REVOLVING CREDIT AND TERM LOAN AGREEMENT
This Revolving Credit and Term Loan Agreement (the "Agreement") is made as of
December 22 1998, between QUALMARK CORPORATION, a Colorado corporation
("Borrower") and U.S. BANK NATIONAL ASSOCIATION, a national banking
association ("Bank").
RECITALS:
i. Borrower has requested that Bank make available to Borrower a revolving
line of credit in the amount of $3,000,000 and a separate term loan in
the amount of $2,000,000 for the purposes of refinancing existing debt
and funding the expansion of test centers as well as for general
corporate purposes; and
ii. Bank is willing to make such line of credit and term loan available as
requested by Borrower, upon and subject to the terms and conditions set
forth i n this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
contained in this Agreement, Borrower and Bank agree as follows:
1. TERMS OF BORROWING
1.01 REVOLVING CREDIT LINE.
1.01.1 COMMITMENT TO LEND. Subject to the following terms and conditions, Bank
agrees to make a line of credit available to Borrower (the "Revolving
Credit Line") in the maximum amount of $3,000,000 (the "Maximum Line")
or, if less, the amount of the Borrowing Base (defined below), pursuant
to which Bank will make loans to Borrower (each an "Advance") in such
amounts as Borrower may request from time to time, the proceeds of which
shall be used for refinancing existing debt and funding the expansion of
test centers as well as for general corporate purposes. The aggregate
outstanding principal balance of all Advances made hereunder may not
exceed the Maximum Line. Amounts borrowed under the Revolving Credit
Line may be repaid prior to the Termination Date (defined below) without
penalty and may be reborrowed subject to the terms hereof.
1.01.2 LIMITS ON COMMITMENT. Bank's commitment to make Advances hereunder is
subject to the conditions in Section 4 below and the following
limitations:
a. Bank's commitment to lend hereunder terminates on December 31,
2001 (the "Termination Date"), if not sooner terminated under
Section 8 below;
b. Bank shall not be obligated to make any Advance which would
cause the outstanding principal balance of the Revolving Credit
Line (the "Line Balance") to exceed the Maximum Line or which
would cause the sum of the Line Balance plus the outstanding
principal balance of the Term Loan (defined below) (said sum
being the "Balance") to exceed the Borrowing Base; and
c. Bank shall not be obligated to make any Advance if an Event of
Default, as defined in Section 7 below, or an event which, with
the giving of notice or lapse of time, or both, would become an
Event of Default (a "Potential Default"), has occurred and has
not been cured or waived by Bank.
1.01.3 LINE NOTE. Borrower's indebtedness to Bank for amounts borrowed under
the Revolving Credit Line and for interest accrued thereon shall be
evidenced by Borrower's promissory note to Bank, on Bank's standard form
for commercial promissory notes and otherwise satisfactory to Bank, in
the principal amount of the Maximum Line (the "Line Note").
1.01.4 INTEREST. Borrower agrees to pay interest on the Line Balance from time
to time as provided herein. Interest will accrue on the daily
outstanding balance of each Advance at a fluctuating rate per annum
equal at all times to the sum of the Reference Rate plus the Applicable
Margin (defined below), which rate will change when and as the Reference
Rate changes, or at Borrower's option, equal to the sum of the
applicable "Reserve Adjusted LIBOR Rate" plus the Applicable Margin as
set forth below for the selected Interest Period (see the attached
EXHIBIT A which will be attached to and incorporated into each Note for
terms and definitions which will apply to the interest rates based on a
Reserve Adjusted LIBOR Rate). Borrower shall have the option to select a
fixed Interest Period for each Advance as provided in said Exhibit A.
The interest rate for any new Advance made on or after the date of
determination of Borrower's Cash Flow Leverage Ratio for each fiscal
quarter, will be subject to adjustment, as of the date of such
determination each fiscal quarter, as follows: When Borrower's Cash
Flow Leverage Ratio is within one of the ranges set forth below, then
the "margin" or "spread" (the "Applicable Margin") to be added to the
Reserve Adjusted LIBOR Rate or Reference Rate, as the case may be, shall
be the rate per annum set forth below opposite such range:
Applicable Margin
to be added to
Cash Flow Leverage Ratio Reserve Adjusted LIBOR Rate Reference Rate
------------------------ --------------------------- --------------
> 3.00 3.50% 1.00%
-
2.00 < 3.00 3.00% 0.50%
1.00 < 2.00 2.50% 0.00%
< 1.00 2.00% (0.25)%
Accrued interest on each Advance shall be due and payable (i) for LIBOR
Rate Advances at the end of each fixed Interest Period but not less than
at the end of each 3 months, (ii) for Reference Rate Advances on the
first day of each quarter, (iii) at maturity of the Line Note and
(iv) on demand after such maturity.
1.01.5 DEFINITIONS RELATING TO INTEREST. As used herein the following terms
have the following meanings:
"REFERENCE RATE" means the rate of interest per annum announced publicly
from time to time as Bank's "reference rate", which may be a rate at,
above or below the rate or rates at which the Bank lends to other
parties, and it is not necessarily the lowest rate charged by Bank on
commercial loans.
"CASH FLOW LEVERAGE RATIO" means the ratio which Borrower's aggregate
Debt (as defined in Section 6.02 below) as of the date of determination
bears to Borrower's EBITDA. For purposes of establishing the INITIAL
Cash Flow Leverage Ratio hereunder and under Section 1.02.3 below, the
amount of the actual litigation expense plus the reserve for litigation
expense relating to the Screening Systems, Inc. litigation shall be
added to EBITDA.
"EBITDA" means the amount of earnings before interest, taxes,
depreciation and amortization for the period being tested.
1.01.6 REPAYMENT OF PRINCIPAL. Borrower agrees to repay all Advances made
hereunder. The Line Balance will be due and payable in full at the
maturity of the Line Note, which will be December 22, 2001, subject to
acceleration upon the occurrence of an Event of Default. Borrower will
repay on demand from time to time any part of the Balance which exceeds
the Borrowing Base.
1.01.7 BORROWING BASE. The "Borrowing Base" means from time to time an amount
equal to the sum of:
i. 85% of Borrower's Eligible Accounts; plus
ii. 30% of Borrower's Eligible Inventory; plus
2
iii. 50% of the net book value of Borrower's equipment located in the
United States of America, including, but not limited to,
computer equipment, general equipment and furniture;
all as shown on the most recent Borrowing Base Certificate (defined
below) delivered to Bank. "Borrowing Base Certificate" means a
certificate showing the calculation of the Borrowing Base, executed by
an appropriate officer of Borrower in the form attached as EXHIBIT B.
1.01.8 ELIGIBLE ACCOUNTS. "Eligible Accounts" means all accounts receivable
arising in the ordinary course of Borrower's business, excluding:
A. Any account for which no invoice has been sent or delivered to
the account debtor;
B. Any account which is unpaid more than sixty (60) days past the
date when payment is due on the invoice therefor or which
remains unpaid more than ninety (90) days after the original
invoice date;
C. Any account or part thereof which is disputed, or against which
any defense, counterclaim or right of setoff has been threatened
or asserted, or upon which the account creditor's right to
payment is contingent upon any matter whatsoever, including
retainage;
D. Any account of the United States government or any department or
agency thereof arising under a contract with any such account
debtor, unless such account is assignable and has been duly
assigned to Bank and acknowledged in accordance with federal
law;
E. Any account of an account debtor whose chief executive office or
principal place of business is located outside the United States
of America, unless such account debtor is specifically approved
by Bank or such account is supported by a letter of credit
issued or confirmed by a bank acceptable to Bank, or is covered
by an export credit insurance policy issued by the Export-Import
Bank of the United States, and the proceeds of such letter of
credit or policy have been duly assigned to Bank;
F. Any account of a person or entity which controls or is
controlled by or is under common control with the account
creditor or any account of an employee of the account creditor
(any such person, entity or employee being an "affiliate"); and
G. All accounts of any account debtor if 10% or more of the total
amount owed the account creditor by such account debtor is
ninety (90) days or more past due.
1.01.9 ELIGIBLE INVENTORY. "Eligible Inventory" means all Inventory of
Borrower remaining after deducting the following: any Inventory which is
work-in-process; any Inventory which is obsolete, damaged, defective or
otherwise unable to be sold or used in the ordinary course of business;
any Inventory not located within the United States of America; and any
Inventory in which Bank does not have a valid, perfected, first priority
security interest, including any in which another creditor claims a
purchase money security interest. "Inventory" means all inventory of
Borrower in all of its forms, wherever located, now or hereafter
existing, including, but not limited to, all of the following named
items or types of inventory: Omni-Axial Vibration Systems and other
stress test systems and environmental test equipment.
1.01.10 LETTERS OF CREDIT. In the event and to the extent Bank issues a letter
of credit (an "L/C") on behalf of Borrower under the Revolving Credit
Line in lieu of an advance, the Maximum Line shall be considered
utilized by the amount of such L/C. Borrower shall pay fees for any
such L/C at the time of issuance and any renewal according to Bank's
schedule of fees relating to letters of credit in effect from time to
time; and Borrower shall execute Bank's then current standard form
application and agreement for such L/C. Amounts drawn under any such
L/C and honored by Bank but not immediately reimbursed by Borrower to
Bank shall become an Advance hereunder in such amount at such time
evidenced by the Line Note and subject to all the terms of this
Agreement, whether or not any Event of Default or Potential Default has
occurred. No such L/C shall expire later than the Termination Date.
3
1.01.11 METHOD OF BORROWING. Requests for Advances may be submitted by Borrower
in writing or by telephone. Bank shall be entitled to honor any such
request it reasonably believes to be genuine, whether or not the person
making the request is named as an authorized person in any corporate
resolution or instruction furnished Bank by Borrower. Advances shall be
disbursed only by deposit to a demand deposit account maintained by
Borrower at Bank. Proceeds of an Advance shall be disbursed on the
Banking Day (as defined in the Colorado Uniform Commercial Code) Bank
receives Borrower's request if such request is received by 2:00 p.m.
Denver time on such day, and on the next Banking Day if received after
2:00 p.m. on such day, and in either case if the conditions of Section 4
are met.
1.01.12 COMMITMENT FEE. As additional consideration for the commitment to lend
hereunder, Borrower agrees to pay Bank a commitment fee on the average
daily unused portion of the Maximum Line from the date of closing until
the Termination Date at a rate of one quarter of one percent (.25%) per
annum, payable quarterly in arrears on the first day of each calendar
quarter during the term of the Revolving Credit Line commencing April 1,
1999 and on the Termination Date.
1.02 TERM LOAN.
1.02.1 COMMITMENT. Subject to the following terms and conditions, Bank agrees
to make a loan to Borrower (the "Term Loan") in not more than two
advances on the dates requested by Borrower, the first being no later
than one month following the date hereof and the second being not more
than one year following the date hereof, in the maximum aggregate amount
of $2,000,000, the proceeds of which shall be used for refinancing
existing debt and funding the expansion of test centers as well as for
general corporate purposes.
1.02.2 TERM NOTE. Borrower's indebtedness to Bank for the amount borrowed
hereunder as a Term Loan and for interest accrued thereon shall be
evidenced by Borrower's promissory note to Bank, on Bank's standard form
for commercial promissory notes and otherwise satisfactory to Bank, in
the amount of the Term Loan (the "Term Note" and together with the Line
Note, the "Notes" or singly, a "Note").
1.02.3 INTEREST. Borrower agrees to pay interest on the Term Loan from time to
time as provided herein. Interest will accrue on the daily outstanding
Term Loan balance at a fluctuating rate per annum equal at all times to
the sum of the Reference Rate plus Applicable Margin, which rate will
change when and as the Reference Rate changes, or Borrower's option,
equal to the sum of the applicable "Reserve Adjusted LIBOR Rate" plus
the Applicable Margin as set forth below for the selected Interest
Period. Borrower shall have the option to select fixed Interest Periods
as provided in Exhibit A to the Note. The interest rate will be subject
to adjustment, as of the date of determination of Borrower's Cash Flow
Leverage Ratio for each fiscal quarter, as follows: When Borrower's
Cash Flow Leverage Ratio is within one of the ranges set forth below,
then the "margin" or "spread" (the "Applicable Margin") to be added to
the Reserve Adjusted LIBOR Rate or Reference Rate, as the case may be,
shall be the rate per annum set forth below opposite such range:
Applicable Margin
to be added to
Cash Flow Leverage Ratio Reserve Adjusted LIBOR Rate Reference Rate
------------------------ --------------------------- --------------
> 3.00 3.75% 1.25%
-
2.00 < 3.00 3.25% 0.75%
1.00 < 2.00 2.75% 0.25%
< 1.00 2.25% 0.00%
Accrued interest shall be due and payable (i) for LIBOR Rate Advances at
the end of each fixed Interest Period but not less than at the end of
each 3 months, (ii) for Reference Rate Advances on the first day of each
quarter, (iii) at final maturity of the Term Loan and (iv) on demand
after such maturity.
1.02.4 REPAYMENT OF PRINCIPAL. Borrower agrees to repay the Term Loan made
hereunder in installments by eleven quarterly principal payments each in
the amount of $100,000, each due on the first day of each
4
fiscal quarter, commencing April 1, 1999, and a final installment of
all unpaid principal and accrued interest due and payable in full at
the final maturity of the Term Loan, which will be December 31, 2001,
subject to acceleration upon the occurrence of an Event of Default.
All or any part of the Term Loan may be repaid prior to maturity
without penalty except as set forth in Exhibit A to the Term Note,
but may not be reborrowed. Payments shall be applied by Bank first
to interest and then to principal. Prepayments of principal shall be
applied to installments in the inverse order of maturity.
1.02.5 FEE. As additional consideration for the commitment to make the Term
Loan hereunder, Borrower agrees to pay Bank a fee of .00625% of the
amount of the Term Loan (being $12,500) payable on the date of closing
hereunder.
1.03 TERMS APPLICABLE TO ADVANCES AND TERM LOAN
1.03.1 INTEREST CALCULATION. Interest shall be computed using the actual
number of days in the period for which such computation is made and a
per diem rate equal to 1/360 of the rate per annum.
1.03.2 DEFAULT INTEREST. After the occurrence of an Event of Default and any
necessary acceleration of maturity of either Note, at Bank's option, the
interest rate applicable to either Note may be increased as provided in
such Note and Borrower agrees to pay any such increased interest.
2. COLLATERAL AND OTHER CREDIT SUPPORT
2.01 COLLATERAL. The repayment of all of Borrower's indebtedness to Bank
shall be secured by first priority security interests (the "Security
Interests") in all accounts, general intangibles, inventory and
equipment (such terms having the meanings given them in the Colorado
Uniform Commercial Code) now owned or hereafter acquired by Borrower and
in all proceeds thereof (the "Collateral"). The Security Interests
shall be created and perfected by security agreements, UCC financing
statements, and any other collateral documents deemed necessary or
advisable by Bank in its sole discretion, each in form satisfactory to
Bank, duly executed by Borrower (the "Collateral Documents").
Hereafter, Borrower shall from time to time execute and deliver to Bank
such other documents in form and substance satisfactory to Bank, and
perform such other acts, as Bank may reasonably request, to perfect and
maintain valid Security Interests in the Collateral. In addition
Borrower hereby grants to Bank a security interest in all Borrower's
deposit accounts at Bank to secure all obligations of Borrower to Bank
now or hereafter arising.
2.02 SUBORDINATED DEBT. Any and all loans or advances made to Borrower by
any of Borrower's shareholders or any other affiliates of Borrower shall
be subordinated to all indebtedness of Borrower to Bank now or hereafter
existing and such subordination shall be evidenced by agreements in form
and substance satisfactory to Bank in Bank's sole discretion, duly
executed by each such other creditor (the "Subordinated Debt").
3. REPRESENTATIONS AND WARRANTIES
To induce Bank to enter into this Agreement, Borrower represents and
warrants as follows:
3.01 INCORPORATION. Borrower is a corporation duly organized, validly
existing, and in good standing under the laws of the State of indicated
at the beginning of this Agreement, and Borrower is duly qualified or
licensed and in good standing to do business as a foreign corporation in
all jurisdictions in which the nature of Borrower's business requires
qualification.
3.02 BORROWER'S AUTHORIZATION. The execution, delivery and performance by
Borrower of this Agreement, the Notes and the Collateral Documents are
within Borrower's corporate powers, have been authorized by all
necessary corporate action and do not and will not contravene Borrower's
Articles of Incorporation or Bylaws, violate any provision of law or
result in a breach of or default under any other agreement to which
Borrower is a party.
5
3.03 LITIGATION. Except as described on Schedule 3.03 hereto, there is no
pending or threatened action, claim, investigation, lawsuit or
proceeding against or affecting Borrower before any court, governmental
agency, arbitrator or arbitration panel, which if decided adversely to
Borrower would have a material adverse affect on the financial condition
or operations of Borrower or in any event which claims or involves an
amount exceeding $250,000 ("Material Litigation").
3.04 FINANCIAL CONDITION. The audited balance sheet of Borrower as at
December 31, 1997, and the related statements of income and retained
earnings for the fiscal year then ended, and the unaudited balance sheet
of Borrower as at September 30, 1998, and the related statements of
income and retained earnings for the period then ended, copies of which
have been furnished to Bank, fairly present the financial condition of
Borrower as at such dates and the results of the operations of Borrower
for the periods ended on such dates, all in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis,
subject to year-end audit adjustments for the unaudited September 30,
1998 financial statements, and since September 30, 1998 there has been
no material adverse change in such condition or operations.
3.05 LIENS. Borrower is the legal and beneficial owner of the property
granted as collateral hereunder, free from any lien, encumbrance, or
restriction whatsoever, and has full power and authority to grant liens
and security interests in such property as collateral for its
indebtedness.
3.06 VALID OBLIGATIONS. This Agreement constitutes, and each of the Notes
and the Collateral Documents when delivered hereunder will be, a legal,
valid and binding obligation of Borrower, enforceable against Borrower
in accordance with its respective terms.
3.07 TAXES. Borrower (i) has filed all tax reports and returns required to
be filed, including but not limited to reports and returns concerning
income, franchise, employment, sales and use, and property taxes; (ii)
has paid all of its tax liabilities which were due on or prior to the
date hereof; and (iii) is not aware of any pending investigation by any
taxing authority or of any pending assessments or adjustments which
would materially increase its tax liability.
3.08 REGULATION U. Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U issued by the Board of Governors of the
Federal Reserve System), and no proceeds of the Term Loan or any Advance
will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying any margin stock.
3.09 DISCLOSURE. No information, exhibit or report furnished by Borrower to
Bank in connection with the negotiation of this Agreement knowingly
contains any material misstatement of fact or omitted to state a
material fact necessary to make the statement contained therein not
misleading.
3.10 ENVIRONMENTAL COMPLIANCE. To the best of Borrower's knowledge, the
ownership and operation of Borrower's properties have been and are in
compliance with all applicable federal, state, and local environmental
protection and hazardous waste disposal statutes and regulations.
Borrower has not received any notice of claim under or violation of any
such laws affecting Borrower's properties.
4. CONDITIONS PRECEDENT
4.01 CONDITIONS PRECEDENT TO TERM LOAN OR INITIAL ADVANCE. The obligation of
Bank to make either the Term Loan or the initial Advance is subject to
the condition precedent that Bank shall have received on or before the
day of such Term Loan or Advance the following, each in form and
substance satisfactory to Bank:
i. the Notes and such Collateral Documents as may be specified by
Bank, each duly executed by Borrower, and any fees specified
above;
ii. copies of the Articles of Incorporation and By-laws of Borrower,
each certified by the Secretary of Borrower to be a true and
correct copy thereof, including all amendments thereto, if any;
6
iii. certified copies of the resolutions of the Board of Directors of
Borrower approving this Agreement, the Notes and the Collateral
Documents, and of all documents evidencing other necessary
corporate action and governmental approvals, if any, with
respect to this Agreement, the Notes and the Collateral
Documents;
iv. a certificate of the Secretary of Borrower certifying the names
and true signatures of the officers of Borrower authorized to
sign this Agreement, the Notes and the Collateral Documents;
v. a certificate of the Secretary of State of Colorado certifying
that Borrower is a corporation duly organized and in good
standing under the laws of such State or other evidence thereof
satisfactory to Bank;
vi. a year 2000 compliance representation letter, on Bank's form;
and
vii. a letter addressed to Bank from Borrower's counsel stating such
counsel's belief that Borrower's products do not infringe on
Screening Systems, Inc. patents.
4.02 CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of Bank to make
the Term Loan and each Advance (including the initial Advance) shall be
subject to the further conditions precedent that on the date of the Term
Loan or any such Advance:
i. the following statements shall be true:
a. the representations and warranties contained in Section
3 are correct on and as of the date of the Term Loan or
such Advance as though made on and as of such date; and
b. no event has occurred and is continuing, or would result
from the Term Loan or such Advance, which constitutes an
Event of Default or Potential Default;
and Bank may request a certificate of an officer of Borrower
stating the foregoing;
ii Bank shall have received such other approvals, opinions or
documents as Bank may reasonably request; and
iii. Bank's legal counsel is reasonably satisfied as to all legal
matters incident to the making of the Term Loan or such Advance.
5. AFFIRMATIVE COVENANTS
So long as either Note or any indebtedness of Borrower to Bank remains
unpaid or Bank has any commitment to lend hereunder, Borrower will:
5.01 ACCOUNTING RECORDS. Maintain adequate books and accounting records in
accordance with GAAP, consistently applied, reflecting all financial
transactions of Borrower.
5.02 INSPECTIONS. At any reasonable time and from time to time, permit any
agents or representatives of Bank to examine and make copies of and
abstracts from records and books of account of Borrower, to visit and
inspect the properties of Borrower and to discuss the affairs, finances
and accounts of Borrower with any of its officers or directors; and,
when any such examination or visit is characterized by Bank as a "field
examination," Borrower will pay Bank a fee related to its costs of any
such field examination in an amount not to exceed $1,500 per year.
5.03 MAINTENANCE OF PROPERTY. Maintain and preserve all of its properties
and assets necessary or useful in the performance of its business in
good working order, repair and condition, ordinary wear and tear
excepted.
5.04 INSURANCE. Maintain insurance with responsible and reputable insurance
companies in such amounts and covering such risks as is usually and
customarily carried by companies engaged in similar businesses and
7
owning similar properties, including, but not limited to, public
liability, property damage and worker's compensation, and deliver to
Bank, at Bank's request, schedules setting forth all insurance then in
effect and copies of policies or certificates of insurance on property
granted or pledged as collateral; cause Bank to be named loss payee on
any insurance covering property granted or pledged as collateral, and
furnish to Bank certificates indicating such status.
5.05 PAYMENT OF TAXES, LIENS. Pay and discharge, before the same become
delinquent, (i) all taxes, assessments and governmental charges or
levies imposed upon Borrower or upon its owned property, and (ii) all
lawful claims which, if unpaid, might by law become a lien upon its
owned property, except any thereof which is being contested in good
faith and by appropriate proceedings.
5.06 COMPLIANCE WITH LAWS. Comply in all material respects with all
applicable laws, rules, regulations and orders of any government
authority, non-compliance with which would materially adversely affect
its business or credit.
5.07 CORPORATE EXISTENCE. Preserve and maintain its corporate existence and
rights and franchises in its State of incorporation, and all licenses
necessary to do business; and qualify and remain qualified and in good
standing as a foreign corporation in each jurisdiction in which such
qualification is necessary in view of its operation or ownership of its
properties.
5.08 REPORTING. Furnish Bank the following as soon as available and in any
event:
i. Within ninety (90) days after the end of each fiscal year of
Borrower, a copy of the annual audited financial statements of
Borrower as at the end of such fiscal year, including a balance
sheet and income statement, audited by an independent Certified
Public Accountant ("CPA") reasonably acceptable to Bank, with an
unqualified opinion thereon by said CPA, together with
Borrower's annual report on Form 10K;
ii. Within forty five (45) days after the end of each fiscal quarter
of Borrower, (a) a copy of the quarterly financial statements of
Borrower as at the end of such fiscal quarter, including a
balance sheet and income statement, certified by an appropriate
officer of Borrower to have been prepared substantially in
accordance with GAAP, together with Borrower's quarterly report
on Form 10Q and (b) a certificate in the form of Exhibit C
attached or in such other form as may be acceptable to Bank
demonstrating compliance with the financial condition
requirements set forth in Section 5.09 of this Agreement,
executed by an appropriate officer of Borrower (a "Compliance
Certificate").
iii. Within thirty (30) days after the end of each month, (a) an
itemized report of Borrower's accounts receivable, indicating
the aging thereof, and (b) a Borrowing Base Certificate; and
iv. From time to time such other information as Bank may reasonably
request.
5.09 FINANCIAL CONDITION. Maintain the financial condition of Borrower,
determined in accordance with GAAP, so that it meets the following
requirements all determined on a quarterly basis as of the end of each
fiscal quarter and, where indicated, for the preceding or trailing 12
month period (the "TTMP") commencing with the quarter ending December
31, 1998;
i. Borrower's ratio of EBITDA to interest expense will be not less
than 2.00:1, for the TTMP;
ii. Borrower's ratio of Free Cash Flow to Debt Service will be not
less than 1.15:1 for the TTMP;
iii. Borrower's ratio of Debt as of the end of such fiscal quarter to
EBITDA for the TTMP will be not more than 3.00:1; and
iv Borrower's Tangible Net Worth will be not less than $4,000,000
as of the end of each fiscal quarter.
8
For purposes hereof "Free Cash Flow" means EBITDA less cash taxes and
cash capital expenditures and cash dividends; and "Debt Service" means
interest expense plus all mandatory principal payments on Debt; and
"Tangible Net Worth" means stockholders' equity less intangible assets.
5.10 DEPOSIT ACCOUNTS. Maintain all material deposit accounts at Bank.
5.11 NOTICE OF SIGNIFICANT EVENTS. Promptly notify Bank in writing of 1) the
occurrence of any Event of Default or Potential Default; 2) any change
in its name, address, form of entity, or organizational or capital
structure; or 3) the threat of or commencement of any Material
Litigation.
6. NEGATIVE COVENANTS
So long as the either Note or any indebtedness of Borrower to Bank
remains unpaid or Bank has any commitment to lend hereunder, without the
prior written consent of Bank, Borrower will not:
6.01 USE OF FUNDS. Use any of the amounts loaned to it by Bank pursuant to
this Agreement for any purpose except for refinancing existing debt and
funding the expansion of test centers as well as for general corporate
purposes;
6.02 DEBT. Create, incur, assume or permit to exist any Debt except 1) Debt
to Bank; 2) Debt which is trade debt incurred by Borrower in the
ordinary course of business on a short term basis for the acquisition of
supplies or services; 3) Subordinated Debt; and 4) unsecured Debt up to
an aggregate amount outstanding of $750,000 as long as Borrower is in
compliance with all the terms of this Agreement (including the financial
condition requirements) both before and after incurring any such
unsecured Debt. "Debt" means (i) indebtedness for borrowed money or for
the deferred purchase price of property or services; (ii) obligations as
lessee under leases which shall have been or should be, in accordance
with GAAP, recorded as capital leases, (iii) obligations under direct or
indirect guaranties in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise assure a
creditor against loss in respect of, indebtedness or obligations of
others of the kinds referred to in clause (i) or (ii) above, and (iv)
liabilities in respect of unfunded vested benefits under plans covered
by Title IV of ERISA;
6.03 LIENS. Create or permit to exist any lien against any of Borrower's
property except those created under the Collateral Documents and liens
for taxes not yet due and payable, deposits or pledges in connection
with or to secure payment of workmen's compensation, unemployment
insurance or other social security or in connection with the good faith
context of any tax lien.
6.04 LOANS, INVESTMENTS. Make loans or advances to or investments in any
person or entity except investments in U.S. Government securities and
except investments by way of acquisitions of assets or equity interests
in any person or entity up to an aggregate amount of $750,000 as long as
Borrower is in compliance with all the terms of this Agreement
(including the financial condition requirements) both before and after
any such acquisition;
6.05 GUARANTY. Guarantee or become liable in any way as surety for any
liability or obligation of any other person or entity except by
endorsement of instruments for deposit or collection in the ordinary
course of business;
6.06 MERGER OR SALE. Merge into or consolidate with any corporation or other
entity; or sell, lease, assign or otherwise transfer or dispose of all
or any material portion of its assets except for sales of inventory in
the ordinary course of business; or
6.07 NATURE OF BUSINESS. Materially change the scope or nature of its
business.
7. DEFAULT
If any of the following events shall occur, it shall be an event of
default ("Event of Default"):
9
7.01 NON-PAYMENT. Borrower fails to pay any principal of either Note or any
other sums payable by Borrower to Bank pursuant to this Agreement when
due, including any part of the Balance which exceeds the Borrowing Base
and which is due on demand pursuant to Section 1.01.6, or Borrower fails
to pay any interest on either Note within 10 days after any such
interest is due;
7.02 REPRESENTATIONS. Any representation or warranty made by Borrower herein
or in connection herewith proves to have been incorrect in any material
respect when made;
7.03 BREACH OF NEGATIVE COVENANTS. Borrower fails to observe or comply with
any of the covenants in Section 6 of this Agreement;
7.04 BREACH OF COVENANTS. Borrower fails to perform or observe any other
term, covenant or agreement contained in this Agreement (other than
those referred to in Section 7.01 and 7.03) or in any Collateral
Document and such failure has not been cured within ten (10) days after
Bank has notified Borrower of such failure;
7.05 DEFAULT ON OTHER DEBT. Borrower shall fail to pay any Debt of Borrower
in excess of $100,000 (other than Debt evidenced by the Notes) or any
interest or premium thereon when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and such failure
shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Debt; or any other default
or event under any agreement or instrument relating to any such Debt
shall occur and shall continue after the applicable grace period, if
any, specified in such agreement or instrument, if the effect of such
default or event is to accelerate, or to permit the acceleration of, the
maturity of such Debt; or any such Debt shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), prior to the stated maturity thereof; it being
understood that for purposes of this Section 7.05 Debt shall not include
any of Borrower's accrued warranty expense;
7.06 INSOLVENCY. Borrower shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against Borrower
seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment
of a receiver, trustee, or other similar official for it or for any
substantial part of its property and, if instituted against Borrower,
shall remain undismissed for a period of thirty days; or Borrower shall
take any corporate action to authorize any of the actions set forth
above in this subsection;
7.07 JUDGMENTS. Any judgment or order for the payment of money in excess of
$250,000 shall be rendered against Borrower and either (i) enforcement
proceedings shall have been commenced by any creditor upon such judgment
or order or (ii) there shall be any period of 10 consecutive days during
which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or
7.08 CHANGE IN CONTROL. A majority of the members of the Board of Directors
of Borrower cease to be members who were members of such Board on the
date hereof or were nominated for election or elected to such Board with
the approval of a majority of members who were members of such Board on
the date hereof.
8. REMEDIES
Upon the occurrence of any Event of Default, Bank shall have the right
by notice to Borrower:
8.01 FURTHER LOANS. To terminate its commitment to make Advances;
8.02 ACCELERATION. To declare the Line Balance and the balance of the Term
Loan and all interest accrued thereon and all other amounts payable
under this Agreement to be immediately due and payable whereupon all
such indebtedness of Borrower to Bank shall become and be immediately
due and payable
10
without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by Borrower; and
8.03 OTHER RIGHTS. To exercise any other rights or remedies available to it
whether under the Collateral Documents or at law or in equity.
9. MISCELLANEOUS
9.01 WAIVER; AMENDMENTS. No waiver by Bank or any amendment of any provision
of this Agreement, nor any consent of Bank to any failure to comply with
the terms hereof by Borrower, shall be effective unless made in writing
and signed by Bank. No waiver by Bank of any default or of any right to
enforce this Agreement shall operate as a waiver of any other default,
or of the same default on a future occasion, or of the right to enforce
this Agreement on any future occasion. No delay in or discontinuance of
the enforcement of this Agreement, nor the acceptance by Bank of
installments of principal or interest after the occurrence of any Event
of Default, shall operate as a waiver of any default.
9.02 RIGHTS CUMULATIVE. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies afforded by any
security agreement, promissory note or other agreement executed in
connection herewith, or provided by law. Bank's remedies may be
exercised concurrently or separately, in any order, and the election of
one remedy shall not be deemed a waiver of any other remedy.
9.03 EXPENSES. In addition to the fees specified elsewhere in this Agreement
but subject to the limitations on such fees, Borrower agrees to pay to
Bank on demand all expenses, including reasonable fees and expenses of
attorneys, paid or incurred by Bank in connection with the creation and
perfection of Bank's security interests in collateral, the collection of
the Term Loan or the Advances made pursuant to this Agreement, or the
protection, preservation or enforcement of Bank's rights hereunder and
in property pledged or granted as collateral.
9.04 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of Borrower, Bank and their respective successors and
assigns. However, Borrower shall not have the right to assign or
otherwise transfer any rights in or under this Agreement without Bank's
prior written consent. Bank reserves the right to sell, assign,
transfer, negotiate or grant participations in the Term Loan or the
Advances provided for herein. In connection therewith Bank may disclose
all documents and information which Bank now has or may hereafter
acquire relating to the Term Loan or the Advances, Borrower, Borrower's
business or any of the Collateral.
9.05 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado.
9.06 NOTICES. All notices, requests and demands given to or made upon either
party must be in writing and shall be deemed to have been given or made
when personally delivered or two (2) days after having been deposited in
the United States Mail, first class postage prepaid, addressed as
follows:
If to Borrower: QualMark Corporation If to Bank: U.S. Bank National Association
Attn: Xx. Xxxxxx Xxxxxx Attn: Xxxxxxx Xxxxxx
0000 X. 000xx Xxxxxx Xxxxxxxxxx Xxxx Xxxxxxxxxx
Xxxxxx, XX 00000 000 00xx Xx.
Xxxxxx, XX 00000
9.07 ACCOUNTING TERMS. All accounting terms not specifically defined herein
shall be construed in accordance with generally accepted accounting
principles consistently applied, except as otherwise stated herein.
9.08 RECITALS. The recitals to this Agreement and any definitions set forth
therein are made a part hereof and incorporated in this Agreement.
11
9.09 ENTIRE AGREEMENT The following documents contain the entire agreement
between the parties concerning the subject matter hereof: this
Agreement, the Notes and the Collateral Documents (collectively, the
"relevant documents"). Any representation, understanding or promise
concerning the subject matter hereof, which is not expressly set forth
in any of the relevant documents, shall not be enforceable by any party
hereto or its successors or assigns. In the event of any conflict or
inconsistency between the terms of this Agreement and the terms of any
other relevant document, the terms of this Agreement shall govern.
9.10 SEVERABILITY. The unenforceability of any provision of this Agreement
shall not affect the enforceability or validity of any other provision
hereof.
9.11 JURY TRIAL WAIVER. BANK AND BORROWER EACH IRREVOCABLY WAIVES ITS RIGHT
TO A JURY TRIAL IN ANY ACTION OR PROCEEDING OF ANY ISSUE, CLAIM,
COUNTERCLAIM OR OTHER CAUSE OF ACTION, WHETHER IN CONTRACT OR TORT,
BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE CREDIT EXTENDED
HEREUNDER, ANY COLLATERAL PROPERTY SECURING SUCH CREDIT, OR ANY OTHER
AGREEMENT OR DEALINGS RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Agreement the date first
stated above for the purposes set forth herein.
QUALMARK CORPORATION U.S. BANK NATIONAL ASSOCIATION
By: By:
-------------------------------- --------------------------------
Title: Title:
----------------------------- -----------------------------
12
EXHIBIT A
[Interest Rate - Reserve Adjusted LIBOR Rate-Fixed Interest Periods]
This Exhibit A contains provisions expressly incorporated into that certain
promissory note (the "Note") dated December 22, 1998 in the original
principal amount of $_______________ executed by QualMark Corporation (the
"Borrower") and payable to the order of U.S. Bank National Association (the
"Bank"). In the event of any inconsistency between the provisions of this
Exhibit A and the terms of the Note, the terms of this Exhibit A shall
control.
1. DEFINITIONS. Unless otherwise defined in the Note, capitalized
terms shall have the following meanings:
"ADVANCE": Each amount borrowed by the Borrower under the credit
facility between the Borrower and the Bank and evidenced by the Note to which
this Exhibit A is attached. Advances may be either LIBOR Rate Advances or
Reference Rate Advances.
"BOARD": The Board of Governors of the Federal Reserve System.
"BUSINESS DAY": Any day of the year on which the Bank's main Denver
office is open for carrying on substantially all of its business and which is
also a day for trading by and between banks in United States dollar deposits
in the interbank Eurodollar market and a day on which banks are open for
business in New York City.
"EUROCURRENCY RESERVE RATE": A percentage equal to the daily average
during the applicable Interest Period of the aggregate maximum reserve
requirements (including all basic, supplemental, marginal and other
reserves), as specified under Regulation D of the Board, or any other
applicable regulation that prescribes reserve requirements applicable to
Eurocurrency liabilities (as presently defined in Regulation D) or applicable
to extensions of credit by member banks the rate of interest on which is
determined with regard to rates applicable to Eurocurrency liabilities.
Without limiting the generality of the foregoing, the Eurocurrency Reserve
Rate shall reflect any reserves required to be maintained by the Bank against
(i) any category of liabilities that includes deposits by reference to which
the LIBOR Rate is to be determined, or (ii) any category of extensions of
credit or other assets that includes loans or advances having an interest
rate based upon the LIBOR Rate. Any LIBOR Rate Advance shall be deemed to be
"Eurocurrency liability" as defined in Regulation D of the Board.
"INTEREST PERIOD": as to any LIBOR Rate Advance, a period commencing
on (and including) the date the funds of such LIBOR Rate Advance are advanced
or the date the immediately preceding Interest Period ends, and ending on the
numerically corresponding day in the calendar month at the end of whichever
period has been specified in the Borrower's Interest Period Election,
PROVIDED, HOWEVER, that (i) if any Interest Period would otherwise end on a
day which is not a Business Day, such Interest Period shall be extended to
the next succeeding Business Day unless such next succeeding Business Day
falls in another calendar month, in which case such Interest Period shall end
on the next preceding Business Day; (ii) any Interest Period which begins on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the calendar month at
the end of such Interest Period; (iii) interest shall accrue from and
including the first day of the Interest Period to but excluding the last day
of such Interest Period, and (iv) no Interest Period applicable to any LIBOR
Rate Advance may end after the maturity date of the Note.
"INTEREST PERIOD ELECTION": The number of months in any Interest
Period as selected by the Borrower or as otherwise determined in accordance
with Section 2 of this Exhibit A.
"LIBOR RATE": The offered rate for deposits in United States Dollars
for delivery of such deposits on the first day of an Interest Period, for the
number of days comprised therein, which appears on the Reuters Screen LIBO
Page as of 11:00 a.m., London time, on the day that is two Business Days
preceding the first day of the Interest Period. If at least two rates appear
on the Reuters Screen LIBO page, the rate for such Interest Period shall be
the arithmetic mean of such rates (rounded to the nearest 1/100th). If fewer
than two rates appear, the rate for such Interest Period shall be determined
by the Bank based on rates offered to banks for United States Dollar deposits
in the interbank Eurodollar market. "Reuters Screen LIBO Page" means the
display designated as page "LIBO" on the
13
Reuters Monitor Money Rates Service (or such other page as may replace the
LIBO Page on that service for the purpose of displaying London interbank
offered rates of major banks for United States Dollar deposits).
"LIBOR RATE ADVANCE": Any Advance as to which the Borrower elects an
interest rate per annum based upon the LIBOR Rate.
"MARGIN": Whatever interest rate factor (sometimes known as the
spread) is to be added to the Reserve Adjusted LIBOR Rate as specified in the
Note or the credit facility between the Borrower and the Bank.
"RESERVE ADJUSTED LIBOR RATE": With respect to each LIBOR Rate
Advance, the rate per annum (rounded to the nearest 1/100th) equal to the
rate obtained by dividing (a) the LIBOR Rate for the first day of the
applicable Interest Period, by (b) a percentage equal to 1.00 minus the
Eurocurrency Reserve Rate. The Reserve Adjusted LIBOR Rate as to any LIBOR
Rate Advance then outstanding shall be adjusted automatically on and after
the date as to which any change in the reserve requirement percentage
referred to above is published by the Board (or any successor thereto),
regardless of whether such change falls within an existing Interest Period.
"REFERENCE RATE": The per annum interest rate publicly announced
from time to time as such by or on behalf of the Bank, which is not
necessarily the lowest rate charged by the Bank; and the Bank may lend to its
customers at per annum rates that are at, above or below the Reference Rate.
The Reference Rate shall be adjusted automatically from time to time
simultaneously with any change in the Reference Rate.
"REFERENCE RATE ADVANCE": Any Advance as to which the interest rate
per annum is based upon the Reference Rate.
2. INTEREST PERIOD ELECTIONS. Interest Period Elections for
purposes hereof shall be determined as follows:
Borrower shall make Interest Period Elections, from time to time.
Borrower shall be entitled to select Interest Periods of 1,2,3 or 6 months in
duration; and the terms of Section 3 below shall apply.
3. DETERMINATION OF RATES. If the Borrower has chosen to make
periodic Interest Period Elections, then not later than 12:00 noon (Denver
time) two Business Days prior to the Business Day on which any LIBOR Rate
Advance is made or is to be made or which is the first day of the selected
Interest Period therefor, the Borrower shall give notice to the Bank
specifying the duration of the Interest Period as specified above. If, upon
the expiration of any Interest Period, the Borrower has failed to elect the
duration of a new Interest Period, the Advance shall automatically become a
Reference Rate Advance bearing interest at the Reference Rate, plus the
Margin.
4. INTEREST RATE NOT ASCERTAINABLE/PREPAYMENTS. The following
provisions apply to all Advances:
(a) If it becomes unlawful for the Bank to make any LIBOR Rate
Advance, or the Bank determines (which determination will be binding on the
Borrower) that: (i) adequate and reasonable means do not exist for
determining the interest rate applicable for any LIBOR Rate Advance; or (ii)
the Bank cannot obtain funds in the amount or for the maturity in the market
relating to any LIBOR Rate Advance, the Bank will not be required to make or
continue to maintain any such LIBOR Rate Advance and all such LIBOR Rate
Advances then existing shall automatically convert to Reference Rate Advances
bearing interest at the Reference Rate plus the Margin; and the Borrower
shall be required to pay the Make-Whole Fee described in sub-section (b) (ii)
below upon such conversion. In addition, if there is a change in law or
regulation as a result of which the Bank determines that the interest rate
applicable to any LIBOR Rate Advance no longer represents the effective cost
to the Bank for funding such LIBOR Rate Advance, the Borrower will pay to the
Bank an amount sufficient to cause the Bank to receive interest at the rate
that reflects the increase in effective rate caused by the change. Bank
agrees that for purposes of this sub-section (a) Borrower shall not be
treated any differently or more severely than any other customer of the Bank
being charged interest based on the LIBOR Rate.
(b) (i) The Borrower understands that upon the making by the
Bank of any LIBOR Rate Advance, the Bank intends to enter into funding
arrangements with third parties (based in whole or in part on such LIBOR Rate
Advance) on terms and conditions which could result in losses to the Bank if
the LIBOR Rate Advance is not made or does not remain outstanding for the
entire Interest Period. Therefore, if either (A) after the Borrower
14
requests a LIBOR Rate Advance, the LIBOR Rate Advance is not made on the
first day of the specified Interest Period for any reason (including, but not
limited to, the failure of the Borrower to comply with one or more of the
conditions precedent to any Advance) other than a wrongful failure by the
Bank to make the LIBOR Rate Advance, or (B) such LIBOR Rate Advance is
prepaid in whole or in part prior to the last day of the applicable Interest
Period, whether as a result of acceleration of or demand under the Note,
voluntary prepayment, mandatory prepayment, termination of this arrangement,
operation of law or otherwise (the full amount of the Advance requested in
the case of clause (i)(A) above and the full amount of the Advance prepaid in
the case of clause (i)(B) above (each being referred to as an "Affected
Amount")), the Borrower agrees to pay on demand to the Bank, as liquidated
damages and not as a penalty and in addition to any other payments required
hereunder, the Make-Whole Fee applicable to the Affected Amount.
(ii) The Make-Whole Fee applicable to each Affected Amount
shall be the sum of (A) the present value of the excess, if any, of (1) the
amount of interest that would have accrued on the Affected Amount during the
remaining portion of the applicable Interest Period, calculated at the
interest rate that otherwise would have been applicable to the Affected
Amount, over (2) the amount of interest that would accrue on the Affected
Amount during the remaining portion of the applicable Interest Period,
calculated using the Reserve Adjusted LIBOR Rate that would be applicable to
a loan in the Affected Amount having a maturity corresponding with the last
day of the applicable Interest Period, plus (B) all out-of-pocket costs and
expenses (including, without limitation, any interest paid by the Bank to
lenders of funds borrowed by it to make or carry any LIBOR Rate Advance and,
to the extent not capable of being determined in accordance with clause
(A)(2) above, any loss sustained by the Bank in connection with the
re-deployment of funds with respect to any such LIBOR Rate Advance) incurred
by the Bank. Present value, as used above, will be determined in accordance
with standard financial practice, using the Reserve Adjusted LIBOR Rate
applicable under clause (A)(2) above as the discount factor.
(iii) The Make-Whole Fee will be determined (A) in the case
of situations falling within clause (i)(A) above, on the first day of the
Interest Period that would have applied to the Affected Amount, and (B) in
the case of situations falling within clause (i)(B) above, the date on which
the Affected Amount is prepaid.
5. BANK'S FUNDING. The Bank shall be entitled to fund and maintain
its funding of all or any part of the Advances in any manner it elects; it
being understood, however, that for purposes of this Exhibit A, all
determinations hereunder shall be made as if the Bank had actually funded and
maintained each LIBOR Rate Advance during the Interest Period for such
Advance through the purchase of deposits having a term corresponding to such
Interest Period and bearing an interest rate equal to the Reserve Adjusted
LIBOR Rate for such Interest Period.
6. BANK'S RECORDS. The Bank's records shall be rebuttably
presumptive evidence of the dates for each Interest Period and the interest
rate for each such period as well as the dates and amounts of payments of
principal and interest on the Note.
15
EXHIBIT B
BORROWING BASE CERTIFICATE
of
QUALMARK CORPORATION
"Borrower"
As Of The Period Ending
------------------------------
This Certificate is submitted to U.S. Bank National Association ("Bank") in
connection with the Revolving Credit and Term Loan Agreement dated as of
December 22, 1998, as it may be amended from time to time (the "Agreement")
between Bank and Borrower. Capitalized terms used herein are defined in the
Agreement.
The undersigned hereby certifies to Bank that the undersigned is familiar
with the following financial information which has been taken from Borrower's
books and records which are complete and accurate and that the following
calculations of the Borrowing Base the remaining amount available under the
Borrowing Base, aging of accounts receivable and categories of inventory are
true and correct:
BORROWING BASE
--------------
A. 1. Total Accounts
Receivable:
Exclusions per Agreement:
No invoice for A/R
A/R over 60 days past due
--------------
Disputed A/Rs
--------------
Federal government
contract A/Rs
--------------
Foreign A/Rs
--------------
Affiliates A/Rs
--------------
10% rule
--------------
Doubtful Value A/Rs
--------------
Bonded A/Rs
--------------
No first lien on A/Rs
--------------
2. Subtotal of excluded A/Rs:
--------------
3. Eligible Accounts
(Line 1 - Line 2) x 85%
-------------- --------------
B. 4. Total Inventory:
Exclusions per Agreement
--------------
Work-in-Process
--------------
Obsolete, defective inventory
--------------
Foreign inventory
--------------
No first lien on inventory
--------------
5. Subtotal of excluded inventory
--------------
6. Eligible Inventory
(Line 4 - Line 5) x 30%
-------------- --------------
16
C. 7. Total Equipment (net book value):
--------------
Exclusions per Agreement
8. Foreign Equipment
--------------
9. Eligible Equipment (Line 7 - Line 8) x 50%
-------------- --------------
D. 10. Borrowing Base:
(Line 3 + Line 6 + line 9) ,
-------------------
11. Less - Balance (i.e. outstandings
under Revolving Credit Line and Term Loan) ,
-------------------
12. [Excess/Deficit] Borrowing Base: ,
-------------------
Aging of Accounts Receivable Categories of Inventory
---------------------------- -----------------------
Current: Raw Materials
--------------- ---------------
1-30 days past due: Work in Process
--------------- ---------------
31-60 days past due: Finished Goods
--------------- ---------------
Over 60 days past due:
---------------
The undersigned further certifies that (a) Borrower is in compliance with all
of the covenants contained in the Agreement, and (b) there has been no Event
of Default under the Agreement which has not been cured or waived, and no
Potential Default has occurred.
By:
------------------------------
Title:
---------------------------
Date:
----------------------------
17
EXHIBIT C
CERTIFICATE OF COMPLIANCE
of
QUALMARK CORPORATION
"Borrower"
As Of The Period Ending
------------------------------
This Certificate is submitted to U.S. Bank National Association ("Bank") in
connection with the Revolving Credit and Term Loan Agreement dated as of
December 22, 1998, as it may be amended from time to time (the "Agreement")
between Bank and Borrower. Capitalized terms used herein are defined in the
Agreement.
The undersigned hereby certifies to Bank that the undersigned is familiar
with the following financial information which has been taken from Borrower's
books and records which are complete and accurate and that the following
calculations of the financial covenants specified in the Agreement are true
and correct:
FINANCIAL COVENANT COMPLIANCE
In Compliance
Covenant Required Actual Yes/No
-------- -------- ------ ------
Min. EBITDA/Interest Expense > 2.00:1
- ---------- ----------
Min. Free Cash Flow/Debt Service > 1.15:1
- ---------- ----------
Max. Cash Flow Leverage Ratio < 3.00:1
- ---------- ----------
Min. Tangible Net Worth > $4,000,000
- ---------- ----------
The undersigned further certifies that (a) Borrower is in compliance with all
of the covenants contained in the Agreement, and (b) there has been no Event
of Default under the Agreement which has not been cured or waived, and no
Potential Default has occurred.
By:
--------------------------------
Title:
-----------------------------
Date:
------------------------------
18
SCHEDULE 3.03
Litigation
19
BORROWER'S SECURITY AGREEMENT
-------------------------------------------------------------------------------
Borrower: QUALMARK CORPORATION Bank: U.S. BANK NATIONAL ASSOCIATION
Address: 000 00XX XXXXXX
XXXXXX, XX 00000
Address: 0000 X. 000XX XXXXXX
XXXXXX, XX 00000
-------------------------------------------------------------------------------
SECURITY INTEREST. THIS SECURITY INTEREST SECURES (CHECK ONE):
X the payment and performance of each and every debt, liability and
obligation of every type and description which the Borrower may now or
at any time owe to the Bank, whether now existing or hereafter arising,
direct or indirect, due or to become due, absolute or contingent,
primary or secondary, liquidated or unliquidated, independent, joint,
several, or joint and several; or
the payment of a promissory note dated ____________, executed and
delivered by the Borrower to the Bank in the original principal sum of
$_________, with interest and other charges as therein provided: or
the payment of a ________________ dated __________________, executed and
delivered by the Borrower to the Bank in the original principal sum of
$____________, with interest and other charges as therein provided;
This security interest also secures all extensions, renewals and
replacements of the above described obligations. Such obligations are
hereinafter collectively referred to as the "Secured Obligations";
The Borrower grants the Bank a security interest in the following
property (hereinafter the "Collateral");
INVENTORY
X All inventory (as the term is defined in the applicable Uniform
Commercial Code) now owned or hereafter at any time acquired by Borrower
or in which Borrower obtains rights;
Specific inventory, described as follows:
EQUIPMENT
X All equipment (as the term is defined in the applicable Uniform
Commercial Code) now owned or hereafter at any time acquired by Borrower
or in which Borrower obtains rights:
Specific equipment, described as follows:
ACCOUNTS, INSTRUMENTS, CHATTEL PAPER, AND OTHER RIGHTS TO PAYMENT
X Each and every right of Borrower to the payment of money, whether such
right to payment now exists or hereafter arises, together with all other
rights and interests (including all liens and security interests) which
Borrower may at any time have by law or agreement against any account
debtor (as defined in the applicable Uniform Commercial Code) or other
obligor obligated to make any such payment or against any of the property
of such account debtor or other obligor;
Specific accounts, instruments, chattel paper and other rights to
payment, described as follows:
GENERAL INTANGIBLES
X All intangibles (as defined in the applicable Uniform Commercial Code)
now owned or hereafter at any time acquired by Borrower;
Specific intangibles, described as follows:
The Collateral shall include (i) all substitutions and replacements for and
proceeds of any and all of the foregoing property, and in the case of all
tangible Collateral, all accessions, accessories, attachments, parts,
equipment and repairs now or hereafter attached or affixed to or used in
connection with any such goods and (ii) all warehouse receipts, bills of
lading and other documents of title now or hereafter coverings such goods.
Borrower warrants, represents and agrees that:
1. The Collateral will X will not be acquired with the
proceeds of the loan or advance made on or about the date hereof. If the
Collateral will be so acquired, the Bank is authorized to disburse such
proceeds directly to the seller(s) of the Collateral.
2. If part of the Collateral now constitutes, or as and when
acquired by Borrower will constitute, Inventory and Equipment (as those terms
are defined in the applicable Uniform Commercial Code) such collateral is or
will be kept at the following location or locations:
SEE ATTACHED EXHIBIT A HERETO.
------------------------------------------------------------------
-------------------------------------------------------------------------
and will not be removed from such location or locations unless, prior to any
such removal, Borrower has given written notice to the Bank of the location
or locations to which the Borrower desires to remove the same, and the Bank
has given its written consent to such removal. If any of the locations where
Borrower now or hereafter keeps the Collateral are leased by the Borrower,
the Borrower shall at Bank's request, obtain a Landlord's waiver in a form
satisfactory to Bank.
3. Borrower's place of business, or chief executive office if
Borrower has more than one place of business, is located at 0000 XXXX 000xx
XXXXXX, XXXXXX, XX 00000 Borrower will notify the Bank in writing of any
change in location of Borrower's place of business or chief executive office.
4. If any Collateral is or will become a mixture, the recorded owner of
the real estate is N/A___________ and the legal description of the real estate
is N/A____________________.
Borrower will not permit any tangible Collateral to become part of or to be
affixed to any real property without first assuring to the reasonable
satisfaction of the Bank that its security interest will be prior and senior to
any interest or lien then held or thereafter acquired by any other party.
5. If any of the Collateral is goods of a type normally used in more
than one state (whether or not actually so used), Borrower will
contemporaneously herewith furnish the Bank a list of such Collateral showing
the states wherein the same is or will be used, and such list will identify
any Collateral covered by certificates of title and the issuing states
thereof. Hereafter Borrower will notify the Bank in writing of any other
states in which any of the Collateral is so used or which have issued
certificates of title covering any of the Collateral.
6. Borrower has or will acquire title to and will at all times keep
the Collateral free of all liens and encumbrances, except the security
interest created hereby, and has full power and authority to execute this
Security Agreement, to perform Borrower's obligations hereunder and to
subject the Collateral to the security interest created hereby. Borrower
will pay all fees, assessments, charges or taxes arising with respect to die
Collateral. There is no encumbrance or security interest with respect to all
or any part of the Collateral which either (i) is superior to the Bank's
security interest hereunder, or (ii) has not been disclosed to the Bank by
the Borrower. All costs of keeping the Collateral free of encumbrances and
security interests prohibited by this Agreement and of removing same if they
should arise shall be borne and paid by Borrower.
7. Each right to payment and each instrument, document, chattel
paper and other agreement constituting or evidencing Collateral is (or will
be when arising or issued) a valid, genuine and legally enforceable
obligation, subject to no defense, set-off or counterclaim (other than those
arising in the ordinary course of business) of the account debtor or other
obligor named therein or in Borrower's records pertaining thereto as be
obligated to pay such obligation. Borrower will not agree to any material
modification, amendment or cancellation of any such obligation without Bank's
prior written consent, and will not subordinate any such right to payment to
claims of other creditors of such account debtor or other obligor.
8. Borrower will at any time or times hereafter execute such
financing statements and other documents and instruments and perform such
acts as the Bank may from time to time request to establish, maintain,
perfect and enforce a valid security interest in the Collateral, and will pay
all costs of filing and recording.
9. Borrower will keep all tangible Collateral and all lands, plants,
buildings and other property now or hereafter owned or used in connection
with its business in good condition, normal depreciation excepted, and
insured against loss or damage by fire (including so-called extended
coverage), theft, physical damage, and against such other risks, including
without limitation public liability, in such amounts, in such companies and
upon such terms as Bank may reasonably require. Borrower will obtain loss
payable endorsements on applicable insurance policies in favor of Borrower
and Bank as their interests may appear and at Bank's request will deposit the
insurance policies with Bank. Borrower shall cause each insurer to agree, by
Policy endorsement or by issuance of a certificate of insurance or by
independent instrument furnished to Bank, that such insurer will give thirty
(30) days written notice to Bank before such policy will be altered or
cancelled. Borrower irrevocably appoints Bank as Borrower's attorney in fact
to make any claim for, to negotiate settlement of claims, to receive payment
for and to execute and endorse any documents, checks or other instruments in
payment for loss, theft, or damage under any insurance policy covering the
Collateral.
10. Borrower will promptly notify Bank of any loss or material damage
to any Collateral or of any adverse change, known to Borrower. in the
prospect of payment of any sums due on or under any instrument, chattel
paper, account or general intangible constituting Collateral.
11. Upon Bank's request (whether a Default as hereinafter defined,
has occurred) Borrower will promptly deliver to Bank any instrument, document
or chattel paper constituting Collateral.
12. Upon Default by Borrower in performance of its obligations
hereunder, Bank shall have the authority, but shall not be obligated to: (i)
effect such insurance and necessary repairs and pay the premiums therefor and
the costs thereof; and (ii) pay and discharge any fees, assessments, charges,
taxes, liens and encumbrances on the Collateral. All sums so advanced or
paid by the Bank shall be payable by Borrower on demand with interest at the
maximum rate allowed by law and shall be a part of the Secured Obligations.
13. Borrower will not sell, lease or otherwise dispose of the
Collateral other than in ordinary course of its business at prices
constituting the then fair market value thereof.
14. The Bank shall have the authority (whether or not a Default has
occurred), but shall not he obligated to: (a) notify any or all account
debtors and obligors on instruments constituting Collateral of the existence
of the Bank's security interest and to pay or remit all sums due or to become
due directly to the Bank or its nominee; (b) place on any chattel paper
received as proceeds a notation or legend showing the Bank's security
interest; (c) in the name of the Borrower or otherwise, to demand, collect,
receive and receipt for, compound, compromise, settle, prosecute and
discontinue any suits or proceedings in respect of any or all of the
Collateral; (d) take any action which the Bank may deem necessary or
desirable in order to realize an the Collateral, including, without
limitation, the power to perform any contract, to endorse in the name of
Borrower any checks, drafts, notes, or other instruments or documents
received in payment of or on account of the Collateral; (e) to place upon
Borrower's books and records relating to the accounts and general intangibles
covered by the security interest granted hereby a notation or legend stating
that such account or general intangible is subject to a security interest
held by the Bank, and (f) after any Default, to enter upon and into and take
possession of all or such part(s) of the properties of Borrower, including
lands, plants, buildings, machinery, equipment and other property as may be
necessary or appropriate in the judgment of the Bank to permit or enable the
Bank to manufacture, produce, process, store or sell or complete the
manufacture, production, processing, storing or sale of all or any part of
the Collateral, as the Bank may elect, and to use and operate said properties
for said purposes and for such length of time as the Bank may deem necessary
or appropriate for said purposes without the payment of any compensation to
Borrower therefor.
15. Borrower will collect all accounts until receipt of notice from
the Bank to notify all account debtors of the existence of the Bank's
security interest and to direct such account debtors to pay or remit all sums
due or to become due directly to the Bank or its nominee. Borrower will hold
all of the proceeds of such collections and all returned and repossessed
goods in trust for the Bank, and will not commingle the same with any other
funds or property of the Borrower, and will deliver the same forthwith to the
Bank at its request; provided, however, that with respect to returned and
repossessed goods Borrower will provide written notice to the Bank of each
return or repossession and will on demand pay to the Bank the full invoice or
contract price thereof.
16. Borrower will keep accurate books, records and accounts with
respect to the Collateral, and with respect to the general business of
Borrower, and will make the same available to the Bank at its request for
examination and inspection; and will make and render to the Bank such
reports, accountings and statements as the Bank from time to time may request
with respect to the Collateral; and will permit any authorized representative
of the Bank to examine and inspect, during normal business hours, any and all
premises where the Collateral is or may be kept or located.
17. The occurrence of any of the following events will constitute a
Default: (a) failure of Borrower, or of any co-maker, indorser, surety or
guarantor to pay when due any amount payable under any of the Secured
Obligations; (b) failure to perform any agreement of Borrower contained
herein or in any other agreement with the Bank; (c) any statement,
representation or warranty of Borrower made herein or at any time furnished
to the Bank is untrue in any respect as of the date made; (d) entry of any
judgment against Borrower; (e) Borrower becomes insolvent or is generally not
paying its debts as such debts become due; (f) appointment of or assignment
to a custodian, as that term is defined in the United States Bankruptcy Code,
for any property of Borrower, or loss, substantial damage to, destruction,
theft, encumbrance, levy, seizure or attachment of any portion of the
Collateral; (g) commencement of any proceeding or filing of a petition by or
against Borrower under the provisions of the United States Bankruptcy Code
for liquidation, reorganization or adjustment of debts, or under any
insolvency law or other statute or law providing for the modification or
adjustment of the rights of creditors; (h) death of any Borrower who is a
natural person or of any partner of any Borrower which is a partnership if
such death causes the termination of the partnership; (i) dissolution,
consolidation, or merger, or transfer of a substantial part of the property
of any Borrower which is a corporation or a partnership; (j) such a change in
the condition or affairs (financial or otherwise) of Borrower or any
co-maker, indorser, surety or guarantor of any of the Secured Obligations as
in the opinion of the Bank impairs the Bank's security or increases its risk;
or (k) the Bank deems itself insecure for any reason whatsoever.
18. Whenever a Default shall exist, the Bank may, at its option and
without demand or notice, declare all or any part of the Secured Obligations
immediately due and payable, and the Bank may exercise, in addition to the
rights and remedies granted hereby, all rights and remedies of a secured
party under the Uniform Commercial Code or any other applicable law.
19. Borrower agrees, in the event of Default, to make the collateral
available to the Bank at a place or places to be designated by the Bank,
which is reasonably convenient to both parties, and to pay all costs of the
Bank, including reasonable attorney's fees, in the collection of any of the
Secured Obligations and the enforcement of any of the Bank's rights. If any
notification of intended disposition of any of the Collateral is required by
law, such notification shall be deemed properly given if mailed a reasonable
time before such disposition, postage prepaid, addressed to the Borrower at
the address shown above. Bank's duty of care with respect to Collateral in
its possession shall be deemed fulfilled if Bank exercises reasonable care in
physically safekeeping such Collateral or, in the case of Collateral in the
custody or possession of a bailee or other third person, exercises reasonable
care in the selection of the bailee or other third person, and Bank need not
otherwise preserve, protect, insure or care for any Collateral. Bank shall
not be obligated to preserve any rights Borrower may have against prior
parties, to realize on the Collateral at all or in any particular manner or
order, or to apply any cash proceeds of Collateral in any particular order of
application. No delay or failure by the Bank in the exercise of any right or
remedy shall constitute a waiver thereof, and no single or partial exercise
by the Bank of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy.
20. If more than one party shall sign this Agreement, the term
"Borrower" shall mean all such parties, and each of them and all such parties
shall be jointly and severally obligated thereunder.
21. This agreement is governed by the laws of the state in which the
Bank is located.
22. See Addendum to Borrower' s Security Agreement attached hereto
and incorporated herein by this reference.
Executed this, 22ND day of DECEMBER 1998
------------ ---------------------------
BOPROWER(S) QUALMARK CORPORATION
By: SIGNATURE/ W. Xxxxxxx Xxxxxx Its: SIGNED TITLE/ President and CEO
-------------------------------------
W. Xxxxxxx Xxxxxx President and CEO
------------------
EXHIBIT A TO BORROWER'S SECURITY AGREEMENT
Locations for Qualmark Corporation are as follows:
0000 X. 000xx Xxxxxx
Xxxxxx, X0 00000
00 Xxxxxxx Xxxxxx, Xxxx XX,
Xxxxxxxxxxx, XX 00000
00000 Xxxxxxx Xxxx Xxxxx, #X-0,
Xxxxxxxxxx Xxxxx, XX 00000
00000 Xxxxxxxx Xxxx, Xxxx X,
Xxxxxxxxxx Xxxxx, XX 00000
Rush Lake Business Park
0000 Xxx Xxx. 0, Xxxxx 000
Xxx Xxxxxxxx, XX 00000
000 X. Xxxxxxx Xxxx., #000.
Xxxxxx Xxxx, XX 00000
000 Xxxxxxxxx Xxxxx, #000,
Xxxxxxxxxxx, XX 00000
0000 Xxxxxx Xxxxxx, Xxxxx X,
Xxxxx Xxxxx, XX 00000
ADDENDUM TO BORROWER'S SECURITY AGREEMENT
FROM QUALMARK CORPORATION ("BORROWER")
TO U.S. BANK NATIONAL ASSOCIATION ("BANK")
A. SPECIAL PROVISIONS CONCERNING TRADEMARKS
1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. Borrower represents
and warrants that it is the true and lawful exclusive owner of or otherwise
has the right to use the Marks listed in SCHEDULE A hereto and that, to the
best of Borrower's knowledge, said listed Marks include all material United
States marks registered in the United States Patent and Trademark Office that
Borrower owns as of the date hereof and that said registrations are valid,
subsisting and have not been cancelled. Borrower further warrants that it is
aware of no third party claim that any aspect of Borrower's present or
contemplated business operations infringes or will infringe any trademark,
service xxxx or trade name. Borrower represents and warrants that it is the
true and lawful owner of or otherwise has the right to use all U. S.
trademark registrations listed in SCHEDULE A hereto and that said
registrations are valid, subsisting, have not been cancelled and that
Borrower is not aware of any third-party claim that any of said registrations
is invalid or unenforceable, or is not aware that there is any reason that
any of said registrations is invalid or unenforceable. Borrower hereby
grants to Bank an absolute power of attorney to sign, upon the occurrence and
during the continuance of an event of Default, any document which may be
required by the United States Patent and Trademark Office in order to effect
an absolute assignment of all right, title and interest in each Xxxx and
record the same.
2. LICENSES AND ASSIGNMENTS. Except as otherwise permitted by the
Revolving Credit and Term Loan Agreement or this Agreement, Borrower hereby
agrees not to divest itself of any right under any Xxxx absent prior written
approval of Bank.
3. INFRINGEMENTS. Borrower agrees, promptly upon learning thereof,
to notify Bank in writing of the name and address of, and to furnish such
pertinent information that may be available with respect to, any party who
Borrower believes is infringing or diluting or otherwise violating in any
material respect any of Borrower's rights in and to any Xxxx, or with respect
to any party claiming that Borrower's use of any Xxxx violates in any
material respect any property right of that party.
4. MAINTENANCE OF REGISTRATION. Borrower shall, at its own expense,
diligently process all documents required to maintain trademark
registrations, including but not limited to affidavits of use and
applications for renewals of registration in the United States Patent and
Trademark Office, for all of its registered Marks, and shall pay all fees and
disbursements in connection therewith.
5. FUTURE REGISTERED MARKS. If any Xxxx registration issues
hereafter to Borrower as a result of any application now or hereafter pending
before the United States Patent and Trademark Office, within 30 days of
receipt of such certificate, Borrower shall deliver to Bank a copy of such
certificate, and an assignment for security in such Xxxx, to Bank and at the
expense of
Borrower, confirming the assignment for security in such Xxxx to Bank
hereunder, the form of such security to be substantially the same as the form
hereof or attached hereto or otherwise acceptable to Bank.
6. REMEDIES. If an event of Default shall occur and be continuing,
Bank may, by written notice to Borrower, take any or all of the following
actions: (i) declare the entire right, title and interest of Borrower in and
to each of the Marks and the goodwill of the business associated therewith,
together with all trademark rights and rights of protection to the same,
vested in Bank, in which event such rights, title and interest shall
immediately vest, in Bank, and Bank shall be entitled to exercise the power
of attorney referred to in Section I hereof to execute, cause to be
acknowledged and notarized and record said absolute assignment with the
applicable agency; (ii) take and use or sell the Marks and the goodwill of
Borrower's business symbolized by the Marks and the right to carry on the
business and use the assets of Borrower in connection with which the Marks
have been used; (iii) in connection with the exercise of any of the other
remedies provided for in this Agreement or any other related document, direct
Borrower to refrain, in which event Borrower shall refrain, from using the
Marks in any manner whatsoever, directly or indirectly, and, if requested by
Bank, change Borrower's corporate name to eliminate therefrom any use of any
Xxxx; and (iv) direct Borrower to execute such other and further documents
that Bank may reasonably request to further confirm the foregoing and to
transfer ownership of the Marks and registrations in the United States Patent
and Trademark Office to Bank.
B. SPECIAL PROVISIONS CONCERNING PATENTS, COPYRIGHTS AND TRADE SECRETS
1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. Borrower represents
and warrants that it is the true and lawful owner or licensee of all rights
in (i) all United States trade secrets and proprietary information necessary
to operate the business of Borrower (the "Trade Secret Rights"), (ii) the
Patents listed in SCHEDULE B hereto for Borrower and that said Patents
include, to the best of Borrower's knowledge, all material United States
patents that Borrower owns as of the date hereof and (iii) the Copyrights
listed in SCHEDULE C hereto for Borrower and that said Copyrights constitute,
to the best of Borrower's knowledge, all the material United States
copyrights registered with the United States Copyright Office that Borrower
now owns. Borrower further warrants that it has no knowledge of any third
party claim that any aspect of Borrower's present or contemplated business
operations infringes or will infringe any patent or any copyright or Borrower
has misappropriated any trade secret or proprietary information. Borrower
hereby grants to Bank an absolute power of attorney to sign, upon the
occurrence and during the continuance of any Event of Default, any document
which may be required by the United States Patent and Trademark Office or
United States Copyright Office, as the case may be, in order to effect an
absolute assignment of all right, title and interest in each Patent and
Copyright, and to record the same.
2. LICENSES AND ASSIGNMENTS. Except as otherwise permitted by the
terms of any credit agreement between Borrower and Bank or this Agreement,
Borrower hereby agrees not to divest itself of any right under any Patent or
Copyright absent prior written approval of Bank.
3. INFRINGEMENTS. Borrower agrees, promptly upon learning thereof, to
furnish Bank in writing with all pertinent information available to Borrower
with respect to any infringement, contributing infringement or active
inducement to infringe in any Patent or Copyright or to any claim that the
practice of any Patent or the use of any Copyright violates, in any material
respect, any property right of a third party, or with respect to any
misappropriation of any Trade Secret Right or any claim that practice of any
Trade Secret Right violates any property right of a third party.
4. MAINTENANCE OF PATENTS OR COPYRIGHTS. At its own expense,
Borrower shall make timely payment of all post-issuance fees required to
maintain in force rights under each Patent or Copyright, absent prior written
consent of Bank.
5. OTHER PATENTS OR COPYRIGHTS. Within 30 days of the acquisition or
issuance of a Patent or Copyright, Borrower shall deliver to Bank a copy of
said certificate or registration of, said Patent or Copyright, as the case
may be, with an assignment for security as to such Patent or Copyright, as
the case may be, to Bank and at the expense of Borrower, confirming the
assignment for security, the form of such assignment for security to be
substantially the same as the form hereof or attached hereto or otherwise
acceptable to Bank.
6. REMEDIES. If an event of Default shall occur and be continuing,
Bank may by written notice to Borrower, take any or all of the following
actions: (i) declare the entire right, title, and interest of Borrower in
each of the Patents and Copyrights vested in Bank, in which event such right,
title, and interest shall immediately vest in Bank, in which case Bank shall
be entitled to exercise the power of attorney referred to in Section I hereof
to execute, cause to be acknowledged and notarized and to record said
absolute assignment with the applicable agency; (ii) in connection with the
exercise of any of the other remedies provided for in this Agreement or any
other related document, take and practice or sell the Patents and Copyrights;
(iii) in connection with the exercise of any of the other remedies provided
for in this Agreement or any other related document, direct Borrower to
refrain, in which event Borrower shall refrain, from practicing the Patents
and Copyrights directly or indirectly; and (iv) direct Borrower to execute
such other and further documents as Bank may request further to confirm the
foregoing and to transfer ownership of the Patents and Copyrights to Bank.
Executed this 22nd day of December, 1998
BORROWER:
QUALMARK CORPORATION
By: SIGNATURE/ W. XXXXXXX XXXXXX
Name: PRINTED NAME/ W. XXXXXXX XXXXXX
Title: PRINTED TITLE/ PRESIDENT AND CEO
SCHEDULE A - TRADEMARKS
(to be provided by Borrower)
XXXX REG. NO. XXX.XXXX
-----------------------------------------------------------------------------
Accelerate the Future 2,2024,180 12/17/1996
Accelerate the Future 2,2024,180 12/17/1996
Accelerated Reliability Test 2,064,227 05/20/1997
ARTC 2,077,178 07/08/1997
AUTOSMEAR 2,136,851 02/17/1998
QUALMARK 2,037,258 02/11/1997
QUALMARK 2,037,258 02/11/1997
QUALMARK 2,040,369 02/25/1997
SCHEDULE B - PATENTS
(to be provided by Borrower)
PATENT PATENT NO. ISSUE DATE
------ ---------- ----------
APPARATUS AND METHOD FOR
THERMAL AND VIBRATIONAL
STRESS SCREENING 5,675,098 10/07/1997
APPARATUS AND METHOD FOR
THERMAL AND VIBRATIONAL
STRESS SCREENING 5,540,109 07/30/1996
APPARATUS FOR RAISING SHAKER
TABLE WITHIN THERMAL CHAMBER 5,517,857 05/21/1996
EXCITER MOUNTING FOR RANDOM
VIBRATION GENERATING TABLE 5,836,202 11/17/1998
EXCITER-MOUNTING FOR
SHAKER TABLE 5,589,637 I2/31/1996
RANDOM VIBRATION
GENERATING APPARATUS 0518954 08/14/1996
RANDOM VIBRATION
GENERATING APPARATUS 0 518 954 France
RANDOM VIBRATION
GENERATING APPARATUS 0 518 954 Germany
RANDOM VIBRATION
GENERATING APPARATUS 0 518 954 Italy
RANDOM VIBRATION
GENERATING APPARATUS 0 518 954 Luxembourg
RANDOM VIBRATION
GENERATING XXXXXXXXX 0 000 000 Xxxxxx
RANDOM VIBRATION
GENERATING APPARATUS 0 518 954 United Kingdom
RANDOM VIBRATION
GENERATING APPARATUS 5,365,788 11/22/1994
RANDOM VIBRATION
GENERATING APPARATUS 5,412,991 05/09/1995
VERSATILE MOUNTING FOR
CONTROL CONSOLE FOR
TESTING CHAMBER 5,813,541 09/29/1998
RANDOM VIBRATION
GENERATING TABLE 5,744,724 04/28/1998
SCHEDULE C - COPYRIGHTS
(to be provided by Borrower)
REGISTRATION PUBLICATION COPYRIGHT
NUMBER DATE TITLE
NONE
STATE OF COLORADO }
} ss.:
CITY AND COUNTY OF DENVER }
On this ______ day of December, 1998, before me personally came W. XXXXXXX
XXXXXX (PRINTED) who, being by me duly sworn, did state as follows: that
[s]he is PRESIDENT-CEO (PRINTED) of QUALMARK CORPORATION, that [s]he is
authorized to execute the foregoing Assignment of Security Interest on
behalf of said corporation and that [s] he did so by authority of the Board
of Directors of said corporation.
XXXXX XXXXX (SIGNATURE AND NOTARY STAMP)
-------------------------------------------
Notary Public 8-17-2001 (PRINTED)
