SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: October 22, 1999
WatchOut! Inc.
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(Exact name of registrant as specified in its charter)
Utah 0114244 84-0959153
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1900 N.W. Corp. Blvd. - Suite 400 E, Boca Raton, FL 33431
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(New Address)
116 Stanyan, San Francisco, CA 94118
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(Prior Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (954) 803-7480
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Item 1. Changes in Control of Registrant
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Pursuant to a Stock Purchase Agreement on October 2, 1999
Innovative Cybersystems Corp., a Florida corporation, (Innovative) agreed to
purchase 6,376,922 issued and outstanding shares of Registrant's common stock
from Robert Galoob, David Galoob, and Archangel Holding Company, LLC. The
6,376,922 shares represent approximately 42% of the outstanding shares of the
common stock of Registrant on a fully-diluted basis. In addition, Innovative has
options to purchase an additional 1,750,000 common shares from David Galoob and
Robert Galoob. Innovative Cybersystems Corp. is controlled by Kevin Waltzer and
John J. Russell. (See "Management" below)
As of the closing of the Purchase, the following persons will
own more than 5% of Registrant's outstanding common stock (on a fully diluted
basis):
Innovative Cybersystems Corp. 6,376,922 shares -42%
(Innovative Cybersystems also has options for 1,750,000 shares which
when combined would total 54% of the Company's outstanding stock.)
Prior to the share purchase, the company was controlled by
Robert Galoob, David Galoob, and Stephen Petre (through Archangel Holding
Company, LLC).
The descriptions contained herein of the Agreements are qualified in
their entirety by reference to the Agreement, dated as of October 2, 1999, by
and among the shareholders of WatchOut!, filed as Exhibit 7.1 hereto.
Item 2. Acquisition or Disposition of Assets
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a. Innovative Cybersystems Corporation (hereafter
"Innovative") was incorporated in September of 1999 as a Florida corporation.
The Company has acquired an exclusive License to market connectivity to a
broadband high-speed communication network that fully implemented will provide
real-time, TV quality videophone calls on an international basis. The License is
only for the State of Nevada for a term of twenty years. In addition, the
Licensee provides the License the added ability to market an advanced
videophone/computer appliance. Other activities covered under the license
include the rights to all advertising revenues, an ISP providing T-1 speed to
any house or business, long distance audio phone calls, and the sale of
associated computer products including software and hardware at competitive
prices.
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In addition, the license provides for pre-engineered retail outlets (especially
designed to add to the marketing power of the network) to be installed in
commercial market areas and high traffic regional shopping mall locations to
support marketing to the general domestic mass market. Also included in the
license is the right to develop a locally based high-speed communication network
of E-Commerce based business outlets through the Company's Intranet that then is
accessible locally or internationally by consumers. Innovative intends to build
the marketing business of the License in WatchOut! Inc. as an operating company.
b. The License provides for development of thirteen (13)
various Intranet networks available over the broadband high-speed network that
will provide everything from pay-per-view sporting events to real-time
open-heart surgery viewing, all in real-time TV quality. Innovative will convey
the license at its cost to WatchOut! Inc.
c. Management believes the ability to transmit and receive
visual information real-time and TV quality is the next step beyond the widely
accepted Internet products that are currently used. The license provides the
opportunity for the Licensee to be an Internet service provider with
bi-directional T-1 communication speed to the Internet. Some competitive
services are capable of providing a one-way connection only but bi-directional
modems for copper wire interfaces (Bell network) are not currently available in
the marketplace at a price practical for the average consumer. Even with that
advantage, a comparison of the communication capabilities the Licensee has under
its license agreement may outperform those capabilities found on the Internet or
available with any of the Bell telephone systems.
The Company will change its name to Innovative Cybersystems
Corporation through a shareholders vote.
Item 3. Bankruptcy or Receivership
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None.
Item 4. Changes in Registrant's Certifying Accountant
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None.
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Item 5. Other Events
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Other provisions of the Share Purchase Agreement require that all warrants have
been canceled, the Sands Brothers Selling Agreement be terminated, all loan
terms be renegotiated, and that certain shareholders reduce their shares in
WatchOut! Inc. Final documents have not yet been executed to complete the
requirements of the Share Purchase Agreement.
Termination of Watch Marketing Effort. The Company has ceased all of
its efforts at the watch marketing business and has abandoned the license.
Item 6. Resignation and Appointment of Directors
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a. Effective as of October 9, 1999, pursuant to the Agreements, John J.
Russell was appointed a Director of Registrant. The prior directors of
Registrant, Robert Galoob and David Galoob, will resign after a Section 14f
Notice to Shareholders has become effective, and Kevin Waltzer and Michelle Long
will be appointed as Directors.
b. NEW MANAGEMENT
The new management of the company will be as shown below. John J.
Russell has been appointed a director, Chief Executive Officer and Chief
Financial Officer effective October 9, 1999. Kevin Waltzer has been appointed
President effective October 9, 1999. Mr. Waltzer and Michelle Long will be
appointed as Directors as soon as the company has completed compliance with
Section 14f of the Securities Exchange Act of 1934, expected to be by November
5, 1999.
Kevin Waltzer, age 32, President and proposed Director (subject
to compliance with Section 14f)
Mr. Waltzer graduated from Boston University with an
undergraduate degree in Political Science (1990). Mr. Waltzer
has been a self-employed equities trader for the past seven
years, using proprietary market trend systems. He served as a
Director for and consultant to The Human Works, Inc, September
- December 1998. Mr. Waltzer was a founding partner and
Director and executive of Eco-Aire Company, Inc., a company
holding multiple patents for evolutionary air and
<PAGE>
water purification techniques from 1996 to 1998. He was a
founding partner and an original investor in Tradescape.com, a
Manhattan based securities trading firm, in 1996. He sold his
interest in 1999. He formed Innovative Cybersystems, Inc. in
1999 and is President and a Director and principal
shareholder.
John J. Russell, age 60, Director, CEO, CFO
John (Jack) Russell graduated from Drexel University with a BS
in accounting. He has accomplished advanced studies at
American College, Bryn Mawr, PA. He received a CHFC
designation in 1990 and a CLU designation in 1993. He is a
Charter member of the Professional Achievement in Continuing
Education Program. Mr. Russell is involved with the American
Institute of Certified Public Accountants where he is a member
of the Tax Division and the Personal Financial Planning
Division. He has recently worked as a financial
planner/business consultant for Glen Mills Financial Services,
Inc. where he specialized in financial planning, personal and
corporate tax returns, corporate financing, and management
systems. From 1994 to 1995, he headed an 18-month project to
turn around a manufacturing company located in the Mid-West.
As CEO of Glas-Kraft, Inc., from 1982 to 1988 he turned the
company around and negotiated the sale of the company. As a
CEO of Eastern Coated Papers, Ltd. from 1983 to 1988 Mr.
Russell arranged acquisition and working capital needs with a
combination of Canadian and U.S. banks. The company was
returned to a positive cash flow, and he negotiated the sale
of the company. From 1978 to 1982, he was CFO of Gentech,
Inc., he established a sophisticated direct costing system. He
helped Gentech, Inc. acquire a significant subsidiary through
a cash tender offer. At Titan Industries, Inc., from 1972 to
1978, he handled all aspects of the Annual Report and SEC
reporting. Mr. Russell also established
<PAGE>
consolidation and reporting controls for over 91 subsidiaries.
In order to improve the state of the company, he assisted in
the sell-off of several unprofitable and/or incompatible
subsidiaries. When he was CFO of SmithKline Laboratories -
Branson Instruments Division, 1969 to 1972, he served on a
five man executive committee responsible for strategic
direction of the company. Mr. Russell is a Director and
shareholder of Innovative Cybersystems, Inc. founded in
October 1999.
Michelle Long, age 45, proposed Director (subject to compliance with
Section 14f)
Ms Long studied Mathematics at the University of Helsinki,
Finland and obtained her undergraduate degree in Finance from
the University of Cincinnati in 1978 and holds an MBA in
Finance from Xavier University. Michelle holds LUTCF, RHU,
ChFC, and CFP designations. Ms. Long is registered with NASD
as an Investment Advisor and General Securities Principal. She
currently heads Quest Financial Group, the Greater Cincinnati
Branch of United Planners' Financial Services of America.
Item 7. Financial Statements, Pro Forma Financials, & Exhibits
7.1 Share Purchase Agreement
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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 thereunto duly authorized.
Date: October 22, 1999 WatchOut! Inc.
/s/ Kevin Waltzer
By: -----------------------------
Kevin Waltzer, President
SHARE PURCHASE AGREEMENT
___________________, 1999
This Share Purchase Agreement ("Agreement"), between Robert Galoob, David
Galoob, Archangel Holdings Company, LLC ("SELLERS"), and Innovative
Cybersystems Corp., a Florida corporation (as BUYER).
W I T N E S S E T H:
A. WHEREAS, WatchOut! Inc., is a corporation organized under the
laws of Utah.
B. WHEREAS, SELLERS are willing to sell, and BUYER desires to purchase
certain issued and outstanding shares of capital stock in WatchOut! Inc., as
specified on Exhibit A.
C. WHEREAS, WatchOut! and SELLERS will benefit from the transactions
contemplated hereby and desire to implement the contemplated transaction.
NOW, THEREFORE, it is agreed among the parties as follows:
ARTICLE I
The Consideration
1.1 Subject to the conditions set forth herein on the "Closing Date"
(as herein defined), SELLERS shall sell and cause to be delivered and BUYER
shall purchase the shares of WatchOut! common stock as specified on exhibit A
except for those shares pledged by sellers to creditors. The transactions
contemplated by this Agreement shall be completed at a closing ("Closing") on a
closing date which shall be on or before October 9, 1999. The purchase price
for the WatchOut! shares to be paid by BUYER to SELLERS is, $10,000, of which
funds $5,000 shall be paid at the execution of this agreement to auditors and
accountants of WatchOut! Inc., for past due audit fees and $5,000 at time of
delivery of the December 31, 1998 audited financial statements and the
agreement by buyers that all creditors bills as listed on Exhibit B will be
paid by BUYER in stock, cash, or any other settlement acceptable to buyers and
creditors within two years after date hereof including as provided in 7.11
hereof. BUYER shall hold sellers harmless and indemnify sellers from any loss,
cost, or damage resulting from any loss cost or claims by such listed
creditors.
On the Closing Date, all of the documents to be furnished pursuant to
this Agreement, including the documents to be furnished pursuant to Article VII
of this Agreement, shall be delivered to M.A. Littman, to be held in escrow
until (a) all closing conditions hereunder have been met or (b) the date of
termination of this Agreement.
<PAGE>
ARTICLE II
Delivery of Shares
2.1 The certificates representing the restricted shares shall be
delivered and conveyed by SELLERS to BUYER with duly executed stock powers,
upon receipt of the consideration by SELLERS and satisfaction of all Conditions
Precedent to Consummation of Purchase as set forth in Article VII hereof,
except that certain shares, shall be held as collateral for creditors as shown
on Schedule 2.1. If the debts for which the collateral pledged is are paid, (or
any remaining shares if pledged collateral is sold) then such shares shall be
transferred at the transfer agent to BUYER.
ARTICLE III
Representations, Warranties, and Covenants of SELLERS as to WATCHOUT
These representations or warranties are made by SELLERS as individuals,
and as officers and directors of WO.
SELLERS hereby represent, warrant, and covenant to BUYER as follows:
3.1 WO is a corporation duly organized, validly existing and in good
standing under the laws of Utah, and has the corporate power and authority to
carry on its business as it is now being conducted. The Articles of
Incorporation of WO and amendments, copies of which have been delivered to
BUYER, are complete and accurate, and the minute books of WO, which will be
delivered to BUYER contain a complete and accurate record of all material
actions taken at, all meetings of the shareholders and Board of Directors of
WO.
3.2 The aggregate number of shares which WO is authorized to issue is
50 Million shares with a par value of $.001 per share, of which 15,030,245
shares are issued and outstanding. Such shares are fully paid and
non-assessable. WO has no outstanding options, warrants or other rights to
purchase, or subscribe to, or securities convertible into or exchangeable for
any shares of capital stock, except for Messrs Bader, Williams, Sands, Sands,
Hollo, Capstone Financial LLC, and Larkin which shall be canceled prior to
closing.
3.3 SELLERS have complete and unrestricted power to enter into and,
upon receipt of the appropriate approvals as required by law, to consummate the
transactions contemplated by this Agreement.
3.4 SELLERS own the common shares of WO free and clear of all liens and
encumbrances, and are authorized to sell such shares to BUYER, subject only to
the pledge agreements and debts recited hereinafter
3.5 SELLERS who represent WO shall not enter into or consummate any
transactions prior to the Closing Date and will pay no dividend, or increase
the compensation of officers and will not enter into any other business
agreement or transaction, prior to closing date.
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3.6 The representations and warranties of SELLERS shall be true and
correct as of the date hereof and as of the Closing Date.
3.7 SELLERS have delivered to buyer all of the corporate books and
records of WO for review, true and correct copies of WO's tax returns since
1995. SELLERS will also deliver to buyer on or before the Closing Date any
reports relating to the financial and business condition of WO which occur
after the date of this Agreement and any other reports sent generally to its
shareholders after the date of this Agreement.
3.8 No representation or warranty by SELLERS in this Agreement or
any certificate delivered pursuant hereto contains any untrue statement of a
material fact or omits to state any material fact necessary to make such
representation or warranty not misleading.
3.9 SELLERS will cause WO not to take any board action without buyer
approval in writing, pending selection of new officers and directors.
3.10 SELLERS will deliver to buyer within 10 days audited financial
statements of WO as of December 31, 1998 and has delivered unaudited September
30, 1998 financial statements. All such financial statements, herein sometimes
called " Financial Statements" are (and will be) complete and correct in all
material respects and, together with the notes to these financial statements,
present fairly the financial position and results of operations of the periods
indicated. All financial statements of WO will have been prepared in accordance
with generally accepted accounting principles, and will be "unqualified" except
as to "going concern."
3.11 Since the dates of the WO Financial Statements, there have not
been any material adverse changes in the business or condition, financial or
otherwise, of WO. WO Does not have any material liabilities or obligations,
secured or unsecured, except as shown in the financial statements. WatchOut!
has settled a dispute with Boit, Inc. over licenses for technology, which needs
to be filed on an 8K with the SEC.
3.12 There are no pending legal proceedings or regulatory
proceedings involving WO, and, except for a claim by Office Depot for $17,000
and a claim by Len Dorfman which have threatened to commence collection
actions, there are no legal proceedings or regulatory proceedings involving
material claims pending, or, to the knowledge of the officers of WO, threatened
against WO or affecting any of their assets or properties, and WO is not in any
material breach or violation of or default under any contract or instrument to
which WO is a party except for the notes and payables listed on the Exhibit B.
3.13 WO shall not enter into or consummate any transactions prior to
the Closing Date and will pay no dividend, or increase the compensation of
officers and will not enter into any agreement or transaction, without consent
of BUYER.
3.14 The representations and warranties of SELLERS shall be true and
correct as of the date hereof and as of the Closing Date.
3.15 WO has no employee benefit plan in effect at this time.
<PAGE>
3.16 No representation or warranty in this Agreement, or any
certificate delivered pursuant hereto contains any untrue statement of a
material fact or omits to state any material fact necessary to make such
representation or warranty not misleading.
3.17 SELLERS warrant and represent that at closing those debts listed on
Exhibit B shall be the sole and only debts of WatchOut! Inc. and sellers agree
to indemnify and hold buyer and WatchOut! Inc. harmless from any other debt
whatsoever not listed thereon.
ARTICLE IV
Representations, Warranties, and Covenants of BUYER
No representations or warranties are made by any director, officer, employee, or
shareholder of buyer as individuals, except as and to the extent stated in this
Agreement or in a separate written statement.
BUYER hereby represents, warrants, and covenants to SELLERS as follows:
4.1 BUYER is a corporation duly organized, validly existing, and in
good standing under the laws of the state of, Florida and has the corporate
power and authority and to carry on its business as it is now being conducted.
4.2 BUYER has complete and unrestricted power to enter into this
agreement; and, to consummate the transactions contemplated by this Agreement.
4.3 Neither the making of nor the compliance with the terms and
provisions of this Agreement and consummation of the transactions contemplated
herein by BUYER will conflict with or result in a breach or violation of the
Articles of Incorporation or Bylaws of BUYER.
4.4 The execution of this Agreement has been duly authorized and
approved by the BUYER Board of Directors.
4.5 The representations and warranties of BUYER shall be true and correct
as of the date hereof and as of the Closing Date.
ARTICLE V
Obligations of the Parties Pending the Closing Date
5.1 At all times prior to the Closing Date during regular business
hours, each party will permit the other to examine its books and records to the
extent the same are relevant to the purchase of the shares of WO and the books
and records of its subsidiaries and will furnish copies thereof on request. It
is recognized that, during the performance of this Agreement, each party may
provide the other party with information which is confidential or proprietary
information. During the term of this Agreement, and for two years following the
earlier of the Closing or the termination of this Agreement, the recipient of
such information shall protect
<PAGE>
such information from disclosure to persons, other than members of its own or
affiliated organizations and its professional advisers, in the same manner as
it protects its own confidential or proprietary information from unauthorized
disclosure, and not use such information to the competitive detriment of the
disclosing party. In addition, if this Agreement is terminated for any reason,
each party shall promptly destroy, return, or cause to be returned all
documents or other written records of such confidential or proprietary
information, together with all copies of such writings and, in addition, shall
either furnish or cause to be furnished, or shall destroy, or shall maintain
with such standard of care as is exercised with respect to its own confidential
or proprietary information, all copies of all documents or other written
records developed or prepared by such party on the basis of such confidential
or proprietary information. No information shall be considered confidential or
proprietary if it is (a) information already in the possession of the party to
whom disclosure is made, (b) information acquired by the party to whom the
disclosure is made from other sources, or (c) information in the public domain
or generally available to interested persons or which at a later date passes
into the public domain or becomes available to the party to whom disclosure is
made without any wrongdoing by the party to whom the disclosure is made.
5.2 SELLERS and BUYER shall promptly provide each other with
information as to any significant developments in the performance of this
Agreement, and shall promptly notify the other if it discovers that any of its
representations, warranties and covenants contained in this Agreement or in any
document delivered in connection with this Agreement was not true and correct
in all material respects or became untrue or incorrect in any material respect.
5.3 All parties to this Agreement shall take all such action as may be
reasonably necessary and appropriate and shall use their best efforts in order
to consummate the transactions contemplated hereby as promptly as practicable.
ARTICLE VI
Procedure for Closing
6.1 At the Closing Date, the purchase and sale shall be effected with
share certificates of WO together with stock powers executed in blank, being
delivered to escrow agent together with delivery of $5,000 to auditors and
accountants (with an additional $5,000 to be paid to auditor and accountants
upon delivery of the December 31, 1998 audit) and documents, agreements,
schedules, warranties, pledge agreements, and representations set forth in this
Agreement.
ARTICLE VII
Conditions Precedent to the
Consummation of the Purchase
The following are conditions precedent to the consummation of the
Agreement on or before the Closing Date:
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7.1 SELLERS and BUYER shall each have performed and complied with all
of their respective obligations hereunder which are to be complied with or
performed on or before the Closing Date and SELLERS and BUYER shall provide one
another at the Closing with a certificate to the effect that such party has
performed each of the acts and undertakings required to be performed by it on
or before the Closing Date pursuant to the terms of this Agreement.
7.2 This Agreement and the transactions contemplated herein shall have
been duly and validly authorized, approved and adopted by SELLERS, and buyer in
accordance with the applicable laws.
7.3 No action, suit or proceeding shall have been instituted or shall
have been threatened before any court or other governmental body or by any
public authority to restrain, enjoin or prohibit the transactions contemplated
herein, or which might subject any of the parties hereto or their directors or
officers to any material liability, fine, forfeiture or penalty on the grounds
that the transactions contemplated hereby, the parties hereto or their
directors or officers, have violated any applicable law or regulation or have
otherwise acted improperly in connection with the transactions contemplated
hereby, and the parties hereto have been advised by counsel that, in the
opinion of such counsel, such action, suit or proceeding raises substantial
questions of law or fact which if decided adversely to any party hereto or its
directors or officers would materially and adversely affect the business,
assets, or financial position of WO.
7.4 The representations and warranties made by SELLERS and by BUYER in
this Agreement shall be true as though such representations and warranties had
been made or given on and as of the Closing Date.
7.5 Since the dated of the WO Financial Statements, there have not been
any material adverse changes in the business or condition, financial, or
otherwise, of WO. WO does not have any material liabilities or obligations,
secured or unsecured except as shown on current financials (whether accrued,
absolute, contingent or otherwise).
7.6 All outstanding liabilities of WO to SELLERS or SELLERS'
affiliates shall be waived prior to or concurrent with closing. Such waiver
shall be deemed and treated as additional paid in capital and shall constitute
additional basis in sellers stock.
7.7 Creditors of WO shall have executed written agreements prior to
Closing Date, providing for a payment schedule, as may be required by buyer.
7.8 No press release or public statement will be issued relating to the
transactions contemplated by this Agreement without prior approval of WO.
However, either BUYER or WO may issue at any time any press release or other
public statement it believes on the advice of its counsel it is obligated to
issue to avoid liability under the law relating to disclosures, but the party
issuing such press release or public statement shall make a reasonable effort
to give the other party prior notice of and opportunity to participate in such
release or statement.
<PAGE>
7.9 The effectiveness of this Agreement is specifically subject to and
contingent upon 1) negotiation of lockup agreements with David Galoob, Robert
Galoob, Archangel Holding Company LLC, and 2) share reduction or option and
lock up agreements with Madison Holding Company LLC, Arc Unlimited LLC,
Strutton International Trading LTD, Cindy Dolgin, Elinor I. Dolgin, The Prince
Family Trust, the Debra and Mark Prince Trust, Camke development LTD, Jeff
Kasch, Jack Frankel, Barbara Frankel, and Robert Stoffregen which satisfy the
BUYER and which result in a net reduction of 1,203,766 shares.
7.10 This agreement is contingent upon and subject to BUYER negotiating a
satisfactory share reduction or Purchase and Release by Sands Brothers, Mark
Hollo, Martin Sands and Stephen Sands. SELLERS agree to waive and release any
and all claims against Sands Brothers LTD, Mark Hollo and Stephen Sands and
Martin Sands prior to closing as part of this Article 7.10 and this agreement
7.11 At Closing there shall be a total of 1,750,000 shares of WO common
stock owned by SELLERS pledged as collateral by SELLERS to the largest
creditors of WO:
Shares
Debt: Pledged
Capstone Financial 275,000 500,000
Messrs. Bader & Williams 300,000 500,000
Len Dorfman $96,000 47,000
All Others General 353,000
Sands Brothers 90,000 250,000
Howard, Rice, Nemerovsky 56,000 100,000
It is agreed that the debt may be paid, at BUYER'S election, either by allowing
sale of collateral in the market, or by buyer purchasing the shares in
increments as buyer may elect from time to time over a two year period. Upon
and at full payment of each debt for which shares have been pledged, buyer
shall receive the balance of any common shares of upon payment of the sum of
$100, except that Messrs. Bader & Williams shall be conveyed 30,000 shares each
from the collateral pledged for the Bader/Williams debt of WatchOut! Inc.
In the event that any pledged shares are sold at pledgee's demand, any proceeds
paid to creditors of the Company shall be deemed additional paid-in capital and
shall increase Sellers share basis.
ARTICLE VIII
Termination and Abandonment
8.1 Anything contained in this Agreement to the contrary
notwithstanding, the Agreement may be terminated and abandoned at any time
prior to the Closing Date:
(a) By mutual consent of SELLERS and BUYER;
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(b) By either party, if any condition set forth in Article VII relating to the
other party has not been met or has not been waived;
(c) By BUYER if any suit, action or other proceeding shall be pending or
threatened by the federal or a state government before any court or
governmental agency, in which it is sought to restrain, prohibit or otherwise
affect the consummation of the transactions contemplated hereby;
(d) By any party, if there is discovered any material error, misstatement or
omission in the representations and warranties of another party;
(e) By either party if SELLERS do not deliver, or indicates to BUYER that it
will not deliver, reworked financial arrangements with all creditors of WO, in
form and substance satisfactory to both BUYER and SELLERS. The parties agree to
cooperate and consult with each other in the negotiation of financial
arrangements, and in the event a creditor arrangement cannot be negotiated, the
parties agree to cooperate in submitting the matter to mediation with a
professional mediator.
8.2 Any of the terms or conditions of this Agreement may be waived at
any time by the party which is entitled to the benefit thereof.
ARTICLE IX
Termination Covenants, of Representations, and Warranties
The respective covenants, representations and warranties of the parties hereto
as contained herein shall survive the Closing for a period of two years.
ARTICLE X
Miscellaneous
10.1 This Agreement embodies the entire agreement between the parties,
and there have been and are no agreements, representations or warranties among
the parties other than those set forth herein, referenced herein, or those
provided for herein.
10.2 To facilitate the execution of this Agreement, any number of
counterparts hereof may be executed, and each such counterpart shall be deemed
to be an original instrument, but all such counterparts together shall
constitute but one instrument.
10.3 All parties to this Agreement agree that if it becomes necessary
or desirable to execute further instruments or to make such other assurances as
are deemed necessary, the party requested to do so will use commercially
reasonable efforts to provide such executed instruments or do all things
necessary or proper to carry out the purpose of this Agreement.
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10.4 This Agreement may be amended only in writing duly executed by all
parties hereto.
10.5 Any notices, requests, or other communications required or
permitted hereunder shall be delivered personally or sent by overnight courier
service, fees prepaid, addressed as follows:
SELLERS:
To: David Galoob
801 Tierra Alta
Moss Beach, CA 94038
copy to: Michael A. Littman
Attorney at Law
10200 W. 44th Ave., #400
Wheat Ridge, CO 80033
BUYERS:
To: Innovative Cybersystems Corp.
1900 N.W. Corp Blvd., #400E
Boca Raton, FL 33431
copy to: Deborah K. Hausman
Attorney at Law
1900 N.W. Corp Blvd., #400E
Boca Raton, FL 33431
or such other addresses as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
received.
10.6 At Closing, SELLERS will cause the directors of WO in office at
the date of this Agreement to resign, effective only upon compliance with
Section 14f of the Securities and Exchange Act of 1934 and will appoint,
effective at closing, John Russell as a director. Two additional directors
shall be appointed effective upon resignation by Robert Galoob and David
Galoob, and said compliance with Section 14f.
10.7 At Closing, BUYER agrees that the Board of Directors will adopt a
Resolution assigning to SELLERS the watch technologies and any related business
or business plan existing or yet to be created for the marketing distribution
and production of any or all watch products. Further WatchOut!! shall assign
all trademarks for watches at no cost to SELLERS or assignees.
10.8 SELLERS agree to sign a lockup agreement as part of closing
documents which incorporates the "lockup" which is required under the Release
and Settlement Agreement with Sands Brothers commencing 120 days after closing
<PAGE>
under this agreement the Lockup Agreement will allow sale of 10,000 shares per
month by each seller for a period of 90 days, and thereafter 20,000 shares per
person per month during the next 90 day period, and thereafter 25,000 shares
per month until 13 months from date of closing, at which time the lockup shall
terminate.
10.9 BUYER agrees that, as controlling shareholder of WatchOut! Inc.,
it will not cause or allow any reverse splits, or consolidations of shares for
a period of two years following closing hereunder, and only in the event of a
reverse split in which this covenant is breached SELLERS shall be granted an
option to purchase 2,000,000 (post reverse) shares of WatchOut! Inc. @ $.001
per share for one year.
10.10 Concurrent with closing, Kevin Waltzer shall make a personal
guarantee of up to a total of $200,000 of the corporate debt of WatchOut, Inc.,
which shall include Capstone Financial LLC, and John Bader and Wayne Williams
as the primary creditors and bridge note holders.
IN WITNESS WHEREOF, the parties have set their hands this
____day of _____ 1999.
SELLERS:
_______________________________ David Galoob
_______________________________ Robert Galoob
________________________________ Archangel Holding Company LLC
BUYER: Innovative Cybersystems Corp.
- --------------------------------
- --------------------------------
- --------------------------------
<PAGE>
EXHIBIT
David Galoob 2,446,211 common shares
of WatchOut! Inc., a Utah
corporation (plus 875,000
shares pledged to creditors and
subject to a purchase option for
$100 to BUYER or assigns for 2
years.)
Robert Galoob 2,446,211 common shares
of WatchOut, Inc., a Utah
corporation (plus 875,000
shares pledged to creditors and
subject to a purchase option for
$100 to BUYER or assigns for 2
years.)
Archangel Holding Company, LLC 1,484,500 common shares of WatchOut, Inc.,
a Utah corporation.
<PAGE>
EXHIBIT B
Bader/Williams $317,500
Capstone $254,000
B. Frankel $35,000
Howard, Rice, Nemerovsky $56,000
Littman Krooks $90,000
Comyns et al (Can be discounted?) $25,000
Michael Johnson Paid from deposit $4,500
Nitto Denko $1,900
DCI $8,000
Dorfman (Can be discounted to 50,000 + $96,000
10,000 +)
Gershman $20,000
Van Wagoner $8,000
Network Sales Commission $92,000
Karen Shao Salary $24,419
Comprehensive Accounting $5,304
Office Depot Customer $17,400
Ed Petre Office Rent $7,730
Gilbert Intl. Warehouse $10,000
Patriot Funding Factor $7,400
Opal Trade Corp.(Capstone) $3,500
Tony Stone Images $2,273.25
Securities Transfer Inc. (Transfer Agent) $995.00
Northwest Etch Technology $4,663.41
<PAGE>
SCHEDULE 2.1
Creditor Debt Pledged Shares
1) Capstone $275,000 500,000
2) Bader Williams $300,000 500,000
3) Littman Krooks $ 90,000 250,000
4) Dorfman $ 96,000 47,000
5) Other Creditors estimated @ 353,000
(only as scheduled $350,000
on Exhibit B)
6) Howard, Rice, Nemerovsky 100,000
