STOCK EXCHANGE AGREEMENT
This Stock Exchange Agreement (the "AGREEMENT") dated as of
the __ day of August 2000, is by and amongst Watchout!, Inc., a Utah corporation
(hereinafter referred to as "Buyer" ) and Cavalcade of Sports Networks, Inc., a,
Nevada corporation, (hereinafter referred to as the "Seller" or "Shareholder")
and Cormax Business Solutions, Ltd., an Alberta corporation, (hereinafter
referred to as the "Company"). WHEREAS, the respective Board of Directors of
Buyer and Seller deem the acquisition by Buyer of all of the issued and
outstanding capital stock of the Company on the terms set forth in this
Agreement to be desirable, generally to the welfare and advantage of each, and
in the best interests of the shareholders of each;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements and covenants herein contained, and for the purpose of
prescribing the terms and conditions of such acquisition, the mode of carrying
it into effect, and such other details and provisions as are necessary or
desirable, the parties hereto hereby represent, warrant, covenant and agree as
follows:
ARTICLE I
PLAN OF AGREEMENT
1.01 Number of Shares. Subject to the further conditions of
this Agreement and the truth of the representations and warranties provided
herein, the Seller agrees to transfer to Buyer at the Closing a total of 1,000
shares of common stock (the "Shares"), said Shares representing all of the
issued and outstanding shares of common stock of the Company owned by the
Company duly endorsed for transfer in exchange for a total of 25,100,000 in the
common stock of the Buyer which is valued at $.30 per share for this agreement
for a total of $7,530,000 shares of common stock. The shares of the Buyer to be
issued to the Shareholders will be restricted securities as that term is defined
under the Securities Act of 1933, as amended.
1
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY
The Company and the Shareholder represent and warrant to Buyer that:
2.01 Incorporation, Common Stock, Etc. Company is a
corporation duly organized and existing in good standing under the laws of the
Province of Alberta. Attached hereto as Exhibit 2.01 is a copy of the Company's
Articles of Incorporation. Company has full corporate power and authority to
carry on its business as it is now being conducted and to own and operate its
assets, businesses and properties. Company has unlimited authorized no par value
capital stock, of which 1,000 shares are issued and outstanding. There are and
at the Closing will be no outstanding subscriptions, options, warrants,
convertible securities, calls, commitments or agreements calling for or
requiring issuance or transfer, sale or other disposition of any shares of
capital stock of the Company or calling for or requiring the issuance of any
securities or rights convertible into or exchangeable (including on a contingent
basis) for shares of capital stock. All of the outstanding shares of the Company
are duly authorized, validly issued, fully paid and non-assessable. There are no
dividends due, to be paid or are in arrears with respect to any of the capital
stock of Company.
2.02 Company Financial Statements. Attached hereto as Schedule
2.02 are the most recent financial statements for the Company dated August 30,
2000. The Company Balance Sheet and Income Statement present fairly the
financial position of the Company as of the dates set forth in the financial
statements. The Balance Sheet has been prepared in conformity with generally
accepted accounting principles. There has been no material change in the
financial condition of the Company since the date of the financial statements.
All liabilities of the Company are set forth in the financial statements and
there are no undisclosed liabilities of any kind or nature.
2
The Company further agrees to provide the Buyer within 60 days of
closing with certified financial statements in conformity with Securities and
Exchange Commission reporting requirements. If the Company is unable to provide
the required certified financial statements or, the certified financial
statements reflect a material change in the financial condition of the Company
from that which was represented in the August 30, 2000 financial statements,
then in that event the Buyer may, in its sole and absolute discretion and in
addition to any remedies available at law, rescind this Agreement.
2.03 Litigation. Except as set forth on exhibit 2.03, there
are no actions, suits, proceedings, or investigations pending or, to the best of
its knowledge, threatened or contemplated against Company at law or in equity,
before any federal, state, municipal or other governmental department,
commission, board, agency or instrumentality, domestic or foreign. The Company
is not subject to any outstanding judgments or operating under or subject to or
in default with respect to any order, writ, injunction or decree of any court or
federal, state, municipal or other governmental department, commission, board,
agency or instrumentality, domestic or foreign.
2.04 Compliance with Laws. The Company has complied in all
material respects with all laws, regulations, orders, domestic and foreign, and
neither the present uses by Company of its properties nor the conduct of its
business violate any such laws, regulations, orders or requirements, and except
as set forth in Schedule 2.04 (if applicable) the Company has not received any
notice of any claim or assertion that it is not so in compliance.
2.05 Indebtedness. Except as set forth in the Company Balance
Sheet, Company has not executed any instruments, entered into any agreements or
arrangements pursuant to which the Company has borrowed any money, incurred or
guaranteed any indebtedness or established any line of credit which represents a
liability of the Company as of the date thereof.
3
2.06 No Material Adverse Change. Since the Company Balance
Sheet Date, there has not been any material adverse change in the condition,
financial or otherwise, of the Company or in its business taken as a whole; nor
has there been any material transaction entered into by the Company. The Company
has not incurred any material obligations, contingent or otherwise except for
legal and accounting fees and expenses in connection with the transactions
contemplated by this Agreement. There has not been any damage, destruction or
loss, whether or not covered by insurance adversely affecting the Company's
business, property or assets; nor has the Company (a) created or incurred any
indebtedness; (b) issued, sold, purchased, redeemed or granted any shares of
Company Common Stock or any other securities of Company or any options, warrants
or other rights to purchase any shares of Company Common Stock except as between
and amongst its current shareholders; (c) amended its Certificate of
Incorporation or bylaws, (d) paid any obligation or liability other than
obligations or liabilities reflected in its Balance Sheet dated as of the
Company Balance Sheet Date or incurred any liabilities except for legal and
accounting fees and disbursements incurred in the ordinary course of business or
in connection with this Agreement and the transactions contemplated hereby.
2.07 No Defaults. Neither the execution nor delivery of this
Agreement nor the consummation of the contemplated transaction are events which,
of themselves or with the giving of notice or passage of time or both, could
constitute a violation of or conflict with or result in any breach of or default
under the terms, conditions or provisions of any judgment, law or regulation or
of the Company's Certificate of Incorporation or Bylaws, or of any agreement or
instrument to which Company is a party or by which it is bound; or could result
in the creation or imposition of any lien, charge or encumbrance of any nature
whatsoever on the property or assets of Company; and no consent of any third
party except as expressly contemplated herein is
4
required for the consummation of this Agreement by Company.
2.08 Corporate Action of Company. The Board of Directors of
the Company has duly authorized the execution and delivery of this Agreement.
Subject to the approval of the stockholders of the Company as provided herein,
this Agreement constitutes a valid, legal and binding agreement of Company and
is enforceable in accordance with its terms.
2.09 Liabilities. As of the Company Balance Sheet Date, the
Company has incurred no other liabilities except in the ordinary course of
business. 2.10 Taxes. Except as set forth on Schedule 2.10, all federal, state,
and local tax returns, reports and declarations of estimated tax or estimated
tax deposit forms required to be filed by Company have been duly filed; the
Company has paid all taxes which have become due pursuant to such returns or
pursuant to any assessment received by it, and has paid all installments of
estimated taxes due; and all taxes, levies and other assessments which Company
is required by law to withhold or to collect have been duly withheld and
collected and have been paid over to the proper governmental authorities.
Company has no knowledge of any tax deficiency which has been or might be
asserted against Company which would materially and adversely affect the
business or operations of Company. At Closing, the Company shall provide Buyer
with copies of all tax returns, of any kind or nature, filed by Company,
together with all accounting information.
2.11 Title to Property; Leases. Company has good and
defensible title in fee simple to, or valid and enforceable leasehold estates
in, all properties and assets, which are material to its continued operations,
free and clear of all liens, encumbrances, charges or restrictions or are not
materially significant or important in relation to its operations and business.
All of such leases and subleases under which Company is the lessor or sublessor,
lessee or sublessee of properties or assets or under which
5
Company holds properties or assets as lessee or sublessee are in full force and
effect. Company is not in default in respect of any of the terms or provisions
of any of such leases or subleases, and no claim has been asserted by anyone
adverse to their respective rights as lessor, sublessor, lessee or sublessee
under any of the leases or subleases mentioned above, or affecting or
questioning their respective rights to continued possession of the leased or
subleased premises or assets under any such lease or sublease; and Company
either owns or leases all such properties as are necessary to its operations as
now conducted.
2.12 Licenses. Except that the Company has not filed as a
foreign corporation doing business in Maryland, the Company has obtained all
required licenses, permits or other governmental authorization for the conduct
of its business as now being conducted.
2.13 Bank Accounts. Attached hereto as schedule 2.13 is a
listing of all bank accounts and account numbers which are currently held by
Company. 2.14 Contracts and Commitments. Except as set forth in Exhibit 2.14,
there are no contracts nor commitments of Company requiring any future payment
to an officer, director, employee, agent or shareholder of Company. Also
attached and marked as Exhibit 2.14 is a list of all current Company employees
and the salary of each.
2.15 Representations True and Correct. This Agreement and the
Schedules and Exhibits attached hereto do not contain any untrue statement of a
material fact concerning Company or omits any material fact concerning Company
which is necessary in order to make the statements therein not misleading. All
of the representations and warranties contained herein (including all statements
contained in any certificate or other instrument delivered by or on behalf of
the Shareholders pursuant hereto or in connection with the transactions
contemplated hereby) shall survive the Closing.
6
2.16 Retirement Plans. Company has no pension plan, profit
sharing or similar employee benefit plan. 2.17 Intellectual Property Rights.
Attached hereto as Exhibit 2.17 is a list of all trademarks, trade names,
copyrights, patents, common law proprietary claims which are owned by the
Company together with copies of any official notice from any issuing governing
organization. The Company has proprietary common law property rights, or will
obtain necessary consents within 14 days to the E commerce Platform Source Codes
as set forth in the attached exhibits.
2.18 Contracts and Commitments. The Company has signed
contracts of $1.3 million and commitments under review and consideration
totaling in excess of $1 million.
2.19 Indemnification. The Company and the Shareholders jointly
and individually shall indemnify and hold Buyer, its officers and directors,
harmless of and in respect of:
(1) Any damage or loss resulting from any loss, any liability of any
kind or nature which is not set forth in the financial statements, damage,
misrepresentation, breach of warranty or non-fulfillment on the part of Company
under this Agreement or from any misrepresentation or omission from any
certificates or other instruments furnished to Company pursuant to this
Agreement.
(2) All actions, suits, proceedings, demands assessments, judgments,
costs and expenses incident to any of the foregoing including reasonable
attorney's fees and all costs incurred by Buyer to enforce this agreement
against Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF Buyer
Buyer represents and warrants to the Shareholder and Company that:
3.01 Incorporation, Common Stock, Etc. Buyer is a corporation
7
duly organized and existing in good standing under the laws of the State of
Utah. The Buyer has full corporate power and authority to carry on its business
as it is now being conducted and to own and operate its assets, businesses and
properties. The Buyer has authorized capital stock consisting of 50 million
shares of Common Stock, par value $.001 per share, of which 24,583,202 will be
outstanding as of August 31, 2000 shares are issued and outstanding. All of the
outstanding shares of the Company are duly authorized, validly issued, fully
paid and non-assessable. There are no dividends due, to be paid or are in
arrears with respect to any of the capital stock of Company.
3.02 Buyer Financial Statements. Attached hereto as Schedule
3.02 are the most recent financial statements for the Buyer dated as of June 30,
2000 as filed with the Securities and Exchange Commission. The Buyer Balance
Sheet and Income Statement present fairly the financial position of Buyer as of
the dates set forth in the financial statements. The Balance Sheet has been
prepared in conformity with generally accepted accounting principles. There has
been no material change in the financial condition of the Buyer since the date
of the financial statements. All liabilities of the Buyer are set forth in the
financial statements and there are no undisclosed liabilities of any kind or
nature.
3.03 Litigation. Except for the Xxxxx litigation, which Buyer
has provided information to Seller, there are no actions, suits, proceedings, or
investigations pending or, to the best of its knowledge, threatened or
contemplated against Buyer at law or in equity, before any federal, state,
municipal or other governmental department, commission, board, agency or
instrumentality, domestic or foreign. The Buyer is not subject to any
outstanding judgments or operating under or subject to or in default with
respect to any order, writ, injunction or decree of any court or federal, state,
municipal or other governmental department, commission, board,
8
agency or instrumentality, domestic or foreign.
3.04 Compliance with Laws. The Buyer has complied in all
material respects with all laws, regulations, orders, domestic and foreign, and
neither the present uses by Buyer of its properties nor the conduct of its
business violate any such laws, regulations, orders or requirements, and the
Buyer has not received any notice of any claim or assertion that it is not so in
compliance.
3.05 No Defaults. Neither the execution nor delivery of this
Agreement nor the consummation of the contemplated transaction are events which,
of themselves or with the giving of notice or passage of time or both, could
constitute a violation of or conflict with or result in any breach of or default
under the terms, conditions or provisions of any judgment, law or regulation or
of Buyer's Certificate of Incorporation or Bylaws, or of any agreement or
instrument to which Buyer is a party or by which it is bound; or could result in
the creation or imposition of any lien, charge or encumbrance of any nature
whatsoever on the property or assets of Buyer; and no consent of any third party
except as expressly contemplated herein is required for the consummation of this
Agreement by Buyer.
3.06 Corporate Action of Buyer. The Board of Directors of the
Buyer has duly authorized the execution and delivery of this Agreement. This
Agreement constitutes a valid, legal and binding agreement of Buyer and is
enforceable in accordance with its terms.
3.07 Taxes. Except as set forth on Schedule 3.07, all federal,
state, and local tax returns, reports and declarations of estimated tax or
estimated tax deposit forms required to be filed by Buyer have been duly filed;
Buyer has paid all taxes which have become due pursuant to such returns or
pursuant to any assessment received by it, and has paid all installments of
estimated taxes due; and all taxes, levies and other assessments which Buyer is
required by law to withhold or to collect have been
9
duly withheld and collected and have been paid over to the proper governmental
authorities. Buyer has no knowledge of any tax deficiency which has been or
might be asserted against Buyer which would materially and adversely affect the
business or operations of Buyer.
3.08 Title to Property; Leases. Buyer has good and defensible
title in fee simple to, or valid and enforceable leasehold estates in, all
properties and assets, which are material to its continued operations, free and
clear of all liens, encumbrances, charges or restrictions except as set forth in
the attached Schedule 3.08 or are not materially significant or important in
relation to its operations and business. All of such leases and subleases under
which Buyer is the lessor or sublessor, lessee or sublessee of properties or
assets or under which Buyer holds properties or assets as lessee or sublessee
are in full force and effect. Buyer is not in default in respect of any of the
terms or provisions of any of such leases or subleases, and no claim has been
asserted by anyone adverse to their respective rights as lessor, sublessor,
lessee or sublessee under any of the leases or subleases mentioned above, or
affecting or questioning their respective rights to continued possession of the
leased or subleased premises or assets under any such lease or sublease; and
Buyer either owns or leases all such properties as are necessary to its
operations as now conducted.
3.09 Representations True and Correct. This Agreement and the
Schedules and Exhibits attached hereto do not contain any untrue statement of a
material fact concerning Buyer or omits any material fact concerning Buyer which
is necessary in order to make the statements therein not misleading. All of the
representations and warranties contained herein (including all statements
contained in any certificate or other instrument delivered by or on behalf of
the Buyer) shall survive the closing.
3.10 Indemnification. Buyer shall indemnify and hold Company,
its officers and directors, harmless of and in respect of:
10
(1) Any damage or loss resulting from any loss, liability,
damage, misrepresentation, breach of warranty or non-fulfillment on the part of
Buyer under this agreement or from any misrepresentation or omission from any
certificates or other instrument furnished to Company pursuant to this
agreement.
(2) All actions, suits, proceedings, demands assessments,
judgments, costs and expenses incident to any of the foregoing including
reasonable attorney's fees and all costs incurred by Company to enforce this
agreement against Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
The Shareholder owns 100% of the issued and outstanding shares of stock
of Company. The Shares are owned free and clear of any liens or encumbrances and
that the Shareholder is free to transfer the Shares without the consent of any
third party.
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF BUYER TO CLOSE
The obligations of Buyer under this Agreement are, at the option of
Buyer, subject to the fulfillment of the following conditions at, or prior to,
the closing date:
5.01 Representations, Warranties and Covenants. All representa
tions and warranties of Company contained in this Agreement and in any
statement, certificate, schedule or other document delivered by Company pursuant
hereto or in connection herewith shall have been true and accurate in all
respects as of the date when made and as of the Closing Date.
5.02 Covenants, Etc. Company shall have substantially
performed and complied with each and every covenant, agreement and condition
required by this Agreement to be performed or complied with by them prior to, or
at, the Closing Date.
11
5.03 Certificate. Company shall have delivered to Buyer a
certificate of the President and Secretary of Company, dated the Closing Date,
certifying to the fulfillment of the conditions set forth in 5.01 and 5.02.
5.04 Proceedings. No action or proceedings shall have been
instituted or threatened against the Company which could materially adversely
affect the business of the Company. No action or proceedings shall have been
instituted or threatened against any of the parties to this Agreement or their
directors or officers before any court or governmental agency to restrain,
prohibit or obtain substantial damages in respect of this Agreement or the
consummation of the transactions contemplated hereby.
5.05 Corporate Documents. Prior to Closing the Company shall
furnish to Buyer copies of the Certificate of Incorporation of Company and each
amendment thereto, if any, which shall be certified by a proper state official;
one copy of the By-Laws and minutes of Company by its secretary or an assistant
secretary as being currently in effect, and a certificate of good standing
issued by the proper state officials of each state in which Company transacts
business and is required to qualify.
5.06 Document & Production. This Agreement is expressly
conditioned on Company providing all identified schedules and exhibits within 14
days of closing.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF THE SELLER
The obligations of the Seller is subject to the fulfillment of the
following conditions at or prior to the Closing Date:
6.01 Representations, Warranties and Covenants. All repre
sentations and warranties of Buyer contained in this Agreement and in any
statement, certificate, schedule or other document delivered pursuant hereto,
12
or in connection herewith, shall have been true and accurate in all respects as
of the date when made and as of the Closing Date.
6.02 Covenants, Etc. Buyer shall have substantially performed
and complied with each and every covenant, agreement and condition required by
this Agreement to be performed or complied with by it prior to, or at, the
Closing Date.
6.03 Proceedings. No action or proceedings shall have been
instituted or threatened against Buyer which could materially and adversely
affect the business of Buyer. No actions or proceedings shall have been
instituted or threatened against any of the parties to this Agreement, or their
directors or officers before any court or governmental agency to restrain,
prohibit or obtain substantial damages in respect to this Agreement or the
consummation of the transactions contemplated hereby.
5.06 Document & Production. This Agreement is expressly
conditioned on Buyer providing all identified schedules and exhibits within 14
days of closing.
ARTICLE VII
CONDITIONS FOLLOWING CLOSING
Pursuant to Article II of this Agreement, the Seller has represented to
the Buyer that the Company will secure contracts for sales totaling $2 million
within the next 180 days.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.01 Abandonment of Agreement. This Agreement may be
terminated and the transactions hereby contemplated abandoned at any time prior
to the Closing Date, whether before or after the approval and adoption hereof by
the shareholders of each Company by (a) the mutual consent of the Board of
Directors of Company and Buyer or (b) the Board of Directors of the Company if
any condition to its obligations provided in this Agreement has not
13
been met at the time such condition is to be met and has not been waived by it,
or (c) by the Board of Directors of Buyer, if any condition to its obligations
provided in this Agreement has not been met at the time such condition is to be
met and has not been waived by it.
8.02 Liabilities. In the event this Agreement is terminated
pursuant to Section 8.01, no party hereto shall have any liability to the other
and each party shall bear their own costs incurred.
8.03 Assignments. This Agreement may not be assigned except
with the written consent of the nonassigning party. Notwithstanding the
foregoing, the rights of the Shareholders to receive the Shares shall be freely
assignable.
8.04 Survival of Representations and Warranties. Company and
Buyer agree all representations and warranties contained herein or made
hereunder shall survive the Closing, except that any breach disclosed in writing
to either party prior to Closing is waived by such party if it elects to close
notwithstanding such breach.
8.05 Notices. All notices, demands and other communications
which may or are required to be given pursuant to this Agreement shall be given
or made when personally delivered or when deposited in the United States Mail,
first class, postage pre-paid, addressed as follows: If to Company to: c/o
Xxxxxxx Xxxxxx 0000 Xxxx Xxxxxxx Xxxx. Xxxxx 000 Xxxxxxx, Xxxxxxx 00000
or to such other address as Company may, from time to time, designate by
Notice to Buyer
If to Buyer to: 0000 X Xxxxx Xxxx, XXX 000
Xxxxxxx, XX 00000
With a copy to:
14
XXXXXX AND XXXXX
00000 Xxxxx Xxxx Xxxxx #000X
Xxxx Xxxxx, Xxxxxxx 00000
or to such other addresses as Buyer may, from time to time, designate by notice
to Company.
8.06 Closing. The closing date for the contemplated
transaction shall be on or before September 1, 2000 . 8.07 Entire Agreement.
This Agreement constitutes the entire agreement between the parties and
supersedes and cancels any and all prior agreements between the parties relating
to its subject matter. The representations, warranties, covenants and conditions
of the obligations of the parties hereto may not be orally amended, modified or
altered, but may be amended, modified or altered in a writing signed by each of
the parties, whether before or after the meeting of shareholders of Company
contemplated herein.
8.08 Captions. The captions of Articles and Sections of
Articles hereof are for convenience only and shall not control or affect the
meaning or construction of any of the provisions of this Agreement.
8.09 Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of Florida and
jurisdiction for any dispute shall be in Florida.
8.10 Waivers. Any failure of either party hereto to comply
with any of its obligations or agreements, or to fulfill conditions herein
contained may be waived in writing by the other party. No waiver by any party of
any condition or the breach of any provision, term, covenant, representation or
warranty contained in this Agreement, whether by conduct or otherwise, shall be
deemed to be or construed as a further or continuing waiver of any such
condition or of the breach of any other provision, term, covenant,
representation, or warranty of this Agreement.
8.11 Counterparts. This Agreement may be executed in several
15
counterparts and all so executed shall constitute one agreement, binding upon
all of the parties hereto, notwithstanding that not all of the parties are
signatory to the original or the same counterpart.
8.12 Successors. The terms covenants and conditions of the
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective heirs, legal representatives, successors and assigns.
8.13 Binding Agreement. This Agreement represents the entire
agreement among the parties hereto with respect to the matters described herein
and is binding upon and shall inure to the benefit of the parties hereto and
their legal representatives. This Agreement may not be assigned and, except as
stated herein, may not be altered or amended except in writing executed by the
party to be charged.
8.14 Tax Free Exchange. It is the intent of the respective
parties that this Agreement be treated as a tax free exchange under the Section
368 of the Internal Revenue Code.
8.15 Delivery of Documents. The Closing of this transaction
is specifically contingent upon delivery of all documents by the respective
parties.
The Remainder of this Space Left Intentionally Blank.
16
This Agreement entered into the date first entered above.
WATCHOUT! INC. WITNESS:
--------------------------------- ---------------------------
BY: Xxx Xxxxxxxxx
Its President ---------------------------
CAVALCADE OF SPORTS NETWORKS, INC.
--------------------------------- ---------------------------
BY: Xxxx Xxxxxxxx
Its president ---------------------------
17
