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EXHIBIT 10.17
THIRD AMENDMENT TO LOAN AGREEMENT
THIS THIRD AMENDMENT TO LOAN AGREEMENT ("Amendment") is made as of
March 31, 2000, by and between U.S. BANK NATIONAL ASSOCIATION, a national
banking association ("Lender") and QUALMARK CORPORATION, a Colorado corporation
("Borrower").
RECITALS:
A. Lender made a revolving loan to Borrower, as evidenced by that
certain Promissory Note dated December 22, 1998 made by Borrower payable to
Lender in the original principle amount of $3,000,000 (the "Original Revolving
Note"), as amended and supplemented by that certain Modification/Extension
Agreement effective as of August 23, 1999 between Lender and Borrower (the
"Amendment to Revolving Note"). Pursuant to the Amendment to Revolving Note, the
principal amount of the Original Revolving Note was reduced to $2,000,000. The
Original Revolving Note, as amended and supplemented by the Amendment to
Revolving Note, is hereinafter called the "Revolving Note".
B. Lender made a term loan to Borrower, as evidenced by that certain
Promissory Note dated December 22, 1998 made by Borrower payable to Lender in
the original principle amount of $2,000,000 (the "Original Term Note"), as
amended and supplemented by that certain Modification/Extension Agreement
effective as of August 23, 1999 between Lender and Borrower (the Amendment to
Term Note"). Pursuant to the Amendment to Term Note, the principle amount of the
Original Term Note was reduced to $1,261,017.47. The Original Term Note, as
amended and supplemented by the Amendment to Term Note, is hereinafter called
the "Term Note."
C. The Revolving Note and the Term Note (collectively, the "Notes") are
subject to the provisions of that certain Revolving Credit and Term Loan
Agreement dated as of December 22, 1998 between Borrower and Lender, as amended
by (i) a Waiver and Amendment to Loan Agreement dated as of March 15, 1999, and
(ii) a Second Amendment to Loan Agreement dated as of August 23, 1999 (as so
amended, the "Loan Agreement").
D. All obligations of the Borrower to Lender are secured by a security
interest in (among other collateral) the Borrower's inventory, equipment, rights
to payment and general intangibles pursuant to a Borrower's Security Agreement
between Borrower and Lender and the Addendum thereto, each dated December 22,
1998 ( The Security Agreement"), and that security interest has been properly
perfected. In addition, Borrower specifically assigned six (6) trademarks and
ten (10) patents pursuant to an Assignment of Security Interest in United States
Trademarks and Patents (the "Assignment," and collectively with the Security
Agreement, the "Security Documents")
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dated as of December 22, 1998 between Borrower, as assignor, and Lender, as
assignee. The Assignment was properly recorded with the United States Patent and
Trademark Office effective on January 14, 1999.
E. Borrower and Lender desire to amend the Loan Agreement, as
specifically hereinafter set forth.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing recitals, the
agreements set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Incorporation of Recitals. The foregoing recitals are hereby
incorporated herein and made a part hereof.
2. Confirmation of Indebtedness. The outstanding principal balance
under the Revolving Note as of March 29, 2000 is $1,500,000. The outstanding
principal balance under the Term Note as of March 29, 2000 is $1,111,017.47.
Interest has and continues to accrue under the Notes in accordance with the
terms thereof.
3. Limited Waiver. Subject to the Borrower's agreement hereto, Lender
hereby waives any default which has occurred by reason of Borrower's failure to
comply with the EBITDA covenant set forth in section 5.09(b)(i) of the Loan
Agreement as of December 31, 1999.
4. Amendment to Loan Agreement. Section 5.09 is deleted in its entirety
and replaced with the following:
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"):
(a) Commencing with the quarter ending December 31, 1998
through the quarter ending March 31, 1999 and then
again commencing with the quarter ending December 31,
2000 and thereafter:
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; and
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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.
(b) Commencing with the quarter ending December 31, 1998
through the quarter ending March 31, 1999 and then
again commencing with the quarter ending June 30, 2000
and thereafter:
i. Borrower's Tangible Net Worth will be not less
than $3,500,000 as of the end of each fiscal
quarter.
(c) Commencing with the quarter ending June 30, 1999 and
continuing through the quarter ending December 31,
2000:
i. Borrower's EBITDA will not be negative more than
$975,000 at 6/30/99 and will not be less that
$75,000 at 9/30/99, $725,000 at 12/31/99, $75,000
at 3/1/00, $500,000 at 6/30/00 and 9/30/00, and
$750,000 at 12/31/00; and
ii. Borrower's Quick Ratio will be not less than
1.25:1 as of the end of each fiscal quarter.
For purposes hereof "Free Cash Flow" means EBITDA less cash
taxes, cash capital expenditures and cash dividends: "Debt
Service" means interest expense plus all mandatory principal
payments on Debt; "Tangible Net Worth" means stockholders'
equity less intangible assets; and "Quick Ratio" means the
ratio of current assets less inventory to current
liabilities, all as determined in accordance with GAAP.
5. General Release. Borrower, for and on behalf of itself and its legal
representatives, heirs, successors and assigns, does hereby waive, release,
relinquish and forever discharge Lender and its past and present directors,
officers, agents, employees, parents, subsidiaries, affiliates, insurers,
attorneys, representatives and assigns, and each and all thereof (collectively,
the "Released Parties"), of and from any and all manner of action or causes of
action, suits, claims, demands, judgements, damages, levies, and the execution
of whatsoever kind, nature and/or description arising on or before the date
hereof, including, without limitation, any claims, losses, costs or damages,
including compensatory and punitive damages, in each case whether known or
unknown, liquidated or unliquidated, fixed or contingent, direct or indirect,
which Borrower, or its legal representatives, heirs, successors or assigns, ever
had or now has or may claim to have against any of the Released Parties, with
respect to any matter whatsoever, including,
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without limitation, this Amendment and any other instruments and agreements
executed by Borrower in connection herewith, arising on or before the date
hereof.
6. Effect of Amendment; Representations and Warranties; Nonwaiver.
Lender and Borrower agree that the Loan Agreement, as amended by this Amendment,
the Notes and the Security Documents remain in full force and effect. Borrower
represents and warrants that it has the power and legal right and authority to
enter into this Amendment, and that neither this Amendment, nor the agreements
contained herein, contravene or constitute a default under any agreement,
instrument or indenture to which Borrower is a party or signatory, or, to the
best knowledge of Borrower, any other agreement or requirement of law. Borrower
represents and warrants that no consent, approval or authorization of or
registration of declaration with any party, including but not limited to any
governmental authority, is required in connection with the execution and
delivery by Borrower of this Amendment, or the performance of its obligations
herein described.
7. Ratification of Notes, Loan Agreement and Security Documents. All of
the terms, conditions, provisions, agreements, requirements, promises
obligations, duties, covenants and representations under the Loan Agreement, as
amended by this Amendment, the Notes and the Security Documents are hereby
ratified and affirmed in all respects by Borrower. Borrower further represents
and warrants that the Security Documents continue to secure the obligations of
Borrower under the Notes.
8. Further Assurances. The Borrower shall promptly correct any defect
or error that may be discovered in any Security Document or in the execution,
acknowledgement or recordation thereof. Promptly upon request by the Lender, the
Borrower also shall do, execute, acknowledge, deliver, record, re-record, file,
re-file, register and re-register, any and all deeds, conveyances, mortgages,
deeds of trust, trust deeds, assignments, estoppel certificates, financing
statements and continuations thereof, notices of assignment, transfers,
certificates, assurances and other instruments as Lender may reasonably require
from time to time in order: (a) to carry out more effectively the purposes of
the Security Documents; (b) to perfect and maintain the validity, effectiveness
and priority of any security interests intended to be created by the Security
Documents; (c) to grant the Lender, to secure the Notes, a perfected lien in any
intellectual property or other assets owned by the Borrower, and (d) to better
assure, convey, grant, assign, transfer, preserve, protect and confirm unto
Lender the rights granted now or hereafter intended to be granted to Lender
under any Security Document or under any other instrument executed in connection
with any Security Document or that the Borrower may be or become bound to
convey, mortgage or assign to Lender in order to carry out the intention or
facilitate the performance of the provisions of any Security Document. The
Borrower shall furnish evidence satisfactory to Lender of every such recording,
filing or registration.
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9. Merger and Integration, Superseding Effect. This Amendment embodies
the entire agreement and understanding between the parties hereto with respect
to the subject matter hereof and supersedes and has merged into it all prior
and written agreements in the same subjects by and between the parties hereto
with the effect that this Amendment shall control.
10. Counterparts. This Amendment may be executed in different
counterparts with the same Effect as if the signatures thereon were in the same
instrument, and will be effective upon delivery of all such counterparts to
Lender.
11. Governing Law. THE LAWS OF THE STATE OF COLORADO GOVERN THIS
AMENDMENT.
12. Advice of Counsel. Borrower acknowledges and agrees that it has
received the advice of independent counsel selected by it, or the opportunity to
obtain such advice, before entering into this Amendment and any other
instruments and agreements executed by Borrower in connection herewith, and has
not relied upon Lender or any of its officers, directors, employees, agents or
attorneys concerning any aspect of the transactions contemplated by this
Amendment or any of the other said instruments and agreements.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered as of the date and year first above written.
QUALMARK CORPORATION
By /s/ Xxxxxx X. Xxxxxx
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VP of Finance and Administration
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(Print Name and Title)
U.S. BANK NATIONAL ASSOCIATION
By
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Xxxxxxx X. Xxxxx, Vice President
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