Exhibit 10.1
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HOTEL MOVIE EXPRESS
ASSET PURCHASE AGREEMENT
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This Asset Purchase Agreement (the "Agreement"), dated this
8th day of July, 1999, among CHEQUEMATE INTERNATIONAL, INC., a Utah corporation
("Chequemate") doing business as C-3D Digital, Inc.; Chequemate's wholly owned
subsidiary Chequemate Technologies, Inc., a Utah corporation ("Buyer"), and KING
FARMS, INC., an Illinois corporation, d.b.a. HOTEL MOVIE EXPRESS INC.
("Seller").
WITNESSETH:
WHEREAS, Buyer desires to purchase from Seller and Seller
desires to sell to Buyer, on the terms and subject to the conditions of this
Agreement, certain assets and business of Seller;
THEREFORE, in consideration of the mutual covenants,
agreements, representations and warranties contained in this Agreement, the
parties agree as follows:
ARTICLE 1. TRANSFER OF ASSETS
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Subject to the terms and conditions set forth in this
Agreement, Seller agrees to sell, convey, transfer, assign and deliver to Buyer,
and Buyer agrees to purchase from Seller, at the Closing described in Article 3
hereof, all of the assets, properties and business of Seller of every kind,
character and description, whether tangible, intangible, real, personal or
mixed, and wherever located which in the aggregate comprise the business known
as Hotel Movie Express, Inc. (but excluding any assets specifically excluded in
the following Sections of this Article 1), all of which are sometimes
collectively referred to in this Agreement as the "Assets," including, but
without limitation to (a) all equipment referred to in that certain Foreclosure
and Conveyance Agreement entered into between Hospitality Business Network, Inc.
("HBN"), a Nevada corporation and MarCap Corporation, a Delaware corporation
("MarCap") and as referred to in that certain Asset Purchase Agreement dated
June , 1999 and entered into between MarCap and the Seller; and (b) the
following:
1.1 Contracts. All of the contracts and contract rights
related to those agreements for pay-per- view and cable services to
hotel/lodging rooms, which agreements are listed in SCHEDULE 1.1 attached hereto
and copies of which are included as part of SCHEDULE 1.1 (hereinafter referred
to as the "Contracts"), except for amounts payable under the contracts for
periods prior to the Closing.
1.2 Equipment. All the machinery, tools, appliances,
furniture, equipment and other tangible personal property of every kind and
description wherever they may be located that are owned by Seller, and are
utilized in connection with Seller's operations, a current list of which is
attached hereto as Schedule 1.2 (hereinafter referred to collectively as the
"Equipment"). At the Closing, Seller shall deliver to Buyer the equipment as set
forth in Schedule 1.2, or appropriate documents transferring the ownership of
the Equipment, free of any claim or encumbrance. Good and marketable title to
all such equipment shall be transferred on delivery, free and clear of any
encumbrances;
1.3 Intangibles. All trade names (including "Hotel Movie
Express"), trademarks, service marks, copyrights, patents, patent rights, trade
secrets, technical know-how, goodwill and other intangibles, including (i) tort
or insurance proceeds arising out of any damage or destruction of any of the
Assets between the date of this Agreement and the Closing Date (as hereinafter
defined); (ii) all contract rights to be assumed by Buyer pursuant to Article 4
used by Seller in (or owned by Seller and useful in) the operation of the
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business, but excluding accounts receivable, accounts payable, contracts not
assumed by Buyer pursuant to Article 4, bank accounts, and tax deposits;
1.4 Books and records. All papers and records in Seller's
care, custody or control relating to any or all of the above-described Assets
and the operation thereof, including, but not limited to, sales records,
accounting and financial records and maintenance records; and
1.5 Other Assets. All product rights in the equipment and all
improvements thereon. All prepaid expenses relating to any of the Assets and the
operation of Seller's business sold pursuant to this Agreement.
ARTICLE 2. PURCHASE PRICE
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2.1 Payment of Purchase Price. In consideration for the
transfer and assignment by Seller of the Assets, and in consideration of the
representations, warranties and covenants of the Seller set forth herein,
Chequemate and Buyer, on the conditions set forth herein and subject to the
provisions in Article 9, state that:
(a) Chequemate shall issue 125,000 shares of Chequemate's
restricted common stock ( hereinafter referred to as the "Shares") to
the Seller at the time of Closing. Such shares shall be registered only
as provided in paragraph 14.12 hereof.
(b) The Buyer shall pay to the Seller the sum of $150,000.00
in cash or by wire transfer to the account of the Seller at the time of
the Closing.
(c) Buyer shall assume and discharge, and shall indemnify
Seller against, liabilities and obligations of the Seller under the
contracts or other agreements, if any as specified on SCHEDULE 4, but
only to the extent that such liabilities or obligations accrue on or
after the Closing Date.
ARTICLE 3. THE CLOSING
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The closing of the purchase and sale of the Assets by Seller
to Buyer (the "Closing") shall take place at the offices of Xxxxx X. Xxxx,
attorney at law, which are located at 3ll Xxxxx Xxxxx Xxxxxx, Xxxxx 000, Xxxx
Xxxx Xxxx, Xxxx, at 10:00 a.m. local time, on Thursday, July 1, 1999, or at such
other place and/or time as the parties may agree in writing (the "Closing
Date").
Chequemate shall perform its due diligence inspection of the
Seller and of the equipment, properties, contracts of the Seller and all other
items reasonably necessary to complete the inspection on or before the Closing
Date of closing set forth above.
3.1 Seller's Obligations at the Closing. At the Closing,
Seller shall deliver or cause to be delivered to Buyer:
(a) instruments of assignment and transfer of all of the
Assets of Seller to be transferred hereunder, in form and substance
satisfactory to Buyer's counsel, including all contracts being
transferred by Seller to Buyer as outlined in SCHEDULE 1.1,
(b) the certificate of the President or Secretary of the
Seller confirming that proper minutes and resolutions of the Seller's
Board of Directors and Shareholders have been secured prior to the
Closing whereby the sale of the Assets has been approved; and
(c) the certificate of Xxxx Xxxx and Xxx Xxxxxxx in the form
and containing the provisions of SCHEDULE 3.1
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Simultaneously with the consummation of the transfer, Seller,
through its officers, agents, and employees, shall put Buyer into full
possession and enjoyment of all the Assets to be conveyed and transferred by
this Agreement. Seller, at any time before or after the closing Date, shall
execute, acknowledge, and deliver any further assignments, conveyances and other
assurances, documents and instruments of transfer, reasonably requested by Buyer
and shall take any other action consistent with the terms of this Agreement that
may reasonably be requested by Buyer for the purpose of assigning, transferring,
granting, conveying and confirming to Buyer, or reducing to possession, any or
all property and assets to be conveyed and transferred by this Agreement. If
requested by Buyer, Seller further agree to prosecute or otherwise enforce in
its own name for the benefit of Buyer any claims, rights, or benefits that are
transferred to Buyer by this Agreement and that require prosecution or
enforcement in the Seller's name. Any prosecution or enforcement of claims,
rights, or benefits under this Section shall be solely at Buyer's expense,
unless the prosecution or enforcement is made necessary by a breach of this
Agreement by the Seller.
3.2 Buyer's Obligations at Closing. Subject to the provision
of Article 9, at the Closing, Buyer shall deliver to Seller (or to the Escrow
Agent as provided in Section 3.3 below), the following instruments and documents
against delivery of the items specified in Section 3.1:
(a) a Chequemate stock certificate issued in the name of King
Farms, Inc. for 125,000 shares of restricted common stock; and
(b) a wire transfer to King Farms, Inc, the sum of $150,000.00
to a bank account identified by Seller; and
(c) the certificate of the President or Secretary of the Buyer
confirming that proper minutes and resolutions of the Buyer's Board of
Directors have been secured prior to the Closing whereby the purchase
of the Assets has been approved.
3.3 Sellers Obligations Within 60 of Closing. Within sixty
(60) days of the Closing Date, the Seller will deliver to the Buyer the
following documents:
(a) the UCC search reports referred to in paragraph 9.2
hereof; and
(b) detailed asset lists supplementing SCHEDULE 1.2 which
include a complete listing of all Equipment (including serial numbers
of all items bearing serial numbers), at each hotel location referred
to in SCHEDULES 1.1 and 1.2.
The certificate representing the Shares shall be held in escrow
pursuant to the escrow agreement attached hereto as SCHEDULE 3.3 (together with
stock powers executed by the Seller), until such time as all of the UCC Search
reports and the detailed equipment lists referred to in paragraphs 3.3(a) and
3.3(b) have been delivered to the Buyer. In the event that any portion of the
Equipment is not in place at the hotel locations referenced in Schedule 1.1 on
the Closing Dated, and is not delivered to the hotel location and installed in
working condition withing five (5) days of the Seller receiving notice of the
fact that such portion of the Equipment is missing, the purchase price described
in Article 2 shall be reduced on a pro rata basis. The Escrow Agent will return
to the Buyer the prorated number of the Shares and the Seller shall pay to the
Buyer the pro rata portion of the sum of $150,000. In the event that any of the
Assets are subject to one or more perfected secured interests have priority over
the MarCap secured interest (the "Priority Secured Interests"), Seller shall pay
to the Buyer an amount equal to the amount of the debt secured by the Priority
Secured Interests (not to exceed $150,000), and the number of the Shares
delivered to the Seller out of escrow will be reduced by the number of shares
that equal the amount that the Priority Secured Interests exceeds the sum of
$150,000, divided by the average of the closing price on AMEX of the common
stock of Chequemate on the five trading days prior to the Closing Date. Payment
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of any amounts by the Seller to the Buyer under this Section 3.3 shall be made
within thirty (30) days of written notice given to the Seller by the Buyer.
ARTICLE 4. ASSUMPTION OF LIABILITIES
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Buyer is not assuming any debt, liability or obligation of
Seller, MarCap or HBN, whether known or unknown, fixed or contingent, except as
herein specifically otherwise provided. Seller agrees to indemnify and hold
Buyer harmless against all debts, claims, liabilities and obligations of Seller,
MarCap and HBN, not expressly assumed by Buyer hereunder. Buyer shall have the
benefit of and shall perform all contracts and commitments, if any, specifically
disclosed in SCHEDULE 1.1, in accordance with the terms and conditions thereof,
except to the extent modifications are specifically disclosed on such SCHEDULE
1.1.
ARTICLE 5. EXCISE AND PROPERTY TAXES
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Seller shall pay all sales, use and transfer taxes arising out
of the transfer of the Assets and shall pay its portion, prorated as of the
Closing Date, of state and local personal property taxes of the business. Buyer
shall not be responsible for any business, occupation, withholding or similar
tax, or for any taxes of any kind related to any period before the Closing Date.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF SELLER
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Seller hereby represents and warrants to Buyer that the
following facts and circumstances are, and except as contemplated hereby, at all
times up to the Closing Date will be true and correct, and hereby acknowledges
that such facts and circumstances constitute the basis upon which Buyer is
induced to enter into and perform this Agreement. Each warranty set forth in
this Article 6 shall survive the Closing and any investigation made by or on
behalf of Buyer.
6.1 Organization, Good Standing and Qualification. Seller is a
corporation duly organized, validly existing, and in good standing under the
laws of Illinois, has all necessary corporate powers to own its properties and
to carry on its business as now owned and operated by it.
6.2 Financial Statements. SCHEDULE 6.3 to this Agreement sets
forth the unaudited financial statements of HBN as of December 31, 1998 and the
balance sheet and income statement of Seller as of May 1, 1999 for the period of
January 1, 1999 until such date, as compiled by HBN. The financial information
of SCHEDULE 6.3 is referred to as the "Financial Statements." The Financial
Statements fairly present the income and expenses of HBN as of the date of the
balance sheets included in the Financial Statements.
6.3 Absence of Specified Changes. After the date of this
Agreement there has not been any:
(a) transaction by Seller except in the ordinary course of
business as conducted on that date;
(b) capital expenditure by Seller exceeding $10,000.00;
(c) material adverse change in the financial condition,
liabilities, assets, business or prospects of Seller;
(d) destruction, damage to, or loss of any assets of Seller
(whether or not covered by insurance) that materially and adversely
affects the financial condition, business or prospects of Seller;
(e) labor trouble or other event or condition of any character
materially and adversely affecting the financial condition, business,
assets or prospects of Seller;
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(f) change in accounting methods or practices (including,
without limitation, any change in depreciation or amortization policies
or rates) by Seller;
(g) revaluation by Seller of any of its assets;
(h) sale or transfer of any asset of Seller, except in the
ordinary course of business;
(i) execution, creation, amendment or termination of any
contract, agreement or license to which Seller is a party;
(j) loan by Seller to any person or entity, or guaranty by
Seller of any loan;
(k) waiver or release of any right or claim of Seller, except
in the ordinary course of business;
(l) mortgage, pledge or other encumbrance of any asset of
Seller;
(m) other event or condition of any character that has or
might reasonably have a material and adverse effect on the financial
condition, business, assets or prospects of Seller; or
(n) agreement by Seller to do any of the things described in
the preceding clauses (a) through (m).
6.4 Tax Returns and Audits. Within the times and in the
manner prescribed by law, Seller has filed all domestic and foreign, federal,
state and local tax returns required by law and has paid all taxes, assessments
and penalties due and payable. There are no present disputes as to taxes of any
nature payable by Seller.
6.5 Inventories. None of the Assets have been pledged as
collateral or are held by the Seller on consignment from others.
6.6 Other Tangible Personal Property. The Equipment described
in Section 1.2 and SCHEDULE 1.2 of this Agreement constitutes all the items of
tangible personal property owned by, in the possession of, or used by Seller in
connection with the business sold pursuant to this Agreement. The Equipment
listed in SCHEDULE 1.2 constitutes all tangible personal property necessary for
the conduct by Seller of the business as now conducted.
No Equipment used by Seller in connection with its business to
be sold pursuant to this agreement is held under any lease, security agreement,
conditional sales contract, or other title retention or security arrangement.
6.7 Trade Names, Trademarks and Copyrights. Except as set
forth in SCHEDULE 6.8, Seller does not use any trademark, service xxxx, trade
name or copyright in its business to be sold pursuant to this Agreement, or own
any trademarks, trademark registrations or applications, trade names, service
marks, copyrights, or copyright registrations or applications. No person (other
than Seller) owns any trademark, trademark registration or application, service
xxxx, trade name, copyright, or copyright registration or application, the use
of which is necessary or contemplated in connection with the performance of any
of the Contracts.
6.8 Title to Assets. Seller has good and marketable title to
all of the Assets and interests in Assets, whether personal, tangible, and
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intangible, which constitute all the Assets and interests in assets that are
used in the business of Seller to be sold pursuant to this Agreement. All the
Assets are free and clear of mortgages, liens, pledges, charges, encumbrances,
equities, claims, easements, rights of way, covenants, conditions, or
restrictions, except for(i) the lien of current taxes not yet due and payable;
and (ii) possible minor matters that, in the aggregate, are not substantial in
amount and do not materially detract from or interfere with the present or
intended use of any of the Assets, nor materially impair business operations.
All tangible personal property of Seller is in good operating condition and
repair, ordinary wear and tear excepted. Except as set forth on the appropriate
SCHEDULE listing such Assets, neither any officer, nor any director or employee
of Seller, nor any spouse, child or other relative of any of these persons,
owns, or has any interest, directly or indirectly, in any of the personal
property owned by or leased to Seller or any copyrights, patents, trademarks,
trade names or trade secrets licensed by Seller for use in the business to be
sold pursuant to this Agreement. Seller does not occupy any real property in
violation of any law, regulation or decree.
6.9 Customers and Sales. SCHEDULE 1.1 to this Agreement is a
correct and current list of all customers of Seller for the business and assets
to be sold pursuant to this Agreement. Seller has no information and is not
aware of any facts indicating that any of these customers intend to cease doing
business with Seller or materially alter the amount of the business that they
are presently doing with Seller.
6.10 Other Contracts. The Assets are not bound by any
distributor's or manufacturer's representative or agency agreement, any
agreement not entered into in the ordinary course of business, any indenture,
mortgage, deed of trust, lease or any agreement that is unusual in nature,
duration or amount. The performance by Buyer of any of the agreements described
on SCHEDULE 1.1 will not result in Buyer becoming bound or liable under any
distributor's or manufacturer's representative or agency agreement. All
contracts which will be assigned to or assumed by Buyer under this Agreement are
valid and binding upon the parties thereto. There is no default or event that
with notice or lapse of time, or both, would constitute a default by any party
to any of the agreements listed in SCHEDULE 1.1. Seller has not received notice
that any party to any of the agreements listed in SCHEDULE 1.1 intends to cancel
or terminate any of these agreements or to exercise or not exercise any options
under any of these agreements. Seller is not a party to, nor is Seller or the
Assets bound by, any agreement that is materially adverse to the business,
property, or financial condition of Seller.
6.11 Compliance with Laws. Seller has complied with, and is
not in violation of, applicable federal, state or local statutes, laws and
regulations (including, without limitation, any applicable environmental,
health, building, zoning or other law, ordinance or regulation) affecting the
Assets or the operation of its business to be sold pursuant to this Agreement.
6.12 Litigation. There is no suit, action, arbitration or
legal, administrative or other proceeding, or governmental investigation
pending, or to the best knowledge of Seller, threatened, against or affecting
Seller, or any of its business, assets or financial condition. Seller is not in
default with respect to any order, writ, injunction or decree of any federal,
state, local or foreign court, department, agency or instrumentality. Seller is
not presently engaged in any legal action to recover moneys due to it or damages
sustained by it.
6.13 Assets Sufficient for Conduct of Business. The Assets
constitute all of the assets required for Buyer to conduct the business of
Seller as it is presently conducted. Further, the Seller warrants that the
Equipment at each location in listed in SCHEDULE 1.2 is in fact in working
condition and does produce commercial quality pay-per-view movies on demand (a
process known as "video on demand"), in each of the guest rooms of the
facilities described in such schedule. Except as provided in the warranties of
this Article 6, this paragraph 6.13 and in paragraph 9.9 of Article 9; the
Equipment shall be sold "AS-IS-WHERE IS."
6.14 Agreement will Not Cause Breach or Violation. Neither the
entry into this Agreement nor the consummation of the transactions contemplated
hereby will result in or constitute any of the following: (i) a breach of any
term or provision of this Agreement; (ii) a default or an event that, with
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notice or lapse of time, or both, would be a default, breach or violation of the
Articles of Incorporation or Bylaws of Seller or any lease, license, promissory
note, conditional sales contract, commitment, indenture, mortgage, deed of trust
or other agreement, instrument or arrangement to which Seller is a party or by
which Seller or the Assets are bound; (iii) an event that would permit any party
to terminate any agreement or to accelerate the maturity of any indebtedness or
other obligation of the Seller; (iv) the creation or imposition of any lien,
charge or encumbrance on any of the Assets; or (v) the violation of any law,
regulation, ordinance, judgment, order or decree applicable to or affecting
Seller or the Assets.
6.15 Authority and Consents. Seller has the right, power,
legal capacity and authority to enter into, and perform its obligations under
this Agreement, and no approvals or consents of any persons other than Seller
are necessary in connection with it. The execution and delivery of this
Agreement by Seller have been duly authorized by all necessary corporate action
of Seller (including any necessary action by Seller's security holders), and
this Agreement constitutes a legal, valid and binding obligation of Seller
enforceable in accordance with its terms.
6.16 Corporate Documents. Seller has furnished to Buyer for
its examination (i) copies of the Articles of Incorporation and Bylaws of Seller
and (ii) the minute books of Seller containing all records required to be set
forth of all proceedings, consents, actions and meetings of the shareholders and
board of directors of Seller to consummate the transaction described in this
business.
6.17 Documents Delivered. Each copy or original of any
agreement, contract or other instrument which is identified in any exhibit
delivered by Seller or its counsel to Buyer (or its counsel or representatives),
whether before or after the execution hereof, is in fact what it is purported to
be by Seller and has not been amended, canceled or otherwise modified.
6.18 Full Disclosure. None of the representations and
warranties made by Seller or made in any letter, certificate or memorandum
furnished or to be furnished by The Seller, or on their behalf, contains or will
contain any untrue statement of a material fact, or omits any material fact the
omission of which would make the statements made misleading. There is no fact
known to Seller which materially adversely affects, or in the future may (so far
as Seller can now reasonably foresee) materially adversely affect the condition,
Assets, liabilities, business operations or prospects of Seller that has not
been set forth herein or heretofore communicated to Buyer in writing pursuant
hereto.
ARTICLE 7. REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER.
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Chequemate and Buyer jointly and severally represent and warrant to the
Seller and the Shareholders as follows:
7.1 Organization and Qualification. Chequemate is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Utah. All subsidiaries of Chequemate are legal entities that are
duly organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation. Chequemate has all requisite power
and authority to own or operate its properties and conduct its business as it is
now being conducted. Chequemate is duly qualified and in good standing as a
foreign corporation or entity authorized to do business in each of the
jurisdictions in which the character of the properties owned or held under lease
by it or the nature of the business transacted by it makes such qualification
necessary.
7.2 Capitalization; Subsidiaries. The authorized capital
stock of Chequemate consists of 500,000,000 shares of Chequemate's Common Stock.
As of May 1, 1999, 21,937,742 shares of Chequemate's Common Stock were issued
and outstanding, or subscribed for. All issued and outstanding shares of capital
stock of Chequemate are validly issued, fully paid, non-assessable and free of
preemptive rights.
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7.3 Authority Relative to this Agreement. Chequemate has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Board of Directors of
Chequemate, and no other corporate proceedings on the part of Chequemate are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
Chequemate and, assuming this Agreement constitutes a valid and binding
obligation of the Seller, this Agreement constitutes a valid and binding
agreement of Chequemate, enforceable against Chequemate in accordance with its
terms.
7.4 SEC Reports. Since January 1, 1999, to the best of its
knowledge Chequemate has filed all required forms, reports and documents
("Chequemate SEC Reports") with the Securities and Exchange Commission (the
"SEC") required to be filed by it pursuant to the federal securities laws and
the SEC rules and regulations thereunder, all of which have complied in all
material respects with all applicable requirements of the Securities Act of 1933
(the "Securities Act") and the Securities Exchange Act of 1934 (the "Exchange
Act"), and the rules and interpretive releases promulgated thereunder. None of
such Chequemate SEC Reports, including without limitation any financial
statements, notes, or schedules included therein, at the time filed, contained
any untrue statement of a material fact, or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, unless supplemented prior to the Closing Date.
Each of the consolidated balance sheets in or incorporated by reference
into the Chequemate SEC Reports fairly presents or will fairly present the
financial position of the entity or entities to which it relates as of its date,
and each of the related consolidated statements of operations and retained
earnings and cash flows or equivalent statements in the Chequemate SEC Reports
(including any related notes and schedules) fairly presents or will fairly
present the results of operations, retained earnings and cash flows, as the case
may be, of the entity or entities to which it relates for the period set forth
therein (subject in the case of unaudited interim statements, to normal year-end
audit adjustments) in each case in accordance with generally-accepted accounting
principles applicable to the particular entity consistently applied throughout
the periods involved, except as may be noted therein; and independent certified
public accountants for Chequemate have rendered or will render an unqualified
opinion with respect to each audited financial statement included in the
Chequemate SEC Reports. The consolidated financial statements included in the
Chequemate SEC Reports are hereinafter sometimes collectively referred to as the
"Chequemate Financial Statements."
7.5 Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement by Chequemate nor the consummation of
the transactions contemplated hereby nor compliance by Chequemate with any of
the provisions hereof will conflict with or result in any breach of any
provision of the Articles of Incorporation or By-laws of Chequemate or any
Subsidiary, require any consent, approval, authorization or permit of, or filing
with or notification to, any Governmental Authority, except pursuant to the
Securities Act and the Exchange Act, such filings and approvals as may be
required under the "blue sky", takeover or securities laws of various states, or
result in a default (with or without due notice or lapse of time or both) (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
contract, license, agreement or other instrument or obligation to which
Chequemate is a party or by which Chequemate, any of its Subsidiaries or any of
their respective assets may be bound, result in the creation or imposition of
any lien, charge or other encumbrance on the assets of Chequemate or violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
Chequemate or any of its respective assets.
7.6 Litigation, etc. Except as disclosed in the Chequemate SEC
Reports or in SCHEDULE 7.6 (collectively referred to as the "Disclosure"), there
is no action, claim, or proceeding pending or, to the knowledge of Chequemate,
threatened, to which Chequemate is or would be a party before any court or
Governmental Authority acting in an adjudicative capacity or any arbitrator or
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arbitration tribunal with respect to which there is a reasonable likelihood of a
determination having, or which, insofar as reasonably can be foreseen in the
future would have, a material adverse effect on Chequemate and since December
31, 1997, there have been no claims made or actions or proceedings brought
against any officer or director of Chequemate arising out of or pertaining to
any action or omission within the scope of his employment or position with
Chequemate, which claim, action or proceeding would involve a material adverse
effect on Chequemate taken as a whole. All material litigation and other
material administrative, judicial or quasi-judicial proceedings to which
Chequemate is a party or to which it has been threatened to be made a party, are
described in the Disclosure.
7.7 Compliance with Law and Permits. Chequemate has owned and
operated its properties and assets in substantial compliance with the provisions
and requirements of all laws, orders, regulations, rules and ordinances issued
or promulgated by all Governmental Authorities having jurisdiction with respect
thereto. All necessary governmental certificates, consents, permits, licenses or
other authorizations with regard to the ownership or operation by Chequemate of
their respective properties and assets have been obtained and no violation
exists in respect of such licenses, permits or authorizations. None of the
documents and materials filed with or furnished to any Governmental Authority
with respect to the properties, assets or businesses of Chequemate contains any
untrue statement of a material fact or fails to state a material fact necessary
to make the statements therein not misleading.
7.8 Chequemate Common Stock. The shares to be issued by
Chequemate pursuant to this Agreement have been duly authorized and, when issued
in accordance with the terms of the this Agreement, will be validly authorized
and issued and fully paid and nonassessable, and no shareholder of Chequemate
will have any preemptive rights or dissenter's right with respect thereto.
ARTICLE 8. SELLER'S OBLIGATIONS BEFORE CLOSING.
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Seller covenants that, except as otherwise agreed in writing
by Buyer, from the date of this Agreement until the Closing:
8.1 Buyer's Access to Premises and Information. Buyer and its
counsel, accountants and other representatives shall be entitled to have full
access during normal business hours to all Seller's properties, books, accounts,
records, contracts and documents of or relating to the Assets. Seller shall
furnish or cause to be furnished to Buyer and its representatives all data and
information concerning the business, finances and properties of Seller that may
reasonably be requested.
8.2 Conduct of Business in Normal Course. Seller shall carry
on its business and activities diligently and in substantially the same manner
as it previously has been carried on, and shall not make or institute any
unusual or novel methods of purchase, sale, lease, management, accounting or
operation that will vary materially from the methods used by Seller as of the
date of this Agreement.
8.3 Preservation of Business Relationships. Seller shall use
its best efforts, without making any commitments on behalf of Buyer, to preserve
its business organization intact, to keep available to Seller its present
employees, and to preserve its present relationships with suppliers, customers
and others having business relationships with it.
8.4 New Transactions. Seller shall not do, or agree to do
without the prior written consent of the Buyer, any of the following acts:
(a) enter into any contract, commitment or transaction not in
the usual and ordinary course of its business; or
Page 13 of 25
(b) enter into any contract, commitment or transaction in the
usual and ordinary course of business involving an amount exceeding
$100,000.00, individually, or $100,000.00 in the aggregate; or
(c) make any capital expenditures in excess of $50,000.00 for
any single item or $100,000.00 in the aggregate, or enter into any
leases of capital equipment or property under which the annual lease
charge is in excess of $50,000.00; or
(d) sell or dispose of any capital assets with a net book
value in excess of $ 50,000.00 individually, or $100,000.00 in the
aggregate.
8.5 Existing Agreements. Seller shall not modify, amend,
cancel or terminate any of its existing contracts or agreements, or agree to do
any of those acts.
8.6 Consent of Others. As soon as reasonably practical after
the execution and delivery of this Agreement, and in any event on or before the
sixtieth day after the Closing Date, Seller shall obtain the written consent to
the assignment to and substitution of the Buyer in place of HBN of the persons
or entities described as the "Hotel" in the agreement, referred to in SCHEDULE
1.1, and will furnish to Buyer executed copies of the consents to the assignment
of the Contracts.
8.7 Representations and Warranties True at Closing. Seller
shall use its best efforts to assure that all representations and warranties of
Seller set forth in this Agreement and in any written statements delivered to
Buyer by Seller under this Agreement will also be true and correct as of the
Closing Date, as if made on that date, and that all conditions precedent to
Closing shall have been met.
8.8 Statutory Filings. Seller shall cooperate fully with Buyer
in preparing and filing all information and documents deemed necessary or
desirable by Buyer under any statutes or governmental rules or regulations
pertaining to the transactions contemplated by this Agreement.
ARTICLE 9. CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE
-------------------------------------------
The obligations of Buyer to purchase the Assets under this
Agreement are subject to the satisfaction, at or before the Closing, of all the
conditions set out below in this Article 9. Buyer may waive any or all of these
conditions in accordance with Section 14.2 hereof; provided however, that no
such waiver of a condition shall constitute a waiver by Buyer of any of its
other rights or remedies, at law or in equity, if The Seller shall be in default
of any of its representations, warranties or covenants under this Agreement.
9.1 Accuracy of the Seller's Representations and Warranties.
All representations and warranties by The Seller in this Agreement or in any
written statement that shall be delivered to Buyer by The Seller under this
Agreement shall be true on and as of the Closing Date as though made at that
time.
9.2 Absence of Liens. Within sixty (60) days of the Closing,
Buyer shall have received UCC search reports dated as of a date not more than
five days before the Closing Date issued by the Secretaries of State for
California, Idaho, Nevada, New Mexico, Texas, Utah and Washington indicating
that there are no filings under the Uniform Commercial Code on file with such
Secretary of State which name King Farms, Inc., Hotel Movie Express, Inc.,
MarCap Corporation or Hospitality Business Network, Inc. as debtor or otherwise
indicating any lien on the Assets, except for the liens otherwise disclosed in
the Schedules hereto.
9.3 The Seller' Performance. The Seller shall have performed,
satisfied, and complied with all covenants, agreements, and conditions required
by this Agreement to be performed or complied with by The Seller on or before
the Closing Date.
Page 14 of 25
9.4 Absence of Litigation. No action, suit or proceeding
before any court or any governmental body or authority, pertaining to the
transaction contemplated by this Agreement or to its consummation, shall have
been instituted or threatened on or before the Closing Date.
9.5 Corporate Approval. The execution and delivery of this
Agreement by Seller, and the performance of its covenants and obligations under
it, shall have been duly authorized by all necessary corporate action, and Buyer
shall have received copies of all resolutions pertaining to that authorization,
certified by the secretary of Seller.
9.6 Certificate Regarding Tax Obligations. Buyer shall have
received a Certificate of the President and Secretary of the Seller stating
that, as of the Closing Date, no contributions, interest, or penalties are
unpaid by Seller with regard to any sales taxes, payroll taxes, or unemployment
or workers' compensation contributions of the Seller for periods prior to June
1, 1999.
9.7 Consents. All necessary agreements and consents of any
parties to the consummation of the transaction contemplated by this Agreement,
or otherwise pertaining to the matters covered by it, shall have been obtained
by Seller and delivered to Buyer.
9.8 Approval of Documentation. The form and substance of all
certificates, instruments and other documents delivered to Buyer under this
Agreement shall be satisfactory in all reasonable respects to Buyer and its
counsel.
9.9 Condition of Assets. The Assets shall not have been
materially or adversely affected in any way as a result of any fire, accident,
storm, or other casualty or labor or civil disturbance or act of God or the
public enemy.
9.10 Completion of Due Diligence. All due diligence reasonably
required by the Buyer has been completed, and the results of such due diligence
are satisfactory to the Buyer in its sole discretion and judgement with regard
to all aspects of the transaction, including by not limited to matters relating
to the Assets, or the intellectual property or financial prospects of the
business to be sold pursuant to this Agreement.
9.11 Compliance with Bulk Sales Laws. The parties have
complied with all applicable Bulk Sales Laws or similar provisions.
ARTICLE 10. CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE
--------------------------------------------
The obligations of Seller to sell and transfer the Assets
under this Agreement are subject to the satisfaction, at or before the Closing,
of all the following conditions:
10.1 Accuracy of Buyer's Representations and Warranties. All
representations and warranties by Buyer contained in this Agreement or in any
written statement delivered by Buyer under this Agreement shall be true on and
as of the Closing as though such representations and warranties were made on and
as of that date.
10.2 Buyer's Performance. Buyer shall have performed and
complied with all covenants and agreements, and satisfied all conditions that it
is required by this Agreement to perform, comply with, or satisfy, before or at
the Closing.
10.3 Buyer's Corporate Approval. Buyer shall have received
corporate authorization and approval for the execution and delivery of this
Agreement and all corporate action necessary or proper to fulfill the
obligations of Buyer to be performed under this Agreement on or before the
Closing Date.
Page 15 of 25
ARTICLE 11. EMPLOYEE PLANS
--------------
Buyer is not assuming any obligations of Seller relating to any
Employee Plan as defined herein, and Seller represents that the Seller has no
Employee Plan in effect or to which the Seller is subject. For purposes of this
Agreement, the term "Employee Plan" includes all pension, retirement,
disability, medical, dental or other health insurance plans, life insurance or
other death benefit plans, profit sharing, deferred compensation, stock option,
bonus or other incentive plans, vacation benefit plans, severance plans, or
other employee benefit plans or arrangements including, without limitation, any
pension plan as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974 ("ERISA") and any welfare plan as defined in Section 3(1)
of ERISA, whether or not funded, covering any employee or to which Seller is a
party or bound or makes or has made any contribution or by which Seller may have
any liability to any employee (including any such plan formerly maintained by or
in connection with which Seller may have any liability to any employee, and any
such plan which is a multi employer plan as defined in Section 3(37) (A) of
ERISA).
ARTICLE 12. SELLER'S OBLIGATIONS AFTER THE CLOSING
--------------------------------------
12.1 Preservation of Goodwill. Following the Closing, Seller
will restrict its activities so that Buyer's reasonable expectations with
respect to the goodwill, business reputation, employee relations and prospects
connected with the Assets will not be materially impaired. In furtherance, but
not in limitation of, this general obligation, Seller agrees that, for a period
of the longer of (a) three (3) years following the Closing Date; or (b) for the
term of the contracts attached as part of SCHEDULE 1.1;
(a) Seller will not compete with the Buyer at the location of
the hotels referred to in SCHEDULE 1.1. For the purposes of this
Agreement, the term "compete" shall mean calling on, soliciting or
taking away, as a client or customer, or attempting to call on, solicit
or take away as a client or customer any individual, partnership,
corporation or association that is referred to in SCHEDULE 1.1;
(b) Seller will not disclose to any person or use for its own
benefit any price lists, pricing data, customer lists, or similar
matters possessed by them relating to the Assets or the business
transferred to Buyer unless they first clearly demonstrate to Buyer
that such matters are at, the time of the proposed disclosure or use,
of common knowledge within the trade.
12.2 Change of Name. Seller agrees that after the Closing Date
it shall not use or employ in any manner directly or indirectly the name "Hotel
Movie Express, Inc.," or any variation thereof.
12.3 Seller's Indemnities. Seller shall indemnify, defend and
hold harmless Chequemate, the Buyer and their officers, directors, and agents
against and in respect of any and all claims, demands, losses, costs, expenses,
obligations, liabilities, damages, recoveries and deficiencies, including
interest, penalties and reasonable attorneys' fees, that Chequemate or the
Buyer, or their officers, directors, or agents shall incur or suffer, which
arise, result from or relate to any breach of, or failure by Seller to perform,
any of its representations, warranties, covenants or agreements in this
Agreement or in any schedule, certificate, exhibit or other instrument furnished
or to be furnished by Seller under this Agreement. Notwithstanding any other
provision of this Agreement, Seller shall not be liable to Chequemate, or to the
Buyer, or their officers, directors, or agents on any warranty, representation
or covenant made by Seller in this Agreement, regarding any single claim, loss,
expense, obligation or other liability that does not exceed $10,000; provided,
however, that when the aggregate amount of all such claims, losses, expenses,
obligations and liabilities not exceeding $10,000 each reaches $10,000, Seller
shall thereafter be liable in full for all such breaches and indemnities, and
regarding all those claims, losses, expenses, obligations, and liabilities.
Page 16 of 25
12.4 Access to Records. From and after the Closing, Seller
shall allow Buyer, and its counsel, accountants and other representatives, such
access to records which after the Closing are in the custody or control of the
Seller as Buyer reasonably requires in order to comply with its obligations
under the law or under contracts assumed by Buyer pursuant to this Agreement.
12.5 Non-solicitation of Employees. Seller shall not, prior to
the third anniversary of the Closing solicit any employee of Buyer to leave such
employment if such employee was at any time between the date hereof and the
Closing an employee of Seller.
ARTICLE 13. COSTS
13.1 Finder's or Broker's Fees. Each of the parties represents
and warrants that it has dealt with no broker or finder in connection with any
of the transactions contemplated by this Agreement, and, insofar as it knows, no
broker or other person is entitled to any commission or finder's fee in
connection with any of these transactions.
13.2 Expenses. Each of the parties shall pay all costs and
expenses incurred or to be incurred by it in negotiating and preparing this
Agreement and in closing and carrying out the transactions contemplated by this
Agreement.
ARTICLE 14. SECURITIES ASPECTS OF AGREEMENT
-------------------------------
14.1 All parties to this Agreement mutually understand, agree
and covenant that any referenced sale or other disposition of any security under
this Agreement shall be controlled and governed by this section. Specifically
should there arise any conflict of application or interpretation under this
section and any other provision or section of this Agreement, this section shall
be given primary definition and control. The term "securities" for the purposes
of this Agreement shall mean and include all shares of Chequemate, and any
warrants to acquire those shares as well as any other instrument or obligation
customary or commonly described as a security. Each of the following terms and
conditions of the issuance and distribution of the securities shall be fully
applicable unless otherwise specifically waved or treated in the following
paragraphs.
14.2 Each security issued pursuant to the terms of this
Agreement shall be a "restricted" security unless otherwise specifically
referenced as being issued pursuant to a registration or offering.
14.3 The Seller understands and agrees that a restricted
security for the purposes of this Agreement is one which is issued without
meeting registration requirements under both federal and state law within the
United States. Each party to this Agreement further agrees and acknowledges that
the nature of restricted security is that it is not freely tradeable. That is,
the holder of such security cannot immediately market or further distribute such
security in the open market, or through private transactions without the express
written consent of the issuer, primarily Chequemate under the terms of this
Agreement.
14.4 The Seller fully acknowledges and understands that the
resale of a restricted security will normally require substantial holding
periods unless subsequently subject to an intervening registration under
applicable federal and state securities laws. The Seller acquiring restricted
stock under this Agreement further acknowledges and agrees that the principal,
though not exclusive, means by which restricted securities are resold under
United States law and conforming state laws and regulations is Securities and
Exchange Commission ("SEC") Rule 144, which essentially requires a holding
period of one year before the stock can be resold or any interest therein
further sold or assigned. In general terms, Rule 144 would require that there be
current public information about the Company before the provisions of the Rule
could be relied upon for subsequent resales, that the aforementioned holding
period had been met, that the sales occurred through independent arms-length and
unsolicited brokerage transactions, that certain volume limitations on the
Page 17 of 25
number of shares sold in each three month period be observed, and that a report
of sales will be filed with the SEC. The Seller understands that the foregoing
constitutes only a general description of Rule 144 and that such person is or
has the means to become familiar with all of the specific provisions and terms
of Rule 144 through his independent legal advisors. The Seller further
acknowledges and agrees that while Rule 144 is not exclusive, that it is
anticipated and intended that it would be the primary means by which securities
acquired under this Agreement could be resold absent the specific registration
provisions of this Agreement.
14.5 The Seller further acknowledges and agrees that, except
as specifically provided by the terms of this Agreement, none of the corporate
parties will have any obligation to register securities issued, and have no
present intention to register such securities other than is specifically
provided for by this Agreement. Each person under this Agreement acquiring
securities further understands and agrees that individual registration of
securities, absent registration by the issuer, is usually not practical and
should not be relied upon as a means for resales or other distributions of
securities acquired under this Agreement.
14.6 Any entity acquiring securities pursuant to this
Agreement with the intent to divide such securities among its principal
shareholders as part of the acquisition process, will be responsible for
obtaining the knowledgeable consent and agreement of such actual shareholder to
the terms of this Agreement, specifically referencing this paragraph.
14.7 The Seller fully understands and agrees that should such
person be deemed to be in a "control" position as to Chequemate incident to the
completion of this Agreement, that such person must comply with the volume
limitations of Rule 144 to complete sales of his or her securities acquired,
except for securities which have been otherwise registered pursuant to this
Agreement. A control person has been defined by the SEC, and by most states
securities regulatory agencies, as a person who has the capacity to exercise
control over the issuing company. While no precise mathematical formulation of a
control person is applicable to all situations, the following are generally
presumed to be control people:
(i) a person holding 10% or more of the shares
of the issuing company;
(ii) any principal officer or any director of the
issuing company.
14.8 Seller represents that it is acquiring the Shares for its
own account, for investment and not with a view to the distribution or resale
thereof. The Seller further represents that its financial and other
circumstances are such that it has adequate means of providing for its current
and anticipated future needs without having to sell or otherwise dispose of the
Shares, and that the Seller is able to bear the economic risks of this
investment and consequently are able to hold the Shares for an indefinite period
of time and to sustain the loss of their entire investment in the Shares, in the
event such a loss should occur.
14.9 Seller acknowledges and represents that, due to its
knowledge and experience in financial and business matters, its investment
experience generally and its experience with investments similar to the Shares
in particular, Seller, either alone or together with its advisors, if any, is
able to understand and evaluate the nature and merits of, and the risks involved
in, its proposed investment in the Shares. Seller, either alone or together with
its advisors, if any, has the capacity to protect its own interests in
connection with this transaction.
14.10 Seller acknowledges that the Buyer and Chequemate have
furnished or made available to Seller all financial and other data relating to
Chequemate, required by Seller to enable it to make an informed decision
concerning its approval of this transaction and its resulting acquisition of the
Shares. In particular, Seller acknowledges that it has received and reviewed the
financial statements of Chequemate for the past two years and complete copies of
all of the Chequemate SEC Reports for such period. Seller acknowledges that it
has been informed that Chequemate has not previously conducted business except
as disclosed in the Chequemate SEC Reports. Seller represents and acknowledges
Page 18 of 25
that it and its principals have been engaged in the business of providing
pay-per-view and cable services in the hotel/lodging industry, which is intended
area of business for which the Assets are being acquired by the Buyer. In this
regard, Seller has been acquainted with the Chief Executive Officer of
Chequemate. Seller further represents and acknowledges that it has had full
opportunity to obtain additional information from Chequemate to verify the
accuracy of the information supplied by it and to evaluate the merits of its
investment decision, including, without limitation, full opportunity to ask
questions of and receive satisfactory answers and other information from
Chequemate, its officers, directors and other persons acting on its behalf, and
all such questions have been answered, and such other information supplied, to
Seller's full satisfaction. Seller is aware of, and has thoroughly evaluated, to
its own satisfaction, the high degree of risk associated with investing in
Chequemate, including but not limited to, the specific risks associated with
Chequemate's business and the risks associated with the ownership of common
stock.
14.11 Seller hereby represents and warrants to Chequemate that
Seller is an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D. Seller further represents and warrants that it is a corporation,
and that each of the equity owners of Seller are "accredited investors" by
reason of the fact that each of the equity owners meets one or both of the
following criteria:
(i) The owner is a natural person whose
individual net worth, or joint net worth
with owner's spouse, at the time of this
agreement, exceeds $1,000,000; or
(ii) The owner is a natural person who had an
individual income in excess of $200,000 in
each of the two most recent years, or joint
income with owner's spouse in excess of
$300,000 in each of those years, and has a
reasonable expectation of reaching the same
income level in the current year.
14.12 Chequemate agrees that it shall (i) file or cause to be
filed with the Commission, not later than September 6, 1999, a registration
statement (the "Registration Statement") on Form S-3 or other applicable form,
providing for the sale by the Seller of all of the Shares and (ii) use its best
efforts to have the Registration Statement declared effective. The Registration
Statement shall cover the issuance of the Shares and the sale by the Seller or
the Seller's transferee in the manner or manners designated by the Seller.
Chequemate agrees to keep the Registration Statement continuously effective for
one year from the Closing Date.
14.13 Chequemate shall pay all expenses incident to its
performance of or compliance with its obligations under Section 14.12,
including, without limitation, all registration, filing, listing and stock
exchange fees, all fees and expenses of complying with state securities or blue
sky laws of the state of Illinois, all the fees, disbursements and other charges
of counsel for Chequemate and of its independent public accountants, but
excluding commissions and applicable transfer taxes, if any, which commissions
and transfer taxes shall be borne by the Seller or sellers of the Shares in all
cases. The Seller or sellers of the Shares shall pay all expenses and fees
related to complying with state securities or blue sky laws of states other than
the state of Illinois.
14.14 Chequemate may require the Seller or the sellers of the
Shares to furnish Chequemate such information regarding such sellers and the
distribution of the securities covered by the Registration Statement as
Chequemate may from time to time reasonably request in writing and as is
required by applicable laws and regulations.
14.15 Securities Indemnification:
(a) Chequemate hereby agrees to indemnify and hold harmless
the Seller, including any other holder of Shares, and their respective
directors, officers, agents and advisers (collectively, the "Agents")
and each person, if any, who controls within the meaning of Section 15
of the Securities Act (the "Control Person") the Seller or any such
holder against any losses, claims, damages or liabilities, joint or
several, to which the Seller, any such other holder of Shares, any such
Page 19 of 25
Agent, or any such Control Person may become subject, under the
Securities Act, the Exchange Act or any other Federal or state law,
including common law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of a material
fact contained in (A) a registration statement filed for any
registration under this Agreement, (B) in any Blue Sky Law application
or other document executed by Chequemate specifically for such
registration or (C) based upon information furnished by Chequemate
filed in any state or other jurisdiction in order to qualify any or all
of the Shares under the securities laws thereof (any such application,
document or information in (B) and (C) above being hereinafter referred
to as a "Blue Sky Application"); (ii) the omission or alleged omission
to state in such registration statement or Blue Sky Application a
material fact required to be stated therein or necessary to make the
statements therein not misleading; or (iii) any untrue statement or
alleged untrue statement of a material fact contained in such
registration statement or Blue Sky Application or the 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 will
reimburse such parties for any reasonable attorneys' fees or other
expenses reasonably incurred by them or any of them in connection with
investigating or defending against any such loss, claim, damage,
liability or action; provided, however, that Chequemate will not be
liable or responsible for reimbursement of expenses in any such case to
the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon and in conformity
with written information furnished to Chequemate by or on behalf of
such indemnified party specifically for use with reference to or in the
preparation of a registration statement, any such pre- or
post-effective amendment or supplement thereof, or any Blue Sky
Application. This indemnity agreement is in addition to any liability
which Chequemate may otherwise have. The indemnity agreement of
Chequemate contained in this Section 14.15 shall remain operative and
in full force and effect regardless of any investigation made by or on
behalf of any of the Seller, any other holder of Shares, any Agent or
any Control Person and shall survive the registration and sale of any
Shares by the Seller or any such holder.
(b) The Seller and each other holder of Shares, by including
such holders Shares in the Registration Statement, agrees, severally,
to indemnify and hold harmless Chequemate, its Agents and the Control
Persons thereof to the same extent as the indemnity from Chequemate to
the Seller, such other holders, their respective Agents and Control
Persons but only with respect to any untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon or in
conformity with written information relating to such person by such
person expressly for use in connection with any registration statement,
pre- or post-effective amendment or supplement thereto or in any Blue
Sky Application filed pursuant to this Agreement. This indemnity
agreement will be in addition to any liability that the Seller or any
such other holder may otherwise have. The indemnity agreement of the
Seller and such other holders contained in this Section 14.15 shall
remain operative and in full force and effect regardless of any
investigation made by or on behalf of Chequemate or any of its Control
Persons and shall survive the registration and sale of any Shares and
the expiration or termination of this Agreement.
(c) If any action or claim shall be brought or asserted by a
party entitled to indemnification under paragraph 14.15(a) or 14.15(b)
(as the case may be) of this Agreement (each an "Indemnified Party") in
respect of which indemnity may be sought from the responsible party
identified in said paragraph 14.15(a) or 14.15(b) (as the case may be)
(the "Indemnifying Party"), the Indemnified Party shall promptly notify
the Indemnifying Party in writing, and the Indemnifying Party shall
assume the defense thereof, including the employment of counsel
satisfactory to each Indemnified Party and the payment of all
reasonable legal and other expenses. The failure of any Indemnified
Party to notify the Indemnifying Party will not relieve the
Indemnifying Party of any liability for indemnification which it may
have to any Indemnified Party under this Section 14.15 unless the
Indemnifying Party has been substantially prejudiced by such failure
Page 20 of 25
and in no event will such failure relieve the Indemnifying Party from
any liability it may have to any Indemnified Party otherwise than under
this Section 14.15. Each Indemnified Party shall have the right to
employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party unless (i) the employment thereof
has been specifically authorized by the Indemnifying Party in writing,
or (ii) the Indemnifying Party has failed to assume the defense and
employ counsel or (iii) the named parties to any such action (including
any impleaded parties) include both (A) any Indemnified Party and (B)
the Indemnifying Party, and, in the judgment of counsel to any
Indemnified Party, it is advisable for such Indemnified Party to be
represented by separate counsel (in which case the Indemnifying Party
shall not have the right to assume the defense of such action on behalf
of such Indemnified Party; provided, however, it being understood that
the Indemnifying Party shall, in connection with any one such action or
separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of only
one separate firm of attorneys at any time for each Indemnified Party
pursuant to this Agreement in each jurisdiction, and each such firm
shall be designated in writing by such Indemnified Party holding a
majority of the Shares being registered for all Indemnified Parties).
The Indemnifying Party shall not be liable for any settlement of any
such action effected by an Indemnified Party without the written
consent of the Indemnifying Party (which shall not be withheld
unreasonably in light of all factors of importance to such Indemnified
Party), but if settled with such written consent, or if there be a
final judgment or decree for the plaintiff in any such action by a
court of competent jurisdiction and the time to appeal shall have
expired or the last appeal shall have been denied, the Indemnifying
Party agrees to indemnify and hold harmless each Indemnified Party from
and against any loss or liability by reason of such settlement or
judgment.
(d) If the indemnification provided for in this Agreement is
held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage or
expense referred to therein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party thereunder, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such
loss, liability, claim, damage or expense in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on
the one hand and of the Indemnified Party on the other hand in
connection with the statements or omissions which resulted in such
loss, liability, claim, damage or expense as well as any other relevant
equitable considerations. The relevant fault of the Indemnifying Party
and the Indemnified Party shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The foregoing contribution agreement shall in no way affect
the contribution liabilities of any persons having liability under
Section 11 of the Securities Act other than Chequemate, the Seller and
such other holders. No contribution shall be requested with regard to
the settlement of any matter from any party who did not consent to the
settlement, provided, however, that such consent shall not be
unreasonably withheld in light of all factors of importance to such
party. Notwithstanding any provisions of this Section 14.15, no person
guilty of a 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.
ARTICLE 15. FORM OF AGREEMENT
-----------------
15.1 Headings. The subject headings of the Articles and
Sections of this Agreement are included for purposes of convenience only, and
shall not affect the construction or interpretation of any of its provisions.
Page 21 of 25
15.2 Entire Agreement; Modification; Waiver. This Agreement
constitutes the entire agreement between the parties pertaining to the subject
matter contained in it and supersedes all prior and contemporaneous agreements,
representations, and understandings of the parties. No supplement, modification
or amendment of this Agreement shall be binding unless executed in writing by
all the parties. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute, a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver. No waiver shall be
binding unless executed in writing by the party making the waiver.
15.3 Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
ARTICLE 16. PARTIES
-------
16.1 Parties in Interest. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it and their
respective successors and assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third persons to any
party to this Agreement, nor shall any provisions give any third persons any
right of subrogation or action over against any party to this Agreement.
16.2 Assignment. This Agreement shall be binding on and shall
inure to the benefit of the parties to it and their respective heirs, legal
representatives, successors and assigns.
ARTICLE 17. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES
-----------------------------------------------------
All representations, warranties, covenants and agreements of the
parties contained in this Agreement, or in any instrument, certificate, opinion
or other writing provided for in it, shall survive the Closing.
ARTICLE 18. NOTICES
-------
All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service if served personally on the party to whom notice is to be given,
or on the third day after mailing if mailed to the party to whom notice is to be
given, by first class mail, registered or certified, postage prepaid, and
properly addressed as follows:
Seller: King Farms, Inc.
XX #0
Xxxxxxxx, XX 00000
Buyer: C-3D Digital, Inc.
Attn: J. Xxxxxxx Xxxx
00 Xxxx 000 Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
with copy to: Xxxxx X. Xxxx
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Any party may change its address for purposes of this Article by giving the
other parties written notice of the new address in the manner set forth above.
Page 22 of 25
ARTICLE 19. GOVERNING LAW
-------------
This Agreement shall be construed in accordance with, and
governed by the laws of the State of
Utah.
ARTICLE 20. MISCELLANEOUS
-------------
20.1 Announcements. The Seller will not make any announcements
to the public or to employees of Seller concerning this Agreement or the
transactions contemplated hereby without the prior approval of Buyer, which will
not be unreasonably withheld. Notwithstanding any failure of Buyer to approve
it, The Seller may make an announcement of substantially the same information as
theretofore announced to the public by Buyer or any announcement required by
applicable law, but the Seller shall in either case notify Buyer of the contents
thereof reasonably promptly in advance of its issuance.
20.2 References. Unless otherwise specified, references to
Sections or Articles are to Sections or Articles in this Agreement.
IN WITNESS WHEREOF, the parties to this Agreement have duly
executed it as of the day and year first above written.
C-3D DIGITAL, INC., CHEQUEMATE TECHNOLOGIES,
a Utah corporation INC., a Utah corporation
By /s/J. Xxxxxxx Xxxx By
-------------------- ----------------------
J. Xxxxxxx Xxxx
Its: CEO Its:
SELLER
KING FARMS, INC. dba
HOTEL MOVIE EXPRESS, INC.,
an Illinois corporation
By /s/ Xxx Xxxxxxx
-----------------
Xxx Xxxxxxx
Its:
Page 23 of 25
SCHEDULE 1.1
CONTRACTS
Site Name of Hotel/Motel; City, #- Rooms Telephone and Expiration Date
State Facsimile of Contract
----------------------------------------------------------------------------------------------------------------
0000 X.X. Xxxxxxx Xxxx Rohnert 145 Tele:(000) 000-0000
Park, CA Fax: (000) 000-0000
----------------------------------------------------------------------------------------------------------------
0407 X.X. Xxxxxxx Motel 116 Tele:(000) 000-0000
Sacramento, CA Fax: (000) 000-0000
----------------------------------------------------------------------------------------------------------------
0405 X.X. Xxxxxx\Tahoe 100 Tele:(000) 000-0000
Truckee, CA Fax: (000) 000-0000
----------------------------------------------------------------------------------------------------------------
0408 B.W. Beachfront Inn 151 Tele:(409) 000-0000
Xxxxxxxxx, XX Fax: (000) 000-0000
----------------------------------------------------------------------------------------------------------------
0417 Comfort Inn Midt 154 Tele:(000) 000-0000
Albuquerque, NM Fax: (000) 000-0000
----------------------------------------------------------------------------------------------------------------
0400 Comfort Inn Las Vegas 109 Tele:(000) 000-0000
Las Vegas, NV Fax: (000) 000-0000
----------------------------------------------------------------------------------------------------------------
0424 Discover Inn 154 Tele:(000) 000-0000
Ukiah, CA Fax: (000) 000-0000
----------------------------------------------------------------------------------------------------------------
0000 Xxxxxx Inn 105 Tele:(000) 000-0000
Eureka, CA Fax: (000) 000-0000
----------------------------------------------------------------------------------------------------------------
0412 Flagship Hotel 220 Tele:(800) 000-0000
Xxxxxxxxx Xxxxxx, XX Fax: (000) 000-0000
----------------------------------------------------------------------------------------------------------------
0422 Holiday Inn Denton 144 Tele:(000) 000-0000
Denton, TX Fax: (000) 000-0000
----------------------------------------------------------------------------------------------------------------
0415 Holiday Inn Express 80 Tele:(000) 000-0000
Socorro, NM Fax: (000) 000-0000
----------------------------------------------------------------------------------------------------------------
0411 Holiday Inn Express 100 Tele:(000) 000-0000
Mill Valley, CA Fax: (000) 000-0000
----------------------------------------------------------------------------------------------------------------
0414 Holiday Inn Green 138 Tele:(000) 000-0000
Greenville, TX Fax: (000) 000-0000
----------------------------------------------------------------------------------------------------------------
0426 Mammoth Mountain 213 Tele:(760) 000-0000
Xxxxxxx Xxxx, XX Fax: (000) 000-0000
--------------------------------------------------------------------------------
0401 Quality Inn Valley 127 Tele:(000) 000-0000
Spokane, WA Fax: (000) 000-0000
----------------------------------------------------------------------------------------------------------------
0423 Reston SLC 98 Tele:(801) 000-0000
Xxxx Xxxx Xxxx, XX Fax: (000) 000-0000
----------------------------------------------------------------------------------------------------------------
Page 24 of 25
0429 Rodeway Inn, Sierra Nevada 166 Tele:(000) 000-0000
Inn Fax: (000) 000-0000
Mammoth Lake, CA
------------------------------------------------------------------------------------
0419 Sandman Motel 112 Tele:(707) 000-0000
Xxxxx Xxxx, XX Fax: (000) 000-0000
------------------------------------------------------------------------------------
0427 St. Trapez 160 Tele:(000) 000-0000
Las Vegas, NV Fax: (000) 000-0000
------------------------------------------------------------------------------------
0428 Templin's Resort 167 Tele:(208) 000-0000
Xxxx Xxxxx, XX Fax: (000) 000-0000
------------------------------------------------------------------------------------
0403 Toll House 97 Tele:(000) 000-0000
Los Gatos, CA Fax: (000) 000-0000
------------------------------------------------------------------------------------
Page 25 of 25
