Exhibit 10.1
Purchase Order Financing Agreement dated June
2, 2003 between Kazi Management VI, LLC
and Quintek Technologies, Inc.
PURCHASE ORDER FINANCING AGREEMENT
This Purchase Order Financing Agreement ("Agreement") made as of June 2, 2003
between Kazi Management VI, LLC, a limited liability company duly organized
under the laws of U.S. Virgin Islands with principal offices at Xxx Xxxx Xxxx
Xxxx, Xx. Xxxxxx, Xxxxxx Xxxxxxx 00000, ("Purchaser"), and Quintek Technologies,
Inc., whose office is at 000 Xxxxxxxxxxxx Xxxxxx, Xxxxx X, Xxxxxxxxx, XX 00000
("Seller").
I. R E C I T A L S
- - - - - - - -
A. The Seller is desirous of selling to Purchaser, at a discount,
orders to purchase desktop microfilm printers manufactured by Seller.
B. The Purchaser has the wherewithal and desire to purchase the
purchase orders from the Seller upon the terms and conditions as more fully set
forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1.01. Purchase Order Financing. Purchaser, on the terms and conditions
hereinafter set forth, will purchase equipment purchase orders ("Qualified
Purchase Orders", as hereinafter defined) in varying amounts from Seller from
time to time during the period starting with the date of this Agreement up to
but not including June 2, 2005 ("Termination Date") in an aggregate principal
amount up to but not to exceed a total of $4,800,000 over the two year term of
the Agreement. Purchaser agrees to purchase up to Two Hundred Thousand Dollars
($200,000) of Qualified Purchase Orders in any given month throughout the two
(2) year term of this Agreement. Purchaser will not be required to hold more
than Two Hundred Thousand Dollars of outstanding Qualified Purchase Orders at
any time.
1.02. Qualified Purchase Order. A purchase order is a Qualified Purchase Order
if it is received from a profitable end user customer corporation (or other
entity) with over Ten Million Dollars ($10,000,000) in annual revenues or a
profitable dealer customer with over Three Million Dollars ($3,000,000) in
annual revenues.
1.03. Purchase Order Sale Price. Perfected Purchase Orders (defined as Qualified
Purchase Orders delivered to and accepted by customer) shall be purchased by the
Purchaser at three percent (3%) discount to the Purchaser, or ninety seven
percent (97%) of face value. Non-Perfected Purchase Orders (defined as Qualified
Purchase Orders not yet shipped to customers) will be purchased by the Purchaser
at ten percent (10%) discount to the Purchaser, or ninety percent (90%) of face
value.
1.04. Funding of Sale. Purchaser agrees to pay Seller the purchase order sale
price as determined by paragraph 1.03 above, and Seller shall have received said
funds in its account, within three (3) days of Seller presenting a Qualified
Purchase Order to Purchaser or Purchaser 's designated representative.
1.05 Right of Rejection. Purchaser shall have the right to reject Qualified
Purchase Orders presented by Seller on the following grounds:
o Purchaser has good reason to doubt Qualified Purchase Order status
or financial solvency of customer
o Poor payment history of customer
o Purchaser has inventory of more than Two Hundred Thousand Dollars
($200,000) of outstanding and unpaid purchase orders from Seller's
customers.
In the event of rejection of a Qualified Purchase Order, Purchaser will notify
Seller in writing of said rejection and reason(s) therefore within three (3)
days of initial presentation of a Qualified Purchase Order by Seller.
1.06. Late Payment Penalty Fee. Seller will pay Purchaser a late payment fee as
follows:
o Perfected Purchase Orders not paid by customer to Purchaser within
30 days of purchase: Seller will pay Purchaser a late payment fee
equal to Three Percent (3%) per month of the discounted purchase
order sale price paid by Purchaser.
o Non-Perfected Purchase Orders not paid by customer to Purchaser
within 60 days of purchase: Seller will pay Purchaser a late
payment fee equal to Five Percent (5%) per month of the discounted
purchase order sale price paid by Purchaser.
Late payment fees may be paid in cash or Seller's common stock at the option of
the Purchaser. If paid in common stock, the price of the common stock will be
based on a fifty percent (50%) discount to the closing bid price of the common
stock on the OTC Bulletin Board at either time of payment, at the option of the
Purchaser.
1.07. Equity Fee. As an inducement for executing this Agreement the Seller shall
issue to the Purchaser a warrant ("Warrant") to purchase One Million Five
Hundred Thousand (1,500,000) shares of common stock of the Seller at the average
closing price of Seller common stock on the OTC Bulletin Board for the 90 days
prior to the execution of this Agreement. The Warrant, of the form attached
hereto as Exhibit A, shall be exercisable for 5 years and shall have standard
piggyback registration rights as described in the Registration Rights Agreement
attached hereto as Exhibit B.
1.08. Bonus Warrant. Purchaser will receive additional warrants ("Additional
Warrants") to purchase two (2) shares of common stock of the Seller for each
dollar of Qualified Purchase Orders purchased and paid for by Purchaser.
Calculation of the number of shares purchasable by Purchaser pursuant to the
Additional Warrants shall be based on the price paid for Purchase Orders by
Purchaser. Additional Warrants will be exercisable for five (5) years at an
exercise price equal to the average closing price of Seller's common stock for
the 90 days prior to the closing of the Purchase Order transaction they
represent or a fifty percent (50%) discount to the closing price of Seller's
common stock at the day of the closing of the transaction they represent, at the
option of the Purchaser. Additional Warrants, of the form attached hereto as
Exhibit C, shall have standard piggyback registration rights as described in the
Registration Rights Agreement attached hereto as Exhibit B
1.09. Cancellation Penalty. If the Purchaser, without adequate reason, does not
fund Qualified Purchase Orders and/or does not timely respond to the Seller's
request for funding, Seller shall have the right to cancel the Warrant described
in paragraph 1.07 above given to Purchaser as an inducement for executing this
Agreement.
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1.10. Maximum Holdings Protection. Notwithstanding anything herein to the
contrary, if and to the extent that, on any date (the "Section 16 Determination
Date"), the holding by Purchaser of any of the Warrants or Additional Warrants
would result in Purchaser's becoming subject to the provisions of Section 16(b)
of the Securities Exchange Act of 1934, as amended, by virtue of being deemed
the "beneficial owner" of more than ten percent (10%) of the then outstanding
shares of Common Stock of Seller, then Purchaser shall not have the right to
exercise any portion of a Warrant or Additional Warrant as shall cause Purchaser
to be deemed the beneficial owner of more than ten percent (10%) of the then
outstanding shares of Common Stock of the Seller during the period ending sixty
(60) days after the Section 16 Determination Date. This limit on exercise shall
be abrogated in the event of a merger or acquisition of the Seller.
1.11. Demand Registration Rights. Purchaser shall have the right to one (1)
demand registration of the common stock underlying the Warrant and Additional
Warrants accruing to Purchaser pursuant to this Agreement after Purchaser has
purchased and paid Seller for $2,400,000 of Qualified Purchase Orders from
Seller. Purchaser shall have the right to an additional one (1) demand
registration of the common stock underlying the Warrant and Additional Warrants
accruing to Purchaser pursuant to this Agreement after Purchaser has purchased
and paid Seller for an additional $2,400,000 (for a total of $4,800,000) of
Qualified Purchase Orders from Seller. The demand registration rights herein are
described in the Registration Rights Agreement attached hereto as Exhibit B.
1.12. Share Availability. Purchaser understands and acknowledges that Seller
currently is near the limit of authorized shares of common stock Seller may
issue. Seller represents that it is in the process of seeking shareholder
approval to amend its Articles of Incorporation to authorize issuance of more
common shares. Thus, Seller will issue the Warrant and Additional Warrants to
Purchaser upon amendment of its Articles of Incorporation to authorize issuance
of more common shares.
1.13. Collateral Interest. Seller will effect a filing of form UCC 1, on behalf
of Purchaser, on Qualified Purchase Orders purchased by Purchaser. Seller will
secure the payment to the Purchaser of the monies due from a customer on bought
Purchase Orders within six months. The security provided Purchaser by Seller for
timely payment of a Qualified Purchase Order consists of all assets, patents and
receivables currently held or obtained by the Seller until the Purchaser has
recouped face value of any purchased Qualified Purchase Orders. The security
provided herein is described in the Security Agreement attached hereto as
Exhibit D.
1.14 Survival of Representations, Warranties, Covenants, Agreements and
Remedies. Except as specifically provided otherwise herein, all representations,
warranties, covenants, agreements and remedies of the parties hereto, shall
survive the date hereof.
1.15. Entire Agreement. This Agreement constitutes the entire understanding and
agreement between the parties hereto with respect to the transactions
contemplated herein, supersedes all prior and contemporaneous agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties, and there have been no warranties, representations or promises, written
or oral, made by any of the parties hereto except as herein expressly set forth
herein.
1.16 Binding Agreement. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, as well as their respective heirs, personal
representatives, successors and assigns but no party may assign its obligations
hereunder.
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1.17. California Law Controls. This Agreement shall be construed in accordance
with and shall be governed by the laws of the state of California without regard
to its conflicts of law rules.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement the date first above written.
KAZI MANAGEMENT VI, LLC
By:__________________________
QUINTEK TECHNOLOGIES, INC.
By: /s/ Xxxxxx Xxxxxx
---------------------------------------
Xxxxxx Xxxxxx, Chief Executive Officer
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EXHIBIT A
Form of Warrant
EXHIBIT B
Registration Rights Agreement
EXHIBIT C
Form of Additional Warrant
EXHIBIT D
Security Agreement
