EXHIBIT 10.42
STOCK AND WARRANT PURCHASE AGREEMENT
BY
AND BETWEEN
QUALMARK CORPORATION
AND
INVESTORS
DECEMBER 21, 2007
STOCK AND WARRANT PURCHASE AGREEMENT
This Stock and Warrant
Purchase Agreement (this “ Agreement
”) is made as of the 21th day of December 2007 by and
among QualMark Corporation, a Colorado corporation (the “
Company ”), and those investors listed on
Exhibit A (each a “ Purchaser ” and,
collectively, the “ Purchasers ”).
WHEREAS , the Company has authorized the sale and issuance
of (i) 781,250 shares of its Common Stock (the
“Stock”), and (ii) warrants to purchase up to
781,250 shares of its Common Stock in the form attached hereto as
Exhibit B to purchase shares of its Common Stock (the
“Warrants”);
Whereas ,
Purchasers desire to purchase the Stock and Warrants on the terms
and conditions set forth herein; and
Whereas , the
Company desires to issue and sell the Stock and Warrants to
Purchasers on the terms and conditions set forth herein.
NOW,
THEREFORE, in consideration of the foregoing recitals and the
mutual promises, representations, warranties, and covenants
hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1.
Purchase and Sale of Stock and Warrants.
1.1 Sale and Issuance of Stock and Warrants.
(a) The Company has authorized (a) the sale
and issuance to the Purchasers of (i) 781,250 shares of its Common
Stock, no par value (the “ Stock ”), and
(ii) warrants to purchase up to 781,250 shares of its Common
Stock in the form attached hereto as Exhibit B (the
“ Warrants ”); and (b) the issue of Common
Stock to be issued upon exercise of the Warrants (the “
Warrant Shares ”). Each Warrant shall entitle the
holder to purchase one share of the Company’s Common Stock.
The Warrants shall have the rights set forth in the form of Warrant
attached hereto as Exhibit B .
(b) Subject to the terms and conditions of this
Agreement, Purchasers agree to purchase at the Closing, and the
Company agrees to sell and issue to Purchasers at the Closing, that
number of shares of Stock and Warrants set forth opposite each
Purchaser’s name on Exhibit A, at a purchase price of $0.7680
per share. The total aggregate number of shares to be purchased by
Purchasers is 781,250 shares, for an aggregate purchase price of
$600,000.
1.2 Closing. The purchase and sale of Stock and
Warrants (the “ Closing ”) shall
take place at the offices of the Company on December 20, 2007
(the “ Closing Date ”), or at such
other time and place as the Company and the Purchasers agree upon,
orally or in writing.
1.3 Deliveries. Subject to the terms of this
Agreement, at the Closing, the Company will deliver to each
Purchaser (i) a certificate representing the Stock to be
purchased by such Purchaser at the Closing and (ii) a Warrant
to purchase shares of Common Stock, against payment of the purchase
price therefor by check payable to the Company, by wire transfer to
a bank account designated by the Company, cancellation or
conversion of indebtedness, or any combination of the foregoing. In
the event that payment by any Purchaser is made, in whole or in
part, by cancellation or conversion of indebtedness, then such
Purchaser shall surrender to the Company for cancellation or
conversion at the Closing any evidence of such
indebtedness.
2.
Representations and Warranties of the Company. The Company
hereby represents and warrants to Purchasers that, except as set
forth on a Schedule of Exceptions attached hereto as
Exhibit C , which exceptions shall be deemed
to be representations and warranties as if made
hereunder:
2.1 Organization, Good Standing and Qualification.
The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Colorado and
has all requisite corporate power and authority to own and operate
its property and assets and to carry on its business as now
conducted, and as presently proposed to be conducted, to execute,
deliver and perform its obligations under this Agreement and the
other documents to be executed and delivered in connection with the
transactions contemplated hereby and to sell and issue the shares
of Common Stock to be sold hereunder, the Warrants and the Warrant
Shares. The Company is duly qualified and is authorized to transact
business and is in good standing in the State of Colorado and each
other jurisdiction in which the failure so to qualify would have a
material adverse effect on the assets, operating results, financial
condition, business or properties of the Company (a “
Material Adverse Effect ”).
2.2 Capitalization. The authorized capital of the
Company consists, or will consist, immediately prior to the Initial
Closing, of:
(a)
15,000,000 shares of Common Stock, 8,841,894 shares of which
are issued and outstanding
immediately
prior to the Closing and 2,000,000 shares of Preferred Stock, no
shares of which are issued and outstanding. All of the outstanding
shares of Common Stock and Preferred Stock have been duly
authorized, fully paid and are nonassessable and issued in
compliance with all applicable federal and state securities laws.
Schedule 2.2 of the Schedule of Exceptions sets forth the
Company’s capitalization on a post-Closing and on
as-converted to Common Stock basis.
(b) As of the Closing, the Company has reserved
472,610 shares of Common Stock for issuance to officers, directors,
employees and consultants of the Company pursuant to its 1996 Stock
Option Plan, duly adopted by the Board of Directors and approved by
the Company stockholders 300,000 shares of Common Stock for
issuance to officers, directors, employees and consultants of the
Company pursuant to its 2005 Stock Option Plan, duly adopted by the
Board of Directors and approved by the Company stockholders and
650,000 shares of its Common Stock pursuant to its 2007 Stock
Option Plan, duly adopted by the Board of Directors conditioned
upon the approval of the Company’s stockholders at the next
scheduled annual meeting (the “ Stock Plans ”).
Of such reserved shares of Common Stock and as of the Closing,
options to purchase 771,750 shares have been granted and are
currently outstanding, 201,000 shares have been granted pending
shareholder approval and are currently outstanding, 860 shares of
Common Stock remain available for grants to officers, directors,
employees and consultants pursuant to the 2005 Stock Plan and
449,000 shares of Common Stock remain available for grants to
officers, directors, employees and consultants pursuant to the 2007
Stock Plan, pending shareholder approval.
(c) As of the Closing, the Company has reserved
646,988 shares of Common Stock for issuance upon conversion of
currently outstanding convertible debt. The convertible debt is
convertible at the option of the holder of the debt.
(d) Except for outstanding options issued pursuant
to the Stock Plan and the convertible debt described above, there
are no outstanding options, warrants, rights (including conversion
or preemptive rights and rights of first refusal or similar rights)
or agreements, orally or in writing, for the purchase or
acquisition from the Company of any shares of its capital
stock.
(e) No stock plan, stock purchase, stock option or
other agreement or understanding between the Company and any holder
of any securities or rights exercisable or convertible for
securities provides for acceleration or other changes in the
vesting provisions or other terms of such agreement or
understanding as the result of the occurrence of any
event.
2.3 Subsidiaries. The Company does not currently
own or control, directly or indirectly, any interest in any other
corporation, association, partnership, limited liability company or
other business entity.
2.4 Authorization. All corporate action on the
part of the Company, its officers, directors and stockholders
necessary for the authorization, execution and delivery of this
Agreement, the performance of all obligations of the Company
hereunder and thereunder and the authorization, issuance and
delivery of the Stock and the Warrants pursuant hereto (together,
the “ Securities ”) has been taken
or will be taken prior to the Closing, and the Agreement, when
executed and delivered by the Company, shall constitute a valid and
legally binding obligation of the Company, enforceable against the
Company in accordance with their terms except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and other laws of general application
affecting enforcement of creditors’ rights
generally.
2.5 Valid Issuance of Securities. The Stock that
is being issued to the Purchasers hereunder, when issued, sold and
delivered in accordance with the terms hereof for the consideration
expressed herein, will be duly and validly issued, fully paid and
nonassessable and free of restrictions on transfer other than
restrictions on transfer under this Agreement, the investor rights
agreement signed by the Company and the Purchasers on the date
hereof (the “ Investor Rights Agreement
”) and applicable state and federal securities laws. Based
in part upon the representations of the Purchasers in this
Agreement and subject to the provisions of Section 2.6 below,
the Stock will be issued in compliance with all applicable federal
and state securities laws. The Warrant Shares have been duly and
validly reserved for issuance, and upon issuance in accordance with
the terms of the Warrants, shall be duly and validly issued, fully
paid and nonassessable and free of restrictions on transfer other
than restrictions on transfer under this Agreement, the Investor
Rights Agreement and applicable federal and state securities laws
and will be issued in compliance with all applicable federal and
state securities laws. All preemptive rights or rights of first
refusal relating to the issuance and sale of the Stock and the
Warrants, if any, have been duly waived or satisfied.
2.6 Governmental Consents. No consent, approval,
order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state or
local governmental authority on the part of the Company is required
in connection with the consummation of the transactions
contemplated by
this
Agreement, except for filings pursuant to applicable state
securities laws and Regulation D of the Securities Act of
1933, as amended (the “ Securities Act
”).
2.7 Litigation. There is no action, suit,
proceeding or investigation pending or, to the actual knowledge of
any executive officer of the Company (hereafter referred to as the
“ Company’s Knowledge ”),
currently threatened against the Company or any of its subsidiaries
that questions the validity of the Agreements or the right of the
Company to enter into them, or to consummate the transactions
contemplated hereby or thereby, or that might result, either
individually or in the aggregate, in any Material Adverse Effect,
or any change in the current equity ownership of the Company, nor
is the Company aware that there is any basis for the foregoing.
Neither the Company nor any of its subsidiaries is a party or
subject to the provisions of any order, writ, injunction, judgment
or decree of any court or government agency or instrumentality.
There is no action, suit, proceeding or investigation by the
Company or any of its subsidiaries currently pending or which the
Company or any of its subsidiaries intends to initiate.
2.8 Intellectual Property. The Company owns or
possesses sufficient legal rights to all patents, trademarks,
service marks, tradenames, copyrights, trade secrets, licenses,
technology, information and proprietary rights and processes
necessary for its business as now conducted and, as presently
proposed to be conducted, without any conflict with, or known
infringement of, the rights of others. The Schedule of Exceptions
contains a complete list of patents and pending patent applications
of the Company as well as trademarks, registered copyrights, and
domain names owned by the Company. The Company has not received any
communications alleging that the Company has violated or, by
conducting its business as proposed, would violate any of the
patents, trademarks, service marks, tradenames, copyrights, trade
secrets or other proprietary rights or processes of any other
person or entity. The Company is not aware that any of its
employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or
subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of such
employee’s best efforts to promote the interests of the
Company or that would conflict with the Company’s business as
presently conducted or proposed to be conducted. Neither the
execution or delivery of this Agreement, nor the carrying on of the
Company’s business by the employees of the Company, nor the
conduct of the Company’s business as proposed, will, to the
best of the Company’s Knowledge, conflict with or result in a
breach of the terms, conditions, or provisions of, or constitute a
default under, any contract, covenant or instrument under which any
such employee is now obligated. The Company does not believe it is
or will be necessary to use any inventions of any of its employees
(or persons it currently intends to hire) made prior to their
employment by the Company.
2.9 Proprietary Information of Third Parties. No
third party has claimed by written notice to the Company or, to the
Company’s Knowledge, has reason to claim that any person
employed by, consulting for or affiliated with the Company has
(a) violated or may be violating, in connection with such
person’s employment or affiliation with the Company, any of
the terms or conditions of his or her employment, noncompetition or
nondisclosure agreement with such third party, (b) disclosed
or may be disclosing or utilized or may be utilizing, in connection
with such person’s employment or affiliation with the
Company, any trade secret or proprietary information or
documentation of such third party or (c) interfered or may be
interfering, in connection with such person’s employment or
affiliation with the Company, in the employment relationship
between such third party and any of its present or former
employees. No third party has requested by written notice
information from the Company which suggests that such a claim might
be contemplated. To the Company’s Knowledge, no person
employed by, consulting for or affiliated with the Company has
employed or proposes to employ any trade secret or any information
or documentation proprietary to any former employer, and no person
employed by, consulting for or affiliated with the Company has, to
the Company’s Knowledge, violated any confidential
relationship which such person may have had with any third party,
in connection with the development, manufacture or sale of any
product or proposed product of the Company or the development or
sale of any service or proposed service of the Company, and the
Company has no reason to believe there will be any such employment
or violation. To the Company’s Knowledge (without inquiry
outside the ordinary course of business), neither the execution or
delivery of this Agreement nor the carrying on of the business of
the Company by any officer, director or key employee of the Company
will conflict with or result in a breach of the terms, conditions
or provisions of or constitute a default under any contract,
covenant or instrument under which any such person is
obligated.
2.10 Leasehold Interests. Each agreement to which
the Company is a party under which it is a lessee of any property,
real or personal, is a valid and subsisting agreement, duly
authorized and entered into, without any default of the Company
thereunder and, to the Company’s Knowledge, without any
default thereunder
of
any other party thereto, other than defaults that are not
reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect. No event has occurred and is continuing
which, with due notice or lapse of time or both, would constitute a
default or event of default by the Company or, to the
Company’s Knowledge, by any other party thereto under any
such lease or agreement, other than defaults that are not
reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect.
2.11 Compliance with Other Instruments.
(a) The Company is not in violation or default of
any provisions of its Articles or Bylaws or of any note, indenture,
mortgage, lease (including equipment leases), agreement, contract,
purchase order or other instrument, document or agreement to which
it is a party or by which it is bound or, with respect to any
injunction or decree of any court or any federal, state, municipal
or other governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, that specifically names
the Company. To the best of the Company’s Knowledge, there
exists no condition, event or act which after notice, lapse of
time, or both, would constitute a default by the Company under any
of the foregoing. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby do not and will not result in any such violation or be in
conflict with or constitute, with or without the passage of time or
the giving of notice or both, either a default under, or result in
the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company under its
Articles or Bylaws or under any note, indenture, mortgage, lease
(including equipment leases), agreement, contract, purchase order
or other instrument, document or agreement to which the Company is
a party.
(b) The Company has avoided every condition, and
has not performed any act, the occurrence of which would result in
the Company’s loss of any right granted under any license,
distribution agreement or other agreement.
2.12 Agreements; Action.
(a) There are no agreements, understandings or
proposed transactions between the Company and any of its officers,
directors, affiliates, holders of any outstanding shares of any
class of the Company’s capital stock, or any affiliate
thereof other than those provided to Purchaser.
(b) Except for agreements explicitly contemplated
by this Agreement, there are no agreements, understandings,
instruments, contracts or proposed transactions to which the
Company or any of its subsidiaries is a party or by which it is
bound that involve (i) obligations (contingent or otherwise)
of, or payments to, the Company or any of its subsidiaries in
excess of, $25,000, (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from the Company or
any of its subsidiaries, (iii) the grant of rights to
manufacture, produce, assemble, license, market, or sell its
products to any other person or affect the Company’s
exclusive right to develop, manufacture, assemble, distribute,
market or sell its products, (iv) the pledging or placing of a
lien or security interest on any asset of the Company, (v) an
obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any share of its capital stock or any of its
other equity securities, or (vi) an agreement under which the
Company has limited or restricted its right to compete with any
person in any respect. The Company, and to the Company’s
Knowledge, each other party thereto has in all material respects
performed their respective obligations, and the Company has
received no notice of default by it and is not in default (with due
notice or lapse of time or both) in any material respect under any
agreement, instrument, commitment, plan or arrangement to which the
Company is a party or by which it or its property may be bound,
other than such nonperformance or default that is not reasonably
expected to have, individually or in the aggregate, a Material
Adverse Effect. The Company has no present expectation or intention
of not fully performing all the Company’s obligations under
each such agreement, instrument, commitment, plan or arrangement,
and to the Company’s Knowledge there is no anticipated breach
by any other party thereto, other than such nonperformance or
breach that is not reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect.
(c) Schedule 2.12(c) of the Schedule of
Exceptions sets forth any and all material contracts of the
Company. The Company has no present expectation or intention of not
fully performing all the Company’s obligations under each
such material contract, and to the Company’s Knowledge there
is no anticipated breach or nonperformance by any other party
thereto and the Company has not received notice from any other
party thereto of such party’s intention to terminate such
material contracts.
(d) Neither the Company nor any of its
subsidiaries has (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any
class or series of its capital stock, (ii) incurred any
indebtedness for money borrowed or incurred any other liabilities
individually in excess of $25,000 or in
excess of
$100,000 in the aggregate, (iii) made any loans or advances to
any person, other than ordinary advances for travel expenses, or
(iv) sold, exchanged or otherwise disposed of any of its
assets or rights, other than the sale of its inventory in the
ordinary course of business.
(e) The Company has not engaged in the past three
(3) months in any discussion (i) with any representative of
any corporation or corporations regarding the merger of the Company
with or into any such corporation or corporations, (ii) with
any representative of any corporation, partnership, association or
other business entity or any individual regarding the sale,
conveyance or disposition of all or substantially all of the assets
of the Company or a transaction or series of related transactions
in which more than fifty percent (50%) of the voting power of the
Company would be disposed of, or (iii) regarding any other
form of liquidation, dissolution or winding up of the
Company.
2.13 Disclosure. The Company has fully provided
the Purchasers with all the information that the Purchasers have
requested for deciding whether to acquire the Stock. No
representation or warranty of the Company contained in this
Agreement (including the schedule of exceptions) and the exhibits
attached hereto or any certificate furnished or to be furnished to
Purchasers at the Closing (when read together) contains any untrue
statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances under which
they were made; provided that the foregoing does not limit any
knowledge or other qualifiers explicitly stated in such
representations or warranties.
2.14 No Conflict of Interest. The Company is not
indebted, directly or indirectly, to any of its stockholders,
officers or directors or to their respective spouses or children,
in any amount whatsoever other than in connection with expenses or
advances of expenses incurred in the ordinary course of business or
relocation expenses of employees. None of the Company’s
stockholders, officers or directors, or any members of their
immediate families, are, directly or indirectly, indebted to the
Company (other than in connection with purchases of the
Company’s stock) or, to the Company’s Knowledge, have
any direct or indirect ownership interest in any firm or
corporation with which the Company is affiliated or with which the
Company has a business relationship, or any firm or corporation
which competes with the Company except that officers, directors
and/or stockholders of the Company may own stock in (but not
exceeding two percent of the outstanding capital stock of) any
publicly traded companies that may compete with the Company. To the
Company’s Knowledge, none of the Company’s officers or
directors or any members of their immediate families are, directly
or indirectly, interested in any material contract with the
Company. The Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
2.15 Rights of Registration and Voting Rights.
Except as contemplated in the Investor Rights Agreement, the
Company has not granted or agreed to grant any registration rights,
including piggyback rights, to any person or entity. To the
Company’s Knowledge, no stockholder of the Company, other
than the Purchasers, has entered into any agreements with respect
to the voting of capital shares of the Company.
2.16 Title to Property and Assets. The Company
owns its property and assets free and clear of all mortgages,
pledges, security interests, cha
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