Document:

exv10w39

 

EXHIBIT 10.39

LOAN MODIFICATION AND LIMITED WAIVER

          This Loan Modification and Conditional Waiver (“Waiver”) is entered into as of May 7, 2007, by
and between Partners for Growth, L.P., a Delaware limited partnership with its principal place of
business at 180 Pacific Avenue, San Francisco, California 94111 (“PFG”) and each of Qualmark
Corporation, a Colorado corporation and Qualmark ACG Corporation, a Colorado corporation, with
their principal place of business at 4580 Florence Street, Denver, Colorado 80238 (“Borrower”).

          WHEREAS, Borrower has existing credit facilities with PFG pursuant to that certain Loan and
Security Agreement dated November 12, 2004 (the “2004 Loan”) and that certain Loan and Security
Agreement dated February 20, 2007 (the “2007 Loan”) (the 2004 Loan and the 2007 Loan are
collectively referred to as the “Loans” and the documents and instruments representing the 2004
Loan and the 2007 Loan are hereinafter collectively referred to as the “Loan Documents”);

          WHEREAS, Borrower has failed to comply with the Amortization Trigger Financial Covenant in
Section 5 of the Schedule to the 2007 Loan for the first quarter of 2007 under which Borrower is
required to meet certain minimum quarterly EBITDA (the “Financial Covenant”), the failure of which
gives PFG the right to require level amortization of outstanding principal amounts under the Loan
Documents;

          WHEREAS, Borrower desires that PFG not require Borrower to amortize borrowings under the Loan
documents, as PFG is entitled to now require, and temporarily waive such requirement on the terms
and conditions set forth herein;

          NOW THEREFORE, the parties hereby agree as follows:

1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be owing by
Borrower to PFG, Borrower is indebted to PFG under the 2004 Loan in the outstanding principal
amount of $960,000 and under the 2007 Loan in the outstanding principal amount of $500,000.
Defined terms used but not otherwise defined herein shall have the same meanings as set forth in
the Loan Documents.

2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the Collateral, as
described in the Loan Agreement and in the Intellectual Property Security Agreement. Hereinafter,
the above-described security documents, including the Cross-Corporate Continuing Guaranty of even
date therewith, together with all other documents securing repayment of the Indebtedness, shall be
referred to as the “Security Documents”. Hereinafter, the Security Documents, together with all
other documents evidencing or securing the Indebtedness shall be referred to as the “Loan
Documents”.

3. LIMITED WAIVER. In consideration of Borrower’s payment of the Waiver Fee, PFG hereby
waives Borrower’s compliance with the Financial Covenant for Q1 2007. If Borrower should fail to
meet the Financial Covenant for Q2 2007, PFG may, at is option,
require Borrower to (i) forthwith pay the sum of $146,000 to reduce the principal outstanding under
the Loans (or such lesser amount as PFG may determine in its sole discretion), and (ii)
commence to make monthly principal payments of not less than $48,667 (or such lesser amount(s) as
PFG may determine in its sole discretion).

 

 

4. REPRESENTATIONS AND WARRANTIES OF THE PARTIES.

          (a). Representations, Warranties and Covenants of Borrower. Borrower represents and
warrants to, and covenants with, PFG that:

          (i) Corporate Power; Authorization. Borrower has all requisite corporate power and
has taken all requisite corporate action to execute and deliver this Waiver, to pay the Waiver Fee
and to carry out and perform all of its obligations hereunder. This Waiver has been duly
authorized, executed and delivered on behalf of Borrower and constitutes the valid and binding
agreement of Borrower, enforceable in accordance with its terms, except as limited by applicable
bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of
creditors’ rights generally and as limited by equitable principles generally. The person executing
this Waiver is a duly authorized officer of Borrower with all necessary legal authority to bind
Borrower generally and with the specific legal authority to cause Borrower to enter into this
Waiver.

          (ii) No Conflict. The execution and delivery of this Waiver does not, and the
consummation of the transactions contemplated hereby will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both), or give rise to a
right of termination, cancellation or acceleration of any obligation or to a loss of a material
benefit, under, any provision of the Restated Certificate of Incorporation or Bylaws, as amended,
or any mortgage, indenture, lease or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to
Borrower, its properties or assets, the effect of which would have a material adverse effect on
Borrower or materially impair or restrict its power to perform its obligations as contemplated
hereby or thereby.

          (iii) Governmental and other Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any governmental
authority or other person or entity is required on the part of Borrower in connection with the
execution, delivery and performance of this Waiver.

          (iv) PFG Reliance. Borrower understands and acknowledges that PFG is entering into
this Waiver in reliance upon, and in partial consideration for, the above representations and
warranties, and agrees that such reliance is reasonable and appropriate.

5. CONSISTENT CHANGES; DEFINITION. The 2007 Loan is hereby amended wherever necessary to
reflect the changes described above, so long as the waiver is effective. The terms “Q1-2007” and
“Q2-2007” refer to the first and second calendar quarters of 2007.

6. PAYMENT OF WAIVER FEE AND EXPENSES. PFG’s limited waiver of its right to require
Borrower to amortize principal payments as set forth in this Waiver is subject to its receipt of:
(i) a fee equal to $15,000 (the “Waiver Fee”), receipt of which PFG hereby acknowledges, and (ii)
the payment upon demand of all of PFG’s costs and expenses, including attorneys’ fees, incurred in
connection with this Waiver.

7. NO DEFENSES. Borrower agrees that, as of the date hereof, it has no defenses against
the obligations to pay any amounts under the Indebtedness.

8. CONTINUING VALIDITY. The conditional limited waivers and amendments set forth in this
Waiver shall be limited precisely as written and shall not be deemed (a) to be a forbearance,
waiver or modification of any other term or condition of the Loans or of any other instrument or
agreement referred to in the Loan Documents or to prejudice any right or remedy which PFG may now
have or may have in the future under or in connection with the Loan Documents or any instrument or
agreement referred to therein; (b) to be a consent to any future amendment or modification,
forbearance or waiver to any instrument or agreement the execution and

 

 

delivery of which is
consented to hereby, or to any waiver of any of the provisions thereof; or (c) to constitute a
consent, commitment or agreement, express or implied, to continue to waive terms of the Loan
Documents or forbear from exercising remedies under the Loan Documents; or (d) to limit or impair
PFG’s right to demand strict performance of all terms and covenants as of any date. Except as
expressly amended hereby (and only for the period during which such amendment is in effect due to
PFG’s waiver), the Loan Documents shall continue in full force and effect. It is the intention of
PFG and Borrower to retain as liable parties all makers and endorsers of Loan Documents, unless the
party is expressly released by PFG in writing. Unless expressly released herein, no maker,
endorser, or guarantor will be released by virtue of this Waiver. The terms of this Section 8
apply not only to this Waiver, but also to all subsequent waivers.

9. CONDITIONS. The effectiveness of this Waiver is conditioned upon : (a) PFG’s receipt
of a fully executed counterpart hereof, (b) PFG’s receipt of the Waiver Fee and its fees and
costs associated with this Waiver, and (c) the truth and accuracy of the Representations and
Warranties of Borrower set forth in Section 4 of this Waiver.

10. MISCELLANEOUS. The quotation marks around modified clauses set forth herein and any
differing font styles in which such clauses are presented herein are for ease of reading only and
shall be ignored for purposes of construing and interpreting this Waiver.

          This Waiver is executed as of the date first written above.

Borrower:

	 	 	 	 	 	 	 	 	 	 	 
	QUALMARK CORPORATION	 	 	 	PARTNERS FOR GROWTH, L.P.
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	 	 	 	 	By	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	President or Vice President
	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	 	 	 	 	Title:
	 	Manager, Partners for Growth, LLC	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	Secretary or Ass’t Secretary
	 	 	 	 	 	Its General Partner	 	 

Borrower:

	 	 	 	 	 	 	 	 	 
	QUALMARK ACG CORPORATION	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	President or Vice President	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Secretary or Ass’t SecretaryFIFTH AMENDMENT TO AMENDED 

STOCK EXCHANGE AND PLAN OF MERGER AGREEMENT 

 

THE STOCK EXCHANGE AND PLAN OF MERGER AGREEEMNT (the “Agreement”) entered into on the 8th day of September 2006, and as subsequently amended, by and among GALTECH SEMICONDUCTOR MATERIALS CORPORATION, a Utah corporation (“GALTECH” or “GTSM”) and CBM GROUP, INC., a Nevada corporation (“CBM” or “CBMG”), is hereby further Amended as follows: 

 

WITNESSETH

 

WHEREAS, CBM Group, Inc. (CBMG) filed an Adversary Action in Bankruptcy Court against Linda Bloom, Case No. 07-01038-s, Trustee, of the Bankruptcy Estate of the Cooks, Case No. 04-17704, as Ms. Bloom alleged to disgorge CBMG of all its intellectual property (IP) purchased from Hydroscope Canada Inc., which IP was the attraction of GALTECH for entering into this Stock Exchange and Plan of Merger Agreement with CBMG; and

 

WHEREAS, the trial of CBMG v. Linda Bloom, Trustee, was completed at the end of May, with the decision taken under advisement by the Bankruptcy Judge, which decision is expected to be rendered in the near future; and

 

WHEREAS, the Adversary case filed by CBMG against Ms. Bloom complained that Ms. Bloom had no right to allege CBMG’s IP “reverted” in ownership from CBMG to the Cook’s Bankruptcy Estate, thus such allegations of Ms. Bloom thwarted the completion of the GALTECH/CBMG exchange and merger Agreement, and CBMG also complained that the Stipulated Motion to Approve Compromise of Controversy Ms. Bloom entered into with Wells Fargo Bank, NA, alleging therein to confirm Wells Fargo’s asserted lien in CBMG’s IP, was also invalid; and 

 

WHEREAS, the actions of Ms. Bloom, in concert with Wells Fargo Bank, NA, removed from the state court calendar CBMG’s pending Summary Judgment Motion that sought a ruling on the merits of Wells Fargo Bank’s asserted lien interest in CBMG’s IP, CBMG’s Summary Judgment Motion therein alleged Wells Fargo Bank’s asserted lien interest was void for lack of consideration and fraud committed by Wells Fargo Bank; and 

 

WHEREAS, these purported actions by Linda Bloom, accomplished in concert with Wells Fargo Bank, NA and Scott Garrett, which allege to have disgorged CBM Group, Inc. of its Hydroscope IP and related assets, has interfered with this Agreement’s closing date by casting a cloud upon the title of ownership of CBMG’s substantial assets; and

 

WHEREAS, all other terms of the proposed Stock Exchange and Plan of Merger Agreement have been completed and or waived by Management and Directors of CBM Group, Inc. and GALTECH; and

 

WHEREAS, Directors of GALTECH and CBMG firmly believe Ms. Bloom had no legal authority to have alleged a disgorgement of CBMG’s IP and hence Ms. Bloom had no trustee powers to have entered into the Stipulated Motion to Approve Compromise of Controversy with Wells Fargo Bank’s that alleged to confirm Wells Fargo’s asserted lien in CBMG’s IP without a hearing on the merits, thus all Directors believe CBMG will obtain a favorable decision in Bankruptcy Court in its action against Ms. Bloom, and CBMG will once again be able to proceed with its Summary Judgment Motion in state court that seeks to declare Wells Fargo’s alleged lien interest in CBMG’s IP void, notwithstanding a favorable decision in the state court on the alleged lien interest of Wells Fargo Bank in IP is not a perquisite for the closing of this Agreement; and 

 

WHEREAS, CBM Group, Inc. is now poised to exploit its IP in the Canadian markets after having completed its acquisition of all outstanding shares of Hydroscope Canada Inc., an Alberta corporation, thus at closing Hydroscope Canada Inc will be CBMG’s wholly owned subsidiary and vehicle used to exploit the Canadian markets; and 

 

WHEREAS, CBM Group, Inc. and GTSM Directors believe there was no merit to Ms. Bloom’s alleged disgorgement of CBMG’s IP and the anticipated Bankruptcy Court’s ruling in CBMG v. Linda Bloom completed in May will confirm this firm belief held by all Directors; and

 

WHEREAS, CBM Group, Inc. and GTSM Directors believe a closing of this Agreement, although delayed, remains in the best interest of all respective shareholders, notwithstanding the delays sustained by the alleged illegal actions of Ms. Bloom, such illegal actions accomplished in concert with Wells Fargo Bank, NA.

 

THEREFORE IT IS RESOLVED, the terms of the Agreement executed on September 8, 2006 and as previously Amended, are further Amended in accordance with the above statements and the Closing Date of the Agreement, as defined in Article VII, unless otherwise amended by the parties hereto, shall be no later than one-hundred twenty (120) days after the effective date of this Amendment of the Agreement, unless otherwise mutually extended, notwithstanding a closing can take place as soon as or shortly after a Federal Bankruptcy Judge’s decision on Ms. Bloom’s disgorgement of CBM Group, Inc. IP is rendered. Should a Closing not take place within one-hundred twenty (120) days from the effective date hereon, unless parties otherwise mutually agree to extend, this Agreement as Amended shall be null and void and shall have no further force or effect upon the parties.  

 

 

 

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            PARTIES:  
 	
            Effective Date: June 14, 2007
 

 

	
             
 	
            CBM Group, Inc.
 

	
             
 	
            a Nevada Corporation
 

 

	
             
 	
            ----------/s/----------  
 

 

	
             
 	
            By___________________________
 

	
             
 	
            Daniel W. Cook, President
 

 

 

	
             
 	
            GALTECH SEMICONDUCTOR
 

MATERIALS CORPORATION 

	
             
 	
            a Utah Corporation
 

 

	
             
 	
            ----------/s/----------  
 

 

	
             
 	
            By____________________________
 

	
             
 	
            Garrett Quintana, President
 

 

 

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