EXHIBIT 10.1
COMMON STOCK PURCHASE AGREEMENT
COMMON STOCK PURCHASE AGREEMENT, dated as of May 10, 2000 (this
"AGREEMENT"), by and among CHEQUEMATE INTERNATIONAL, INC., D/B/A C-3D DIGITAL,
INC., a Utah corporation (the "COMPANY"), and CROOKS HOLLOW ROAD, LLC, a
Cayman Islands Limited Liability Company ("PURCHASER").
RECITALS
A. Purchaser desires to purchase, and the Company desires to issue
and sell, shares ("SHARES") of the Company's Common Stock, par value $.0001
per share ("COMMON STOCK"), on the terms and conditions set forth below. For
purposes of this Agreement, the Shares shall mean the Initial Shares (as
defined below) and the Repriced Shares (as defined below).
B. The parties hereto intend that the issuance of the Shares as
anticipated by this Agreement shall be accomplished without registration under
the U.S. Securities Act of 1933, as amended (the "SECURITIES ACT"), and
without registration or qualification under the securities laws of any state
or other jurisdiction, in reliance on exemptions from the registration
requirements of the Securities Act, including, without limitation, Regulation
D under the Securities Act and Section 4(2) of the Securities Act; PROVIDED,
HOWEVER, that nothing in this Agreement shall act or be construed as a
limitation on Purchaser's right to sell any of the Shares to be acquired
pursuant to this Agreement pursuant to the Registration Statement (the
"REGISTRATION STATEMENT") contemplated by the Registration Rights Agreement
(as defined below), or other provisions of the Registration Rights Agreement
or in accordance with applicable laws.
THEREFORE, in consideration of the mutual promises and covenants set
forth below and for other good and valuable consideration, the receipt and
sufficiency of which the parties acknowledge by their signatures below, the
parties hereto hereby agree as follows:
AGREEMENT
1. PURCHASE OF COMMON STOCK. Subject to the terms and conditions
of this Agreement, the Company agrees to issue and sell, and Purchaser agrees
to acquire, six hundred seventy-one thousand four hundred sixty-three
(671,463) fully paid and non-assessable shares (the "INITIAL SHARES") at $4.17
per share, in exchange for Purchaser's payment to the Company of aggregate
consideration of Two Million Eight Hundred Thousand Dollars ($2,800,000) (the
"PURCHASE PRICE").
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1.1 FORM OF PAYMENT. Purchaser shall pay the Purchase Price
for the Initial Shares by delivering immediately available good funds in
United States Dollars to the escrow agent (the "ESCROW AGENT") identified in
the Joint Escrow Instructions attached hereto as EXHIBIT E (the "JOINT ESCROW
INSTRUCTIONS"). No later than the Closing Date (as defined below), the
Company shall deliver one or more certificates representing the Initial Shares
duly executed on behalf of the Company (collectively, each the "CERTIFICATES")
to the Escrow Agent. By signing this Agreement, each Purchaser and the
Company, and subject to acceptance by the Escrow Agent, each agrees to all of
the terms and conditions of, and becomes a party to, the Joint Escrow
Instructions, all of the provisions of which are incorporated herein by this
reference as if set forth in full.
1.2 METHOD OF PAYMENT. Purchasers shall pay into escrow the
Purchase Price for the Initial Shares by wire transfer of funds to:
Bank of New York
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
For credit to the account of Xxxxxxx & Xxxxxx, LLP
Account No.: 637-0000000
Purchaser shall deliver payment of the Purchase Price to the Escrow Agent at
or before 1:00 p.m., New York time, on the date which is one (1) Business Day
after the Company executes and delivers this Agreement and returns a signed
counterpart of this Agreement to the Escrow Agent by facsimile. Purchaser
shall deposit the Purchase Price for the Initial Shares with the Escrow Agent
in immediately available funds. Time is of the essence with respect to such
payment, and failure by Purchaser to make such payment shall allow the Company
to cancel this Agreement. For purposes of this Agreement, "BUSINESS DAY"
shall mean a day on which the New York Stock Exchange is open for business.
1.3 ESCROW PROPERTY. The Purchase Price and the Certificate
delivered to the Escrow Agent as contemplated by SECTION 1.1 hereof are
referred to as the "ESCROW PROPERTY."
2. CLOSING.
2.1 INITIAL CLOSING. On the date set forth pursuant to
Article 10 (the "Closing Date") Purchaser shall pay Two Million Eight Hundred
Thousand. On the Closing Date, the parties hereto shall execute and deliver
the following documents (incorporated herein by this reference, collectively
with this Agreement, the "TRANSACTION DOCUMENTS"): (i) the Registration Rights
Agreement (the "REGISTRATION RIGHTS AGREEMENT") in the form attached hereto as
EXHIBIT A; (ii) the Escrow Agreement in the form attached hereto as EXHIBIT B;
and (iii) the Warrant (the "WARRANT") in the form attached hereto as EXHIBIT
C. On the Closing Date (as defined below), the Escrow Agent shall deliver
(i) the Purchase Price to the Company and (ii) the Certificate to the
Purchaser.
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2.2 REPRICED SHARES. Definitions:
(a) As used herein, "CLOSING BID PRICE" shall mean the
closing bid price of the Common Stock as reported, at the option of Purchaser,
by Bloomberg, LP or the American Stock Exchange ("ASE").
(b) "EFFECTIVE DATE" shall mean date on which the
Securities and Exchange Commission (the "SEC") declares effective the
registration statement covering the Registrable Shares (as defined in the
Registration Rights Agreement).
(c) "INITIAL CLOSING PRICE" shall mean 80% of the
average Closing Bid Price for the ten (10) consecutive Business Days
immediately prior to the date of the Initial Closing (i.e. $4.17).
(d) "REPRICING PERIOD" shall mean each of the First
Repricing Period, the Second Repricing Period, and the Third Repricing Period,
each as defined below.
(e) "REPRICED SHARES" shall mean the First Repriced
Shares, the Second Repriced Shares, and the Third Repriced Shares, each as
defined below.
2.3 FIRST REPRICING PERIOD. The "FIRST REPRICING PERIOD"
shall commence on the earlier of (a) the day that is sixty (60) days after the
Closing Date or (b) the Effective Date, and end twenty (20) trading days after
such date. If the lowest average Closing Bid Price for any five (5) Business
Days (not necessarily consecutive) during the First Repricing Period (the
"FIRST REPRICING PRICE"), is not equal to or greater than 120% of the Initial
Closing Price, then one-third (1/3) of the Initial Shares shall be repriced
(the "FIRST REPRICED SHARES"). The Company shall issue to Purchaser the
number of additional Shares as determined according to the following formula:
((1.20 x Initial Closing Price) - First Repricing Price) x (# of the First
Repriced Shares) / First Repricing Price.
2.4 SECOND REPRICING PERIOD. The "SECOND REPRICING PERIOD"
shall commence on the day immediately following the First Repricing Period and
end twenty (20) trading days thereafter. If the lowest average Closing Bid
Price for any five (5) Business Days (not necessarily consecutive) during the
Second Repricing Period (the "SECOND REPRICING PRICE"), is not equal to or
greater than 125% of the Initial Closing Price, then one-third (1/3) of the
Initial Shares shall be repriced (the "SECOND REPRICED SHARES"). The Company
shall issue to Purchaser the number of additional Shares as determined
according to the following formula:
((1.25 x Initial Closing Price) - Second Repricing Price) x (# of the Second
Repriced Shares) / Second Repricing Price.
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2.5 THIRD REPRICING PERIOD. (a) The "THIRD REPRICING
PERIOD" shall commence on the day immediately following the Second Repricing
Period and end twenty (20) days thereafter. If the lowest average Closing Bid
Price for any five (5) Business Days (not necessarily consecutive) during the
Third Repricing Period (the "THIRD REPRICING PRICE"), is not equal to or
greater than 130% of the Initial Closing Price, one-third (1/3) of the Initial
Shares shall be repriced (the "THIRD REPRICED SHARES"). The Company shall
issue to Purchaser the number of additional Shares as determined according to
the following formula:
(1.30 x Initial Closing Price) - Third Repricing Price) x (# of the Third
Repriced Shares) / Third Repricing Price.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. To induce the
Company's acceptance of this Agreement, each of Purchasers hereby severally
certifies, represents and warrants to the Company and its agents and attorneys
as follows, which representations and warranties are solely for the benefit of
the Company and may be waived in whole or in part at any time prior to the
Initial Closing by the Company:
3.1 INTENT. Purchaser will be acquiring the Shares for its
own account, and Purchaser has no present arrangement (whether or not legally
binding) to sell any of the Shares to or through any person or entity;
PROVIDED, HOWEVER, that by making the representations herein, Purchaser does
not agree to hold any of the Shares for any minimum or other specific term and
reserves the right to dispose of the Shares at any time in accordance with
U.S. federal and state securities laws applicable to such disposition and any
restrictions imposed on such transfer by the Transaction Documents. Purchaser
understands that the Shares must be held indefinitely unless the Shares are
subsequently registered under the Securities Act or an exemption from
registration is available. Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act.
3.2 SOPHISTICATED INVESTOR. Purchaser is a "sophisticated
investor" (as described in Rule 506(b)(2)(ii) of Regulation D) and an
"accredited investor" (as defined in Rule 501(a) of Regulation D), and
Purchaser has such knowledge and experience in business and financial matters
that it is capable of evaluating the merits and risks of an investment in the
Company.
3.3 ABILITY OF PURCHASER TO BEAR RISK OF INVESTMENT.
Purchaser acknowledges that the Shares are speculative investments and involve
a high degree of risk and Purchaser is able to bear the economic risk of an
investment in the Shares, and, at the present time, is able to afford a
complete loss of such investment.
3.4 AUTHORITY. Each of the Transaction Documents (except for
the Warrant) has been duly authorized and validly executed and delivered by
Purchaser and (assuming due authorization and valid execution by the Company)
is a legal, valid and binding agreement of Purchaser enforceable against
Purchaser in accordance with its terms, subject to general principles of
equity and to bankruptcy, insolvency or similar laws relating to, or affecting
generally the enforcement of creditors'
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rights and remedies or by other equitable principles of general application.
The person or persons executing the Transaction Documents (except for the
Warrant) have all requisite authority to do so on behalf of Purchaser.
3.5 BROKERS, FINDERS. Except with respect to Dutchess
Advisors, Ltd., Purchaser has taken no action which would give rise to any
claim by any person for brokerage commission, finder's fees or similar
payments by the Company relating to this Agreement or the transactions
contemplated hereby. The Company shall have no obligation with respect to
such fees or with respect to any claims made by or on behalf of other persons
for fees of a type contemplated in this section that may be due in connection
with the transactions contemplated hereby. Purchaser shall indemnify and hold
harmless the Company, its employees, officers, directors, agents and partners,
and their respective affiliates, from and against all claims, losses, damages,
costs (including the costs of preparation and attorneys' fees) and expenses
suffered in respect of any such claimed or existing fees, as and when incurred.
3.6 ORGANIZATION; AUTHORITY. Purchaser is an entity
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite power and authority to
enter into and to consummate the transactions contemplated by this Agreement
and to carry out its obligations thereunder. The acquisition of the Shares
and the payment of the Purchase Price therefor by such Purchaser have been
duly authorized by all necessary action on the part of Purchaser.
3.7 ABSENCE OF CONFLICTS. The execution and delivery of each
of the Transaction Documents (except for the Warrant), and the consummation of
the transactions contemplated by this Agreement and such other documents and
instruments, and compliance with the requirements thereof, will not violate
any law, rule, regulation, order, writ, judgment, injunction, decree or award
binding on Purchaser, or the provision of any indenture, instrument or
agreement to which Purchaser is a party or is subject, or by which Purchaser
or any of its assets is bound, or conflict with or constitute a material
default thereunder, or require the approval of any third-party pursuant to any
material contract, agreement, instrument, relationship or legal obligation to
which Purchaser is subject or to which any of its assets, operations or
management may be subject.
3.8 DISCLOSURE; ACCESS TO INFORMATION. Purchaser has
received copies of or has had access to all documents, records, books and
other information pertaining to Purchaser's investment in the Company and the
Shares that have been requested by Purchaser. Purchaser or its representative
has been afforded the opportunity to ask questions of the Company and its
management. Purchaser further acknowledges that it understands that the
Company is subject to the periodic reporting requirements of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and Purchaser has
reviewed or received copies of any such reports that it has requested.
3.9 MANNER OF SALE. At no time was Purchaser presented with
or solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising with
respect to the Shares.
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3.10 ACCURACY OF OTHER MATERIALS. To the extent Purchaser has
received from the Company documents or other materials, which constitute
summaries, projections, forecasts or estimates, Purchaser acknowledges the
following with respect to such documents or other materials. Such documents or
other materials are intended to illustrate projected financial and other
results based upon a set of assumptions (in some cases based on information
obtained by the Company from outside sources) that the Company views as
reasonable and obtainable. All such summaries, projections, forecasts or
estimates pertaining to revenue growth, profitability and other similar
financial or market data are forward-looking statements. Such statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those projected. No representations or warranties of
future performance by or market trends for the Company are intended, and such
are expressly disclaimed.
3.11 ACCURACY OF REPRESENTATIONS AND INFORMATION. All
representations made by Purchaser in the Transaction Documents, and all
information provided by Purchaser to the Company concerning Purchaser are
correct and complete in all material respects as of the date hereof.
3.12 Notwithstanding any other provision hereof, of the
Warrants or of any of the other Transaction Agreements, in no event (except
(i) as specifically provided in this Agreement as an exception to this
provision, or (ii) while there is outstanding a tender offer for any or all of
the shares of the Company's Common Stock) shall the Purchaser be entitled to
exercise Repricing Rights or shall the Company have the obligation, to deliver
Repricing Shares to the extent that, after such conversion, the sum of (1)
the number of shares of Common Stock beneficially owned by the Purchaser and
its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership Repricing Shares not yet issued or
unexercised portion of the Warrants), and (2) the number of shares of Common
Stock issuable upon the exercise of Repricing Rights or exercise of the
Warrants with respect to which the determination of this proviso is being
made, would result in beneficial ownership by the Purchaser and its affiliates
of more than 9.99% of the outstanding shares of Common Stock (after taking
into account the shares to be issued to the Purchaser upon such exercise).
For purposes of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), except as
otherwise provided in clause (1) of such sentence. The Purchaser, further
agrees that if the Purchaser transfers or assigns any of the Shares to a party
who or which would not be considered such an affiliate, such assignment shall
be made subject to the transferee's or assignee's specific agreement to be
bound by the provisions of this Paragraph 3.12 as if such transferee or
assignee were the original Purchaser hereof.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to Purchaser as follows, which representations
and warranties are solely for the benefit of Purchaser and may be waived in
whole or in part by Purchaser at any time prior to the Initial Closing. For
purposes of this Section, the word "knowledge" shall mean the actual knowledge
of the president, chief executive officer, chief operating officer or the
chief financial officer.
4.1 COMPANY STATUS. The Company has registered the Common
Stock pursuant
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to Section 12(b) of the Exchange Act, is in compliance in all material
respects with the reporting requirements of the Exchange Act, meets the
requirements for the continued listing of the Common Stock on the American
Stock Exchange, and the Common Stock currently trades on the American Stock
Exchange.
4.2 CURRENT PUBLIC INFORMATION. The Company has furnished or
made available to Purchaser, the location of, or true and correct copies of
all registration statements, reports and documents filed with the SEC by or
with respect to the Company since March 31, 1999, and prior to the date of
this Agreement, pursuant to the Securities Act or the Exchange Act
(collectively, the "SEC DOCUMENTS"). The SEC Documents are the only filings
made by or with respect to the Company since March 31, 1999 pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act or pursuant to the
Securities Act. The Company has filed all reports, schedules, forms,
statements and other documents required to be filed under Sections 13(a), 14
and 15(d) of the Exchange Act since March 31, 1999, and prior to the date of
this Agreement.
4.3 NO GENERAL SOLICITATION. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in
any form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the Shares.
4.4 VALID ISSUANCE OF COMMON STOCK. The authorized capital
stock of the Company consists of 500,000,000 shares of Common Stock, of which
6,880,076 shares are issued and outstanding as of May 3, 2000, a maximum of
2,535,751 shares are reserved for issuance upon exercise of options and
approximately 1,300,000 may be issued upon conversion of certain debt in the
principal amount of $1,300,000, such reserved shares being exclusive of any
shares of Common Stock issuable purusant to this Agreement or the Warrant.
All of the outstanding shares of Common Stock of the Company have been duly
and validly authorized and issued and are fully paid and non-assessable.
Except as set forth above, as of the date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company, or contracts,
commitments, understandings or arrangements by which the Company is or may
become bound to redeem or issue additional shares of capital stock of the
Company or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company, (ii) there are
no outstanding debt securities, (iii) there are no agreements or arrangements
under which the Company is obligated to register the sale of any of their
securities under the Securities Act, (iv) there are no securities or
instruments containing any anti-dilution, right of first refusal, preemptive
rights or similar provisions that will be triggered by the issuance of the
Shares as described in this Agreement. When issued pursuant to this Agreement
upon payment of the consideration therefor, the Shares will be duly and
validly issued, fully paid and non-assessable.
4.5 ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly incorporated and existing in good standing under the laws of
Utah, and has the requisite corporate
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power to own its properties and to carry on its business as now being
conducted. The Company does not have any subsidiaries. The Company is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a Material Adverse Effect. "MATERIAL
ADVERSE EFFECT" means any effect on the business, operations, properties,
prospects, or financial condition of the entity or entities with respect to
which such term is used and which is material and adverse to such entity or to
other entities controlling or controlled by such entity, and/or any condition
or situation which would prohibit or otherwise interfere with the ability of
the entity or entities with respect to which said term is used to enter into
and perform its obligations under the Transaction Documents.
4.6 AUTHORIZATION: ENFORCEMENT. (i) The Company has the
requisite corporate power and authority to enter into and perform under the
Transaction Documents and to issue the Shares and the Warrant in accordance
with the terms of the Transaction Documents, (ii) the execution, issuance and
delivery of the Transaction Documents by the Company and the consummation by
it of the transactions contemplated by the Transaction Documents have been
duly authorized by all necessary corporate action, and no further consent or
authorization of the Company or its board of directors or shareholders is
required, (iii) the Transaction Documents have been duly executed and
delivered by the Company, and (iv) the Transaction Documents (assuming due
authorization and valid and legal execution by Purchaser) constitute legal,
valid and binding obligations of the Company enforceable against the Company
in accordance with their terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
4.7 [Intentionally Omitted]
4.8 NO CONFLICTS. Except as set forth in SCHEDULE 4.8, the
execution, delivery and performance of the Transaction Documents by the
Company and the consummation by the Company of the transactions contemplated
hereby, including, without limitation, the issuance of the Shares, do not and
will not (i) result in a violation of the Company's Articles of Incorporation
or Bylaws, (ii) conflict with, or result in a breach of or forfeiture of any
rights (or result in an event which with notice or lapse of time or both would
become a breach of or forfeiture of any rights) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
material agreement, indenture or instrument to which the Company is a party or
(iii) result in a violation of any federal or state law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or by which any property or asset of
the Company is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect). To
the best of its knowledge, the business of the Company is not being conducted
in violation of any law, ordinance or regulation of any governmental entity,
except for possible violations which either singly or in the aggregate do not
and will not have a Material Adverse Effect. The Company is not required
under federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or governmental agency in order for it to execute,
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deliver or perform any of its obligations under this Agreement or issue and
sell the Shares and the Warrant in accordance with the terms of this Agreement
(other than any SEC, NASD or state securities filings which may be required to
be made by the Company subsequent to any Closing, and any registration
statement which may be filed in furtherance of this Agreement); PROVIDED that,
for purposes of the representation made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations and
agreements of Purchaser herein. The Company is not in violation of any
material term of or in material default under its Articles of Incorporation,
of any outstanding series of preferred stock or Bylaws or their organizational
charter or Bylaws, respectively, or any material contract, agreement,
mortgage, indebtedness, indenture, instrument, judgment, decree of order or
any statute, rule or regulation applicable to the Company, which has not been
duly waived as of the date of this Agreement.
4.9 SEC DOCUMENTS. The Company has not provided to Purchaser
any information which according to applicable law, rule or regulation, should
have been disclosed publicly prior to the date hereof by the Company but which
has not been so disclosed. As of their respective dates, the SEC Documents
complied, and all similar documents filed with the SEC prior to the Closing
Date will comply, in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and rules and
regulations of the SEC promulgated thereunder and other federal, state and
local laws, rules and regulations applicable to such SEC Documents, and none
of the SEC Documents contained, nor will any similar document filed with the
SEC prior to the Closing Date contain, 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 SEC Documents, as of the dates thereof, complied, and all
similar documents filed with the SEC prior to the Closing Date will comply, as
to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC and other applicable rules and
regulations with respect thereto. Such financial statements were prepared in
accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the
case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements as permitted by Form 10-Q
of the SEC) and fairly present in all material respects the financial position
of the Company as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
4.10 NO UNDISCLOSED LIABILITIES. Except as set forth in
SCHEDULE 4.10, the Company has no liabilities or obligations of a financial
nature (whether accrued, absolute, contingent or otherwise), which are
material, individually or in the aggregate, and required to be disclosed in,
but are not disclosed in, the SEC Documents, other than those incurred in the
ordinary course of the Company's business consistent with past practice since
September 30, 1999, and which, individually or in the aggregate, do not or
would not have a Material Adverse Effect on the Company.
4.11 LITIGATION AND OTHER PROCEEDINGS. Except as may be set
forth in the SEC
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Documents or set forth in SCHEDULE 4.11, there are no lawsuits or proceedings
pending or, to the best knowledge of the Company, threatened, against the
Company, nor has the Company received any written or oral notice of any such
action, suit, proceeding or investigation, which might have a Material Adverse
Effect on the Company or which likely would have a Material Adverse Effect on
the transactions contemplated by this Agreement. Except as set forth in the
SEC Documents, no judgment, order, writ, injunction or decree or award has
been issued by or, to the best knowledge of the Company, requested of any
court, arbitrator or governmental agency which likely would have a Material
Adverse Effect on the transactions contemplated by this Agreement.
4.12 MATERIAL NON-PUBLIC INFORMATION. The Company is not in
possession of, nor has the Company or its agents disclosed to Investor, any
information which it considers to be material non-public information that (a)
if disclosed, would reasonably be expected to have a materially adverse effect
on the price of the Common Stock or(b) according to applicable law, rule or
regulation, should have been disclosed publicly by the Company prior to the
date hereof but which has not been so disclosed. Notwithstanding the
foregoing, the Purchaser understands and agrees that, in the normal course of
its business, the Company possesses inside information concerning its
business, prospects and financial condition which it does not publicly
disclose and which it did not disclose to the Purchaser.
4.13 NATURE OF COMPANY. The Company is not an open-ended
investment company or a unit investment trust, registered or required to be
registered, or a closed end investment company required to be registered, but
not registered, under the Investment Company Act of 1940.
4.14 BROKERS, FINDERS. Except for the payment of consulting
fees in the amount of $183,000 to Dutchess Advisors, Ltd., payment of which is
the sole responsibility of the Company, the Company has taken no action which
would give rise to any claim by any person for brokerage commission, finder's
fees or similar payments by Purchaser relating to this Agreement or the
transactions contemplated hereby. Purchaser shall have no obligation with
respect to such fees or with respect to any claims made by or on behalf of
other persons for fees of a type contemplated in this SECTION 4.14 that may be
due in connection with the transactions contemplated hereby. The Company
shall indemnify and hold harmless each of Purchaser and its employees,
officers, directors, agents, partners and affiliates, from and against all
claims, losses, damages, costs (including the costs of preparation and
attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as and when incurred.
4.15 ABSENCE OF CERTAIN CHANGES. Except as set forth in
SCHEDULE 4.15, since September 30, 1999, no Material Adverse Effect has been
suffered by, and no material adverse development has occurred in the business,
properties, operations, financial condition or results of operations of the
Company. The Company has not taken any steps, and does not currently expect
to take any steps, to seek protection pursuant to any bankruptcy law, nor does
the Company have any knowledge or reason to believe that its creditors intend
to initiate involuntary bankruptcy proceedings.
4.16 INTELLECTUAL PROPERTY RIGHTS. To its knowledge without
conducting any special
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investigation and except as set forth on SCHEDULE 4.16, the Company owns or
possesses the rights or licenses to use all trademarks, trade names, service
marks, service xxxx registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations,
trade secrets and rights used by it in the conduct of its businesses as now
conducted. None of the Company's material trademarks, trade names, service
marks, service xxxx registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, government authorizations, trade
secrets or other intellectual property rights has expired or terminated.
Except as set forth on SCHEDULE 4.16, the Company has not received written
notice of any infringement by the Company of trademarks, trade name rights,
patents, patent rights, copyrights, inventions, licenses, service names,
service marks, service xxxx registrations, trade secrets or other similar
intellectual property rights of others, and, the Company has not received any
written claims, and is not subject to any action or proceeding, or, to the
best of its knowledge, has any action or proceeding been threatened in writing
against the Company regarding trademark, trade name, patent, patent rights,
invention, copyright, license, service name, service xxxx, service xxxx
registration, trade secret or other infringement of similar intellectual
property rights. The Company has taken what it believes to be reasonable
security measures to protect the confidentiality of all of its material
intellectual properties.
4.17 INTERNAL ACCOUNTING CONTROLS. The Company has not been
advised by its independent auditors that its system of internal accounting
controls is not sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
4.18 TAX STATUS. Except as set forth in SCHEDULE 4.18, the
Company has made or filed all federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject and has paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such returns,
reports, declarations, except those being contested in good faith, and has
set aside on its books, provisions which the Company believes reasonably
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports, or declarations apply. There are no unpaid taxes
in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim.
4.19 CERTAIN TRANSACTIONS. Except (a) as set forth in the SEC
Documents, (b) for arm's length transactions pursuant to which the Company
makes payments in the ordinary course of business upon terms no less favorable
than the Company could obtain from third parties, (c) the grant of stock
options and compensation and (d) transactions not required to be disclosed in
the SEC Filings, none of the officers, directors or employees of the Company
(or any spouse or relative of any such person) is presently a party to any
transaction with the Company (other than for services as employees, officers
and directors), including any contract, agreement or other arrangement
providing
15
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.
4.20 DILUTION. The number of shares of Common Stock issuable
as Repriced Shares may increase substantially in certain circumstances,
including, but not necessarily limited to, the circumstance wherein the
trading price of the Common Stock declines during the period between the
Effective Date and the end of the Third Repricing Period. The Company's
executive officers and directors have studied and fully understand the nature
of the transactions contemplated by this Agreement and recognize that they
have a potential dilutive effect. The board of directors of the Company has
concluded, in its good faith business judgment, that such issuance is in the
best interests of the Company. The Company specifically acknowledges that its
obligation to issue the Repriced Shares is binding upon the Company and
enforceable regardless of the dilution such issuance may have on the ownership
interests of other shareholders of the Company.
4.21 MARKET QUOTES. The Company's Common Stock is presently
quoted on the American Stock Exchange under the symbol "DDD". The Company is
not in receipt of any written notice from any stock exchange, market or
trading facility on which the Common Stock is or has been listed or traded (or
on which it is or has been quoted) to the effect that the Company is not in
compliance with the listing or maintenance requirements of such stock
exchange, market or trading facility or that the Common Stock will be delisted
from such stock exchange, market or trading facility.
4.22 NO INTEGRATED OFFERING. Neither the Company nor any of
its affiliates nor any person acting on its or their behalf has, directly or
indirectly, at any time since November 1, 1999, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under
Regulation D in connection with the offer and sale of the Shares as
contemplated hereby.
5. USE AND DISPOSITION OF PROCEEDS. The Company will use the
proceeds from the sale of the Initial Shares (excluding amounts paid by the
Company for legal fees, finder's fees and escrow agent fees in connection with
the sale of the Initial Shares) for working capital and other corporate
purposes, including possible acquisitions, joint ventures and other strategic
relationships, but shall not, directly or indirectly, use such proceeds for
investment in or repay debt to any affiliate (other than a subsidiary, joint
venture or other entity in which the Company has an equity interest).
6. COMPANY RELIANCE ON PURCHASER'S REPRESENTATIONS. Purchaser
understands that the Company is relying on the truth and accuracy of the
representations and warranties made herein by Purchaser in offering the Shares
for sale and in relying upon applicable exemptions available under the Act and
applicable state securities laws.
7. RESTRICTED SHARES. Purchaser understands and acknowledges that
the Shares have not
16
been, and will not as of the time issued, be registered under the Securities
Act and that they will be issued in reliance upon exemptions from the
registration requirements of the Securities Act, and thus cannot be resold
unless they are included in an effective registration statement filed under
the Securities Act or unless an exemption from registration is available for
such resale. With regard to the restrictions on resales of the Shares,
Purchaser is aware: (a) that the Company will issue stop transfer orders to
its stock transfer agent in the event of attempts to improperly transfer any
such Shares, and (b) that a restrictive legend will be placed on certificates
representing the Shares, which legend will read substantially as follows:
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN
OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION
THAT SUCH REGISTRATION IS NOT REQUIRED.
The legend set forth above shall be promptly removed, and the Company shall
issue a certificate without such legend to the holder of any such Unlegended
Shares (as defined below) upon which such legend is stamped, if, unless
otherwise required by state securities laws, (i) such Shares are registered
for resale under the Securities Act, (ii) in connection with a sale
transaction, provided that such holder provides the Company with an opinion of
counsel, in a generally acceptable form, to the effect that a public sale,
assignment or transfer of such Shares may be made without registration under
the Securities Act, or (iii) such holder provides the Company with reasonable
assurances that such Shares can be sold pursuant to Rule 144 promulgated under
the Securities Act without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold.
Notwithstanding the removal of the legend set forth above in the event the
Shares are registered for resale on an effective registration statement, the
Company reserves the right to affix a legend on certificates representing such
Shares that any selling shareholder must comply with the prospectus delivery
requirements of the Securities Act in connection with any resale. The Company
shall bear the cost of the removal of any legend as anticipated by this
SECTION 7.
8. OTHER COVENANTS OF THE COMPANY.
8.1 FURNISHING OF INFORMATION. As long as Purchaser owns
Shares, the Company covenants to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to
be filed by the Company after the date hereof pursuant to Section 13(a) or
15(d) of the Exchange Act. If at any time prior to the date on which
Purchaser may resell all of its Shares without volume restrictions pursuant to
Rule 144(k) promulgated under the Securities Act (as determined by counsel to
the Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent for the benefit of and enforceable
by Purchaser) the Company is not required to file reports pursuant to such
sections, it will prepare and furnish to Purchaser and make publicly available
in accordance with Rule 144(c) promulgated under the
17
Securities Act annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required to be included
in reports required by Section 13(a) or 15(d) of the Exchange Act in the time
period that such filings would have been required to have been made under the
Exchange Act. The Company further covenants that it will take such further
action as Purchaser may reasonably request, all to the extent required from
time to time to enable Purchaser to sell its Shares without registration under
the Securities Act within the limitation of the exemptions provided by Rule
144 promulgated under the Securities Act.
8.2 LISTING OF SHARES. The Company shall, if required by any
applicable listing agreement, (a) not later than the Effective Date, prepare
and file with any national securities exchange, market or trading facility on
which the Common Stock is then listed an additional shares listing application
covering the Shares, (b) take all steps necessary to cause such shares to be
approved for listing on any other national securities exchange, market or
trading facility on which the Common Stock is then listed as soon as possible
thereafter and (c) provide to Purchaser evidence of such listing, and the
Company shall maintain the listing of its Common Stock on such exchange or
market.
8.3 FIRST RIGHT. The Company shall not, directly or
indirectly, without the prior written consent of Purchaser, offer, sell, grant
any option to purchase, or otherwise dispose of (or announce any offer, sale,
grant or any option to purchase or other disposition) any of its Common Stock
or securities convertible into Common Stock at a price that is less than the
90% of the market price of the Common Stock at the time of issuance of such
security or investment (a "SUBSEQUENT FINANCING") for a period of (a) six (6)
months after the Effective Date, or (b) the date all of the Shares shall have
been sold, or (c) such date as the Purchaser shall have sold not less than 80%
of the Shares purchased by the Purchaser, except (i) the granting of options
or warrants to employees, officers, directors and consultants, (ii) the
issuance of shares upon exercise of options granted under any stock option
plan heretofore or hereinafter duly adopted by the Company, (iii) the issuance
of any shares upon any currently outstanding warrants or options and upon
conversion of any currently outstanding convertible securities to the extent
described in SECTION 4.4, (iv) securities issued in connection with the
capitalization or creation of a joint venture with a strategic partner, (v)
shares issued to pay part or all of the purchase price for the acquisition by
the Company of a person (which, for purposes of this clause (v), shall not
include an individual or group of individuals), (vi) shares issued, other than
for cash, in connection with a merger, consolidation or acquisition of
assets, (vii) shares issued in a public offering by the Company of its
securities which is registered with the Securities and Exchange Commission
pursuant to the Securities Act, or (viii) shares issued to a qualified
institutional buyer, as defined in Rule 144A(a), or (ix) shares issued in a
private placement if the placement agent is acceptable to the Purchaser,
unless (A) the Company delivers to Purchaser a written notice (the "SUBSEQUENT
FINANCING NOTICE") of its intention to effect such Subsequent Financing, which
Subsequent Financing Notice shall describe in reasonable detail the proposed
terms of such Subsequent Financing, the amount of proceeds intended to be
raised thereunder, the person with whom such Subsequent Financing shall be
effected, and attached to which shall be a term sheet or similar document
relating thereto and (B) Purchaser shall not have notified the Company by 5:00
p.m. (New York time) on the tenth (10th) Business Day after its receipt of the
Subsequent Financing Notice of
18
its willingness to provide, subject to completion of mutually acceptable
documentation, financing to the Company on substantially the terms set forth
in the Subsequent Financing Notice. If Purchaser shall fail to notify the
Company of its intention to enter into such negotiations within such time
period (the "Purchaser Evaluation Period"), then the Company may effect the
Subsequent Financing substantially upon the terms and to the persons (or
affiliates of such persons) set forth in the Subsequent Financing Notice;
PROVIDED THAT the Company shall provide Purchaser with a second Subsequent
Financing Notice, and Purchaser shall again have the right of first refusal
set forth above in this SECTION 8.3, if the Subsequent Financing subject to
the initial Subsequent Financing Notice shall not have been consummated for
any reason on the terms set forth in such Subsequent Financing Notice within
forty (40) Business Days after the expiration of the Purchaser Evaluation
Period with the person (or an affiliate of such person) identified in the
Subsequent Financing Notice. The rights granted to Purchaser in this SECTION
8.3 are not subject to any prior right of first refusal given to any other
person except as disclosed on SCHEDULE 4.4.
8.4 CERTAIN AGREEMENTS.
(a) The Company covenants and agrees that it will not, without
the prior written consent of Purchaser, enter into any subsequent or further
offer or sale of Common Stock or securities convertible into Common Stock with
any third party until the date which is one hundred eighty (180) days after
the Effective Date.
(b) The provisions of SECTION 8.4(a) will not apply to: (w)
Common Stock issued pursuant to Rule 144, provided the holder thereof is
required to hold such Common Stock for at least one year from the date of
issuance; (x) a public offering of shares of Common Stock registered pursuant
to the Securities Act; or (y) the issuance of securities (other than for cash)
in connection with a merger, consolidation, sale of assets, disposition or the
exchange of the capital stock for assets, stock or other joint venture
interests; or (z) any other sales or other transactions which permitted by
SECTION 8.3 of this Agreement; and provided further, that such securities
would not be included in the Registration Statement relating to the Initial
Shares and a registration statement in respect of such stock shall not be
filed prior to sixty (60) days after the Effective Date.
8.5 LIMITATION ON ISSUANCE OF COMMON STOCK. The Company
shall not issue an aggregate number of (i) Shares under this Agreement and
(ii) shares of Common Stock pursuant to the exercise of the Warrant, that
exceeds 19.9% of the shares of Common Stock issued and outstanding on the date
of the Initial Closing (the "SHARE LIMITATION"). If, pursuant to this
Agreement and the Warrant the Company otherwise would be required to issue a
number of shares of Common Stock that exceeds the Share Limitation, then (i)
the Company will promptly take all steps reasonably necessary to be in a
position to issue Shares and Repricing Shares upon exercise of the Warrants
without violating the Cap Regulations and (ii) if, despite taking such steps,
the Company still cannot issue such Shares and Repricing Shares without
violating the Cap Regulations, the Company shall redeem each Repriced Share
for an amount equal to the economic benefit a holder of Initial Shares would
realize before taxes and commissions for selling the Repricing Shares issuable
to him.
19
8.6 AVAILABLE SHARES. The Company shall have at all times
authorized and reserved for issuance, free from preemptive rights, shares of
Common Stock sufficient to yield the number of shares of Common Stock issuable
as may be required to issue the Repriced Shares.
8.7 WARRANT. The Company agrees to issue to Purchaser at the
Closing, the transferable divisible Warrant for the number of shares of Common
Stock equal to 20% of the Purchase Price divided by the Initial Closing Price.
The Warrant shall (i) bear an exercise price per share of Common Stock equal
to 120% of the Closing Bid Price for the ten (10) Business Days immediately
prior to the Closing Date, (ii) be exercisable immediately upon issuance, and
for a period of five (5) years thereafter, and (iii) shall have cashless
exercise provision.
8.8 REIMBURSEMENT. If (i) Purchaser, other than by reason of
its gross negligence or willful misconduct, becomes involved in any capacity
in any action, proceeding or investigation brought by any shareholder of the
Company, in connection with or as a result of the consummation of the
transactions contemplated by the Transaction Documents, or if Purchaser is
impleaded in any such action, proceeding or investigation by any person, or
(ii) Purchaser, other than by reason of its gross negligence or willful
misconduct or by reason of its trading of the Common Stock in a manner that is
illegal under the federal or state securities laws, becomes involved in any
capacity in any action, proceeding or investigation brought by the SEC against
or involving the Company or in connection with or as a result of the
consummation of the transactions contemplated by the Transaction Documents, or
if Purchaser is impleaded in any such action, proceeding or investigation by
any person, then in any such case, the Company will reimburse Purchaser for
its reasonable legal and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith, as such
expenses are incurred. In addition, other than with respect to any matter in
which Purchaser is a named party, the Company will pay to Purchaser reasonable
out-of-pocket costs with respect to assisting in preparation for hearings,
trials or pretrial matters, or otherwise with respect to inquiries, hearing,
trials, and other proceedings relating to the subject matter of this
Agreement. The reimbursement obligations of the Company under this SECTION
8.8 shall be in addition to any liability which the Company may otherwise
have, shall extend upon the same terms and conditions to any affiliates of
Purchaser that are actually named in such action, proceeding or investigation,
and partners, directors, agents, employees and controlling persons (if any),
as the case may be, of Purchaser and any such affiliate, and shall be binding
upon and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, Purchaser and any such affiliate and any such
person.
8.9 [OMITTED]
9. TRANSFER AGENT INSTRUCTIONS.
9.1 IRREVOCABLE INSTRUCTIONS. The Company will irrevocably
instruct its transfer agent to issue Repriced Shares from time to time in such
amounts as shall be specified from time to time by the Company to the transfer
agent, bearing the restrictive legend specified in SECTION 7 of this Agreement
prior to registration of the Shares under the Securities Act, registered in
the name of Purchaser or its nominee and in such denominations to be specified
by Purchaser in connection with
20
each Closing. The Company warrants that no instruction other than such
instructions referred to in this SECTION 9 and stop transfer instructions to
give effect to SECTION 7 hereof prior to registration and sale of the Shares
under the Securities Act will be given by the Company to the transfer agent
and that the securities 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 in this
SECTION 9 shall affect in any way Purchaser's obligations and agreement to
comply with all applicable securities laws upon resale of the Shares.
9.2 [Intentionally Omitted]
9.3 ISSUANCE OF UNLEGENDED SHARES.
(a) Within three (3) Business Days from the Effective Date,
the Company will deliver to its transfer agent a letter in the form of EXHIBIT
F. After the Effective Date, and as long as the Registration Statement is
current and effective, the Company will, by a letter in substantially the form
of Appendix B to Exhibit F, (i) instruct the transfer agent as to the
issuance of Repriced Shares with five Business Days after the Repriced Shares
become issuable, and (ii) instruct the transfer agent as to the issuance of
any shares ("Warrant Shares") of Common Stock upon exercise or conversion of
the Warrant within five Business Days after receipt of the Warrant in proper
form for exercise or conversion.
(b) If an opinion of counsel is necessary for the issuance of
Shares or Warrant Shares without a legend, the Company shall, within five
Business Days after the Effective Date, cause its counsel to issue an
appropriate opinion to the transfer agent in order that (i) the legend be
removed from the outstanding Shares that are subject to the Registration
Statement and (ii) the Shares or Warrant Shares are issued without a legend;
provided, that such opinion shall only be given if the Registration Statement
is current and effective.
9.4 DELAY. The Company understands that a delay in the
issuance of the Unlegended Shares beyond the Delivery Date could result in
economic loss to Purchaser. On and after the Effective Date as compensation
to Purchaser for such loss, the Company agrees to pay late payments to
Purchaser for late issuance of Unlegended Shares in accordance with the
following schedule (where "NO. OF DAYS LATE" is defined as the number of days
beyond five (5) Business Days from Delivery Date):
LATE PAYMENT FOR EACH
NO. OF DAYS LATE $10,000 OF COMMON STOCK
---------------- -----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
21
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 +$200 for each Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this SECTION 9.4 in
immediately available funds upon demand. Nothing herein shall limit
Purchaser's right to pursue actual damages for the Company's failure to issue
and deliver the Unlegended Shares to Purchaser, except to the extent that such
late payments shall constitute payment for and offset any such actual damages
alleged by Purchaser, and any Buy In Adjustment Amount (as defined below).
9.5 COVER. If the Company fails for any reason to deliver
the letter and opinion of counsel required by SECTION 9.3, and a holder (a
"Holder") of the Shares or Warrant Shares purchases, in an open market
transaction or otherwise, shares of Common Stock (the "COVERING SHARES") in
order to make delivery in satisfaction of a sale of Common Stock by such
Holder (the "SOLD SHARES"), which delivery such Holder anticipated to make
using the Unlegended Shares (a "BUY-IN") because of the effectiveness of the
Registration Statement, then the Company shall pay to such Holder (in addition
to all other amounts contemplated in other provisions of the Transaction
Documents, and not in lieu thereof), the Buy-In Adjustment Amount (as defined
below). The "BUY-IN ADJUSTMENT AMOUNT" is the amount equal to the excess, if
any, of (x) such Holder's total purchase price (including brokerage
commissions, if any) for the Covering Shares over (y) the net proceeds (after
brokerage commissions, if any) received by such Holder from the sale of the
Sold Shares. The Company shall pay the Buy-In Adjustment Amount to such
Holder in immediately available funds immediately upon demand by such Holder.
By way of illustration and not in limitation of the foregoing, if such Holder
purchases Covering Shares having a total purchase price (including brokerage
commissions) of $11,000 to cover a Buy-In with respect to shares of Common
Stock that it sold for net proceeds of $10,000, the Buy-In Adjustment Amount
that the Company will be required to pay to such Holder will be $1,000.
9.6 The Company will authorize its transfer agent to give
information relating to the Company directly to the Purchaser or the
Purchaser's representatives upon the request of the Purchaser or any such
representative, to the extent such information relates to (i) the status of
shares of Common Stock issued or claimed to be issued to the Purchaser, or
(ii) the number of outstanding shares of Common Stock of all stockholders as
of a current or other specified date. The Company will provide the Purchaser
with a copy of the authorization so given to the transfer agent.
9.7 Subject to the completeness and accuracy of the Buyer's
representations and warranties herein, upon the conversion of any Preferred
Stock by a person who is a non-U.S. Person, and following the expiration of
any applicable Restricted Period (as those terms are defined in Regulation S),
the Company, shall, at its 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 without
22
restrictive legend or stop orders in the name of Buyer (or its nominee (being
a non-U.S. Person) or such non-U.S. Persons as may be designated by Buyer) and
in such denominations to be specified at conversion representing the number of
shares of Common Stock issuable upon such conversion, as applicable. Nothing
in this Section 9.7, however, shall affect in any way Buyer's or such
nominee's obligations and agreement to comply with all applicable securities
laws upon resale of the Securities.
10. CLOSING DATE.
10.1 The closing of the issuance and sale of the Initial
Shares shall occur on the date (the "CLOSING DATE"), which is the first
Business Day after the fulfillment or waiver of all closing conditions
pursuant to SECTIONS 11 AND 12 hereof or such other date and time as is
mutually agreed upon by the Company and Purchaser.
10.2 Notwithstanding anything to the contrary contained
herein, the Escrow Agent will be authorized to release the Escrow Property
only upon satisfaction of the conditions set forth in SECTIONS 11 AND 12
hereof.
11. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
Purchaser understands that the Company's obligation to sell the
Initial Shares on the Closing Date to Purchaser pursuant to this Agreement is
conditioned upon:
11.1 The receipt and acceptance by Purchaser of this Agreement
as evidenced by Purchaser's execution and delivery of this Agreement.
11.2 Delivery by Purchaser to the Escrow Agent of good funds
as payment in full of an amount equal to the Purchase Price for the Initial
Shares in accordance with SECTION 1.2 hereof;
11.3 The accuracy on the Closing Date of the representations
and warranties of Purchaser contained in this Agreement as if made on the
Closing Date, and the performance by Purchaser on or before the Closing Date
of all covenants and agreements of Purchaser required to be performed on or
before the Closing Date;
11.4 There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
12. CONDITIONS TO PURCHASER'S OBLIGATION TO PURCHASE.
The Company understands that Purchaser's obligation to purchase
the Initial Shares on the Closing Date is conditioned upon:
12.1 Acceptance by the Company of this Agreement for the sale
of the Initial Shares,
23
as indicated by the Company's execution and delivery of this Agreement;
12.2 Delivery by the Company to the Escrow Agent of the
Certificate in accordance with this Agreement;
12.3 The accuracy in all material respects on the Closing Date
of the representations and warranties of the Company contained in this
Agreement as if made on the Closing Date and the performance by the Company on
or before the Closing Date of all covenants and agreements of the Company
required to be performed on or before the Closing Date; and
12.4 On the Closing Date, Purchaser having received an opinion
of in-house general counsel for the Company, dated the Closing Date, in form,
scope and substance reasonably satisfactory to Purchaser, to the effect set
forth hereto, the Registration Rights Agreement, the Warrant and the
Additional Agreements.
12.5 No statute, rule, regulation, executive order, decree,
ruling or injunction shall be enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits or
adversely effects any of the transactions contemplated by the Transaction
Documents, and no proceeding or investigation shall have been commenced or
threatened which may have the effect of prohibiting or adversely effecting any
of the transactions contemplated by the Transaction Documents.
12.6 From and after the date hereof to and including the
Closing Date, the trading of the Common Stock shall not have been suspended by
the SEC, or the ASE and trading in securities generally on the New York Stock
Exchange or NASDAQ shall not have been suspended or limited, nor shall minimum
prices have been established for securities traded on ASE, nor shall there be
any outbreak or escalation of hostilities involving the United States or any
material adverse change in any financial market that in either case in the
reasonable judgment of Purchaser makes it impracticable or inadvisable to
purchase the Initial Shares, as the case may be.
13. GENERAL PROVISIONS.
13.1 ASSIGNMENT. Neither this Agreement nor any rights of
Purchaser hereunder may be assigned by either party to any other person
without the prior written consent of the Company.
13.2 ATTORNEYS' FEES. In the event any dispute arises under
this Agreement or the documents or instruments executed and delivered in
connection with this Agreement, and the parties hereto resort to litigation to
resolve such dispute, the prevailing party in any such litigation, in addition
to all other remedies at law or in equity, shall be entitled to an award of
costs and fees from the other party, which costs and fees shall include,
without limitation, reasonable attorneys' fees and legal costs.
13.3 CHOICE OF LAW; VENUE. This Agreement will be construed
and enforced in accordance with and governed by the laws of California without
reference to principles of conflicts of
24
law. The parties agree that, in the event of any dispute arising out this
Agreement or the transactions contemplated thereby, venue for such dispute
shall be in the state or federal courts located in Los Angeles, and that each
party hereto waives any objection to such venue based on forum non conveniens.
13.4 COSTS AND EXPENSES. The parties shall be responsible for
and shall pay their own costs and expenses, including without limitation
attorneys' fees and accountants' fees and expenses, in connection with the
conduct of the due diligence inquiry, negotiation, execution and delivery of
this Agreement and the instruments, documents and agreements executed in
connection with this Agreement, except that the Company shall pay the legal
and escrow fees of the Purchaser in connection herewith.
13.5 COUNTERPARTS/FACSIMILE SIGNATURES. This Agreement may be
executed in one or more counterparts, each of which when so signed shall be
deemed to be an original, and such counterparts together shall constitute one
and the same instrument. In lieu of the original, a facsimile transmission or
copy of the original shall be as effective and enforceable as the original.
13.6 ENTIRE AGREEMENT: AMENDMENT. This Agreement, together
with the exhibits to this Agreement and the other instruments and documents
delivered in connection with this Agreement constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party
in any manner by any warranties, representations or covenants except as
specifically set forth in this Agreement or therein. Except as expressly
provided in this Agreement, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought.
13.7 HEADINGS. The headings of the sections and paragraphs of
this Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
13.8 NOTICES. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be
in writing and, unless otherwise specified herein, shall be (a) personally
served,(b) deposited in the mail, registered or certified, return receipt
requested, postage prepaid, (c) delivered by reputable courier service which
provides evidence of delivery with charges prepaid, or (d) transmitted by hand
delivery, or (e) by facsimile, addressed as set forth below or to such other
address as such party shall have specified most recently by written notice
given in accordance herewith. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (i) upon hand
delivery or delivery at the address or number designated below (if delivered
on a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (ii) on the second business day following the date of
mailing by express courier service or on the fifth business day after
deposited in the mail, in each case, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur or (iii)
if by facsimile, upon confirmation of receipt by the recipient or
25
confirmation of transmission in another manner provided in this SECTION 13.8.
The addresses for such communications shall be:
IF TO THE COMPANY:
Chequemate International, Inc.
d/b/a C-3D Digital, Inc.
000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx xxx Xxx, Xxxxxxxxxx 00000
ATTENTION: Xxxx Xxxxxx, Esq.
General Counsel
Tel No.: (000) 000-0000
Fax No.:
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Esanu Katsky Xxxxxx & Siger, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ATTENTION: Xxxxx X. Xxxxxxxx P.C.
Tel No.: (000) 000-0000
Fax No.: (000) 000-0000
IF TO PURCHASER:
Crooks Hollow Road LLC
Corporate Center
Windward One
West Bay Road
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Xxxxxxx & Xxxxxx, LLP
00 Xxxxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
ATTENTION: Xxxxxx X. Xxxxxxx, Esq.
Tel No.: (000) 000-0000
Fax No: (000) 000-0000
Either party hereto may from time to time change its address or facsimile
number for notices under this Section 9.1 by giving at least ten (10) days'
prior written notice of such changed address or facsimile number to the other
party hereto.
26
13.9 PUBLICITY. The Company and Purchaser shall consult with
each other in issuing any press releases or otherwise making public statements
with respect to the transactions contemplated hereby and no party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other parties, which consent shall not be
unreasonably withheld or delayed, except that no prior consent shall be
required if such disclosure is required by law, in which such case the
disclosing party shall provide the other parties with prior notice of such
public statement. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of Purchaser without the prior written consent of
such Purchaser, except to the extent required by law. Purchaser acknowledges
that this Agreement and all or part of the Transaction Documents may be deemed
to be "material contracts" as that term is defined by Item 601(b)(10) of
Regulation S-K, and that the Company may therefore be required to file such
documents as exhibits to reports or registration statements filed under the
Securities Act or the Exchange Act. Purchaser further agrees that the status
of such documents and materials as material contracts shall be determined
solely by the Company, in consultation with its counsel.
13.10 SEVERABILITY. Should any one or more of the provisions
of this Agreement be determined to be illegal or unenforceable, all other
provisions of this Agreement shall be given effect separately from the
provision or provisions determined to be illegal or unenforceable and shall
not be affected thereby.
13.11 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's
representations and warranties herein shall survive the execution and delivery
of this Agreement for one (1) year, and shall inure to the benefit of
Purchaser and its successors and assigns.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
27
IN WITNESS WHEREOF, the parties named below have caused this Agreement
to be executed, as of the date first above written.
PURCHASER:
CROOKS HOLLOW ROAD, LLC
By:
-------------------------------
Its:
------------------------------
THE COMPANY:
CHEQUEMATE INTERNATIONAL, INC.
D/B/A C-3D DIGITAL, INC.
By:
-------------------------------
Its:
------------------------------
28
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
29
EXHIBIT B
ESCROW AGREEMENT
30
EXHIBIT C
WARRANT
31
EXHIBIT D
ADDITIONAL AGREEMENTS
32
EXHIBIT E
JOINT ESCROW INSTRUCTIONS
33
EXHIBIT F
INSTRUCTION TO TRANSFER AGENT
[Name and Address
of Transfer Agent]
Attention of
Re: CHEQUEMATE INTERNATIONAL, INC.
Ladies and Gentlemen:
Reference is made to:
(a) The shares of common stock, par value $.0001 per share ("Common
Stock") of Chequemate International, Inc., a Utah corporation
(the "Company"), issued or issuable pursuant to an agreement (the
"Agreement") dated as of May , 2000, between the Company and
the person named on Appendix A to this Letter (the "Holder").
(b) The Company's Series A Common Stock Purchase Warrants (the
"Warrants") issued in the name of the Holder.
The Company hereby certifies to you as follows:
(i) A registration statement on Form S- , File No. 333- ,
covering (A) a maximum of shares of Common
Stock (the "Agreement Shares") issued or issuable pursuant to the
Agreement and (B) a maximum of shares of Common Stock
("Warrant Shares") issuable upon exercise of the Warrants, has
been filed with the Securities and Exchange Commission and has
been declared effective.
(ii) You may issue certificates without a restrictive legend for the
Agreement Shares listed in Appendix A to this letter. If any
certificate for outstanding Agreement Shares is presented to you
with an investment legend, you may reissue the certificate
without the legend.
(iii) You are authorized to issue an Agreement Shares or Warrant Shares
to the Holder named on Appendix A to this Letter, upon receipt of
a fax from us in substantially the form of Appendix B to this
letter.
(iv) If requested by the Holder or its representative or broker, you
are authorized to deliver the shares by DWAC. Such delivery
should be coordinated with the contact person.
34
(v) The outstanding Agreement Shares have been duly authorized for
issuance and are and will be validly issued, fully paid and
non-assessable. The additional Agreement Shares have been duly
authorized and, when issued pursuant to the Agreement, will be
validly issued, fully paid and non-assessable. The Warrant
Shares have been duly authorized for issuance and, when issued as
provided in the Warrant, will be validly issued, fully paid and
non-assessable.
Very truly yours,
35
Appendix A
Outstanding
-----------
Social Security or Agreement Name and Telephone Delivery or
------------------ --------- ------------------ -----------
Name and Address Taxpayer ID No. Shares No. of Contact Person DWAC
---------------- --------------- ------ --------------------- ----
00
Xxxxxxxx X
[Name and Address
of Transfer Agent]
Attention of
Re: CHEQUEMATE INTERNATIONAL, INC.
Ladies and Gentlemen:
Reference is made to our letter to you dated , 2000, a
copy of which is attached.
Pursuant to the above-mentioned letter, you are hereby authorized and
instructed to issue an aggregate of shares (the "Shares") of
common stock, par value $.0001 per share, of Chequemate International, Inc
(the "Company") to the person named in Annex I to this letter. The Shares of
[Agreement Shares] [Warrant Shares] as described in the above-mentioned letter.
Please deliver the certificate to the persons in whose name the Shares
are to be issued by the DWAC system. Please refer to the contact named in
Annex I. Please send a copy of your transmittal letter to me.
Very truly yours,
37
Annex I
Name Number of Shares Contact (Name and Phone No.)
---- ---------------- ----------------------------
38
