Exhibit 10.22
SECURITIES PURCHASE AGREEMENT
Securities Purchase Agreement dated as of August 2, 2004 (this "Agreement") by
and between Quintek Technologies, Inc., a California corporation, with principal
executive offices located at 00000 Xxxxx Xxxxxx, Xxxxxxxxxx Xxxxx, XX 00000 (the
"Company"), and Golden Gate Investors, Inc. ("Buyer").
WHEREAS, Buyer desires to purchase from the Company, and the Company
desires to issue and sell to Buyer, upon the terms and subject to the conditions
of this Agreement, the Convertible Debenture of the Company in the aggregate
principal amount of $300,000 (the "Debenture"); and
WHEREAS, in conjunction with the Debenture, the Company has issued a
Warrant to Purchase Common Stock to the Buyer (the "Warrant or Conversion
Warrant"); and
WHEREAS, upon the terms and subject to the conditions set forth in the
Debenture and the Warrant, the Debenture and Warrant are convertible and
exercisable, respectively, into shares of the Company's Common Stock (the
"Common Stock");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
I. PURCHASE AND SALE OF DEBENTURE
A. Transaction. Buyer hereby agrees to purchase from the
Company, and the Company has offered and hereby agrees to issue and
sell to Buyer in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act of 1933, as
amended (the "Securities Act"), the Debenture. B. Purchase Price; Form
of Payment. The purchase price for the Debenture to be purchased by
Buyer hereunder shall be $300,000 (the "Purchase Price").
Simultaneously with the execution of this Agreement, Buyer shall pay
$225,000 of the Purchase Price (the "Initial Purchase Price") by wire
transfer of immediately available funds to the Company. Simultaneously
with the execution of this Agreement, the Company shall deliver the
Convertible Debenture and the Conversion Warrants (which shall have
been duly authorized, issued and executed I/N/O Buyer or, if the
Company otherwise has been notified, I/N/O Buyer's nominee). Upon
notification and verification that the Registration Statement for the
Conversion Shares (as defined below) and the shares of Common Stock
issuable upon exercise of the Conversion Warrants (the "Warrant
Shares") has been declared effective by the Securities and Exchange
Commission, and such shares can legally be issued to Buyer, Buyer shall
immediately send via wire the remainder of the Purchase Price.
II. BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to and covenants and agrees with the
Company as follows:
A. Buyer is purchasing the Debenture and the Common Stock
issuable upon conversion or redemption of the Debenture (the
"Conversion Shares" and, collectively with the Debenture and
the Warrant Shares, the "Securities") for its own account, for
investment purposes only and not with a view towards or in
connection with the public sale or distribution thereof in
violation of the Securities Act.
1
B. Buyer is (i) an "accredited investor" within the meaning of
Rule 501 of Regulation D under the Securities Act, (ii)
experienced in making investments of the kind contemplated by
this Agreement, (iii) capable, by reason of its business and
financial experience, of evaluating the relative merits and
risks of an investment in the Securities, and (iv) able to
afford the loss of its investment in the Securities.
C. Buyer understands that the Securities are being offered and
sold by the Company in reliance on an exemption from the
registration requirements of the Securities Act and equivalent
state securities and "blue sky" laws, and that the Company is
relying upon the accuracy of, and Buyer's compliance with,
Buyer's representations, warranties and covenants set forth in
this Agreement to determine the availability of such exemption
and the eligibility of Buyer to purchase the Securities;
D. Buyer understands that the Securities have not been
approved or disapproved by the Securities and Exchange
Commission (the "Commission") or any state or provincial
securities commission.
E. This Agreement has been duly and validly authorized,
executed and delivered by Buyer and is a valid and binding
agreement of Buyer enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar
laws affecting creditors' rights and remedies generally and
except as rights to indemnity and contribution may be limited
by federal or state securities laws or the public policy
underlying such laws.
III. THE COMPANY'S REPRESENTATIONS
The Company represents and warrants to Buyer that:
A. Capitalization.
1. The authorized capital stock of the Company consists of
200,000,000 shares of Common Stock and 50,000,000 shares of
Series A Preferred Stock of which 48,749,994 shares and -0-
shares, respectively, are issued and outstanding as of the
date hereof and are fully paid and nonassessable. The amount,
exercise, conversion or subscription price and expiration date
for each outstanding option and other security or agreement to
purchase shares of Common Stock is accurately set forth on
Schedule III.A.1.
2. The Conversion Shares and the Warrant Shares have been duly
and validly authorized and reserved for issuance by the
Company, and, when issued by the Company upon conversion of
the Debenture, will be duly and validly issued, fully paid and
nonassessable and will not subject the holder thereof to
personal liability by reason of being such holder.
2
3. Except as disclosed on Schedule III.A.3., there are no
preemptive, subscription, "call," right of first refusal or
other similar rights to acquire any capital stock of the
Company or other voting securities of the Company that have
been issued or granted to any person and no other obligations
of the Company to issue, grant, extend or enter into any
security, option, warrant, "call," right, commitment,
agreement, arrangement or undertaking with respect to any of
their respective capital stock.
B. Organization; Reporting Company Status.
1. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the state or
jurisdiction in which it is incorporated and is duly qualified
as a foreign corporation in all jurisdictions in which the
failure so to qualify would reasonably be expected to have a
material adverse effect on the business, properties,
prospects, condition (financial or otherwise) or results of
operations of the Company or on the consummation of any of the
transactions contemplated by this Agreement (a "Material
Adverse Effect").
2. The Company is subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Common Stock is traded on the OTC Bulletin Board
service of the National Association of Securities Dealers,
Inc. ("OTCBB") and the Company has not received any notice
regarding, and to its knowledge there is no threat of, the
termination or discontinuance of the eligibility of the Common
Stock for such trading.
C. Authorization.
The Company (i) has duly and validly authorized and reserved for
issuance shares of Common Stock, which is a number sufficient for the
conversion of the Debenture and the exercise of the Conversion Warrant
and (ii) at all times from and after the date hereof shall have a
sufficient number of shares of Common Stock duly and validly authorized
and reserved for issuance to satisfy the conversion of the Debenture in
full and the exercise of the Conversion Warrant. The Company
understands and acknowledges the potentially dilutive effect on the
Common Stock of the issuance of the Conversion Shares and the Warrant
Shares. The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Debenture and the exercise of
the Conversion Warrant and the Initial Warrant in accordance with this
Agreement is absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other
stockholders of the Company and notwithstanding the commencement of any
case under 11 U.S.C. ss. 101 et seq. (the "Bankruptcy Code"). In the
event the Company is a debtor under the Bankruptcy Code, the Company
hereby waives to the fullest extent permitted any rights to relief it
may have under 11 U.S.C. ss. 362 in respect of the conversion of the
Debenture. The Company agrees, without cost or expense to Buyer, to
take or consent to any and all action necessary to effectuate relief
under 11 U.S.C. ss. 362.
D. Authority; Validity and Enforceability.
The Company has the requisite corporate power and authority to enter
into the Documents (as such term is hereinafter defined) and to perform
3
all of its obligations hereunder and thereunder (including the
issuance, sale and delivery to Buyer of the Securities). The execution,
delivery and performance by the Company of the Documents and the
consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the issuance of the Debenture
and the issuance and reservation for issuance of the Conversion Shares
and the Warrant Shares) have been duly and validly authorized by all
necessary corporate action on the part of the Company. Each of the
Documents has been duly and validly executed and delivered by the
Company and each Document constitutes a valid and binding obligation of
the Company enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally and except as rights to indemnity and
contribution may be limited by federal or state securities laws or the
public policy underlying such laws. The Securities have been duly and
validly authorized for issuance by the Company and, when executed and
delivered by the Company, will be valid and binding obligations of the
Company enforceable against it in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally. For purposes of this
Agreement, the term "Documents" means (i) this Agreement; (ii) the
Registration Rights Agreement dated as of even date herewith between
the Company and Buyer, (iii) the Debenture; and (iv) the Conversion
Warrant.
E. Validity of Issuance of the Securities.
The Debenture, the Conversion Shares upon their issuance in accordance
with the Debenture, and the Warrant Shares will be validly issued and
outstanding, fully paid and nonassessable, and not subject to any
preemptive rights, rights of first refusal, tag-along rights,
drag-along rights or other similar rights.
F. Non-contravention.
The execution and delivery by the Company of the Documents, the
issuance of the Securities, and the consummation by the Company of the
other transactions contemplated hereby and thereby do not, and
compliance with the provisions of this Agreement and other Documents
will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any
obligation or loss of a material benefit under, or result in the
creation of any Lien (as such term is hereinafter defined) upon any of
the properties or assets of the Company or any of its Subsidiaries
under, or result in the termination of, or require that any consent be
obtained or any notice be given with respect to (i) the Articles or
Certificate of Incorporation or By Laws of the Company or the
comparable charter or organizational documents of any of its
Subsidiaries, in each case as amended to the date of this Agreement,
(ii) any loan or credit agreement, Debenture, bond, mortgage,
indenture, lease, contract or other agreement, instrument or permit
applicable to the Company or any of its Subsidiaries or their
respective properties or assets or (iii) any Law (as such term is
hereinafter defined) applicable to, or any judgment, decree or order of
any court or government body having jurisdiction over, the Company or
any of its Subsidiaries or any of their respective properties or
assets.
4
G. Approvals.
No authorization, approval or consent of any court or public or
governmental authority is required to be obtained by the Company for
the issuance and sale of the Securities to Buyer as contemplated by
this Agreement, except such authorizations, approvals and consents as
have been obtained by the Company prior to the date hereof.
H. Commission Filings.
The Company has properly and timely filed with the Commission all
reports, proxy statements, forms and other documents required to be
filed with the Commission under the Securities Act and the Exchange Act
since becoming subject to such Acts (the "Commission Filings"). As of
their respective dates, (i) the Commission Filings complied in all
material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the
Commission promulgated thereunder applicable to such Commission Filings
and (ii) none of the Commission Filings contained at the time of its
filing 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. The financial statements of the Company
included in the Commission Filings, as of the dates of such documents,
were true and complete in all material respects and complied with
applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto, were prepared in
accordance with generally accepted accounting principles in the United
States ("GAAP") (except in the case of unaudited statements permitted
by Form 10-Q under the Exchange Act) applied on a consistent basis
during the periods involved (except as may be indicated in the notes
thereto) and fairly presented the consolidated financial position of
the Company and its 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 that in the aggregate are not material and
to any other adjustment described therein).
I. Full Disclosure.
There is no fact known to the Company (other than general economic or
industry conditions known to the public generally) that has not been
fully disclosed in the Commission Filings that (i) reasonably could be
expected to have a Material Adverse Effect or (ii) reasonably could be
expected to materially and adversely affect the ability of the Company
to perform its obligations pursuant to the Documents.
J. Absence of Events of Default.
No "Event of Default" (as defined in any agreement or instrument to
which the Company is a party) and no event which, with notice, lapse of
time or both, would constitute an Event of Default (as so defined), has
occurred and is continuing.
K. Securities Law Matters.
Assuming the accuracy of the representations and warranties of Buyer
set forth in Article II, the offer and sale by the Company of the
Securities is exempt from (i) the registration and prospectus delivery
requirements of the Securities Act and the rules and regulations of the
Commission thereunder and (ii) the registration and/or qualification
provisions of all applicable state and provincial securities and "blue
5
sky" laws. The Company shall not directly or indirectly take, and shall
not permit any of its directors, officers or Affiliates directly or
indirectly to take, any action (including, without limitation, any
offering or sale to any person or entity of any security similar to the
Debenture) which will make unavailable the exemption from Securities
Act registration being relied upon by the Company for the offer and
sale to Buyer of the Debenture, the Conversion Shares and the Warrant
Shares as contemplated by this Agreement. No form of general
solicitation or advertising has been used or authorized by the Company
or any of its officers, directors or Affiliates in connection with the
offer or sale of the Debenture (and the Conversion Shares) as
contemplated by this Agreement or any other agreement to which the
Company is a party.
L. Registration Rights.
Except as set forth on Schedule III.L., no Person has, and as of the
Closing (as such term is hereinafter defined), no Person shall have,
any demand, "piggy-back" or other rights to cause the Company to file
any registration statement under the Securities Act relating to any of
its securities or to participate in any such registration statement.
M. Interest.
The timely payment of interest on the Debenture is not prohibited by
the Articles or Certificate of Incorporation or By-Laws of the Company,
in each case as amended to the date of this Agreement, or any
agreement, contract, document or other undertaking to which the Company
is a party.
N. No Misrepresentation.
No representation or warranty of the Company contained in this
Agreement or any of the other Documents, any schedule, annex or exhibit
hereto or thereto or any agreement, instrument or certificate furnished
by the Company to Buyer pursuant to this Agreement contains any untrue
statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading. O. Finder's Fee. There is no finder's fee, brokerage
commission or like payment in connection with the transactions
contemplated by this Agreement for which Buyer is liable or
responsible.
IV. CERTAIN COVENANTS AND ACKNOWLEDGMENTS
A. Filings.
The Company shall make all necessary Commission Filings and "blue sky"
filings required to be made by the Company in connection with the sale
of the Securities to Buyer as required by all applicable Laws, and
shall provide a copy thereof to Buyer promptly after such filing.
B. Reporting Status.
So long as Buyer beneficially owns any of the Securities, the Company
shall timely file all reports required to be filed by it with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act.
6
C. Listing.
Except to the extent the Company lists its Common Stock on The New York
Stock Exchange, The American Stock Exchange or The Nasdaq Stock Market,
the Company shall use its best efforts to maintain its listing of the
Common Stock on OTCBB. If the Common Stock is delisted from OTCBB, the
Company will use its best efforts to list the Common Stock on the most
liquid national securities exchange or quotation system that the Common
Stock is qualified to be listed on.
D. Reserved Conversion Common Stock.
The Company at all times from and after the date hereof shall have such
number of shares of Common Stock duly and validly authorized and
reserved for issuance as shall be sufficient for the conversion in full
of the Debenture and the exercise of the Conversion Warrant.
E. Information.
Each of the parties hereto acknowledges and agrees that Buyer shall not
be provided with, nor be given access to, any material non-public
information relating to the Company.
F. Accounting and Reserves.
The Company shall maintain a standard and uniform system of accounting
and shall keep proper books and records and accounts in which full,
true, and correct entries shall be made of its transactions, all in
accordance with GAAP applied on consistent basis through all periods,
and shall set aside on such books for each fiscal year all such
reserves for depreciation, obsolescence, amortization, bad debts and
other purposes in connection with its operations as are required by
such principles so applied.
G. Transactions with Affiliates.
So long as the Debenture is outstanding, neither the Company nor any of
its Subsidiaries shall, directly or indirectly, enter into any material
transaction or agreement with any stockholder, officer, director or
Affiliate of the Company or family member of any officer, director or
Affiliate of the Company, unless the transaction or agreement is (i)
reviewed and approved by a majority of Disinterested Directors (as such
term is hereinafter defined) and (ii) on terms no less favorable to the
Company or the applicable Subsidiary than those obtainable from a
nonaffiliated person. A "Disinterested Director" shall mean a director
of the Company who is not and has not been an officer or employee of
the Company and who is not a member of the family of, controlled by or
under common control with, any such officer or employee.
H. Certain Restrictions.
So long as the Debenture is outstanding, no dividends shall be declared
or paid or set apart for payment nor shall any other distribution be
declared or made upon any capital stock of the Company, nor shall any
capital stock of the Company be redeemed, purchased or otherwise
acquired (other than a redemption, purchase or other acquisition of
shares of Common Stock made for purposes of an employee incentive or
benefit plan (including a stock option plan) of the Company or pursuant
to any of the security agreements listed on Schedule III.A, for any
consideration by the Company, directly or indirectly, nor shall any
moneys be paid to or made available for a sinking fund for the
redemption of any Common Stock of any such stock.
7
I. Short Selling.
So long as the Debenture is outstanding, Buyer agrees and covenants on
its behalf and on behalf of its affiliates that neither Buyer nor its
affiliates shall at any time engage in any short sales with respect to
the Company's Common Stock, or sell put options or similar instruments
with respect to the Company's Common Stock.
V. ISSUANCE OF COMMON STOCK
A. The Company undertakes and agrees that no instruction other than the
instructions referred to in this Article V and customary stop transfer
instructions prior to the registration and sale of the Common Stock
pursuant to an effective Securities Act registration statement shall be
given to its transfer agent for the Conversion Shares and the Warrant
Shares and that the Conversion Shares and the Warrant Shares shall
otherwise be freely transferable on the books and records of the
Company as and to the extent provided in this Agreement, the
Registration Rights Agreement and applicable law. Nothing contained in
this Section V.A. shall affect in any way Buyer's obligations and
agreement to comply with all applicable securities laws upon resale of
such Common Stock.
B. Buyer shall have the right to convert the Debenture and exercise the
Warrant by telecopying an executed and completed Conversion Notice (as
such term is defined in the Debenture) or Warrant Notice of Exercise
(as such term is defined in the Warrant) to the Company. Each date on
which a Conversion Notice or Warrant Notice of Exercise is telecopied
to and received by the Company in accordance with the provisions hereof
shall be deemed a Conversion Date (as such term is defined in the
Debenture). The Company shall cause the transfer agent to transmit the
certificates evidencing the Common Stock issuable upon conversion of
the Debenture (together with a new debenture, if any, representing the
principal amount of the Debenture not being so converted) or exercise
of the Warrant (together with a new Warrant, if any, representing the
amount of the Warrant not being so exercised) to Buyer via express
courier, or if a Registration Statement covering the Common Stock has
been declared effective by the SEC by electronic transfer, within three
(3) business days after receipt by the Company of the Conversion Notice
or Warrant Notice of Exercise (the "Delivery Date").
C. Upon the conversion of the Debenture or exercise of the Warrant or
part thereof, the Company shall, at its own cost and expense, take all
necessary action (including the issuance of an opinion of counsel) to
assure that the Company's transfer agent shall issue stock certificates
in the name of Buyer (or its nominee) or such other persons as
designated by Buyer and in such denominations to be specified at
conversion representing the number of shares of common stock issuable
upon such conversion or exercise. The Company warrants that the
Conversion Shares and Warrant Shares will be unlegended, free-trading,
and freely transferable, and will not contain a legend restricting the
resale or transferability of the Company Common Stock provided the
Conversion Shares and Warrant Shares are being sold pursuant to an
effective registration statement covering the Common Stock to be sold
or is otherwise exempt from registration when sold.
D. The Company understands that a delay in the delivery of the Common
Stock in the form required pursuant to this section, or the Mandatory
Redemption Amount described in Section E hereof, beyond the Delivery
Date or Mandatory Redemption Payment Date (as hereinafter defined)
could result in economic loss to the Buyer. As compensation to the
8
Buyer for such loss, the Company agrees to pay late payments to the
Buyer for late issuance of Common Stock in the form required pursuant
to Section C hereof upon Conversion of the Debenture or late payment of
the Mandatory Redemption Amount, in the amount of $100 per business day
after the Delivery Date or Mandatory Redemption Payment Date, as the
case may be, for each $10,000 of Debenture principal amount being
converted or redeemed. The Company shall pay any payments incurred
under this Section in immediately available funds upon demand.
Furthermore, in addition to any other remedies which may be available
to the Buyer, in the event that the Company fails for any reason to
effect delivery of the Common Stock by the Delivery Date or make
payment by the Mandatory Redemption Payment Date, the Buyer will be
entitled to revoke all or part of the relevant Notice of Conversion or
rescind all or part of the notice of Mandatory Redemption by delivery
of a notice to such effect to the Company whereupon the Company and the
Buyer shall each be restored to their respective positions immediately
prior to the delivery of such notice, except that late payment charges
described above shall be payable through the date notice of revocation
or rescission is given to the Company.
E. Mandatory Redemption.
In the event the Company is prohibited from issuing Common Stock, or
fails to timely deliver Common Stock on a Delivery Date, or upon the
occurrence of an Event of Default (as defined in the Debenture) or for
any reason other than pursuant to the limitations set forth herein, or
upon the occurrence of an Event of Default as defined in the Debenture,
then at the Buyer's election, the Company must pay to the Buyer ten
(10) business days after request by the Buyer or on the Delivery Date
(if requested by the Buyer) a sum of money determined by multiplying up
to the outstanding principal amount of the Debenture designated by the
Buyer by 130%, together with accrued but unpaid interest thereon
("Mandatory Redemption Payment"). The Mandatory Redemption Payment must
be received by the Buyer on the same date as the Company Common Stock
otherwise deliverable or within ten (10) business days after request,
whichever is sooner ("Mandatory Redemption Payment Date"). Upon receipt
of the Mandatory Redemption Payment, the corresponding Debenture
principal and interest will be deemed paid and no longer outstanding.
F. Buy-In.
In addition to any other rights available to the Buyer, if the Company
fails to deliver to the Buyer such Common Stock issuable upon
conversion of a Debenture or exercise of a Warrant by the Delivery Date
and if ten (10) days after the Delivery Date the Buyer purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by the Buyer of the Common Stock which the
Buyer anticipated receiving upon such conversion (a "Buy-In"), then the
Company shall pay in cash to the Buyer (in addition to any remedies
available to or elected by the Buyer) the amount by which (A) the
Buyer's total purchase price (including brokerage commissions, if any)
for the shares of Common Stock so purchased exceeds (B) the aggregate
principal and/or interest amount of the Debenture or Warrant for which
such conversion or exercise was not timely honored, together with
interest thereon at a rate of 15% per annum, accruing until such amount
and any accrued interest thereon is paid in full (which amount shall be
paid as liquidated damages and not as a penalty). For example, if the
Buyer purchases shares of Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion of
$10,000 of Debenture or Warrant principal and/or interest, the Company
shall be required to pay the Buyer $1,000, plus interest. The Buyer
shall provide the Company written notice indicating the amounts payable
to the Buyer in respect of the Buy-In.
9
G. The Securities shall be delivered by the Company to the Buyer
pursuant to Section I.B. hereof on a "delivery-against-payment basis"
at the Closing.
VI. CLOSING DATE
The Closing shall occur by the delivery: (i) to the Buyer of the
certificate evidencing the Debenture and all other Agreements, and (ii)
to the Company the Purchase Price.
VII. CONDITIONS TO THE COMPANY'S OBLIGATIONS
Buyer understands that the Company's obligation to sell the Debenture
on the Closing Date to Buyer pursuant to this Agreement is conditioned
upon: A. Delivery by Buyer to the Company of the Initial Purchase
Price; B. The accuracy on the Closing Date of the representations and
warranties of Buyer contained in this Agreement as if made on the
Closing Date (except for representations and warranties which, by their
express terms, speak as of and relate to a specified date, in which
case such accuracy shall be measured as of such specified date) and the
performance by Buyer in all material respects on or before the Closing
Date of all covenants and agreements of Buyer required to be performed
by it pursuant to this Agreement on or before the Closing Date; and C.
There shall not be in effect any Law or order, ruling, judgment or writ
of any court or public or governmental authority restraining, enjoining
or otherwise prohibiting any of the transactions contemplated by this
Agreement.
VIII. CONDITIONS TO BUYER'S OBLIGATIONS
The Company understands that Buyer's obligation to purchase the
Securities on the Closing Date pursuant to this Agreement is
conditioned upon: A. Delivery by the Company of the Debenture, the
Conversion Warrant and the other Agreements (I/N/O Buyer or I/N/O
Buyer's nominee); B. The accuracy on the Closing Date of the
representations and warranties of the Company contained in this
Agreement as if made on the Closing Date (except for representations
and warranties which, by their express terms, speak as of and relate to
a specified date, in which case such accuracy shall be measured as of
such specified date) and the performance by the Company in all respects
on or before the Closing Date of all covenants and agreements of the
Company required to be performed by it pursuant to this Agreement on or
before the Closing Date, all of which shall be confirmed to Buyer by
delivery of the certificate of the chief executive officer of the
Company to that effect;
C. There not having occurred (i) any general suspension of trading in,
or limitation on prices listed for, the Common Stock on the OTCBB/Pink
Sheet, (ii) the declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States, (iii) the
commencement of a war, armed hostilities or other international or
national calamity directly or indirectly involving the United States or
any of its territories, protectorates or possessions or (iv) in the
case of the foregoing existing at the date of this Agreement, a
material acceleration or worsening thereof;
D. There not having occurred any event or development, and there being
in existence no condition, having or which reasonably and foreseeably
could have a Material Adverse Effect;
E. The Company shall have delivered to Buyer reimbursement of Buyer's
reasonable out-of-pocket costs and expenses incurred in connection with
the transactions contemplated by this Agreement;
10
F. There shall not be in effect any Law, order, ruling, judgment or
writ of any court or public or governmental authority restraining,
enjoining or otherwise prohibiting any of the transactions contemplated
by this Agreement;
G. The Company shall have obtained all consents, approvals or waivers
from governmental authorities and third persons necessary for the
execution, delivery and performance of the Documents and the
transactions contemplated thereby, all without material cost to the
Company;
H. Buyer shall have received such additional documents, certificates,
payment, assignments, transfers and other deliveries as it or its legal
counsel may reasonably request and as are customary to effect a closing
of the matters herein contemplated;
I. Delivery by the Company of an enforceability opinion from its
outside counsel in form and substance satisfactory to Buyer
J. Reimbursement of Buyer's legal fees in the amount of $5,000.
IX. SURVIVAL; INDEMNIFICATION
A. The representations, warranties and covenants made by each of the
Company and Buyer in this Agreement, the annexes, schedules and
exhibits hereto and in each instrument, agreement and certificate
entered into and delivered by them pursuant to this Agreement shall
survive the Closing and the consummation of the transactions
contemplated hereby. In the event of a breach or violation of any of
such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all
rights and remedies for such breach or violation available to it under
the provisions of this Agreement or otherwise, whether at law or in
equity, irrespective of any investigation made by or on behalf of such
party on or prior to the Closing Date.
B. The Company hereby agrees to indemnify and hold harmless Buyer, its
affiliates and their respective officers, directors, partners and
members (collectively, the "Buyer Indemnitees") from and against any
and all losses, claims, damages, judgments, penalties, liabilities and
deficiencies (collectively, "Losses") and agrees to reimburse Buyer
Indemnitees for all out-of-pocket expenses (including the fees and
expenses of legal counsel), in each case promptly as incurred by Buyer
Indemnitees and to the extent arising out of or in connection with: 1.
any misrepresentation, omission of fact or breach of any of the
Company's representations or warranties contained in this Agreement or
the other Documents, or the annexes, schedules or exhibits hereto or
thereto or any instrument, agreement or certificate entered into or
delivered by the Company pursuant to this Agreement or the other
Documents; 2. any failure by the Company to perform any of its
covenants, agreements, undertakings or obligations set forth in this
Agreement or the other Documents or any instrument, certificate or
agreement entered into or delivered by the Company pursuant to this
Agreement or the other Documents; 3. the purchase of the Debenture, the
conversion of the Debenture, the payment of interest on the Debenture,
the issuance of the Warrant Shares, the consummation of the
transactions contemplated by this Agreement and the other Documents,
the use of any of the proceeds of the Purchase Price by the Company,
the purchase or ownership of any or all of the Securities, the
performance by the parties hereto of their respective obligations
11
hereunder and under the Documents or any claim, litigation,
investigation, proceedings or governmental action relating to any of
the foregoing, whether or not Buyer is a party thereto; or 4. resales
of the Common Stock by Buyer in the manner and as contemplated by this
Agreement and the Registration Rights Agreement.
C. Buyer hereby agrees to indemnify and hold harmless the Company, its
Affiliates and their respective officers, directors, partners and
members (collectively, the "Company Indemnitees") from and against any
and all Losses, and agrees to reimburse the Company Indemnitees for all
out-of-pocket expenses (including the fees and expenses of legal
counsel), in each case promptly as incurred by the Company Indemnitees
and to the extent arising out of or in connection with: 1. any
misrepresentation, omission of fact or breach of any of Buyer's
representations or warranties contained in this Agreement or the other
Documents, or the annexes, schedules or exhibits hereto or thereto or
any instrument, agreement or certificate entered into or delivered by
Buyer pursuant to this Agreement or the other Documents; or 2. any
failure by Buyer to perform in any material respect any of its
covenants, agreements, undertakings or obligations set forth in this
Agreement or the other Documents or any instrument, certificate or
agreement entered into or delivered by Buyer pursuant to this Agreement
or the other Documents.
D. Promptly after receipt by either party hereto seeking
indemnification pursuant to this Article IX (an "Indemnified Party") of
written notice of any investigation, claim, proceeding or other action
in respect of which indemnification is being sought (each, a "Claim"),
the Indemnified Party promptly shall notify the party against whom
indemnification pursuant to this Article IX is being sought (the
"Indemnifying Party") of the commencement thereof, but the omission so
to notify the Indemnifying Party shall not relieve it from any
liability that it otherwise may have to the Indemnified Party except to
the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights or defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and
the Indemnified Party are parties, the Indemnifying Party shall be
entitled to assume the defense thereof. Notwithstanding the assumption
of the defense of any Claim by the Indemnifying Party, the Indemnified
Party shall have the right to employ separate legal counsel and to
participate in the defense of such Claim, and the Indemnifying Party
shall bear the reasonable fees, out-of-pocket costs and expenses of
such separate legal counsel to the Indemnified Party if (and only if):
(x) the Indemnifying Party shall have agreed to pay such fees,
out-of-pocket costs and expenses, (y) the Indemnified Party and the
Indemnifying Party reasonably shall have concluded that representation
of the Indemnified Party and the Indemnifying Party by the same legal
counsel would not be appropriate due to actual or, as reasonably
determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense
of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those
available to the Indemnifying Party or (z) the Indemnifying Party shall
have failed to employ legal counsel reasonably satisfactory to the
Indemnified Party within a reasonable period of time after notice of
the commencement of such Claim. If the Indemnified Party employs
separate legal counsel in circumstances other than as described in
clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party.
Except as provided above, the Indemnifying Party shall not, in
connection with any Claim in the same jurisdiction, be liable for the
fees and expenses of more than one firm of legal counsel for the
Indemnified Party (together with appropriate local counsel). The
12
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party (which consent shall not unreasonably be withheld),
settle or compromise any Claim or consent to the entry of any judgment
that does not include an unconditional release of the Indemnified Party
from all liabilities with respect to such Claim or judgment.
E. In the event one party hereunder should have a claim for
indemnification that does not involve a claim or demand being asserted
by a third party, the Indemnified Party promptly shall deliver notice
of such claim to the Indemnifying Party. If the Indemnified Party
disputes the claim, such dispute shall be resolved by mutual agreement
of the Indemnified Party and the Indemnifying Party or by binding
arbitration conducted in accordance with the procedures and rules of
the American Arbitration Association. Judgment upon any award rendered
by any arbitrators may be entered in any court having competent
jurisdiction thereof.
X. GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of California, without regard to the conflicts of
law principles of such state.
XI. SUBMISSION TO JURISDICTION
Each of the parties hereto consents to the exclusive jurisdiction of
the federal courts whose districts encompass any part of the City of
San Diego or the state courts of the State of California sitting in the
City of San Diego in connection with any dispute arising under this
Agreement and the other Documents. Each party hereto hereby irrevocably
and unconditionally waives, to the fullest extent it may effectively do
so, any defense of an inconvenient forum or improper venue to the
maintenance of such action or proceeding in any such court and any
right of jurisdiction on account of its place of residence or domicile.
Each party hereto irrevocably and unconditionally consents to the
service of any and all process in any such action or proceeding in such
courts by the mailing of copies of such process by registered or
certified mail (return receipt requested), postage prepaid, at its
address specified in Article XVII. Each party hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in
any other manner provided by law.
XII. WAIVER OF JURY TRIAL TO THE FULLEST EXTENT PERMITTED BY LAW, EACH OF
THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER
DOCUMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF
THIS AGREEMENT AND OTHER DOCUMENTS. EACH PARTY HERETO (i) CERTIFIES
THAT NEITHER OF THEIR RESPECTIVE REPRESENTATIVES, AGENTS OR ATTORNEYS
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.
XIII. COUNTERPARTS; EXECUTION
This Agreement may be executed in counterparts, each of which when so
executed and delivered shall be an original, but both of which
counterparts shall together constitute one and the same instrument. A
facsimile transmission of this signed Agreement shall be legal and
binding on both parties hereto.
13
XIV. HEADINGS
The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this
Agreement.
XV. SEVERABILITY
In the event any one or more of the provisions contained in this
Agreement or in the other Documents should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability
of the remaining provisions contained herein or therein shall not in
any way be affected or impaired thereby. The parties shall endeavor in
good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions, the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
XVI. ENTIRE AGREEMENT; REMEDIES, AMENDMENTS AND WAIVERS
This Agreement and the Documents constitute the entire agreement
between the parties hereto pertaining to the subject matter hereof and
supersede all prior agreements, understandings, negotiations and
discussions, whether oral or written, of such parties. No supplement,
modification or waiver of this Agreement shall be binding unless
executed in writing by both parties. No waiver of any of the provisions
of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
XVII. NOTICES
Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally, or sent by telecopier
machine or by a nationally recognized overnight courier service, and
shall be deemed given when so delivered personally, or by telecopier
machine or overnight courier service as follows:
A. if to the Company, to:
Quintek Technologies, Inc.
00000 Xxxxx Xxxxxx
Xxxxxxxxxx Xxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
B. if to Buyer, to:
Golden Gate Investors, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
The Company or Buyer may change the foregoing address by notice given
pursuant to this Article XVII.
14
XVIII. CONFIDENTIALITY
Each of the Company and Buyer agrees to keep confidential and not to
disclose to or use for the benefit of any third party the terms of this
Agreement or any other information which at any time is communicated by
the other party as being confidential without the prior written
approval of the other party; provide, however, that this provision
shall not apply to information which, at the time of disclosure, is
already part of the public domain (except by breach of this Agreement)
and information which is required to be disclosed by law (including,
without limitation, pursuant to Item 601(b)(10) of Regulation S-K under
the Securities Act and the Exchange Act).
XIX. ASSIGNMENT
This Agreement shall not be assignable by either of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement
to be executed and delivered on the date first above written.
Quintek Technologies, Inc. Golden Gate Investors, Inc.
By: /s/ Xxxxxx Xxxxxx By: /s/ Xxxxxx Xxxx
-------------------------------- --------------------------------
Title: Chief Executive Officer Title: Portfolio Manager
SCHEDULE III.L.
REGISTRATION RIGHTS
Name
15
Exhibit 10.22a
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND IS
BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THIS SECURITY MAY NOT BE SOLD
OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS.
5 3/4 % CONVERTIBLE DEBENTURE
Company: Quintek Technologies, Inc.
Company Address:
Closing Date: August 2, 2004
Maturity Date: August 2, 2006
Principal Amount: $300,000
First Payment Due Date: September 15, 2004
Quintek Technologies, Inc., a California corporation, and any successor or
resulting corporation by way of merger, consolidation, sale or exchange of all
or substantially all of the assets or otherwise (the "Company"), for value
received, hereby promises to pay to the Holder (as such term is hereinafter
defined), or such other Person (as such term is hereinafter defined) upon order
of the Holder, on the Maturity Date, the Principal Amount (as such term is
hereinafter defined), as such sum may be adjusted pursuant to Article 3, and to
pay interest thereon from the Closing Date, monthly in arrears, on the 15th day
of each month (each an "Interest Payment Due Date" and collectively, the
"Interest Payment Due Dates"), commencing on the First Payment Due Date, at the
rate of five and three-quarter percent (5 3/4%) per annum (the "Debenture
Interest Rate"), until the Principal Amount of this Debenture has been paid in
full. All interest payable on the Principal Amount of this Debenture shall be
calculated on the basis of a 360-day year for the actual number of days elapsed.
Payment of interest on this Debenture shall be in cash or, at the option of the
Holder, in shares of Common Stock of the Company valued at the then applicable
Conversion Price (as defined herein). This Debenture may not be prepaid without
the written consent of the Holder, except as specifically set forth herein.
ARTICLE 1
DEFINITIONS
SECTION 1.1 Definitions.
The terms defined in this Article whenever used in this Debenture have the
following respective meanings:
(i) "Affiliate" has the meaning ascribed to such term in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended.
(ii) "Bankruptcy Code" means the United States Bankruptcy Code of 1986, as
amended (11 U.S.C. xx.xx. 101 et. seq.).
(iii) "Business Day" means a day other than Saturday, Sunday or any day on which
banks located in the State of California are authorized or obligated to close.
(iv) "Capital Shares" means the Common Stock and any other shares of any other
class or series of capital stock, whether now or hereafter authorized and
however designated, which have the right to participate in the distribution of
earnings and assets (upon dissolution, liquidation or winding-up) of the
Company.
16
(v) "Common Shares" or "Common Stock" means shares of the Company's Common
Stock.
(vi) "Common Stock Issued at Conversion", when used with reference to the
securities deliverable upon conversion of this Debenture, means all Common
Shares now or hereafter Outstanding and securities of any other class or series
into which this Debenture hereafter shall have been changed or substituted,
whether now or hereafter created and however designated.
(vii) "Conversion" or "conversion" means the repayment by the Company of the
Principal Amount of this Debenture (and, to the extent the Holder elects as
permitted by Section 3.1, accrued and unpaid interest thereon) by the delivery
of Common Stock on the terms provided in Section 3.2, and "convert,"
"converted," "convertible" and like words shall have a corresponding meaning.
(viii) "Conversion Date" means any day on which all or any portion of the
Principal Amount of this Debenture is converted in accordance with the
provisions hereof.
(ix) "Conversion Notice" means a written notice of conversion substantially in
the form annexed hereto as Exhibit A.
(x) "Conversion Price" on any date of determination means the applicable price
for the conversion of this Debenture into Common Shares on such day as set forth
in Section 3.1(a).
(xi) "Current Market Price" on any date of determination means the closing price
of a Common Share on such day as reported on the NASDAQ OTCBB Exchange; provided
that, if such security is not listed or admitted to trading on the NASDAQ OTCBB,
as reported on the principal national security exchange or quotation system on
which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange or
quotation system, the closing bid price of such security on the over-the-counter
market on the day in question as reported by Bloomberg LP or a similar generally
accepted reporting service, as the case may be.
(xii) "Deadline" means the date that is the 120th day from the Closing Date.
(xiii) "Debenture" or "Debentures" means this Convertible Debenture of the
Company or such other convertible debenture(s) exchanged therefor as provided in
Section 2.1.
(xiv) "Discount Multiplier" has the meaning set forth in Section 3.1(a).
(xv) "Event of Default" has the meaning set forth in Section 6.1.
(xvi) "Holder" means Golden Gate Investors, Inc., any successor thereto, or any
Person to whom this Debenture is subsequently transferred in accordance with the
provisions hereof.
(xvii) "Interest Payment Due Date" has the meaning set forth in the opening
paragraph of this Debenture.
(xviii) "Market Disruption Event" means any event that results in a material
suspension or limitation of trading of the Common Shares.
(xix) "Market Price" per Common Share means the lowest price of the Common
Shares during any Trading Day as reported on the NASDAQ OTCBB; provided that, if
such security is not listed or admitted to trading on the NASDAQ OTCBB, as
reported on the principal national security exchange or quotation system on
which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange or
quotation system, the lowest price of the Common Shares during any Trading Day
on the over-the-counter market as reported by Bloomberg LP or a similar
generally accepted reporting service, as the case may be.
17
(xx) "Maximum Rate" has the meaning set forth in Section 6.4.
(xxi) "Outstanding" when used with reference to Common Shares or Capital Shares
(collectively, "Shares") means, on any date of determination, all issued and
outstanding Shares, and includes all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares; provided, however, that any such Shares directly or indirectly owned or
held by or for the account of the Company or any Subsidiary of the Company shall
not be deemed "Outstanding" for purposes hereof.
(xxii) "Person" means an individual, a corporation, a partnership, an
association, a limited liability company, an unincorporated business
organization, a trust or other entity or organization, and any government or
political subdivision or any agency or instrumentality thereof.
(xxiii) "Principal Amount" means, for any date of calculation, the principal sum
set forth in the first paragraph of this Debenture (but only such principal
amount as to which the Holder has (a) actually advanced pursuant to the
Securities Purchase Agreement, and (b) not theretofore furnished a Conversion
Notice in compliance with Section 3.2).
(xxiv) "Registration Rights Agreement" means that certain Registration Rights
Agreement of even date herewith by and between the Company and Holder, as the
same may be amended from time to time.
(xxv) "SEC" means the United States Securities and Exchange Commission.
(xxvi) "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder, all as in effect at the time.
(xxvii) "Securities Purchase Agreement" means that certain Securities Purchase
Agreement of even date herewith by and among the Company and Holder, as the same
may be amended from time to time.
(xxviii) "Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are owned directly or
indirectly by the Company.
(xxix) "Trading Day" means any day on which (i) purchases and sales of
securities on the principal national security exchange or quotation system on
which the Common Shares are traded are reported thereon, or, if not quoted or
listed or admitted to trading on any national securities exchange or quotation
system, as reported by Bloomberg LP or a similar generally accepted reporting
service, as the case may be, (ii) at least one bid for the trading of Common
Shares is reported and (iii) no Market Disruption Event occurs.
All references to "cash" or "$" herein means currency of the United States of
America.
ARTICLE 2
EXCHANGES, TRANSFER AND REPAYMENT
SECTION 2.1 Registration of Transfer of Debentures.
This Debenture, when presented for registration of transfer, shall (if so
required by the Company) be duly endorsed, or be accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company duly
executed, by the Holder duly authorized in writing.
18
SECTION 2.2 Loss, Theft, Destruction of Debenture.
Upon receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of this Debenture and, in the case of any such loss,
theft or destruction, upon receipt of indemnity or security reasonably
satisfactory to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Debenture, the Company shall make, issue and
deliver, in lieu of such lost, stolen, destroyed or mutilated Debenture, a new
Debenture of like tenor and unpaid Principal Amount dated as of the date hereof
(which shall accrue interest from the most recent Interest Payment Due Date on
which an interest payment was made in full). This Debenture shall be held and
owned upon the express condition that the provisions of this Section 2.2 are
exclusive with respect to the replacement of a mutilated, destroyed, lost or
stolen Debenture and shall preclude any and all other rights and remedies
notwithstanding any law or statute existing or hereafter enacted to the contrary
with respect to the replacement of negotiable instruments or other securities
without the surrender thereof.
SECTION 2.3 Who Deemed Absolute Owner.
The Company may deem the Person in whose name this Debenture shall be registered
upon the registry books of the Company to be, and may treat it as, the absolute
owner of this Debenture (whether or not this Debenture shall be overdue) for the
purpose of receiving payment of or on account of the Principal Amount of this
Debenture, for the conversion of this Debenture and for all other purposes, and
the Company shall not be affected by any notice to the contrary. All such
payments and such conversions shall be valid and effectual to satisfy and
discharge the liability upon this Debenture to the extent of the sum or sums so
paid or the conversion or conversions so made.
SECTION 2.4 Repayment at Maturity.
At the Maturity Date, the Company shall repay the outstanding
Principal Amount of this Debenture in whole in cash, together with all accrued
and unpaid interest thereon, in cash, to the Maturity Date.
SECTION 2.5 Optional Redemption.
For a period of 3 months following the Closing Date, the Company may redeem this
Debenture in whole in cash for 150% of the outstanding Principal Amount plus
accrued and unpaid interest.
ARTICLE 3
CONVERSION OF DEBENTURE
SECTION 3.1 Conversion; Conversion Price; Valuation Event.
(a) At the option of the Holder, this Debenture may be converted,
either in whole or in part, up to the full Principal Amount hereof (in
increments of $1,000 in Principal Amount) into Common Shares
(calculated as to each such conversion to the nearest 1/100th of a
share), at any time and from time to time on any Business Day, subject
to compliance with Section 3.2. The Warrant must be exercised
concurrently with the conversion of this Debenture in an amount equal
to ten times the dollar amount of the Debenture conversion. The number
of Common Shares into which this Debenture may be converted is equal to
the dollar amount of the Debenture being converted multiplied by
eleven, minus the product of the Conversion Price multiplied by ten
times the dollar amount of the Debenture being converted, and the
entire foregoing result shall be divided by the Conversion Price. In
addition, the Company shall pay to the Holder on the Conversion Date,
19
in cash, any accrued and unpaid interest on the Debenture being
converted not included at the option of the Holder in clause (i) of the
immediately preceding sentence. The "Conversion Price" shall be equal
to the lesser of (i) $0.50, or (ii) 80% of the average of the 5 lowest
Volume Weighted Average Prices during the 20 Trading Days prior to
Holder's election to convert, or (iii) 80% of the Volume Weighted
Average Price on the Trading Day prior to Holder's election to convert
(the percentage figure being a "Discount Multiplier"); provided, that
in the event the Registration Statement has not been declared effective
by the SEC by the Deadline then the applicable Discount Multiplier
shall decrease by three percentage points for each month or partial
month occurring after the Deadline that the Registration Statement is
not effective or, if the Registration Statement has theretofore been
declared effective but is not thereafter effective, then the applicable
Discount Multiplier shall decrease by three percentage points for each
week or partial week occurring after the Deadline that the Registration
Statement is not effective. Beginning in the first full calendar month
after the Registration Statement is declared effective, Holder shall
convert at least 5%, but no more than 15% (such 15% maximum amount to
be cumulative from the Deadline), of the face value of the Debenture
per calendar month into Common Shares of the Company, provided that the
Common Shares are available, registered and freely tradable. Holder
must exercise the Warrant concurrently with such conversions, in an
amount equal to ten times the dollar amount of the Debenture being
converted. If Holder converts more than 5% of the face value of the
Debenture in any calendar month, the excess over 5% shall be credited
against the next month's minimum conversion amount. The 15% monthly
maximum amount shall not be applicable if the Current Market Price of
the Common Stock at anytime during the applicable month is higher than
the Current Market Price of the Common Stock on the Closing Date. In
the event Holder does not convert at least 5% of the Debenture in any
particular calendar month, Holder shall not be entitled to collect
interest on the Debenture for that month if the Company gives Holder
written notice, at least 5 business days prior to the end of the month,
of Holder's failure to convert the minimum required amount for that
month. If the Holder elects to convert a portion of the Debenture and,
on the day that the election is made, the Volume Weighted Average Price
is below $0.10, the Company shall have the right to prepay that portion
of the Debenture that Holder elected to convert, plus any accrued and
unpaid interest, at 125% of such amount. In the event that the Company
elects to prepay that portion of the Debenture, Holder shall have the
right to withdraw its Conversion Notice. If, at anytime during the
month, the Volume Weighted Average Price is below $0.10, Holder shall
not be obligated to convert any portion of the Debenture during that
month. In any calendar month, the Holder shall only have the right to
submit conversions for no more than 5% of the face value of the
Debenture on any day that the Volume Weighted Average Price is below
$0.10. At the Company's option, Holder shall not be allowed to submit
Debenture conversions or Warrant exercises for a period of 10 days from
the date of receipt of written notice from the Company to the Holder to
that effect. The Company shall only be allowed to exercise this option
a maximum of 3 times during the term of the Debenture and a maximum of
2 times in any 30 day period. Holder shall not be required to convert
any minimum amount of the Debenture, nor exercise any minimum amount of
Warrants, in any month that the Company exercises this option.
(b) Notwithstanding the provisions of Section 3.1(a), in the event the
Company's Registration Statement has not been declared effective by the
Deadline or, if the Registration Statement has theretofore been
declared effective but is not thereafter effective, the following will
also apply in addition to any damages incurred by the Holder as a
result thereof:
20
(i) The Holder may demand repayment of one hundred and fifty
percent (150%) of the Principal Amount of the Debenture,
together with all accrued and unpaid interest thereon, in
cash, at any time prior to the Company's Registration
Statement being declared effective by the SEC or during the
period that the Company's Registration Statement is not
effective, such repayment to be made within three (3) business
days of such demand. In the event that the Debenture is so
accelerated, in addition to the repayment of one hundred and
fifty percent (150%) of the Principal Amount together with
accrued interest as aforesaid, the Company shall immediately
issue and pay, as the case may be, to the Holder 50,000 Shares
of Common Stock and $15,000 for each thirty (30) day period,
or portion thereof, during which the Principal Amount,
including interest thereon, remains unpaid, with the monthly
payment amount to increase to $20,000 for each thirty (30) day
period, or portion thereof, after the first ninety (90) day
period;
(ii) If the Holder does not elect to accelerate the Debenture,
the Company shall immediately issue or pay, as the case may
be, to Holder 50,000 Shares of Common Stock and $15,000 for
each thirty (30) day period, or portion thereof, that the
Registration Statement is not effective, with the monthly
payment amount to increase to $20,000 for each thirty (30) day
period, or portion thereof, after the first ninety (90) day
period. (iii) If the SEC indicates that the Company's
Registration Statement will be declared effective upon request
by the Company, and the Company does not, within 3 business
days of the SEC indication, request that the Registration
Statement become effective, the amounts set forth in
subsections (ii) and (iii) above shall double.
SECTION 3.2 Exercise of Conversion Privilege.
(a) Conversion of this Debenture may be exercised on any Business Day
by the Holder by telecopying an executed and completed Conversion
Notice to the Company. In addition, Holder shall e-mail the Conversion
Notice to xxxxx@xxxxxxx.xxx and xxxxxxx@xxxxxxx.xxx. Each date on which
a Conversion Notice is telecopied to the Company in accordance with the
provisions of this Section 3.2 shall constitute a Conversion Date. The
Company shall convert this Debenture and issue the Common Stock Issued
at Conversion in the manner provided below in this Section 3.2, and all
voting and other rights associated with the beneficial ownership of the
Common Stock Issued at Conversion shall vest with the Holder, effective
as of the Conversion Date at the time specified in the Conversion
Notice. The Conversion Notice also shall state the name or names (with
addresses) of the persons who are to become the holders of the Common
Stock Issued at Conversion in connection with such conversion. As
promptly as practicable after the receipt of the Conversion Notice as
aforesaid, but in any event not more than three (3) Business Days after
the Company's receipt of such Conversion Notice, the Company shall (i)
issue the Common Stock Issued at Conversion in accordance with the
provisions of this Article 3 and (ii) cause to be mailed for delivery
by overnight courier, or if a Registration Statement covering the
Common Stock has been declared effective by the SEC cause to be
electronically transferred, to Holder (x) a certificate or
certificate(s) representing the number of Common Shares to which the
Holder is entitled by virtue of such conversion, (y) cash, as provided
in Section 3.3, in respect of any fraction of a Common Share
deliverable upon such conversion and (z) cash or shares of Common
21
Stock, as applicable, representing the amount of accrued and unpaid
interest on this Debenture as of the Conversion Date. Such conversion
shall be deemed to have been effected at the time at which the
Conversion Notice indicates, and at such time the rights of the Holder
of this Debenture, as such (except if and to the extent that any
Principal Amount thereof remains unconverted), shall cease and the
Person and Persons in whose name or names the Common Stock Issued at
Conversion shall be issuable shall be deemed to have become the holder
or holders of record of the Common Shares represented thereby, and all
voting and other rights associated with the beneficial ownership of
such Common Shares shall at such time vest with such Person or Persons.
The Conversion Notice shall constitute a contract between the Holder
and the Company, whereby the Holder shall be deemed to subscribe for
the number of Common Shares which it will be entitled to receive upon
such conversion and, in payment and satisfaction of such subscription
(and for any cash adjustment to which it is entitled pursuant to
Section 3.4), to surrender this Debenture and to release the Company
from all liability thereon (except if and to the extent that any
Principal Amount thereof remains unconverted). No cash payment
aggregating less than $1.00 shall be required to be given unless
specifically requested by the Holder.
(b) If, at any time after the date of this Debenture, (i) the Company
challenges, disputes or denies the right of the Holder hereof to effect
the conversion of this Debenture into Common Shares or otherwise
dishonors or rejects any Conversion Notice delivered in accordance with
this Section 3.2 or (ii) any third party who is not and has never been
an Affiliate of the Holder commences any lawsuit or legal proceeding or
otherwise asserts any claim before any court or public or governmental
authority which seeks to challenge, deny, enjoin, limit, modify, delay
or dispute the right of the Holder hereof to effect the conversion of
this Debenture into Common Shares, then the Holder shall have the
right, but not the obligation, by written notice to the Company, to
require the Company to promptly redeem this Debenture for cash at one
hundred and fifty (150%) of the Principal Amount thereof, together with
all accrued and unpaid interest thereon to the date of redemption.
Under any of the circumstances set forth above, the Company shall be
responsible for the payment of all costs and expenses of the Holder,
including reasonable legal fees and expenses, as and when incurred in
defending itself in any such action or pursuing its rights hereunder
(in addition to any other rights of the Holder).
(c) The Holder shall be entitled to exercise its conversion privilege
notwithstanding the commencement of any case under the Bankruptcy Code.
In the event the Company is a debtor under the Bankruptcy Code, the
Company hereby waives to the fullest extent permitted any rights to
relief it may have under 11 U.S.C. ss. 362 in respect of the Holder's
conversion privilege. The Company hereby waives to the fullest extent
permitted any rights to relief it may have under 11 U.S.C. ss. 362 in
respect of the conversion of this Debenture. The Company agrees,
without cost or expense to the Holder, to take or consent to any and
all action necessary to effectuate relief under 11 U.S.C. ss. 362.
SECTION 3.3 Fractional Shares. No fractional Common Shares or scrip
representing fractional Common Shares shall be delivered upon
conversion of this Debenture. Instead of any fractional Common Shares
which otherwise would be delivered upon conversion of this Debenture,
the Company shall pay a cash adjustment in respect of such fraction in
an amount equal to the same fraction multiplied by the Current Market
Price on the Conversion Date. No cash payment of less than $1.00 shall
be required to be given unless specifically requested by the Holder.
22
SECTION 3.4 Adjustments.
The Conversion Price and the number of shares deliverable upon conversion of
this Debenture are subject to adjustment from time to time as follows:
(i) Reclassification, Etc. In case the Company shall reorganize its
capital, reclassify its capital stock, consolidate or merge with or
into another Person (where the Company is not the survivor or where
there is a change in or distribution with respect to the Common Stock
of the Company), sell, convey, transfer or otherwise dispose of all or
substantially all its property, assets or business to another Person,
or effectuate a transaction or series of related transactions in which
more than fifty percent (50%) of the voting power of the Company is
disposed of (each, a "Fundamental Corporate Change") and, pursuant to
the terms of such Fundamental Corporate Change, shares of common stock
of the successor or acquiring corporation, or any cash, shares of stock
or other securities or property of any nature whatsoever (including
warrants or other subscription or purchase rights) in addition to or in
lieu of common stock of the successor or acquiring corporation ("Other
Property") are to be received by or distributed to the holders of
Common Stock of the Company, then the Holder of this Debenture shall
have the right thereafter, at its sole option, to (x) require the
Company to prepay this Debenture for cash at one hundred and
twenty-five percent (125%) of the Principal Amount thereof, together
with all accrued and unpaid interest thereon to the date of prepayment,
(y) receive the number of shares of common stock of the successor or
acquiring corporation or of the Company, if it is the surviving
corporation, and Other Property as is receivable upon or as a result of
such Fundamental Corporate Change by a holder of the number of shares
of Common Stock into which the outstanding portion of this Debenture
may be converted at the Conversion Price applicable immediately prior
to such Fundamental Corporate Change or (z) require the Company, or
such successor, resulting or purchasing corporation, as the case may
be, to, without benefit of any additional consideration therefor,
execute and deliver to the Holder a debenture with substantial
identical rights, privileges, powers, restrictions and other terms as
this Debenture in an amount equal to the amount outstanding under this
Debenture immediately prior to such Fundamental Corporate Change. For
purposes hereof, "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which
is not preferred as to dividends or assets over any other class of
stock of such corporation and which is not subject to prepayment and
shall also include any evidences of indebtedness, shares of stock or
other securities which are convertible into or exchangeable for any
such stock, either immediately or upon the arrival of a specified date
or the happening of a specified event and any warrants or other rights
to subscribe for or purchase any such stock. The foregoing provisions
shall similarly apply to successive Fundamental Corporate Changes.
SECTION 3.5 Certain Conversion Limits.
Notwithstanding anything herein to the contrary, if and to the extent that, on
any date, the holding by the Holder of this Debenture would result in the
Holder's being deemed the beneficial owner of more than 9.99% of the then
Outstanding shares of Common Stock, then the Holder shall not have the right,
and the Company shall not have the obligation, to convert any portion of this
23
Debenture as shall cause such Holder to be deemed the beneficial owner of more
than 9.99% of the then Outstanding shares of Common Stock. If any court of
competent jurisdiction shall determine that the foregoing limitation is
ineffective to prevent a Holder from being deemed the beneficial owner of more
than 9.99% of the then Outstanding shares of Common Stock, then the Company
shall prepay such portion of this Debenture as shall cause such Holder not to be
deemed the beneficial owner of more than 9.99% of the then Outstanding shares of
Common Stock. Upon such determination by a court of competent jurisdiction, the
Holder shall have no interest in or rights under such portion of the Debenture.
Any and all interest paid on or prior to the date of such determination shall be
deemed interest paid on the remaining portion of this Debenture held by the
Holder. Such prepayment shall be for cash at a prepayment price of one hundred
and twenty-five percent (125%) of the Principal Amount thereof, together with
all accrued and unpaid interest thereon to the date of prepayment.
SECTION 3.6 Surrender of Debentures.
Upon any redemption of this Debenture pursuant to Sections 3.2, 3.5 or 6.2, or
upon maturity pursuant to Section 2.4, the Holder shall either deliver this
Debenture by hand to the Company at its principal executive offices or surrender
the same to the Company at such address by nationally recognized overnight
courier. Payment of the redemption price or the amount due on maturity specified
in Section 2.4, shall be made by the Company to the Holder against receipt of
this Debenture (as provided in this Section 3.5) by wire transfer of immediately
available funds to such account(s) as the Holder shall specify by written notice
to the Company. If payment of such redemption price is not made in full by the
redemption date, or the amount due on maturity is not paid in full by the
Maturity Date, the Holder shall again have the right to convert this Debenture
as provided in Article 3 hereof or to declare an Event of Default.
ARTICLE 4
STATUS; RESTRICTIONS ON TRANSFER
SECTION 4.1 Status of Debenture.
This Debenture constitutes a legal, valid and binding obligation of the Company,
enforceable in accordance with its terms subject, as to enforceability, to
general principles of equity and to principles of bankruptcy, insolvency,
reorganization and other similar laws of general applicability relating to or
affecting creditors' rights and remedies generally.
SECTION 4.2 Restrictions on Transfer.
This Debenture, and any Common Shares deliverable upon the conversion hereof,
have not been registered under the Securities Act. The Holder by accepting this
Debenture agrees that this Debenture and the shares of Common Stock to be
acquired as interest on and upon conversion of this Debenture may not be
assigned or otherwise transferred unless and until (i) the Company has received
the opinion of counsel for the Holder that this Debenture or such shares may be
sold pursuant to an exemption from registration under the Securities Act or (ii)
a registration statement relating to this Debenture or such shares has been
filed by the Company and declared effective by the SEC. Each certificate for
shares of Common Stock deliverable hereunder shall bear a legend as follows
unless and until such securities have been sold pursuant to an effective
registration statement under the Securities Act:
24
"The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"). The securities
may not be offered for sale, sold or otherwise transferred except (i) pursuant
to an effective registration statement under the Securities Act or (ii) pursuant
to an exemption from registration under the Securities Act in respect of which
the issuer of this certificate has received an opinion of counsel satisfactory
to the issuer of this certificate to such effect. Copies of the agreement
covering both the purchase of the securities and restrictions on their transfer
may be obtained at no cost by written request made by the holder of record of
this certificate to the Secretary of the issuer of this certificate at the
principal executive offices of the issuer of this certificate."
ARTICLE 5
COVENANTS
SECTION 5.1 Conversion.
The Company shall cause the transfer agent, not later than three (3) Business
Days after the Company's receipt of a Conversion Notice, to issue and deliver to
the Holder the requisite shares of Common Stock Issued at Conversion. Such
delivery shall be by electronic transfer if a Registration Statement covering
the Common Stock has been declared effective by the SEC.
SECTION 5.2 Notice of Default.
If any one or more events occur which constitute or which, with notice, lapse of
time, or both, would constitute an Event of Default, the Company shall forthwith
give notice to the Holder, specifying the nature and status of the Event of
Default or such other event(s), as the case may be.
SECTION 5.3 Payment of Obligations.
So long as this Debenture shall be outstanding, the Company shall pay, extend,
or discharge at or before maturity, all its respective material obligations and
liabilities, including, without limitation, tax liabilities, except where the
same may be contested in good faith by appropriate proceedings.
SECTION 5.4 Compliance with Laws.
So long as this Debenture shall be outstanding, the Company shall comply with
all applicable laws, ordinances, rules, regulations and requirements of
governmental authorities, except for such noncompliance which would not have a
material adverse effect on the business, properties, prospects, condition
(financial or otherwise) or results of operations of the Company and the
Subsidiaries.
SECTION 5.5 Inspection of Property, Books and Records.
So long as this Debenture shall be outstanding, the Company shall keep proper
books of record and account in which full, true and correct entries shall be
made of all material dealings and transactions in relation to its business and
activities and shall permit representatives of the Holder at the Holder's
expense to visit and inspect any of its respective properties, to examine and
make abstracts from any of its respective books and records, not reasonably
deemed confidential by the Company, and to discuss its respective affairs,
finances and accounts with its respective officers and independent public
accountants, all at such reasonable times and as often as may reasonably be
desired.
25
ARTICLE 6
EVENTS OF DEFAULT; REMEDIES
SECTION 6.1 Events of Default.
"Event of Default" wherever used herein means any one of the following events:
(i) the Company shall default in the payment of principal of or
interest on this Debenture as and when the same shall be due and
payable and, in the case of an interest payment default, such default
shall continue for five (5) Business Days after the date such interest
payment was due, or the Company shall fail to perform or observe any
other covenant, agreement, term, provision, undertaking or commitment
under this Debenture, the Conversion Warrants (as defined in the
Securities Purchase Agreement), the Securities Purchase Agreement or
the Registration Rights Agreement and such default shall continue for a
period of ten (10) Business Days after the delivery to the Company of
written notice that the Company is in default hereunder or thereunder;
(ii) any of the representations or warranties made by the Company
herein, in the Securities Purchase Agreement, the Registration Rights
Agreement or in any certificate or financial or other written
statements heretofore or hereafter furnished by or on behalf of the
Company in connection with the execution and delivery of this
Debenture, the Warrants, the Securities Purchase Agreement or the
Registration Rights Agreement shall be false or misleading in a
material respect on the Closing Date;
(iii) under the laws of any jurisdiction not otherwise covered by
clauses (iv) and (v) below, the Company or any Subsidiary (A) becomes
insolvent or generally not able to pay its debts as they become due,
(B) admits in writing its inability to pay its debts generally or makes
a general assignment for the benefit of creditors, (C) institutes or
has instituted against it any proceeding seeking (x) to adjudicate it a
bankrupt or insolvent, (y) liquidation, winding-up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its
debts under any law relating to bankruptcy, insolvency, reorganization
or relief of debtors including any plan of compromise or arrangement or
other corporate proceeding involving or affecting its creditors or (z)
the entry of an order for relief or the appointment of a receiver,
trustee or other similar person for it or for any substantial part of
its properties and assets, and in the case of any such official
proceeding instituted against it (but not instituted by it), either the
proceeding remains undismissed or unstayed for a period of sixty (60)
calendar days, or any of the actions sought in such proceeding
(including the entry of an order for relief against it or the
appointment of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its properties and assets) occurs
or (D) takes any corporate action to authorize any of the above
actions;
(iv) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company or any Subsidiary a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect
of the Company under the Bankruptcy Code or any other applicable
Federal or state law, or appointing a receiver, liquidator, assignee,
trustee or sequestrator (or other similar official) of the Company or
of any substantial part of its property, or ordering the winding-up or
liquidation of its affairs, and any such decree or order continues and
is unstayed and in effect for a period of sixty (60) calendar days;
26
(v) the institution by the Company or any Subsidiary of proceedings to
be adjudicated a bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under the Bankruptcy Code or any other applicable federal or
state law, or the consent by it to the filing of any such petition or
to the appointment of a receiver, liquidator, assignee, trustee or
sequestrator (or other similar official) of the Company or of any
substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as and when they become due, or
the taking of corporate action by the Company in furtherance of any
such action;
(vi) a final judgment or final judgments for the payment of money shall
have been entered by any court or courts of competent jurisdiction
against the Company and remains undischarged for a period (during which
execution shall be effectively stayed) of thirty (30) days, provided
that the aggregate amount of all such judgments at any time outstanding
(to the extent not paid or to be paid, as evidenced by a written
communication to that effect from the applicable insurer, by insurance)
exceeds One Hundred Thousand Dollars ($100,000);
(vii) it becomes unlawful for the Company to perform or comply with its
obligations under this Debenture, the Conversion Warrant, the
Securities Purchase Agreement or the Registration Rights Agreement in
any respect;
(viii) the Common Shares shall be delisted from the NASDAQ OTCBB (the
"Trading Market" or, to the extent the Company becomes eligible to list
its Common Stock on any other national security exchange or quotation
system, upon official notice of listing on any such exchange or system,
as the case may be, it shall be the "Trading Market") or suspended from
trading on the Trading Market, and shall not be reinstated, relisted or
such suspension lifted, as the case may be, within ten (10) days or;
(ix) the Company shall default (giving effect to any applicable grace
period) in the payment of principal or interest as and when the same
shall become due and payable, under any indebtedness, individually or
in the aggregate, of more than One Hundred Thousand Dollars ($100,000);
SECTION 6.2 Acceleration of Maturity; Rescission and Annulment.
If an Event of Default occurs and is continuing, then and in every such case the
Holder may, by a notice in writing to the Company, rescind any outstanding
Conversion Notice and declare that all amounts owing or otherwise outstanding
under this Debenture are immediately due and payable and upon any such
declaration this Debenture shall become immediately due and payable in cash at a
price of one hundred and fifty percent (150%) of the Principal Amount thereof,
together with all accrued and unpaid interest thereon to the date of payment;
provided, however, in the case of any Event of Default described in clauses
(iii), (iv), (v) or (vii) of Section 6.1, such amount automatically shall become
immediately due and payable without the necessity of any notice or declaration
as aforesaid.
SECTION 6.3 Late Payment Penalty.
If any portion of the principal of or interest on this Debenture shall not be
paid within ten (10) days of when it is due, the Discount Multiplier under this
Debenture, and under all warrants granted by the Company to the Holder, shall
decrease by one percentage point (1%) for all conversions of this Debenture and
warrant exercises thereafter.
27
SECTION 6.4 Maximum Interest Rate.
Notwithstanding anything herein to the contrary, if at any time the applicable
interest rate as provided for herein shall exceed the maximum lawful rate which
may be contracted for, charged, taken or received by the Holder in accordance
with any applicable law (the "Maximum Rate"), the rate of interest applicable to
this Debenture shall be limited to the Maximum Rate. To the greatest extent
permitted under applicable law, the Company hereby waives and agrees not to
allege or claim that any provisions of this Note could give rise to or result in
any actual or potential violation of any applicable usury laws.
SECTION 6.5 Remedies Not Waived.
No course of dealing between the Company and the Holder or any delay in
exercising any rights hereunder shall operate as a waiver by the Holder.
SECTION 6.6 Remedies.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Holder, by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Debenture will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Debenture, that the Holder shall be entitled
to all other available remedies at law or in equity, and in addition to the
penalties assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Debenture and to enforce specifically
the terms and provisions thereof, without the necessity of showing economic loss
and without any bond or other security being required.
SECTION 6.7 Payment of Certain Amounts.
Whenever pursuant to this Debenture the Company is required to pay an amount in
excess of the Principal Amount plus accrued and unpaid interest, the Company and
the Holder agree that the actual damages to the Holder from the receipt of cash
payment on this Debenture may be difficult to determine and the amount to be so
paid by the Company represents stipulated damages and not a penalty and is
intended to compensate the Holder in part for loss of the opportunity to convert
this Debenture and to earn a return from the sale of shares of Common Stock
acquired upon conversion of this Debenture at a price in excess of that price
paid for such shares pursuant to this Debenture. The Company and the Holder
hereby agree that such amount of stipulated damages is not disproportionate to
the possible loss to the Holder from the receipt of a cash payment without the
opportunity to convert this Debenture into shares of Common Stock.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1 Notice of Certain Events.
In the case of the occurrence of any event described in Section 3.4 of this
Debenture, the Company shall cause to be mailed to the Holder of this Debenture
at its last address as it appears in the Company's security registry, at least
twenty (20) days prior to the applicable record, effective or expiration date
hereinafter specified (or, if such twenty (20) days' notice is not possible, at
the earliest possible date prior to any such record, effective or expiration
date), a notice thereof, including, if applicable, a statement of (y) the date
on which a record is to be taken for the purpose of such dividend, distribution,
issuance or granting of rights, options or warrants, or if a record is not to be
taken, the date as of which the holders of record of Common Stock to be entitled
28
to such dividend, distribution, issuance or granting of rights, options or
warrants are to be determined or (z) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding-up is
expected to become effective, and the date as of which it is expected that
holders of record of Common Stock will be entitled to exchange their shares for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale transfer, dissolution, liquidation or winding-up.
SECTION 7.2 Register.
The Company shall keep at its principal office a register in which the Company
shall provide for the registration of this Debenture. Upon any transfer of this
Debenture in accordance with Articles 2 and 4 hereof, the Company shall register
such transfer on the Debenture register.
SECTION 7.3 Withholding.
To the extent required by applicable law, the Company may withhold amounts for
or on account of any taxes imposed or levied by or on behalf of any taxing
authority in the United States having jurisdiction over the Company from any
payments made pursuant to this Debenture.
SECTION 7.4 Transmittal of Notices.
Except as may be otherwise provided herein, any notice or other communication or
delivery required or permitted hereunder shall be in writing and shall be
delivered personally, or sent by telecopier machine or by a nationally
recognized overnight courier service, and shall be deemed given when so
delivered personally, or by telecopier machine or overnight courier service as
follows:
(1) if to the Company, to:
Quintek Technologies, Inc.
00000 Xxxxx Xxxxxx
Xxxxxxxxxx Xxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
(2) if to the Holder, to:
Golden Gate Investors, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Each of the Holder or the Company may change the foregoing address by notice
given pursuant to this Section 7.4.
SECTION 7.5 Attorneys' Fees.
Should any party hereto employ an attorney for the purpose of enforcing or
construing this Debenture, or any judgment based on this Debenture, in any legal
proceeding whatsoever, including insolvency, bankruptcy, arbitration,
declaratory relief or other litigation, the prevailing party shall be entitled
to receive from the other party or parties thereto reimbursement for all
reasonable attorneys' fees and all reasonable costs, including but not limited
to service of process, filing fees, court and court reporter costs,
investigative costs, expert witness fees, and the cost of any bonds, whether
29
taxable or not, and that such reimbursement shall be included in any judgment or
final order issued in that proceeding. The "prevailing party" means the party
determined by the court to most nearly prevail and not necessarily the one in
whose favor a judgment is rendered.
SECTION 7.6 Governing Law.
This Debenture shall be governed by, and construed in accordance with, the laws
of the State of California (without giving effect to conflicts of laws
principles). With respect to any suit, action or proceedings relating to this
Debenture, the Company irrevocably submits to the exclusive jurisdiction of the
courts of the State of California sitting in San Diego and the United States
District Court located in the City of San Diego and hereby waives, to the
fullest extent permitted by applicable law, any claim that any such suit, action
or proceeding has been brought in an inconvenient forum. Subject to applicable
law, the Company agrees that final judgment against it in any legal action or
proceeding arising out of or relating to this Debenture shall be conclusive and
may be enforced in any other jurisdiction within or outside the United States by
suit on the judgment, a certified copy of which judgment shall be conclusive
evidence thereof and the amount of its indebtedness, or by such other means
provided by law.
SECTION 7.7 Waiver of Jury Trial.
To the fullest extent permitted by law, each of the parties hereto hereby
knowingly, voluntarily and intentionally waives its respective rights to a jury
trial of any claim or cause of action based upon or arising out of this
Debenture or any other document or any dealings between them relating to the
subject matter of this Debenture and other documents. Each party hereto (i)
certifies that neither of their respective representatives, agents or attorneys
has represented, expressly or otherwise, that such party would not, in the event
of litigation, seek to enforce the foregoing waivers and (ii) acknowledges that
it has been induced to enter into this Debenture by, among other things, the
mutual waivers and certifications herein.
SECTION 7.8 Headings. The headings of the Articles and Sections of this
Debenture are inserted for convenience only and do not constitute a part of this
Debenture.
SECTION 7.9 Payment Dates.
Whenever any payment hereunder shall be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day.
SECTION 7.10 Binding Effect.
Each Holder by accepting this Debenture agrees to be bound by and comply with
the terms and provisions of this Debenture.
SECTION 7.11 No Stockholder Rights.
Except as otherwise provided herein, this Debenture shall not entitle the Holder
to any of the rights of a stockholder of the Company, including, without
limitation, the right to vote, to receive dividends and other distributions, or
to receive any notice of, or to attend, meetings of stockholders or any other
proceedings of the Company, unless and to the extent converted into shares of
Common Stock in accordance with the terms hereof.
SECTION 7.12 Facsimile Execution.
Facsimile execution shall be deemed originals.
IN WITNESS WHEREOF, the Company has caused this Debenture to be signed by its
duly authorized officer on the date of this Debenture.
Quintek Technologies, Inc.
By: /s/ Xxxxxx Xxxxxx
---------------------------------
Title: Chief Executive Officer
30
EXHIBIT A
DEBENTURE CONVERSION NOTICE
TO: Quintek Technologies, Inc.
The undersigned owner of this Convertible Debenture due August 2, 2006 (the
"Debenture") issued by Quintek Technologies, Inc. (the "Company") hereby
irrevocably exercises its option to convert $__________ Principal Amount of the
Debenture into shares of Common Stock in accordance with the terms of the
Debenture. The undersigned hereby instructs the Company to convert the portion
of the Debenture specified above into shares of Common Stock Issued at
Conversion in accordance with the provisions of Article 3 of the Debenture. The
undersigned directs that the Common Stock and certificates therefor deliverable
upon conversion, the Debenture reissued in the Principal Amount not being
surrendered for conversion hereby, [the check or shares of Common Stock in
payment of the accrued and unpaid interest thereon to the date of this Notice,]
together with any check in payment for fractional Common Stock, be registered in
the name of and/or delivered to the undersigned unless a different name has been
indicated below. All capitalized terms used and not defined herein have the
respective meanings assigned to them in the Debenture. The conversion pursuant
hereto shall be deemed to have been effected at the date and time specified
below, and at such time the rights of the undersigned as a Holder of the
Principal Amount of the Debenture set forth above shall cease and the Person or
Persons in whose name or names the Common Stock Issued at Conversion shall be
registered shall be deemed to have become the holder or holders of record of the
Common Shares represented thereby and all voting and other rights associated
with the beneficial ownership of such Common Shares shall at such time vest with
such Person or Persons.
Date and time: _________________________
-----------------------------------------
By: _____________________________________
Title: __________________________________
Fill in for registration of Debenture:
Please print name and address
(including ZIP code number):
GOLDEN GATE INVESTORS, INC.
0000 XXXXX XXXXXX, 0xx XXXXX
XXX XXXXXXXXX, XXXXXXXXXX 00000
TELEPHONE: (000) 000-0000
FACSIMILE: (000) 000-0000
E-MAIL: XXXX@XXXXXXX.XXX
LA JOLLA xxx.XXXXxxxxxxxx.xxx
SAN FRANCISCO
31
Exhibit 10.22b
August 2, 2004
Mr. Xxxxxx Xxxxxx
Quintek Technologies, Inc.
00000 Xxxxx Xxxxxx
Xxxxxxxxxx Xxxxx, XX 00000
Re: Registration Statement Legal and Accounting Fees
Dear Xxxxxx:
This letter will set forth our agreement for the payment of the attorneys' and
accounting fees necessary for the filing of a registration statement by Quintek
Technologies, Inc. ("Quintek") to cover, among other things, the shares of
Quintek common stock necessary for the 5 3/4 % Convertible Debenture and the
warrants issued to Golden Gate Investors, Inc. ("GGI").
Under the Securities Purchase Agreement, GGI is to advance $225,000 to Quintek
upon closing. It is agreed that GGI will retain $50,000 of the initial advance
for the payment of legal and accounting fees for the filing of the Registration
Statement for the Conversion Shares and the Warrant Shares.
Quintek agrees that it is responsible for the payment of legal and accounting
fees, if any, over and above the $50,000 covered herein.
If this letter correctly reflects our agreement regarding the payment of
Quintek's attorneys' and accounting fees for the preparation and filing of the
Registration Statement, please acknowledge your agreement by signing below.
Sincerely,
/s/ Xxxxxx X. Xxxx
--------------------------
Xxxxxx X. Xxxx
Portfolio Manager
Quintek Technologies, Inc.
By: /s/ Xxxxxx Xxxxxx
--------------------------------------
Title: Chairman and CEO
GOLDEN GATE INVESTORS, INC.
0000 XXXXX XXXXXX, 0xx XXXXX
XXX XXXXXXXXX, XXXXXXXXXX 00000
TELEPHONE: (000) 000-0000
FACSIMILE: (000) 000-0000
E-MAIL: XXXX@XXXXXXX.XXX
LA JOLLA xxx.xxxxxxxxxxxx.xxx
SAN FRANCISCO
32
Exhibit 10.22c
August 2, 2004
Mr. Xxxxxx Xxxxxx
Quintek Technologies, Inc.
00000 Xxxxx Xxxxxx
Xxxxxxxxxx Xxxxx, XX 00000
Re: Warrant Prepayment
Dear Xxxxxx:
This letter will set forth our agreement for the prepayment toward future
Warrant exercises under the Warrant Agreement dated as of August 2, 2004 by and
between Quintek Technologies, Inc. ("Quintek") and Golden Gate Investors, Inc.
("GGI"). Capitalized terms used herein and not otherwise defined herein shall
have the definitions set forth in the Convertible Debenture dated August 2, 2004
issued by Quintek to GGI.
Once the Registration Statement is declared effective by the SEC and Quintek is
able to issue registered Common Stock to GGI, GGI will immediately submit a
$2,500 Debenture conversion and related $25,000 Warrant exercise. Within 2
business days of GGI's receipt of the registered Common Stock from such
Debenture conversion and Warrant exercise, GGI shall wire the sum of $275,000 to
Quintek, and within 30 days of GGI's receipt of the registered Common Stock from
such Debenture conversion and Warrant exercise, GGI shall wire the sum of
$200,000 to Quintek. Such funds shall represent a prepayment towards the future
exercise of Warrant Shares under the Warrant Agreement. The timing of the
application of the prepaid funds shall be at GGI's sole discretion. Quintek
shall not be able to prevent GGI from converting the Debenture and shall not be
able to prepay the Debenture, regardless of the price of the Stock, in
connection with the Debenture conversions associated with the Warrant
prepayments.
If this letter correctly reflects our agreement regarding the prepayment by GGI
to Quintek toward Warrant exercises, please acknowledge your agreement by
signing below.
Sincerely,
/s/ Xxxxxx X. Xxxx
----------------------------
Xxxxxx X. Xxxx
Portfolio Manager
Quintek Technologies, Inc.
By: /s/ Xxxxxx Xxxxxx
------------------------------------
Title: Chairman & CEO
33
Exhibit 10.22d
Initials Initials
----------- ----------
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement dated as of August 2, 2004 (this
"Agreement") by and between Quintek Technologies, Inc., a California
corporation, with principal executive offices located at 00000 Xxxxx Xxxxxx,
Xxxxxxxxxx Xxxxx, XX 00000 (the "Company"), and Golden Gate Investors, Inc. (the
"Initial Investor").
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement dated as of even date herewith, by and between the
Initial Investor and the Company (the "Securities Purchase Agreement"), the
Company has agreed to issue and sell to the Initial Investor a Convertible
Debenture (the "Debenture") of the Company in the aggregate principal amount of
$300,000 which, upon the terms of and subject to the conditions contained
therein, is convertible into shares of the Company's Common Stock (the "Common
Stock") ; and
WHEREAS, to induce the Initial Investor to execute and deliver
the Securities Purchase Agreement, the Company has agreed to provide with
respect to the Common Stock issued upon conversion of the Debenture and the
Warrant Shares certain registration rights under the Securities Act;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Definitions
(A) As used in this Agreement, the following terms shall have the
meanings:
(1) "Affiliate" of any specified Person means any other Person
who directly, or indirectly through one or more intermediaries, is in control
of, is controlled by, or is under common control with, such specified Person.
For purposes of this definition, control of a Person means the power, directly
or indirectly, to direct or cause the direction of the management and policies
of such Person whether by contract, securities ownership or otherwise; and the
terms "controlling" and "controlled" have the respective meanings correlative to
the foregoing.
(2) "Closing Date" means the date of this Agreement.
(3) "Commission" means the Securities and Exchange Commission.
(4) "Exchange Act" means the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission thereunder, or any
similar successor statute.
(5) "Investor" means each of the Initial Investor and any
transferee or assignee of Registrable Securities which agrees to become bound by
all of the terms and provisions of this Agreement in accordance with Section 8
hereof.
(6) "Person" means any individual, partnership, corporation,
limited liability company, joint stock company, association, trust,
unincorporated organization, or a government or agency or political subdivision
thereof.
34
(7) "Prospectus" means the prospectus (including, without
limitation, any preliminary prospectus and any final prospectus filed pursuant
to Rule 424(b) under the Securities Act, including any prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance on Rule 430A under the Securities Act)
included in the Registration Statement, as amended or supplemented by any
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Securities covered by the Registration Statement and by all
other amendments and supplements to such prospectus, including all material
incorporated by reference in such prospectus and all documents filed after the
date of such prospectus by the Company under the Exchange Act and incorporated
by reference therein.
(8) "Public Offering" means an offer registered with the
Commission and the appropriate state securities commissions by the Company of
its Common Stock and made pursuant to the Securities Act.
(9) "Registrable Securities" means the Common Stock issued or
issuable (i) upon conversion or redemption of the Debenture, (ii) exercise of
the Conversion Warrants (iii) pursuant to the terms and provisions of the
Debenture or the Securities Purchase Agreement, (iv) in connection with any
distribution, recapitalization, stock-split, stock adjustment or reorganization
of the Company; provided, however, a share of Common Stock shall cease to be a
Registrable Security for purposes of this Agreement when it no longer is a
Restricted Security.
(10) "Registration Statement" means a registration statement
of the Company filed on an appropriate form under the Securities Act providing
for the registration of, and the sale on a continuous or delayed basis by the
holders of, all of the Registrable Securities pursuant to Rule 415 under the
Securities Act, including the Prospectus contained therein and forming a part
thereof, any amendments to such registration statement and supplements to such
Prospectus, and all exhibits to and other material incorporated by reference in
such registration statement and Prospectus.
(11) "Restricted Security" means any share of Common Stock
issued upon conversion or redemption of the Debenture or Warrant except any such
share that (i) has been registered pursuant to an effective registration
statement under the Securities Act and sold in a manner contemplated by the
prospectus included in such registration statement, (ii) has been transferred in
compliance with the resale provisions of Rule 144 under the Securities Act (or
any successor provision thereto) or is transferable pursuant to paragraph (k) of
Rule 144 under the Securities Act (or any successor provision thereto) or (iii)
otherwise has been transferred and a new share of Common Stock not subject to
transfer restrictions under the Securities Act has been delivered by or on
behalf of the Company.
(12) "Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, or any
similar successor statute. (B) All capitalized terms used and not defined herein
have the respective meaning assigned to them in the Securities Purchase
Agreement or the Debenture.
35
2. Registration
(A) Filing and Effectiveness of Registration Statement. The Company
shall prepare and file with the Commission as soon as practicable a Registration
Statement relating to the offer and sale of the Registrable Securities and shall
use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable but in
no event later than the Deadline (as defined in the Debenture). The Company
shall promptly (and, in any event, no more than 24 hours after it receives
comments from the Commission), notify the Buyer when and if it receives any
comments from the Commission on the Registration Statement and promptly forward
a copy of such comments, if they are in writing, to the Buyer. At such time
after the filing of the Registration Statement pursuant to this Section 2(A) as
the Commission indicates, either orally or in writing, that it has no further
comments with respect to such Registration Statement or that it is willing to
entertain appropriate requests for acceleration of effectiveness of such
Registration Statement, the Company shall promptly, and in no event later than
two (2) business days after receipt of such indication from the Commission,
request that the effectiveness of such Registration Statement be accelerated
within forty-eight (48) hours of the Commission's receipt of such request. The
Company shall notify the Initial Investor by written notice that such
Registration Statement has been declared effective by the Commission within 24
hours of such declaration by the Commission.
(B) Eligibility for Use of Form S-3 or an SB-2. The Company agrees that
at such time as it meets all the requirements for the use of Securities Act
Registration Statement on Form S-3 or SB-2 and it shall file all reports and
information required to be filed by it with the Commission in a timely manner
and take all such other action so as to maintain such eligibility for the use of
such form.
(C) Additional Registration Statement. In the event the Current Market
Price declines to a price per share the result of which is that the Company
cannot satisfy its conversion obligations to Initial Investor hereunder, the
Company shall, to the extent required by the Securities Act (because the
additional shares were not covered by the Registration Statement filed pursuant
to Section 2(a)), as reasonably determined by the Initial Investor, file an
additional Registration Statement with the Commission for such additional number
of Registrable Securities as would be issuable upon conversion of the Debenture
(the "Additional Registrable Securities") in addition to those previously
registered. The Company shall, to the extent required by the Securities Act, as
reasonably determined by the Initial Investor, prepare and file with the
Commission not later than the 30th day thereafter, a Registration Statement
relating to the offer and sale of such Additional Registrable Securities and
shall use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable but not
later than the Deadline. The Company shall not include any other securities in
the Registration Statement relating to the offer and sale of such Additional
Registrable Securities.
(D) (i) If the Company proposes to register any of its warrants, Common
Stock or any other shares of common stock of the Company under the Securities
Act (other than a registration (A) on Form S-8 or S-4 or any successor or
similar forms, (B) relating to Common Stock or any other shares of common stock
of the Company issuable upon exercise of employee share options or in connection
with any employee benefit or similar plan of the Company or (C) in connection
with a direct or indirect acquisition by the Company of another Person or any
transaction with respect to which Rule 145 (or any successor provision) under
the Securities Act applies), whether or not for sale for its own account, it
will each such time, give prompt written notice at least 20 days prior to the
anticipated filing date of the registration statement relating to such
36
registration to each Investor, which notice shall set forth such Investor's
rights under this Section 2(D) and shall offer such Investor the opportunity to
include in such registration statement such number of Registrable Securities as
such Investor may request. Upon the written request of any Investor made within
10 days after the receipt of notice from the Company (which request shall
specify the number of Registrable Securities intended to be disposed of by such
Investor), the Company will use its best efforts to effect the registration
under the Securities Act of all Registrable Securities that the Company has been
so requested to register by each Investor, to the extent requisite to permit the
disposition of the Registrable Securities so to be registered; provided,
however, that (A) if such registration involves a Public Offering, each Investor
must sell its Registrable Securities to any underwriters selected by the Company
with the consent of such Investor on the same terms and conditions as apply to
the Company and (B) if, at any time after giving written notice of its intention
to register any Registrable Securities pursuant to this Section 2 and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register such
Registrable Securities, the Company shall give written notice to each Investor
and, thereupon, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration. The Company's obligations under
this Section 2(D) shall terminate on the date that the registration statement to
be filed in accordance with Section 2(A) is declared effective by the
Commission. (ii) If a registration pursuant to this Section 2(D) involves a
Public Offering and the managing underwriter thereof advises the Company that,
in its view, the number of shares of Common Stock that the Company and the
Investors intend to include in such registration exceeds the largest number of
shares of Common Stock that can be sold without having an adverse effect on such
Public Offering (the "Maximum Offering Size"), the Company will include in such
registration only such number of shares of Common Stock as does not exceed the
Maximum Offering Size, and the number of shares in the Maximum Offering Size
shall be allocated among the Company, the Investors and any other sellers of
Common Stock in such Public Offering ("Third-Party Sellers"), first, pro rata
among the Investors until all the shares of Common Stock originally proposed to
be offered for sale by the Investors have been allocated, and second, pro rata
among the Company and any Third-Party Sellers, in each case on the basis of the
relative number of shares of Common Stock originally proposed to be offered for
sale under such registration by each of the Investors, the Company and the
Third-Party Sellers, as the case may be. If as a result of the proration
provisions of this Section 2(D)(ii), any Investor is not entitled to include all
such Registrable Securities in such registration, such Investor may elect to
withdraw its request to include any Registrable Securities in such registration.
With respect to registrations pursuant to this Section 2(D), the number of
securities required to satisfy any underwriters' over-allotment option shall be
allocated among the Company, the Investors and any Third Party Seller pro rata
on the basis of the relative number of securities offered for sale under such
registration by each of the Investors, the Company and any such Third Party
Sellers before the exercise of such over-allotment option.
3. Obligations of the Company.
In connection with the registration of the Registrable Securities, the
Company shall: (A) Promptly (i) prepare and file with the Commission such
amendments (including post-effective amendments) to the Registration Statement
and supplements to the Prospectus as may be necessary to keep the Registration
Statement continuously effective and in compliance with the provisions of the
Securities Act applicable thereto so as to permit the Prospectus forming part
thereof to be current and useable by Investors for resales of the Registrable
Securities for a period of five (5) years from the date on which the
Registration Statement is first declared effective by the Commission (the
"Effective Time") or such shorter period that will terminate when all the
Registrable Securities covered by the Registration Statement have been sold
37
pursuant thereto in accordance with the plan of distribution provided in the
Prospectus, transferred pursuant to Rule 144 under the Securities Act or
otherwise transferred in a manner that results in the delivery of new securities
not subject to transfer restrictions under the Securities Act (the "Registration
Period") and (ii) take all lawful action such that each of (A) the Registration
Statement and any amendment thereto does not, when it becomes effective, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, not misleading
and (B) the Prospectus forming part of the Registration Statement, and any
amendment or supplement thereto, does not at any time during the Registration
Period include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(B) During the Registration Period, comply with the provisions of the
Securities Act with respect to the Registrable Securities of the Company covered
by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the Investors as set forth in the Prospectus forming part of the
Registration Statement;
(C) (i) Prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or delivery of
any Prospectus (including any supplements thereto), provide (A) draft copies
thereof to the Investors and reflect in such documents all such comments as the
Investors (and their counsel) reasonably may propose and (B) to the Investors a
copy of the accountant's consent letter to be included in the filing and (ii)
furnish to each Investor whose Registrable Securities are included in the
Registration Statement and its legal counsel identified to the Company, (A)
promptly after the same is prepared and publicly distributed, filed with the
Commission, or received by the Company, one copy of the Registration Statement,
each Prospectus, and each amendment or supplement thereto and (B) such number of
copies of the Prospectus and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(D) (i) Register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "blue sky" laws of such
jurisdictions as the Investors who hold a majority-in-interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in such jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period and (iv) take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(D), (B) subject itself to general taxation in any such jurisdiction or
(C) file a general consent to service of process in any such jurisdiction;
(E) As promptly as practicable after becoming aware of such event,
notify each Investor of the occurrence of any event, as a result of which the
Prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and
promptly prepare an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each Investor as such
Investor may reasonably request;
38
(F) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the Commission of any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time and take all lawful action
to effect the withdrawal, rescission or removal of such stop order or other
suspension;
(G) Cause all the Registrable Securities covered by the Registration
Statement to be listed on the principal national securities exchange, and
included in an inter-dealer quotation system of a registered national securities
association, on or in which securities of the same class or series issued by the
Company are then listed or included;
(H) Maintain a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
(I) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the registration statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts, as the case may be, as the Investors reasonably may
request and registered in such names as the Investor may request; and, within
three (3) business days after a registration statement which includes
Registrable Securities is declared effective by the Commission, deliver and
cause legal counsel selected by the Company to deliver to the transfer agent for
the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such registration statement) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
(J) Take all such other lawful actions reasonably necessary to expedite
and facilitate the disposition by the Investors of their Registrable Securities
in accordance with the intended methods therefor provided in the Prospectus
which are customary under the circumstances;
(K) Make generally available to its security holders as soon as
practicable, but in any event not later than three (3) months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with Section 11 (a) of
the Securities Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(L) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;
(M) (i) Make reasonably available for inspection by Investors, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by such
Investors or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and (ii) cause the Company's officers, directors and employees to
supply all information reasonably requested by such Investors or any such
underwriter, attorney, accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence examinations;
39
provided, however, that all records, information and documents that are
designated in writing by the Company, in good faith, as confidential,
proprietary or containing any material nonpublic information shall be kept
confidential by such Investors and any such underwriter, attorney, accountant or
agent (pursuant to an appropriate confidentiality agreement in the case of any
such holder or agent), unless such disclosure is made pursuant to judicial
process in a court proceeding (after first giving the Company an opportunity
promptly to seek a protective order or otherwise limit the scope of the
information sought to be disclosed) or is required by law, or such records,
information or documents become available to the public generally or through a
third party not in violation of an accompanying obligation of confidentiality;
and provided, further, that, if the foregoing inspection and information
gathering would otherwise disrupt the Company's conduct of its business, such
inspection and information gathering shall, to the maximum extent possible, be
coordinated on behalf of the Investors and the other parties entitled thereto by
one firm of counsel designated by and on behalf of the majority in interest of
Investors and other parties;
(N) In connection with any underwritten offering, make such
representations and warranties to the Investors participating in such
underwritten offering and to the managers, in form, substance and scope as are
customarily made by the Company to underwriters in secondary underwritten
offerings;
(O) In connection with any underwritten offering, obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managers) addressed to the
underwriters, covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings (it being agreed that the matters
to be covered by such opinions shall include, without limitation, as of the date
of the opinion and as of the Effective Time of the Registration Statement or
most recent post-effective amendment thereto, as the case may be, the absence
from the Registration Statement and the Prospectus, including any documents
incorporated by reference therein, of an untrue statement of a material fact or
the omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, subject to customary
limitations);
(P) In connection with any underwritten offering, obtain "cold comfort"
letters and updates thereof from the independent public accountants of the
Company (and, if necessary, from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company, in each
case for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each underwriter
participating in such underwritten offering (if such underwriter has provided
such letter, representations or documentation, if any, required for such cold
comfort letter to be so addressed), in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;
(Q) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the managers, if
any, and
(R) In the event that any broker-dealer registered under the Exchange
Act shall be an "Affiliate" (as defined in Rule 2729(b)(1) of the rules and
regulations of the National Association of Securities Dealers, Inc. (the "NASD
Rules") (or any successor provision thereto)) of the Company or has a "conflict
of interest" (as defined in Rule 2720(b)(7) of the NASD Rules (or any successor
provision thereto)) and such broker-dealer shall underwrite, participate as a
40
member of an underwriting syndicate or selling group or assist in the
distribution of any Registrable Securities covered by the Registration
Statement, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying
with the requirements of the NASD Rules, including, without limitation, by (A)
engaging a "qualified independent underwriter" (as defined in Rule 2720(b)(15)
of the NASD Rules (or any successor provision thereto)) to participate in the
preparation of the Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect thereof and
to recommend the public offering price of such Registrable Securities, (B)
indemnifying such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 6 hereof and (C) providing
such information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the NASD Rules.
4. Obligations of the Investors
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
(A) It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable Securities
held by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request;
(B) Each Investor by its acceptance of the Registrable Securities
agrees to cooperate with the Company in connection with the preparation and
filing of the Registration Statement hereunder, unless such Investor has
notified the Company in writing of its election to exclude all of its
Registrable Securities from the Registration Statement; and
(C) Each Investor agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in Section 3(E) or
3(F), it shall immediately discontinue its disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 3(E) and, if so directed by the Company, such
Investor shall deliver to the Company (at the expense of the Company) or destroy
(and deliver to the Company a certificate of destruction) all copies in such
Investor's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice.
5. Expenses of Registration
All expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Section 3, but including, without limitation, all registration, listing, and
qualifications fees, printing and engraving fees, accounting fees, and the fees
and disbursements of counsel for the Company, and the reasonable fees of one
firm of counsel to the holders of a majority in interest of the Registrable
Securities shall be borne by the Company.
41
6. Indemnification and Contribution
(A) Indemnification by the Company. The Company shall indemnify and
hold harmless each Investor and each underwriter, if any, which facilitates the
disposition of Registrable Securities, and each of their respective officers and
directors and each person who controls such Investor or underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
(each such person being sometimes hereinafter referred to as an "Indemnified
Person") from and against any losses, claims, damages or liabilities, joint or
several, to which such Indemnified Person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement of a material fact contained in any Registration Statement or
an omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, not misleading, or
arise out of or are based upon an untrue statement of a material fact contained
in any Prospectus or an omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
and the Company hereby agrees to reimburse such Indemnified Person for all
reasonable legal and other expenses incurred by them in connection with
investigating or defending any such action or claim as and when such expenses
are incurred; provided, however, that the Company shall not be liable to any
such Indemnified Person in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon (i) an untrue
statement or alleged untrue statement made in, or an omission or alleged
omission from, such Registration Statement or Prospectus in reliance upon and in
conformity with written information furnished to the Company by such Indemnified
Person expressly for use therein or (ii) in the case of the occurrence of an
event of the type specified in Section 3(E), the use by the Indemnified Person
of an outdated or defective Prospectus after the Company has provided to such
Indemnified Person an updated Prospectus correcting the untrue statement or
alleged untrue statement or omission or alleged omission giving rise to such
loss, claim, damage or liability.
(B) Notice of Claims, etc. Promptly after receipt by a party seeking
indemnification pursuant to this Section 6 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section 6 is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees, costs
and expenses, (y) the Indemnified Party and the Indemnifying Party shall
reasonably have concluded that representation of the Indemnified Party by the
Indemnifying Party by the same legal counsel would not be appropriate due to
actual or, as reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of the
defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those available to
42
the Indemnifying Party or (z) the Indemnifying Party shall have failed to employ
legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any Claim
in the same jurisdiction, be liable for the fees and expenses of more than one
firm of counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnified Party shall not, without the prior written consent of
the Indemnifying Party (which consent shall not unreasonably be withheld),
settle or compromise any Claim or consent to the entry of any judgment that does
not include an unconditional release of the Indemnifying Party from all
liabilities with respect to such Claim or judgment.
(C) Contribution. If the indemnification provided for in this Section 6
is unavailable to or insufficient to hold harmless an Indemnified Person under
subsection (A) above in respect of any losses, claims, damages or liabilities
(or actions in respect thereof) referred to therein, then each Indemnifying
Party shall contribute to the amount paid or payable by such Indemnified Party
as a result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and the Indemnified Party in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnifying Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6(D) were determined by
pro rata allocation (even if the Investors or any underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 6(D).
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such Indemnified Party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Investors and any underwriters in this
Section 6(D) to contribute shall be several in proportion to the percentage of
Registrable Securities registered or underwritten, as the case may be, by them
and not joint.
(D) Notwithstanding any other provision of this Section 6, in no event
shall any (i) Investor be required to undertake liability to any person under
this Section 6 for any amounts in excess of the dollar amount of the proceeds to
be received by such Investor from the sale of such Investor's Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) pursuant to any Registration Statement under which such Registrable
Securities are to be registered under the Securities Act and (ii) underwriter be
required to undertake liability to any Person hereunder for any amounts in
excess of the aggregate discount, commission or other compensation payable to
such underwriter with respect to the Registrable Securities underwritten by it
and distributed pursuant to the Registration Statement.
43
(E) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity. 7. Rule 144
With a view to making available to the Investors the benefits of Rule
144 under the Securities Act or any other similar rule or regulation of the
Commission that may at any time permit the Investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to
use its best efforts to:
(1) comply with the provisions of paragraph (c) (1) of Rule
144 and
(2) file with the Commission in a timely manner all reports
and other documents required to be filed by the Company pursuant to Section 13
or 15(d) under the Exchange Act; and, if at any time it is not required to file
such reports but in the past had been required to or did file such reports, it
will, upon the request of any Investor, make available other information as
required by, and so long as necessary to permit sales of, its Registrable
Securities pursuant to Rule 144.
8. Assignment
The rights to have the Company register Registrable Securities pursuant
to this Agreement shall be automatically assigned by the Investors to any
permitted transferee of all or any portion of such Registrable Securities (or
all or any portion of the Debenture or Warrant of the Company which is
convertible into such securities) only if
(a) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such
assignment,
(b) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (i) the name
and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or
assigned,
(c) immediately following such transfer or assignment, the
securities so transferred or assigned to the transferee or assignee
constitute Restricted Securities and
(d) at or before the time the Company received the written
notice contemplated by clause (b) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the
provisions contained herein.
9. Amendment and Waiver
Any provision of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold a majority-in-interest of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 9 shall be binding
upon each Investor and the Company.
44
10. Changes in Common Stock
If, and as often as, there are any changes in the Common Stock by way
of stock split, stock dividend, reverse split, combination or reclassification,
or through merger, consolidation, reorganization or recapitalization, or by any
other means, appropriate adjustment shall be made in the provisions hereof, as
may be required, so that the rights and privileges granted hereby shall continue
with respect to the Common Stock as so changed.
11. Miscellaneous
(A) A person or entity shall be deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(B) If, after the date hereof and prior to the Commission declaring the
Registration Statement to be filed pursuant to Section 2(a) effective under the
Securities Act, the Company grants to any Person any registration rights with
respect to any Company securities which are more favorable to such other Person
than those provided in this Agreement, then the Company forthwith shall grant
(by means of an amendment to this Agreement or otherwise) identical registration
rights to all Investors hereunder.
(C) Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally, or sent by telecopier machine or by a
nationally recognized overnight courier service, and shall be deemed given when
so delivered personally, or by telecopier machine or overnight courier service
as follows:
(1) if to the Company, to:
Quintek Technologies, Inc.
00000 Xxxxx Xxxxxx
Xxxxxxxxxx Xxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
(2) if to the Investor, to:
Golden Gate Investors, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
(3) if to any other Investor, at such address as
such Investor shall have provided in writing
to the Company.
The Company, the Initial Investor or any Investor may change the foregoing
address by notice given pursuant to this Section 11(C).
(D) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
45
(E) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of California. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of San Diego or the state courts of the State of California sitting in the
City of San Diego in connection with any dispute arising under this Agreement
and hereby waives, to the maximum extent permitted by law, any objection
including any objection based on forum non conveniens, to the bringing of any
such proceeding in such jurisdictions.
(F) Should any party hereto employ an attorney for the purpose of
enforcing or construing this Agreement, or any judgment based on this Agreement,
in any legal proceeding whatsoever, including insolvency, bankruptcy,
arbitration, declaratory relief or other litigation, the prevailing party shall
be entitled to receive from the other party or parties thereto reimbursement for
all reasonable attorneys' fees and all reasonable costs, including but not
limited to service of process, filing fees, court and court reporter costs,
investigative costs, expert witness fees, and the cost of any bonds, whether
taxable or not, and that such reimbursement shall be included in any judgment or
final order issued in that proceeding. The "prevailing party" means the party
determined by the court to most nearly prevail and not necessarily the one in
whose favor a judgment is rendered.
(G) The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(H) The Company shall not enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The Company is not currently a party to any agreement
granting any registration rights with respect to any of its securities to any
person which conflicts with the Company's obligations hereunder or gives any
other party the right to include any securities in any Registration Statement
filed pursuant hereto, except for such rights and conflicts as have been
irrevocably waived. Without limiting the generality of the foregoing, without
the written consent of the holders of a majority in interest of the Registrable
Securities, the Company shall not grant to any person the right to request it to
register any of its securities under the Securities Act unless the rights so
granted are subject in all respect to the prior rights of the holders of
Registrable Securities set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement. The restrictions on the
Company's rights to grant registration rights under this paragraph shall
terminate on the date the Registration Statement to be filed pursuant to Section
2(A) is declared effective by the Commission.
(I) This Agreement, the Securities Purchase Agreement, the Debenture
and the Conversion Warrants Agreement, of even date herewith among the Company
and the Initial Investor constitute the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. These Agreements supersede all prior agreements and undertakings among
the parties hereto with respect to the subject matter hereof.
46
(J) Subject to the requirements of Section 8 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(K) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(L) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(M) The Company acknowledges that any failure by the Company to perform
its obligations under Section 3, or any delay in such performance, could result
in direct damages to the Investors and the Company agrees that, in addition to
any other liability the Company may have by reason of any such failure or delay,
the Company shall be liable for all direct damages caused by such failure or
delay.
(N) This Agreement may be executed in counterparts, each of which shall
be deemed an original but both of which shall constitute one and the same
agreement. A facsimile transmission of this signed Agreement shall be legal and
binding on the parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement
to be executed and delivered on the date first above written.
Quintek Technologies, Inc.
By: /s/ Xxxxxx Xxxxxx
------------------------------
Name: Xxxxxx Xxxxxx
Title: President, CEO
Golden Gate Investors, Inc.
By: Xxxxxx Xxxx
------------------------------
Name: Xxxxxx Xxxx
Title: Portfolio Manager
47
