SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO 13d-
1(a) AND AMENDMENTS THERETO FILED PURSUANT TO 13d-2(a)
(Amendment No. )*
International Dispensing Corporation
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(Name of Issuer)
COMMON STOCK, PAR VALUE $.001 PER SHARE
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(Title of Class of Securities)
459407 10 2
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(CUSIP Number)
Martin R. Bring, Esq.
Wolf, Block, Schorr and Solis-Cohen LLP
250 Park Avenue
New York, New York 10177
Tel. No. (212) 986-1116
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
October 25, 1999
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(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note. Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1 (a) for other parties to whom copies are to
be sent.
(Continued on the following pages)
(Page 1 of 32 Pages)
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* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to the "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE>
SCHEDULE 13D
CUSIP No. 459407 10 2 Page 2 of 32 Pages
1 NAME OF REPORTING PERSON S.S.
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
George Kriste
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a)[ ] (b)[ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
PF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) OR 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
7. NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH SOLE
VOTING POWER
1,043,333
8. NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH SHARED
VOTING POWER
0
9. NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH SOLE
DISPOSITIVE POWER
1,043,333
10. NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH SHARED
DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,043,333
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.1%
14 TYPE OF REPORTING PERSON*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Item 1. Security and Issuer.
(a) This Statement on Schedule 13D relates to the common stock, par value
$.001 per share (the "Common Stock"), of International Dispensing Corporation, a
Delaware corporation ("IDC" or the "Company").
(b) The principal executive offices of IDC are located at 2500 Westchester
Avenue, Suite 304, Purchase, NY 10577.
ITEM 2. IDENTITY AND BACKGROUND.
(a) This Statement on Schedule 13D is being filed by George Kriste (the
"Reporting Person").
(b) The Reporting Person's business address is 20643 Seabord Road, Malibu,
California 90265.
(c) The Reporting Person is a private investor, principally through Bedrock
Associates, LLC, an investment firm with an address at 20643 Seabord Road,
Mailbu, California 90265.
(d) During the last five years, the Reporting Person has not been convicted
in any criminal proceeding (excluding traffic violations or similar
misdemeanors) nor during that time has the Reporting Person been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
which resulted in a judgment, decree or final order enjoining the Reporting
Person from future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or any finding of any violation with
respect to such laws.
(e) The Reporting Person is a citizen of the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
In October, 1995, the Company issued to the Reporting Person an aggregate of
130,000 shares of Common Stock in connection with the settlement of certain
litigation.
On January 27, 1998, the Reporting Person purchased an aggregate of 150,000
shares of Common Stock for an aggregate purchase price of $90,000, which amount
was paid with the Reporting Person's personal funds.
On October 25, 1999 the Reporting Person purchased 82.5 shares of the
Company's Series A Redeemable Convertible Preferred Stock ("Preferred Stock")
for an aggregate purchase price of $165,000 which amount was paid with the
Reporting Person's personal funds. The Preferred Stock is immediately
convertible into Common Stock initially at the rate of one share of Common Stock
for each $.22 in liquidation value of the Preferred Stock converted. The
conversion rate is subject to adjustment in certain circumstances.
ITEM 4. PURPOSE OF TRANSACTION.
The Reporting Person acquired the Common Stock and Preferred Stock for
investment purposes only. The Reporting Person purchased the Preferred Stock
from the Company on October 25, 1999 pursuant to
(Continued on the following pages)
(Page 3 of 32 Pages)
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a Preferred Stock Subscription Agreement dated as of September 23, 1999 among
the Company and certain investors, including the Reporting Person (collectively,
the "Investors"), as amended by Amendment No. 1 thereto, dated as of October 25,
1999 (collectively, the "Subscription Agreement").
The Subscription Agreement provides that the Investors agree to purchase an
aggregate of 1,000 shares of Preferred Stock at an initial closing and one or
more subsequent closings to be scheduled by the Company subject to the
satisfaction of certain conditions. The Company sold to the Investors an
aggregate of 350 shares of Preferred Stock at the initial closing. The Reporting
Person has committed to purchase approximately 23.6% of the shares of Preferred
Stock to be sold at subsequent closings (approximately 153.2 additional shares
of Preferred Stock for an aggregate purchase price of $306,400 if the maximum
number of shares of Preferred Stock are sold pursuant to the Subscription
Agreement). However, any Investor may terminate his commitment to purchase
additional shares upon notice to the Company and no Investor has the obligation
to purchase any shares of Preferred Stock after August 31, 2000.
The holders of Preferred Stock are entitled to receive cumulative dividends
at the rate of 12% per year. In the discretion of the Company, the dividends may
be paid in cash, in additional shares of Preferred Stock or any combination of
the foregoing. The holders of Preferred Stock, voting as a separate class, are
entitled to elect one director of the Company. In addition, the holders of
Preferred Stock are entitled to vote on all matters (including elections of
directors) together with the holders of the Common Stock with each share of
Preferred Stock having the number of votes equal to the number of whole and
fractional shares of Common Stock into which such share is then convertible (as
of the date hereof each share of Preferred Stock would have approximately 9,091
votes).
Except as set forth herein, the Reporting Person has no plans or proposals
which would relate to or result in:
(a) The acquisition by any person of additional securities of the Company,
or the disposition of securities of the Company;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its
subsidiaries;
(c) A sale or transfer of a material amount of assets of the Company or
any of its subsidiaries;
(d) Any change in the present board of directors or management of the
Company, including any plans or proposals to change the number or
terms of directors or to fill any existing vacancies on the board;
(e) Any material change in the present capitalization or dividend policy
of the Company;
(f) Any other material change in the Company's business or corporate
structure;
(g) Changes in the Company's charter, by-laws or instruments corresponding
thereto or other actions which may impede the acquisition of control
of the Company by any person;
(Continued on the following pages)
(Page 4 of 32 Pages)
<PAGE>
(h) Causing a class of securities of the Company to be delisted from a
national securities exchange or to cease to be authorized to be quoted
in an inter-dealer quotation system of a registered national
securities association;
(i) A class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the
Securities Exchange Act of 1934, as amended; or
(j) Any action similar to any of those enumerated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) As of the date hereof, the Reporting Person may be deemed to
beneficially own 1,043,333 shares of the Company's Common Stock which represents
approximately 10.1% of the Company's outstanding common stock.
(b) The Reporting Person has sole voting and investment power with
respect to the 1,043,333 shares of Common Stock referred to herein.
(c) No transactions in the Common Stock were effected during the past
sixty days by the Reporting Person except that on October 25, 1999, the
Reporting Person purchased directly from the Company 82.5 shares of Preferred
Stock at a price of $2,000 per share. Such shares of Preferred Stock are
currently convertible into 750,000 shares of Common Stock.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
The Reporting Person has agreed not to sell, convey, pledge or otherwise
transfer the 150,000 shares of Common Stock purchased by him on January 27, 1998
for a period of at least two years.
Pursuant to the Subscription Agreement, the Reporting Person has agreed,
subject to the satisfaction by the Company of certain conditions and the right
of the Reporting Person to terminate his commitment, to purchase up to an
additional 153.2 shares of Preferred Stock for an aggregate purchase price of
approximately $306,400. See Item 4, herein.
Item 7 is amended in its entirety to read as follows:
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
1. Letter Agreement dated January 21, 1998 between the Company and the
Reporting Person.
2. Preferred Stock Subscription Agreement dated as of September 23, 1998
between the Company and the Investors.
(Continued on the following pages)
(Page 5 of 32 Pages)
<PAGE>
3. Amendment No. 1, dated as of October 25, 1999 to Preferred Stock
Subscription Agreement between the Company and the Investors.
(Continued on the following pages)
(Page 6 of 32 Pages)
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
November 3, 1999
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(Date)
/s/ George Kriste
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George Kriste
(Continued on the following pages)
(Page 7 of 32 Pages)
<PAGE>
Exhibit 1
January 21, 1998
International Dispensing Corporation
2500 Westchester Avenue
Suite 304
Purchase, New York 10577
Gentlemen:
Reference is made to the Sale and Assignment Agreement dated as of
November 19, 1997 between Harvey R. Miller, as Trustee for the Liquidation of
Stratton Oakmont, Inc. ("Stratton") and International Dispensing Corporation
(the "Company") pursuant to which the Company or designees of the Company will
become entitled to purchase shares of Common Stock of the Company ("Shares")
from Stratton (the "Sale Agreement").
In order to induce the Company to designate the undersigned as an "IDC
Purchaser" under the Sale Agreement, and enable the undersigned to purchase
Shares pursuant thereto, the undersigned agrees that for a period ending on the
second anniversary of the consummation of the sale of Shares to the undersigned
pursuant to the Sale Agreement the undersigned will not sell, convey, pledge or
otherwise transfer any of such Shares. The undersigned also agrees that all
certificates representing Shares purchased by the undersigned pursuant to the
Sale Agreement may contain a legend to the effect of the foregoing, and stop
transfer instructions may be given to and maintained by the transfer agent for
the Company's common stock.
Sincerely yours,
/s/ George Kriste
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George Kriste
<PAGE>
Exhibit 2
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PREFERRED STOCK SUBSCRIPTION AGREEMENT
Dated as of September 23, 1999
By and Among
THE INVESTORS LISTED ON EXHIBIT A HERETO
and
INTERNATIONAL DISPENSING CORPORATION
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<PAGE>
PREFERRED STOCK SUBSCRIPTION AGREEMENT
PREFERRED STOCK SUBSCRIPTION AGREEMENT (this "Agreement") dated as of
September 23, 1999, by and among the Investors listed on Exhibit A hereto (each
a "Investor," and collectively the "Investors"), and INTERNATIONAL DISPENSING
CORPORATION, a Delaware corporation (the "Company").
W I T N E S S E T H :
WHEREAS, the Investors desire to subscribe for, and the Company desires
to issue up to an aggregate of 1,000 shares of the Company's Series A Redeemable
Convertible Preferred Stock, par value $.001 per share (the "Preferred Stock")
for the per share purchase price of $2,000 on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, IT IS AGREED:
ARTICLE I
ISSUANCE OF STOCK AND PAYMENT OF SUBSCRIPTION PRICE; CLOSING
1.1 ISSUANCE OF STOCK. Subject to the terms and conditions set forth in
this Agreement, the Company agrees to sell to the Investors, and the Investors
severally irrevocably subscribe for and agree to purchase for $2,000 per Share,
1,000 shares of Preferred Stock (the "Shares").
1.2 CLOSING DATES.
(a) The purchase and sale of the Shares shall occur at one or more
closings (each, a "Closing") at such times as shall be determined by the
Company, subject to the conditions set forth in this Agreement. The initial
Closing shall occur within three business days after the execution of this
Agreement by the Company and the Investors . The date of the initial Closing is
hereinafter referred to as the "Initial Closing Date." On the Initial Closing
Date GREGORY B. ABBOTT, GEORGE V. KRISTE, LOUIS SIMPSON and GARY ALLANSON
(collectively, the "Investors") shall purchase THREE HUNDRED FIFTY (350) Shares
and shall pay to the Company by certified check or wire transfer of immediately
available funds, SEVEN HUNDRED THOUSAND DOLLARS ($700,000).
<PAGE>
(b) Subsequent Closings shall occur not less than forty-five (45)
days after written NOTICE BY THE COMPANY TO THE INVESTORS (THE "CALL NOTICE") IN
THE FORM ATTACHED HERETO AS EXHIBIT B. The Call Notice shall set forth the
number of Shares to be issued and sold to the Investors at such Closing. Within
forty-five (45) days after the giving of the Call Notice to the Investors, the
Investors shall give written notice to the Company setting forth the amount of
Shares to be purchased BY EACH INVESTOR AT THE CLOSING TO WHICH THE CALL NOTICE
RELATES; PROVIDED, that if the Investors cannot agree upon the number of Shares
to be purchased by them, each Investor shall be severally obligated to purchase
the entire number of Shares as set forth in the Call Notice. The Company may
schedule as many Closings as it desires, subject to the following conditions:
(i) The Company shall not issue and sell more than an
aggregate of 350 Shares (including Shares sold on the Initial
Closing Date) prior to November 1, 1999.
(ii) The Company shall not issue and sell more than an
aggregate of 560 Shares on a cumulative basis from and after
(and including) the Initial Closing Date through February 1,
2000.
(iii) The Company shall not issue and sell more than an
aggregate of 860 shares on a cumulative basis from and after
(and including) the Initial Closing Date through May 1, 2000.
(iv) The Company shall not issue and sell more than an
aggregate of 1,000 Shares on a cumulative basis from and after
(and including) the Initial Closing Date and no Investor shall
have the obligation to purchase any Shares after August 31,
2000.
(v) Any Investor, at any time, in his or its sole
direction, upon written notice to the Company, may terminate his
commitment to purchase Shares.
(vi) The commitment of each Investor to purchase
additional Shares shall also terminate upon written notice from
the Company that the Company has determined not to issue and
sell additional Shares pursuant to this Agreement. The Company
may make such determination in its sole discretion and without
incurring any penalty or incurring any obligation to any
Investor.
(vii) No Investor shall have the obligation to purchase
any Shares at any time during which the Company does not have at
least $100,000 in cash or immediately available funds in bank or
investment accounts, which have not been pledged or hypothecated
or subject to any lien.
<PAGE>
1.3 LEGENDS. From and after the date hereof, all share certificates
representing Shares, or shares of the Common Stock into which the Shares are
convertible ("Conversion Shares"), shall bear a legend which shall state as
follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL FOR THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER SUCH ACT."
ARTICLE II
REPRESENTATIONS AND COVENANTS OF THE COMPANY
2. REPRESENTATIONS AND COVENANTS OF THE COMPANY. The Company hereby
represents, warrants and agrees as follows:
2.1 EXISTENCE AND GOOD STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has the requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. The Company is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the character or location of the
properties owned, leased or operated by the Company or the nature of the
business conducted by the Company makes such qualification or license necessary,
except where the failure to be so duly qualified or licensed would not have a
material adverse effect on the business, operations, financial condition or
results of operations of the Company (a "Material Adverse Effect").
2.2 CAPITAL STOCK. The Company has an authorized capitalization
consisting of 40,000,000 shares of common stock, par value $.001 per share (the
"Common Stock") and 2,000,000 shares of Preferred Stock, par value $.001 per
share. Of the Common Stock, 9,566,668 shares are issued and outstanding and no
shares of Preferred Stock are issued and outstanding. Options and warrants to
purchase an aggregate of 2,327,776 shares of Common Stock are outstanding. On
the Initial Closing Date and on each subsequent date of Closing, after giving
effect to the transactions contemplated by this Agreement, each Investor will
receive good and marketable title to the Shares he acquires from the Company,
free and clear of all liens, claims and other encumbrances. All outstanding
shares of capital stock of the Company have been, and will on the Initial
Closing Date be, duly authorized and validly issued and fully paid and
nonassessable. Other than as set forth on SCHEDULE 2.2 and as set forth in this
Agreement, there will be on the Initial Closing Date no
<PAGE>
outstanding subscriptions, options, registration rights, warrants, rights,
calls, commitments, conversion rights, rights of exchange, preemptive rights,
rights of first refusal, rights of first offer, plans or other agreements of any
character providing for the purchase, registration, issuance or sale of any
shares of the capital stock of the Company.
2.3 AUTHORIZATION AND VALIDITY OF THIS AGREEMENT. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement by the Company and the performance of its
obligations hereunder have been duly authorized and approved by its Board of
Directors and no other corporate action on the part of the Company is necessary
to authorize the execution, delivery and performance of this Agreement by the
Company. This Agreement has been duly executed and delivered by the Company and,
assuming due execution of this Agreement by the Investors, is a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except to the extent that its enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles.
2.4 SEC DOCUMENTS; NO MATERIAL CHANGES. (a) The Company has furnished to
the Investors true, correct and complete copies of its Annual Report on Form
10-KSB for the fiscal year ended December 31, 1998 and its Quarterly Reports on
Form 10-QSB for the quarters ended March 31, 1999 and June 30, 1999. Such
periodic reports constitute all the documents that the Company was required to
file with the Securities and Exchange Commission (the "SEC") from January 1,
1999 to the Initial Closing Date. Each of the periodic reports filed by the
Company with the SEC since June 30, 1998 ("SEC Documents") has been timely and
duly filed and when filed was in compliance in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the rules and regulations of the SEC thereunder applicable to such SEC
Document. Each of the SEC Documents (including the financial statements included
therein) was complete and correct in all material respects as of its date and,
as of its date, did not contain any untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading. The financial statements included within the SEC
Documents have been prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and present fairly or will present fairly (subject, in the case of the
unaudited statements, to normal year-end audit adjustments) the consolidated
financial position of the Company as at the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended.
(b) Since June 30, 1999, there has been no (i) material adverse
change in the business, operations, financial condition, results of operations
or prospects of the Company or (ii) material damage, destruction or loss to any
asset or property, tangible or intangible, of the Company which materially
affects the ability of the Company to conduct its business. Notwithstanding the
foregoing, the Investors acknowledge that the Company is in the development
stage, has incurred significant losses since inception and will continue to
incur significant losses.
<PAGE>
2.5 CONSENTS AND APPROVALS: NO VIOLATIONS. The execution and delivery of
this Agreement by the Company and the consummation of the transactions
contemplated hereby and thereby (a) will not violate or contravene any provision
of the Certificate of Incorporation or By-laws of the Company, or any statute,
rule, regulation, order or decree of any public body or authority by which the
Company is or any of its properties are bound, (b) will not require any filing
with, or consent of, or the giving of any notice to, any governmental or
regulatory body, agency or authority, or any other person and (c) will not
result in a violation or breach of, conflict with, constitute a default (or give
rise to any right of termination, cancellation, payment or acceleration) under,
or result in the creation of any encumbrance upon any of the properties or
assets of the Company under, any of the terms, conditions or provisions of any
agreement, instrument or obligation to which the Company is a party, or by which
any of its properties or assets may be bound or under which it may have any
rights, excluding from the foregoing clauses (b) and (c) filings, notices,
permits, consents and approvals, the absence of which, and violations, breaches,
defaults, conflicts and encumbrances of which, in the aggregate, would not have
a Material Adverse Effect.
2.6 BROKER'S OR FINDER'S FEES. No agent, broker, person or firm acting on
behalf of the Company, is, or will be, entitled to any commission or broker's or
finder's fees from the Company, or from any person or entity controlling,
controlled by or under common control with the Company, in connection with any
of the transactions contemplated by this Agreement; PROVIDED, HOWEVER, that the
independent committee of the Board of Directors of the Company retained Brooks,
Houghton & Company, Inc. ("BHC") to render an opinion concerning the fairness of
the transactions contemplated by this Agreement to the holders of Common Stock
of the Company and BHC will be paid a fee by the Company in connection
therewith.
2.7 REVERSE STOCK SPLIT. The Board of Directors of the Company shall meet
at an appropriate time to consider the terms of a possible reverse stock split
of the Company's Common Stock, and if that occurs, the numbers set forth herein
will be adjusted in an equitable manner.
ARTICLE III
REPRESENTATIONS OF THE INVESTORS
3. REPRESENTATIONS OF THE INVESTORS. Each Investor, represents, warrants and
agrees, for itself or himself only, as follows:
3.1 EXISTENCE AND GOOD STANDING; POWER AND AUTHORITY. Such Investor, if
it is a corporation, a limited liability company or a limited liability
partnership, is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization. Such Investor has the legal power
and authority to enter into, execute and deliver this Agreement and perform its
obligations hereunder and thereunder. This Agreement has been duly authorized
and approved by such Investor and is a valid and binding obligation of such
Investor enforceable against such Investor in accordance with its terms, except
to the extent that its enforceability may be subject to applicable
<PAGE>
bankruptcy, insolvency, reorganization, moratorium and other similar laws
effecting the enforcement of creditors' rights generally and by general
equitable principles.
3.2 RESTRICTIVE DOCUMENTS. Such Investor is not subject to any mortgage,
lien, lease, agreement, instrument, order, law, rule, regulation, judgment or
decree, or any other restriction of any kind or character, which would prevent
consummation by such Investor of the transactions contemplated by this
Agreement.
3.3 PURCHASE FOR INVESTMENT. Such Investor will acquire the Shares for
its own account for investment and not with a view toward any resale or
distribution thereof; provided, however, that the disposition of each such
Investor's property shall at all times remain within the sole control of the
Investor.
3.4 BROKER'S OR FINDER'S FEES. No agent, broker, person or firm acting
on behalf of such Investor is, or will be, entitled to any commission or
broker's or finder's fees from any of the parties hereto, or from any person
controlling, controlled by or under common control with any of the parties
hereto, in connection with any of the transactions contemplated by this
Agreement.
3.5 EXEMPTION FROM REGISTRATION. Such Investor acknowledges that the
offering and sale of the Shares is intended to be exempt from registration under
the Securities Act of 1933, as amended (the "Securities Act"), by virtue of
Section 4(2) of the Securities Act and Regulation D promulgated thereunder.
3.6 ABILITY TO BEAR ECONOMIC RISK. Such Investor has determined that the
Shares are a suitable investment for the Investor, that the Investor has the
financial ability to bear the economic risk of its investment in the Company,
has adequate means of providing for its current needs and personal contingencies
and has no need for liquidity with respect to investment in the Company.
3.7 NO LIQUIDITY. Such Investor will not sell or otherwise transfer the
Shares without registration under the Act or an exemption therefrom, and fully
understands and agrees that the Investor must bear the economic risk of its
investment for an indefinite period of time because, among other reasons, the
Shares have not been registered under the Act or under the securities laws of
any state and, therefore, cannot be resold, pledged, assigned or otherwise
disposed of unless they are subsequently registered under the Act and under
applicable state securities laws or an exemption from such registration is
available. Such Investor also understands that sales or transfers of the Shares
are further restricted by the provisions of state securities laws.
3.8 SUITABILITY AND ACCREDITED STATUS. Such Investor represents and
warrants that such Investor is an accredited investor and that all information
provided by such Investor in the Purchaser Questionnaire executed simultaneous
herewith is true and correct as of the Initial Closing Date.
<PAGE>
3.9 ACCESS TO INFORMATION. Such Investor acknowledges that the Company
has made available to him the opportunity to ask questions of, and receive
answers from, the management of the Company concerning the terms and conditions
of this Agreement and the business, financial condition and prospects of the
Company and to obtain additional information to the extent the Company possesses
such information or can acquire it without unreasonable effort or expense,
necessary to verify the accuracy of the information given to the Investor in the
SEC Documents or otherwise to make an informed investment decision and
acknowledges that all material documents, records and books pertaining to the
investment have, on request, been made available to any advisors designated by
the Investor to receive such information.
ARTICLE IV
COVENANTS
4.1 APPOINTMENT OF DIRECTORS; DIRECTORS AND OFFICERS INSURANCE.
The holders of the Shares shall be entitled to appoint one (1) Director to the
Company's Board of Directors until such time as a majority of the issued Shares
have been converted into Common Stock. The Company shall maintain at all times
from the date hereof and during the period which any person designated solely by
the holders of Shares to act as a director of the Company pursuant to the
provisions of the Certificate of Designation of the Preferred Stock, so acts as
a director, an insurance policy or policies providing liability insurance for
directors, officers, employees, agents or fiduciaries of the Company of an
amount not less than FIVE MILLION DOLLARS ($5,000,000), which is now currently
in effect. The designee of the holders of the Preferred Stock shall be covered
by such policy or policies in accordance with its or their terms to the maximum
extent of the coverage available for any such director, officer, employee, agent
or fiduciary under such policy or policies. In addition, such designee will be
entitled to the full and complete indemnification by the Company as permitted by
applicable law.
4.2 SEC REPORTS. So long as any Shares are outstanding the Company shall
(a) within 15 days of each required filing date (i.e., the date on which the
reports or other documents are required to be filed with the SEC pursuant to
Sections 13(a) and 15(d), (b) transmit by mail to all holders of Shares, as
their names and addresses appear in the corporate books and records maintained
by the Company, without cost to such holders, copies of the annual reports,
quarterly reports and other documents which the Company is required to file with
the SEC pursuant to Sections 13(a) and 15(d) of the Exchange Act, and (c)
transmit to all holders any and all documents or materials distributed to all of
the holders of the Common Stock simultaneously with the distribution to the
holders of Common Stock.
ARTICLE V
REGISTRATION RIGHTS
5.1 CERTAIN DEFINITIONS. As used in this Article V, the following
terms shall have the following respective meanings:
<PAGE>
"Holders" shall mean the holders of Registrable Securities.
"Initiating Holders" shall mean any persons who in the aggregate are
Holders of at least a majority of the voting power held by all outstanding
Registrable Securities.
"Registrable Securities" shall mean (i) the Conversion Shares and
(ii) any Common Stock issued in respect thereof upon any stock split, stock
dividend, recapitalization or similar event.
"Requesting Stockholders" shall mean holders of securities of the
Company entitled to have securities included in any registration pursuant to
Section 5.2 and who shall request such inclusion.
The terms "register," "registered" and "registration" shall refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses incurred by the
Company in compliance with Sections 5.2 and 5.3 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses, reasonable
fees and disbursements of one counsel for all the selling Holders for a "due
diligence" examination of the Company, and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company, which shall be paid in any event by the
Company).
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for any Holder, except as otherwise provided herein.
"Underwritten Offering" shall mean the offering and sale of
Registrable Securities in a registration pursuant to a firm commitment
underwriting to an underwriter at a fixed price for reoffering or pursuant to
agency or best efforts arrangements with a placement agent or underwriter.
5.2 DEMAND REGISTRATION
(a) REQUESTS FOR REGISTRATION. At any time after thirty (30) days from
the date of this Agreement the Initiating Holders may request registration under
the Securities Act of all or part of their Registrable Securities. Within ten
(10) days after receipt of any such request, the Company will give written
notice of such requested registration to all other Holders of Registrable
Securities and any other stockholder having registration rights which entitle it
to participate in such registration. The Company will include in such
registration all Registrable Securities with respect to which it has received
written requests for inclusion therein within fifteen (15) days after receipt
<PAGE>
of the Company's notice. The Company shall cause its management to cooperate
fully and to use its best efforts to support the registration of the Registrable
Securities and the sale of the Registrable Securities pursuant to such
registration as promptly as is practicable. Such cooperation shall include, but
not be limited to, management's attendance and reasonable presentations in
respect of the Company at road shows with respect to the offering of Registrable
Securities. All registrations requested under this Section 5.2(a) are referred
to herein as "Demand Registrations." The Holders of Registrable Securities will
be entitled to request one Demand Registration hereunder. A registration will
not count as a Demand Registration until it has become effective. Should the
Demand Registration not be filed by the Company within sixty (60) days of the
date of the Company's written notice to the Holders of Registrable Securities,
then the Company shall pay to all the Holders of Registrable Securities, on a
pro rata basis, as liquidated damages, the sum of FIVE THOUSAND DOLLARS ($5,000)
per day for each day beyond the sixty (60) day period that the Demand
Registration has not become effective.
(b) DEMAND REGISTRATION EXPENSES. The Company will pay up to an aggregate
of TWENTY THOUSAND DOLLARS ($20,000) of Registration Expenses in connection with
a Demand Registration hereunder. The Requesting Stockholders shall be obligated
to pay their pro rata share (based on the number of their Registrable Securities
included in the registration statement) of any Registration Expenses in
connection with a Demand Registration which exceed TWENTY THOUSAND DOLLARS
($20,000) in the aggregate. The Requesting Stockholders shall also pay all
Selling Expenses attributable to the sale of their securities pursuant to any
Demand Registration, including their pro rata share of all fees and
disbursements of counsel for the Holders in connection with such Demand
Registration.
(c) PRIORITY ON DEMAND REGISTRATIONS. If a Demand Registration is an
Underwritten Offering, and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities requested to
be included exceeds the number which can be sold in such offering, the Company
will include in such registration such number of shares, which in the opinion of
such underwriters, may be sold, allocated among the Holders electing to
participate and all other persons entitled to and electing to participate pro
rata in accordance with the amounts of securities requested to be so included by
the respective Holders and other persons.
(d) RESTRICTIONS ON DEMAND REGISTRATION. The Company will not be
obligated to effect any Demand Registration within six (6) months after the
effective date of a previous registration in which the Holders of Registrable
Securities were given piggyback rights pursuant to Section 5.3 other than a
registration of Registrable Securities intended to be offered on a continuous or
delayed basis under Rule 415 or any successor rule under the Securities Act.
5.3 PIGGYBACK REGISTRATIONS
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to register any of
its securities under the Securities Act (other than pursuant to a Demand
Registration) and the registration form to be used may be used for the
registration and contemplated disposition of
<PAGE>
Registrable Securities (a "Piggyback Registration"), the Company will give
prompt written notice to all Holders of Registrable Securities of its intention
to effect such a registration so that such notice is received by each Holder at
least twenty (20) days before the anticipated filing date. The Company will
include in such registration all Registrable Securities with respect to which
the Company has received written requests for inclusion therein within ten (10)
days after the receipt of the Company's notice.
(b) PIGGYBACK EXPENSES. In connection with each Piggyback Registration,
all of the Registration Expenses of the Holders of Registrable Securities will
be paid by the Company and such Holders shall pay all of the Selling Expenses
attributable to the sale of their securities pursuant to the Piggyback
Registration, including their pro rata share of all fees and disbursements of
counsel for the Holders in connection with such Piggyback Registration.
(c) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback Registration is an
underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the
distribution of the Registrable Securities to be included concurrently with the
securities being registered on behalf of the Company would materially adversely
affect the distribution of such securities by the Company, the Company will
include in such registration (i) first, the securities the Company proposes to
sell, (ii) second, the Registrable Securities and securities of the Company with
respect to which similar registration rights have heretofore been granted and
requested to be included in such registration, pro rata in accordance with the
amounts of Registrable Securities and such securities requested to be so
included by the respective Holders and holders of such securities of the
Company; and (iii) third, any other securities requested to be included in such
registration.
(d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration is
an underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriters advise the Company in writing that in
their opinion the distribution of the Registrable Securities to be included
concurrently with the securities being registered on behalf of the Company would
materially adversely affect the distribution of such securities by the Company,
the Company will include in such registration (i) first, the securities
requested to be included therein by the holders requesting such registration,
(ii) second, the Registrable Securities and securities of the Company with
respect to which similar registration rights have heretofore been granted and
requested to be included in such registration, pro rata in accordance with the
amounts of Registrable Securities and such securities requested to be so
included by the respective Holders and holders of such securities of the
Company, and (iii) third, other securities requested to be included in such
registration.
5.4 HOLDBACK AGREEMENTS.
(a) Each Holder of Registrable Securities which is a party to this
Agreement agrees not to effect any public sale or distribution of equity
securities of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven (7)
<PAGE>
days prior to and the 90-day period beginning on the effective date of any
underwritten Demand Registration in which the Holder participates or any
underwritten Piggyback Registration in which the Holder participates (except as
part of such underwritten registration or with the consent of the managing
underwriter).
(b) The Company agrees (i) not to effect any public sale or distribution
of its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven (7) days prior to and the
90-day period beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration (except (A) as part of
such underwritten registration, (B) with the consent of the managing underwriter
or (C) pursuant to registrations on Form S-8 or any other similar form for
employee benefit plans), and (ii) to use its reasonable best efforts to cause
each holder of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, purchased from the Company at
any time after the date of this Agreement (other than in a registered public
offering) to agree not to effect any public sale or distribution of any such
securities during such period (except as part of such underwritten registration,
if otherwise permitted or with the consent of the managing underwriter).
5.5 REGISTRATION PROCEDURES. Whenever the Holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Article V, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the Company will as
expeditiously as possible:
(a) prepare and file with the Commission a registration statement with
respect to such Registrable Securities, which registration statement will state
that the Holders of Registrable Securities covered thereby may sell such
Registrable Securities either under such registration statement or, at any
Holder's proper request, pursuant to Rule 144 (or any similar rule then in
effect), and use its best efforts to cause such registration statement to become
effective (provided that before filing a registration statement or prospectus or
any amendments or supplements thereto, the Company will furnish to the counsel
selected by the Holders of a majority of the Registrable Securities covered by
such registration statement copies of all such documents proposed to be filed,
which documents will be subject to the review and approval of such counsel);
(b) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for the period
set forth in Section 5.5(k) hereof and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such registration
statement;
(c) furnish to each Holder of Registrable Securities covered by such
registration such number of copies of such registration statement, each
amendment and supplement thereto, the prospectus included in such registration
statement (including each preliminary prospectus) and such
<PAGE>
other documents as such Holder may reasonably request in order to facilitate the
disposition of the Registrable Securities;
(d) use its best efforts to register or qualify such Registrable
Securities covered by such registration under such other securities or blue sky
laws of such jurisdictions as any Holder reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to enable
the Holders thereof to consummate the disposition in such jurisdictions of the
Registrable Securities as requested by such Holders (provided that the Company
will not be required to qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this subsection,
subject itself to taxation in any such jurisdiction, or consent to general
service of process in any such jurisdiction);
(e) notify each Holder of Registrable Securities covered by such
registration, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in such registration statement contains an untrue
statement of a material fact or omits to state any fact necessary to make the
statements therein not misleading, and, the Company will prepare a supplement or
amendment to such prospectus so that, such prospectus (or any document
incorporated therein by reference) will not contain an untrue statement of a
material fact or omit to state any fact necessary to make the statements therein
not misleading;
(f) cause all such Registrable Securities to be listed on each securities
exchange or automated quotation system on which similar securities issued by the
Company are then listed or quoted;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including an underwriting
agreement in customary form) and take all such other actions as the Holders of a
majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including, without limitation, using its best efforts to
effect a stock split or a combination of shares);
(i) make available for inspection by any Holder of Registrable Securities
covered by such registration, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney, accountant or other
agent retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
<PAGE>
(j) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC, and make generally available to its security
holders, earnings statements satisfying the provisions of Section 11(a) of the
Securities Act, no later than 45 days after the end of any 12-month period (i)
commencing at the end of any fiscal quarter in which Registrable Securities are
sold and (ii) beginning with the first month of the Company's first fiscal
quarter commencing after the effective date of the registration statement, which
statements shall cover said 12-month periods; and
(k) keep each registration statement effective for a period of one year
after the effective date of such registration statement, except in the case of a
Form S-3 Registration Statement which shall continue to remain effective.
5.6 INDEMNIFICATION. In the event of any registration under the
provisions of this Article V, the Company, to the extent permitted by law, will
indemnify any Holder participating in such registration, its respective officers
and directors, if any, and each person, if any, who controls such Holder within
the meaning of Section 15 of the Securities Act, against all losses, claims,
damages and liabilities caused by any untrue statement of a material fact
contained in the registration statement or prospectus (and as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading and
will reimburse such Holder its officers and directors and any person, if any,
who controls such Holder within the meaning of Section 15 of the Securities Act,
against any legal or other expenses reasonably incurred by such Holder, officer,
director or person in connection with investigating or defending any such
losses, claims, damages and liabilities, except insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or omission contained
in information furnished in writing to the Company by such Holder participating
in such registration or by underwriters expressly for use therein. The
obligation of the Company under this Article V to register securities for any of
the Holders shall be subject to the condition that each such Holder and the
underwriters involved in the offering shall furnish to the Company in writing
such information as shall be reasonably requested by the Company for use in
connection with the preparation of any such registration statement or prospectus
and, to the extent permitted by law, shall indemnify the Company, its directors
and officers, any other underwriter, the other Holders participating in such
registration and each person, if any, who controls the Company, any other
underwriter or such other Holders, within the meaning of Section 15 of the
Securities Act, against all losses, claims, damages and liabilities caused by
any untrue statement or omission contained in information so furnished in
writing to the Company by such Holder or such underwriter expressly for use
therein.
5.7 CONTRIBUTION. If the indemnification provided for in this Article V
from the indemnifying party is unavailable as a matter of law or public policy
to any indemnified party hereunder in respect of any losses, claims, damages or
liabilities referred to herein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages
<PAGE>
or liabilities, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified parties, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party under this
Article V as a result of the losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding. The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5.7 were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to herein.
5.8 TERMINATION. The registration rights provided in this Article V shall
terminate as to any Investor which can immediately sell all of the shares of
Common Stock issued or issuable to such Investor upon conversion of the Shares
in a single sale pursuant to Rule 144 under the Securities Act.
ARTICLE VI
INDEMNITIES
6.1 INDEMNITY OF INVESTORS. Each Investor, severally, agrees to indemnify
and hold harmless the Company and each other person, if any, who controls the
Company within the meaning of Section 15 of the Act, against any and all loss,
liability, claim, damage and expense whatsoever (including, but not limited to,
any and all expenses reasonably incurred in investigating, preparing or
defending against any litigation commenced or threatened or any claim
whatsoever) arising out of or based upon any false representation or warranty or
breach or failure by such Investor to comply with any covenant or agreement made
by such Investor herein or in any other document furnished by the Investor to
any of the foregoing in connection with this transaction. The Company hereby
acknowledges that no Investor shall have any liability for a breach by any other
Investor of any representation, warranty or agreement hereunder.
6.2 INDEMNITY OF COMPANY. The Company agrees to indemnify and hold
harmless the Investors, against any and all loss, liability, claim, damage and
expense whatsoever (including, but not limited to, any and all expenses
reasonably incurred in investigating, preparing or defending against any
litigation commenced or threatened or any claim whatsoever) arising out of or
based upon any false representation or warranty or breach or failure by the
Company to comply with any covenant or agreement made by the Company herein or
in any other document furnished by the Company to any of the foregoing in
connection with this transaction.
6.3 NOTICE TO INDEMNIFYING PARTY. Each party entitled to indemnification
under this Article VI (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has actual
<PAGE>
knowledge of any claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom, PROVIDED, that counsel for the Indemnifying Party, who
shall conduct the defense of such claim or any litigation resulting therefrom,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense, and PROVIDED, FURTHER, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Article VI unless such failure
has had a material adverse effect on the defense against such claim. The parties
to this Agreement reserve any rights to claim under this Agreement for damages
actually incurred by reason of any failure of the Indemnified Party to give
prompt notice of a claim. To the extent counsel for the Indemnifying Party shall
in such counsel's reasonable judgment, have a conflict in representing an
Indemnified Party in conjunction with the Indemnifying Party or other
Indemnified Parties, such Indemnified Party shall be entitled to separate
counsel at the expense of the Indemnifying Party subject to the approval of such
counsel by the Indemnified Party (whose approval shall not be unreasonably
withheld). No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with the defense of
such claim and any litigation resulting therefrom.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS
7. SURVIVAL OF REPRESENTATIONS. The respective representations and
warranties of the Company and the Investors contained in this Agreement shall
survive the Closing for a period of two years.
ARTICLE VIII
MISCELLANEOUS
8.1 KNOWLEDGE OF THE COMPANY. Where any representation or warranty made
by the Company contained in this Agreement is expressly qualified by reference
to its knowledge, such knowledge shall be deemed to exist if the matter is
within the knowledge of the executive officers of the Company.
8.2 EXPENSES The parties hereto shall pay their own expenses relating to
the transactions contemplated by this Agreement, including, without limitation,
the fees and expenses of their respective counsel and financial advisers.
<PAGE>
8.3 GOVERNING LAW. The interpretation and construction of this Agreement,
and all matters relating hereto, shall be governed by the laws of the State of
New York applicable to agreements executed and to be performed solely within
such State.
8.4 CAPTIONS. The Article and Section captions used herein are for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
8.5 NOTICES. Any notice or other communication required or permitted
under this Agreement shall be sufficiently given if delivered in person or sent
by telecopy or by registered or certified mail, postage prepaid, addressed as
follows: if to any Investor, to the address set forth on Exhibit A attached
hereto set forth below such Investor's name; and if to the Company, to it at
2500 Westchester Avenue, Suite 304, Purchase, New York 10577 (Facsimile No.
914-251-0335) Attention: Gary Allanson, President and Chief Executive Officer,
with a copy to its counsel, Wolf, Block, Schorr and Solis-Cohen LLP, 250 Park
Avenue, New York, New York 10177 (Facsimile Number 212-986-0604) Attention:
Martin R. Bring, , Esq., or such other address or number as shall be furnished
in writing by any such party, and such notice or communication shall be deemed
to have been given upon automatic confirmation of receipt by the receiving
machine if sent by telecopier, upon delivery if delivered in person, and upon
mailing if mailed.
8.6 PARTIES IN INTEREST . This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and permitted assigns.
8.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
8.8 ENTIRE AGREEMENT. This Agreement, including the exhibits, schedules,
and other documents referred to herein and therein which form a part hereof and
thereof, contain the entire understanding of the parties hereto with respect to
the subject matter contained herein and therein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
8.9 AMENDMENTS. This Agreement may not be changed orally, but only by an
agreement in writing signed by the Investors and the Company.
8.10 SEVERABILITY. In case any provision in this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof will not in any way be affected or impaired
thereby.
8.11 THIRD PARTY BENEFICIARIES. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto.
<PAGE>
8.12 JURISDICTION. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto shall be brought in the courts of the State of New York,
or in the United States District Court for the Southern District of New York,
and, by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of such courts. The foregoing consent to
jurisdiction shall not be deemed to confer rights on any Person other than the
respective parties to this Agreement.
8.13 AVAILABILITY OF EQUITABLE REMEDIES. Since a breach of the provisions
of this Agreement could not adequately be compensated by money damages, any
party shall be entitled, either before or after any Closing, in addition to any
other right or remedy available to it, to an injunction restraining such breach
or a threatened breach and to specific performance of any such provision of this
Agreement, and in either case no bond or other security shall be required in
connection therewith, and the parties hereby consent to the issuance of such
injunction and to the ordering of specific performance.
IN WITNESS WHEREOF, the Investors have signed this Agreement and the
Company has caused its corporate name to be hereunto subscribed by its officers
thereunto duly authorized, all as of the day and year first above written.
INTERNATIONAL DISPENSING CORPORATION
BY: /s/Gary Allanson
--------------------
Name: Gary Allanson
Title: President
INVESTORS:
/s/ Gregory B. Abbott
------------------------
GREGORY B. ABBOTT
/s/ George V. Kriste
------------------------
GEORGE V. KRISTE
/s/ Louis Simpson
------------------------
LOUIS SIMPSON
/s/ Gary Allanson
------------------------
GARY ALLANSON
<PAGE>
EXHIBIT A
INVESTORS
Percentage of Shares
Name Address to be Purchased
Gregory B. Abbott 120 Kessler Drive 31.43 %
Aspen, Colorado 81611
George V. Kriste 20643 Seabord Road 31.43%
Malibu, California 90265
Louis Simpson c/o Plaza Investment Managers, Inc. 31.43%
5951 La Sendita, Building A
Rancho Santa Fe, California 92067
Gary Allanson 275 Long Point Road 5.71%
Crownsville, Maryland 21032
<PAGE>
EXHIBIT B
CALL NOTICE
INTERNATIONAL DISPENSING CORPORATION
2500 Westchester Avenue, Suite 304
Purchase, New York 10574
Reference is made to the Preferred stock Purchase Agreement dated as of
September 23, 1999 by and among International Dispensing Corporation (the
"Company") and certain investors (the "Investors"), including you (the
"Agreement"). Unless otherwise defined herein, capitalized terms used herein
have the same meanings herein as in the Agreement.
In accordance with Section 1.2(a) of the Agreement you are hereby
notified that the Company will sell to the Investors at a closing to be held on
[not less than 45 days after the date of this Call Notice] ____ Shares.
In accordance with Section 1.2(a) of the Agreement you are required to
notify the Company within 45 days after the giving of this Call Notice how many
of such ________ Shares you shall purchase.
Very truly yours,
INTERNATIONAL DISPENSING CORPORATION
BY:
---------------------------------
<PAGE>
EXHIBIT 3
AMENDMENT NO. 1
TO
PREFERRED STOCK SUBSCRIPTION AGREEMENT
THIS AMENDMENT NO. 1 (THE "AMENDMENT") TO PREFERRED STOCK SUBSCRIPTION
AGREEMENT DATED AS OF SEPTEMBER 23, 1999 (THE "SUBSCRIPTION AGREEMENT") BY AND
AMONG THE INVESTORS LISTED ON THE SIGNATURE PAGE THERETO (THE "INVESTORS") and
INTERNATIONAL DISPENSING CORPORATION, A DELAWARE CORPORATION (THE "COMPANY"), is
entered into on the date hereinafter set forth.
WHEREAS: The Investors and the Company are parties to the Subscription
Agreement and they wish to amend the Subscription Agreement as set forth below.
NOW, THEREFORE, IT IS AGREED as follows:
1. Section 1.2(a) of the Subscription Agreement is hereby amended in its
entirety to read as follows:
(a) The purchase and sale of the Shares shall occur at one or more
closings (each, a "Closing") at such times as shall be determined by the
Company, subject to the conditions set forth in this Agreement. The initial
Closing shall occur within three business days after the execution of this
Agreement by the Company and the Investors . The date of the initial Closing is
hereinafter referred to as the "Initial Closing Date." On the Initial Closing
Date, GREGORY B. ABBOTT, GEORGE V. KRISTE, LOUIS A. SIMPSON and GARY ALLANSON
(collectively, the "Investors") shall purchase THREE HUNDRED FIFTY (350) Shares
and shall pay to the Company by certified check or wire transfer of immediately
available funds, SEVEN HUNDRED THOUSAND DOLLARS ($700,000), in the following
amounts:
AMOUNT OF SHARES DOLLAR
NAME TO BE PURCHASED AMOUNT
---------------- --------------- --------
Gregory Abbott 137.5 $275,000
George V. Kriste 82.5 $165,000
Louis A. Simpson 110 $220,000
Gary Allanson 20 $ 40,000
TOTALS: 350 $700,000
<PAGE>
2. Section 1.2(b) of the Subscription Agreement is hereby amended by
adding thereto the following language:
The obligation of each Investor for subsequent closings shall be
in the same proportion as set forth in Section 1.2(a) hereof. Should
any Investor give notice to the Company that such Investor wishes to
terminate such Investor's commitment to purchase additional shares,
then the remaining Investors may, but are not required, to purchase
such shares of the Investor who declines to purchase additional
shares, in the same proportion as set forth above.
3. Section 4.1 of the Subscription Agreement is hereby amended by
changing the amount of the liability insurance to be provided to directors,
officers, employees, agents or fiduciaries of the Company from "not less than
FIVE MILLION DOLLARS ($5,000,000)" to "not less than ONE MILLION DOLLARS
($1,000,000)".
4. Section 5.2(a) of the Subscription Agreement is amended in its entirety
to read as follows:
"(a) REQUESTS FOR REGISTRATION. At any time after one hundred
twenty (120) days from the date of this Agreement the Initiating
Holders may request registration under the Securities Act of all or
part of their Registrable Securities. Within ten (10) days after
receipt of any such request, the Company will give written notice of
such requested registration to all other Holders of Registrable
Securities and any other stockholder having registration rights which
entitle it to participate in such registration. The Company will
include in such registration all Registrable Securities with respect
to which it has received written requests for inclusion therein within
fifteen (15) days after receipt of the Company's notice. The Company
shall cause its management to cooperate fully and to use its best
efforts to support the registration of the Registrable Securities and
the sale of the Registrable Securities pursuant to such registration
as promptly as is practicable. Such cooperation shall include, but not
be limited to, management's attendance and reasonable presentations in
respect of the Company at road shows with respect to the offering of
Registrable Securities. All registrations requested under this Section
5.2(a) are referred to herein as "Demand Registrations." The Holders
of Registrable Securities will be entitled to request one Demand
Registration hereunder. A registration will not count as a Demand
Registration until it has become effective. Should the Demand
Registration not be filed by the Company within ninety (90) days of
the date of the Company's written notice to the Holders of Registrable
Securities, then the Company shall pay to all the Holders of
Registrable Securities, on a pro rata basis, as liquidated damages,
the sum of TWO HUNDRED THIRTY-THREE DOLLARS ($233) per day for each
day beyond the ninety (90) day period that the Demand Registration has
<PAGE>
not been filed; PROVIDED, HOWEVER, that the maximum amount of
liquidated damages payable to the Holders hereunder shall be
$100,000."
5. In all other respects, the Subscription Agreement is hereby
ratified, confirmed and approved.
This Amendment No. 1 may be signed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment this
25th day of October, 1999.
COMPANY:
INTERNATIONAL DISPENSING CORPORATION,
a Delaware corporation
BY: /s/Gary Allanson
--------------------
Name: Gary Allanson
Title: President
INVESTORS:
/s/ Gregory B. Abbott
------------------------
GREGORY B. ABBOTT
/s/ George V. Kriste
------------------------
GEORGE V. KRISTE
/s/ Louis A. Simpson
------------------------
LOUIS A. SIMPSON
/s/ Gary Allanson
------------------------
GARY ALLANSON
