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Exhibit 3.1
CINEMAWORKS
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") dated this 25/th/ day of March,
2000, between CHEQUEMATE INTERNATIONAL, INC., a Utah corporation ("Buyer") doing
business as C-3D Digital, whose office is located at 330 Washington Blvd., Suite
507, Marina del Rey, CA 90292, and Cinema Internet Networks Inc., a British
Columbia, Canada corporation doing business as CinemaWorks, whose office is
located at 3150 Celtic Avenue Building #2 Vancouver, BC V6N 3X7 ("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 relating to pay-per-view and cable
services to hotel/lodging rooms, of every character and description, whether
tangible, intangible, real, personal or mixed, and wherever located 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, the following:
1.1 Contracts. All of the contracts and contract rights related to the
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agreements for pay-per-view and cable services to hotel/lodging rooms,
which agreements are listed in SCHEDULE 1.1 attached hereto (hereinafter
referred to as the "Contracts").
1.2 Equipment. All the equipment (including essential replacement parts) and
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other tangible personal property of every kind and description wherever
they may be located that are owned or leased by Seller, and are utilized in
connection with Seller's pay-per-view 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. Prior to the
Closing, Seller will make a good faith effort to supplement Schedule 1.2
with serial numbers of the equipment located at the hotels which are
subject to the contracts listed in Schedule 1.1.
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1.3 Intangibles. All trade names (excluding "CinemaWorks"), trademarks, service
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marks, copyrights, patents, patent rights, trade secrets, technical know-
how, goodwill and other intangibles including (i) tort claims 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); and (ii) all contracts to be assumed by Buyer pursuant to Article
4 used by Seller in (or owned by Seller and useful in) the operation of the
business.
1.4 Books and records. All papers and records in Seller's care, custody or
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control relating to any or all of the above-described Assets and the
operation thereof, including, but not limited to, all blueprints and
specifications, personnel and labor relations records, environmental
control records, sales records, accounting and financial records,
maintenance and production records; and
1.5 Other Assets. All product rights in the Equipment and all improvements
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thereon, and all prepaid expenses relating to any of the Assets, or to the
operation of Seller's business sold pursuant to this Agreement.
ARTICLE 2. PURCHASE PRICE
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2.1 Purchase Price and Payment. In consideration for the transfer and
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assignment by Seller of the Assets, and in consideration of the
representations, warranties and covenants of the Seller set forth herein,
Buyer on the conditions set forth herein and subject to the provisions in
Article 9 states that:
(a) Buyer will pay to Seller a purchase price to Seller of $530,200 (US
$200 per room) for 2,651 operating pay-per-view rooms as listed in
SCHEDULE 1.1, plus an additional $17,000.00 for inventory, making a
grand total of $547,200.00.
(b) The Buyer shall pay to the Seller the sum of $40,000 in cash as soon
as practicable after execution. Buyer shall use its best efforts to
pay this amount, and the cash payment to Scott Applegate, by the end
of March, 2000.
(c) Buyer shall issue sufficient shares of Buyer's common stock
(hereinafter referred to as the "Shares") to the Seller at the time of
Closing based upon a value of closing price over the previous five (5)
days of trading for the balance due at closing or $10.00 per share
whichever is greater.
(d) Buyer agrees to assume the outstanding leases now obligating Seller.
Leases involve hotels listed under Schedule 1.1 also see Lease
obligations in Schedule 1.3 (Lease Obligations) all obligations will
be deducted from the stock portion of the purchase price as described
in (2.1b).
(e) Buyer has assumed management of Hotels listed in Schedule 1.1 as of
September 1, 1999. All costs incurred by Buyer in the management, and
operations for the properties will be deducted from the purchase
price. Buyer will also provide a royalty report to Seller with amounts
being applied against Buyers operational cost. See Schedule 1.4 (Costs
of Operations).
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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 C-3D Digital, which are located at
330 Washington Blvd., Suite 507, Marina del Rey, CA, at 11:00 A.M local time, on
April 21, 2000, or at such other place and/or time as the parties may agree in
writing (the "Closing Date"). In the event that the conditions specified in this
Agreement have not been fulfilled by such date, Buyer may extend the Closing
Date for a period or periods not exceeding an aggregate of 30 days by giving
written notice to the Seller.
Buyer shall perform as part of its due diligence, such inspection of Sellers
equipment, properties, contracts and all other items as Buyer reasonably deems
necessary, and shall complete such inspection on or before the Closing Date set
forth above.
3.1 Seller's Obligations at the Closing. At the Closing, Seller shall deliver
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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;
(b) instruments of assignment and transfer of all contracts being
transferred by Seller to Buyer as outlined in SCHEDULE 1.1.
(c) the UCC search reports referred to in paragraph 9.2 hereof; and
(d) 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.
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 agrees to prosecute or otherwise enforce in
their own names 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 either of the Sellers name. Any prosecution or enforcement of
claims, rights, or benefits under this Section shall be solely at Buyer's
expense, unless Seller makes the prosecution or enforcement necessary by breach
of this Agreement.
3.2 Buyer's Obligations at Closing. Subject to the provisions of Article 9, at
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the Closing, Buyer shall deliver to Seller the following instruments and
documents against delivery of the items specified in Section 3.1:
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(a) Chequemate Stock Certificates issued in the name of Seller for a
sufficient number of shares of restricted common stock to constitute
the balance described in Section 2.1; and
(b) 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.
ARTICLE 4. ASSUMPTION OF LIABILITIES
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Buyer is not assuming any debt, liability or obligation of Seller, whether known
or unknown, fixed or contingent except as herein specifically otherwise
provided. Seller agrees to indemnify Buyer against and hold Buyer harmless from
all debts, claims, liabilities and obligations of Seller not expressly assumed
by Buyer hereunder, and to pay any and all attorneys fees and legal costs
incurred by Buyer, its successors and assigns in connection therewith. Buyer
shall have the benefit of and shall perform all contracts and commitments if any
specifically disclosed in SCHEDULE 1.3, in accordance with the terms and
conditions thereof, except to the extent modifications are specifically
disclosed on such SCHEDULE 1.3.
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 Seller 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
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organized, validly existing, and in good standing under the laws of the
United States of America and Canada, has all necessary corporate powers to
own its properties and to carry on its business as now owned and operated
by it, and is duly qualified to transact interstate business and is in good
standing in all jurisdictions in which the nature of its business or of its
properties makes such qualification necessary.
6.2 Tax Returns and Audits. Within the times and in the manner prescribed by
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law, Seller has filed all domestic and
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foreign, federal, state and local tax returns required by law, and has paid
all taxes, assessments and penalties which would otherwise be due and
payable. There are no present disputes as to taxes of any nature payable by
Seller.
6.3 Inventories. Except as otherwise listed in this agreement none of the
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Assets have been pledged as collateral or are held by the Seller on
consignment from others.
6.4 Other Tangible Personal Property. The Equipment described in Section 1.2
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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.
The equipment inventory listed in SCHEDULE 1.2 is new equipment, or is used
equipment in good condition and repair; and is sufficient in kind and
quality for the installation of fully operational pay-per-view services.
Seller has additional, supplemental, and replacement equipment in its
warehouse/offices related to providing pay-per-view services and Buyer may
have that equipment free and clear as an integral part of this agreement.
This equipment will be stored at no charge to Buyer for 60 days from
closing, at which time Buyer may instruct Seller to ship (at Buyers
expense) said equipment to a location of the Buyers choosing in the USA or
Canada. If Buyer wishes Seller to continue Storing the warehoused
equipment, payment to Seller for doing so will be negotiated at that time.
If after the above mentioned 60 days, Buyer decides to not pay for
continued storage or for shipment of the warehoused equipment, then Seller
may dispose of the equipment in any manner of Seller's choosing. Seller
will provide Buyer with an inventory and the location of all equipment (See
Schedule 1.2).
6.5 Trade Names Trademarks and Copyrights. Seller does not use any trademark,
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service mark, 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 mark, 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.
6.6 Title to Assets. Seller has good and marketable title to all of the Assets
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and interests in Assets, whether personal, tangible, and 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. Except as
specifically listed in 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
(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.
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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.
6.7 Customers and Sales. SCHEDULE 1.1 to this Agreement is a correct and
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current list of all customers of Seller for the business 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.
6.8 Indemnification. Seller shall indemnify Buyer against and hold Buyer
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harmless from any and all claims related to the Seller's pay-per-view
business which accrue up to and until the date of closing.
6.9 Other Contracts. Except as set forth in SCHEDULE 1.2, the Assets are not
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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 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 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.
6.10 Compliance with Laws. To the best of Seller's knowledge, Seller has
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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.
6.11 Litigation. Except as set forth in SCHEDULE 6.11, there is no suit, action,
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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. Except as set forth in SCHEDULE
6.11, Seller is not presently engaged in any legal action to recover moneys
due to it or damages sustained by it.
6.12 Assets Sufficient for Conduct of Business. The Assets constitute all of the
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assets required for Buyer to conduct
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the business of Seller as it is presently conducted.
6.13 Agreement will Not Cause Breach or Violation. Neither the entry into this
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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 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 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.
6.14 Authority and Consents. Seller has the right, power, legal capacity and
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authority to enter into, and perform its obligations under this Agreement,
and no approvals or consents of any persons or entity 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.
6.15 Interest in Customers, Suppliers and Competitors. Neither the Seller, nor
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any officer, director or employee of any of the Seller, nor any spouse or
child of any of them has any direct or indirect interest in any competitor,
supplier or customer of Seller or in any person with whom Seller is doing
business in the pay-per-view and cable services to hotel/lodging rooms
business to be sold pursuant to this Agreement.
6.16 Corporate Documents. Seller will furnish to Buyer before closing for its
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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
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other instrument which is identified in any exhibit delivered by Seller or
their 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 the
Seller and has not been amended, canceled or otherwise modified.
6.18 Full Disclosure. None of the representations and warranties made by Seller
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or made in any letter, certificate or memorandum furnished or to be
furnished by Seller, or on its 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
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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 BUYER.
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Buyer represents and warrants to the Seller as follows:
7.1 Organization and Qualification. Buyer is a corporation duly organized,
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validly existing and in good standing under the laws of the State of Utah.
All subsidiaries of Buyer are legal entities that are duly organized,
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation. Buyer has all requisite power and authority
to own or operate its properties and conduct its business as it is now
being conducted. Buyer 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 Authority Relative to this Agreement. Buyer has all requisite corporate
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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 Buyer, and no
other corporate proceedings on the part of Buyer are necessary to authorize
this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by Buyer and,
assuming this Agreement constitutes a valid and binding obligation of the
Seller, this Agreement constitutes a valid and binding agreement of Buyer,
enforceable against Buyer in accordance with its terms.
7.3 SEC Reports. Since January 1, 1998, to the best of its knowledge Buyer has
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filed all required forms, reports and documents ("Buyer 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 Buyer 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.
Each of the consolidated balance sheets in or incorporated by reference
into the Buyer 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 Buyer 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
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yearend 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 Buyer have
rendered or will render an unqualified opinion with respect to each audited
financial statement included in the Buyer SEC Reports. The consolidated
financial statements included in the Buyer SEC Reports are hereinafter
sometimes collectively referred to as the "Buyer Financial Statements."
7.4 Consents and Approvals: No Violation. Neither the execution and delivery of
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this Agreement by Buyer nor the consummation of the transactions
contemplated hereby nor compliance by Buyer 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 Buyer 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 Buyer is a party or by which Buyer, any of its
Subsidiaries or any of their respective assets, may be bound, or result in
the creation or imposition of any lien, charge or other encumbrance on the
assets of Buyer or violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Buyer or any of its respective assets.
7.5 Litigation. Etc. Except as disclosed in the Buyer SEC Reports or in
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SCHEDULE 7.5, there is no action, claim, or proceeding pending or, to the
knowledge of Buyer, threatened, to which Buyer is or would be a party
before any court or Governmental Authority acting in an adjudicative
capacity or any arbitrator or 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 Buyer and since December 31, 1997, there have been no
claims made or actions or proceedings brought against any officer or
director of Buyer arising out of or pertaining to any action or omission
within the scope of his employment or position with Buyer, which claim,
action or proceeding would involve a material adverse effect on Buyer taken
as a whole. All material litigation and other material administrative,
judicial or quasi-judicial proceedings to which Buyer is a party or to
which it has been threatened to be made a party are described in the Buyer
SEC Reports or in SCHEDULE 7.5.
7.6 Compliance with Law and Permits. Buyer has owned and operated its
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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 Buyer 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 Buyer contains any untrue statement of a material fact or
fails to state a material fact necessary to make the statements therein not
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misleading.
7.7 Buyer Common Stock. The shares to be issued by Buyer pursuant to this
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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 Buyer 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,
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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
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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,
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without making any commitments on behalf of Buyer, to preserve its business
organization intact, to keep available to Buyer its present employees, and
to preserve its present relationships with suppliers, customers and others
having business relationships with it.
8.4 Maintenance of Insurance. Seller shall continue to carry its existing
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insurance, subject to variations in amounts required by the ordinary
operations of its business. At the request of Buyer and at Buyer's sole
expense, the amount of insurance against fire and other casualties which,
at the date of this Agreement, Seller carries on any of the Assets or in
respect of its operations shall be increased by such amount or amounts as
Buyer shall specify. Seller shall cause Buyer to be named as an additional
insured on each existing insurance policy carried by Seller.
8.5 New Transactions. Seller shall not do, or agree to do without the prior
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written consent of the Buyer, any of the following acts, if such acts could
affect the Assets being purchased:
(a) enter into any contract, commitment or transaction not in the usual
and ordinary course of its business; or
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(b) enter into any contract, commitment or transaction in the usual and
ordinary course of business involving an amount exceeding $1,000.00,
individually, or $10,000.00 in the aggregate; or
(c) make any capital expenditures in excess of $5,000.00 for any single
item or $10,000.00 in the aggregate, or enter into any leases of
capital equipment or property under which the annual lease charge is
in excess of $5,000.00; or
(d) sell or dispose of any capital assets with a net book value in excess
of $1,000.00 individually, or $10,000.00 in the aggregate.
8.7 Existing Agreements. Seller shall not modify, amend, cancel or terminate
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any of its existing contracts or agreements, or agree to do any of those
acts, without the written consent of Buyer, which consent shall not be
unreasonably withheld or delayed.
8.8 Consent of Others. As soon as reasonably practical after the execution and
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delivery of this Agreement, and in any event on or before the Closing Date,
Seller shall obtain the written consent of the persons described in
SCHEDULE 8.8 to this Agreement and will furnish to Buyer executed copies of
these consents to the assignment of the Contracts. Further, Seller agrees
to use its best efforts to obtain new contracts between the Buyer and the
customers described in SCHEDULE 1.1 to this Agreement.
8.9 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.
8.10 Sales and Use Tax on Prior Sales. Seller agrees to furnish to Buyer a
---------------------------------
clearance certificate from the appropriate agencies and any related
certificates that Buyer may reasonably request as evidence that all sales
and use and other tax liabilities of Seller (other than income tax
liabilities) accruing before the Closing Date have been fully satisfied or
provided for.
8.11 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 15.2 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 Seller shall be in default of any of its
11
<PAGE>
representations, warranties or covenants under this Agreement.
9.1 Accuracy of Sellers Representations and Warranties. All representations and
--------------------------------------------------
warranties by Seller in this Agreement or in any written statement that
shall be delivered to Buyer by 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. At or prior to 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 each State where assets are
located, indicating that there are no filings under the Uniform Commercial
Code on file with such Secretary of State which name T.E.N. Private Cable,
Cinemaworks, Cinema Internet Networks Inc., William Massey or any other
name used by the Seller as debtor other than the liens otherwise disclosed
in the Schedules hereto.
9.3 Seller Performance. Seller shall have performed, satisfied, and complied
------------------
with all covenants, agreements, and conditions required by this Agreement
to be performed or complied with by Seller on or before the Closing Date.
9.4 Certification by Seller. Buyer shall have received a certificate, dated the
-----------------------
Closing Date, signed and verified by Seller's president or vice president
and its treasurer or assistant treasurer, certifying, in such detail as
Buyer and its counsel may reasonably request, that the conditions specified
in Sections 9.1 and 9.3 have been fulfilled.
9.5 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.
9.6 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.
9.7 Corporation Tax Clearance. Buyer shall have received a Certificate of Good
-------------------------
Standing for Seller as of a date not more than 3 days before the Closing
Date and a Letter of Account Status for Seller as of a date not more than 3
days before the Closing Date certifying that all sales taxes or other taxes
of the Seller have been paid. Such documents are to be issued by the states
where business has been done.
9.8 Certificate Regarding Employment 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 payroll taxes, or unemployment or workers'
compensation contributions for periods prior to most recent filing
deadlines.
9.9 Consents. All necessary agreements and consents of any parties to the
---------
consummation of the transaction
12
<PAGE>
contemplated by this Agreement, or otherwise pertaining to the matters
covered by it, shall have been obtained by Seller and delivered to Buyer.
9.10 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.
9.11 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.
9.12 Valuation of Assets. Buyer shall have accepted the valuation of the Assets,
-------------------
as set forth on the schedules attached hereto (as adjusted as of the
Closing Date).
9.13 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 judgment 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.
9.14 Compliance with Bulk Sales Laws. The parties have complied with all
--------------------------------
applicable Bulk Sales Laws or similar provisions.
9.15 Simultaneous Closing. The closing of this transaction shall be contingent
---------------------
upon the prior or simultaneous closing of the lease purchase from Scott
Applegate and CapitalPlus. See SCHEDULE 9.15.
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.
13
<PAGE>
ARTICLE 11. EMPLOYEE PLANS
--------------
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, or any comparable
Canadian laws.
ARTICLE 12. SELLERS 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
three (3) years following the Closing Date:
(a) Seller will not compete with the Buyer or engage in any activity which
is substantially the same as, or represents an outgrowth of, any
business or activity presently conducted by Seller, in the field of
"pay per view" and "free to viewer" in room hotel services, if such
business or activity extends to the states of where assets are located
or of any counties of such states and/or any other county in which
Seller has heretofore engaged in business or otherwise established its
goodwill, business reputation, or any customer relations. For the
purposes of this Agreement, the term "compete" shall mean (i) 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 was a client
or customer of the Seller pay-per-view and cable services to
hotel/lodging rooms; or (ii) entering into or attempting to enter into
any business or substantially similar business to or competing in any
way with the business of the Buyer in the pay-per-view and cable
services to hotel/lodging rooms, either alone or with any individual,
partnership, corporation or association; or (iii) acting as an agent,
representative, consultant, officer, director, independent contractor,
or employee of an entity or enterprise which is competing with the
business of the Buyer; or (iv) participating in any such competing
entity or enterprise as an owner, partner, limited partner, joint
venture, creditor or stockholder.
The parties intend that the covenant contained in the preceding
portion of this Section shall be construed as a series of separate
covenants, one for each state. Each separate covenant shall be deemed
identical in terms to the covenant contained in this Section. If, in
any judicial proceeding, a court shall refuse to
14
<PAGE>
enforce any of the separate covenants deemed included in this Section,
then such unenforceable covenant shall be deemed eliminated from these
provisions for the purpose of those proceedings to the extent
necessary to permit the remaining separate covenants to be enforced.
(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 it relating to the Assets or the business transferred to
Buyer unless it first clearly demonstrates to Buyer that such matters
are, at the time of the proposed disclosure or use, of common
knowledge within the trade.
12.3 Seller Indemnities. Seller shall indemnify, defend and hold harmless Buyer
------------------
and its 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 Buyer, or its 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 Buyer, or its 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.
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 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.
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
-------------------------------
15
<PAGE>
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
waived 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 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 tradable. 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 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. 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 resale, 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 number of shares sold in each three month
period be observed, and that a report of sales will be filed with the SEC.
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. 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 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.
16
<PAGE>
14.6 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 state 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.
14.7 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 is able to hold the Shares for an indefinite
period of time and to sustain the loss of its entire investment in the
Shares, in the event such a loss should occur.
14.8 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 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.
14.9 Seller acknowledges that Buyer has furnished or made available to Seller
all financial and other data relating to Buyer, 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 Buyer for the past two years and complete copies of all of
the Buyer's SEC Reports for such period. Seller acknowledges that it has
been informed that Buyer has not previously conducted business except as
disclosed in the Buyer's SEC Reports. Seller represents and acknowledges
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 Buyer. Seller further represents and acknowledges that it has
had full opportunity to obtain additional information from Buyer 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 Buyer, 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
17
<PAGE>
thoroughly evaluated, to its own satisfaction, the high degree of risk
associated with investing in Buyer, including but not limited to, the
specific risks associated with Buyer's business and the risks associated
with the ownership of common stock.
14.10 Seller hereby represents and warrants to Buyer 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.
14.11 Seller hereby agrees (of behalf of itself and subsequent transferees of
the Securities) that the Securities shall not be sold, transferred,
pledged or hypothecated unless, in the opinion of counsel satisfactory to
Buyer, such registration is not required, and that each certificate
evidencing any of the Securities shall bear a legend in substantially the
following form:
"The securities represented by this certificate have not been registered
under the United States Securities Act of 1933 or under the securities
laws of any state, and such securities may not be sold or offered for
sale, transferred, pledged or hypothecated unless in the opinion of
counsel satisfactory to the Company such registration is not required."
In addition, Seller hereby agrees that, if Buyer maintains its own share
records, a notation consistent with such legend may be made in such share
transfer records restricting any such sale, transfer, pledge or hypothecation or
such other notation appropriate to ensure compliance with federal and state
securities laws, or, if such share transfer records are maintained by a
registrar, Buyer may issue to such registrar stop transfer instructions or other
instructions appropriate to ensure compliance with federal and state securities
laws. The foregoing restrictions and related legend provisions shall remain in
effect until, in the opinion of counsel satisfactory to Buyer, they are no
longer required.
Seller further agrees that it will defer the receipt of the Securities until
such time as the Additional Listing Application related to the Securities is
approved by AMEX. Buyer agrees to promptly file the Additional Listing
Application and pursue its approval with reasonable diligence.
14.12 Registration Rights (piggyback clause).
If the Company proposes to register any of its stock or other securities under
the Securities Act of 1933 (the "Act")
18
<PAGE>
in connection with the public offering of such securities solely for cash (other
than a registration relating solely to the sale of securities to participants in
a Company stock plan, or a registration on any form which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Shares) the Company shall,
subject to the provisions of this paragraph, use its reasonable efforts to cause
to be registered under the Act all of the Shares that Seller has acquired under
this Agreement. In connection with any registrations in which the Shares have
the right to be included pursuant to this paragraph, and which involve an
underwriting of securities being issued by the Company, the Company shall not be
required to include any of the Shares in such underwriting unless Seller accepts
the terms of the underwriting as agreed upon between the Company and the
underwriters selected by it, and then only in such quantity as will not, in the
opinion of the underwriters, jeopardize the success of the offering by the
Company. It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this paragraph that Seller shall furnish to the
Company such information regarding Seller, the Shares held by Seller, and the
intended method of disposition of such Shares as shall be required to effect the
registration of its Shares.
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.
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.
19
<PAGE>
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. This agreement is not assignable
without the prior written consent of Seller, which shall not be
unreasonably withheld or delayed.
ARTICLE 17. REMEDIES
--------
17.1 Recovery of Litigation Costs. If any legal action or any arbitration or
-----------------------------
other proceeding so brought for the enforcement of this Agreement, or
because of an alleged dispute, breach, default or misrepresentation in
connection with any of the provisions of this Agreement, the successful or
prevailing party shall be entitled to recover reasonable attorneys' fees
and other costs incurred in that action or proceeding, in addition to any
other relief to which it may be entitled.
17.2 Conditions Permitting Termination. Subject to the provisions of Article 3
---------------------------------
relating to the postponement of the Closing Date, either party may on or
prior to the Closing Date terminate this Agreement by written notice to the
other, without liability to the other, if any bona fide action or
proceeding shall be pending against either party on the Closing Date that
could result in an unfavorable judgment, decree or order that would prevent
or make unlawful the carrying out of this Agreement.
17.3 Defaults Permitting Termination. If either Buyer or Seller materially
-------------------------------
defaults in the due and timely performance of any of its warranties,
covenants, or agreements under this Agreement, the non-defaulting party or
parties may on the Closing Date give notice of termination of this
Agreement, in the manner provided in Article 19. The notice shall specify
with particularity the default or defaults on which the notice is based.
The termination shall be effective five days after the Closing Date, unless
the specified default or defaults have been cured on or before this
effective date for termination.
ARTICLE 18. NATURE AND SURVIVAL OF REPRESENTIONS 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 19. 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:
Cinema Internet Networks, Inc.
William (Bill) Massey
20
<PAGE>
3150 Celtic Ave. Bldg. #2
Vancouver, BC V6N3X7
Buyer:
C-3D Digital c/o Alan Hunter
330 Washington Blvd., Suite 507
Marina del Rey, CA 90292
with copy to:
Paul D.H. LaBarre
Hotel Movie Network
145 N. McQueen Suite 4
Gilbert, AZ 85233
Any party may change its address for purposes of this Article by giving the
other party written notice of the new address in the manner set forth above.
ARTICLE 20. GOVERNING LAW
-------------
This Agreement shall be construed in accordance with, and governed by the laws
of the State of California
ARTICLE 21. MISCELLANEOUS
-------------
21.1 Announcements. 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, 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 Seller shall in either case notify Buyer
of the contents thereof reasonably promptly in advance of its issuance.
21.2 References. Unless otherwise specified, references to Sections or
----------
Articles are to Sections or Articles in this Agreement.
21.3 Further Assurances. The parties agree to execute any and all further
------------------
documents reasonably necessary to give full effect to the intentions of
the parties as set forth herein.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed it as of
the day and year first above written.
CHEQUEMATE INTERNATIONAL, INC.,
-------------------------------
a Utah corporation
21
<PAGE>
By /s/ J. Michael Heil
Its: J. Michael Heil CEO
SELLER
Cinema Internet Networks Inc.
-----------------------------
a Canadian corporation
By /s/ William Massey
------------------------
Its: William Massey, CEO
22
<PAGE>
Schedule 1.1
Hotel Information Room Count
----------------- ----------
Days Inn Scottsdale 175
4710 N. Scottsdale Road.
Scottsdale, AZ 85251
Comfort Inn Airport
3031 N. 3 Road 130
Vancouver, BC V6x286
Abercorn Inn 94
9260 Brideport Road
Richmond, BC V6X286
Days Inn Metro 66
2075 Kingsway
Vancouver, BC V5N2T2
Executive Inn Express 81
9020 Bridgeport Road
Richmond, BC VX151
The Atrium Inn 105
2889 E. Hasting
Vancouver, BC V5K2A1
The Bedford Regency 40
1140 Government Street
Victoria, BC V8W1y2
The Biltmore Hotel 96
395 Kingway
Vancouver, BC V5T3J7
The Blue Horizon 214
1225 Robson Street
Vancouver, BC V6E1C3
23
<PAGE>
Clarion Hotel 122
344 Rosedale
Bakersfield, CA 93308
Ramada Resort 255
1800 E. Palm Canyon
Palm Springs, CA 92262
Ramada Denver Airport 148
3737 Quebec Street
Denver, CO 80202
Baymeadows Holiday Inn 249
9150 Baymeadows Road
Jacksonville, FL 32256
Bilmar Beach Resort 172
10650 Gulf Blvd.
Treasure Island, FL 33706
St. Petersburg Holiday Inn 189
5250 Gulf Blvd.
St. Petersburg, FL. 33706
Holiday Inn South Savanna 177
I-95 & GA Highway
Savanna, GA 331419
Wilson World Hotel & Suites 240
2325 Stemmons Freeway
Dallas, TX 75207
Room Count Total 2553
24
<PAGE>
Schedule 1.2
Equipment
25
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Schedule 1.3
Hotel with Lease Obligations
Hotel Information Lease Payment
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Days Inn Scottsdale $484.99 Capital
4710 N. Scottsdale Road.
Scottsdale, AZ 85251
Comfort Inn Airport $614.60 Integra
3031 N. 3 Road
Vancouver, BC V6x286
Ramada Resort $487.94 Capital
1800 E. Palm Canyon
Palm Springs, CA 92262
Baymeadows Holiday Inn $482.26 Capital
9150 Baymeadows Road
Jacksonville, FL 32256
Bilmar Beach Resort $484.53 Capital
10650 Gulf Blvd.
Treasure Island, FL 33706
St. Petersburg Holiday Inn $484.83 Capital
5250 Gulf Blvd.
St. Petersburg, FL. 33706
Wilson World Hotel & Suites $490.19 Capital
2325 Stemmons Freeway
Dallas, TX 75207
Lease Payment Total $3529.34
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Schedule 1.4
Cost of Operations of CinemaWorks Hotels from September 1, 1999
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1. Corporate Information
Legal Name: Cinema Internet Networks Inc. (d.b.a. CinemaWorks)
Symbol: CWK
Stock Exchange: Canadian Exchange Venture (CDNX Exchange)
Incorporated: 1986 Victoria, British Columbia, Canada
Tax ID Number: 105174114 RT
Business Number: 200-926-9 R
Address: 3150 Celtic Ave. - Building #2
Vancouver, BC, V6N 3X7
Phone: (604) 602-1280
Fax: (604) 602-1290
President: William (Bill) Massey
Phone (604) 681-2179
State of Washington:
Incorporated: 600-629-501
Fed Tax ID #: 52-147-1623
2. Liabilities (PPV assets)
Leases: $116,000 (approx.) Capital Plus, Salt Lake City UT
$42,000 (approx.) Integra, Calgary Alberta
Tax Liabilities (States): None
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Chequemate International Inc. August 3, 2000
330 Washington, Ste. 330
Marina del Ray, CA 90292
Attn: Michael Heil, CEO
cc: Alan Hunter and Paul LaBarre
This letter is to confirm our phone conversation today between myself, Paul
LaBarre and Bill Massey. We have agreed on the following in order to close the
purchase of the CinemaWorks ("CWK") assets by Chequemate ("C-3D"). The following
amendments were agreed to by the parties. All dollars are US$ unless otherwise
noted.
#1: a) The new agreed net purchase price of the PPV assets is $251,000. At
--
this price, CWK still retains the Integra lease obligation until the lease is
paid by CWK or assigned to a purchaser of the Canadian PPV assets.
b) To purchase the PPV assets, Chequemate will immediately deliver to the
escrow agent a certificate for 55,000 restricted shares and immediately file a
registration statement (S-3) with respect to those shares to be released when
shareholder approval is obtained by CinemaWorks..
c) In addition, Chequemate will immediately place 40,000 restricted C-3D
Shares (144 stock) in escrow with Paige Fraser. The holding period for these
shares will begin on the date of this Agreement between the parties.
#2: CinemaWorks will immediately (within 1 working day of Paige Fraser
--
receiving the Shares in #1 in escrow) call an extraordinary shareholder meeting
to approve the disposition of the PPV assets, a fait accompli. This step is
anticipated to be completed in approximately 30 days.
#3: CWK and Chequemate will sign a separate "Exclusive Agent Agreement"
--
allowing CinemaWorks exclusive right to sell the Canadian PPV assets for an
amount solely determined by CinemaWorks. However, CWK will use its best efforts
to maximize the sale price of the assets.
#4: Title to the PPV assets in Canada will remain with CWK until such time as
the assets are sold by CWK and title is transferred to a new buyer. All cash
and/or stock proceeds from the purchase will retained by CWK.
#5: Until, the PPV assets in Canada are sold or until the restricted Shares are
released from escrow as per #7 below, Chequemate and its subsidiary, Hotel Movie
Network (HMN), will provide monthly new movies and perform service calls for the
Canadian
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hotel PPV systems in the same professional manner as they do for the USA-based
PPV assets. At the same time, all monthly PPV movie revenues collected from the
Canadian PPV assets will continue to be sent to CWK. CinemaWorks will also
continue to invoice the Canadian PPV assets until the assets are sold or until
the144 Shares are saleable under Rule 144 and released from escrow as per #7
below.
#6: CinemaWorks will continue to be liable for- and pay the Integra lease
payment each month from revenues collected in #5. And, the balance of collected
revenues will be sent to Chequemate on a quarterly basis until such time as the
Canadian PPV assets are sold to another company.
#7: a) If CWK for any reason is unable to sell the Canadian PPV assets, then
the restricted stock will be transferred to CWK from escrow after one (1) year
and the Shares become saleable under Rule 144.
b) However, simultaneous with those Shares being released from escrow to
CWK, CinemaWorks will assign free and clear title of the Canadian PPV assets to
Chequemate.
c) If there is money still owed on the Integra lease by CWK at this time,
then it will be CWK's sole obligation to pay the remainder of the Integra lease.
#8: CWK will seek shareholder approval for the disposition of its PPV assets,
with the understanding that the lease obligation to Scott Applegate must be
removed from Bill Massey and CinemaWorks either directly by Applegate or by
Chequemate after taking assignment of this obligation from Applegate. This may
be accomplished by any document suitable to protect Bill Massey and CWK from any
and all legal actions related to what is now the Applegate lease obligation.
#9: Should CWK sucessfully sell the Canadian PPV assets before the Chequemate
restricted Shares become saleable under Rule 144, then the total proceeds amount
shall be credited to Chequemate in the form of restricted Shares to be released
to CWK and Chequemate from escrow. The value per restricted Share credited to
Chequemate will be $3.00. For example: if the total proceeds from the sale of
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the Canadian PPV assets are $75,000, then Chequemate will receive 25,000 shares
from escrow with the remaining 15,000 shares going to CWK.
Signed: Signed:
/s/ Bob Hahn /s/ J. Michael Heil
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Bob Hahn J. Michael Heil
CFO, Cinema Internet Networks Inc. CEO, Chequemate International Inc.
