<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 8-K/A No. 2
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 6, 1999
SPORTSNUTS.COM INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 333-14477 87-0561426
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
The Towers at South Towne #2, Suite 550, 10421 South 400 West,
Salt Lake City, Utah 84095.
(Address of principal executive offices)
Registrant's telephone number, including area code (801) 816-2500
Durwood, Inc. 4085 West 4715 South Kearns, Utah 84118
(Former name or former address, if changed since last report.)
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Item 1. Change in Control of Registrant.
On April 6, 1999, the Registrant, Durwood, Inc., acquired (the
"Reorganization") approximately eighty one percent (81%) of the outstanding
capital stock from accredited investors (the "Participating Shareholders") in
SportsNuts.com, Inc., a Delaware corporation ("SportsNuts"). Additionally, the
Registrant changed its name to SportsNuts.com International, Inc., as described
in the Restated Certificate of Incorporation of the Registrant, which became
effective on April 6, 1999 (the "Restated Certificate"), attached as Exhibit D
to that certain Agreement and Plan of Reorganization, dated April 6, 1999, among
the Registrant, SportsNuts, and Darren Heiselt, a shareholder of the Registrant
(the "Acquisition Agreement"), attached to this Form 8-K/A No. 2 as Exhibit 2.1.
Prior to the Reorganization of SportsNuts, the Registrant conducted no
active business. SportsNuts is an internet based "on line" sports club and
retail distributor of sports, outdoor, and fitness related products, services,
and information, including through direct marketing by independent distributors.
A principal asset of SportsNuts is its Internet web site. The Registrant intends
to operate SportsNuts in a manner to continue the business that SportsNuts
engaged in prior to the Reorganization.
In connection with the Reorganization, the Registrant affected a 2.213 for
1 forward stock split (the "Forward Split") of all then currently outstanding
shares of its common stock, $0.0001 par value (the "Common Stock"). The Forward
Split resulted in an increase in the outstanding shares of the Registrant's
Common Stock from 1,103,500 to 2,441,713 shares.
Immediately prior to the Reorganization, the Registrant sold to accredited
investors 1,000,000 post Forward Split shares of Common Stock at $1.00 per share
to raise gross proceeds of $1,000,000 (the "Private Offering").
As part of the Reorganization, the Registrant issued 7,651,252 shares of
Common Stock to the Participating Shareholders of SportsNuts in exchange for
their collective 11,683,000 shares of SportsNuts common stock. Each
Participating Shareholder of SportsNuts received 0.654904748 shares of the
Registrant's Common Stock in exchange for each share of common stock of
SportsNuts. Additionally, the Registrant issued to holders of warrants in
SportsNuts who were also accredited investors (each a "Participating Warrant
Holder") warrants for the purchase of 3,353,113 shares of the Registrant's
Common Stock. Each Participating Warrant Holder received the right to purchase
0.654904748 shares of the Registrant's Common Stock in exchange for each share
of SportsNuts common stock it was entitled to purchase pursuant to its
SportsNuts warrants.
In the future, the Registrant may issue up to an additional 1,808,192
shares of Common Stock to acquire the remaining 2,761,000 shares of Common Stock
of SportsNuts that are currently held by the remaining shareholders (other than
the Registrant). Additionally, 635,257 shares of Common Stock have been reserved
for possible issuance to the remaining SportsNuts warrant holders, and 9,915,258
shares of Common Stock have been reserved for issuance to holders of options to
purchase common stock in SportsNuts which the Registrant may exchange at a
future date for warrants or options of the Registrant.
Pursuant to the Acquisition Agreement, the sole director and officer of the
Registrant resigned upon the consummation of the Reorganization. The resigning
director has not indicated that the resignation related to any
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disagreement with the Registrant on any matter relating to the Registrant's
operations, policies or practices. The persons serving as directors and officers
of SportsNuts immediately prior to the consummation of the Reorganization were
elected to the same directorships and offices with the Registrant. These same
persons retained their positions as directors and officers of SportsNuts. The
following persons (collectively, the "Officers and Directors") were elected to
and hold those offices in the Registrant set opposite their names:
<TABLE>
<S> <C>
Richard Lubic Chairman, Chief Executive Officer
and Director
Kenneth Forrest President and Director
Anthony Moore Director
Pierre Boivin Director
Kenneth Denos Executive Vice President, General
Counsel,Secretary, Treasurer and
Director
Timothy Shields Vice President and Director
Rodger Smith Vice President
</TABLE>
Upon consummation of the Reorganization, the Officers and Directors owned
as a group 11.69% of the voting securities of the Registrant, giving them
control of the Registrant. The 11.69% figure assumes the conversion of all
common stock held by the Officers and Directors in SportsNuts to Common Stock of
the Registrant. This figure does not include the exercise of outstanding
warrants or options, which is addressed below. The source of consideration used
in the Reorganization by the Registrant were the shares of common stock of
SportsNuts that each of them respectively owned or held beneficially prior to
the Reorganization.
In the event that the Officers and Directors exercised all warrants which
they beneficially own to purchase Common Stock in the Registrant, their
percentage interest in the Registrant would collectively be 17.71%. In addition,
the Officers and Directors have options to purchase Common Stock in SportsNuts.
If these options are converted to options to purchase Common Stock of the
registrant, and all of these options are exercised (together with all warrants
as described in the previous sentence), then the percentage interest of the
Officers and Directors in the Registrant collectively would be 47.03%.
Prior to the Reorganization, no material relationship existed between
SportsNuts and/or any of its affiliates and the Registrant or any of its
officers or directors, or any associate of any such officer or director. The
consideration given by the Registrant for the stock of SportsNuts was determined
by negotiation between the two companies.
Other than as described in this Item 1, the Registrant is not aware of any
arrangements, the operation of which may at a subsequent date result in a change
in control of the Registrant.
The transactions described in the Item 1 were approved by written consents
of shareholders owning a majority of the Registrant's Common Stock, and included
approval of the following actions:
(a) A 2.213 for 1 forward stock split of all then currently outstanding
shares of the Registrant's Common Stock, resulting in an increase in the number
of outstanding shares of Common Stock of the Registrant from 1,103,500 to
2,441,713 shares, effective April 6, 1999.
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(b) The filing of the Restated Certificate which (1) changed the
Registrant's corporate name from Durwood, Inc., to SportsNuts.com International,
Inc.; (2) provided for two classes of capital stock, Preferred Stock, 5,000,000
shares (with the designations, powers, and preferences to be determined by the
board of directors) and Common Stock, 50,000,000 shares, and with both classes
having a par value $0.0001 per share; (3) provided for a board of directors that
is divided into three classes, with each class to be elected at the first annual
meeting of stockholders, for terms expiring at the succeeding annual meeting,
the next succeeding annual meeting, and the third succeeding annual meeting; (4)
provided that a 66 2/3% vote of the shares outstanding shall be necessary to
amend certain articles of the Certificate of Incorporation relating to the
organization and operation of the board of directors of the Registrant; and (5)
provided for the indemnification and limitation of liability of the officers and
directors of the Registrant to the fullest extent permitted by Delaware law.
(c) The Reorganization, pursuant to which the Registrant may issue in at
least two stages a total of 9,459,444 shares of Common Stock, warrants to
acquire 3,988,370 shares of Common Stock, and options to acquire 9,915,258
shares of Common Stock, as more fully described in the Acquisition Agreement.
(d) The election of the directors named above.
Item 2. Acquisition or Disposition of Assets.
See discussion in Item 1, above.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Audited Financial Statements of SPORTSNUTS.COM, Inc. as
of and for the years ended December 31, 1998 and 1997
(b) Unaudited Financial Statements of SPORTSNUTS.COM, Inc. as
of and for the three months ended March 31, 1999
(c) Pro Forma Condensed and Combined Financial Statements
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INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of SPORTSNUTS.COM, Inc.
We have audited the accompanying balance sheets of SPORTSNUTS.COM, Inc. (a
Delaware corporation) as of December 31 1998 and 1997, and the related
statements of income, retained deficit, and cash flows for the years then ended.
These financial statements are the responsibility of the management of
SPORTSNUTS.COM, Inc. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SPORTSNUTS.COM, Inc. as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 10 to the
financial statements, the Company incurred a loss from operations and has a net
capital deficiency, which raise substantial doubt about its ability to continue
as a going concern. Management's plans regarding those matters also are
described in Note 10. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
As discussed in Note 12 to the financial statements, the Company's intangible
assets, accumulated deficit, and expenses previously reported as $148,601,
$1,866,635, and $1,940,582, respectively, in our audit report dated March 10,
1999 changed to $0, $2,015,235, and $2,039,078, respectively, for 1998. For
1997, the Company's intangible assets, accumulated deficit, and expenses
previously reported as $48,361, $368,335, and $907,155, respectively, in our
audit report dated March 10, 1999 changed to $0, $416,696, and $955,507,
respectively. This reclassification was made subsequent to the issuance of the
financial statements. The financial statements have been restated to reflect
this change.
/s/ Squire & Co.
Orem, Utah
June 16, 1999
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SPORTSNUTS.COM, INC.
BALANCE SHEETS
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Inventory $ 16,584 $ 84,928
Prepaid expenses 37,645 --
Current portion-deferred tax asset -- 5,009
----------- -----------
Total current assets 54,229 89,937
Fixed Assets:
Vehicles -- 94,636
Office equipment and furnishings 59,343 51,396
Computer equipment 53,981 18,782
----------- -----------
113,324 164,814
Accumulated depreciation 21,754 14,292
----------- -----------
Net fixed assets 91,570 150,522
Other Assets:
Long-term portion-deferred tax asset -- 35,704
----------- -----------
$ 145,799 $ 276,163
=========== ===========
LIABILITIES AND EQUITY
Current Liabilities:
Cash overdraft $ 48,203 $ 2,306
Accounts payable 195,200 109,046
Accrued liabilities 47,345 2,311
Current portion-notes payable 301,618 324,977
Deferred tax liability 1,258 188
----------- -----------
Total current liabilities 593,624 438,828
Long-Term Liabilities:
Notes payable -- 212,004
Deferred tax liability -- 2,082
----------- -----------
Total long-term liabilities -- 214,086
Stockholders' equity:
Common stock 50,000,000 $.0001
par value shares authorized;
11,077,000 and 7,786,000 issued
and outstanding in 1998 and
1997, respectively 1,125 779
Additional paid-in capital 1,651,285 41,096
Accumulated deficit (2,015,235) (416,696)
Stock subscriptions receivable (85,000) (1,930)
----------- -----------
Total stockholders' equity (447,825) (376,751)
----------- -----------
Total liabilities and equity $ 145,799 $ 276,163
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
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SPORTSNUTS.COM, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C>
Revenue from Sales $ 535,634 $ 539,189
Operating Expenses:
Cost of sales 707,256 445,442
General and administrative 601,648 280,375
Selling and marketing 566,541 171,433
Research and development 163,633 58,317
----------- -----------
Total operating expenses 2,039,078 955,507
----------- -----------
Loss from operations (1,503,444) (416,318)
Other Income and Expense:
Interest expense (59,563) (38,721)
Gain on disposal of property and equipment 4,168 --
----------- -----------
Total other income and expenses (55,395) (38,721)
Loss before income tax benefit (1,558,839) (455,039)
Income Tax Benefit
Current income tax expense -- 100
Deferred income tax expense (benefit) 39,701 (38,443)
----------- -----------
Net income tax benefit 39,701 (38,343)
----------- -----------
Net Loss $(1,598,540) $ (416,696)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
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SPORTSNUTS.COM, INC.
STATEMENTS OF STOCKHOLDERS EQUITY
December 31, 1998 and 1997
<TABLE>
<CAPTION>
Common Stock Additional Accumu- Stock
------------------------ Paid-in lated Subscription
Shares Amount Capital Deficit Receivable Total
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at January 1, -- $ -- $ -- $ -- $ -- $ --
1997
Issuance of common
stock for subscription receivable 3,860,000 386 1,544 -- (1,930) --
Issuance of commonstock for cash 3,926,000 393 39,552 -- -- 39,945
Net loss (416,696) (416,696)
----------- ----------- ----------- ----------- ----------- -----------
Balances at December 31, 1997 7,786,000 779 41,096 (416,696) (1,930) (376,751)
Issuance of common stock for cash and
subscription receivable 1,983,000 215 991,285 -- (85,000) 906,500
Conversion of long-term debt and
accrued interest to common stock 1,178,000 118 553,918 -- -- 554,306
Issuance of common
stock for services 130,000 13 64,987 -- -- 65,000
Receipt of cash
for subscription receivable -- -- -- -- 1,930 1,930
Net loss -- -- -- (1,598,540) -- (1,598,540)
----------- ----------- ----------- ----------- ----------- -----------
Balances at December 31, 1998 11,077,000 $ 1,125 $ 1,651,235 $(2,015,236) $ (85,000) $ (447,825)
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
8
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SPORTSNUTS.COM, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $(1,598,540) $ (416,696)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 18,459 14,292
Non-cash operating activities 83,369 --
Deferred income taxes 39,701 (38,443)
Gain on disposal of fixed assets (4,168) --
(Increase) decrease in inventories 68,344 (84,928)
(Increase) in prepaid expenses (37,645) --
Increase in accounts payable 86,154 109,046
Increase in accrued liabilities 45,034 2,311
----------- -----------
Total adjustments 299,248 2,278
----------- -----------
Net cash flows used by operating activities (1,299,292) (414,418)
Cash Flows from Investing Activities:
Cash payments for the purchase of fixed assets (46,283) (164,814)
Cash Flows from Financing Activities:
Increase in cash overdraft 45,897 2,306
Proceeds from issuance of long-term debt 797,950 536,981
Proceeds from issuance of common stock 906,500 31,875
Principal payments on long-term debt (404,772) --
----------- -----------
Net cash flows provided by financing activities 1,345,575 571,162
----------- -----------
Net Increase in Cash and Equivalents -- --
Cash and Equivalents - Beginning of Year -- --
----------- -----------
Cash and Equivalents - End of Year $ -- $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
9
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SPORTSNUTS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1. Summary of Significant Accounting Policies
This summary of significant accounting policies of SPORTSNUTS.COM, Inc. (the
Company) is presented to assist in understanding the Company's financial
statements. These accounting policies conform to generally accepted accounting
principles and have been consistently applied in the preparation of the
financial statements.
Business Depreciation - The Company was incorporated in the state of Utah on
November 13, 1996 for the purpose of, but not limited to, sales and distribution
of sporting goods and health food supplies through a network marketing strategy.
The Company began operations as a Corporation on January 1, 1997. During 1998
the Company reincorporated into the State of Delaware.
Sales Policy - Substantially all of the Company's sales are on a
cash-for-service basis. Occasionally, sales are made on account for large-dollar
service rendered.
Inventory - Inventory consists of sporting goods and health food products.
Inventory is stated at the lower of cost (first-in, first-out) or market value.
Depreciation - Provisions for depreciation of equipment is computed on a
straight-line method for financial reporting purposes. Depreciation for
equipment is based upon estimated useful lives of five to ten years.
Depreciation charged to operations were $18,459 and $14,292 for the years ended
December 31, 1998 and 1997, respectively.
Maintenance, repairs, and renewals which neither materially add to the value of
the equipment nor appreciably prolong its life are charged to expense as
incurred.
Cash and Cash Equivalents - For the purpose of the statement of cash flows, cash
and cash equivalents are defined as demand deposits at banks.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts disclosed. Accordingly, actual
results could differ from those estimates.
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SPORTSNUTS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
Stock Options - The Company has elected to follow Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and related
Interpretations in accounting for its employee stock options rather than
adopting the alternative fair value accounting provided for under FASB Statement
No. 123, Accounting for Stock-based Compensation. Under APB 25, because the
exercise price of the Company's stock options equals the fair value of the
underlying stock on the date of grant, no compensation expense is recognized.
Advertising Costs - Advertising costs are expensed during the year in which they
are incurred. Advertising expenses were none and $35,332, respectively for the
years ended December 31, 1998 and 1997.
Comprehensive Income - In 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income, which is effective for fiscal years beginning after
December 15, 1997. SFAS No. 130 requires that all items that are recognized
under accounting standards as components of comprehensive income be reported in
a financial statement that is displayed with the same prominence as other
financial statements. The items of other comprehensive income that are typically
required to be displayed are foreign currency items, minimum pension liability
adjustments, and unrealized gains and losses on certain investments in debt and
equity securities. There were no items of other comprehensive income in 1998 or
prior.
Note 2. Stock Subscriptions Receivable
The Company issued in advance of receiving payment 170,000 shares of common
stock with a value of $85,000 and 386,000 shares of common stock with the value
of $1,930 receivable at December 31, 1998 and 1997, respectively. These amounts
are classified as a contra equity since the stock subscription receivables
mature in a reasonably short period of time.
Note 3. Accrued Liabilities
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Accrued payroll and related taxes
and benefits $41,392 $ 2,311
Accrued interest 5,953 --
------- -------
Total accrued liabilities $47,345 $ 2,311
======= =======
</TABLE>
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SPORTSNUTS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Note 4. Deferred Taxes
The Company files its income tax returns on a calendar year end using an accrual
basis method of accounting. The principal timing difference result from
differences in depreciation according to generally accepted accounting
principles and depreciation allowed by tax law. Further differences are created
by the treatment of corporate tax net operating loss carry-forward provisions.
The net deferred tax asset as of December 31, 1998 was $373,990. A valuation
allowance of $373,990 was established to account for the probability that the
total deferred tax asset will not be realized in the future. As a result of the
valuation allowance, the deferred tax asset as of December 31, 1998 was $0. The
deferred tax liability at December 31, 1998 totaled $1,258.
The net deferred tax asset as of December 31, 1997 was $79,129. A valuation
allowance of $40,686 was established to account for the possibility that the
total deferred tax asset will not be realized in the future. As a result of the
valuation allowance, the net deferred tax asset as of December 31,1997 was
$38,443.
The Corporation's deductible temporary timing differences consist of the
following:
<TABLE>
<S> <C>
Net operating loss carryforward $1,875,296
Accumulated depreciation on property 25,163
</TABLE>
The Company has net operating losses to offset future income tax. If not used,
these credits will expire as follows:
<TABLE>
<CAPTION>
Expires Amounts
------- ---------
<S> <C> <C>
Federal net operating loss 2012 $406,778
Federal net operating loss 2013 1,468,518
State net operating loss 2002 406,678
State net operating loss 2003 1,468,518
</TABLE>
Deferred income tax expense for 1998 is the result of valuation allowances
established for current year and prior year deferred tax assets.
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SPORTSNUTS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
Note 5. Notes Payable
The company owed a total of $301,618 and $536,981 on notes payable as of
December 31, 1998 and 1997, respectively. A summary of the outstanding balances
on notes payable as of December 31, 1998 is as follows:
<TABLE>
<S> <C>
Investor loan, 12% interest, secured
by shareholder's personal guarantee,
matures December, 1999 $ 122,036
Investor loan, 18% interest, secured
by shareholder's personal guarantee,
matures April, 1999 25,000
Investor loan, 15% interest, secured
by shareholder's personal guarantee,
matures February, 1999 27,582
Investor loan, 10% interest, secured
by shareholder's personal guarantee,
matures December, 1999 10,000
Investor loan, 0% interest, secured
by shareholder's personal guarantee,
matures January, 1999 100,000
Investor loan, 0% interest, secured
by shareholder's personal guarantee,
matures January, 1999 10,000
Note payable, 0% interest, secured
by shareholder's personal guarantee,
matures January, 1999 7,000
------------
Total notes payable 301,618
Less current portion (301,618)
------------
Long term portion $ --
============
</TABLE>
An officer and director of the Company, has personally guaranteed the total
amount of the indicated notes payable.
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SPORTSNUTS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Note 6. Related Party Transactions
As of December 31, 1998, $294,618 of the notes payable reported in note 5 are
debt agreements entered into with stockholders of the Company.
Note 7. Common Stock
The Company issued 3,291,000 shares of $.0001 par value common stock during the
year ending December 31, 1998. The issuance of these shares resulted in $906,500
in cash inflows and $619,306 in either debt reduction through convertible
debentures or stock for services.
Note 8. Additional Cash Flow Statement Disclosures
The Company paid $47,078 and $38,721 of interest for notes payable and other
miscellaneous debts, and $0 and $100 for taxes for the years ended December 31,
1998 and 1997, respectively.
Non-cash transaction for the year ended December 31, 1998 included the
following:
$87,041 of debt was eliminated from the records of the company in
exchange for certain fixed assets.
$541,500 of debt was converted to common stock along with $12,536 of
interest payable by issuing 1,348,000 shares of common stock.
$65,000 of expenses were recorded on the records of the Company
through the issuance of 130,000 shares of common stock.
No non-cash transactions occurred during the year ended December
31,1997.
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SPORTSNUTS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 9. Stock Options and Warrants
The Company adopted a stock option plan in 1998. In accordance with plan
provisions, the Company may grant options to officers, directors, employees, and
consultants of the Company for up to 20,000,000 shares of common stock. The
original exercise price for options granted under the plan was $.50 with
negotiated vesting periods. Options granted during the current year had market
values equal to the option price at the date of the grant; therefore, no
compensation expense was charged to operations. The options expire five years
after date of grant.
A summary of stock option activity, and related information for the year ended
December 31, 1998 follows:
<TABLE>
<CAPTION>
Weighted-
Shares Outstanding Stock Options Average
--------------------- Exercise
Available Number of Price Price
for Grant shares Per Share
------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at
January 1, 1998 -- -- -- --
Plan authorization 20,000,000 -- -- --
Options granted (9,420,000) 9,420,000 $.50 $.50
------------------------------------------------------
Balance at
December 31, 1998 10,580,000 9,420,000 $.50 $.50
======================================================
Exercisable at
December 31, 1998 2,348,000 $.50 $.50
====================================
</TABLE>
The weighted average fair value of options granted in the year ended December
31, 1998, was $.13. The weighted average remaining contractual life of the
options outstanding and options exercisable at December 31, 1998 were 5 years,
respectively.
Pro forma information regarding the effect of issuing stock options during the
year on net income (loss) is required by Statement No. 123, and has been
determined as if the Company had accounted for its employee stock options under
the fair value method. The fair value of these options was estimated at the date
of grant using a Minimum Value option pricing model with the
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SPORTSNUTS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
following weighted average assumptions for 1998: risk-free interest rates of
5.63%; dividend yield of 0%; and a weighted-average expected life of the
option of 5 years.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized over the options' vesting period. Because the effect of SFAS No.
123 is prospective, the initial impact on pro forma net income (loss) may not be
representative of compensation expense in future years. Pro forma net loss for
fiscal year 1998 was $1,852,339.
During 1998, 9,420,000 stock options were granted at the exercise price of $.50.
All options were outstanding and have a remaining contractual life of five
years. At December 31, 1998, 2,348,000 options were exercisable.
During 1998, 2,940,000 stock warrants were granted with some loans. The market
price of the warrants was equal to the exercise price of $.50; therefore, no
commission expense was deemed necessary. All warrants were outstanding at
December 31, 1998.
Note 10. Retained Deficit and Net Operating Loss
As shown in the accompanying financial statements, the Corporation incurred a
net loss of $1,598,540 and $416,696 during the years ended December 31, 1998 and
1997, respectively. At December 31, 1998 and 1997, the Company's current
liabilities exceeded its current assets by $539,395 and $348,891, respectively.
The ability of the Company to continue as a going concern is dependent on
increasing sales and obtaining additional capital and/or financing. The
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
The Company intends to obtain both debt and equity financing to sustain
operations until sales can be increased enough to achieve profitability.
16
<PAGE> 17
SPORTSNUTS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
Note 11. Subsequent Events
In January 1999, the Company paid off the following notes payable outstanding at
December 31, 1998:
<TABLE>
<S> <C>
Investor loan, 18% interest, secured
by shareholder's personal guarantee,
Matures April, 1999 $ 25,000
Investor loan, 12% interest, secured
by shareholder's personal guarantee,
Matures December, 1999 122,036
Investor loan, 15% interest, secured
by shareholder's personal guarantee,
Matures February, 1999 27,582
Investor loan, 0% interest, secured
by shareholder's personal guarantee,
Matures January, 1999 100,000
Investors loan, 0% interest, secured
by shareholder's personal guarantee,
Matures January, 1999 10,000
Note payable, 0% interest, secured
by shareholder's personal guarantee,
Matures January, 1999 7,000
--------
Total notes paid $291,618
========
</TABLE>
On January 15, 1999, the board of directors of the Company voted unanimously to
approve a 2 for 1 stock split. The stock split increased the number of shares
issued and outstanding as of that date. The Company issued 3,119,000 shares
(post-split) of no-par common stock for $1,535,500 during January and February
1999. The effect of the stock split has been retroactively reflected in the
accompanying financial statements.
17
<PAGE> 18
SPORTSNUTS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Note 12. Restatement of Financial Statements
Subsequent to the issuance of the audit report dated March 10, 1999, certain
reclassifications were made on the balance sheets and statements of operations.
These reclassifications consisted primarily of expensing certain costs
associated with website development previously capitalized. These financial
statements have been restated as follows:
<TABLE>
<CAPTION>
1998 1997
-----------------------------
<S> <C> <C>
Decrease in assets $(233,601) $ (50,291)
Decrease in stockholders' equity (233,601) (50,291)
Increase in operating expenses 100,240 48,361
</TABLE>
This restatement results in an increase in net loss of $100,240 and $48,261 for
the years ending December 31, 1998 and 1997, respectively.
Item 7. Financial Statements and Exhibits
(b) Unaudited Condensed Financial Statements of SPORTSNUTS.COM, Inc. as of
and for the three months ended March 31, 1999.
18
<PAGE> 19
SPORTSNUTS.COM, INC.
Unaudited Condensed Balance Sheet
March 31, 1999
<TABLE>
<S> <C>
Assets
Current assets:
Cash $ 162,929
Inventories 20,987
Prepaid expenses 60,020
-----------
Total current assets 243,936
Property and equipment, net 371,882
-----------
$ 615,818
===========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 217,731
Accrued liabilities 48,603
-----------
Total current liabilities 266,334
===========
Commitments and contingencies
Stockholders' equity:
Common stock, $.0001 par value: 50,000,000
shares authorized; 14,444,000 shares
issued and outstanding 1,444
Additional paid-in capital 3,200,467
Accumulated deficit (2,852,427)
-----------
Total stockholders' equity 349,484
-----------
$ 615,818
===========
</TABLE>
See accompanying notes.
19
<PAGE> 20
SPORTSNUTS.COM, INC.
Unaudited Condensed Statement of Operations
For the three months ended March 31, 1999
<TABLE>
<S> <C>
Revenues $ 141,304
Operating expenses:
Cost of sales 123,613
General and administrative 255,807
Selling and marketing 501,349
Research and development 94,629
---------
975,398
---------
Operating loss (834,094)
Other income (expense):
Interest expense (4,355)
---------
Loss before income taxes (838,449)
Income tax benefit 1,258
---------
Net loss $(837,191)
=========
</TABLE>
See accompanying notes.
20
<PAGE> 21
SPORTSNUTS.COM, INC.
Unaudited Condensed Statement of Cash Flows
For the three months ended March 31, 1999
<TABLE>
<S> <C>
Cash flows from operating activities
Net loss $ (837,191)
Adjustments to reconcile net income to net cash used
in operating activities:
Depreciation and amortization 56,100
Non-cash Marketing Expense 114,000
Deferred income taxes (1,258)
Changes in operating assets and liabilities:
Increase in inventories (4,403)
Increase in prepaid expenses (22,375)
Increase in accounts payable 22,531
Increase in accrued liabilities 1,258
-----------
Net cash flows used in operating activities (671,338)
Cash flows from investing activities
Purchases of property and equipment (336,412)
Cash flows from financing activities
Repayment of cash overdraft (48,203)
Principal payments on notes payable (301,618)
Proceeds from issuance of common stock 1,435,500
Proceeds from stock subscription receivable 85,000
-----------
Net cash flows provided by financing activities 1,170,679
-----------
Net increase in cash 162,929
Cash at beginning of period --
-----------
Cash at end of period $ 162,929
===========
</TABLE>
See accompanying notes.
21
<PAGE> 22
SPORTSNUTS.COM, INC.
1. Summary of Significant Accounting Policies
Description of Organization and Business
SportsNuts.com, Inc. (the "Company") was incorporated under the laws of the
State of Utah on November 13, 1996. During 1998 the Company reincorporated in
the State of Delaware. The Company is engaged in the sale and distribution of
sporting goods and health food supplies via the internet and network marketing
channels.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
Regulation S-B. Accordingly, certain information and footnote disclosures have
been condensed or omitted. These financial statements should be read in
conjunction with the financial statements and footnotes included herein this
Form 8-K/A No. 2.
The accompanying financial statements have been restated in this Form 8-K/A No.
2 from the financial statements previously issued in Form 8-K/A filed on June
18, 1999. The restatement is principally due to a correction to the previously
issued unaudited condensed balance sheet to reduce cash and additional paid in
capital by $85,000. In addition, certain adjustments and reclassifications have
been made to conform with the current presentation.
In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary for a fair presentation have been
included. The results of operations for interim periods are not indicative of
the results of operations to be expected for a full year.
2. Retained Deficit and Net Operating Loss
As shown in the accompanying financial statements, the Company incurred a net
loss of $1,598,540 and $416,696 during the years ended December 31, 1998 and
1997, respectively. At December 31, 1998 and 1997, the Company's current
liabilities exceeded its current assets by $539,395 and $348,891, respectively.
The ability of the Company to continue as a going concern is dependent on
increasing sales and obtaining additional capital and/or financing. The
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
The Company intends to obtain both debt and equity financing to sustain
operations until sales can be increased enough to achieve profitability.
3. Debt
For the three months ended March 31, 1999, the Company paid off $301,618 in
notes payable that were outstanding at December 31, 1998.
4. Stockholders' Equity
Issuances of Common Stock
For the three months ended March 31, 1999, the Company issued 2,939,000 shares
of common stock in exchange for gross proceeds of $1,535,500. In connection
22
<PAGE> 23
with this offering, the Company incurred fund raising costs of $200,000, which
included the issuance of 200,000 shares of common stock with a value of
$100,000.
For the three months ended March 31, 1999, the Company issued 228,000 shares of
common stock for the acquisition of royalty rights valued at $114,000.
Stock Subscriptions Receivable
The Company issued in advance of receiving payment 170,000 shares of common
stock with a value of $85,000 for the year ended December 31, 1998 and 386,000
shares of common stock with a value of $1,930 receivable for the year ended
December 31, 1997. As of March 31, 1999, no amounts were outstanding.
5. Subsequent Event
Mergers and Acquisitions
On April 6, 1999, Durwood, Inc. (the "Registrant") acquired (the
"Reorganization") approximately eighty one percent (81%) of the outstanding
capital stock from accredited investors (the "Participating Shareholders") in
the Company. Additionally, the Registrant changed its name to SportsNuts.com
International, Inc. Prior to the Reorganization of the Company, the Registrant
conducted no active business. The Company is an internet based, "on line" sports
club and retail distributor of sports, outdoor, and fitness related products,
services, and information.
The Registrant intends to operate the Company in a manner to continue the
business that the Company engaged in prior to the Reorganization. In connection
with the Reorganization, the Registrant affected a 2.213 for 1 forward stock
split (the "Forward Split") of all then currently outstanding shares of its
common stock, $0.0001 par value (the "Common Stock"). The Forward Split resulted
in an increase in the outstanding shares of the Registrant's Common Stock from
1,103,500 to 2,441,713 shares. Immediately prior to the Reorganization, the
Registrant sold to accredited investors 1,000,000 post Forward Split shares of
Common Stock at $1.00 per share to raise gross proceeds of $1,000,000, less
issuance costs of $50,000. As part of the Reorganization, the Registrant issued
7,651,252 shares of Common Stock to the Participating Shareholders of the
Company in exchange for their collective 11,683,000 shares of the Company's
common stock. Each Participating Shareholder of the Company received 0.654904748
shares of the Registrant's Common Stock in exchange for each share of common
stock of the Company. Additionally, the Registrant issued to holders of warrants
in the Company who were also accredited investors (each a "Participating Warrant
Holder") warrants for the purchase of 3,353,113 shares of the Registrant's
Common Stock. Each Participating Warrant Holder received the right to purchase
0.654904748 shares of the Registrant's Common Stock in exchange for each share
of the Company's common stock they were entitled to purchase pursuant to their
warrants in the Company. In the future, the Registrant may issue up to an
additional 1,808,192 shares of Common Stock to acquire the remaining 2,761,000
shares of Common Stock of the Company that are currently held by the remaining
shareholders (other than the Registrant). As compared to prior statements
describing the Merger on Forms 8-K and 8-K/A filed previously with the
Commission, the number of shares and warrants issued to Participating
Shareholders and Participating Warrant Holders has been increased to reflect
conversions by certain Company shareholders of their shares and warrants for
shares and warrants of the Registrant during the second quarter of 1999,
subsequent to the Reorganization. These transactions were treated by the
23
<PAGE> 24
Registrant as being effective April 6, 1999.
Item 7. Financial Statements and Exhibits.
(c) Pro forma financial information.
SPORTSNUTS.COM INTERNATIONAL, INC.
(Formerly Durwood, Inc.)
PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS INTRODUCTION
The following Unaudited pro forma condensed combined financial statements (the
"Financial Statements") have been prepared from the historical consolidated
financial statements of SPORTSNUTS.COM INTERNATIONAL, Inc. (Formerly Durwood,
Inc.) (the "Registrant"). The SPORTSNUTS.COM, Inc. (SPORTSNUTS.COM) column in
the following Financial Statements reflect the historical financial statements
of SPORTSNUTS.COM restated to be consistent with the reporting periods of the
Registrant.
The Financial Statements have been restated in this form 8-K/A No. 2 from those
previously issued in the Registrant's 8-K/A filed on June 18, 1999 to reflect
SPORTNUTS.COM as the accounting acquirer in a reverse merger into an inactive
public company (the "Reorganization"). The previously issued Financial
Statements reflected the Reorganization as if the Registrant was the accounting
acquirer. In addition, certain adjustments to cash and accounts receivable have
been made to the pro forma condensed combined balance sheets to more properly
account for transactions occurring during 1999 prior to the Reorganization.
Also, certain adjustments and reclassifications have been made to the pro forma
condensed combined statement of operations to more properly account for
transactions occurring in 1998 and 1999, and to bring these numbers in agreement
with the 1998 audited financial statements of SPORTSNUTS.COM included herein.
The Financial Statements assume that the Reorganization occurred as of December
31, 1998 for the Unaudited pro forma condensed combined statement of operations
and as of April 6, 1999 for the Unaudited pro forma condensed combined balance
sheet.
The Financial Statements should be read in conjunction with the Registrant's
historical consolidated financial statements and related notes to such
statements in the December 31, 1998 Annual Report on Form 10-K filed by the
Registrant; and the SPORTSNUTS.COM historical financial statements and notes
thereto included herein. The Financial Statements are not necessarily indicative
of the financial position or results of operations had the Reorganization
occurred on the indicated dates nor do they purport to indicate the results of
future operations of the Registrant.
The pro forma financial information has been prepared by the Registrant and all
calculations have been made based upon assumptions deemed appropriate by the
Registrant. In the opinion of management, all adjustments necessary to present
fairly the Financial Statements have been made.
The adjustments being made to the following balance sheet and statement of
operations are summarized as follows:
24
<PAGE> 25
a) An adjustment was made to the equity section in the balance sheet to
recognize the minority interest in SPORTSNUTS.COM.
b) An adjustment was made to the equity section of the balance sheet to
eliminate the accumulated deficit of SPORTSNUTS.COM INTERNATIONAL, Inc.
25
<PAGE> 26
SPORTSNUTS.COM INTERNATIONAL, INC.
(Formerly Durwood, Inc.)
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF April 6, 1999
<TABLE>
<CAPTION>
SPORTSNUTS.COM Pro Forma
INTERNATIONAL, Adjmts &
INC.(Formerly SPORTSNUTS. Combined Elimination Pro Forma
Durwood, Inc.) COM Total Entries Combined
---------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash $ 950,330 $ 162,929 $ 1,113,259 $ 1,113,259
Inventories -- 20,987 20,987 20,987
Prepaid expenses -- 60,020 60,020 60,020
----------- ----------- ----------- ----------- -----------
Total current assets 950,330 243,936 1,194,266 1,194,266
Property and equip-
ment, net -- 371,882 371,882 371,882
$ 950,330 $ 615,818 $ 1,566,148 $ 1,566,148
=========== =========== =========== =========== ===========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ -- $ 217,731 $ 217,731 $ 217,731
Accrued liabilities -- 48,603 48,603 48,603
----------- ----------- ----------- ----------- -----------
Total current liabilities -- 266,334 266,334 266,334
Minority interest -- -- -- 66,804 66,804
Stockholders' equity:
Common stock 344 1,444 1,788 (679) 1,109
Additional paid-in
capital 999,294 3,200,467 4,199,761 (66,804)
679
(49,308) 4,084,328
Accumulated deficit (49,308) (2,852,427) (2,901,735) 49,308 (2,852,427)
----------- ----------- ----------- ----------- -----------
Total stockholders' equity 950,330 349,484 1,299,814 1,299,814
----------- ----------- ----------- ----------- -----------
$ 950,330 $ 615,818 $ 1,566,148 $ 1,566,148
=========== =========== =========== =========== ===========
</TABLE>
26
<PAGE> 27
SPORTSNUTS.COM INTERNATIONAL, INC.
(Formerly Durwood, Inc.)
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
SPORTSNUT.COM Pro Forma
INTERNATIONAL, Adjustments
INC. (Formerly SPORTSNUTS Combined and Elimina- Pro Forma
Durwood, Inc.) .COM Total tion Entries Combined
-------------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Revenues $ -- $ 535,634 $ 535,634 $ 535,634
Operating expenses:
Cost of sales -- 707,256 707,256 707,256
General and admin-
istrative -- 601,648 601,648 601,648
Selling and marketing -- 566,541 566,541 566,541
Research and
development -- 163,633 163,633 163,633
----------- ----------- ----------- -----------
-- 2,039,078 2,039,078 2,039,078
----------- ----------- ----------- -----------
Operating income -- (1,503,444) (1,503,444) (1,503,444)
Other income (expense):
Interest expense -- (59,563) (59,563) (59,563)
Gain on disposal of
property and eqpmt -- 4,168 4,168 4,168
----------- ----------- ----------- -----------
Loss from continuing
operations before taxes -- (1,558,839) (1,558,839) (1,558,839)
Tax Expense (39,701) (39,701) (39,701)
----------- ----------- ----------- -----------
Loss from continuing
operations -- (1,598,540) (1,598,540) (1,598,540)
Loss from discontinued
operations (25,534) -- (25,534) (25,534)
----------- ----------- ----------- -----------
Net loss $ (25,534) $(1,598,540) $(1,624,074) $(1,624,074)
=========== =========== =========== ===========
Basic and diluted net
loss per common share $ (.17)
===========
Weighted-average shares
outstanding 9,696,093
===========
</TABLE>
(c) Exhibits.
2.1 Agreement and Plan of Reorganization dated as of April 6, 1999,
among Durwood, Inc., SportsNuts, and Darren Heiselt, a
shareholder of Durwood, Inc., which includes as an exhibit the
Restated Certificate of Incorporation of the Registrant
2.2 Amended and Restated Agreement and Plan of Reorganization dated
as of April 6, 1999 among Durwood, Inc., SportsNuts, and Darren
Heiselt, a shareholder of Durwood, Inc., which includes as an
exhibit the Restated Certificate of Incorporation of the
Registrant
27
<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SPORTSNUTS.COM INTERNATIONAL, INC.
(Formerly Durwood, Inc.)
Date: January 14, 2000 By: /s/ KENNETH DENOS
-----------------------------------
Kenneth Denos, Executive Vice
President
28
<PAGE> 29
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
Number -----------
- ------
<S> <C>
2.1 Agreement and Plan of Reorganization dated April 6, 1999, among
Durwood, Inc., SportsNuts.com, Inc., and Darren Heiselt, a
shareholder of Durwood, Inc, which includes as an Exhibit the
Restated Certificate of Incorporation of the Registrant.
2.2 Amended and Restated Agreement and Plan of Reorganization effective
as of April 6, 1999 among Durwood, Inc., SportsNuts.com, Inc., and
Darren Heiselt, a shareholder of Durwood, Inc, which includes as an
Exhibit the Restated Certificate of Incorporation of the Registrant.
</TABLE>
29
<PAGE> 1
Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (hereinafter the "Agreement") is
entered into effective as of this 6th day of April 1999, by and among Durwood,
Inc., a Delaware corporation (hereinafter "Durwood"); Darren Heiselt, a
shareholder of Durwood (hereinafter "Heiselt"); SportsNuts.com, Inc., a Delaware
corporation (hereinafter "SNC"), and owners of outstanding common stock of SNC
(hereinafter the "SNC Stockholders").
RECITALS:
WHEREAS, the SNC Stockholders own issued and outstanding common stock of
SNC (the "SNC Common Stock"). Durwood desires to acquire the SNC Common Stock
solely in exchange for voting common stock of Durwood, making SNC a controlled
or wholly-owned subsidiary of Durwood (the "Acquisition"); and
WHEREAS, the SNC Stockholders (as set forth on Exhibit "A") desire to
acquire voting common stock of Durwood in exchange for the SNC Common Stock, as
more fully set forth herein.
NOW THEREFORE, for the mutual consideration set out herein and other good
and valuable consideration, the legal sufficiency of which is hereby
acknowledged, the parties agree as follows:
AGREEMENT
1. PLAN OF REORGANIZATION. It is hereby agreed that the SNC Common Stock
shall be acquired by Durwood in exchange solely for Durwood common voting stock
(the "Durwood Shares"). It is the intention of the parties hereto that SNC
Common Stock be acquired by Durwood in exchange solely for Durwood common voting
stock and that this entire transaction qualify as a corporate reorganization
under Section 368(a)(1)(B) and/or Section 351 of the Internal Revenue Code of
1986, as amended, and related or other applicable sections thereunder.
2. OVERALL TRANSACTION. It is the ultimate purpose of this transaction to
cause Durwood to make an offer to acquire all of the issued and outstanding
capital stock, warrants and options of SportsNuts in exchange for like
securities of Durwood as further described herein and to cause SportsNuts to
become a wholly owned subsidiary of Durwood. However, said transaction shall be
accomplished in two steps. In the first step, Durwood, with the assistance of
SportsNuts, shall present an offer to all current shareholders of SNC who are
reasonably believed by SNC to be accredited investors as defined by Rule 501(a)
of Regulation D, promulgated under the Securities Act of 1933, as amended (the
"Act"). The Closing of the Acquisition described herein is conditioned upon the
acceptance by accredited SportsNuts Stockholders representing at least 80% of
the outstanding SNC Common Stock. In the event the Acquisition is completed, in
that Durwood is able to acquire at least 80% of the outstanding SNC Common Stock
from accredited SNC Stockholders, Durwood shall, as the second step, use its
best efforts to file and pursue to effectiveness a registration statement with
the S.E.C. and any applicable state agencies, covering an offer to all remaining
SNC securities holders (common shares, warrants and options) to exchange their
existing securities of SNC for like securities of Durwood on the basis described
herein, (the "Second Exchange").In the first step, Durwood shall offer to
existing accredited holders of outstanding SNC Warrants ("SNC Warrantholders")
the opportunity to exchange such securities for like securities of Durwood in
the manner and on the basis described herein (the "Accredited Warrant
Exchange").
3. TERMS OF EXCHANGE. The parties agree that on the Closing Date or at the
Closing as hereinafter defined, which includes any subsequent Closings to
accomplish the Second Exchange and the Accredited Warrant Exchange, Durwood
shall deliver its securities, after giving effect to a 2.213 for 1 forward stock
split as to all currently outstanding shares of common stock (the "Forward
Split") as follows:
<PAGE> 2
(a) Durwood shall, subject to the terms and conditions set forth herein,
issue an aggregate of 9,299,648 shares of its common stock (the "Durwood
Shares") to the SNC Stockholders in exchange for 14,200,000 shares of
outstanding SNC Common Stock on a ratio of .654904748 Durwood shares for each
outstanding share of SNC Common Stock. The SNC Stockholders are listed on the
attached Exhibit "A" which is by this reference incorporated herein.
(b) Durwood shall, subject to the terms and conditions set forth herein,
issue warrants to acquire an aggregate of 3,870,487 Durwood Shares to SNC
Warrantholders in exchange for outstanding SNC Warrants. The SNC Warrantholders
are listed on Exhibit "A". The terms of the Durwood Warrants are outlined and
set forth in the attached Exhibit "B", which is by this reference incorporated
herein. The ratio of the exchange shall give the SNC Warrantholders the right to
purchase .654904748 Durwood Shares for each share of SNC Common Stock covered by
outstanding SNC Warrants.
(c) Durwood shall, subject to the terms and conditions set forth herein,
issue options to acquire an aggregate of 9,862,865 Durwood Shares to SNC
Optionholders in exchange for outstanding SNC Options. The SNC Optionholders are
listed on Exhibit "A". The terms of the Durwood Options are outlined and set
forth in the attached Exhibit "C", which is by this reference incorporated
herein. The ratio of the exchange shall give the SNC Optionholders the right to
purchase .654904748 Durwood Shares for each share of SNC Common Stock covered by
outstanding SNC Warrants.
(d) Each SNC Stockholder shall execute this Agreement or a written consent
to the exchange of their SNC Common Stock for Durwood Shares.
(e) The Acquisition shall close only in the event Durwood is able to
acquire at least 80% of the outstanding SNC Common Stock from accredited
investors.
4. PRE-CLOSING EVENTS. The Closing is subject to the completion at or about
the time of Closing of the following:
(a) Durwood shall restate its Certificate of Incorporation in the State of
Delaware in substantially the form attached hereto as Exhibit "D" and shall have
authorized 50,000,000 shares of $.0001 par value common stock and 5,000,000
shares of $.0001 par value preferred stock. The preferred stock shall be subject
to issuance in such series and with such rights, preferences and designations as
determined in the sole discretion of the board of directors.
(b) Durwood shall have effectuated the Forward Split at or about the
Closing, and shall have 2,441,713 shares of its common stock issued and
outstanding and no other shares of capital stock issued or outstanding.
(c) Durwood shall demonstrate to the reasonable satisfaction of SNC that it
has no material assets other than the proceeds of the Durwood Financing as
described herein, and no liabilities contingent or fixed.
5. EXCHANGE OF SECURITIES. As of the Initial Closing Date (as defined
herein) each of the following shall occur:
(a) All shares of SNC Common Stock held by accredited SNC Stockholders who
have accepted the Durwood offer, assuming at least 80% of the outstanding shares
of SNC Common Stock is covered, shall be exchanged for Durwood Shares. All such
outstanding shares of SNC Common Stock shall be deemed, after Closing, to be
owned by Durwood. The holders of such certificates previously evidencing shares
of SNC Common Stock outstanding immediately prior to the Closing Date shall
cease to have any rights with respect to such shares of SNC Common Stock except
as otherwise provided herein or by law;
(b) Any shares of SNC Common Stock held in the treasury of SNC immediately
prior to the Closing Date shall automatically be canceled and extinguished
without any conversion thereof and no payment shall be made with respect
thereto;
2
<PAGE> 3
(c) The 2,441,713 shares of Durwood common stock previously issued and
outstanding immediately prior to the Closing, after giving effect to the Forward
Split, will remain outstanding.
(d) Durwood Warrants shall be exchanged for the SNC Warrants to the extent
said exchange is accepted by accredited SportsNuts' Warrantholders.
6. OTHER EVENTS OCCURRING AT CLOSING. At Closing, the following shall be
accomplished:
(a) Durwood shall file a restatement to its Certificate of Incorporation
with the Secretary of State of the State of Delaware in substantially the form
attached hereto as Exhibit "D" effecting a restatement to its Certificate of
Incorporation to reflect a name change and revised authorized capitalization all
as set forth in Exhibit "D".
(b) The resignation of the existing Durwood officers and directors and
appointment of new officers and directors as directed by SNC.
(c) Durwood shall have completed a private offering under Regulation D,
Rule 506, as promulgated by the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended, of 1,000,000 shares of its common stock
at $1.00 per share. The gross proceeds of this offering (the "Durwood
Financing") shall be $1,000,000, which amount, less agreed upon costs, shall be
delivered to the control of new management of Durwood at Closing in good funds.
The Durwood Financing shall have been completed in compliance with all
applicable state and federal securities laws and the restricted securities sold
shall be delivered at Closing to the investors in the Durwood Financing.
(d) Durwood shall adopt a Stock Option Plan at Closing to include up to
15,000,000 shares of its common stock. The Plan shall include "incentive" stock
options under Section 422 of the Internal Revenue Code of 1986, as amended and
other options and similar rights.
7. DELIVERY OF CERTAIN SHARES. On or as soon as practicable after the
Closing Date, SNC will use its best efforts to cause the SNC Stockholders to
surrender certificates for cancellation representing their shares of SNC Common
Stock, against delivery of certificates representing the Durwood Shares for
which the shares of SNC Common Stock are to be exchanged at Closing.
8. REPRESENTATIONS OF SNC STOCKHOLDERS. Each SNC Stockholder hereby
represents and warrants each only as to its own SNC Common Stock, effective this
date and the Closing Date as follows:
(a) Except as may be set forth in Exhibit "A", the SNC Common Stock is free
from claims, liens, or other encumbrances, and at the Closing Date said SNC
Stockholder will have good title and the unqualified right to transfer and
dispose of such SNC Common Stock.
(b) Said SNC Stockholder is the sole owner of the issued and outstanding
SNC Common Stock as set forth in Exhibit "A";
(c) Said SNC Stockholder has no present intent to sell or dispose of the
Durwood Shares and is not under a binding obligation, formal commitment, or
existing plan to sell or otherwise dispose of the Durwood Shares.
9. REPRESENTATIONS OF SNC. SNC hereby represents and warrants as follows,
which warranties and representations shall also be true as of the Closing Date:
(a) Except as noted on Exhibit "A", the SNC Stockholders listed on the
attached Exhibit "A" are the sole owners of record and beneficially of the
issued and outstanding common stock of SNC.
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(b) SNC has no outstanding or authorized capital stock, warrants, options
or convertible securities other than as described in the SNC Financial
Statements or on Exhibits "A", "B" and "C", attached hereto.
(c) The audited financial statements as of and for the periods ended
December 31, 1997 and unaudited financial statements for the period ended
December 31, 1998, which have been delivered to Durwood (hereinafter referred to
as the "SNC Financial Statements") are complete and accurate and fairly present
the financial condition of SNC as of the dates thereof and the results of its
operations for the periods covered. Prior to Closing, SportsNuts shall deliver
audited financial statements for the period ended December 31, 1998, which shall
not show any material variations from the unaudited statements for said period.
There are no material liabilities or obligations, either fixed or contingent,
not disclosed in the SNC Financial Statements or in any exhibit thereto or notes
thereto other than contracts or obligations in the ordinary course of business;
and no such contracts or obligations in the ordinary course of business
constitute liens or other liabilities which materially alter the financial
condition of SNC as reflected in the SNC Financial Statements. SNC has good
title to all assets shown on the SNC Financial Statements subject only to
dispositions and other transactions in the ordinary course of business, the
disclosures set forth therein and liens and encumbrances of record. The SNC
Financial Statements have been prepared in accordance with generally accepted
accounting principles consistently applied (except as may be indicated therein
or in the notes thereto) and fairly present the financial position of SNC as of
the dates thereof and the results of its operations and changes in financial
position for the periods then ended.
(d) Since the date of the SNC Financial Statements, there have not been any
material adverse changes in the financial position of SNC except changes arising
in the ordinary course of business, which changes will in no event materially
and adversely affect the financial position of SNC.
(e) SNC is not a party to any material pending litigation or, to its best
knowledge, any governmental investigation or proceeding, not reflected in the
SNC Financial Statements, and to its best knowledge, no material litigation,
claims, assessments or any governmental proceedings are threatened against SNC.
(f) SNC is in good standing in its jurisdiction of incorporation, and is in
good standing and duly qualified to do business in each jurisdiction where
required to be so qualified except where the failure to so qualify would have no
material negative impact on SNC.
(g) SNC has (or, by the Closing Date, will have filed) all material tax,
governmental and/or related forms and reports (or extensions thereof) due or
required to be filed and has (or will have) paid or made adequate provisions for
all taxes or assessments which have become due as of the Closing Date.
(h) SNC has not materially breached any material agreement to which it is a
party. SNC has previously given Durwood copies or access thereto of all material
contracts, commitments and/or agreements to which SNC is a party including all
relationships or dealings with related parties or affiliates.
(i) SNC has no subsidiary corporations except as described in writing to
Durwood.
(j) SNC has made all material corporate financial records, minute books,
and other corporate documents and records available for review to present
management of Durwood prior to the Closing Date, during reasonable business
hours and on reasonable notice.
(k) The execution of this Agreement does not materially violate or breach
any material agreement or contract to which SNC is a party and has been duly
authorized by all appropriate and necessary corporate action under Delaware of
other applicable law and SNC, to the extent required, has obtained all necessary
approvals or consents required by any agreement to which SNC is a party.
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(l) SNC has complied with all applicable state and federal securities laws
in connection with the offer, sale and issuance of all securities issued by it
since its inception.
(m) All disclosure information regarding SNC which is to be set forth in
disclosure documents of Durwood or otherwise delivered to Durwood by SNC for use
in connection with the Acquisition described herein is true, complete and
accurate in all material respects.
10. REPRESENTATIONS OF DURWOOD AND HEISELT. Durwood, and Heiselt to the
best of his knowledge, hereby jointly and severally represent and warrant as
follows, each of which representations and warranties shall continue to be true
as of the Closing Date:
(a) As of the Closing Date, the Durwood Shares, to be issued and delivered
to the SNC Stockholders hereunder will, when so issued and delivered,
constitute, duly authorized, validly and legally issued shares of Durwood common
stock, fully-paid and nonassessable. Durwood shall have completed its Forward
Split wherein each holder of Durwood Shares shall have received 2.213 shares of
the Durwood Shares for each Durwood Shares previously held. The total number of
Durwood shares of common stock outstanding shall be 2,441,713. No shares of
Durwood preferred stock, shall be outstanding.
(b) Durwood has the corporate power to enter into this Agreement and to
perform its respective obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by the board of directors of Durwood. The execution and
performance of this Agreement will not constitute a material breach of any
agreement, indenture, mortgage, license or other instrument or document to which
Durwood is a party and will not violate any judgment, decree, order, writ, rule,
statute, or regulation applicable to Durwood or its properties. The execution
and performance of this Agreement will not violate or conflict with any
provision of the Certificate of Incorporation or by-laws of Durwood.
(c) Durwood has delivered to SNC (or shall deliver prior to Closing) a true
and complete copy of its audited financial statements for the years ended
December 31, 1997 and 1998 (the "Durwood Financial Statements"). The Durwood
Financial Statements are complete, accurate and fairly present the financial
condition of Durwood as of the dates thereof and the results of its operations
for the periods then ended. There are no material liabilities or obligations
either fixed or contingent not reflected therein. The Durwood Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be indicated therein or
in the notes thereto) and fairly present the financial position of Durwood as of
the dates thereof and the results of its operations and changes in financial
position for the periods then ended.
(d) Since December 31, 1998, there have not been any material adverse
changes in the financial condition of Durwood except with regard to
disbursements to pay reasonable and ordinary expenses in connection with
maintaining its corporate status and pursuing the matters contemplated in this
Agreement. Prior to Closing, all accounts payable and other liabilities of
Durwood shall be paid and satisfied in full and Durwood shall have no
liabilities either contingent or fixed.
(e) Durwood is not a party to or the subject of any pending litigation,
claims, or governmental investigation or proceeding not reflected in the Durwood
Financial Statements or otherwise disclosed herein, and there are no lawsuits,
claims, assessments, investigations, or similar matters, to the best knowledge
of Heiselt, threatened or contemplated against or affecting Durwood, its
management or its properties.
(f) Durwood is duly organized, validly existing and in good standing under
the laws of the State of Delaware; has the corporate power to own its property
and to carry on its business as now being conducted and is duly qualified to do
business in any jurisdiction where so required except where the failure to so
qualify would have no material negative impact on it.
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(g) Durwood has filed all federal, state, county and local income, excise,
property and other tax, governmental and/or related returns, forms, or reports,
which are due or required to be filed by it prior to the date hereof, except
where the failure to do so would have no material adverse impact on Durwood, and
has paid or made adequate provision in the Durwood Financial Statements for the
payment of all taxes, fees, or assessments which have or may become due pursuant
to such returns or pursuant to any assessments received. Durwood is not
delinquent or obligated for any tax, penalty, interest, delinquency or charge.
(h) There are no existing options, calls, warrants, preemptive rights or
commitments of any character relating to the issued or unissued capital stock or
other securities of Durwood, except as contemplated in this Agreement.
(i) The corporate financial records, minute books, and other documents and
records of Durwood have been made available to SNC prior to the Closing and
shall be delivered to new management of Durwood at Closing.
(j) Durwood has not breached, nor is there any pending, or to the knowledge
of management, any threatened claim that Durwood has breached, any of the terms
or conditions of any agreements, contracts or commitments to which it is a party
or by which it or its assets are is bound. The execution and performance hereof
will not violate any provisions of applicable law or any agreement to which
Durwood is subject. Durwood hereby represents that it has no business operations
or material assets and it is not a party to any material contract or commitment
other than appointment documents with its transfer agent, and that it has
disclosed to SNC all relationships or dealings with related parties or
affiliates.
(k) Durwood common stock is currently approved for quotation on the OTC
Bulletin Board under the symbol "DWOD" and there are no stop orders in effect
with respect thereto.
(l) Durwood has complied with all applicable state and federal securities
laws in connection with the offer, sale and issuance of all securities issued by
it since its inception.
(m) All information regarding Durwood which has been provided to SNC or
otherwise disclosed in connection with the transactions contemplated herein, is
true, complete and accurate in all material respects. Durwood and Heiselt
specifically disclaim any responsibility regarding disclosures as to SNC, its
business or its financial condition.
11. CLOSING. The Initial Closing of the transactions contemplated herein
shall take place on such date (the "Closing") as mutually determined by the
parties hereto when all conditions precedent have been met and all required
documents have been delivered, which Closing is expected to take place on or
about April 6, 1999, but no later than April 30, 1999, unless extended by mutual
consent of all parties hereto. The "Closing Date" of the transactions described
herein (the "Acquisition"), shall be that date on which all conditions set forth
herein have been met and the Durwood Shares are issued in exchange for the SNC
Common Stock. As contemplated in Section 2 hereof, there is expected to be more
than one Closing after the Initial Closing whereat at least 80% of the
outstanding SNC Common Stock is acquired by Durwood. Such additional Closings
shall be held as are necessary to complete the transactions contemplated herein
subject to the conditions stated herein.
12. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SNC. All obligations of SNC
under this Agreement are subject to the fulfillment, prior to or as of the
Closing and/or the Closing Date, as indicated below, of each of the following
conditions:
(a) The representations and warranties by or on behalf of Heiselt and
Durwood contained in this Agreement or in any certificate or document delivered
pursuant to the provisions hereof shall be true in all material respects at and
as of the Closing and Closing Date as though such representations and warranties
were made at and as of such time.
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(b) Durwood shall have performed and complied with all covenants,
agreements, and conditions set forth in, and shall have executed and delivered
all documents required by this Agreement to be performed or complied with or
executed and delivered by it prior to or at the Closing.
(c) On or before the Closing, the board of directors, and shareholders
representing a majority interest the outstanding common stock of Durwood, shall
have approved in accordance with applicable state corporation law the execution
and delivery of this Agreement and the consummation of the transactions
contemplated herein.
(d) On or before the Closing Date, Durwood shall have delivered to SNC
certified copies of resolutions of the board of directors and shareholders of
Durwood approving and authorizing the execution, delivery and performance of
this Agreement and authorizing all of the necessary and proper action to enable
Durwood to comply with the terms of this Agreement including the election of
SNC's nominees to the Board of Directors of Durwood and all matters outlined
herein.
(e) The Acquisition shall be permitted by applicable law and Durwood shall
have sufficient shares of its capital stock authorized to complete the
Acquisition.
(f) At Closing, the existing sole officer and director of Durwood shall
have resigned in writing from all positions as director and officer of Durwood
effective upon the election and appointment of the SNC nominees.
(g) At the Closing, all instruments and documents delivered to SNC and SNC
Stockholders pursuant to the provisions hereof shall be reasonably satisfactory
to legal counsel for SNC.
(h) The shares of restricted Durwood capital stock to be issued to SNC
Stockholders and in the Durwood Financing at Closing will be validly issued,
nonassessable and fully-paid under Delaware corporation law and will be issued
in compliance with all federal, state and applicable corporation and securities
laws.
(i) SNC and SNC Stockholders shall have received the advice of their tax
advisor, if deemed necessary by them, as to all tax aspects of the Acquisition.
(j) SNC shall have received all necessary and required approvals and
consents from required parties and its shareholders.
(k) Durwood shall have completed the Durwood Financing and shall have on
hand $1,000,000 in gross proceeds.
(l) At the Closing, Durwood shall have delivered to SNC an opinion of its
counsel dated as of the Closing to the effect that:
(i) Durwood is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation;
(ii) This Agreement has been duly authorized, executed and delivered by
Durwood and is a valid and binding obligation of Durwood enforceable in
accordance with its terms;
(iii) Durwood through its board of directors and stockholders has taken
all corporate action necessary for performance under this Agreement;
(iv) The documents executed and delivered by Durwood to SNC and SNC
Stockholders hereunder are valid and binding in accordance with their terms
and vest in SNC Stockholders, as the case may be, all right, title and
interest in and to the Durwood Shares to be issued pursuant to the terms
hereof, and the Durwood Shares when issued will be duly and validly issued,
fully-paid and nonassessable;
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(v) Durwood has the corporate power to execute, deliver and perform
under this Agreement;
(vi) Legal counsel for Durwood is not aware of any liabilities, claims
or lawsuits pending or threatened or otherwise involving Durwood;
(vii) Durwood's authorized capital stock consists of 50,000,000 shares
of common stock, $.001 par value, of which 1,103,500 shares are issued and
outstanding and 500,000 shares of preferred stock, $.001 par value per
share, of which none are issued or outstanding. The outstanding shares of
common stock have been duly authorized, validly issued and are fully-paid
and non-assessable.
(viii) To our best knowledge there are no outstanding options,
warrants, or other rights calling for the issuance of, and no commitments,
plans or arrangements to issue, any shares of capital stock of Durwood or
any security convertible into or exchanged for capital stock of Durwood,
except as described in the Agreement.
13. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF DURWOOD. All obligations of
Durwood under this Agreement are subject to the fulfillment, prior to or at the
Closing, of each of the following conditions:
(a) The representations and warranties by SNC and SNC Stockholders
contained in this Agreement or in any certificate or document delivered pursuant
to the provisions hereof shall be true in all material respects at and as of the
Closing as though such representations and warranties were made at and as of
such time.
(b) SNC shall have performed and complied with, in all material respects,
all covenants, agreements, and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing;
(c) SNC shall deliver on behalf of the SNC Stockholders a letter commonly
known as an "Investment Letter," signed by each of said shareholders, in
substantially the form attached hereto as Exhibit "E", acknowledging that the
Durwood Shares are being acquired for investment purposes and sufficient
documentation to give Durwood reasonable basis to establish the SNC Stockholders
as Accredited Investors.
(d) SNC shall deliver an opinion of its legal counsel to the effect that:
(i) SNC is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and is duly
qualified to do business in any jurisdiction where so required except where
the failure to so qualify would have no material adverse impact on SNC;
(ii) This Agreement has been duly authorized, executed and delivered by
SNC.
(iii) The documents executed and delivered by SNC and SNC Stockholders
to Durwood hereunder are valid and binding in accordance with their terms
and vest in Durwood all right, title and interest in and to the SNC Common
Stock, which stock is duly and validly issued, fully-paid and
nonassessable.
14. INDEMNIFICATION. During any applicable statute of limitation period as
to any tax matters, and as to all other matters for a period of two years from
the Closing, Durwood and Heiselt agree to jointly and severally indemnify and
hold harmless SNC, and SNC agrees to indemnify and hold harmless Durwood and
Heiselt, against and in respect of any liability, damage or deficiency, all
actions, suits, proceedings, demands, assessments, judgments, costs and expenses
including attorney's fees incident to any of the foregoing, resulting from any
material misrepresentations made by an indemnifying party to an indemnified
party, an indemnifying party's breach of covenant or warranty or an indemnifying
party's nonfulfillment of any agreement hereunder, or from any material
misrepresentation in or omission from any certificate furnished or to be
furnished hereunder.
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15. NATURE AND SURVIVAL OF REPRESENTATIONS. All representations, warranties
and covenants made by any party in this Agreement shall survive the Closing and
the consummation of the transactions contemplated hereby for two years from the
Closing. All of the parties hereto are executing and carrying out the provisions
of this Agreement in reliance solely on the representations, warranties and
covenants and agreements contained in this Agreement and not upon any
investigation upon which it might have made or any representation, warranty,
agreement, promise or information, written or oral, made by the other party or
any other person other than as specifically set forth herein.
16. DOCUMENTS AT CLOSING. At the Closing, the following documents shall be
delivered:
(a) SNC will deliver, or will cause to be delivered, to Durwood the
following:
(i) a certificate executed by the President and Secretary of SNC to the
effect that all representations and warranties made by SNC under this
Agreement are true and correct as of the Closing, the same as though
originally given to Durwood on said date;
(ii) a certificate from the jurisdiction of incorporation of SNC dated
at or about the Closing to the effect that SNC is in good standing under
the laws of said jurisdiction;
(iii) Investment Letters in the form attached hereto as Exhibit "C"
executed by each SNC Stockholder and evidence of accreditation;
(iv) such other instruments, documents and certificates, if any, as are
required to be delivered pursuant to the provisions of this Agreement;
(v) certified copies of resolutions adopted by the shareholders and
directors of SNC authorizing this transaction; and
(vi) all other items, the delivery of which is a condition precedent to
the obligations of Durwood as set forth herein.
(vii) the legal opinion required by Section 12(d) hereof.
(b) Durwood will deliver or cause to be delivered to SNC:
(i) stock certificates representing the Durwood Shares to be issued as
a part of the stock exchange as described herein;
(ii) a certificate of the President of Durwood, to the effect that all
representations and warranties of Durwood made under this Agreement are
true and correct as of the Closing, the same as though originally given to
SNC on said date;
(iii) certified copies of resolutions adopted by Durwood's board of
directors and Durwood's Stockholders authorizing the Acquisition and all
related matters described herein;
(iv) certificate from the jurisdiction of incorporation of Durwood
dated at or about the Closing Date that Durwood is in good standing under
the laws of said state;
(v) opinion of Durwood's counsel as described in Section 11(l) above;
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(vi) such other instruments and documents as are required to be
delivered pursuant to the provisions of this Agreement;
(vii) resignation of the existing officer and director of Durwood;
(viii) all corporate and financial records of Durwood; and
(ix) all other items, the delivery of which is a condition precedent to
the obligations of SNC, as set forth in Section 12 hereof, including the
net proceeds from the Limited Offering not to be less than $950,000.
17. FINDER'S FEES. Durwood, represents and warrants to SNC, and SNC
represents and warrants to Durwood that neither of them, or any party acting on
their behalf, has incurred any liabilities, either express or implied, to any
"broker" of "finder" or similar person in connection with this Agreement or any
of the transactions contemplated hereby other than the arrangements described in
Section 5(d) hereof. In this regard, Durwood, on the one hand, and SNC on the
other hand, will indemnify and hold the other harmless from any claim, loss,
cost or expense whatsoever (including reasonable fees and disbursements of
counsel) from or relating to any such express or implied liability other than as
disclosed herein.
18. MISCELLANEOUS.
(a) Further Assurances. At any time, and from time to time, after the
Closing Date, each party will execute such additional instruments and take such
action as may be reasonably requested by the other party to confirm or perfect
title to any property transferred hereunder or otherwise to carry out the intent
and purposes of this Agreement.
(b) Waiver. Any failure on the part of any party hereto to comply with any
of its obligations, agreements or conditions hereunder may be waived in writing
by the party to whom such compliance is owed.
(c) Amendment. This Agreement may be amended only in writing as agreed to
by all parties hereto.
(d) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person or sent by
prepaid first class registered or certified mail, return receipt requested.
(e) Headings. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(g) Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware.
(h) Arbitration. All disputes hereunder shall be resolved by binding
arbitration in Salt Lake City, Utah before a single arbitrator in accordance
with the applicable rules of the American Arbitration Association then in
effect. Judgment of the Arbitrator may be entered in any court having
jurisdiction over the party against whom the judgment is rendered.
(i) Binding Effect. This Agreement shall be binding upon the parties hereto
and inure to the benefit of the parties, their respective heirs, administrators,
executors, successors and assigns.
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(j) Entire Agreement. This Agreement and the attached Exhibits constitute
the entire agreement of the parties covering everything agreed upon or
understood in the transaction. There are no oral promises, conditions,
representations, understandings, interpretations or terms of any kind as
conditions or inducements to the execution hereof.
(k) Time. Time is of the essence.
(l) Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
DURWOOD, INC.
By: /s/ Darren Heiselt
----------------------------------
Darren Heiselt, President
/s/ Darren Heiselt
-------------------------------------
Darren Heiselt, individually
SPORTSNUTS.COM, INC.
By: /s/ Kenneth Denos By: /s/ Kenneth Forrest
--------------------------------- -------------------------------------
Kenneth Denos, Secretary Kenneth Forrest, President
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EXHIBIT "A"
TO AGREEMENT AND PLAN OF REORGANIZATION
LIST OF SNC STOCKHOLDERS, WARRANTHOLDERS AND OPTIONHOLDERS
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EXHIBIT "B"
TO AGREEMENT AND PLAN OF REORGANIZATION
OUTLINE OF TERMS AND FORM OF DURWOOD WARRANT
In consideration for services rendered to it and in consideration for financial
sums provided to it, SportsNuts issued warrants to twenty individuals to acquire
5,910,000 shares of Common Stock at an exercise price of $0.50 per share. Each
of the warrants are exercisable for a period of two years from the date of
grant, ranging from June 30, 2000 to January 14, 2001. These SportsNuts warrants
will be exchanged for warrants to acquire in the aggregate 3,870,487 shares of
the Company's common stock exercisable at $.76 per share.
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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "ACT") OR APPLICABLE STATE LAW AND MAY NOT BE OFFERED, SOLD, OR
OTHERWISE TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR STATE LAW OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THE SECURITIES, SUCH OFFER, SALE, OR TRANSFER,
PLEDGE, OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
Void after 5:00 p.m., Mountain Standard Time
on_________________
SPORTSNUTS.COM INTERNATIONAL, INC.
WARRANT
This certifies that, for value received, _________________, or registered
assigns (the "Holder"), is entitled to purchase at a price of _______________
($________) per share (the "Exercise Price"), subject to the provisions of this
Warrant, from SPORTSNUTS.COM INTERNATIONAL, INC., a Delaware corporation, (the
"Company"), ______________________ (________________) shares of the unregistered
Common Stock of the Company (the "Warrant Stock").
1. Exercise of Warrant. This Warrant may be exercised in whole or in part
at any time or from time to time on or after the date hereof, but not later than
5:00 p.m., Mountain Standard Time, on , , or if such date is a day on which
federal or state chartered banking institutions are authorized by law to close,
then on the next succeeding day which shall not be such a day, by presentation
and surrender thereof to the Company at its principal office or at the office of
its stock transfer agent, if any, with the Purchase Form annexed hereto duly
executed and accompanied by payment, in cash or by certified or official bank
check, payable to the order of the Company, of the Exercise Price for the number
of shares of Warrant Stock specified in such form, together with all taxes
applicable upon such exercise. If this Warrant should be exercised in part only,
the Company shall upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant of the same tenor evidencing the right of the Holder to
purchase the balance of the shares of Warrant Stock purchasable hereunder upon
the same terms and conditions as herein set forth. Upon and as of receipt by the
Company of this Warrant at the office or stock transfer agent of the Company, in
proper form for exercise, and accompanied by payment as herein provided, the
Holder shall be deemed to be the holder of record of the shares of Warrant Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such shares
of Warrant Stock shall not then be actually delivered to the Holder.
2. Reservation of Shares. The Company hereby covenants and agrees that at
all times during the period this Warrant is exercisable it shall reserve from
its authorized and unissued shares of Common Stock for issuance and delivery
upon exercise of this Warrant such number of shares of its Warrant Stock as
shall be required for issuance and delivery upon exercise of this Warrant. The
Company agrees that its issuance of this Warrant shall constitute full authority
to its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the shares of Warrant Stock
upon the exercise of this Warrant.
3. Fractional Shares. No fractional shares or stock representing fractional
shares shall be issued upon the exercise of this Warrant. In lieu of any
fractional shares which would otherwise be issuable, the Company shall pay cash
equal to the product of such fraction multiplied by the fair market value of one
share of the Warrant Stock on the date of exercise, as determined in good faith
by the Company's Board of Directors.
4. Transfer, Exchange, Assignment or Loss of Warrant.
(a) This Warrant may not be assigned or transferred except as provided
herein and in accordance with and subject to the provisions of the Securities
Act of 1933 and the Rules and Regulations promulgated thereunder (said Act and
such Rules and Regulations being hereinafter collectively referred to as the
"Act"). Any purported transfer or assignment made other than in accordance with
this Section 4 and Section 8 hereof shall be null and void and of no force and
effect.
(b) This Warrant may be transferred or assigned only with the written
consent of the Company, which shall not be unreasonably withheld. In addition,
this Warrant shall be transferable only upon the opinion of counsel satisfactory
to the Company, which may be counsel to the Company, that (i) the transferee is
a person to whom the Warrant may be legally transferred without registration
under the Act; and (ii) such transfer will not violate any applicable law or
governmental rule or
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regulation including, without limitation, any applicable federal or state
securities law, as further referenced in Section 8 below. Prior to the transfer
or assignment, the assignor or transferor shall reimburse the Company for its
reasonable expenses, including attorneys' fees, incurred in connection with the
transfer or assignment.
(c) Any assignment permitted hereunder shall be made by surrender of
this Warrant to the Company at its principal office with the Assignment Form
annexed hereto duly executed and funds sufficient to pay any transfer tax. In
such event the Company shall, without charge, execute and deliver a new Warrant
in the name of the assignee named in such instrument of assignment and this
Warrant shall promptly be canceled. This Warrant may be divided or combined with
other Warrants which carry the same rights upon presentation thereof at the
principal office of the Company together with a written notice signed by the
Holder thereof, specifying the names and denominations in which new Warrants are
to be issued. The terms "Warrant" and "Warrants" as used herein includes any
Warrants in substitution for or replacement of this Warrant, or into which this
Warrant may be divided or exchanged.
(d) Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date and any such lost,
stolen, destroyed or mutilated Warrant shall thereupon become void. Any such new
Warrant executed and delivered shall constitute an additional contractual
obligation on the part of the Company, whether or not the Warrant so lost,
stolen, destroyed or mutilated shall be at any time enforceable by anyone.
(e) Each Holder of this Warrant, the shares of Warrant Stock issued
hereunder or any other security issued or issuable upon the exercise of this
Warrant shall indemnify and hold harmless the Company, its directors and
officers, and each person, if any, who controls the Company, against any losses,
claims, damages or liabilities, joint or several, to which the Company or any
such director, officer or any such person may become subject under the Act or
statute or common law, insofar as such losses, claims, damages or liabilities,
or actions in respect thereof, arise out of or are based upon the disposition by
such Holder of the Warrant, the shares of Warrant Stock acquired under the
Warrant, or other such securities in violation of this Warrant.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant and
are not enforceable against the Company except to the extent set forth herein.
6. Adjustment of Exercise Price and Number of Shares. The number and kind
of securities issuable upon the exercise of this Warrant and the Exercise Price
of such securities shall be subject to adjustment from time to time upon the
happening of certain events as follows:
(a) Adjustment for Dividends in Stock. In case at any time or from time
to time on or after the date hereof the holders of the Common Stock of the
Company (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received, or, on or after the record
date fixed for the determination of eligible stockholders, shall have become
entitled to receive without payment therefor, other or additional stock of the
Company by way of dividend, then and in each case, the Holder of this Warrant
shall, upon the exercise hereof be entitled to receive, in addition to the
number of shares of Warrant Stock receivable thereupon, and without payment of
any additional consideration therefor, the amount of such other or additional
stock of Company which such Holder would hold on the date of such exercise had
it been the holder of record of such shares of Warrant Stock on the date hereof
and had thereafter, during the period from the date hereof to and including the
additional stock receivable by it as aforesaid during such period, giving effect
to all adjustments called for during such period by paragraphs (a) and (b) of
this Section 6.
(b) Adjustment for Reclassification, Reorganization or Merger. In case
of any reclassification or change of the outstanding securities of the Company
or of any reorganization of the Company (or any other corporation the stock or
securities of which are at the time receivable upon the exercise of this
Warrant) on or after the date hereof, or in case, after such date, the Company
(or any such other corporation) shall merge with or into another corporation or
convey all or substantially all of its assets to another corporation, then and
in each such case the Holder of this Warrant, upon the exercise hereof at any
time after the consummation of such reclassification, change, reorganization,
merger or conveyance, shall be entitled to receive, in lieu of the stock or
other securities and property receivable upon the exercise hereof prior to such
consummation, the stock or other securities or property which such Holder would
have been entitled upon such consummation if such Holder had exercised this
Warrant immediately prior thereto. In each such case, the terms of this Section
6 shall be applicable to the shares of stock or other securities properly
receivable upon the exercise of this Warrant after such consummation.
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(c) Stock Splits and Reverse Stock Splits. If at any time on or after
the date hereof the Company shall subdivide its outstanding shares of Warrant
Stock into a greater number of shares, the Exercise Price in effect immediately
prior to such subdivision shall thereby be proportionately reduced and the
number of shares of Warrant Stock receivable upon exercise of the Warrant shall
thereby be proportionately increased; and, conversely, if at any time on or
after the date hereof the outstanding number of shares of Warrant Stock shall be
combined into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination shall thereby be proportionately increased
and the number of shares of Warrant Stock receivable upon exercise of the
Warrant shall thereby be proportionately decreased.
7. Officer's Certificate. Whenever the Exercise Price or the number of
shares of Warrant Stock that may be acquired under the Warrant shall be adjusted
as required by the provisions of Section 6 hereof, the Company shall forthwith
file with its Secretary or an Assistant Secretary at its principal office, and
with its stock transfer agent, if any, an officer's certificate showing the
adjusted Exercise Price and shares of Warrant Stock determined as herein
provided and setting forth in reasonable detail the facts requiring such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the Holder, and the Company shall, forthwith
after each such adjustment, deliver a copy of such certificate to the Holder.
8. Transfer to Comply with the Securities Act of 1933.
(a) This Warrant and the shares of Warrant Stock issued hereunder or
any other security issued or issuable upon exercise of this Warrant may not be
sold, transferred or otherwise disposed of, except to a person who, in the
opinion of counsel reasonably satisfactory to the Company, is a person to whom
this Warrant or such shares of Warrant Stock may legally be transferred pursuant
to Section 4 hereof without registration and without the delivery of a current
prospectus under the Act with respect thereto and then only against receipt of
an agreement of such person to comply with the provision of this Section 8 with
respect to any resale or other disposition of such securities unless, in the
opinion of such counsel, such agreement is not required.
(b) The Company may cause the following legend to be set forth on each
certificate representing shares of Warrant Stock acquired under this Warrant or
any other security issued or issuable upon exercise of this Warrant, unless
counsel for the Company is of the opinion as to any such certificate that such
legend is unnecessary:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "ACT") OR APPLICABLE STATE LAW AND MAY NOT BE OFFERED, SOLD, OR
OTHERWISE TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR STATE LAW OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THE SECURITIES, SUCH OFFER, SALE, OR TRANSFER,
PLEDGE, OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
9. Governing Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Utah excluding that body of law
pertaining to conflicts of law.
10. Notice. Notices and other communications to be given to the Holder of
the Warrants evidenced by this certificate shall be delivered by hand or mailed,
postage prepaid, to ______________________________________________, or such
other address as the Holder shall have designated by written notice to the
Company as provided herein. Notices or other communications to the Company shall
be deemed to have been sufficiently given if delivered by hand or mailed postage
prepaid to the Company at The Towers at South Towne #2, 10421 South 400 West,
Salt Lake City, UT 84095, attn: Kenneth I. Denos, or such other address as the
Company shall have designated by written notice to such registered owner as
herein provided. Notice by mail shall be deemed given when deposited in the
United States mail, postage prepaid, as herein provided.
IN WITNESS WHEREOF, the Company has executed this Warrant as of the
_____ day of April, 1999.
SPORTSNUTS.COM INTERNATIONAL, INC.
By:
-----------------------------------
Its:
-----------------------------------
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PURCHASE FORM
Dated:________________
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing _________ shares of Warrant Stock, and hereby makes
payment of $________ in payment of the actual exercise price thereof.
---------------------------------
Signature
---------------------------------------------
ASSIGNMENT FORM
Dated:________________
FOR VALUE RECEIVED, ____________________ hereby sells, assigns and transfers
unto ____________________________
(please type or print)
- --------------------------------------
(address)
the right to purchase shares of Warrant Stock represented by this Warrant to the
extent of shares as to which such right is exercisable, and does hereby
irrevocably constitute and appoint the Company and/or its transfer agent as
attorney to transfer the same on the books of the Company with full power of
substitution in the premises.
----------------------------
Signature
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EXHIBIT "C"
TO AGREEMENT AND PLAN OF REORGANIZATION
Outline of Terms and Form of Option
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EXHIBIT "D"
TO AGREEMENT AND PLAN OF REORGANIZATION
Form of Restatement to Certificate of Incorporation
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RESTATED CERTIFICATE OF INCORPORATION
Durwood, Inc., a corporation organized and existing under the laws of the
State of Delaware, hereby certifies as follows:
1. The name of the corporation is Durwood, Inc., and it was originally
incorporated under the same name, and the original Certificate of Incorporation
of the corporation was filed with the Secretary of State of the State of
Delaware on July 12, 1996.
2. Pursuant to Section 242 and 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Certificate of Incorporation
of this corporation.
3. The text of the Restated Certificate of Incorporation as heretofore
amended or supplemented is hereby restated and further amended to read in its
entirety as follows:
CERTIFICATE OF INCORPORATION
OF
SPORTSNUTS.COM INTERNATIONAL, INC.
ARTICLE I. NAME
The name of the corporation is SPORTSNUTS.COM INTERNATIONAL, INC. (the
"Corporation").
ARTICLE II. REGISTERED OFFICE
The address of the Corporation's registered office in the State of Delaware
is Corporation Service Company, 1013 Centre Road, in the City of Wilmington,
County of New Castle and its registered agent at such address is CORPORATION
SERVICE COMPANY.
ARTICLE III. PURPOSE
The purpose or purposes of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware.
ARTICLE IV. CAPITAL STOCK
The Corporation is authorized to issue two classes of shares to be
designated, respectively, "Preferred Stock" and "Common Stock". The number of
shares of Preferred Stock authorized to be issued is Five Million (5,000,000).
The number of shares of Common Stock authorized to be issued is Fifty Million
(50,000,000). The Preferred Stock and the Common Stock shall each have a par
value of $.0001 per share.
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(a) Provisions Relating to the Common Stock. Each holder of Common
Stock is entitled to one vote for each share of Common Stock standing in
such holder's name on the records of the Corporation on each matter
submitted to a vote of the stockholders, except as otherwise required by
law.
(b) Provisions Relating to Preferred Stock. The Board of Directors
(the "Board") is authorized, subject to limitations prescribed by law and
the provisions of this Article IV, to provide for the issuance of the
shares of Preferred Stock in accordance with Sections 102(a) and 151(a) of
the General Corporation Law of Delaware, in one or more series, and by
filing a certificate pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers,
preferences and rights of the shares of each such series and the
qualification, limitations or restrictions thereof.
ARTICLE V. BOARD OF DIRECTORS
(a) Number. The number of directors constituting the entire Board
shall be as fixed from time to time by vote of a majority of the entire
Board, provided, however, that the number of directors shall not be reduced
so as to shorten the terms of any director at any time in office.
(b) Classified Board. The Board shall be divided into three classes,
as nearly equal in numbers as the then total number of directors
constituting the entire Board permits with the term of office of one class
expiring each year. At the first annual meeting of the stockholders,
directors of the first class will be elected to hold office for a term
expiring at the next succeeding annual meeting, directors of the second
class will be elected to hold office for a term expiring at the second
succeeding annual meeting, and directors of the third class will be elected
to hold office for a term expiring at the third succeeding annual meeting.
(c) Vacancies. Vacancies on the Board shall be filled by the
affirmative vote of the majority of the remaining directors, though less
than a quorum of the Board, or by election at an annual meeting or at a
special meeting of the stockholders called for that purpose.
(d) Election of directors need not be by written ballot.
ARTICLE VI. BY-LAWS
In furtherance and not in limitation of the powers conferred by statute,
the Board is expressly authorized to make, alter, amend or repeal the By-Laws of
the Corporation.
ARTICLE VII. LIABILITY
To the fullest extent permitted by the Delaware General Corporation Law as
the same exists or as may hereafter be amended, no director of the Corporation
shall be personally liable to the Corporation or its stockholders for or with
respect to any acts or omissions in the performance of his or her duties as a
director of the Corporation. Any amendment or repeal of this Article VII will
not eliminate or reduce the affect of any right or protection of a director of
the Corporation existing immediately prior to such amendment or repeal.
ARTICLE VIII. SPECIAL VOTING REQUIREMENTS
The following actions, when submitted to the stockholders of the
Corporation for their consideration, shall require the affirmative vote of at
least 66 2/3% of the outstanding Common Stock of the Corporation: amendment of
Sections (a), (b), or (c) of Article V of the Certificate of Incorporation. The
foregoing voting requirements shall not otherwise be deemed to affect the voting
rights granted by this Certificate of Incorporation, the By-laws, or the
Delaware General Corporation Law, to the Board.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
signed under the seal of the Corporation this 6th day of April, 1999.
DURWOOD, INC.
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By: /s/ Darren Heiselt
-------------------------------------
Darren Heiselt, President and Secretary
22
<PAGE> 23
EXHIBIT "E"
TO AGREEMENT AND PLAN OF REORGANIZATION
Form of Investment Letter
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<PAGE> 1
Exhibit 2.2
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
This Amended and Restated Agreement and Plan of Reorganization (hereinafter
the "Agreement") is entered into effective as of the 6th day of April 1999, by
and among Durwood, Inc., a Delaware corporation (hereinafter "Durwood"); Darren
Heiselt, a shareholder of Durwood (hereinafter "Heiselt"); SportsNuts.com, Inc.,
a Delaware corporation (hereinafter "SNC"), and owners of outstanding common
stock of SNC (hereinafter the "SNC Stockholders").
RECITALS:
WHEREAS, the SNC Stockholders own issued and outstanding common stock of
SNC (the "SNC Common Stock"). Durwood desires to acquire the SNC Common Stock
solely in exchange for voting common stock of Durwood, making SNC a controlled
or wholly-owned subsidiary of Durwood (the "Acquisition"); and
WHEREAS, the SNC Stockholders (as set forth on Exhibit "A") desire to
acquire voting common stock of Durwood in exchange for the SNC Common Stock, as
more fully set forth herein.
NOW THEREFORE, for the mutual consideration set out herein and other good
and valuable consideration, the legal sufficiency of which is hereby
acknowledged, the parties agree as follows:
AGREEMENT
1. PLAN OF REORGANIZATION. It is hereby agreed that the SNC Common Stock
shall be acquired by Durwood in exchange solely for Durwood common voting stock
(the "Durwood Shares"). It is the intention of the parties hereto that SNC
Common Stock be acquired by Durwood in exchange solely for Durwood common voting
stock and that this entire transaction qualify as a corporate reorganization
under Section 368(a)(1)(B) and/or Section 351 of the Internal Revenue Code of
1986, as amended, and related or other applicable sections thereunder.
2. OVERALL TRANSACTION. It is the ultimate purpose of this transaction to
cause Durwood to make an offer to acquire all of the issued and outstanding
capital stock, warrants and options of SportsNuts in exchange for like
securities of Durwood as further described herein and to cause SportsNuts to
become a wholly owned subsidiary of Durwood. However, said transaction shall be
accomplished in two steps. In the first step, Durwood, with the assistance of
SportsNuts, shall present an offer to all current shareholders of SNC who are
reasonably believed by SNC to be accredited investors as defined by Rule 501(a)
of Regulation D, promulgated under the Securities Act of 1933, as amended (the
"Act"). The Closing of the Acquisition described herein is conditioned upon the
acceptance by accredited SportsNuts Stockholders representing at least 80% of
the outstanding SNC Common Stock. In the event the Acquisition is completed, in
that Durwood is able to acquire at least 80% of the outstanding SNC Common Stock
from accredited SNC Stockholders, Durwood shall, as the second step, use its
best efforts to file and pursue to effectiveness a registration statement with
the S.E.C. and any applicable state agencies, covering an offer to all remaining
SNC securities holders (common shares, warrants and options) to exchange their
existing securities of SNC for like securities of Durwood on the basis described
herein, (the "Second Exchange").In the first step, Durwood shall offer to
existing accredited holders of outstanding SNC Warrants ("SNC Warrantholders")
the opportunity to exchange such securities for like securities of Durwood in
the manner and on the basis described herein (the "Accredited Warrant
Exchange").
3. TERMS OF EXCHANGE. The parties agree that on the Closing Date or at the
Closing as hereinafter defined, which includes any subsequent Closings to
accomplish the Second Exchange and the Accredited Warrant Exchange, Durwood
shall deliver its securities, after giving effect to a 2.213 for 1 forward stock
split as to all currently outstanding shares of common stock (the "Forward
Split") as follows:
(a) Durwood shall, subject to the terms and conditions set forth herein,
issue an aggregate of 9,459,444 shares of its common stock (the "Durwood
Shares") to the SNC Stockholders in exchange for 14,444,000 shares of
outstanding SNC Common Stock on a
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<PAGE> 2
ratio of .654904748 Durwood shares for each outstanding share of SNC Common
Stock. The SNC Stockholders are listed on the attached Exhibit "A" which is by
this reference incorporated herein.
(b) Durwood shall, subject to the terms and conditions set forth herein,
issue warrants to acquire an aggregate of 3,988,370 Durwood Shares to SNC
Warrantholders in exchange for outstanding SNC Warrants. The SNC Warrantholders
are listed on Exhibit "A". The terms of the Durwood Warrants are outlined and
set forth in the attached Exhibit "B", which is by this reference incorporated
herein. The ratio of the exchange shall give the SNC Warrantholders the right to
purchase .654904748 Durwood Shares for each share of SNC Common Stock covered by
outstanding SNC Warrants.
(c) Durwood shall, subject to the terms and conditions set forth herein,
issue options to acquire an aggregate of 9,915,258 Durwood Shares to SNC
Optionholders in exchange for outstanding SNC Options. The SNC Optionholders are
listed on Exhibit "A". The terms of the Durwood Options are outlined and set
forth in the attached Exhibit "C", which is by this reference incorporated
herein. The ratio of the exchange shall give the SNC Optionholders the right to
purchase .654904748 Durwood Shares for each share of SNC Common Stock covered by
outstanding SNC Warrants.
(d) Each SNC Stockholder shall execute this Agreement or a written consent
to the exchange of their SNC Common Stock for Durwood Shares.
(e) The Acquisition shall close only in the event Durwood is able to
acquire at least 80% of the outstanding SNC Common Stock from accredited
investors.
4. PRE-CLOSING EVENTS. The Closing is subject to the completion at or about
the time of Closing of the following:
(a) Durwood shall restate its Certificate of Incorporation in the State of
Delaware in substantially the form attached hereto as Exhibit "D" and shall have
authorized 50,000,000 shares of $.0001 par value common stock and 5,000,000
shares of $.0001 par value preferred stock. The preferred stock shall be subject
to issuance in such series and with such rights, preferences and designations as
determined in the sole discretion of the board of directors.
(b) Durwood shall have effectuated the Forward Split at or about the
Closing, and shall have 2,441,713 shares of its common stock issued and
outstanding and no other shares of capital stock issued or outstanding.
(c) Durwood shall demonstrate to the reasonable satisfaction of SNC that it
has no material assets other than the proceeds of the Durwood Financing as
described herein, and no liabilities contingent or fixed.
5. EXCHANGE OF SECURITIES. As of the Initial Closing Date (as defined
herein) each of the following shall occur:
(a) All shares of SNC Common Stock held by accredited SNC Stockholders who
have accepted the Durwood offer, assuming at least 80% of the outstanding shares
of SNC Common Stock is covered, shall be exchanged for Durwood Shares. All such
outstanding shares of SNC Common Stock shall be deemed, after Closing, to be
owned by Durwood. The holders of such certificates previously evidencing shares
of SNC Common Stock outstanding immediately prior to the Closing Date shall
cease to have any rights with respect to such shares of SNC Common Stock except
as otherwise provided herein or by law;
(b) Any shares of SNC Common Stock held in the treasury of SNC immediately
prior to the Closing Date shall automatically be canceled and extinguished
without any conversion thereof and no payment shall be made with respect
thereto;
(c) The 2,441,713 shares of Durwood common stock previously issued and
outstanding immediately prior to the Closing, after giving effect to the Forward
Split, will remain outstanding.
(d) Durwood Warrants shall be exchanged for the SNC Warrants to the extent
said exchange is accepted by accredited SportsNuts' Warrantholders.
6. OTHER EVENTS OCCURRING AT CLOSING. At Closing, the following shall be
accomplished:
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<PAGE> 3
(a) Durwood shall file a restatement to its Certificate of Incorporation
with the Secretary of State of the State of Delaware in substantially the form
attached hereto as Exhibit "D" effecting a restatement to its Certificate of
Incorporation to reflect a name change and revised authorized capitalization all
as set forth in Exhibit "D".
(b) The resignation of the existing Durwood officers and directors and
appointment of new officers and directors as directed by SNC.
(c) Durwood shall have completed a private offering under Regulation D,
Rule 506, as promulgated by the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended, of 1,000,000 shares of its common stock
at $1.00 per share. The gross proceeds of this offering (the "Durwood
Financing") shall be $1,000,000, which amount, less agreed upon costs, shall be
delivered to the control of new management of Durwood at Closing in good funds.
The Durwood Financing shall have been completed in compliance with all
applicable state and federal securities laws and the restricted securities sold
shall be delivered at Closing to the investors in the Durwood Financing.
(d) Durwood shall adopt a Stock Option Plan at Closing to include up to
15,000,000 shares of its common stock. The Plan shall include "incentive" stock
options under Section 422 of the Internal Revenue Code of 1986, as amended and
other options and similar rights.
7. DELIVERY OF CERTAIN SHARES. On or as soon as practicable after the
Closing Date, SNC will use its best efforts to cause the SNC Stockholders to
surrender certificates for cancellation representing their shares of SNC Common
Stock, against delivery of certificates representing the Durwood Shares for
which the shares of SNC Common Stock are to be exchanged at Closing.
8. REPRESENTATIONS OF SNC STOCKHOLDERS. Each SNC Stockholder hereby
represents and warrants each only as to its own SNC Common Stock, effective this
date and the Closing Date as follows:
(a) Except as may be set forth in Exhibit "A", the SNC Common Stock is free
from claims, liens, or other encumbrances, and at the Closing Date said SNC
Stockholder will have good title and the unqualified right to transfer and
dispose of such SNC Common Stock.
(b) Said SNC Stockholder is the sole owner of the issued and outstanding
SNC Common Stock as set forth in Exhibit "A";
(c) Said SNC Stockholder has no present intent to sell or dispose of the
Durwood Shares and is not under a binding obligation, formal commitment, or
existing plan to sell or otherwise dispose of the Durwood Shares.
9. REPRESENTATIONS OF SNC. SNC hereby represents and warrants as follows,
which warranties and representations shall also be true as of the Closing Date:
(a) Except as noted on Exhibit "A", the SNC Stockholders listed on the
attached Exhibit "A" are the sole owners of record and beneficially of the
issued and outstanding common stock of SNC.
(b) SNC has no outstanding or authorized capital stock, warrants, options
or convertible securities other than as described in the SNC Financial
Statements or on Exhibits "A", "B" and "C", attached hereto.
(c) The audited financial statements as of and for the periods ended
December 31, 1997 and unaudited financial statements for the period ended
December 31, 1998, which have been delivered to Durwood (hereinafter referred to
as the "SNC Financial Statements") are complete and accurate and fairly present
the financial condition of SNC as of the dates thereof and the results of its
operations for the periods covered. Prior to Closing, SportsNuts shall deliver
audited financial statements for the period ended December 31, 1998, which shall
not show any material variations from the unaudited statements for said period.
There are no material liabilities or obligations, either fixed or contingent,
not disclosed in the SNC Financial Statements or in any exhibit thereto or notes
thereto other than contracts or obligations in the ordinary course of business;
and no such contracts or obligations in the ordinary course of business
constitute liens or other liabilities which materially alter the financial
condition of SNC as reflected in the SNC Financial Statements. SNC has good
title to all assets shown on the SNC Financial Statements subject only to
dispositions and other transactions in the ordinary course of business, the
disclosures set forth therein and liens and encumbrances of record. The SNC
Financial Statements have been prepared in accordance with generally accepted
accounting
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<PAGE> 4
principles consistently applied (except as may be indicated therein or in the
notes thereto) and fairly present the financial position of SNC as of the dates
thereof and the results of its operations and changes in financial position for
the periods then ended.
(d) Since the date of the SNC Financial Statements, there have not been any
material adverse changes in the financial position of SNC except changes arising
in the ordinary course of business, which changes will in no event materially
and adversely affect the financial position of SNC.
(e) SNC is not a party to any material pending litigation or, to its best
knowledge, any governmental investigation or proceeding, not reflected in the
SNC Financial Statements, and to its best knowledge, no material litigation,
claims, assessments or any governmental proceedings are threatened against SNC.
(f) SNC is in good standing in its jurisdiction of incorporation, and is in
good standing and duly qualified to do business in each jurisdiction where
required to be so qualified except where the failure to so qualify would have no
material negative impact on SNC.
(g) SNC has (or, by the Closing Date, will have filed) all material tax,
governmental and/or related forms and reports (or extensions thereof) due or
required to be filed and has (or will have) paid or made adequate provisions for
all taxes or assessments which have become due as of the Closing Date.
(h) SNC has not materially breached any material agreement to which it is a
party. SNC has previously given Durwood copies or access thereto of all material
contracts, commitments and/or agreements to which SNC is a party including all
relationships or dealings with related parties or affiliates.
(i) SNC has no subsidiary corporations except as described in writing to
Durwood.
(j) SNC has made all material corporate financial records, minute books,
and other corporate documents and records available for review to present
management of Durwood prior to the Closing Date, during reasonable business
hours and on reasonable notice.
(k) The execution of this Agreement does not materially violate or breach
any material agreement or contract to which SNC is a party and has been duly
authorized by all appropriate and necessary corporate action under Delaware of
other applicable law and SNC, to the extent required, has obtained all necessary
approvals or consents required by any agreement to which SNC is a party.
(l) SNC has complied with all applicable state and federal securities laws
in connection with the offer, sale and issuance of all securities issued by it
since its inception.
(m) All disclosure information regarding SNC which is to be set forth in
disclosure documents of Durwood or otherwise delivered to Durwood by SNC for use
in connection with the Acquisition described herein is true, complete and
accurate in all material respects.
10. REPRESENTATIONS OF DURWOOD AND HEISELT. Durwood, and Heiselt to the
best of his knowledge, hereby jointly and severally represent and warrant as
follows, each of which representations and warranties shall continue to be true
as of the Closing Date:
(a) As of the Closing Date, the Durwood Shares, to be issued and delivered
to the SNC Stockholders hereunder will, when so issued and delivered,
constitute, duly authorized, validly and legally issued shares of Durwood common
stock, fully-paid and nonassessable. Durwood shall have completed its Forward
Split wherein each holder of Durwood Shares shall have received 2.213 shares of
the Durwood Shares for each Durwood Shares previously held. The total number of
Durwood shares of common stock outstanding shall be 2,441,713. No shares of
Durwood preferred stock, shall be outstanding.
(b) Durwood has the corporate power to enter into this Agreement and to
perform its respective obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly
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<PAGE> 5
authorized by the board of directors of Durwood. The execution and performance
of this Agreement will not constitute a material breach of any agreement,
indenture, mortgage, license or other instrument or document to which Durwood is
a party and will not violate any judgment, decree, order, writ, rule, statute,
or regulation applicable to Durwood or its properties. The execution and
performance of this Agreement will not violate or conflict with any provision of
the Certificate of Incorporation or by-laws of Durwood.
(c) Durwood has delivered to SNC (or shall deliver prior to Closing) a true
and complete copy of its audited financial statements for the years ended
December 31, 1997 and 1998 (the "Durwood Financial Statements"). The Durwood
Financial Statements are complete, accurate and fairly present the financial
condition of Durwood as of the dates thereof and the results of its operations
for the periods then ended. There are no material liabilities or obligations
either fixed or contingent not reflected therein. The Durwood Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be indicated therein or
in the notes thereto) and fairly present the financial position of Durwood as of
the dates thereof and the results of its operations and changes in financial
position for the periods then ended.
(d) Since December 31, 1998, there have not been any material adverse
changes in the financial condition of Durwood except with regard to
disbursements to pay reasonable and ordinary expenses in connection with
maintaining its corporate status and pursuing the matters contemplated in this
Agreement. Prior to Closing, all accounts payable and other liabilities of
Durwood shall be paid and satisfied in full and Durwood shall have no
liabilities either contingent or fixed.
(e) Durwood is not a party to or the subject of any pending litigation,
claims, or governmental investigation or proceeding not reflected in the Durwood
Financial Statements or otherwise disclosed herein, and there are no lawsuits,
claims, assessments, investigations, or similar matters, to the best knowledge
of Heiselt, threatened or contemplated against or affecting Durwood, its
management or its properties.
(f) Durwood is duly organized, validly existing and in good standing under
the laws of the State of Delaware; has the corporate power to own its property
and to carry on its business as now being conducted and is duly qualified to do
business in any jurisdiction where so required except where the failure to so
qualify would have no material negative impact on it.
(g) Durwood has filed all federal, state, county and local income, excise,
property and other tax, governmental and/or related returns, forms, or reports,
which are due or required to be filed by it prior to the date hereof, except
where the failure to do so would have no material adverse impact on Durwood, and
has paid or made adequate provision in the Durwood Financial Statements for the
payment of all taxes, fees, or assessments which have or may become due pursuant
to such returns or pursuant to any assessments received. Durwood is not
delinquent or obligated for any tax, penalty, interest, delinquency or charge.
(h) There are no existing options, calls, warrants, preemptive rights or
commitments of any character relating to the issued or unissued capital stock or
other securities of Durwood, except as contemplated in this Agreement.
(i) The corporate financial records, minute books, and other documents and
records of Durwood have been made available to SNC prior to the Closing and
shall be delivered to new management of Durwood at Closing.
(j) Durwood has not breached, nor is there any pending, or to the knowledge
of management, any threatened claim that Durwood has breached, any of the terms
or conditions of any agreements, contracts or commitments to which it is a party
or by which it or its assets are is bound. The execution and performance hereof
will not violate any provisions of applicable law or any agreement to which
Durwood is subject. Durwood hereby represents that it has no business operations
or material assets and it is not a party to any material contract or commitment
other than appointment documents with its transfer agent, and that it has
disclosed to SNC all relationships or dealings with related parties or
affiliates.
(k) Durwood common stock is currently approved for quotation on the OTC
Bulletin Board under the symbol "DWOD" and there are no stop orders in effect
with respect thereto.
(l) Durwood has complied with all applicable state and federal securities
laws in connection with the offer, sale and issuance of all securities issued by
it since its inception.
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<PAGE> 6
(m) All information regarding Durwood which has been provided to SNC or
otherwise disclosed in connection with the transactions contemplated herein, is
true, complete and accurate in all material respects. Durwood and Heiselt
specifically disclaim any responsibility regarding disclosures as to SNC, its
business or its financial condition.
11. CLOSING. The Initial Closing of the transactions contemplated herein
shall take place on such date (the "Closing") as mutually determined by the
parties hereto when all conditions precedent have been met and all required
documents have been delivered, which Closing is expected to take place on or
about April 6, 1999, but no later than April 30, 1999, unless extended by mutual
consent of all parties hereto. The "Closing Date" of the transactions described
herein (the "Acquisition"), shall be that date on which all conditions set forth
herein have been met and the Durwood Shares are issued in exchange for the SNC
Common Stock. As contemplated in Section 2 hereof, there is expected to be more
than one Closing after the Initial Closing whereat at least 80% of the
outstanding SNC Common Stock is acquired by Durwood. Such additional Closings
shall be held as are necessary to complete the transactions contemplated herein
subject to the conditions stated herein.
12. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SNC. All obligations of SNC
under this Agreement are subject to the fulfillment, prior to or as of the
Closing and/or the Closing Date, as indicated below, of each of the following
conditions:
(a) The representations and warranties by or on behalf of Heiselt and
Durwood contained in this Agreement or in any certificate or document delivered
pursuant to the provisions hereof shall be true in all material respects at and
as of the Closing and Closing Date as though such representations and warranties
were made at and as of such time.
(b) Durwood shall have performed and complied with all covenants,
agreements, and conditions set forth in, and shall have executed and delivered
all documents required by this Agreement to be performed or complied with or
executed and delivered by it prior to or at the Closing.
(c) On or before the Closing, the board of directors, and shareholders
representing a majority interest the outstanding common stock of Durwood, shall
have approved in accordance with applicable state corporation law the execution
and delivery of this Agreement and the consummation of the transactions
contemplated herein.
(d) On or before the Closing Date, Durwood shall have delivered to SNC
certified copies of resolutions of the board of directors and shareholders of
Durwood approving and authorizing the execution, delivery and performance of
this Agreement and authorizing all of the necessary and proper action to enable
Durwood to comply with the terms of this Agreement including the election of
SNC's nominees to the Board of Directors of Durwood and all matters outlined
herein.
(e) The Acquisition shall be permitted by applicable law and Durwood shall
have sufficient shares of its capital stock authorized to complete the
Acquisition.
(f) At Closing, the existing sole officer and director of Durwood shall
have resigned in writing from all positions as director and officer of Durwood
effective upon the election and appointment of the SNC nominees.
(g) At the Closing, all instruments and documents delivered to SNC and SNC
Stockholders pursuant to the provisions hereof shall be reasonably satisfactory
to legal counsel for SNC.
(h) The shares of restricted Durwood capital stock to be issued to SNC
Stockholders and in the Durwood Financing at Closing will be validly issued,
nonassessable and fully-paid under Delaware corporation law and will be issued
in compliance with all federal, state and applicable corporation and securities
laws.
(i) SNC and SNC Stockholders shall have received the advice of their tax
advisor, if deemed necessary by them, as to all tax aspects of the Acquisition.
(j) SNC shall have received all necessary and required approvals and
consents from required parties and its shareholders.
(k) Durwood shall have completed the Durwood Financing and shall have on
hand $1,000,000 in gross proceeds.
(l) At the Closing, Durwood shall have delivered to SNC an opinion of its
counsel dated as of the Closing to the effect that:
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<PAGE> 7
(i) Durwood is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation;
(ii) This Agreement has been duly authorized, executed and delivered by
Durwood and is a valid and binding obligation of Durwood enforceable in
accordance with its terms;
(iii) Durwood through its board of directors and stockholders has taken
all corporate action necessary for performance under this Agreement;
(iv) The documents executed and delivered by Durwood to SNC and SNC
Stockholders hereunder are valid and binding in accordance with their terms
and vest in SNC Stockholders, as the case may be, all right, title and
interest in and to the Durwood Shares to be issued pursuant to the terms
hereof, and the Durwood Shares when issued will be duly and validly issued,
fully-paid and nonassessable;
(v) Durwood has the corporate power to execute, deliver and perform
under this Agreement;
(vi) Legal counsel for Durwood is not aware of any liabilities, claims
or lawsuits pending or threatened or otherwise involving Durwood;
(vii) Durwood's authorized capital stock consists of 50,000,000 shares
of common stock, $.001 par value, of which 1,103,500 shares are issued and
outstanding and 500,000 shares of preferred stock, $.001 par value per
share, of which none are issued or outstanding. The outstanding shares of
common stock have been duly authorized, validly issued and are fully-paid
and non-assessable.
(viii) To our best knowledge there are no outstanding options,
warrants, or other rights calling for the issuance of, and no commitments,
plans or arrangements to issue, any shares of capital stock of Durwood or
any security convertible into or exchanged for capital stock of Durwood,
except as described in the Agreement.
13. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF DURWOOD. All obligations of
Durwood under this Agreement are subject to the fulfillment, prior to or at the
Closing, of each of the following conditions:
(a) The representations and warranties by SNC and SNC Stockholders
contained in this Agreement or in any certificate or document delivered pursuant
to the provisions hereof shall be true in all material respects at and as of the
Closing as though such representations and warranties were made at and as of
such time.
(b) SNC shall have performed and complied with, in all material respects,
all covenants, agreements, and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing;
(c) SNC shall deliver on behalf of the SNC Stockholders a letter commonly
known as an "Investment Letter," signed by each of said shareholders, in
substantially the form attached hereto as Exhibit "E", acknowledging that the
Durwood Shares are being acquired for investment purposes and sufficient
documentation to give Durwood reasonable basis to establish the SNC Stockholders
as Accredited Investors.
(d) SNC shall deliver an opinion of its legal counsel to the effect that:
(i) SNC is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and is duly
qualified to do business in any jurisdiction where so required except where
the failure to so qualify would have no material adverse impact on SNC;
(ii) This Agreement has been duly authorized, executed and delivered by
SNC.
(iii) The documents executed and delivered by SNC and SNC Stockholders
to Durwood hereunder are valid and binding in accordance with their terms
and vest in Durwood all right, title and interest in and to the SNC Common
Stock, which stock is duly and validly issued, fully-paid and
nonassessable.
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<PAGE> 8
14. INDEMNIFICATION. During any applicable statute of limitation period as
to any tax matters, and as to all other matters for a period of two years from
the Closing, Durwood and Heiselt agree to jointly and severally indemnify and
hold harmless SNC, and SNC agrees to indemnify and hold harmless Durwood and
Heiselt, against and in respect of any liability, damage or deficiency, all
actions, suits, proceedings, demands, assessments, judgments, costs and expenses
including attorney's fees incident to any of the foregoing, resulting from any
material misrepresentations made by an indemnifying party to an indemnified
party, an indemnifying party's breach of covenant or warranty or an indemnifying
party's nonfulfillment of any agreement hereunder, or from any material
misrepresentation in or omission from any certificate furnished or to be
furnished hereunder.
15. NATURE AND SURVIVAL OF REPRESENTATIONS. All representations, warranties
and covenants made by any party in this Agreement shall survive the Closing and
the consummation of the transactions contemplated hereby for two years from the
Closing. All of the parties hereto are executing and carrying out the provisions
of this Agreement in reliance solely on the representations, warranties and
covenants and agreements contained in this Agreement and not upon any
investigation upon which it might have made or any representation, warranty,
agreement, promise or information, written or oral, made by the other party or
any other person other than as specifically set forth herein.
16. DOCUMENTS AT CLOSING. At the Closing, the following documents shall be
delivered:
(a) SNC will deliver, or will cause to be delivered, to Durwood the
following:
(i) a certificate executed by the President and Secretary of SNC to the
effect that all representations and warranties made by SNC under this
Agreement are true and correct as of the Closing, the same as though
originally given to Durwood on said date;
(ii) a certificate from the jurisdiction of incorporation of SNC dated
at or about the Closing to the effect that SNC is in good standing under
the laws of said jurisdiction;
(iii) Investment Letters in the form attached hereto as Exhibit "C"
executed by each SNC Stockholder and evidence of accreditation;
(iv) such other instruments, documents and certificates, if any, as are
required to be delivered pursuant to the provisions of this Agreement;
(v) certified copies of resolutions adopted by the shareholders and
directors of SNC authorizing this transaction; and
(vi) all other items, the delivery of which is a condition precedent to
the obligations of Durwood as set forth herein.
(vii) the legal opinion required by Section 12(d) hereof.
(b) Durwood will deliver or cause to be delivered to SNC:
(i) stock certificates representing the Durwood Shares to be issued as
a part of the stock exchange as described herein;
(ii) a certificate of the President of Durwood, to the effect that all
representations and warranties of Durwood made under this Agreement are
true and correct as of the Closing, the same as though originally given to
SNC on said date;
(iii) certified copies of resolutions adopted by Durwood's board of
directors and Durwood's Stockholders authorizing the Acquisition and all
related matters described herein;
(iv) certificate from the jurisdiction of incorporation of Durwood
dated at or about the Closing Date that Durwood is in good standing under
the laws of said state;
(v) opinion of Durwood's counsel as described in Section 11(l) above;
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<PAGE> 9
(vi) such other instruments and documents as are required to be
delivered pursuant to the provisions of this Agreement;
(vii) resignation of the existing officer and director of Durwood;
(viii) all corporate and financial records of Durwood; and
(ix) all other items, the delivery of which is a condition precedent to
the obligations of SNC, as set forth in Section 12 hereof, including the
net proceeds from the Limited Offering not to be less than $950,000.
17. FINDER'S FEES. Durwood, represents and warrants to SNC, and SNC
represents and warrants to Durwood that neither of them, or any party acting on
their behalf, has incurred any liabilities, either express or implied, to any
"broker" of "finder" or similar person in connection with this Agreement or any
of the transactions contemplated hereby other than the arrangements described in
Section 5(d) hereof. In this regard, Durwood, on the one hand, and SNC on the
other hand, will indemnify and hold the other harmless from any claim, loss,
cost or expense whatsoever (including reasonable fees and disbursements of
counsel) from or relating to any such express or implied liability other than as
disclosed herein.
18. MISCELLANEOUS.
(a) Further Assurances. At any time, and from time to time, after the
Closing Date, each party will execute such additional instruments and take such
action as may be reasonably requested by the other party to confirm or perfect
title to any property transferred hereunder or otherwise to carry out the intent
and purposes of this Agreement.
(b) Waiver. Any failure on the part of any party hereto to comply with any
of its
obligations, agreements or conditions hereunder may be waived in writing by the
party to whom such compliance is owed.
(c) Amendment. This Agreement may be amended only in writing as agreed to
by all parties hereto.
(d) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person or sent by
prepaid first class registered or certified mail, return receipt requested.
(e) Headings. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(g) Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware.
(h) Arbitration. All disputes hereunder shall be resolved by binding
arbitration in Salt Lake City, Utah before a single arbitrator in accordance
with the applicable rules of the American Arbitration Association then in
effect. Judgment of the Arbitrator may be entered in any court having
jurisdiction over the party against whom the judgment is rendered.
(i) Binding Effect. This Agreement shall be binding upon the parties hereto
and inure to the benefit of the parties, their respective heirs, administrators,
executors, successors and assigns.
(j) Entire Agreement. This Agreement and the attached Exhibits constitute
the entire agreement of the parties covering everything agreed upon or
understood in the transaction. There are no oral promises, conditions,
representations, understandings, interpretations or terms of any kind as
conditions or inducements to the execution hereof.
(k) Time. Time is of the essence.
(l) Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in full force and
effect.
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IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first set forth above.
DURWOOD, INC.
By: /s/ Darren Heiselt
---------------------------------
Darren Heiselt, President
/s/ Darren Heiselt
---------------------------------
Darren Heiselt, individually
SPORTSNUTS.COM, INC.
By: /s/Kenneth Denos By: /s/ Kenneth Forrest
---------------------------------- ----------------------------------
Kenneth Denos, Secretary Kenneth Forrest, President
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<PAGE> 11
EXHIBIT "A"
TO AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
LIST OF SNC STOCKHOLDERS, WARRANTHOLDERS AND OPTIONHOLDERS
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<PAGE> 12
EXHIBIT "B"
TO AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
OUTLINE OF TERMS AND FORM OF DURWOOD WARRANT
In consideration for services rendered to it and in consideration for financial
sums provided to it, SportsNuts issued warrants to twenty individuals to acquire
6,090,000 shares of Common Stock at an exercise price of $0.50 per share. Each
of the warrants are exercisable for a period of two years from the date of
grant, ranging from June 30, 2000 to January 14, 2001. These SportsNuts warrants
will be exchanged for warrants to acquire in the aggregate 3,988,370 shares of
the Company's common stock exercisable at $.76 per share.
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<PAGE> 13
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "ACT") OR APPLICABLE STATE LAW AND MAY NOT BE OFFERED, SOLD, OR
OTHERWISE TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR STATE LAW OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THE SECURITIES, SUCH OFFER, SALE, OR TRANSFER,
PLEDGE, OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
Void after 5:00 p.m., Mountain Standard Time
on_________________
SPORTSNUTS.COM INTERNATIONAL, INC.
WARRANT
This certifies that, for value received, _________________, or registered
assigns (the "Holder"), is entitled to purchase at a price of _______________
($________) per share (the "Exercise Price"), subject to the provisions of this
Warrant, from SPORTSNUTS.COM INTERNATIONAL, INC., a Delaware corporation, (the
"Company"), ______________________ (________________) shares of the unregistered
Common Stock of the Company (the "Warrant Stock").
1. Exercise of Warrant. This Warrant may be exercised in whole or in part
at any time or from time to time on or after the date hereof, but not later than
5:00 p.m., Mountain Standard Time, on , , or if such date is a day on which
federal or state chartered banking institutions are authorized by law to close,
then on the next succeeding day which shall not be such a day, by presentation
and surrender thereof to the Company at its principal office or at the office of
its stock transfer agent, if any, with the Purchase Form annexed hereto duly
executed and accompanied by payment, in cash or by certified or official bank
check, payable to the order of the Company, of the Exercise Price for the number
of shares of Warrant Stock specified in such form, together with all taxes
applicable upon such exercise. If this Warrant should be exercised in part only,
the Company shall upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant of the same tenor evidencing the right of the Holder to
purchase the balance of the shares of Warrant Stock purchasable hereunder upon
the same terms and conditions as herein set forth. Upon and as of receipt by the
Company of this Warrant at the office or stock transfer agent of the Company, in
proper form for exercise, and accompanied by payment as herein provided, the
Holder shall be deemed to be the holder of record of the shares of Warrant Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such shares
of Warrant Stock shall not then be actually delivered to the Holder.
2. Reservation of Shares. The Company hereby covenants and agrees that at
all times during the period this Warrant is exercisable it shall reserve from
its authorized and unissued shares of Common Stock for issuance and delivery
upon exercise of this Warrant such number of shares of its Warrant Stock as
shall be required for issuance and delivery upon exercise of this Warrant. The
Company agrees that its issuance of this Warrant shall constitute full authority
to its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the shares of Warrant Stock
upon the exercise of this Warrant.
3. Fractional Shares. No fractional shares or stock representing fractional
shares shall be issued upon the exercise of this Warrant. In lieu of any
fractional shares which would otherwise be issuable, the Company shall pay cash
equal to the product of such fraction multiplied by the fair market value of one
share of the Warrant Stock on the date of exercise, as determined in good faith
by the Company's Board of Directors.
4. Transfer, Exchange, Assignment or Loss of Warrant.
(a) This Warrant may not be assigned or transferred except as provided
herein and in accordance with and subject to the provisions of the Securities
Act of 1933 and the Rules and Regulations promulgated thereunder (said Act and
such Rules and Regulations being hereinafter collectively referred to as the
"Act"). Any purported transfer or assignment made other than in accordance with
this Section 4 and Section 8 hereof shall be null and void and of no force and
effect.
(b) This Warrant may be transferred or assigned only with the written
consent of the Company, which shall not be unreasonably withheld. In addition,
this Warrant shall be transferable only upon the opinion of counsel satisfactory
to the Company, which may be counsel to the Company, that (i) the transferee is
a person to whom the Warrant may be legally transferred without registration
under the Act; and (ii) such transfer will not violate any applicable law or
governmental rule or
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<PAGE> 14
regulation including, without limitation, any applicable federal or state
securities law, as further referenced in Section 8 below. Prior to the transfer
or assignment, the assignor or transferor shall reimburse the Company for its
reasonable expenses, including attorneys' fees, incurred in connection with the
transfer or assignment.
(c) Any assignment permitted hereunder shall be made by surrender of
this Warrant to the Company at its principal office with the Assignment Form
annexed hereto duly executed and funds sufficient to pay any transfer tax. In
such event the Company shall, without charge, execute and deliver a new Warrant
in the name of the assignee named in such instrument of assignment and this
Warrant shall promptly be canceled. This Warrant may be divided or combined with
other Warrants which carry the same rights upon presentation thereof at the
principal office of the Company together with a written notice signed by the
Holder thereof, specifying the names and denominations in which new Warrants are
to be issued. The terms "Warrant" and "Warrants" as used herein includes any
Warrants in substitution for or replacement of this Warrant, or into which this
Warrant may be divided or exchanged.
(d) Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date and any such lost,
stolen, destroyed or mutilated Warrant shall thereupon become void. Any such new
Warrant executed and delivered shall constitute an additional contractual
obligation on the part of the Company, whether or not the Warrant so lost,
stolen, destroyed or mutilated shall be at any time enforceable by anyone.
(e) Each Holder of this Warrant, the shares of Warrant Stock issued
hereunder or any other security issued or issuable upon the exercise of this
Warrant shall indemnify and hold harmless the Company, its directors and
officers, and each person, if any, who controls the Company, against any losses,
claims, damages or liabilities, joint or several, to which the Company or any
such director, officer or any such person may become subject under the Act or
statute or common law, insofar as such losses, claims, damages or liabilities,
or actions in respect thereof, arise out of or are based upon the disposition by
such Holder of the Warrant, the shares of Warrant Stock acquired under the
Warrant, or other such securities in violation of this Warrant.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant and
are not enforceable against the Company except to the extent set forth herein.
6. Adjustment of Exercise Price and Number of Shares. The number and kind
of securities issuable upon the exercise of this Warrant and the Exercise Price
of such securities shall be subject to adjustment from time to time upon the
happening of certain events as follows:
(a) Adjustment for Dividends in Stock. In case at any time or from time
to time on or after the date hereof the holders of the Common Stock of the
Company (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received, or, on or after the record
date fixed for the determination of eligible stockholders, shall have become
entitled to receive without payment therefor, other or additional stock of the
Company by way of dividend, then and in each case, the Holder of this Warrant
shall, upon the exercise hereof be entitled to receive, in addition to the
number of shares of Warrant Stock receivable thereupon, and without payment of
any additional consideration therefor, the amount of such other or additional
stock of Company which such Holder would hold on the date of such exercise had
it been the holder of record of such shares of Warrant Stock on the date hereof
and had thereafter, during the period from the date hereof to and including the
additional stock receivable by it as aforesaid during such period, giving effect
to all adjustments called for during such period by paragraphs (a) and (b) of
this Section 6.
(b) Adjustment for Reclassification, Reorganization or Merger. In case
of any reclassification or change of the outstanding securities of the Company
or of any reorganization of the Company (or any other corporation the stock or
securities of which are at the time receivable upon the exercise of this
Warrant) on or after the date hereof, or in case, after such date, the Company
(or any such other corporation) shall merge with or into another corporation or
convey all or substantially all of its assets to another corporation, then and
in each such case the Holder of this Warrant, upon the exercise hereof at any
time after the consummation of such reclassification, change, reorganization,
merger or conveyance, shall be entitled to receive, in lieu of the stock or
other securities and property receivable upon the exercise hereof prior to such
consummation, the stock or other securities or property which such Holder would
have been entitled upon such consummation if such Holder had exercised this
Warrant immediately prior thereto. In each such case, the terms of this Section
6 shall be applicable to the shares of stock or other securities properly
receivable upon the exercise of this Warrant after such consummation.
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<PAGE> 15
(c) Stock Splits and Reverse Stock Splits. If at any time on or after
the date hereof the Company shall subdivide its outstanding shares of Warrant
Stock into a greater number of shares, the Exercise Price in effect immediately
prior to such subdivision shall thereby be proportionately reduced and the
number of shares of Warrant Stock receivable upon exercise of the Warrant shall
thereby be proportionately increased; and, conversely, if at any time on or
after the date hereof the outstanding number of shares of Warrant Stock shall be
combined into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination shall thereby be proportionately increased
and the number of shares of Warrant Stock receivable upon exercise of the
Warrant shall thereby be proportionately decreased.
7. Officer's Certificate. Whenever the Exercise Price or the number of
shares of Warrant Stock that may be acquired under the Warrant shall be adjusted
as required by the provisions of Section 6 hereof, the Company shall forthwith
file with its Secretary or an Assistant Secretary at its principal office, and
with its stock transfer agent, if any, an officer's certificate showing the
adjusted Exercise Price and shares of Warrant Stock determined as herein
provided and setting forth in reasonable detail the facts requiring such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the Holder, and the Company shall, forthwith
after each such adjustment, deliver a copy of such certificate to the Holder.
8. Transfer to Comply with the Securities Act of 1933.
(a) This Warrant and the shares of Warrant Stock issued hereunder or
any other security issued or issuable upon exercise of this Warrant may not be
sold, transferred or otherwise disposed of, except to a person who, in the
opinion of counsel reasonably satisfactory to the Company, is a person to whom
this Warrant or such shares of Warrant Stock may legally be transferred pursuant
to Section 4 hereof without registration and without the delivery of a current
prospectus under the Act with respect thereto and then only against receipt of
an agreement of such person to comply with the provision of this Section 8 with
respect to any resale or other disposition of such securities unless, in the
opinion of such counsel, such agreement is not required.
(b) The Company may cause the following legend to be set forth on each
certificate representing shares of Warrant Stock acquired under this Warrant or
any other security issued or issuable upon exercise of this Warrant, unless
counsel for the Company is of the opinion as to any such certificate that such
legend is unnecessary:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "ACT") OR APPLICABLE STATE LAW AND MAY NOT BE OFFERED, SOLD, OR
OTHERWISE TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR STATE LAW OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THE SECURITIES, SUCH OFFER, SALE, OR TRANSFER,
PLEDGE, OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
9. Governing Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Utah excluding that body of law
pertaining to conflicts of law.
10. Notice. Notices and other communications to be given to the Holder of
the Warrants evidenced by this certificate shall be delivered by hand or mailed,
postage prepaid, to ______________________________________________, or such
other address as the Holder shall have designated by written notice to the
Company as provided herein. Notices or other communications to the Company shall
be deemed to have been sufficiently given if delivered by hand or mailed postage
prepaid to the Company at The Towers at South Towne #2, 10421 South 400 West,
Salt Lake City, UT 84095, attn: Kenneth I. Denos, or such other address as the
Company shall have designated by written notice to such registered owner as
herein provided. Notice by mail shall be deemed given when deposited in the
United States mail, postage prepaid, as herein provided.
IN WITNESS WHEREOF, the Company has executed this Warrant as of the
_____ day of April, 1999.
SPORTSNUTS.COM INTERNATIONAL, INC.
By:
----------------------------------
Its:
----------------------------------
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PURCHASE FORM
Dated:_____________
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing _________ shares of Warrant Stock, and hereby makes
payment of $________ in payment of the actual exercise price thereof.
-----------------------------
Signature
------------------------------------
ASSIGNMENT FORM
Dated:_____________
FOR VALUE RECEIVED, _______________ hereby sells, assigns and transfers unto
(please type or print)
- --------------------------------------
(address)
the right to purchase shares of Warrant Stock represented by this Warrant to the
extent of _______shares as to which such right is exercisable, and does hereby
irrevocably constitute and appoint the Company and/or its transfer agent as
attorney to transfer the same on the books of the Company with full power of
substitution in the premises.
--------------------------
Signature
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EXHIBIT "C"
TO AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
Outline of Terms and Form of Option
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EXHIBIT "D"
TO AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
Form of Restatement to Certificate of Incorporation
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RESTATED CERTIFICATE OF INCORPORATION
Durwood, Inc., a corporation organized and existing under the laws of the
State of Delaware, hereby certifies as follows:
1. The name of the corporation is Durwood, Inc., and it was originally
incorporated under the same name, and the original Certificate of Incorporation
of the corporation was filed with the Secretary of State of the State of
Delaware on July 12, 1996.
2. Pursuant to Section 242 and 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Certificate of Incorporation
of this corporation.
3. The text of the Restated Certificate of Incorporation as heretofore
amended or supplemented is hereby restated and further amended to read in its
entirety as follows:
CERTIFICATE OF INCORPORATION
OF
SPORTSNUTS.COM INTERNATIONAL, INC.
ARTICLE I. NAME
The name of the corporation is SPORTSNUTS.COM INTERNATIONAL, INC. (the
"Corporation").
ARTICLE II. REGISTERED OFFICE
The address of the Corporation's registered office in the State of Delaware
is Corporation Service Company, 1013 Centre Road, in the City of Wilmington,
County of New Castle and its registered agent at such address is CORPORATION
SERVICE COMPANY.
ARTICLE III. PURPOSE
The purpose or purposes of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware.
ARTICLE IV. CAPITAL STOCK
The Corporation is authorized to issue two classes of shares to be
designated, respectively, "Preferred Stock" and "Common Stock". The number of
shares of Preferred Stock authorized to be issued is Five Million (5,000,000).
The number of shares of Common Stock authorized to be issued is Fifty Million
(50,000,000). The Preferred Stock and the Common Stock shall each have a par
value of $.0001 per share.
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(a) Provisions Relating to the Common Stock. Each holder of Common
Stock is entitled to one vote for each share of Common Stock standing in
such holder's name on the records of the Corporation on each matter
submitted to a vote of the stockholders, except as otherwise required by
law.
(b) Provisions Relating to Preferred Stock. The Board of Directors
(the "Board") is authorized, subject to limitations prescribed by law and
the provisions of this Article IV, to provide for the issuance of the
shares of Preferred Stock in accordance with Sections 102(a) and 151(a) of
the General Corporation Law of Delaware, in one or more series, and by
filing a certificate pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers,
preferences and rights of the shares of each such series and the
qualification, limitations or restrictions thereof.
ARTICLE V. BOARD OF DIRECTORS
(a) Number. The number of directors constituting the entire Board
shall be as fixed from time to time by vote of a majority of the entire
Board, provided, however, that the number of directors shall not be reduced
so as to shorten the terms of any director at any time in office.
(b) Classified Board. The Board shall be divided into three classes,
as nearly equal in numbers as the then total number of directors
constituting the entire Board permits with the term of office of one class
expiring each year. At the first annual meeting of the stockholders,
directors of the first class will be elected to hold office for a term
expiring at the next succeeding annual meeting, directors of the second
class will be elected to hold office for a term expiring at the second
succeeding annual meeting, and directors of the third class will be elected
to hold office for a term expiring at the third succeeding annual meeting.
(c) Vacancies. Vacancies on the Board shall be filled by the
affirmative vote of the majority of the remaining directors, though less
than a quorum of the Board, or by election at an annual meeting or at a
special meeting of the stockholders called for that purpose.
(d) Election of directors need not be by written ballot.
ARTICLE VI. BY-LAWS
In furtherance and not in limitation of the powers conferred by statute,
the Board is expressly authorized to make, alter, amend or repeal the By-Laws of
the Corporation.
ARTICLE VII. LIABILITY
To the fullest extent permitted by the Delaware General Corporation Law as
the same exists or as may hereafter be amended, no director of the Corporation
shall be personally liable to the Corporation or its stockholders for or with
respect to any acts or omissions in the performance of his or her duties as a
director of the Corporation. Any amendment or repeal of this Article VII will
not eliminate or reduce the affect of any right or protection of a director of
the Corporation existing immediately prior to such amendment or repeal.
ARTICLE VIII. SPECIAL VOTING REQUIREMENTS
The following actions, when submitted to the stockholders of the
Corporation for their consideration, shall require the affirmative vote of at
least 66 2/3% of the outstanding Common Stock of the Corporation: amendment of
Sections (a), (b), or (c) of Article V of the Certificate of Incorporation. The
foregoing voting requirements shall not otherwise be deemed to affect the voting
rights granted by this Certificate of Incorporation, the By-laws, or the
Delaware General Corporation Law, to the Board.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
signed under the seal of the Corporation this 6th day of April, 1999.
DURWOOD, INC.
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By: /s/ Darren Heiselt
-----------------------------
Darren Heiselt, President and Secretary
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EXHIBIT "E"
TO AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
Form of Investment Letter
45
