**EXHIBIT 10.36*****Partners for Growth*****Loan and Security Agreement**   **Borrower:** **Qualmark Corporation, a Colorado corporation****Address:** **4580 Florence Street, Denver, CO 80238**   **Borrower:** **Qualmark ACG Corporation, a Colorado corporation****Address:** **232 Front Avenue, West Haven, CT 06516**   **Borrower:** **Qualmark Ling Corporation, a Colorado Corporation****Address:** **232 Front Avenue, West Haven, CT 06516**   **Date:** **February 20, 2007****THIS LOAN AND SECURITY AGREEMENT**is entered into on the above date between PARTNERS FORGROWTH, L.P. (“PFG”), whose address is 180 Pacific Avenue , San Francisco, CA 94111 and theborrowers named above (jointly and severally, “Borrower”), whose chief executive office is locatedat the above address (“Borrower’s Address”). The Schedule to this Agreement (the “Schedule”) beingsigned by the parties concurrently, is an integral part of this Agreement. (Definitions of certainterms used in this Agreement are set forth in Section 7 below.)1.LOANS.     ***1.1 Loans.***PFG will make a loan to Borrower (the “Loan”) in the amount shown on theSchedule, provided no Default or Event of Default has occurred and is continuing.     ***1.2 Interest.***All Loans and all other monetary Obligations shall bear interest at the rateshown on the Schedule, except where expressly set forth to the contrary in this Agreement.Interest shall be payable monthly, on the last day of the month.     ***1.3 Fees.***Borrower shall pay PFG the fees shown on the Schedule, which are in addition toall interest and other sums payable to PFG and are not refundable.     ***1.4 Loan Requests.***To obtain a Loan, Borrower shall make a request to PFG by facsimile ortelephone. Loan requests may also be made by Borrower by email, but the same shall not be deemedmade until PFG acknowledges receipt of the same by email or otherwise in writing. Loan requestsreceived after 12:00 Noon Pacific time will not be considered by PFG until the next Business Day.PFG may rely on any telephone request for a Loan given by a person whom PFG believes in good faithis an authorized representative of Borrower, and Borrower will indemnify PFG for any loss PFGsuffers as a result of that reliance.     ***1.5 Late Fee.***If any payment of accrued interest for any month is not made within threebusiness days after the date a bill therefor is sent by PFG to Borrower, or if any payment ofprincipal or any other payment is not made within three Business Days after the date due, Borrowershall pay PFG a late payment fee equal to 5% of the amount of such late payment. The provisions ofthis paragraph shall not be construed as PFG’s consent to Borrower’s failure to pay any amountswhen due, and PFG’s acceptance of any such late payments shall not restrict PFG’s exercise of anyremedies arising out of any such failure.
 

 
   **Partners for Growth** **Loan and Security Agreement**2. SECURITY INTEREST.      ***2.1 Grant of Security Interest.***To secure the payment and performance of all of theObligations when due, each Borrower hereby grants to PFG a security interest in all of thefollowing (collectively, the “Collateral”): all right, title and interest of Borrower in and toall of the following, whether now owned or hereafter arising or acquired and wherever located: allAccounts; all Inventory; all Equipment; all Deposit Accounts; all General Intangibles (includingwithout limitation all Intellectual Property); all Investment Property; all Other Property; and anyand all claims, rights and interests in any of the above, and all guaranties and security for anyof the above, and all substitutions and replacements for, additions, accessions, attachments,accessories, and improvements to, and proceeds (including proceeds of any insurance policies,proceeds of proceeds and claims against third parties) of, any and all of the above, and allBorrower’s books relating to any and all of the above.3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.     In order to induce PFG to enter into this Agreement and to make Loans, each Borrowerrepresents and warrants to PFG as follows, and each Borrower covenants that the followingrepresentations will continue to be true, and that Borrower will at all times comply with all ofthe following covenants, throughout the term of this Agreement and until all Obligations have beenpaid and performed in full:     ***3.1 Corporate Existence and Authority.***Borrower is and will continue to be, duly organized,validly existing and in good standing under the laws of the jurisdiction of its incorporation.Borrower is and will continue to be qualified and licensed to do business in all jurisdictions inwhich any failure to do so would result in a Material Adverse Change. The execution, delivery andperformance by Borrower of this Agreement, and all other documents contemplated hereby (i) havebeen duly and validly authorized, (ii) are enforceable against Borrower in accordance with theirterms (except as enforcement may be limited by equitable principles and by bankruptcy, insolvency,reorganization, moratorium or similar laws relating to creditors’ rights generally), and (iii) donot violate Borrower’s articles or certificate of incorporation, or Borrower’s by-laws, or any lawor any material agreement or instrument which is binding upon Borrower or its property, and (iv)do not constitute grounds for acceleration of any material indebtedness or obligation under anyagreement or instrument which is binding upon Borrower or its property.     ***3.2 Name; Trade Names and Styles.***As of the date hereof, the name of Borrower set forth inthe heading to this Agreement is its correct name, as set forth in its Articles or Certificate ofIncorporation. Listed in the Representations are all prior names of Borrower and all of Borrower’spresent and prior trade names as of the date hereof. Borrower shall give PFG 30 days’ priorwritten notice before changing its name or doing business under any other name. Borrower hascomplied, and will in the future comply, in all material respects, with all laws relating to theconduct of business under a fictitious business name, if applicable to Borrower.     ***3.3 Place of Business; Location of Collateral.***As of the date hereof, the address set forthin the heading to this Agreement is Borrower’s chief executive office. In addition, as of the datehereof, Borrower has places of business and Collateral is located only at the locations set forthin the Representations. Borrower will give PFG at least 30 days prior written notice beforeopening any additional place of business, changing its chief executive office, or moving any of theCollateral to a location other than Borrower’s Address or one of the locations set forth in theRepresentations, except that Borrower may move Collateral on a temporary basis as reasonablyrequired and as is customary and consistent with Borrower’s ordinary course of business, and maymaintain sales offices in the ordinary course of business at which not more than a total of $10,000fair market value of Equipment is located.     ***3.4 Title to Collateral; Perfection; Permitted Liens.***     (a) Borrower is now, and will at all times in the future be, the sole owner of all theCollateral, except for items of Equipment which are leased to Borrower. The Collateral now is andwill remain free and clear of any and all liens, charges, security interests, encumbrances andadverse claims, except for Permitted Liens. PFG now has, and will continue to have, afirst-priority perfected and enforceable security interest in all of the Collateral, subject onlyto the Permitted Liens, and Borrower will at all times defend PFG and the Collateral against allclaims of others.     (b) Borrower has set forth in the Representations all of Borrower’s Deposit Accounts, andBorrower will give PFG five Business Days advance written notice before establishing any newDeposit Accounts and will cause the institution where any such new Deposit Account is maintained toexecute and deliver to PFG a control agreement in form sufficient to perfect PFG’s securityinterest in the Deposit Account and otherwise satisfactory to PFG in its good faith businessjudgment.     (c) In the event that Borrower shall at any time after the date hereof have any commercialtort claims against others, which it is asserting, and in which the potential recovery exceeds$100,000, Borrower shall promptly notify
 

 
   **Partners for Growth** **Loan and Security Agreement**PFG thereof in writing and provide PFG with such information regarding the same as PFG shallrequest (unless providing such information would waive the Borrower’s attorney-client privilege).Such notification to PFG shall constitute a grant of a security interest in the commercial tortclaim and all proceeds thereof to PFG, and Borrower shall execute and deliver all such documentsand take all such actions as PFG shall request in connection therewith.     (d) None of the Collateral now is or will be affixed to any real property in such a manner, orwith such intent, as to become a fixture. Borrower is not and will not become a lessee under anyreal property lease pursuant to which the lessor may obtain any rights in any of the Collateral(except such rights which may be obtained after the date hereof, are reasonably acceptable to PFGand are specifically subordinated to the security interest of PPFG) and no such lease nowprohibits, restrains, impairs or will prohibit, restrain or impair Borrower’s right to remove anyCollateral from the leased premises. Whenever any Collateral is located upon premises in which anythird party has an interest, Borrower shall, whenever requested by PFG, use commercially reasonableefforts to cause such third party to execute and deliver to PFG, in form acceptable to PFG, suchwaivers and subordinations as PFG shall specify in its good faith business judgment. Borrower willkeep in full force and effect, and will comply with all material terms of, any lease of realproperty where any of the Collateral now or in the future may be located.     ***3.5 Maintenance of Collateral.***Borrower will maintain the Collateral in good workingcondition (ordinary wear and tear excepted), and Borrower will not use the Collateral for anyunlawful purpose. Borrower will immediately advise PFG in writing of any material loss or damageto the Collateral.     ***3.6 Books and Records.***Borrower has maintained and will maintain at Borrower’s Addresscomplete and accurate books and records, comprising an accounting system in accordance with GAAP.     ***3.7 Financial Condition, Statements and Reports.***All financial statements now or in thefuture delivered to PFG have been, and will be, prepared in conformity with GAAP and now and in thefuture will fairly present the results of operations and financial condition of Borrower in allmaterial respects, in accordance with GAAP, at the times and for the periods therein stated.Between the last date covered by any such statement provided to PFG and the date hereof, there hasbeen no Material Adverse Change.     ***3.8 Tax Returns and Payments; Pension Contributions.***Borrower has timely filed, and willtimely file, all required tax returns and reports, and Borrower has timely paid, and will timelypay, all foreign, federal, state and local taxes, assessments, deposits and contributions now or inthe future owed by Borrower. Borrower may, however, defer payment of any of the foregoing whichare contested by Borrower in good faith, provided that Borrower (i) contests the same byappropriate proceedings promptly and diligently instituted and conducted, (ii) notifies PFG inwriting of the commencement of, and any material development in, the proceedings, and (iii) postsbonds or takes any other steps required to keep the same from becoming a lien upon any of theCollateral. Borrower is unaware of any claims or adjustments proposed for any of Borrower’s priortax years which could result in additional taxes becoming due and payable by Borrower. Borrowerhas paid, and shall continue to pay all amounts necessary to fund all present and future pension,profit sharing and deferred compensation plans in accordance with their terms, and Borrower has notand will not withdraw from participation in, permit partial or complete termination of, or permitthe occurrence of any other event with respect to, any such plan which could reasonably be expectedto result in any liability of Borrower, including any liability to the Pension Benefit GuarantyCorporation or its successors or any other governmental agency.     ***3.9 Compliance with Law.***Borrower has, to the best of its knowledge, complied, and willcomply, in all material respects, with all provisions of all foreign, federal, state and local lawsand regulations applicable to Borrower, including, but not limited to, those relating to Borrower’sownership of real or personal property, the conduct and licensing of Borrower’s business, and allenvironmental matters.     ***3.10 Litigation.***There is no claim, suit, litigation, proceeding or investigation pending or(to best of Borrower’s knowledge) threatened against or affecting Borrower in any court or beforeany governmental agency (or any basis therefor known to Borrower) which could reasonably beexpected to result, either separately or in the aggregate, in any Material Adverse Change.Borrower will promptly inform PFG in writing of any claim, proceeding, litigation or investigationin the future threatened or instituted against Borrower involving any single claim of $50,000 ormore, or involving $100,000 or more in the aggregate.     ***3.11 Use of Proceeds.***All proceeds of all Loans shall be used solely for lawful businesspurposes. Borrower is not purchasing or carrying any “margin stock” (as defined in Regulation U ofthe Board of Governors of the Federal Reserve System) and no part of the proceeds of any Loan willbe used to purchase or carry any “margin stock” or to extend credit to others for the purpose ofpurchasing or carrying any “margin stock.”
 

 
   **Partners for Growth** **Loan and Security Agreement**     ***3.12 No Default.***At the date hereof, no Default or Event of Default has occurred, and noDefault or Event of Default will have occurred after giving effect to any Loans being madeconcurrently herewith.4. ADDITIONAL DUTIES OF BORROWER.     ***4.1 Financial and Other Covenants.***Borrower shall at all times comply with the financial andother covenants set forth in the Schedule.     ***4.2. Remittance of Proceeds.***Subject to the rights of the Senior Lender, all proceeds arisingfrom the disposition of any Collateral shall be delivered, in kind, by Borrower to PFG in theoriginal form in which received by Borrower not later than the following Business Day after receiptby Borrower, to be applied to the Obligations in such order as PFG shall determine; provided that,if no Default or Event of Default has occurred and is continuing, Borrower shall not be obligatedto remit to PFG (i) the proceeds of Accounts arising in the ordinary course of business, or (ii)the proceeds of the sale of worn out or obsolete Equipment disposed of by Borrower in good faith inan arm’s length transaction for an aggregate purchase price of $25,000 or less (for all suchtransactions in any fiscal year), or (iii) the proceeds of the sale of other assets not exceeding$50,000 in the aggregate in any fiscal year. Borrower agrees that it will not commingle proceedsof Collateral with any of Borrower’s other funds or property, but will hold such proceeds separateand apart from such other funds and property and in an express trust for PFG, except as set forthabove, and subject to the rights of the Senior Lender. Nothing in this Section limits therestrictions on disposition of Collateral set forth elsewhere in this Agreement.     ***4.3 Insurance.***Borrower shall, at all times insure all of the tangible personal propertyCollateral and carry such other business insurance, with insurers reasonably acceptable to PFG, insuch form and amounts as PFG may reasonably require and as are customary and in accordance withstandard practices for Borrower’s industry and locations, and Borrower shall provide evidence ofsuch insurance to PFG. All such insurance policies shall name PFG as an additional loss payee, andshall contain a lenders loss payee endorsement in form reasonably acceptable to PFG. Upon receiptof the proceeds of any such insurance, subject to the rights of the Senior Lender, PFG shall applysuch proceeds in reduction of the Obligations as PFG shall determine in its good faith businessjudgment, except that, provided no Default or Event of Default has occurred and is continuing, PFGshall release to Borrower insurance proceeds with respect to Equipment totaling less than $250,000,which shall be utilized by Borrower for the replacement of the Equipment with respect to which theinsurance proceeds were paid. PFG may require reasonable assurance that the insurance proceeds soreleased will be so used. If Borrower fails to provide or pay for any insurance, PFG may, but isnot obligated to, obtain the same at Borrower’s expense. Borrower shall promptly deliver to PFGcopies of all material reports made to insurance companies.     ***4.4 Reports.***Borrower, at its expense, shall provide PFG with the written reports set forthin the Schedule, and such other written reports with respect to Borrower (including budgets,projections, operating plans and other financial documentation), as PFG shall from time to timespecify in its good faith business judgment.     ***4.5 Access to Collateral, Books and Records.***At reasonable times, and on two Business Days’notice, PFG, or its agents, shall have the right to inspect the Collateral, and the right to auditand copy Borrower’s books and records. The foregoing inspections and audits shall be at Borrower’sexpense and the charge therefor shall be $750 per person per day (or such higher amount as shallrepresent PFG’s then current standard charge for the same), plus reasonable out-of-pocket expenses.Notwithstanding the foregoing, if no Default or Event of Default has occurred and is continuing,Borrower shall not be required to disclose to PFG any document or information (i) where disclosureis prohibited by applicable law or any agreement binding on Borrower, or (ii) is subject toattorney-client or similar privilege or constitutes attorney work product. If Borrower iswithholding any information under the preceding sentence, it shall so advise PFG in writing, givingPFG a general description of the nature of the information withheld.     ***4.6 Negative Covenants.***Except as may be permitted in the Schedule, Borrower shall not,without PFG’s prior written consent (which shall be a matter of its good faith business judgment),do any of the following:          (i) merge or consolidate with another corporation or entity (except that QACG and/or QL maymerge into each other or into Qualmark);          (ii) acquire any assets, except in the ordinary course of business, or make any Investmentsother than Permitted Investments;          (iii) enter into any other transaction outside the ordinary course of business;
 

 
   **Partners for Growth** **Loan and Security Agreement**          (iv) sell or transfer any Collateral (including without limitation and sale or transfer ofCollateral which is then leased back by Borrower), except for (A) the sale of finished Inventory inthe ordinary course of Borrower’s business, and except for the sale of obsolete or unneededEquipment in the ordinary course of business, (B) the sale of other assets not exceeding $50,000 inthe aggregate in any fiscal year, (C) the making or Permitted Investments, (D) the granting ofPermitted Liens, and (E) the non-exclusive licensing of Intellectual Property in the ordinarycourse of business;          (v) store any Inventory or other Collateral with any warehouseman or other third party, unlessthere is in place a bailee agreement in such form as PFG shall specify in its good faith businessjudgment;          (vi) sell any Inventory on a sale-or-return, guaranteed sale, consignment, or other contingentbasis;          (vii) make any loans of any money or other assets, other than Permitted Investments;          (viii) incur any Indebtedness, other than Permitted Indebtedness;          (ix) guarantee or otherwise become liable with respect to the obligations of another party orentity;          (x) pay or declare any dividends on Borrower’s stock (except for dividends payable solely instock of Borrower and dividends paid by QACG and/or QL to Qualmark);          (xi) redeem, retire, purchase or otherwise acquire, directly or indirectly, any of Borrower’sstock;          (xii) engage, directly or indirectly, in any business other than the businesses currentlyengaged in by Borrower or reasonably related thereto;          (xiii) with respect to Qualmark, cease to own 100% of QACG and 100% of QL;          (xiv) with respect to Qualmark, permit a change in control of QACG or QL; or          (xv) dissolve or elect to dissolve (except that QACG and/or QL may dissolve into Qualmark).Transactions permitted by the foregoing provisions of this Section are only permitted if no Defaultor Event of Default would occur as a result of such transaction.     ***4.7 Litigation Cooperation.***Should any third-party suit or proceeding be instituted by oragainst PFG with respect to any Collateral or relating to Borrower, Borrower shall, without expenseto PFG, make available Borrower and its officers, employees and agents and Borrower’s books andrecords, to the extent that PFG may deem them reasonably necessary in order to prosecute or defendany such suit or proceeding.     ***4.8 Changes.***Borrower agrees to notify PFG in writing of any changes in the information setforth in the Representations.     ***4.9 Further Assurances.***Borrower agrees, at its expense, on request by PFG, to execute alldocuments and take all actions, as PFG, may, in its good faith business judgment, deem necessary oruseful in order to perfect and maintain PFG’s perfected first-priority security interest in theCollateral (subject to Permitted Liens), and in order to fully consummate the transactionscontemplated by this Agreement.5. TERM.     ***5.1 Maturity Date.***This Agreement shall continue in effect until the maturity date set forthon the Schedule (the “Maturity Date”), subject to Sections 5.2 and 5.3 below.     ***5.2 Early Termination.***This Agreement may be terminated prior to the Maturity Date asfollows: (i) if specifically permitted in the Schedule, by Borrower, effective three Business Daysafter written notice of termination is given to PFG; or (ii) by PFG at any time after theoccurrence and during the continuance of an Event of Default, without notice, effectiveimmediately. If this Agreement is terminated by Borrower (if permitted in the Schedule) or by PFGunder this Section 5.2, Borrower shall pay to PFG a prepayment fee in the amount set forth in theSchedule. Any prepayment fee shall be due and payable on the effective date of termination andthereafter shall bear interest at a rate equal to the highest rate applicable to any of theObligations.     ***5.3 Payment of Obligations.***On the Maturity Date or on any earlier effective date oftermination, Borrower shall pay and perform in full all Obligations, whether evidenced byinstallment notes or otherwise, and whether or not all or any part of such Obligations areotherwise then due and payable. Notwithstanding any termination of this Agreement, all of PFG’ssecurity interests in all of the Collateral and all of the terms and provisions of this
 

 
   **Partners for Growth** **Loan and Security Agreement**Agreement shall continue in full force and effect until all Obligations have been paid andperformed in full; provided that PFG may, in its sole discretion, refuse to make any further Loansafter termination. No termination shall in any way affect or impair any right or remedy of PFG,nor shall any such termination relieve Borrower of any Obligation to PFG, until all of theObligations have been paid and performed in full. Upon payment and performance in full of all theObligations and termination of this Agreement, PFG shall promptly terminate its financingstatements with respect to the Borrower and deliver to Borrower such other documents as may berequired to fully terminate PFG’s security interests.6. EVENTS OF DEFAULT AND REMEDIES.     ***6.1 Events of Default.***The occurrence of any of the following events shall constitute an“Event of Default” under this Agreement, and Borrower shall give PFG immediate written noticethereof:          (a) Any warranty, representation, statement, report or certificate made or delivered to PFG byBorrower or any of Borrower’s officers, employees or agents, now or in the future, shall be untrueor misleading in a material respect when made or deemed to be made; or          (b) Borrower shall fail to pay any Loan or any interest thereon or any other monetaryObligation within three Business Days after the date due; or          (c) Borrower shall fail to comply with any of the financial covenants set forth in theSchedule, or shall breach any of the provisions of Section 4.6 hereof, or shall fail to perform anyother non-monetary Obligation which by its nature cannot be cured, or shall fail to permit PFG toconduct an inspection or audit as provided in Section 4.5 hereof or shall fail to provide PFG withreports required under Section 6 of the Schedule within one Business Day after the date due; or          (d) Borrower shall fail to perform any other non-monetary Obligation, which failure is notcured within five Business Days after the date due; or          (e) any levy, assessment, attachment, seizure, lien or encumbrance (other than a PermittedLien) is made on all or any part of the Collateral which is not cured within 10 days after theoccurrence of the same; or          (f) any default or event of default occurs under any obligation secured by a Permitted Lien,which is not cured within any applicable cure period or waived in writing by the holder of thePermitted Lien; or          (g) Borrower breaches any material contract or obligation, which has resulted or reasonablymay be expected to result in a Material Adverse Change; or          (h) Dissolution, termination of existence, insolvency or business failure of Borrower; orappointment of a receiver, trustee or custodian, for all or any part of the property of, assignmentfor the benefit of creditors by, or the commencement of any proceeding by Borrower under anyreorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution orliquidation law or statute of any jurisdiction, now or in the future in effect, or Borrower shallgenerally not pay its debts as they become due, or Borrower shall conceal, remove or transfer anypart of its property, with intent to hinder, delay or defraud its creditors, or make or suffer anytransfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyanceor similar law; or          (i) the commencement of any proceeding against Borrower or any guarantor of any of theObligations under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect,which is not cured by the dismissal thereof within 45 days after the date commenced; or          (j) revocation or termination of, or limitation or denial of liability upon, any guaranty ofthe Obligations or any attempt to do any of the foregoing, or commencement of proceedings by anyguarantor of any of the Obligations under any bankruptcy or insolvency law; or          (k) revocation or termination of, or limitation or denial of liability upon, any pledge of anycertificate of deposit, securities or other property or asset of any kind pledged by any thirdparty to secure any or all of the Obligations, or any attempt to do any of the foregoing, orcommencement of proceedings by or against any such third party under any bankruptcy or insolvencylaw; or          (l) Borrower makes any payment on account of any indebtedness or obligation which has beensubordinated to the Obligations (other than as permitted in the applicable subordinationagreement), or if any Person who has subordinated such indebtedness or obligations terminates or inany way limits his subordination agreement; or
 

 
   **Partners for Growth** **Loan and Security Agreement**          (m) there shall be a change in the record or beneficial ownership of an aggregate of more than20% of the outstanding shares of stock of Borrower, in one or more transactions, compared to theownership of outstanding shares of stock of Borrower in effect on the date hereof, without theprior written consent of PFG; or          (n) a Material Adverse Change shall occur.PFG may cease making any Loans hereunder during any of the cure periods provided above, andthereafter if an Event of Default has occurred and is continuing.     ***6.2 Remedies.***Upon the occurrence and during the continuance of any Event of Default, and atany time thereafter, PFG, at its option, and without notice or demand of any kind (all of which arehereby expressly waived by Borrower), may do any one or more of the following: (a) Cease makingLoans or otherwise extending credit to Borrower under this Agreement or any other Loan Document;(b) Accelerate and declare all or any part of the Obligations to be immediately due, payable, andperformable, notwithstanding any deferred or installment payments allowed by any instrumentevidencing or relating to any Obligation; (c) Take possession of any or all of the Collateralwherever it may be found, and for that purpose Borrower hereby authorizes PFG without judicialprocess to enter onto any of Borrower’s premises without interference to search for, takepossession of, keep, store, or remove any of the Collateral, and remain on the premises or cause acustodian to remain on the premises in exclusive control thereof, without charge for so long as PFGdeems it necessary, in its good faith business judgment, in order to complete the enforcement ofits rights under this Agreement or any other agreement; provided, however, that should PFG seek totake possession of any of the Collateral by court process, Borrower hereby irrevocably waives: (i)any bond and any surety or security relating thereto required by any statute, court rule orotherwise as an incident to such possession; (ii) any demand for possession prior to thecommencement of any suit or action to recover possession thereof; and (iii) any requirement thatPFG retain possession of, and not dispose of, any such Collateral until after trial or finaljudgment; (d) Require Borrower to assemble any or all of the Collateral and make it available toPFG at places designated by PFG which are reasonably convenient to PFG and Borrower, and to removethe Collateral to such locations as PFG may deem advisable; (e) Complete the processing,manufacturing or repair of any Collateral prior to a disposition thereof and, for such purpose andfor the purpose of removal, PFG shall have the right to use Borrower’s premises, vehicles, hoists,lifts, cranes, and other Equipment and all other property without charge; (f) Sell, lease orotherwise dispose of any of the Collateral, in its condition at the time PFG obtains possession ofit or after further manufacturing, processing or repair, at one or more public and/or privatesales, in lots or in bulk, for cash, exchange or other property, or on credit, and to adjourn anysuch sale from time to time without notice other than oral announcement at the time scheduled forsale. PFG shall have the right to conduct such disposition on Borrower’s premises without charge,for such time or times as PFG deems reasonable, or on PFG’s premises, or elsewhere and theCollateral need not be located at the place of disposition. PFG may directly or through anyaffiliated company purchase or lease any Collateral at any such public disposition, and ifpermissible under applicable law, at any private disposition. Any sale or other disposition ofCollateral shall not relieve Borrower of any liability Borrower may have if any Collateral isdefective as to title or physical condition or otherwise at the time of sale; (g) Demand paymentof, and collect any Accounts and General Intangibles comprising Collateral and, in connectiontherewith, Borrower irrevocably authorizes PFG to endorse or sign Borrower’s name on allcollections, receipts, instruments and other documents, to take possession of and open mailaddressed to Borrower and remove therefrom payments made with respect to any item of the Collateralor proceeds thereof, and, in PFG’s good faith business judgment, to grant extensions of time topay, compromise claims and settle Accounts and the like for less than face value; (h) Exercise anyand all rights under any present or future control agreements relating to Deposit Accounts orInvestment Property; and (i) Demand and receive possession of any of Borrower’s federal and stateincome tax returns and the books and records utilized in the preparation thereof or referringthereto. All reasonable attorneys’ fees, expenses, costs, liabilities and obligations incurred byPFG with respect to the foregoing shall be added to and become part of the Obligations, shall bedue on demand, and shall bear interest at a rate equal to the highest interest rate applicable toany of the Obligations. Without limiting any of PFG’s rights and remedies, from and after theoccurrence and during the continuance of any Event of Default, the interest rate applicable to theObligations shall be increased by an additional four percent per annum (the “Default Rate”).     ***6.3 Standards for Determining Commercial Reasonableness.***Borrower and PFG agree that a saleor other disposition (collectively, “sale”) of any Collateral which complies with the followingstandards will conclusively be deemed to be commercially reasonable: (i) Notice of the sale isgiven to Borrower at least ten days prior to the sale, and, in the case of a public sale, notice ofthe sale is published at least five days before the sale in a newspaper of general circulation inthe county where the sale is to be conducted; (ii) Notice of the sale describes the collateral ingeneral, non-specific terms; (iii) The sale is conducted at a place designated by PFG, with orwithout the Collateral
 

 
   **Partners for Growth** **Loan and Security Agreement**being present; (iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m.; (v)Payment of the purchase price in cash or by cashier’s check or wire transfer is required; (vi) Withrespect to any sale of any of the Collateral, PFG may (but is not obligated to) direct anyprospective purchaser to ascertain directly from Borrower any and all information concerning thesame. PFG shall be free to employ other methods of noticing and selling the Collateral, in itsdiscretion, if they are commercially reasonable.     ***6.4 Power of Attorney.***Upon the occurrence and during the continuance of any Event ofDefault, without limiting PFG’s other rights and remedies, Borrower grants to PFG an irrevocablepower of attorney coupled with an interest, authorizing and permitting PFG (acting through any ofits employees, attorneys or agents) at any time, at its option, but without obligation, with orwithout notice to Borrower, and at Borrower’s expense, to do any or all of the following, inBorrower’s name or otherwise, but PFG agrees that if it exercises any right hereunder, it will doso in good faith and in a commercially reasonable manner: (a) Execute on behalf of Borrower anydocuments that PFG may, in its good faith business judgment, deem advisable in order to perfect andmaintain PFG’s security interest in the Collateral, or in order to exercise a right of Borrower orPFG, or in order to fully consummate all the transactions contemplated under this Agreement, andall other Loan Documents; (b) Execute on behalf of Borrower, any invoices relating to any Account,any draft against any Account Debtor and any notice to any Account Debtor, any proof of claim inbankruptcy, any Notice of Lien, claim of mechanic’s, materialman’s or other lien, or assignment orsatisfaction of mechanic’s, materialman’s or other lien; (c) Take control in any manner of any cashor non-cash items of payment or proceeds of Collateral; endorse the name of Borrower upon anyinstruments, or documents, evidence of payment or Collateral that may come into PFG’s possession;(d) Endorse all checks and other forms of remittances received by PFG; (e) Pay, contest or settleany lien, charge, encumbrance, security interest and adverse claim in or to any of the Collateral,or any judgment based thereon, or otherwise take any action to terminate or discharge the same; (f)Grant extensions of time to pay, compromise claims and settle Accounts and General Intangibles forless than face value and execute all releases and other documents in connection therewith; (g) Payany sums required on account of Borrower’s taxes or to secure the release of any liens therefor, orboth; (h) Settle and adjust, and give releases of, any insurance claim that relates to any of theCollateral and obtain payment therefor; (i) Instruct any third party having custody or control ofany books or records belonging to, or relating to, Borrower to give PFG the same rights of accessand other rights with respect thereto as PFG has under this Agreement; and (j) Take any action orpay any sum required of Borrower pursuant to this Agreement and any other Loan Documents. Any andall reasonable sums paid and any and all reasonable costs, expenses, liabilities, obligations andattorneys’ fees incurred by PFG with respect to the foregoing shall be added to and become part ofthe Obligations, shall be payable on demand, and shall bear interest at a rate equal to the highestinterest rate applicable to any of the Obligations. In no event shall PFG’s rights under theforegoing power of attorney or any of PFG’s other rights under this Agreement be deemed to indicatethat PFG is in control of the business, management or properties of Borrower.     ***6.5 Application of Proceeds.***All proceeds realized as the result of any sale of theCollateral shall be applied by PFG first to the reasonable costs, expenses, liabilities,obligations and attorneys’ fees incurred by PFG in the exercise of its rights under this Agreement,second to the interest due upon any of the Obligations, and third to the principal of theObligations, in such order as PFG shall determine in its sole discretion. Any surplus shall bepaid to Borrower or other persons legally entitled thereto; Borrower shall remain liable to PFG forany deficiency. If, PFG, in its good faith business judgment, directly or indirectly enters into adeferred payment or other credit transaction with any purchaser at any sale of Collateral, PFGshall have the option, exercisable at any time, in its good faith business judgment, of eitherreducing the Obligations by the principal amount of purchase price or deferring the reduction ofthe Obligations until the actual receipt by PFG of the cash therefor.     ***6.6 Remedies Cumulative.***In addition to the rights and remedies set forth in this Agreement,PFG shall have all the other rights and remedies accorded a secured party under the Code and underall other applicable laws, and under any other instrument or agreement now or in the future enteredinto between PFG and Borrower, and all of such rights and remedies are cumulative and none isexclusive. Exercise or partial exercise by PFG of one or more of its rights or remedies shall notbe deemed an election, nor bar PFG from subsequent exercise or partial exercise of any other rightsor remedies. The failure or delay of PFG to exercise any rights or remedies shall not operate as awaiver thereof, but all rights and remedies shall continue in full force and effect until all ofthe Obligations have been fully paid and performed.     7.DEFINITIONS. ***As used in this Agreement, the following terms have the following meanings:***     “Account Debtor” means the obligor on an Account.
 

 
   **Partners for Growth** **Loan and Security Agreement**     “Accounts” means all present and future “accounts” as defined in the CaliforniaUniform Commercial Code in effect on the date hereof with such additions to such term as mayhereafter be made, and includes without limitation all accounts receivable and other sums owing toBorrower.     “Affiliate” means, with respect to any Person, a relative, partner, shareholder,director, officer, or employee of such Person, or any parent or subsidiary of such Person, or anyPerson controlling, controlled by or under common control with such Person.     “Business Day” means a day on which PFG is open for business.     “Code” means the Uniform Commercial Code as adopted and in effect in the State ofCalifornia from time to time.     “Collateral” has the meaning set forth in Section 2 above.     “continuing” and “during the continuance of” when used with reference to aDefault or Event of Default means that the Default or Event of Default has occurred and has notbeen either waived in writing by PFG or cured within any applicable cure period.     “Default” means any event which with notice or passage of time or both, wouldconstitute an Event of Default.     “Default Rate” has the meaning set forth in Section 6.2 above.     “Deposit Accounts” means all present and future “deposit accounts” as defined in theCalifornia Uniform Commercial Code in effect on the date hereof with such additions to such term asmay hereafter be made, and includes without limitation all general and special bank accounts,demand accounts, checking accounts, savings accounts and certificates of deposit.     “Equipment” means all present and future “equipment” as defined in the CaliforniaUniform Commercial Code in effect on the date hereof with such additions to such term as mayhereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles(including motor vehicles and trailers), and any interest in any of the foregoing.     “Event of Default” means any of the events set forth in Section 6.1 of this Agreement.     “GAAP” means generally accepted accounting principles consistently applied.     “General Intangibles” means all present and future “general intangibles” as defined inthe California Uniform Commercial Code in effect on the date hereof with such additions to suchterm as may hereafter be made, and includes without limitation all Intellectual Property, paymentintangibles, royalties, contract rights, goodwill, franchise agreements, purchase orders, customerlists, route lists, telephone numbers, domain names, claims, income tax refunds, security and otherdeposits, options to purchase or sell real or personal property, rights in all litigation presentlyor hereafter pending (whether in contract, tort or otherwise), insurance policies (includingwithout limitation key man, property damage, and business interruption insurance), payments ofinsurance and rights to payment of any kind.     “good faith business judgment” means honesty in fact and good faith (as defined inSection 1201 of the Code) in the exercise of PFG’s business judgment.     “including” means including (but not limited to).     “Indebtedness” means (a) indebtedness for borrowed money or the deferred purchaseprice of property or services (other than trade payables arising in the ordinary course ofbusiness), (b) obligations evidenced by bonds, notes, debentures or other similar instruments, (c)reimbursement obligations in connection with letters of credit, and (d) capital lease obligations.     “Intellectual Property” means all present and future: (a) copyrights, copyrightrights, copyright applications, copyright registrations and like protections in each work ofauthorship and derivative work thereof, whether published or unpublished, (b) trade secret rights,including all rights to unpatented inventions and know-how, and confidential information; (c) maskwork or similar rights available for the protection of semiconductor chips; (d) patents, patentapplications and like protections including without limitation improvements, divisions,continuations, renewals, reissues, extensions and continuations-in-part of the same; (e)trademarks, servicemarks, trade styles, and trade names, whether or not any of the foregoing areregistered, and all applications to register and registrations of the same and like protections,and the entire goodwill of the business of Borrower connected with and symbolized
 

 
   **Partners for Growth** **Loan and Security Agreement**by any such trademarks; (f) computer software and computer software products; (g) designs anddesign rights; (h) technology; (i) all claims for damages by way of past, present and futureinfringement of any of the rights included above; and (j) all licenses or other rights to use anyproperty or rights of a type described above.     “Inventory” means all present and future “inventory” as defined in the CaliforniaUniform Commercial Code in effect on the date hereof with such additions to such term as mayhereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies,packing and shipping materials, work in process and finished products, including without limitationsuch inventory as is temporarily out of Borrower’s custody or possession or in transit andincluding any returned goods and any documents of title representing any of the above.     “Investment” means any beneficial ownership interest in any Person (including anystock, partnership interest or other equity or debt securities issued by any Person), and any loan,advance or capital contribution to any Person.     “Investment Property” means all present and future investment property, securities,stocks, bonds, debentures, debt securities, partnership interests, limited liability companyinterests, options, security entitlements, securities accounts, commodity contracts, commodityaccounts, and all financial assets held in any securities account or otherwise, and all options andwarrants to purchase any of the foregoing, wherever located, and all other securities of everykind, whether certificated or uncertificated.     “Loan Documents” means, collectively, this Agreement, the Representations, and allother present and future documents, instruments and agreements between PFG and Borrower, including,but not limited to those relating to this Agreement, and all amendments and modifications theretoand replacements therefor.     “Material Adverse Change” means any of the following: (i) a material adverse change inthe business, operations, or financial or other condition of the Borrower, or (ii) a materialimpairment of the prospect of repayment of any portion of the Obligations; or (iii) a materialimpairment of the value or priority of PFG’s security interests in the Collateral.     “Obligations” means all present and future Loans, advances, debts, liabilities,obligations, guaranties, covenants, duties and indebtedness at any time owing by Borrower to PFG,whether evidenced by this Agreement or any note or other instrument or document or other writtenrepresentation, undertaking, consent or agreement of Borrower, whether arising from an extension ofcredit, opening of a letter of credit, banker’s acceptance, loan, guaranty, indemnification orotherwise, whether direct or indirect (including, without limitation, those acquired by assignmentand any participation by PFG in Borrower’s debts owing to others), absolute or contingent, due orto become due, including, without limitation, all interest, charges, expenses, fees, attorney’sfees, expert witness fees, audit fees, collateral monitoring fees, closing fees, facility fees,termination fees, minimum interest charges and any other sums chargeable to Borrower under thisAgreement or under any other Loan Documents.     “Other Property” means the following as defined in the California Uniform CommercialCode in effect on the date hereof with such additions to such term as may hereafter be made, andall rights relating thereto: all present and future “commercial tort claims” (including withoutlimitation any commercial tort claims identified in the Representations), “documents”,“instruments”, “promissory notes”, “chattel paper”, “letters of credit”, “letter-of-credit rights”,“fixtures”, “farm products” and “money”; and all other goods and personal property of every kind,tangible and intangible, whether or not governed by the California Uniform Commercial Code.     “Payment” means all checks, wire transfers and other items of payment received by forcredit to Borrower’s outstanding Obligations.     “Permitted Indebtedness” means, collectively for Qualmark, QACG and QL:          (i) the Loans and other Obligations; and          (ii) Indebtedness existing on the date hereof and shown on Exhibit A hereto;          (iii) Subordinated Debt;          (iv) Indebtedness owing to Senior Lender not to exceed the Senior Debt Limit specified in theSchedule;          (v) other Indebtedness secured by Permitted Liens;          (vi) reimbursement obligations in respect of letters of credit in an aggregate face amountoutstanding not to exceed $300,000 at any time outstanding, which has been reported to PFG inwriting, and, in the case of
 

 
   **Partners for Growth** **Loan and Security Agreement**reimbursement obligations to the Senior Lender in respect of letters of credit which do notexceed the Senior Debt Limit (taking into account all other Indebtedness to Senior Lender).     “Permitted Investments” are:          (i) Investments (if any) shown on the Exhibit A and existing on the date hereof;          (ii) marketable direct obligations issued or unconditionally guaranteed by the United Statesor its agency or any State maturing within 1 year from its acquisition;          (iii) commercial paper maturing no more than 1 year after its creation and having the highestrating from either Standard & Poor’s Corporation or Moody’s Investors Service, Inc; and          (iv) bank certificates of deposit issued maturing no more than 1 year after issue.     “Permitted Liens” means the following:          (i) purchase money security interests in specific items of Equipment;          (ii) leases of specific items of Equipment;          (iii) liens for taxes not yet payable;          (iv) additional security interests and liens consented to in writing by PFG, which consent maybe withheld in its good faith business judgment. PFG will have the right to require, as a conditionto its consent under this subparagraph (iv), that the holder of the additional security interest orlien sign an intercreditor agreement on PFG’s then standard form, acknowledge that the securityinterest is subordinate to the security interest in favor of PFG, and agree not to take any actionto enforce its subordinate security interest so long as any Obligations remain outstanding, andthat Borrower agree that any uncured default in any obligation secured by the subordinate securityinterest shall also constitute an Event of Default under this Agreement;          (v) security interests being terminated substantially concurrently with this Agreement;          (vi) liens of materialmen, mechanics, warehousemen, carriers, or other similar liens arisingin the ordinary course of business and securing obligations which are not delinquent;          (vii) liens incurred in connection with the extension, renewal or refinancing of theindebtedness secured by liens of the type described above in clauses (i) or (ii) above, providedthat any extension, renewal or replacement lien is limited to the property encumbered by theexisting lien and the principal amount of the indebtedness being extended, renewed or refinanceddoes not increase;          (viii) liens in favor of customs and revenue authorities which secure payment of customsduties in connection with the importation of goods;          (ix) statutory, common law or contractual liens of depository institutions or institutionsholding securities account (including rights of set-off) securing only customary charges and feesin connection with such accounts; and          (x) liens in favor of Senior Lender securing an amount not in excess of the Senior Debt Limit.     “Person” means any individual, sole proprietorship, partnership, joint venture, trust,unincorporated organization, association, corporation, government, or any agency or politicaldivision thereof, or any other entity.     “Qualmark” means Qualmark Corporation.     “QACG” means Qualmark ACG Corporation, a wholly-owned Subsidiary of Qualmark.     “QL” means Qualmark Ling Corporation, a wholly-owned Subsidiary of Qualmark.     “Representations” means the written Representations and Warranties provided byBorrower to PFG referred to in the Schedule.     “Senior Lender” has the meaning set forth in Section 8 of the Schedule.     “Subordinated Debt” means debt incurred by Borrower subordinated to Borrower’s debt toPFG (pursuant to a subordination agreement entered into between PFG, Borrower and the subordinatedcreditor), on terms acceptable to PFG in its absolute discretion.
 

 
   **Partners for Growth** **Loan and Security Agreement**     “Subsidiary” means (a) any corporation of which more than 50% of the issued andoutstanding equity securities having ordinary voting power to elect a majority of the Board ofDirectors of such corporation is at the time directly or indirectly owned or controlled byBorrower, (b) any partnership, joint venture, or other association of which more than 50% of theequity interest having the power to vote, direct or control the management of such partnership,joint venture or other association is at the time directly or indirectly owned and controlled byBorrower, (c) any other entity included in the financial statements of Borrower on a consolidatedbasis.     Other Terms. All accounting terms used in this Agreement, unless otherwise indicated,shall have the meanings given to such terms in accordance with GAAP, consistently applied. Allother terms contained in this Agreement, unless otherwise indicated, shall have the meaningsprovided by the Code, to the extent such terms are defined therein.8.GENERAL PROVISIONS.     ***8.1 Confidentiality*****.**PFG agrees to use the same degree of care that it exercises withrespect to its own proprietary information, to maintain the confidentiality of any and allproprietary, trade secret or confidential information provided to or received by PFG from theBorrower, which indicates that it is confidential, including business plans and forecasts,non-public financial information, confidential or secret processes, formulae, devices andcontractual information, customer lists, and employee relation matters, provided that PFG maydisclose such information (i) to its officers, directors, employees, attorneys, accountants,affiliates, participants, prospective participants, assignees and prospective assignees, and suchother Persons to whom PFG shall at any time be required to make such disclosure in accordance withapplicable law or legal process, and (ii) in its good faith business judgment in connection withthe enforcement of its rights or remedies after an Event of Default, or in connection with anydispute with Borrower or any other Person relating to Borrower. The confidentiality agreement inthis Section supersedes any prior confidentiality agreement of PFG relating to Borrower.     ***8.2 Interest Computation.***In computing interest on the Obligations, all Payments receivedafter 12:00 Noon, Pacific Time, on any day shall be deemed received on the next Business Day.     ***8.3 Payments****.*All Payments may be applied, and in PFG’s good faith business judgment reversedand re-applied, to the Obligations, in such order and manner as PFG shall determine in its goodfaith business judgment.     ***8.4 Monthly Accountings.***PFG shall provide Borrower monthly with an account of advances,charges, expenses and payments made pursuant to this Agreement. Such account shall be deemedcorrect, accurate and binding on Borrower and an account stated (except for reverses andreapplications of payments made and corrections of errors discovered by PFG), unless Borrowernotifies PFG in writing to the contrary within 60 days after such account is rendered, describingthe nature of any alleged errors or omissions.     ***8.5 Notices.***All notices to be given under this Agreement shall be in writing and shall begiven either personally, or by reputable private delivery service, or by regular first-class mail,or certified mail return receipt requested, or by fax to the most recent fax number a party has forthe other party (and if by fax, sent concurrently by one of the other methods provided herein),addressed to PFG or Borrower at the addresses shown in the heading to this Agreement, or at anyother address designated in writing by one party to the other party. All notices shall be deemed tohave been given upon delivery in the case of notices personally delivered, or at the expiration ofone Business Day following delivery to the private delivery service, or two Business Days followingthe deposit thereof in the United States mail, with postage prepaid, or on the first business dayof receipt during business hours, U.S. Pacific Time, in the case of notices sent by fax, asprovided herein.     ***8.6 Severability.***Should any provision of this Agreement be held by any court of competentjurisdiction to be void or unenforceable, such defect shall not affect the remainder of thisAgreement, which shall continue in full force and effect.     ***8.7 Integration.***This Agreement and such other written agreements, documents and instruments asmay be executed in connection herewith are the final, entire and complete agreement betweenBorrower and PFG and supersede all prior and contemporaneous negotiations and oral representationsand agreements, all of which are merged and integrated in this Agreement. There are no oralunderstandings, representations or agreements between the parties which are not set forth in thisAgreement or in other written agreements signed by the parties in connection herewith.     ***8.8 Waivers; Indemnity.***The failure of PFG at any time or times to require Borrower tostrictly comply with any of the provisions of this Agreement or any other Loan Document shall notwaive or diminish any right of PFG later
 

 
   **Partners for Growth** **Loan and Security Agreement**to demand and receive strict compliance therewith. Any waiver of any default shall not waiveor affect any other default, whether prior or subsequent, and whether or not similar. None of theprovisions of this Agreement or any other Loan Document shall be deemed to have been waived by anyact or knowledge of PFG or its agents or employees, but only by a specific written waiver signed byan authorized officer of PFG and delivered to Borrower. Borrower waives the benefit of allstatutes of limitations relating to any of the Obligations or this Agreement or any other LoanDocument, and Borrower waives demand, protest, notice of protest and notice of default or dishonor,notice of payment and nonpayment, release, compromise, settlement, extension or renewal of anycommercial paper, instrument, account, General Intangible, document or guaranty at any time held byPFG on which Borrower is or may in any way be liable, and notice of any action taken by PFG, unlessexpressly required by this Agreement. Borrower hereby agrees to indemnify PFG and its affiliates,subsidiaries, parent, directors, officers, employees, agents, and attorneys, and to hold themharmless from and against any and all claims, debts, liabilities, demands, obligations, actions,causes of action, penalties, costs and expenses (including reasonable attorneys’ fees), of everykind, which they may sustain or incur based upon or arising out of any of the Obligations, or anyrelationship or agreement between PFG and Borrower, or any other matter, relating to Borrower orthe Obligations; provided that this indemnity shall not extend to damages resulting from theindemnitee’s own gross negligence or willful misconduct. Notwithstanding any provision in thisAgreement to the contrary, the indemnity agreement set forth in this Section shall survive anytermination of this Agreement and shall for all purposes continue in full force and effect.     ***8.9 No Liability for Ordinary Negligence.***Neither PFG, nor any of its directors, officers,employees, agents, attorneys or any other Person affiliated with or representing PFG shall beliable for any claims, demands, losses or damages, of any kind whatsoever, made, claimed, incurredor suffered by Borrower or any other party through the ordinary negligence of PFG, or any of itsdirectors, officers, employees, agents, attorneys or any other Person affiliated with orrepresenting PFG, but nothing herein shall relieve PFG from liability for its own gross negligenceor willful misconduct.     ***8.10 Amendment.***The terms and provisions of this Agreement may not be waived or amended,except in a writing executed by Borrower and a duly authorized officer of PFG.     ***8.11 Time of Essence.***Time is of the essence in the performance by Borrower of each andevery obligation under this Agreement.     ***8.12 Attorneys’ Fees and Costs.***Borrower shall reimburse PFG for all reasonable attorneys’fees and all filing, recording, search, title insurance, appraisal, audit, and other reasonablecosts incurred by PFG, pursuant to, or in connection with, or relating to this Agreement (whetheror not a lawsuit is filed), including, but not limited to, any reasonable attorneys’ fees and costsPFG incurs in order to do the following: prepare and negotiate this Agreement and all present andfuture documents relating to this Agreement; obtain legal advice in connection with this Agreementor Borrower; enforce, or seek to enforce, any of its rights; prosecute actions against, or defendactions by, Account Debtors; commence, intervene in, or defend any action or proceeding; initiateany complaint to be relieved of the automatic stay in bankruptcy; file or prosecute any probateclaim, bankruptcy claim, third-party claim, or other claim; examine, audit, copy, and inspect anyof the Collateral or any of Borrower’s books and records; protect, obtain possession of, lease,dispose of, or otherwise enforce PFG’s security interest in, the Collateral; and otherwiserepresent PFG in any litigation relating to Borrower. If either PFG or Borrower files any lawsuitagainst the other predicated on a breach of this Agreement, the prevailing party in such actionshall be entitled to recover its reasonable costs and attorneys’ fees, including (but not limitedto) reasonable attorneys’ fees and costs incurred in the enforcement of, execution upon or defenseof any order, decree, award or judgment. All attorneys’ fees and costs to which PFG may beentitled pursuant to this Paragraph shall immediately become part of Borrower’s Obligations, shallbe due on demand, and shall bear interest at a rate equal to the highest interest rate applicableto any of the Obligations.     ***8.13 Benefit of Agreement.***The provisions of this Agreement shall be binding upon and inureto the benefit of the respective successors, assigns, heirs, beneficiaries and representatives ofBorrower and PFG; provided, however, that Borrower may not assign or transfer any of its rightsunder this Agreement without the prior written consent of PFG, and any prohibited assignment shallbe void. No consent by PFG to any assignment shall release Borrower from its liability for theObligations.     ***8.14 Joint and Several Liability.***If Borrower consists of more than one Person, theirliability shall be joint and several, and the compromise of any claim with, or the release of, anyBorrower shall not constitute a compromise with, or a release of, any other Borrower.
 

 
   **Partners for Growth** **Loan and Security Agreement**     ***8.15 Limitation of Actions.***Any claim or cause of action by Borrower against PFG, itsdirectors, officers, employees, agents, accountants or attorneys, based upon, arising from, orrelating to this Loan Agreement, or any other Loan Document, or any other transaction contemplatedhereby or thereby or relating hereto or thereto, or any other matter, cause or thing whatsoever,occurred, done, omitted or suffered to be done by PFG, its directors, officers, employees, agents,accountants or attorneys, shall be barred unless asserted by Borrower by the commencement of anaction or proceeding in a court of competent jurisdiction by the filing of a complaint within oneyear after the first act, occurrence or omission upon which such claim or cause of action, or anypart thereof, is based, and the service of a summons and complaint on an officer of PFG, or on anyother person authorized to accept service on behalf of PFG, within thirty (30) days thereafter.Borrower agrees that such one-year period is a reasonable and sufficient time for Borrower toinvestigate and act upon any such claim or cause of action. The one-year period provided hereinshall not be waived, tolled, or extended except by the written consent of PFG in its solediscretion. This provision shall survive any termination of this Loan Agreement or any other LoanDocument.     ***8.16 Paragraph Headings; Construction.***Paragraph headings are only used in this Agreementfor convenience. Borrower and PFG acknowledge that the headings may not describe completely thesubject matter of the applicable paragraph, and the headings shall not be used in any manner toconstrue, limit, define or interpret any term or provision of this Agreement. This Agreement hasbeen fully reviewed and negotiated between the parties and no uncertainty or ambiguity in any termor provision of this Agreement shall be construed strictly against PFG or Borrower under any ruleof construction or otherwise. The defined term “Borrower” shall mean, as the context requires, eachof QualMark and QACG severally, and QualMark and QACG jointly.     ***8.17 Governing Law; Jurisdiction; Venue.***This Agreement and all acts and transactionshereunder and all rights and obligations of PFG and Borrower shall be governed by the laws of theState of California. As a material part of the consideration to PFG to enter into this Agreement,Borrower (i) agrees that all actions and proceedings relating directly or indirectly to thisAgreement shall, at PFG’s option, be litigated in courts located within California, and that theexclusive venue therefor shall be San Francisco County; (ii) consents to the jurisdiction and venueof any such court and consents to service of process in any such action or proceeding by personaldelivery or any other method permitted by law; and (iii) waives any and all rights Borrower mayhave to object to the jurisdiction of any such court, or to transfer or change the venue of anysuch action or proceeding.     ***8.18 Mutual Waiver of Jury Trial.*****BORROWER AND PFG EACH HEREBY WAIVE THE RIGHT TO TRIAL BYJURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO, THISAGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN PFG AND BORROWER, OR ANYCONDUCT, ACTS OR OMISSIONS OF PFG OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH PFG OR BORROWER, IN ALL OF THE FOREGOINGCASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. WITHOUT INTENDING IN ANY WAY TO LIMITTHE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY**, if the above waiver ofthe right to a trial by jury is not enforceable, the parties hereto agree that any and all disputesor controversies of any nature between them arising at any time shall be decided by a reference toa private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judgeof the San Francisco County, California Superior Court) appointed in accordance with CaliforniaCode of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if thedispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, inSan Francisco County, California; and the parties hereby submit to the jurisdiction of such court.The reference proceedings shall be conducted pursuant to and in accordance with the provisions ofCalifornia Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall havethe power, among others, to grant provisional relief, including without limitation, enteringtemporary restraining orders, issuing preliminary and permanent injunctions and appointingreceivers. All such proceedings shall be closed to the public and confidential and all recordsrelating thereto shall be permanently sealed. If during the course of any dispute, a party desiresto seek provisional relief, but a judge has not been appointed at that point pursuant to thejudicial reference procedures, then such party may apply to the San Francisco County, CaliforniaSuperior Court for such relief. The proceeding before the private judge shall be conducted in thesame manner as it would be before a court under the rules of evidence applicable to judicialproceedings. The parties shall be entitled to discovery which shall be conducted in the samemanner as it would be before a court under the rules of discovery applicable to judicialproceedings. The private judge shall oversee discovery and may enforce all discovery rules andorder applicable to judicial proceedings in the same manner as a trial court judge. The partiesagree that the selected or appointed private judge shall have the power to
 

 
   **Partners for Growth** **Loan and Security Agreement**decide all issues in the action or proceeding, whether of fact or of law, and shall report astatement of decision thereon pursuant to the California Code of Civil Procedure § 644(a). Nothingin this paragraph shall limit the right of any party at any time to exercise self-help remedies,foreclose against collateral, or obtain provisional remedies. The private judge shall alsodetermine all issues relating to the applicability, interpretation, and enforceability of thisparagraph.             **Borrower:**     **PFG:**                   **QUALMARK CORPORATION**   **PARTNERS FOR GROWTH, L.P.**                 **By**     **By**        ** President or Vice President**     ** **          **Name:**                                **By**                           **Secretary or Ass’t Secretary**   **Title: **Manager, Partners for Growth, LLC**            **Its General Partner**               **Borrower:**     **Borrower:                 **QUALMARK ACG CORPORATION**   **QUALMARK LING CORPORATION**                 **By**     **By**        ** President or Vice President**     ** President or Vice President**                 **By**     **By**        ** Secretary or Ass’t Secretary**     ** Secretary or Ass’t Secretary**  
 

 
***Partners For Growth*****Schedule to****Loan and Security Agreement**   **Borrower:** **Qualmark Corporation, a Colorado corporation****Address:** **4580 Florence Street, Denver, CO 80238**   **Borrower:** **QualMark ACG Corporation, a Colorado corporation****Address:** **232 Front Avenue, West Haven, CT 06516**   **Borrower:** **Qualmark Ling Corporation, a Colorado Corporation****Address:** **232 Front Avenue, West Haven, CT 06516**   **Date:** **February 20, 2007**This Schedule forms an integral part of the Loan and Security Agreement between PARTNERS FORGROWTH, L.P. and the above-Borrowers of even date. Defined terms used in this Schedule have themeanings set forth herein and in the Loan and Security Agreement.   **1. LOAN**(Section 1.1):          (a) **Loan:** The Loan shall consist of a term loan in the amount of $500,000, which shall bedisbursed in its entirety at closing        (b) **Use of Proceeds:** The proceeds of the Loan shall be used exclusively to pay down theSenior Lender’s term loan.        (c) **Principal Repayment /******