SHARE PURCHASE AGREEMENT
___________________, 1999
This Share Purchase Agreement ("Agreement"), between Xxxxxx Xxxxxx, Xxxxx
Xxxxxx, Archangel Holdings Company, LLC ("SELLERS"), and Innovative
Cybersystems Corp., a Florida corporation (as BUYER).
W I T N E S S E T H:
A. WHEREAS, WatchOut! Inc., is a corporation organized under the
laws of Utah.
B. WHEREAS, SELLERS are willing to sell, and BUYER desires to purchase
certain issued and outstanding shares of capital stock in WatchOut! Inc., as
specified on Exhibit A.
C. WHEREAS, WatchOut! and SELLERS will benefit from the transactions
contemplated hereby and desire to implement the contemplated transaction.
NOW, THEREFORE, it is agreed among the parties as follows:
ARTICLE I
The Consideration
1.1 Subject to the conditions set forth herein on the "Closing Date"
(as herein defined), SELLERS shall sell and cause to be delivered and BUYER
shall purchase the shares of WatchOut! common stock as specified on exhibit A
except for those shares pledged by sellers to creditors. The transactions
contemplated by this Agreement shall be completed at a closing ("Closing") on a
closing date which shall be on or before October 9, 1999. The purchase price
for the WatchOut! shares to be paid by BUYER to SELLERS is, $10,000, of which
funds $5,000 shall be paid at the execution of this agreement to auditors and
accountants of WatchOut! Inc., for past due audit fees and $5,000 at time of
delivery of the December 31, 1998 audited financial statements and the
agreement by buyers that all creditors bills as listed on Exhibit B will be
paid by BUYER in stock, cash, or any other settlement acceptable to buyers and
creditors within two years after date hereof including as provided in 7.11
hereof. BUYER shall hold sellers harmless and indemnify sellers from any loss,
cost, or damage resulting from any loss cost or claims by such listed
creditors.
On the Closing Date, all of the documents to be furnished pursuant to
this Agreement, including the documents to be furnished pursuant to Article VII
of this Agreement, shall be delivered to M.A. Xxxxxxx, to be held in escrow
until (a) all closing conditions hereunder have been met or (b) the date of
termination of this Agreement.
ARTICLE II
Delivery of Shares
2.1 The certificates representing the restricted shares shall be
delivered and conveyed by SELLERS to BUYER with duly executed stock powers,
upon receipt of the consideration by SELLERS and satisfaction of all Conditions
Precedent to Consummation of Purchase as set forth in Article VII hereof,
except that certain shares, shall be held as collateral for creditors as shown
on Schedule 2.1. If the debts for which the collateral pledged is are paid, (or
any remaining shares if pledged collateral is sold) then such shares shall be
transferred at the transfer agent to BUYER.
ARTICLE III
Representations, Warranties, and Covenants of SELLERS as to WATCHOUT
These representations or warranties are made by SELLERS as individuals,
and as officers and directors of WO.
SELLERS hereby represent, warrant, and covenant to BUYER as follows:
3.1 WO is a corporation duly organized, validly existing and in good
standing under the laws of Utah, and has the corporate power and authority to
carry on its business as it is now being conducted. The Articles of
Incorporation of WO and amendments, copies of which have been delivered to
BUYER, are complete and accurate, and the minute books of WO, which will be
delivered to BUYER contain a complete and accurate record of all material
actions taken at, all meetings of the shareholders and Board of Directors of
WO.
3.2 The aggregate number of shares which WO is authorized to issue is
50 Million shares with a par value of $.001 per share, of which 15,030,245
shares are issued and outstanding. Such shares are fully paid and
non-assessable. WO has no outstanding options, warrants or other rights to
purchase, or subscribe to, or securities convertible into or exchangeable for
any shares of capital stock, except for Messrs Bader, Williams, Sands, Sands,
Hollo, Capstone Financial LLC, and Xxxxxx which shall be canceled prior to
closing.
3.3 SELLERS have complete and unrestricted power to enter into and,
upon receipt of the appropriate approvals as required by law, to consummate the
transactions contemplated by this Agreement.
3.4 SELLERS own the common shares of WO free and clear of all liens and
encumbrances, and are authorized to sell such shares to BUYER, subject only to
the pledge agreements and debts recited hereinafter
3.5 SELLERS who represent WO shall not enter into or consummate any
transactions prior to the Closing Date and will pay no dividend, or increase
the compensation of officers and will not enter into any other business
agreement or transaction, prior to closing date.
3.6 The representations and warranties of SELLERS shall be true and
correct as of the date hereof and as of the Closing Date.
3.7 SELLERS have delivered to buyer all of the corporate books and
records of WO for review, true and correct copies of WO's tax returns since
1995. SELLERS will also deliver to buyer on or before the Closing Date any
reports relating to the financial and business condition of WO which occur
after the date of this Agreement and any other reports sent generally to its
shareholders after the date of this Agreement.
3.8 No representation or warranty by SELLERS in this Agreement or
any certificate delivered pursuant hereto contains any untrue statement of a
material fact or omits to state any material fact necessary to make such
representation or warranty not misleading.
3.9 SELLERS will cause WO not to take any board action without buyer
approval in writing, pending selection of new officers and directors.
3.10 SELLERS will deliver to buyer within 10 days audited financial
statements of WO as of December 31, 1998 and has delivered unaudited September
30, 1998 financial statements. All such financial statements, herein sometimes
called " Financial Statements" are (and will be) complete and correct in all
material respects and, together with the notes to these financial statements,
present fairly the financial position and results of operations of the periods
indicated. All financial statements of WO will have been prepared in accordance
with generally accepted accounting principles, and will be "unqualified" except
as to "going concern."
3.11 Since the dates of the WO Financial Statements, there have not
been any material adverse changes in the business or condition, financial or
otherwise, of WO. WO Does not have any material liabilities or obligations,
secured or unsecured, except as shown in the financial statements. WatchOut!
has settled a dispute with Boit, Inc. over licenses for technology, which needs
to be filed on an 8K with the SEC.
3.12 There are no pending legal proceedings or regulatory
proceedings involving WO, and, except for a claim by Office Depot for $17,000
and a claim by Xxx Xxxxxxx which have threatened to commence collection
actions, there are no legal proceedings or regulatory proceedings involving
material claims pending, or, to the knowledge of the officers of WO, threatened
against WO or affecting any of their assets or properties, and WO is not in any
material breach or violation of or default under any contract or instrument to
which WO is a party except for the notes and payables listed on the Exhibit B.
3.13 WO shall not enter into or consummate any transactions prior to
the Closing Date and will pay no dividend, or increase the compensation of
officers and will not enter into any agreement or transaction, without consent
of BUYER.
3.14 The representations and warranties of SELLERS shall be true and
correct as of the date hereof and as of the Closing Date.
3.15 WO has no employee benefit plan in effect at this time.
3.16 No representation or warranty in this Agreement, or any
certificate delivered pursuant hereto contains any untrue statement of a
material fact or omits to state any material fact necessary to make such
representation or warranty not misleading.
3.17 SELLERS warrant and represent that at closing those debts listed on
Exhibit B shall be the sole and only debts of WatchOut! Inc. and sellers agree
to indemnify and hold buyer and WatchOut! Inc. harmless from any other debt
whatsoever not listed thereon.
ARTICLE IV
Representations, Warranties, and Covenants of BUYER
No representations or warranties are made by any director, officer, employee, or
shareholder of buyer as individuals, except as and to the extent stated in this
Agreement or in a separate written statement.
BUYER hereby represents, warrants, and covenants to SELLERS as follows:
4.1 BUYER is a corporation duly organized, validly existing, and in
good standing under the laws of the state of, Florida and has the corporate
power and authority and to carry on its business as it is now being conducted.
4.2 BUYER has complete and unrestricted power to enter into this
agreement; and, to consummate the transactions contemplated by this Agreement.
4.3 Neither the making of nor the compliance with the terms and
provisions of this Agreement and consummation of the transactions contemplated
herein by BUYER will conflict with or result in a breach or violation of the
Articles of Incorporation or Bylaws of BUYER.
4.4 The execution of this Agreement has been duly authorized and
approved by the BUYER Board of Directors.
4.5 The representations and warranties of BUYER shall be true and correct
as of the date hereof and as of the Closing Date.
ARTICLE V
Obligations of the Parties Pending the Closing Date
5.1 At all times prior to the Closing Date during regular business
hours, each party will permit the other to examine its books and records to the
extent the same are relevant to the purchase of the shares of WO and the books
and records of its subsidiaries and will furnish copies thereof on request. It
is recognized that, during the performance of this Agreement, each party may
provide the other party with information which is confidential or proprietary
information. During the term of this Agreement, and for two years following the
earlier of the Closing or the termination of this Agreement, the recipient of
such information shall protect
such information from disclosure to persons, other than members of its own or
affiliated organizations and its professional advisers, in the same manner as
it protects its own confidential or proprietary information from unauthorized
disclosure, and not use such information to the competitive detriment of the
disclosing party. In addition, if this Agreement is terminated for any reason,
each party shall promptly destroy, return, or cause to be returned all
documents or other written records of such confidential or proprietary
information, together with all copies of such writings and, in addition, shall
either furnish or cause to be furnished, or shall destroy, or shall maintain
with such standard of care as is exercised with respect to its own confidential
or proprietary information, all copies of all documents or other written
records developed or prepared by such party on the basis of such confidential
or proprietary information. No information shall be considered confidential or
proprietary if it is (a) information already in the possession of the party to
whom disclosure is made, (b) information acquired by the party to whom the
disclosure is made from other sources, or (c) information in the public domain
or generally available to interested persons or which at a later date passes
into the public domain or becomes available to the party to whom disclosure is
made without any wrongdoing by the party to whom the disclosure is made.
5.2 SELLERS and BUYER shall promptly provide each other with
information as to any significant developments in the performance of this
Agreement, and shall promptly notify the other if it discovers that any of its
representations, warranties and covenants contained in this Agreement or in any
document delivered in connection with this Agreement was not true and correct
in all material respects or became untrue or incorrect in any material respect.
5.3 All parties to this Agreement shall take all such action as may be
reasonably necessary and appropriate and shall use their best efforts in order
to consummate the transactions contemplated hereby as promptly as practicable.
ARTICLE VI
Procedure for Closing
6.1 At the Closing Date, the purchase and sale shall be effected with
share certificates of WO together with stock powers executed in blank, being
delivered to escrow agent together with delivery of $5,000 to auditors and
accountants (with an additional $5,000 to be paid to auditor and accountants
upon delivery of the December 31, 1998 audit) and documents, agreements,
schedules, warranties, pledge agreements, and representations set forth in this
Agreement.
ARTICLE VII
Conditions Precedent to the
Consummation of the Purchase
The following are conditions precedent to the consummation of the
Agreement on or before the Closing Date:
7.1 SELLERS and BUYER shall each have performed and complied with all
of their respective obligations hereunder which are to be complied with or
performed on or before the Closing Date and SELLERS and BUYER shall provide one
another at the Closing with a certificate to the effect that such party has
performed each of the acts and undertakings required to be performed by it on
or before the Closing Date pursuant to the terms of this Agreement.
7.2 This Agreement and the transactions contemplated herein shall have
been duly and validly authorized, approved and adopted by SELLERS, and buyer in
accordance with the applicable laws.
7.3 No action, suit or proceeding shall have been instituted or shall
have been threatened before any court or other governmental body or by any
public authority to restrain, enjoin or prohibit the transactions contemplated
herein, or which might subject any of the parties hereto or their directors or
officers to any material liability, fine, forfeiture or penalty on the grounds
that the transactions contemplated hereby, the parties hereto or their
directors or officers, have violated any applicable law or regulation or have
otherwise acted improperly in connection with the transactions contemplated
hereby, and the parties hereto have been advised by counsel that, in the
opinion of such counsel, such action, suit or proceeding raises substantial
questions of law or fact which if decided adversely to any party hereto or its
directors or officers would materially and adversely affect the business,
assets, or financial position of WO.
7.4 The representations and warranties made by SELLERS and by BUYER in
this Agreement shall be true as though such representations and warranties had
been made or given on and as of the Closing Date.
7.5 Since the dated of the WO Financial Statements, there have not been
any material adverse changes in the business or condition, financial, or
otherwise, of WO. WO does not have any material liabilities or obligations,
secured or unsecured except as shown on current financials (whether accrued,
absolute, contingent or otherwise).
7.6 All outstanding liabilities of WO to SELLERS or SELLERS'
affiliates shall be waived prior to or concurrent with closing. Such waiver
shall be deemed and treated as additional paid in capital and shall constitute
additional basis in sellers stock.
7.7 Creditors of WO shall have executed written agreements prior to
Closing Date, providing for a payment schedule, as may be required by buyer.
7.8 No press release or public statement will be issued relating to the
transactions contemplated by this Agreement without prior approval of WO.
However, either BUYER or WO may issue at any time any press release or other
public statement it believes on the advice of its counsel it is obligated to
issue to avoid liability under the law relating to disclosures, but the party
issuing such press release or public statement shall make a reasonable effort
to give the other party prior notice of and opportunity to participate in such
release or statement.
7.9 The effectiveness of this Agreement is specifically subject to and
contingent upon 1) negotiation of lockup agreements with Xxxxx Xxxxxx, Xxxxxx
Xxxxxx, Archangel Holding Company LLC, and 2) share reduction or option and
lock up agreements with Madison Holding Company LLC, Arc Unlimited LLC,
Xxxxxxxx International Trading LTD, Xxxxx Xxxxxx, Xxxxxx X. Xxxxxx, The Prince
Family Trust, the Xxxxx and Xxxx Xxxxxx Trust, Camke development LTD, Xxxx
Xxxxx, Xxxx Xxxxxxx, Xxxxxxx Xxxxxxx, and Xxxxxx Xxxxxxxxxx which satisfy the
BUYER and which result in a net reduction of 1,203,766 shares.
7.10 This agreement is contingent upon and subject to BUYER negotiating a
satisfactory share reduction or Purchase and Release by Sands Brothers, Xxxx
Xxxxx, Xxxxxx Xxxxx and Xxxxxxx Xxxxx. SELLERS agree to waive and release any
and all claims against Sands Brothers LTD, Xxxx Xxxxx and Xxxxxxx Xxxxx and
Xxxxxx Xxxxx prior to closing as part of this Article 7.10 and this agreement
7.11 At Closing there shall be a total of 1,750,000 shares of WO common
stock owned by SELLERS pledged as collateral by SELLERS to the largest
creditors of WO:
Shares
Debt: Pledged
Capstone Financial 275,000 500,000
Messrs. Xxxxx & Xxxxxxxx 300,000 500,000
Xxx Xxxxxxx $96,000 47,000
All Others General 353,000
Sands Brothers 90,000 250,000
Howard, Rice, Xxxxxxxxxx 56,000 100,000
It is agreed that the debt may be paid, at BUYER'S election, either by allowing
sale of collateral in the market, or by buyer purchasing the shares in
increments as buyer may elect from time to time over a two year period. Upon
and at full payment of each debt for which shares have been pledged, buyer
shall receive the balance of any common shares of upon payment of the sum of
$100, except that Messrs. Xxxxx & Xxxxxxxx shall be conveyed 30,000 shares each
from the collateral pledged for the Xxxxx/Xxxxxxxx debt of WatchOut! Inc.
In the event that any pledged shares are sold at pledgee's demand, any proceeds
paid to creditors of the Company shall be deemed additional paid-in capital and
shall increase Sellers share basis.
ARTICLE VIII
Termination and Abandonment
8.1 Anything contained in this Agreement to the contrary
notwithstanding, the Agreement may be terminated and abandoned at any time
prior to the Closing Date:
(a) By mutual consent of SELLERS and BUYER;
(b) By either party, if any condition set forth in Article VII relating to the
other party has not been met or has not been waived;
(c) By BUYER if any suit, action or other proceeding shall be pending or
threatened by the federal or a state government before any court or
governmental agency, in which it is sought to restrain, prohibit or otherwise
affect the consummation of the transactions contemplated hereby;
(d) By any party, if there is discovered any material error, misstatement or
omission in the representations and warranties of another party;
(e) By either party if SELLERS do not deliver, or indicates to BUYER that it
will not deliver, reworked financial arrangements with all creditors of WO, in
form and substance satisfactory to both BUYER and SELLERS. The parties agree to
cooperate and consult with each other in the negotiation of financial
arrangements, and in the event a creditor arrangement cannot be negotiated, the
parties agree to cooperate in submitting the matter to mediation with a
professional mediator.
8.2 Any of the terms or conditions of this Agreement may be waived at
any time by the party which is entitled to the benefit thereof.
ARTICLE IX
Termination Covenants, of Representations, and Warranties
The respective covenants, representations and warranties of the parties hereto
as contained herein shall survive the Closing for a period of two years.
ARTICLE X
Miscellaneous
10.1 This Agreement embodies the entire agreement between the parties,
and there have been and are no agreements, representations or warranties among
the parties other than those set forth herein, referenced herein, or those
provided for herein.
10.2 To facilitate the execution of this Agreement, any number of
counterparts hereof may be executed, and each such counterpart shall be deemed
to be an original instrument, but all such counterparts together shall
constitute but one instrument.
10.3 All parties to this Agreement agree that if it becomes necessary
or desirable to execute further instruments or to make such other assurances as
are deemed necessary, the party requested to do so will use commercially
reasonable efforts to provide such executed instruments or do all things
necessary or proper to carry out the purpose of this Agreement.
10.4 This Agreement may be amended only in writing duly executed by all
parties hereto.
10.5 Any notices, requests, or other communications required or
permitted hereunder shall be delivered personally or sent by overnight courier
service, fees prepaid, addressed as follows:
SELLERS:
To: Xxxxx Xxxxxx
000 Xxxxxx Xxxx
Xxxx Xxxxx, XX 00000
copy to: Xxxxxxx X. Xxxxxxx
Attorney at Law
00000 X. 00xx Xxx., #000
Xxxxx Xxxxx, XX 00000
BUYERS:
To: Innovative Cybersystems Corp.
0000 X.X. Xxxx Xxxx., #000X
Xxxx Xxxxx, XX 00000
copy to: Xxxxxxx X. Xxxxxxx
Attorney at Law
0000 X.X. Xxxx Xxxx., #000X
Xxxx Xxxxx, XX 00000
or such other addresses as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
received.
10.6 At Closing, SELLERS will cause the directors of WO in office at
the date of this Agreement to resign, effective only upon compliance with
Section 14f of the Securities and Exchange Act of 1934 and will appoint,
effective at closing, Xxxx Xxxxxxx as a director. Two additional directors
shall be appointed effective upon resignation by Xxxxxx Xxxxxx and Xxxxx
Xxxxxx, and said compliance with Section 14f.
10.7 At Closing, BUYER agrees that the Board of Directors will adopt a
Resolution assigning to SELLERS the watch technologies and any related business
or business plan existing or yet to be created for the marketing distribution
and production of any or all watch products. Further WatchOut!! shall assign
all trademarks for watches at no cost to SELLERS or assignees.
10.8 SELLERS agree to sign a lockup agreement as part of closing
documents which incorporates the "lockup" which is required under the Release
and Settlement Agreement with Sands Brothers commencing 120 days after closing
under this agreement the Lockup Agreement will allow sale of 10,000 shares per
month by each seller for a period of 90 days, and thereafter 20,000 shares per
person per month during the next 90 day period, and thereafter 25,000 shares
per month until 13 months from date of closing, at which time the lockup shall
terminate.
10.9 BUYER agrees that, as controlling shareholder of WatchOut! Inc.,
it will not cause or allow any reverse splits, or consolidations of shares for
a period of two years following closing hereunder, and only in the event of a
reverse split in which this covenant is breached SELLERS shall be granted an
option to purchase 2,000,000 (post reverse) shares of WatchOut! Inc. @ $.001
per share for one year.
10.10 Concurrent with closing, Xxxxx Xxxxxxx shall make a personal
guarantee of up to a total of $200,000 of the corporate debt of WatchOut, Inc.,
which shall include Capstone Financial LLC, and Xxxx Xxxxx and Xxxxx Xxxxxxxx
as the primary creditors and bridge note holders.
IN WITNESS WHEREOF, the parties have set their hands this
____day of _____ 1999.
SELLERS:
_______________________________ Xxxxx Xxxxxx
_______________________________ Xxxxxx Xxxxxx
________________________________ Archangel Holding Company LLC
BUYER: Innovative Cybersystems Corp.
--------------------------------
--------------------------------
--------------------------------
EXHIBIT
Xxxxx Xxxxxx 2,446,211 common shares
of WatchOut! Inc., a Utah
corporation (plus 875,000
shares pledged to creditors and
subject to a purchase option for
$100 to BUYER or assigns for 2
years.)
Xxxxxx Xxxxxx 2,446,211 common shares
of WatchOut, Inc., a Utah
corporation (plus 875,000
shares pledged to creditors and
subject to a purchase option for
$100 to BUYER or assigns for 2
years.)
Archangel Holding Company, LLC 1,484,500 common shares of WatchOut, Inc.,
a Utah corporation.
EXHIBIT B
Xxxxx/Xxxxxxxx $317,500
Capstone $254,000
X. Xxxxxxx $35,000
Howard, Rice, Xxxxxxxxxx $56,000
Xxxxxxx Krooks $90,000
Comyns et al (Can be discounted?) $25,000
Xxxxxxx Xxxxxxx Paid from deposit $4,500
Nitto Denko $1,900
DCI $8,000
Xxxxxxx (Can be discounted to 50,000 + $96,000
10,000 +)
Xxxxxxxx $20,000
Xxx Xxxxxxx $8,000
Network Sales Commission $92,000
Xxxxx Xxxx Salary $24,419
Comprehensive Accounting $5,304
Office Depot Customer $17,400
Xx Xxxxx Office Rent $7,730
Xxxxxxx Intl. Warehouse $10,000
Patriot Funding Factor $7,400
Opal Trade Corp.(Capstone) $3,500
Xxxx Xxxxx Images $2,273.25
Securities Transfer Inc. (Transfer Agent) $995.00
Northwest Etch Technology $4,663.41
SCHEDULE 2.1
Creditor Debt Pledged Shares
1) Capstone $275,000 500,000
2) Xxxxx Xxxxxxxx $300,000 500,000
3) Xxxxxxx Xxxxxx $ 90,000 250,000
4) Xxxxxxx $ 96,000 47,000
5) Other Creditors estimated @ 353,000
(only as scheduled $350,000
on Exhibit B)
6) Howard, Rice, Xxxxxxxxxx 100,000
