Exhibit 10.25 Note Purchase Agreement dated October 18, 2004
NOTE PURCHASE AGREEMENT
This Note Purchase Agreement is made this 16th day of October, 2004, by
and between QUINTEK TECHNOLOGIES, INC., a California corporation ("QTEK" or
"Company"), and Xxxxxx Xxxxxxx ("XXXXXXX" or "Investor"), an accredited
investor.
Background
As more fully set forth herein, XXXXXXX agrees to purchase from the Company a
total of one (1) Note (the "Note"), in $250,000 denomination with a 5 3/4 %
annual interest rate and a six month term. The Note is annexed hereto as Exhibit
A. Additionally, the Company will issue to XXXXXXX 5,000,000 bonus redeemable
warrants to purchase one share of Company common stock at $0.10 (Ten Cents) for
a period of three years from closing. (The bonus warrants ("Warrants") and the
Common Stock issuable upon exercise of the Warrants ("Warrant Stock") are
collectively referred to herein as, the "Securities"). Upon acceptance of this
Agreement by the Subscriber, the Company shall issue and deliver to the
Subscriber the Note against payment, by federal funds wire transfer of $250,000.
A form of the Warrant is attached hereto as Exhibit B. The Company will seek to
file with the Securities Exchange Commission ("SEC") and make effective a
Registration Statement covering the Warrant Stock in this transaction within 120
days of the closing. .In the event the Registration Statement is not declared
Effective by the SEC within one hundred and twenty (120) days of the funding of
the Note, the Company shall pay a penalty of 1 % (one percent) of the principal
amount of the Note. Penalty shall be paid in Common Stock or cash at the option
of the Company, on a pro-rata basis for partial months, for each full month the
Registration Statement on the Warrant Stock is not declared effective.
Agreement
NOW THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
1. Subscription. XXXXXXX hereby purchases, and the Company hereby
sells, the Note and Warrants; and the funding of said Note shall occur within 48
hours of the execution of this Note Purchase Agreement.
At the time of the execution and delivery of this Note Purchase
Agreement, XXXXXXX and QTEK have also executed and delivered the Registration
Rights Agreement attached hereto as Exhibit "C" ("Registration Rights
Agreement")and the Security Agreement attached hereto as Exhibit "D" ("Security
Agreement"). Pursuant to the Registration Rights Agreement, the Company agrees
to register all of the Warrant Stock with the Securities and Exchange
Commission. Pursuant to the Security Agreement, the Note is secured by 543,798
free trading shares of Xxxxxxx Investments PLC owned by the Company held in an
account in the name of Quintek Technologies, Inc. at Cristows Ltd., in London
England. XXXXXXX may demand repayment of $150,000 of the principal amount of the
Note within 30 days of the effectiveness of a registration statement for the
Warrant Stock.
2. Verification of Status as "Accredited Investor". XXXXXXX hereby
represents to QTEK that he qualifies as an "accredited investor" as such term is
defined in Rule 501 promulgated under the Act.
3. Representations And Warranties of the Company. The Company hereby
makes the following representations and warranties to XXXXXXX:
(a) Issuance of Securities. The issuance of the Securities has
been duly authorized by QTEK, and when issued will be validly issued. The
Warrants and Warrant Shares when issued will be fully paid and non-assessable.
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(b) Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the state of
California, with all requisite power, authority and licensing to own, operate
and lease its properties and carry on its business as now being conducted.
(c) Authority. The execution and delivery of this Agreement,
and the consummation of the transactions contemplated hereby has been duly
authorized by the Board of Directors of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to carry out the transactions contemplated hereby. (D) Miscelaneous. The
Company represents that existing investors have committed to fund additional
monies to the Company at this time. Under these agreements, Quintek will receive
in excess of an additional $600,000 once a registration statement has been
deemed effective by the SEC
4. Representations by XXXXXXX. XXXXXXX represents and warrants to the
Company as follows:
(a) XXXXXXX has received, read and understands the provisions
of each of the Company's reports on Forms 8-K, 10-QSB and 10-KSB for the past
three fiscal years, including the following: (i) the Company's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 2004; and (ii) the Company's
Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004; XXXXXXX
understands that all of the foregoing together with this Note Purchase Agreement
shall be referred to herein as "Offering Materials".
(b) XXXXXXX has relied only upon the information presented and
contained in the Offering Materials and in the QTEK's filings with the SEC.
XXXXXXX has had the opportunity to ask of the person or persons acting on behalf
of the Company any and all relevant questions in connection with any aspect of
the Company including, but not limited to, the Securities offered by the
Offering Materials and has received answers which it considers to be reasonably
responsive to such questions. XXXXXXX has had the opportunity to verify the
accuracy of the information contained in the Offering Materials. XXXXXXX
understands that the proceeds from the sale of the Note and Securities will be
used for the purpose of securing an irrevocable letter of credit.
(c) XXXXXXX understands that it is subscribing for the
Securities without being furnished any literature or prospectus in connection
with the offering of the Securities other than the Offering Materials, and that
the offering of the Securities presented in the Offering Materials will not have
been scrutinized by the securities administrator or similar bureau, agency, or
department of the state of its domicile.
(d) XXXXXXX understands (i) that neither the Warrants nor the
Warrant Stock has been registered under the Act or registered or qualified under
the securities laws of the state of domicile of XXXXXXX; (ii) that except as
otherwise provided in the Registration Rights Agreement, XXXXXXX has no right to
require such registration or qualification; and (iii) that therefore XXXXXXX
must bear the economic risk of the investment for an indefinite period of time
because neither the Warrants nor Warrant Stock may be sold unless so registered
or qualified or unless an exemption from such registration and qualification is
available.
(e) Subject to being resold pursuant to an effective
registration statement, the Securities are being purchased for XXXXXXX'x own
account for investment purposes only and not for the interest of any other
person and are not being purchased with a view to or for the resale,
distribution, subdivision or fractionalization thereof. Although the Common
Stock of QTEK is currently traded on the OTC Bulletin Board under the symbol
"QTEK", XXXXXXX also understands that there may not be any established public
trading market for the sale of the Securities.
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(f) XXXXXXX recognizes that the purchase of the Securities
involves a high degree of risk including those special risks set forth under the
caption "Risk Factors" and "Forward Looking Statements" on October 1, 2004 under
the Form 10-KSB for the year ended June 30, 2004, all of which are incorporated
herein by reference.
(g) Subject to the registration rights set forth above,
XXXXXXX understands that its right to transfer the Warrants and Warrant Stock
will be restricted as set forth on the stock certificates. Such restrictions
include provisions against transfer unless such transfer is not in violation of
the Act, or applicable state securities laws (including investor suitability
standards).
(h) All information which XXXXXXX has provided to the Company
including, but not limited to, its tax identification number, its financial
position, and status as an accredited investor, and its knowledge of financial
and business matters is true, correct and complete as of the date of execution
of this Note Purchase Agreement. XXXXXXX understands that QTEK will rely in a
material degree upon the representations contained herein.
(i) XXXXXXX maintains its principal place of business at the
address shown on the signature page of this Note Purchase Agreement, at which
address XXXXXXX has subscribed for the Securities.
(j) XXXXXXX understands that legends may be placed on any
certificate representing the Warrants, and Warrant Stock substantially to the
following effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES STATUTES AND
REGULATIONS. SUCH SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES STATUTES AND REGULATIONS, UNLESS, IN THE OPINION
(WHICH SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION) OF
COUNSEL SATISFACTORY TO THE CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
(k) The execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby has been duly authorized by
XXXXXXX.
5. Delay of Registration. Notwithstanding anything contained herein to the
contrary, if the Registration Statement (as such term is defined in the
Registration Rights Agreement) has not been declared effective under the Act by
the Securities and Exchange Commission within 120 days following the date
hereof, then in such event, the Company shall owe to XXXXXXX an additional one
percent (1%) of the aggregate amount of the Note, on a pro rata basis for
partial months, for each full month that the Registration Statement is not so
declared effective. In lieu of cash, the Company may elect to xxxxx XXXXXXX this
amount in shares of common stock (based upon the Warrant exercise price of $0.10
(ten cents). These shares, if any, shall be covered by the Registration Rights
Agreement.
7. 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.
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8. 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.
9. 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.
10. 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.
11. Expenses. The Company shall pay for and prepare all documentation and
filings related to this transaction.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Note Purchase Agreement the date first above written.
XXXXXX XXXXXXX
Witness:_________________ By:
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Address:
00000 Xxxxxx Xxxx
Xxxxxx Xxxx, XX 00000
QUINTEK TECHNOLOGIES, INC.
By: /s/ Xxxxxx Xxxxxx
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Xxxxxx Xxxxxx
Chief Executive Officer
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