10.16
LOAN AGREEMENT
THIS AGREEMENT, dated as of January 14, 2000, is between Chaparral Network
Storage, Inc. (the "Company"), 0000 X. Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxx 00000
(address), and Norwest Bank Colorado N.A. - Boulder (the "Bank"), 0000 Xxxxx
Xxxxxx, P.O. Box 227, Boulder, Colorado.
ARTICLE I
DEFINITIONS
SECTION 1.1 The terms defined in this Article shall have the meanings
specified for all purposes of this Agreement.
(a) "Borrowing Base" shall mean an amount equal to the sum of the
following:
(1) 90% of the Company's U.S. Treasury or U.S. Agency investments with
a maturity of 1 year or less held in a Norwest Investment Services, Inc. account
and pledged to the Bank; plus
(2) 80% of the Company's investment grade commercial paper investments
with a maturity of 1 year or less held in a Norwest Investment Services, Inc.
account and pledged to the Bank.
(b) "Commitment Expiration Date" shall mean August 31, 2000.
(c) "Consolidated Debt to Worth Ratio" shall mean the ratio of
(i) the aggregate debt of the Company, determined in accordance
with generally accepted accounting principles, less any debt formally
subordinated by a creditor to the indebtedness of the Company to the Bank,
to
(ii) the Company's net equity, determined in accordance with
generally accepted accounting principles, less any notes due from
stockholders, plus any debt formally subordinated by a creditor to the
indebtedness of the Company to the Bank. Debt to trade creditors that
subordinate their lien positions to the Bank, if any, shall not be deemed
subordinated debt for purposes of the foregoing calculation.
(d) "Investment Grade Marketable Securities" shall mean U.S. Government and
U.S. Agency issued debt instruments and investment grade commercial paper, all
with maturities of one year or less. Money market funds backed solely by the
same investment instruments shall also qualify under this definition.
(e) "Equity Equivalent Investments" shall mean cash provided to the Company
either by the purchase of common or preferred stock or by the making of Loans to
the Company that are formally subordinated to the indebtedness of the Company to
the Bank.
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(f) "ERISA" shall mean the Employment Retirement Income Security Act of
1974, as amended.
(g) "Event of Default" shall mean any of the events listed in Section 5.1
below.
(h) "Loan" or "Loans" shall mean all advances that the Bank agrees to make
or issue hereunder.
ARTICLE II
THE COMMITMENT
SECTION 2.1 The Bank agrees, on the terms herein set forth, to make Loans
to the Company under a Revolving Line of Credit in an aggregate amount not
exceeding the lesser of the Borrowing Base or $3,000,000.00. The Loans may be in
the form of cash advances as requested by the Company on or before the
Commitment Expiration Date, when said Loans, together with interest thereon,
shall be due and payable. The amount available for Loans at any time shall be
the lesser of $3,000,000.00 or the Borrowing Base, minus the aggregate principal
amount of all outstanding cash advances, minus the aggregate face amount of all
outstanding Letters of Credit. If any time the aggregate balance outstanding on
the Loans exceeds the Borrowing Base, the excess shall become immediately due
and payable and shall be paid to the Bank within five business days after
written notice to the Company.
SECTION 2.2 The Loan shall be evidenced by a Promissory Note in the maximum
principal amount of $3,000,000.00, payable to the order of the Bank on or before
August 31, 2000.
SECTION 2.3 The Loans shall bear interest at a rate equal to the Norwest
Bank Colorado National Association Prime Rate (the "Prime Rate") as in effect
from time to time, which rate shall change, without notice, whenever the Prime
Rate changes, to and including maturity. Overdue principal and (to the extent
legally enforceable) overdue interest, whether caused by acceleration of
maturity or otherwise, shall bear interest at a rate four percentage points
above the rate in effect at the time such principal or interest becomes due.
Interest shall be payable monthly in arrears on the last day of each month,
beginning January 31, 2000.
SECTION 2.4 The Company shall have the right to repay the Loans in part or
in whole at any time without penalty; however, prepayment in full must be
accompanied by payment of all accrued interest then due.
SECTION 2.5 All payments made by the Company on account of principal and of
interest shall be made in immediately available funds to the Bank.
SECTION 2.6 The Bank's commitment to make the initial and all subsequent
Loans hereunder shall be subject to the following conditions:
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(a) Prior to the initial Loan, payment by the Company of a 1/4% ($7,500.00)
loan commitment fee.
(b) As of the dates of the initial and any subsequent Loans, all
representations and warranties of the Company contained herein shall be true and
no Event of Default shall have occurred and be continuing.
ARTICLE III
REPRESENTATION AND WARRANTIES
The company represents and warrants to the Bank as follows:
SECTION 3.1 The Company is duly organized, validly existing, and in good
standing under the laws of the State of Colorado, and is duly qualified to do
business wherever necessary to carry on its present operations.
SECTION 3.2 The making and performance of this Agreement is within the
Company's corporate powers; has been duly authorized by all necessary corporate
action; does not require any stockholder consent; does not require the approval
of any federal or state regulatory authority; does not contravene any law,
regulation or agreement to which the Company is a party or by which it or its
assets may be bound; and will not conflict with any provision of the articles of
incorporation, bylaws or other governing documents of the Company.
SECTION 3.3 This Agreement is the legal, valid and binding obligation of
the Company, enforceable in accordance with its terms.
SECTION 3.4 There is no pending or threatened action or proceedings before
any court or administrative agency which may materially adversely affect the
Company's financial condition or operations.
SECTION 3.5 The Company has good and marketable title to all of its
properties or assets (except leased assets), and none of such properties or
assets included in the Borrowing Base are subject to any mortgage, pledge, loan
security interest, encumbrance or any other security agreement or arrangement of
any type whatsoever except the security interests, liens and encumbrances
permitted by this Agreement.
SECTION 3.6 To the best of the Company's knowledge and information no
material claim for taxes, whether federal, state or local, are presently being
assessed against the Company with respect to any past due taxes, nor are there
any tax disputes being litigated or determined by governmental proceedings at
the present time that have not been reflected in the financial statements of the
Company previously furnished to the Bank.
SECTION 3.7 The Company or property of the Company is not currently the
subject of any threatened or ongoing litigation, judgment, decree, order,
citation, compliant, or notice of violation relating to or arising out of
environmental laws or issues. For purposes of this Agreement,
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Contamination and Contaminated shall mean the presence of solid or hazardous
wastes, hazardous substances, pollutants or contaminants, petroleum, toxic or
hazardous constituents, or similar materials, as such terms are defined under
any federal, state, or local statute, whether currently or subsequently enacted,
or under common law.
ARTICLE IV
COVENANTS OF THE BORROWER
SECTION 4.1 So long as the Company may borrow hereunder and until payment
in full of the Note and performance of all other obligations of the Company, the
Company shall:
(a) (i) Furnish to the Bank within 30 days after the end of each month
during each fiscal year a consolidated balance sheet and income statement;
(ii) furnish to the Bank within 120 days after the end of each fiscal
year of the Company an audited consolidated balance sheet and income
statement;
(iii) furnish to the Bank within 120 days after the end of each fiscal
year of the Company cash flow projections for the ensuing year;
(iv) permit or cause to permit the Bank at any reasonable time to have
access to the books and records of the Company, and to inspect or otherwise
check the properties of the Company;
(v) furnish to the Bank from time to time with reasonable promptness
such further information relating to the financial condition and operations
of the Company as the Bank may reasonably request; and
(vi) reimburse the Bank for any reasonable costs incurred through the
performance by the Bank of inspections of the Company's book's or
operations.
(b) Maintain a cash plus Investment Grade Marketable Securities position of
$4,000,000.00 or greater.
(d) Maintain a Consolidated Debt to Worth Ratio not to exceed 1.5 to 1.
(e) Maintain a minimum Net Worth position of $4,000,000.00 or greater.
(f) Use the Bank as its principal depository for all demand and savings
business accounts.
(g) Allow the Bank the opportunity to bid on all short term investments
including certificates of deposit and repurchase agreements.
(h) Maintain insurance with responsible companies on such of its
properties, in such amounts and against such amount and against such risks as is
reasonable and customarily maintained by similar businesses operating in the
same vicinity.
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(i) Comply in all material respects with all laws and regulations
applicable to its business and operations.
(j) Promptly provide notice to the Bank of (i) the occurrence of an Event
of Default; (ii) the occurrence of a "Reportable Event" (as defined in ERISA);
or (iii) the institution of steps by the Company to withdraw from or terminate
any employee benefit plan as to which the Company may have any liability.
(k) Promptly furnish to the Bank copies of all documents filed by it with
the Securities and Exchange Commission, the National Association of Securities
Dealers, Inc., any securities exchange or any state securities commission,
including but not limited to all registration statements, annual reports on Form
10K, quarterly reports on Form 10Q, reports on Form 8K, proxy statements and
annual reports to shareholders, and all amendments there to.
SECTION 4.2 So long as the Company may borrow hereunder and until payment
in full of the Note and performance of all other obligations of the Company
hereunder, the Company shall not, without the consent of the Bank, which consent
shall not be unreasonably withheld;
(a) Pay a dividend on capital stock now or hereafter outstanding, or
redeem, retire, purchase or otherwise acquire directly or indirectly any shares
of the debtor's stock now or hereafter outstanding.
(b) Enter into any mergers, acquisitions or consolidations.
(c) Sell, lease or otherwise dispose of all or any substantial part of its
assets or operation.
(d) Make any loans or advances to another person or entity, enter into any
direct borrowings other than purchase money security agreements for equipment
acquisitions or assume, guarantee or otherwise become contingently liable on any
borrowings or indebtedness of another person or entity.
(e) Permit any Pension and/or Profit Sharing Plan maintained by it to:
(i) Engage in any "prohibited transaction" as such term is defined in
section 4975 of the Internal Revenue Code of 12954, as amended;
(ii) Incur any "accumulated funding deficiency" as such term is defined
in section 302 of ERISA; or
(iii) Terminate in a manner which could result in the imposition of a
lien on the property of the Company pursuant to section 4068 to ERISA.
(f) Create, incur or permit to exist any lien, security interest or other
encumbrance upon any of its properties or assets included in the Borrowing Base
except (i) liens for taxes or other items
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not yet overdue or being contested in good faith, or (ii) pursuant to purchase
money security agreements for equipment acquisitions.
ARTICLE V
EVENTS OF DEFAULT
SECTION 5.1 The occurrence of any of the following events shall be an
"Event of Default":
(a) Any payment of principal or interest shall not be made when due and not
be cured within ten business days thereafter; or
(b) Any representation or warranty made by the Company in connection with
the execution and delivery of this Agreement, or in any certificate furnished
pursuant hereto, shall prove to be at any time incorrect in any material
respect; or
(c) The Company shall fail to perform or observe any other term, covenant
or agreement contained in this Agreement and such failure shall continue for a
period of seven days after written notice to the Company from the Bank; which
failure to perform or observe any covenant having occurred subsequent to review
of the occasion with the Bank; or
(d) Any obligation of the Company for the payment of borrowed money is not
made at maturity, whether by acceleration or otherwise, or is declared to be due
and payable prior to the stated maturity thereof by reason of default or other
violation of the terms thereof; or
(e) In the opinion of the Bank there shall occur a material adverse change
in the financial condition of the Company.
SECTION 5.2 Upon the occurrence of an Event of Default, the obligation of
the Bank to make advances under this Agreement or any other loan commitment to
the Company and to issue Letters of Credit shall terminate and the Bank may
declare the principal balance, together with accrued interest thereon, to be
immediately due and payable, and the same shall forthwith become immediately due
and payable without presentment, protest, notice or demand of any kind, all of
which are hereby expressly waived by the Company Upon any such Event of Default,
the Bank may proceed with each and every remedy provided for it in this
Agreement, the Note, or security agreements and other instruments executed in
connection with the Loans, anything in said instruments to the contrary
not-withstanding, and may pursue any other remedy available to the Bank, whether
in law or equity, to enforce collection of all sums due and owing to the Bank,
all of such right and remedies being cumulative and not exclusive of all rights
and remedies which the Bank has or may have against the Company.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 No failure on the part of the Bank in exercising any power or
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power
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preclude any other or further exercise thereof or the exercise of any other
right or power hereunder. No modification or waiver of any provision of this
Agreement nor consent to any departure by the Company therefrom shall in any
event be effective unless the same shall be in writing and then such a waiver or
consent shall be effective only in the specific instance and for the purposes
for which it was given. No notice or demand on the Company in any case shall
entitle it to any other or further notice or demand in similar or other
circumstances.
SECTION 6.2 No modification of this Agreement shall be effective unless the
same be in writing and mutually agreeable between the two parties.
SECTION 6.3 The Company agrees to pay all costs incurred by both parties in
connection with preparation of this Agreement, the enforcement of any provision
of this Agreement, the collection of the Note or the foreclosure or realization
upon any security therefor.
SECTION 6.4 The Company agrees to defend, indemnify, and hold harmless the
Bank for, from, and against and to reimburse the Bank with respect to any and
all claims, actions, costs and expenses whatsoever (including, without
limitation, attorneys fees and expenses and costs reasonably incurred), known or
unknown, asserted against or incurred by the Bank at any time by reason of or
arising out of or relating to any actual or alleged violation of any existing or
future environmental law or actual or threatened Contamination relating to the
property or activities of the Company, whether or not such contamination was in
violation of any environmental statute. This indemnity shall last indefinitely
and is specifically intended to survive this Agreement.
SECTION 6.5 All notices or other communication s required or permitted
under this Agreement shall be in writing and shall be deemed given when
personally delivered or mailed to the respective parties' addresses as set forth
above.
SECTION 6.6 This Agreement and the rights and obligations of the parties
hereunder shall be construed and interpreted in accordance with the laws of the
State of Colorado.
Norwest Bank Colorado, N.A. Chaparral Network Storage, Inc
Boulder
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxxxxx Xxxxxxxx
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Xxxxxx X. Xxxxxxxx Xxxxxxx Xxxxxxxx
Vice President Chief Financial Officer
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