EXHIBIT 10.38
DEFAULT WAIVER AND SIXTH AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
This
DEFAULT WAIVER AND SIXTH AMENDMENT to Loan and Security
Agreement (this “Amendment”) is entered into this 2
nd day
of April, 2007, by and among Silicon Valley Bank
(“Bank”) and QualMark Corporation, a Colorado
corporation, QualMark ACG Corporation, a Colorado corporation, and
QualMark Ling Corporation, a Colorado corporation (jointly and
severally, “Borrower”) whose address is 4580 Florence
Street, Denver, Colorado 80238.
Recitals
A. Bank and Borrower have entered into that certain Loan and
Security Agreement dated as of December 8, 2005, as amended by
that certain Forbearance and Third Amendment to Loan and Security
Agreement by and between Bank and Borrower dated as of
December 8, 2006, that certain Forbearance and Fourth
Amendment to Loan and Security Agreement by and between Bank and
Borrower dated as of January 25, 2007, and that certain
Default Waiver and Fifth Amendment to Loan and Security Agreement
by and between Bank and Borrower dated as of March 13, 2007
(as the same may from time to time be further amended, modified,
supplemented or restated, the “Loan Agreement”). Bank
has extended credit to Borrower for the purposes permitted in the
Loan Agreement.
B. Borrower is currently in default of the Loan Agreement
for failing to comply with the Minimum Debt Service Coverage Ratio
covenant set forth in Section 6.7 of the Loan Agreement for
the month ended February 28, 2007 (the “Existing
Default”)
C. Borrower has requested that Bank waive its rights and
remedies against Borrower, limited specifically to the Existing
Default. Although Bank is under no obligation to do so, Bank is
willing to not exercise its rights and remedies against Borrower
related to the specific Existing Default on the terms and
conditions set forth in this Amendment, so long as Borrower
complies with the terms, covenants and conditions set forth in this
Amendment.
D. Borrower has further requested that Bank amend the Loan
Agreement to revise the Minimum Debt Service Coverage Ratio
financial covenant. Bank has agreed to so amend certain provisions
of the Loan Agreement, but only to the extent, in accordance with
the terms, subject to the conditions and in reliance upon the
representations and warranties set forth below.
Agreement
Now,
Therefore, in consideration of the foregoing recitals
and other good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged, and intending to be legally bound,
the parties hereto agree as follows:
1.
Definitions. Capitalized terms used but not defined in this
Amendment shall have the meanings given to them in the Loan
Agreement.
2.
Waiver of Covenant Default.
Bank
hereby waives Borrower’s Existing Defaults. Bank’s
waiver of Borrower’s compliance of these covenants shall
apply only to the foregoing periods. Accordingly, hereinafter,
Borrower shall be in compliance with these covenants as amended
herein.
Bank’s
agreement to waive the above-described default (1) in no way
shall be deemed an agreement by the Bank to waive Borrower’s
compliance with the above-described covenants as of all other dates
and (2) shall not limit or impair the Bank’s right to
demand strict performance of these covenants as of all other dates
and (3) shall not limit or impair the Bank’s right to
demand strict performance of all other covenants as of any
date.
3.
Amendment to Loan Agreement.
3.1 Section 6.7 ( Financial Covenants ). The
Minimum Debt Service Coverage Ratio financial covenant is amended
in its entirety and replaced with the following:
Minimum
Debt Service Coverage Ratio. A ratio, measured on a rolling
three-month basis, of (a) EBITDA to (b) the required
principal payments on the Term Loan plus interest expense on all
Indebtedness of Borrowers owing to Bank, of at least 1.00 to 1.00
for the 3 month periods ending March 31, 2007, April 30,
2007 and May 31, 2007, increasing to at least 2.00 to 1.00
beginning with the 3 month period ending June 30, 2007
and thereafter.
4.
Limitation of Amendment.
4.1 The amendment set forth in Section 3 ,
above, is effective for the purposes set forth herein and shall be
limited precisely as written and shall not be deemed to (a) be
a consent to any amendment, waiver or modification of any other
term or condition of any Loan Document, or (b) otherwise prejudice
any right or remedy which Bank may now have or may have in the
future under or in connection with any Loan Document.
4.2 This Amendment shall be construed in connection with and
as part of the Loan Documents and all terms, conditions,
representations, warranties, covenants and agreements set forth in
the Loan Documents, except as herein amended, are hereby ratified
and confirmed and shall remain in full force and effect.
5.
Representations and Warranties. To induce Bank to enter into
this Amendment, Borrower hereby represents and warrants to Bank as
follows:
5.1 Immediately after giving effect to this Amendment
(a) the representations and warranties contained in the Loan
Documents are true, accurate and complete in all material respects
as of the date hereof (except to the extent such representations
and warranties relate to an ea
