SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of May 20,
2003, by and among Q Comm International, Inc., a Utah corporation, having its
principal office at 0000 Xxxxx 0000 Xxxx, Xxxx, Xxxx 00000 (the "Company"), and
Jurika Family Trust U/A 1989 (the "Buyer").
WHEREAS:
A. The Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act"); and
B. The Company desires to issue and sell, upon the terms and conditions
set forth in this Agreement: (i) the Company's 12% unsecured promissory note in
the original principal amount of One Million Dollars ($1,000,000), substantially
in the form attached hereto as Exhibit "A" (the "Note") and (ii) warrants, in
the form attached hereto as Exhibit "B" (the "Warrants"), to purchase 3,571,428
shares of the Company's common stock, par value $.001 per share (the "Common
Stock"); and
C. Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, the Note and the Warrants.
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. PURCHASE AND SALE OF DEBENTURES, SHARES AND WARRANTS.
a. Purchase of Securities. On the Closing Date (as
defined below), the Company shall issue and sell to the Buyer and the Buyer
agrees to purchase from the Company the Note and the Warrants.
b. Purchase Price and Form of Payment. The purchase
price for the Note and the Warrants shall be $1,000,000 in the aggregate (the
"Purchase Price"). On the Closing Date (as defined below), (i) the Buyer shall
pay the Purchase Price by wire transfer of immediately available funds (or as
otherwise mutually agreed) to the Company, in accordance with the Company's
written wiring instructions, against delivery of the Note and the Warrants and
(ii) the Company shall deliver the Note and the Warrants, duly executed on
behalf of the Company, to the Buyer, against delivery of such Purchase Price.
c. Closing Date. Subject to the satisfaction (or
waiver) of the conditions thereto set forth in Section 5 and Section 6 below,
the date and time of the issuance and sale of the Note and the Warrants shall be
11:00 a.m. Eastern Standard Time on May 31, 2003 or such other mutually agreed
upon time (the "Closing Date"). The closing of the transactions contemplated by
this Agreement (the "Closing") shall occur on the Closing Date at the offices of
the Companya s set forth above, or at such other location as may be agreed to by
the parties.
2. BUYER'S REPRESENTATIONS AND WARRANTIES. The Buyer
represents and warrants to the Company that:
a. Investment Purpose. As of the date hereof, the
Buyer is purchasing the Note and the Warrants and the shares of the Common Stock
issuable upon exercise of the Warrants (the "Warrant Shares" and, together with
the Note, the "Securities") for its own account and not with a present view
towards the public sale or distribution thereof, except pursuant to sales
registered or exempted from registration under the 1933 Act; provided, however,
that by making the representations herein, the Buyer, subject to any agreement
to the contrary executed simultaneously herewith, does not agree to hold any of
the Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
b. Accredited Investor Status. The Buyer is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D (an
"Accredited Investor") for the reasons checked on Schedule 1 hereto.
c. Reliance on Exemptions. The Buyer understands that
the Securities are being offered and sold to it in reliance upon specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
d. Information. The Buyer and its advisors, if any,
have been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities that the Buyer or its advisors has requested. The Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. The Buyer understands that its investment in the Securities involves a
significant degree of risk.
e. Governmental Review. The Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the
Securities.
f. Transfer or Re-sale. The Buyer understands that
(i) the sale or re-sale of the Securities has not been and is not being
registered under the 1933 Act or any applicable state securities laws, and none
of the Securities may be transferred unless (a) they are sold pursuant to an
effective registration statement under the 1933 Act, (b) the Buyer shall have
delivered to the Company an opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions) to the effect that the Securities to be sold or transferred may be
sold or transferred pursuant to an exemption from such registration, (c) the
Securities are sold or transferred to an "affiliate" (as defined in Rule 144
promulgated under the 1933 Act (or a successor rule) ("Rule 144")) of the Buyer
who agrees to sell or otherwise transfer such securities only in accordance with
this Section 2(f) and who is an Accredited Investor, or (d) the Securities are
sold pursuant to Rule 144; (ii) any sale of the Securities made in reliance on
Rule 144 may be made only in accordance with the terms of said Rule and further,
if said Rule is not applicable, any re-sale of such Securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the 0000 Xxx) may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder. Notwithstanding the foregoing or anything else contained
herein to the contrary, the Securities may be pledged as collateral in
connection with a bona fide margin account or other lending arrangement.
g. Legends. The Buyer acknowledges that, except as
otherwise set forth in this Section 2(g), the Note and the certificates
evidencing the Warrants and the Warrant Shares shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for such Securities):
2
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities may not be sold, transferred or assigned in the
absence of an effective registration statement for the
securities under said Act, or an opinion of counsel, in form,
substance and scope customary for opinions of counsel in
comparable transactions, that registration is not required
under said Act or unless sold pursuant to Rule 144 under said
Act."
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a)
such Security is registered for sale under an effective registration statement
filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 without
any restriction as to the number of securities as of a particular date that can
then be immediately sold, or (b) such holder provides the Company with an
opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale or transfer
of such Security may be made without registration under the 1933 Act, including
pursuant to the provisions of Rule 144 and such sale or transfer is effected.
The Buyer agrees to sell all Securities, including those represented by a
certificate(s) from which the legend has been removed, in compliance with
applicable prospectus delivery requirements, if any.
h. Authorization; Enforcement. This Agreement has
been duly and validly authorized, executed and delivered on behalf of the Buyer,
and this Agreement constitutes the valid and binding agreement of the Buyer
enforceable in accordance with its terms.
i. Broker. Except as otherwise set forth in this
Section 2i), the Buyer represents and warrants that it has not dealt with any
broker, finder, agent or other intermediary who is entitled to a commission or
fee with respect to the transactions contemplated hereby. Notwithstanding the
foregoing, Xxxxxxx Capital, Inc. shall be entitled to a fee equal to 6% of the
Purchase Price, which fee shall be payable by the Company out of the Purchase
Price.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Buyer that:
a. Organization and Qualification. The Company and
each of its Subsidiaries (as defined below), is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated, with full power and authority (corporate and other) to
own, lease, use and operate its properties and to carry on its business as and
where now owned, leased, used, operated and conducted. The Company and each of
its Subsidiaries is duly qualified as a foreign corporation to do business and
is in good standing in every jurisdiction in which its ownership or use of
property or the nature of the business conducted by it makes such qualification
necessary except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect. "Material Adverse Effect" means any material
adverse effect on the business, operations, assets, financial condition or
prospects of the Company or its Subsidiaries, if any, taken as a whole, or on
the transactions contemplated hereby or by the agreements or instruments to be
entered into in connection herewith. "Subsidiaries" means any corporation or
other organization, whether incorporated or unincorporated, in which the Company
owns, directly or indirectly, any equity or other ownership interest. The
Company has only one subsidiary - Q Comm, Inc., a Utah corporation.
3
b. Authorization; Enforcement; No Conflict. (i) The
Company has all requisite corporate power and authority to enter into and
perform this Agreement and to consummate the transactions contemplated hereby
and thereby and to issue the Securities, in accordance with the terms hereof,
(ii) the execution and delivery of this Agreement and the Securities by the
Company and the consummation by it of the transactions contemplated hereby and
thereby (including without limitation, the issuance of the Note and the Warrants
and the issuance and reservation for issuance of the Warrant Shares issuable
upon exercise of the Warrants) have been duly authorized by the Company's Board
of Directors and no further consent or authorization of the Company, its Board
of Directors, or its stockholders is required, (iii) this Agreement has been
duly executed and delivered by the Company, and (iv) this Agreement constitutes,
and upon execution and delivery by the Company of the Note and the Warrants,
each of such instruments will constitute, a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with its terms. The
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby will not (i)
conflict with or result in a violation of any provision of the Company's
Articles of Incorporation or bylaws or (ii) violate or conflict with, or result
in a breach of any provision of, or constitute a default (or an event which with
notice or lapse of time or both could become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and regulations of any self-regulatory organizations to
which the Company or its securities are subject) applicable to the Company or
any of its Subsidiaries or by which any property or asset of the Company or any
of its Subsidiaries is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect).
c. Issuance of Shares. The Warrant Shares are (or
shall be) duly authorized and reserved for issuance and, upon exercise of the
Warrants in accordance with their respective terms, will be validly issued,
fully paid and non-assessable, and free from all taxes, liens, claims and
encumbrances with respect to the issue thereof and shall not be subject to
preemptive rights or other similar rights of stockholders of the Company and
will not impose personal liability upon the holder thereof.
d. SEC Documents; Financial Statements. Since at
least January 1, 2002, the Company has timely filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Securities Exchange Act of 1934,
as amended (the "1934 Act") (all of the foregoing filed prior to the date hereof
and all exhibits included therein and financial statements and schedules thereto
and documents (other than exhibits to such documents) incorporated by reference
therein, being hereinafter referred to herein as the "SEC Documents"). As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. None of the
statements made in any such SEC Documents is, or has been, required to be
amended or updated under applicable law (except for such statements as have been
amended or updated in subsequent filings prior to the date hereof). As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements) and fairly present in all material respects the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
4
e Absence of Certain Changes. Since March 31, 2003,
there has been no material adverse change and no material adverse development in
the assets, liabilities, business, properties, operations, financial condition,
results of operations or prospects of the Company or any of its Subsidiaries.
f. Disclosure. All information relating to or
concerning the Company or any of its Subsidiaries set forth in this Agreement is
true and correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading.
4. COVENANTS.
a. Best Efforts. The parties shall use their best
efforts to satisfy timely each of the conditions described in Section 6 and 7 of
this Agreement.
b. Use of Proceeds. The Company shall use the
proceeds from the sale of the Securities primarily to contract manufacture its
Qxpress 200 terminals, including purchasing parts and components used in the
assembly of such terminals and to purchase inventory, including PINs from
telecommunications carriers.
c. Indebtedness for Borrowed Money. Except for any
purchase money indebtedness incurred in connection with the purchase of
inventory, as long as any amount remains unpaid on the Note, the Company will
not without the prior written consent of Buyer, incur any additional
indebtedness for borrowed money unless such indebtedness is by its terms
subordinate in all material respects, including but not limited to, in right of
payment, to the payment of the Note.
d. Reservation of Shares. The Company shall at all
times have authorized, and reserved for the purpose of issuance, a sufficient
number of shares of Common Stock to provide for the full exercise of the
Warrants and issuance of the Warrant Shares in connection therewith (based on
the exercise price of the Warrants in effect from time to time). The Company
shall not reduce the number of shares of Common Stock reserved for issuance upon
exercise of the Warrants without the consent of the Buyer.
5. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The
obligation of the Company hereunder to issue and sell the Note and the Warrants
to the Buyer at the Closing is subject to the satisfaction, at or before the
Closing Date of each of the following conditions thereto, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion:
a. The Buyer shall have delivered the Purchase Price
in accordance with Section 1(b) above.
b. The representations and warranties of the Buyer
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date), and the Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Buyer at or prior to the Closing Date.
5
c. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
6. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The
obligation of the Buyer to purchase the Note and Warrants at the Closing is
subject to the satisfaction, at or before the Closing Date of each of the
following conditions, provided that these conditions are for the Buyer's sole
benefit and may be waived by the Buyer at any time in its sole discretion:
a. The Company shall have executed this Agreement and
delivered the same to the Buyer.
b. The Company shall have delivered to the Buyer a
duly executed Note and warrant certificate evidencing the Warrants in accordance
with Section 1(b) above.
c. Xxxx Xxxxxx shall have executed and delivered to
the Buyer a subordination agreement in the form of Exhibit "C" hereto.
d. The representations and warranties of the Company
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at such time (except for representations
and warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer shall
have received a certificate or certificates, executed by the chief executive
officer of the Company, dated as of the Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by such Buyer
including, but not limited to certificates with respect to the Company's
Certificate of Incorporation, By-laws and Board of Directors' resolutions
relating to the transactions contemplated hereby.
e. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
7. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. THIS AGREEMENT SHALL BE ENFORCED,
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED
IN SAN FRANCISCO, CALIFORNIA, WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS
AGREEMENT, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING.
BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST
CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON
THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER
PARTY'S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. BOTH
PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTY THAT DOES NOT
PREVAIL IN ANY DISPUTE ARISING UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL
FEES AND EXPENSES, INCLUDING ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY
IN CONNECTION WITH SUCH DISPUTE.
6
b. Counterparts; Signatures by Facsimile. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
c. Headings. The headings of this Agreement are for
convenience of reference only and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. In the event that any provision of
this Agreement is invalid or enforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
e. Entire Agreement; Amendments. This Agreement and
the instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
f. Notices. Any notices required or permitted to be
given under the terms of this Agreement shall be sent by certified or registered
mail (return receipt requested) or delivered personally or by courier (including
a recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be:
If to the Company:
Q COMM INTERNATIONAL
0000 Xxxxx 0000 Xxxx
Xxxx, Xxxx 00000
Attention: Chief Executive Officer
Telephone: 000-000-0000
7
With copy to:
Morse, Zelnick, Rose & Lander, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to the Buyer: To the address set forth immediately below such
Buyer's name on the signature page hereto.
Each party shall provide notice to the other party of any change in
address.
g. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
assigns. Neither the Company nor the Buyer shall assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other.
h. Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is neither for the benefit of, nor may any provision
hereof be enforced by, any other person.
i. Survival. The representations and warranties of
the Buyer set forth in Section 2 hereof shall survive the Closing for a period
of six months. The representations and warranties of the Company set forth in
Section 3 hereof and the covenants of the company set forth in Section 4 hereof
shall survive the Closing for as long as any amount shall remain unpaid under
the Note. The Company agrees to indemnify and hold harmless the Buyer and all
its officers, directors, employees and agents for loss or damage arising as a
result of or related to any breach or alleged breach by the Company of any of
its representations, warranties and covenants set forth in Sections 3 and 4
hereof. The Buyer agrees to indemnify and hold harmless the Company and its
officers, directors, employees and agents for loss or damage arising as a result
of or related to any material breach by the Buyer of any of its representations,
warranties and covenants set forth in Section 2 hereof.
j. Further Assurances. Each party shall do and
perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in order to
carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
k. No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
8
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Agreement to be duly executed as of the date first above written.
Q COMM INTERNATIONAL, INC.
By: /s/ Xxxx Xxxxxx
------------------------------------
Xxxx Xxxxxx
Chairman and Chief Executive Officer
Jurika Family Trust U/A 1989
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Trustee
RESIDENCE: California
ADDRESS:
C/o Jurika & Associates
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Tax ID No.:
9
