EXHIBIT 10.32
ASSET PURCHASE AGREEMENT
AGREEMENT dated November 12, 2004, among QualMark ACG Corporation, a
Colorado corporation ("Purchaser"), QualMark Corporation, a Colorado corporation
("Parent"), and ACG Dynamics, Inc., a Connecticut corporation ("Seller").
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, substantially all the assets of Seller, upon the terms
hereinafter set forth; and
WHEREAS, Purchaser is a wholly-owned subsidiary of Parent, which has agreed
to take some actions on behalf of Purchaser, and which also has some rights and
obligations under this Agreement (Parent and Purchaser are collectively referred
to herein as "QualMark").
NOW, THEREFORE, in consideration of the covenants set forth herein and in
reliance on the representations and warranties contained herein, the parties
hereto hereby agree as follows:
Section 1. Purchase and Sale of Assets.
1.1. Acquired Assets.
(a) On the Closing Date (as hereinafter defined), Seller shall sell,
assign, transfer and deliver, unto Purchaser, and its successors and assigns
forever, free and clear of all Liens (as defined in Section 5.4 hereof) (other
than rights of third parties under contracts assigned pursuant to this
Agreement), all right, title, interest and claims in or to the business,
properties and assets of Seller or used in Seller's business other than the
Excluded Assets (hereinafter defined), together with the goodwill of Seller, all
as the same shall exist on the date hereof, together with any additions thereto
after the date of this Agreement, (hereinafter sometimes together referred to as
the "Acquired Assets"), including without limitation the following assets:
(i) all machines, equipment, tools, dies, molds, furniture, fixtures,
trucks, automobiles, other vehicles, office supplies, and all other
tangible personal property, including without limitation that property (A)
described on Schedule l.l(a)(i) hereto, (B) used or dedicated to use in the
operations of the business of Seller, (C) located at the premises operated
by Seller (except, with respect to clauses (A) through (C) above, property
leased by Seller, which shall be delivered at the Closing subject to such
leases);
(ii) the contracts, promissory notes, leases of personal property and
agreements listed on Schedule l.l(a)(ii) hereto, and all other contracts,
leases, agreements, promissory notes and other evidences of indebtedness to
Seller (the "Contracts");
(iii) all intangible assets and all rights, interests and claims of
Seller in, to or under all intangible assets (including without limitation
Seller's name and any trademarks, trade names or service marks under which
Seller has operated, any copyrighted or copyrightable material, patents,
patent applications, trade secrets, drawings, designs, formulas, customers'
records, customer lists, supplier lists, pricing information, employee
records, choses in action, claims), together with any goodwill associated
with any of the foregoing, and including without limitation the intangible
assets described on Schedule 1.1(a)(iii) hereto;
(iv) all inventories, raw materials (including inventories and raw
materials on order but not received as of the Closing Date),
work-in-progress, finished goods ("Inventory");
(v) all claims, demands, judgments, rights, choses in action, accounts
receivable, bills and notes receivable, documents, instruments, credits and
deferred items; and
(vi) all books, records and files of Seller relating to the business
and operations of Seller for all periods ending on or before the Closing
Date.
(b) From and after the Closing Date, Purchaser shall give to Seller
free and unrestricted access to the books, files and records relating to the
business and operations of Seller prior to the Closing transferred to Purchaser
pursuant to Section l.l(a) hereof, as Seller shall from time to time reasonably
request. Any access pursuant to this Section l.l(b) shall be conducted in such a
manner as not to interfere unreasonably with the operations of the business of
Purchaser after the Closing Date.
1.2. Excluded Assets. The Acquired Assets do not include the assets
(hereinafter collectively referred to as the "Excluded Assets") of Seller as
follows: (a) inventory sold after the date hereof for fair value in the ordinary
course of business consistent with prior practice; (b) cash, cash equivalents
and securities; (c) real property, buildings and all appurtenances (with the
exception of trade fixtures); (d) minute books and stock transfer ledger of
Seller; (e) counterclaims and cross claims to the extent relating to any
liability against which Seller indemnifies QualMark hereunder; (f) insurance
claims and rights under insurance policies to the extent relating to any
liability against which Seller indemnifies QualMark hereunder; (g) rights of
Seller under this Agreement; (h) the tangible personal property at Seller's
facility owned by the shareholders of Seller and listed on Schedule 1.2 hereto;
- (i) and contracts of employment of Seller, and any employees of Seller, except
those particular employees whom Parent has agreed to employ, as specifically set
forth herein; (j) Seller's Prepaid Federal Tax account; and (k) Seller's
property tax escrow.
Section 2. Liabilities and Excluded Liabilities.
(a) Purchaser shall assume on the Closing Date and, effective as of
the Closing and contingent upon the occurrence of the Closing, shall discharge
in accordance with their terms (subject to any defenses or claimed offsets
asserted in good faith against the obligee to whom such liabilities, payments
and obligations are owed), all liabilities, payments or obligations of Seller
(absolute, contingent or otherwise) arising out of the business and operations
of Seller or the ownership or operation of the Acquired Assets, including,
without limitation:
(j) the current accrued liabilities of Seller to the extent of the
amount thereof correctly stated on the Closing Date Balance
(k) Sheet to be provided by Seller to Purchaser pursuant to Section
2(c) below; and
(ii) the continuing obligations under the Contracts arising subsequent
to the Effective Time of the Closing (as hereinafter defined) based on
operations subsequent thereto.
(b) It is the intention of the parties that Purchaser assume only the
current accrued liabilities of Seller to the extent of the amount thereof
correctly stated on the Closing Date Balance Sheet; therefore, any provision in
Section 2(a) above to the contrary notwithstanding, Purchaser is not assuming,
and shall have no obligation to pay, perform, discharge or satisfy, any of the
following items (collectively the "Excluded Liabilities"), as to all of which
Seller hereby retains liability:
(i) Any liability not listed in Section 2(a) above.
(ii) The liability of Seller under that term loan with Chase (the
"Chase Term Loan").
(iii) Any and all liabilities to employees of Seller, including
without limitation employment contracts, workers' compensation awards,
incentive compensation accrued, pension costs accrued, benefits accrued or
claims payable pursuant to the benefit plans of Seller, payroll, payroll
tax accruals, and income, franchise, excise, sales, use, personal, real
property and employment taxes (or any other taxes or similar imposts) to
the extent that they relate to
the period prior to the Effective Time of the Closing or to termination of
the employment of such employees as a result of this Agreement;
(iv) Any and all liabilities and obligations to the extent that they
pertain principally to any of the Excluded Assets, including but not
limited to any mortgages, deeds of trust or notes secured by real property;
(v) Any accounts payables owing to any subsidiary, affiliate or equity
interest owner of Seller;
(vi) Liabilities or obligations arising by virtue of the sale and
purchase pursuant to this agreement, including but not limited to any taxes
owed by Seller as a result of this Agreement;
(vii) Any and all liabilities related to the release of any hazardous
or toxic substance or the violation of any environmental law relating to
the operation of Seller's business prior to the Effective Time of the
Closing;
(viii) Any and all liabilities for OSHA and other worker safety
matters, taxes, noncompliance with applicable laws or regulations, personal
injury, death or property damage, relating to the operation of Seller's
business prior to the Effective Time of the Closing; and
(ix) Such other obligations and liabilities of Seller as are expressly
stated herein to be the continuing responsibility of Seller.
(c) Seller shall prepare and furnish to Purchaser on or about November
11, 2004 a balance sheet of Seller as of the end of business on November 11,
2004 (the "Closing Date Balance Sheet"), prepared from the books and records of
Seller in a manner consistent with the accounting principles and methods as
defined below in Section 5.3. Such Closing Date Balance Sheet shall be certified
by the President of Seller, and shall show a ratio as of the Closing Date of
Acquired Assets to Current Liabilities (the "Closing Current Ratio") of at least
2.9:1.
Section 3. Consideration.
3.1. Purchase Price. The purchase price (the "Purchase Price") for the
Acquired Assets, the Noncompetition Agreements and the other considerations to
be supplied by Seller and its equity interest owners hereunder shall be
$1,650,000, payable as follows: (a) $50,000 paid by Parent on behalf of
Purchaser on October 1, 2004, the receipt of which is hereby confirmed by
Seller; (b) $850,000, payable at Closing (hereinafter defined) by wire transfer
to the account of Seller (a portion of such amount shall be paid by wire
transfer to Seller's lender to pay off Seller's existing bank financing); and
(c) a number of shares of the Common Stock, no par value per share, of Parent
(the "Securities") equal to $750,000, divided by the average closing price of
Parent's Common Stock over the thirty (30) days of trading immediately preceding
November 10, 2004 (September 28, 2004, through November 9, 2004, inclusive),
subject to the conditions and restrictions set forth in Sections 3.2 and 3.3
below. At Closing, Seller and Purchaser shall confirm in writing the calculation
of the average closing price of Parent's Common Stock over the thirty (30) days
of trading immediately preceding November 10, 2004 and the number of Securities
to be issued.
3.2 Restricted Securities. Seller has directed that the Securities be
issued to its equity interest owners in the following names and proportions: 40%
of the shares to ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, 40% of the shares to ▇▇. ▇▇▇ ▇▇▇▇, and 20%
of the shares to Mr. ▇▇▇▇▇ ▇▇▇▇▇▇▇. (Mssrs. ▇▇▇▇▇▇▇▇, Keys and ▇▇▇▇▇▇▇ are
hereinafter referred to as the "Equity Owners") The Securities will be
unregistered and restricted, and will be stamped with a "restricted" legend
indicating that the Securities may not be resold unless they are registered with
the SEC or are exempt from the registration process. QualMark shall have no
obligation to register the Securities or remove such legend; however, at Closing
the Purchaser shall deliver (a) addressed to each Equity Owner, an opinion of
Parent's counsel, that, under securities laws as of the Closing Date, if the
Securities of such Equity Owner are held for a period of one year after the
Closing Date without transfer, and if Parent completes in timely fashion all of
its filings required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), then such Equity Owner shall thereafter be able to transfer
such Securities under Securities and Exchange Commission Rule 144, subject to
all of the restrictions of such Rule 144, and (b) to each Equity Owner, a letter
from Parent's Chief Financial Officer stating that the Securities are being
issued as of November 15. 2004, that any applicable 1-year holding period will
end on November 15, 2005. Copies of the form of both such letters are attached
hereto and made a part hereof as Schedule 3.2. Parent shall engage its counsel
to assist the Equity
Owners in the sale of the Securities under Rule 144 by issuing opinions to the
extent reasonably required by Equity Owners' brokers or Parent's transfer agent,
and by performing any related work, but Parent shall not be required to pay more
than $10,000 in the aggregate for such opinions and related work; provided,
however, that if Parent's counsel will not for any reason issue such opinions
for any sale, and Equity Owners' counsel will issue such opinions, then Parent
shall pay Equity Owners' counsel to issue such opinions, but, in no case, more
than $10,000 in the aggregate. Parent shall cooperate with Equity Owners and
take all commercially reasonable steps within its reasonable control to make
sure that the Securities are saleable under Rule 144 and shall not take any
action to obstruct or cause the transfer agent to obstruct any sale of the
Securities under Rule 144, if not prohibited by applicable law. Trading of the
Securities will also be subject to any applicable ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ restrictions.
By their execution of this Agreement Seller and the Equity Owners acknowledge
the restrictions on the Securities and agree to abide by all Securities and
Exchange Commission regulations (including but not limited to Rule 144) with
respect to their trading of the Securities. Each Equity Owner individually
agrees to indemnify QualMark with respect to his own violation of such
restrictions and/or failure to abide by such regulations, but in no
circumstances shall the Seller or an Equity Owner be liable for any act or
omission of another Equity Owner. The provisions of this Section 3.2 shall
survive termination of this Agreement. Parent shall complete and file in a
timely fashion through December 31, 2006 all filings under the Exchange Act
necessary for the Purchaser to satisfy the current public information
requirement of Rule 144(c) under the Securities Act of 1933, as Amended.
3.3 Notes and Purchaser's Option to Convert. Purchaser shall issue
promissory notes (the "Notes") in the form set forth in Schedule 3.3 payable to
the Equity Owners as follows: $300,000 to ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, $300,000 to ▇▇.
▇▇▇ ▇▇▇▇, and $150,000 to Mr. ▇▇▇▇▇ ▇▇▇▇▇▇▇. The Notes will be transferable,
bear interest at the annual rate of 6.5%, and will be payable in equal monthly
installments of principal and interest, with the first such payment payable on
February 15, 2005, and the last such payment due on the fifth (5th) anniversary
of the Closing Date. Schedule 3.3 to this Agreement sets forth such payments to
made on each of the Notes. At Closing the Notes will be placed in escrow with
Seller's attorney under the Escrow Agreement set forth in Exhibit A. At any time
during the period of January 5, 2005 through January 15, 2005 Purchaser shall
have the option of recalling all the shares of the Securities issued in the
name(s) of all of the Equity Owners and exchanging them for the Note(s) issued
in the names of the corresponding Equity Owner(s). If the Securities are not
recalled by the Purchaser before January 16, 2005, the Escrow Agent shall return
the Notes to Purchaser on request of Purchaser. It is agreed by the parties
hereto and by the Equity Owners that this Section 3.3 shall survive the
termination of this Agreement and shall be specifically enforceable in a court
of equity.
3.4 Allocation. Seller and Purchaser agree to enter into good-faith
discussions to determine, by the Closing, the allocated fair market value of the
Acquired Assets as follows:
Accounts Receivable
Inventory
Furniture, Fixtures and Equipment
Covenant not to Compete
Customer List
Goodwill
TOTAL $1,650,000
Such allocation shall be memorialized in a letter agreement between Seller
and Purchaser to be executed at Closing, and shall be binding on Purchaser and
Seller for all federal, state and local tax purposes. Purchaser and Seller shall
file with their respective federal income tax returns forms that shall reflect
such allocation.
Section 4. Closing. Provided that the conditions in Sections 8 and 9 hereof
have been satisfied or waived, the consummation of the purchase and sale of the
Acquired Assets contemplated by this Agreement (the "Closing") shall, unless
another date or place is agreed to in writing by Seller and Purchaser, take
place at the offices of Akabas & ▇▇▇▇▇, on November 15, 2004 (the "Closing
Date"). All references contained herein to "the Effective Time of the Closing"
shall be deemed to refer to the close of business on the date that the
consummation of the transaction contemplated hereby is completed.
Section 5. Representations and Warranties of Seller. Seller represents and
warrants to QualMark as follows, and acknowledges and confirms that each such
representation and warranty shall be deemed to be material and
that QualMark is relying upon such representations and warranties in connection
with the execution, delivery and performance of this Agreement, notwithstanding
any investigation made by QualMark or on its behalf.
5.1. Organization and Good Standing.
(a) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation and is qualified
to transact business and is in good standing as a foreign corporation in the
jurisdictions where it is required to qualify.
(b) Seller has the power and authority (corporate and otherwise) to
own, lease and operate its properties and to carry on its business as now
conducted.
(c) Seller has no subsidiaries or equity investments in any entities.
5.2. Consents, Authorizations and Binding Effect.
(a) Seller may execute, deliver and perform this Agreement without the
necessity of obtaining any consent, approval, authorization or waiver or giving
any notice or otherwise, except as set forth on Schedule 5.2 hereto.
(b) This Agreement has been duly authorized, executed and delivered by
Seller and constitutes the legal, valid and binding obligation of Seller,
enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement will not:
(i) constitute a violation of the Certificate or Articles of
Incorporation or the By-Laws, as amended, of Seller;
(ii) conflict with, result in the breach of, constitute a default,
with or without notice and/or lapse of time, under, result in being
declared void or voidable any provision of, or result in any right to
terminate or cancel any contract, lease, agreement, license, commitment or
purchase order to which Seller or any of its properties is bound;
(iii) constitute a violation of any statute, judgment, order, decree
or regulation or rule of any court, governmental authority or arbitrator
applicable or relating to Seller, the Acquired Assets or the business of
Seller to be acquired by Purchaser pursuant hereto; or
(iv) result in the acceleration of any debt or other obligation of
Seller or the creation of any Lien (as defined in Section 5.4) upon any of
the Acquired Assets.
5.3. Financial Statements and Financial Condition.
(a) Seller has maintained its books of account in accordance with
applicable laws, rules and regulations, and such books and records are and,
during the periods covered by the Financial Statements (hereinafter defined),
were correct and complete in all respects, and completely and accurately reflect
the transactions of Seller's business and the income, expenses, assets and
liabilities of Seller, including the nature thereof and the transactions giving
rise thereto.
(b) Included in Schedule 5.3 are the reviewed balance sheets of Seller
as of September 30, 2003 and September 30, 2004, and the related unaudited
statements of income and of cash flows for the fiscal year ended each such
September 30th (collectively the "Financial Statements"). The reviewed balance
sheet of Seller as of September 30, 2004, is referred to in this Agreement as
the "Balance Sheet.
(c) The Financial Statements have been prepared from the books of
account of Seller in accordance with GAAP, except for the valuation of
inventory, which has been valued according to the method described on Schedule
5.5 hereto, and present fairly the financial position of the business of Seller
as of the date of such
statements and the results of operations of the business of Seller for the
periods covered thereby. The Financial Statements reflect all necessary
adjustments and reserves for losses and contingencies as of the date of such
statements.
(d) Seller has no material liabilities (including, without limitation,
unasserted claims, whether known or unknown, matured or unmatured, absolute,
contingent or otherwise) that are required to be reflected, and are not
reflected or are in excess of the amount reflected, in the Balance Sheet or
notes thereto except those incurred since the date of the Balance Sheet in the
ordinary course of business, consistent with past practice, in arms' length
transactions with unrelated parties, and which do not have and cannot reasonably
be expected to have, in the aggregate, a material adverse effect on the
business, financial condition or prospects of Seller (a "Material Adverse
Effect").
5.4. Title and Condition of Assets.
(a) Except as otherwise disclosed on Schedule 5.4 hereto, Seller has,
and pursuant to this Agreement Seller will sell, transfer, assign and deliver to
Purchaser, good and marketable title to the Acquired Assets, free and clear of
liens, encumbrances, claims of third parties, security interests, mortgages,
pledges, agreements, options and rights of others of any kind whatsoever,
whether or not filed, recorded or perfected, and including, without limitation,
any conditional sale or title retention agreement or lease in the nature thereof
or any financing statements filed in any jurisdiction or any agreement to give
any such financing statements (hereinafter collectively referred to as "Liens"),
other than rights of third parties under leases of tangible personal property
disclosed on Schedule 5.4(a) hereto and liens for taxes not due and payable.
(b) The equipment included in the Acquired Assets is in operating
condition and constitutes sufficient equipment necessary to operate the business
of Seller as conducted during the year prior to the date hereof. None of the
Acquired Assets has been affected by any fire, accident, act of God or any other
casualty that materially and adversely impairs its function in the business of
Seller. The business of Seller is not conducted under any restriction imposed
upon Seller, but not imposed upon other similar businesses in the locality where
its business is located.
(c) Schedule 1.1(a)(i) hereto includes a complete and correct list and
a summary description of substantially all material tangible personal property
in the nature of machinery and equipment owned or leased by Seller and used in
connection with the business of Seller.
(d) Schedule 1.1(a)(i) hereto includes a complete and correct list and
a summary description of substantially all material contracts used in connection
with the business of Seller. The Contracts are good and valid, and enforceable
in accordance with their terms. No consents or approvals are necessary to assign
to and vest in Purchaser all of Seller's interest in the Contracts, except the
Contracts listed on Schedule 5.4(d) hereto. Seller is not in material default
under any of the Contracts and has no knowledge of any material default by any
other party thereto.
5.5. Inventories. The inventories of Seller reflected on the Balance Sheet
have been valued in Seller's reasonable determination of fair market value in
accordance with Schedule 5.5 hereof, and the value of obsolete materials and
materials of below standard quality has been written down.
5.6. Receivables. The trade accounts and other receivables of Seller are
bona fide receivables and arose out of arms' length transactions, are recorded
correctly on the books and records of Seller, and are not subject to any
offsetting claims or adjustments, known to Seller, except to the extent of any
reserves therefor reflected on the Balance Sheet or added by Seller in the
ordinary course of business since the date of the Balance Sheet, consistent with
prior practice.
5.7. Insurance.
(a) Schedule 5.7 hereto sets forth (i) a list of all policies of
insurance maintained by Seller, including insurance providing benefits for
employees, in effect on the date hereof; (ii) a description of the coverage of
such policies; and (iii) the annual premiums therefor and the underwriter and
expiration dates thereof.
(b) There are no claims pending or, to the best knowledge of Seller,
threatened under Seller's casualty or liability insurance policies, and no claim
has been made thereunder during the three years preceding the date hereof. All
premiums due and payable thereon have been paid, and all such policies are in
full force and effect in
accordance with their respective terms. Such policies are underwritten by
financially sound and reputable insurers and constitute commercially reasonable
insurance coverage in respect of Seller's past practice and companies similarly
situated with Seller. There are no outstanding claims or liabilities, whether
fixed or contingent, known to Seller, under any medical reimbursement plan or
any other plan, policy or arrangement under which Seller acts as a self-insured.
5.8. Litigation and Compliance.
(a) There are no actions, suits, claims or proceedings or governmental
or administrative investigations pending or, to the best knowledge of Seller,
threatened, nor, to the best knowledge of Seller, is there any reasonable basis
for any such action, suit, claim or proceeding (i) by, against or otherwise
involving Seller, Seller's officers, directors, employees or agents, any of the
Acquired Assets or any asset or property of others leased or used by Seller
pursuant to an agreement to be assigned by Seller or (ii) which questions or
challenges the validity of this Agreement or any action taken or to be taken
pursuant to this Agreement.
(b) Seller possesses all material permits, licenses and consents from
any governmental authority necessary to enable Seller to conduct the business,
taken as a whole, substantially as now conducted. Seller is in substantial
compliance with, is not in default or violation in any material respect under,
and has not been charged with or received any notice at any time of any
violation by Seller of, any statute, law, ordinance, regulation, decree or order
applicable to the business or operations of Seller.
(c) Neither Seller nor any of the Acquired Assets or transactions
contemplated under this Agreement is subject to any judgment, order or decree
entered in any lawsuit or proceeding applicable to the business and operations
of Seller.
5.9. Taxes.
(a) Seller has, or on or before the Closing Date will have, duly filed
all tax reports and returns required to be filed in respect of its business and
operations and the Acquired Assets as of such date. All such tax reports and
returns are or will be complete, accurate and in compliance with all relevant
laws and regulations in all material respects, and none has been audited by any
governmental authority. Seller has, or on or before the Closing Date will have,
paid and discharged all federal, state, local and foreign taxes, interest,
penalties or other payments required, as the case may be, to be paid and then
currently due as shown on such tax reports and returns or otherwise in respect
of the Acquired Assets and the business, operations and employees of Seller as
of such date. To the best knowledge of Seller, no audit of Seller is planned or
threatened. Seller has withheld proper and accurate amounts from its employees'
compensation in substantial compliance with all withholding and similar
provisions of the IRS Code of 1986, as amended, and any other applicable law.
(b) Seller has not received notice of any tax deficiency outstanding,
proposed or assessed against it, nor does Seller have any knowledge of any basis
for any tax deficiency or assessment, nor has Seller executed any waiver of any
statute of limitations on the assessment or collection of any tax. There are no
tax liens upon, pending against or, to the best knowledge of Seller, threatened
against any Acquired Assets.
5.10. Employees. Schedule 5.10 hereto contains a list of all persons
receiving compensation from Seller and a description of all compensation
arrangements (including without limitation salaries and bonus compensation) and
employment agreements affecting them. No employee of any Seller is covered by
any collective bargaining agreement.
5.11. ERISA. Included on Schedule 5.11 is a list of each employee benefit
plan (within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), written or oral employment or
consulting agreement, severance pay plan, employee relations policy, practice or
arrangement, agreements with respect to leased or temporary employees, vacation
plan or arrangement, sick plan, stock purchase plan, stock option plan, fringe
benefit plan, bonus plan and any deferred compensation agreement, plan or
program covering any present or former employee of Seller and which is, or at
any time was, sponsored or maintained by (or to which contributions are, were,
or at any time were required to have been, made by) Seller or any other
organization
which is a member of a controlled group of organizations (within the meaning of
Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as
amended) of which each Seller is a member (the "Controlled Group").
5.12. Contracts. Etc. All material contracts, leases, agreements, licenses,
commitments and orders to which Seller is a party or by which Seller or any of
its assets is bound relating in any way to the business of Seller ("Contracts")
are listed on Schedule l.l(a)(ii). All of the Contracts are in full force and
effect. To the knowledge of Seller, no party to any such Contract has committed
a material breach thereof that is continuing on the date hereof, and no party to
any such Contract is paying on the date hereof liquidated damages in lieu of
performance thereunder.
5.13. Parent Stock. Seller is acquiring the Securities for investment
purposes, and not as a result of any advertisement, public meeting or other
public offering. Seller acknowledges that the Securities are not registered and
are restricted securities as defined in SEC Rule 144(a)(3)(i). Seller is aware
of the risks of an investment in securities, and Seller has no need for any
income from its investment in the Securities and can afford to lose its entire
investment. Seller acknowledges that QualMark has made no representation as to
the value of the Securities now or in the future. Seller or legal and financial
advisors available to Seller, has such knowledge and experience in financial and
business matters so that Seller is capable of assessing the merits and risks of
acquiring the Securities.
5.14. Fraudulent Conveyances; Bankruptcy. Seller is not entering into this
Agreement with the intent to hinder, delay or defraud present or future
creditors. Seller is not now insolvent and is not, and has not been, involved in
any bankruptcy or similar proceeding.
5.15. Other Information. The Schedules annexed hereto and the documents and
information with respect to Seller, the Acquired Assets and the business of
Seller that are required to be supplied to Purchaser pursuant to this Agreement
do not contain any statement which is false or misleading with respect to a
material fact.
Section 6. Representations and Warranties of QualMark. QualMark represents
and warrants to Seller as follows, and acknowledges that Seller is relying upon
such representations and warranties in connection with the execution, delivery
and performance of this Agreement, notwithstanding any investigation made by
Seller or on its behalf.
6.1. Authorizations and Binding Effect. Purchaser and Parent are duly
licensed to carry on their business as currently conducted in the State of
Colorado, and in each state in which QualMark currently is doing business. This
Agreement has been duly executed and delivered by Purchaser and Parent and
constitutes the legal, valid and binding obligation of such parties, enforceable
in accordance with its terms. The execution, delivery and performance of this
Agreement does not and will not:
(i) conflict with, result in the breach of, constitute a default, with
or without notice and/or lapse of time, result in being declared void or
voidable any provision of, or result in any right to terminate or cancel
any contract, lease or agreement to which QualMark or any of its properties
is bound;
(ii) constitute a violation of any statute, judgment, order, decree or
regulation or rule of any court, governmental authority or arbitrator
applicable or relating to QualMark; or
(iii) result in the acceleration of any debt or other obligation of
QualMark.
6.2. Judgments. No judgments exist against QualMark or any of QualMark's
assets.
6.3. Litigation. No actions, suits, claims, proceedings or investigations
(whether or not purportedly on behalf of or against QualMark), including,
without limitation, the claims by ▇▇. ▇▇▇▇▇ against the Purchaser in Civil
Actions Nos. 03-WY-0198 AJ (MJW) and 04-WY-1362-AJ (MJW) in the United States
District Court for the District Of Colorado and the United States Court of
Appeals for the Tenth Circuit, are pending or threatened against QualMark at law
or in equity that relate to the transactions contemplated by this Agreement or
that will prohibit QualMark from performing the obligations to be performed by
it hereunder.
6.4. Parent Stock.
(a) The Securities, when issued pursuant to the terms hereof, will
constitute the duly authorized, validly issued, fully paid and nonassessable
shares of Parent.
(b) A description of each class of security authorized to be issued by
Parent, including the number authorized to be issued and the number actually
issued, is included in Schedule 6.4 hereto
(c) The most recent Forms 10-QSB and 10-KSB, and any Forms 8-K filed
since the most recent 10-KSB, filed by Parent with the Securities and Exchange
Commission (the "34 Act Filings") are included in Schedule 6.4 hereto and are
true and correct in all material respects and do not omit to state any fact that
is necessary to prevent the disclosures therein from being misleading.
(d) QualMark is in compliance with, is not in default or violation in
any respect under, and has not been charged with or received any notice at any
time of any violation by QualMark of, any securities law or regulation reporting
requirements.
Section 7. Covenants.
7.1. Access to Records and Properties of Seller. Between the date of this
Agreement and the Closing Date, Seller shall give to QualMark such access to the
premises, books and records of Seller as QualMark may from time to time
reasonably request. Any investigation pursuant to this Section 7.1 shall be
conducted in such manner as not to interfere unreasonably with the operation of
the business of Seller.
7.2. Operation of Seller. From and after the date hereof Seller shall:
(a) Operate Seller's business diligently and only in the usual,
ordinary manner and, to the extent consistent with such operation, (i) preserve
its current business organization intact, (ii) preserve its current
relationships with employees, customers, suppliers and all other persons having
business dealings with them and (iii) maintain in force the insurance policies
referred to in Section 5.7 hereof.
(b) Maintain Seller's books, accounts and records in the usual and
ordinary manner, and in a manner that fairly and correctly reflects Seller's
income, expenses, assets and liabilities in accordance with generally accepted
accounting principles on a basis consistent with prior years.
(c) Comply with all Federal, state, local and other governmental
(domestic or foreign) laws, statutes, ordinances, rules, regulations, orders,
writs, injunctions, decrees, awards or other requirements of any court or other
governmental or other authority applicable to them or their assets or to the
conduct of their business, and use best efforts to perform all obligations under
all contracts, agreements, licenses, permits and undertakings without default.
(d) Not sell or dispose of any of the Acquired Assets and not acquire
any capital assets.
(e) Not incur any indebtedness other than that incurred in the usual
and ordinary course of business.
(f) Not make any agreement, commitment or arrangement to take any
action inconsistent with the obligations under, or prohibited by, the foregoing
Subsection 7.2.
7.3. Operation of QualMark. From and after the date hereof through the
Closing Date QualMark shall:
(a) not issue any securities of any class, except the Securities to
Seller.
(b) operate QualMark's business diligently and only in the usual,
ordinary manner and, to the extent consistent with such operation, preserve its
current business organization intact.
7.4. Competing Transactions. Seller shall not take any action, directly or
indirectly, to negotiate, cause, promote, authorize or agree to any transaction
competing or interfering with any of the transactions contemplated by this
Agreement.
7.5. Best Efforts to Satisfy Conditions and Notice. Seller and QualMark
shall each use its best efforts to cause the conditions to the obligations of
the other party to be satisfied to the extent that the satisfaction of such
conditions is in its or his control, including obtaining any necessary consents,
authorizations, and approvals. Seller and QualMark shall notify the other
promptly of any representation or warranty made by it herein that becomes untrue
prior to the Closing.
7.6. Reserved.
7.7. Reserved.
7.8. Confidentiality; Announcements. The parties hereto shall keep in
strict confidence, and shall refrain from disclosing, except as strictly
necessary to accomplish the consummation of the transactions contemplated
hereunder, all information pertaining to the business of Seller and QualMark and
relating to this Agreement, including, without limitation, the terms of such
transaction. The parties agree to consult with each other and to coordinate with
one another prior to the issuance of any press release or similar public
announcement or communication. Provided, however, that neither party shall be
restrained from making any such disclosure as may be required by the Securities
Laws or other laws.
Section 8. Conditions of Obligations of QualMark. The obligations of
QualMark to consummate the purchase and sale under this Agreement are subject to
the satisfaction of the following conditions, each of which may be waived by
QualMark.
8.1. Representations and Warranties; Performance of Obligations.
(a) The representations and warranties of Seller set forth in Section
5 hereof and in all agreements, documents and instruments executed and delivered
pursuant hereto or in connection with the Closing shall have been on the date
hereof and shall be on the Closing Date true and correct in all material
respects as though made on and as of the Closing Date.
(b) Seller shall have performed the agreements and obligations
necessary to be performed by them under this Agreement prior to the Closing
Date. Without limiting the generality of the foregoing, Seller shall have
obtained all consents, waivers, approvals and authorizations, and shall have
given all notices to third parties, and discharged in full any Liens, necessary
to convey, sell, transfer, assign and deliver to Purchaser all of the Acquired
Assets and to vest in Purchaser all right, title, interest and claims of Seller
in, to, relating to or arising under the Acquired Assets free and clear of any
Liens.
(c) Seller shall have delivered to Purchaser a certificate dated the
Closing Date and signed on behalf of Seller by an authorized officer or
representative certifying to the fulfillment of the conditions set forth in
subsections 8.l(a) and 8.1(b) above.
(d) The Closing Date Balance Sheet to be delivered on November 11,
2004, shall show a Closing Current Ratio (as defined in Section 2(c) above) of
at least 2.9:1.
8.2. Transfer of Acquired Assets. Seller shall have delivered to Purchaser
the Acquired Assets and such bills of sale, assignments and other good and
sufficient instruments of transfer and conveyance, in form and substance
reasonably satisfactory to Purchaser and its counsel, as shall be effective to
vest in Purchaser, and to evidence the vesting in Purchaser of, good and
marketable title to the Acquired Assets as provided for herein.
8.3. Seller's Goodstanding. Seller shall have provided Purchaser with a
copy of a short-form good-standing certificate of the state of its
incorporation, together with a copy of its charter and by-laws, as amended, and
the minutes of its board meeting (or, if applicable, executed consent of its
directors) approving this Agreement, each of the documents referred to herein
and the consummation of the transactions contemplated hereby.
8.4. Lease, Noncompetition and Employment Agreements. Seller shall have
executed and delivered to Purchaser a lease for the premises at West Haven, CT,
in the form of Exhibit B attached hereto, and fully complied with its
obligations under Article 12 thereof. Seller shall have executed and delivered
to QualMark a noncompete agreement in the form of Exhibit C attached hereto.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall have executed and delivered to QualMark a noncompetition
agreement in the form of Exhibit D attached hereto. ▇▇▇ ▇▇▇▇▇ shall have
executed and delivered to QualMark a noncompetition agreement in the form of
Exhibit E attached hereto. ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall have executed and delivered to
QualMark a noncompetition agreement in the form of Exhibit F attached hereto.
Purchaser shall have entered into an employment agreement with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
in the form of Exhibit G attached hereto. Purchaser shall have entered into an
employment agreement with ▇▇▇ ▇▇▇▇ in the form of Exhibit H attached hereto.
8.5. Chase Term Loan. Not later than the Closing Date, Seller shall fully
pay off all its obligations under the Chase Term Loan and provide Purchaser with
a copy of the duly-executed release of said indebtedness which Seller shall
cause to be promptly recorded.
8.6. Opinion of Counsel. QualMark shall have received an opinion from
Seller's counsel, dated the Closing Date, to the effect that (i) Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Connecticut, (ii) Seller has all requisite corporate power and
authority to enter into and consummate the transactions contemplated by this
Agreement and related documents (the aforesaid documents hereinafter referred to
as the "Operative Documents") and (iii) the Operative Documents have been duly
executed and delivered by Seller and are the valid and binding obligations of
Seller, enforceable against Seller in accordance with their respective terms,
subject as to enforcement to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting the enforcement of creditors'
rights generally and the application of equitable principles.
8.7. Ratification. This Agreement and the execution hereof by each of the
parties hereto shall have been ratified by their respective Boards of Directors.
8.8. Other Matters. Seller shall have furnished, or caused to be furnished,
to QualMark, in form and substance satisfactory to QualMark, such certificates
and other evidence as QualMark may have reasonably requested as to the
satisfaction of the conditions contained in this Section 8 and as to such other
matters as QualMark may reasonably request.
Section 9. Conditions of Obligations of Seller. The obligations of Seller
to consummate the sale and purchase under this Agreement are subject to the
satisfaction of the following conditions, each of which may be waived by Seller.
9.1. Representations and Warranties; Performance of Obligations.
(a) The representations and warranties of QualMark set forth in
Section 6 hereof and in all agreements, documents and instruments executed and
delivered pursuant hereto or in connection with the Closing shall have been and
be true and correct in all respects at all times commencing with the date of
this Agreement and ending with and on the Closing Date as though made on and as
of the Closing Date.
(b) QualMark shall have performed the agreements and obligations
necessary to be performed by it under this Agreement prior to the Closing Date.
(c) QualMark shall have delivered to Seller a certificate dated the
Closing Date and signed on behalf of Purchaser by an authorized officer or
representative certifying to the fulfillment of the conditions set forth in
subsections 9.l(a) and 9.1(b) above.
9.2. Purchase Price. Purchaser shall have delivered to Seller the portion
of the Purchase Price to be delivered on the Closing Date pursuant to Section 3
hereof.
9.3. QualMark's Goodstanding. Purchaser and Parent shall each have provided
Seller with a copy of a short-form good-standing certificate of the state of
their incorporation, together with a copy of their charter and by-laws, as
amended, and the minutes of its board meeting (or, if applicable, executed
consent of its directors) approving this Agreement, each of the documents
referred to herein and the consummation of the transactions contemplated hereby.
9.4. Employment Agreements. Purchaser and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall have
entered into an agreement with regard to his employment in the form of Exhibit G
attached hereto. Purchaser and ▇▇▇ ▇▇▇▇ shall have entered into an agreement
with regard to his employment in the form of Exhibit H attached hereto.
9.5. Reserved.
9.6. Financing. By October 31, 2004, Parent shall have obtained a bank
financing commitment that confirms execution of this Agreement and the bank's
agreement to wire into the account of Seller on behalf of Purchaser the $850,000
to be paid upon Closing.
9.7. Opinion of Counsel. Seller shall have received an opinion from
QualMark's counsel, dated the Closing Date, to the effect that (i) Purchaser and
Parent iare corporations duly organized, validly existing and in good standing
under the laws of the State of Colorado, (ii) QualMark has all requisite
corporate power and authority to enter into and consummate the transactions
contemplated by this Agreement and each other Operative Document, (iii) The
Securities, when issued pursuant to the terms hereof, will constitute the duly
authorized, validly issued, fully paid and nonassessable shares of Parent, and
(iv) each of the Operative Documents has been duly executed and delivered by
Purchaser and/or QualMark and are the valid and binding obligations of such
parties, enforceable against them in accordance with their respective terms,
subject as to enforcement to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting the enforcement of creditors'
rights generally and the application of equitable principles.
9.8. Ratification. This Agreement and the execution hereof by each of the
parties hereto shall have been ratified by their respective Boards of Directors.
9.9. Other Matters. QualMark shall have furnished, or caused to be
furnished, to Seller, in form and substance satisfactory to Seller, such
certificates and other evidence as Seller may have reasonably requested as to
the satisfaction of the conditions contained in this Section 9 and as to such
other matters as Seller may reasonably request.
Section 10. Survival of Representations and Warranties; Indemnifications.
10.1. Survival. The representations, warranties and agreements made in
Sections 5 and 6 hereof and in the Schedules hereto by QualMark and Seller shall
remain operative and in full force for a period of twelve months after the
Closing Date, except with respect to Section 5.4(a) and with respect to tax
matters, as to which such representations and warranties shall continue to
survive for a period of any applicable statutes of limitation, regardless of any
investigation made by or on behalf of any party.
10.2. Indemnification by Seller. Seller shall defend and indemnify QualMark
and its officers, employees and directors, from any and all losses, liabilities,
proceedings, claims, settlements, judgments, fines, assessments, damages and
expenses (including reasonable attorneys' fees and litigation expenses, whether
arising out of a third party claim or relating to recovering indemnifiable
damages from Seller) (collectively, the "indemnifiable damages") that
QualMark may suffer or incur in whole or in part by reason of, or which may
arise out of: (i) the Excluded Liabilities; (ii) the inaccuracy of any of the
representations of Seller in this Agreement; (iii) the breach by Seller of any
of the covenants or warranties herein; (iv) any claim for payment of the Chase
Term Loan; and (v) those matters described in Section 3.2 hereof.
10.3. Indemnification by QualMark. Purchaser and Parent shall each defend
and indemnify Seller and its officers, employees and directors, from any and all
"indemnifiable damages" that Seller may suffer or incur by reason of: (i) the
inaccuracy of any of their respective representations herein; and (ii) the
breach of any of their respective covenants or warranties herein. Purchaser
shall defend and indemnify Seller and its officers, employees and directors,
from any and all "indemnifiable damages" that Seller may suffer or incur by
reason of any claim for payment of any liability assumed by Purchaser pursuant
hereto. Parent shall defend and indemnify Seller and its officers, employees and
directors, from any and all "indemnifiable damages" that Seller may suffer or
incur by reason of the ▇▇▇▇▇ Claim.
10.4. Notice and Right to Defend Third Party Claims.
(a) Promptly upon receipt of notice of any third party claim, demand
or assessment or the commencement of any suit, action or proceeding in respect
of which indemnity may be sought on account of an indemnity agreement contained
in this Section 10, the party seeking indemnification (the "Indemnitee") shall
notify in writing, within sufficient time to respond to such claim or answer or
otherwise plead in such action, the party or parties from whom indemnification
is sought (collectively, the "Indemnitors") thereof; provided, however, that
failure or delay to supply such notice shall not relieve Indemnitors of their
indemnification obligation hereunder except to the extent that Indemnitors are
actually prejudiced by such failure or delay.
(b) In case any claim, demand or assessment is asserted or suit,
action or proceeding commenced against an Indemnitee (collectively a "Claim")
and it notifies the Indemnitors of the commencement thereof, if the Indemnitors
acknowledge their indemnification obligations therefor hereunder, then, the
Indemnitors together shall be entitled to participate therein, and, to the
extent that they may wish, collectively to assume the defense, conduct or
settlement thereof, with counsel satisfactory to the Indemnitee, whose consent
to the selection of counsel shall not unreasonably be withheld. After notice
from the Indemnitors to the Indemnitee of its election so to assume the defense,
conduct or settlement thereof, the Indemnitors shall not be liable to the
Indemnitee for any legal or other expenses subsequently incurred by the
Indemnitee in connection with the defense, conduct or settlement thereof;
provided, however, that if the Indemnitee has any separate defense from those of
the Indemnitors, the Indemnitee shall have the right to be represented by its
own counsel at the Indemnitors', expense. The Indemnitee shall have the right in
any event to participate in any such defense with its own counsel at its own
expense. The Indemnitee will cooperate with the Indemnitors in connection with
any such Claim and make personnel, books and records relevant to the Claim
available to the Indemnitors at Indemnitors' expense. In the event that the
Indemnitors fail timely to defend, contest or otherwise protect against any such
Claim, the Indemnitee shall have the right to defend, contest or otherwise
protect against the same and may make any compromise or settlement thereof and
recover the entire cost thereof from the Indemnitors, including, without
limitation, reasonable attorneys, fees, disbursements and all amounts paid as a
result of such Claim or compromise or settlement thereof.
(c) Anything to the contrary herein notwithstanding, prior to finally
settling any such Claim, the Indemnitors shall give to the Indemnitee prompt
notice of their intention to settle same and the terms of such proposed
settlement and acknowledging their indemnification responsibility therefor
hereunder. If the Indemnitee shall object to such proposed settlement within 10
days, then the Indemnitee shall thereafter, at its sole expense, assume the
control and defense of such claim, suit, action, investigation or proceeding and
in such event the liability of the Indemnitors shall be limited to the amount
for which the same could have been settled as proposed by the Indemnitors. If
the Indemnitee does not object to the terms of the proposed settlement within
the aforesaid l0-day period, then the Indemnitors shall have the right to
consummate such proposed settlement upon the terms set forth in the aforesaid
notice.
10.5. Basket and Limitation of Liability. The foregoing indemnification
provisions shall be the exclusive remedy any party may have for breach of
representation, warranty, or covenant. Seller's liability under this Section 10
shall be subject to the following limitations:
(a) Seller shall have no liability unless and until the aggregate
amount of claims for which Seller is obligated to indemnify pursuant to Section
10.2 above shall exceed $40,000, but if the amount of such claims for which
Seller is ultimately found to be obligated exceeds such $40,000, then Seller
shall be liable for all such amounts, including such initial $40,000.
(b) Notwithstanding the foregoing, QualMark shall be entitled to
recover for, and the threshold amount set forth in paragraph 10.5(a) above shall
not apply as a threshold to, any and all claims or payments made with respect to
fraud, intentional misrepresentation, claims against individual Equity Holders
under Section 3.2, willful misconduct of Seller, or any violation of Seller's
warranty under Section 12 (Broker's Fees).
10.6. Payment of Amounts Due. The amount of any indemnifiable damages
conceded or determined to be due from one party to the other, pursuant to any of
the provisions of this Section 10, shall be paid to other within five (5)
business days from the date so conceded or determined.
Section 11. Further Actions. From time to time, as and when requested by
QualMark, Seller shall execute and deliver such documents and instruments and
shall take such further or other actions as QualMark may deem necessary or
desirable to carry out the intent and purposes of this Agreement, to convey,
transfer, assign and deliver to Purchaser, and its successors and assigns, the
Acquired Assets (or to evidence any of the foregoing) and to consummate and give
effect to the other transactions contemplated hereby. From and after the Closing
Date Purchaser shall have the right and authority to collect for its own account
all accounts receivable and other items that are included in the Acquired Assets
transferred to it and to endorse (for deposit only) with the name of Seller any
checks or drafts received by it with respect to accounts receivable or other
items that are included in the Acquired Assets. Purchaser and Seller agree to
establish procedures whereby any checks or drafts received by Seller or its
subsidiaries with respect to receivables or other items relating solely to the
Acquired Assets will be promptly delivered to or deposited for the credit of
Purchaser.
Section 12. Broker's Fees. Each of Seller and QualMark represents and
warrants that it has not dealt with any broker or agent in regard to the
transactions contemplated herein other than Woodbridge Group, Inc. Seller shall
pay any commission due to Woodbridge Group, Inc., and otherwise each of Seller
and QualMark shall pay its own broker fees.
Section 13. Expenses. Except as otherwise specifically provided herein,
Seller and QualMark shall bear their own, legal fees and other costs and
expenses with respect to the negotiation, execution and the delivery of this
Agreement and the consummation of the transactions hereunder, and the Acquired
Assets shall not be reduced or impaired by the payment or accrual of any such
costs and expenses of Seller.
Section 14. Entire Agreement. This Agreement, which includes the Schedules
and Exhibits hereto and the other documents, agreements and instruments executed
and delivered pursuant to or in connection with this Agreement, contains the
entire agreement between Seller and Purchaser with respect to the transactions
contemplated by this Agreement and supersedes all prior arrangements or
understandings with respect thereto.
Section 15. Construction.
(a) The descriptive headings of this Agreement are for convenience
only and shall not control or affect the meaning or construction of any
provision of this Agreement.
(b) Each of the parties to this Agreement participated in the drafting
of this Agreement and the interpretation of any ambiguity contained in this
Agreement will not be affected by the claim that a particular party drafted any
provision hereof.
(c) Any pronoun herein shall include all genders and/or the plural or
singular as appropriate from the context.
Section 16. Notices. All notices or other communications that are required
or permitted hereunder shall be in writing and sufficient when delivered
personally or telecopied by confirmed facsimile if delivered or telecopied
during normal business hours, and if not, then on the next business day after
delivery or telecopying, or the day accepted or rejected by addressee after
mailing by registered or certified mail, return receipt requested, or the next
business day if sent by nationally recognized overnight courier providing for
signature on delivery, in each case postage prepaid, addressed as follows:
If to Purchaser or Parent:
Mr. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Chief Executive Officer
QualMark Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
And
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chief Financial Officer
QualMark Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
If to Seller:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to:
Akabas & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax (▇▇▇) ▇▇▇-▇▇▇▇
Any party may by notice change the address to which notice or other
communications to it are to be delivered or mailed.
Section 17. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut applicable to
contracts entered into, executed and to be performed wholly in such state.
Section 18. Assignability. This Agreement shall not be assignable otherwise
than by operation of law by any party hereto without the prior written consent
of the other parties, and any purported assignment without such prior written
consent shall be void, except that QualMark may assign this agreement to a
corporation controlling, controlled by or under common control with QualMark.
Section 19. Waivers and Amendments. Any waiver of any term or condition of
this Agreement, or any amendment or supplementation of this Agreement, shall be
effective only if in writing executed by the party against whom such waiver,
amendment or supplementation is sought to be charged. A waiver of any breach or
failure to enforce any of the terms or conditions of this Agreement shall not in
any way affect, limit or waive a party's rights hereunder at any time to enforce
strict compliance thereafter with every term or condition of this Agreement.
Section 20. Third Party Rights. Any other provision of this Agreement to
the contrary notwithstanding, this Agreement shall not create benefits for any
third party.
Section 21. Illegalities. In the event that any provision contained in this
Agreement shall be determined to be invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability of any such
provision in every other respect and the remaining provisions of this Agreement
shall not, at the election of the party for whose benefit the provision exists,
be in any way impaired.
Section 22. Termination; Effect of Termination.
22.1. Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual consent of Purchaser, Parent and Seller;
(b) by either QualMark or Seller (the "Non-Defaulting Party") if there
has been a material breach of any material representation or warranty, covenant
or agreement set forth in this Agreement on the part of the other party (the
"Defaulting Party"); provided, however, that the Non-Defaulting Party shall not
have the right to terminate this Agreement until after it has given written
notice to the Defaulting Party, in reasonable specificity, of the breach in
question and expressing the Non-Defaulting Party's intention so to terminate
this Agreement as a result thereof, and the Defaulting Party shall have
subsequently failed to cure such breach within thirty (30) days of the
Defaulting Party's receipt of said notice; it being agreed that the Closing Date
and the date specified in Section 4 shall be postponed to such date as is
necessary for the expiration of such thirty (30) day period. Furthermore, the
election of a party to close with knowledge of a breach or default by another
party hereto shall constitute a waiver of such breach or default; or
(c) by any party if the Closing shall not have occurred before
November 16, 2004 or at such other date as the parties shall agree upon in
writing, if at the time notice of such termination is given the Closing shall
not have occurred for any reason other than a material breach of this Agreement
by the terminating party; or
(d) By QualMark if the Closing Date Balance Sheet does not show a
Closing Current Ratio (as defined in Section 2(c) above) of at least 2.9:1.
22.2. Effect of Termination. In the event of termination of this Agreement
by any party as provided in Section 22.1, this Agreement shall forthwith become
null and void and there shall be no liability or obligation on the part of any
party hereto or their respective officers, directors or employees except with
respect to those provisions of this Agreement which will survive termination
hereof, and except to the extent that such termination results from the willful
breach (a "Willful Breach") in any material respect by a party hereto of any of
its representations, warranties, covenants or agreements set forth in this
Agreement.
Section 23 Counterparts. This Agreement may be executed in multiple
counterparts all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, each of the undersigned corporations has caused this
Agreement to be executed by its duly authorized officer, as of the date first
above written.
QUALMARK ACG CORPORATION ACG DYNAMICS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------- ------------------------------------
Name: Name:
--------------------------- ------------------------------
Title: Title:
-------------------------- -----------------------------
QUALMARK CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
Name:
---------------------------
Title:
--------------------------
The Equity Owners (as to Section 3.2 only)
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇:
--------------------------
▇▇. ▇▇▇ ▇▇▇▇:
---------------------------------
Mr. ▇▇▇▇▇ ▇▇▇▇▇▇▇:
----------------------------
LIST OF EXHIBITS, SCHEDULES AND CLOSING DELIVERIES
Exhibits
A: Escrow Agreement
B: Lease
C: Seller Noncompetition Agreement
D: ▇▇▇▇▇▇▇▇ Noncompetition Agreement
E: Keys Noncompetition Agreement
F: ▇▇▇▇▇▇▇ Noncompetition Agreement
G: ▇▇▇▇▇▇▇▇ Employment Agreement
H: Keys Employment Agreement
Schedules
1.1(a)(i): tangible property
(a)(ii): contracts, etc.
(a)(iii): intangible assets
1.2 excluded personal property
3.2 Form of Securities Letters
3.3 form of the Notes
5.3: Financial Statements
5.4(a): liens and exceptions to title
5.4(d): contracts requiring approval
5.5: valuation method for inventory
5.7: insurance
5.10: employees and compensation
5.11: health, welfare, etc. plans
6.4: QualMark's capital structure; SEC filings
Closing Deliveries
Seller:
Good-standing Certificate
▇▇▇▇ of Sale; Assignments
Board and Shareholder Consents
Proof of release of Chase loan
Certificate of fulfillment of conditions
Opinion of Counsel
QualMark:
Purchase Price
Securities
The Notes (to escrow with Seller's counsel)
Good-standing Certificate
Board Consents
Opinion of Counsel