Exhibit 2.1
ASSET SALE AGREEMENT
This Share Purchase Agreement ("AGREEMENT"), between Novalink Finance
Ltd.("NOVA") a Alberta Corporation, referred to as "SELLERS", Watchout! Inc., a
foreign corporation, referred to as "BUYER" and the Principals of Expanded
Systems Inc. referred to as Expanded.
W I T N E S S E T H:
A. WHEREAS, BUYER is a corporation organized under the laws of UTAH.
B. WHEREAS, SELLER is willing to sell, and BUYER desires to purchase all
of issued and outstanding shares of capital stock in Expanded Systems
Inc. (EXPANDED), as specified on Exhibit A.
C. WHEREAS, The SELLER owns 100% of the shares in EXPANDED, a Canada Corp-
oration
D. WHEREAS, BUYER and SELLER will benefit from the transactions
contemplated hereby and desire to implement the contemplated trans-
action.
NOW, THEREFORE, it is agreed among the parties as follows:
DEFINITIONS
"Effective Date" The effective date of this agreement shall be the
15th day of March 2001.
"Liquidation Period" The liquidation period is three equal ninety-
calendar day periods beginning the day after the
Security and Exchange Commission issues a no comment
letter on the registration statement. If such letter
is not issued within 120 days following the Effective
Date then the liquidation period shall commence no
later then one year from the date of this agreement.
"SEC " The United States Securities and Exchange Commission
"Shortfall" Means the proceeds from the sale of shares in the
escrow account are less than required amount to make
one of the three payments.
"Excess Shares" Means excess shares in the escrow account at the end
of the liquidation period.
"The Shares" The shares mean the 400,000 common shares of the
BUYER to be deposited into the escrow account.
"Escrow Account" Means the escrow account to be established by the
BUYER.
"Escrow Agent" Means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ a lawyer employed at the
Law firm of ▇▇▇▇▇▇▇▇ Labton Rudoff & Surkoff located
at ▇▇▇ ▇▇▇▇ ▇▇▇, in the City of New York, New York
U.S.A.
"The Stock" Means all of the issued and outstanding shares of EX-
PANDED being acquired pursuant to this agreement.
ARTICLE I
The Consideration
SELLER shall sell and cause to be delivered and BUYER shall purchase
the shares of EXPANDED common stock as specified on Exhibit "A"("THE STOCK").
The transactions contemplated by this Agreement shall be completed at a closing
("CLOSING") on a closing date which shall be the business day after THE STOCK
has been deposited into an Escrow Account ("ESCROW ACCOUNT") established and
controlled by the BUYER (Exhibit B). The purchase price for THE STOCK to be
paid by BUYER to SELLER is TWO HUNDRED Thousand ($200,000 USD) Dollars on
terms.
The BUYER shall deposit Four Hundred Thousand (400,000) shares of Watchout!
Inc. Common Shares ("THE SHARES") into the ESCROW ACCOUNT, acceptable to the
SELLER. The BUYER shall then pay the Two Hundred Thousand ($200,000) dollars
purchase price under the following terms:
The BUYER shall register THE SHARES under a registration statement filed with
the SEC. The BUYER shall file such registration statement no later than Apr
15th, 2001. The BUYER shall make all reasonable efforts to ensure the
registration statement becomes effective and shall immediately notify the
SELLER of any problems with the registration statement. Upon the registration
statement becoming effective the BUYER shall notify the Escrow Agent ("ESCROW
AGENT") to cause THE SHARES in the ESCROW ACCOUNT to be liquidated in an
orderly fashion, in any event no more than 20,000 of THE SHARES per week. The
ESCROW AGENT shall liquidate THE SHARES over the liquidation period and pay no
more than Fifty Thousand dollars ($50,000) at the end of the first and second
periods, and, no more than One Hundred Thousand dollars ($100,000) at the end
of the third period. The ESCROW AGENT shall not sell more than one hundred
thousand of THE SHARES during the first third of the liquidation period. The
ESCROW AGENT shall not sell more than one hundred thousand of THE SHARES during
the second third of the liquidation period. The ESCROW AGENT shall not sell
more than two hundred thousand of THE SHARES during the final third of the
liquidation period. The proceeds of the sale shall be paid to the SELLER seven
days after the close of each period.
In the event of a SHORTFALL from the proceeds in the ESCROW ACCOUNT the
corporation is required to pay the amount of the shortfall in cash seven days
after the final liquidation period. In the event of EXCESS SHARES in the ESCROW
ACCOUNT the ESCROW AGENT shall return these shares to the Treasury of the BUYER
ARTICLE II
Delivery of Shares
The certificates representing THE STOCK of EXPANDED that shall be
purchased shall be delivered and conveyed by SELLERS to the ESCROW AGENT on the
closing date, to be delivered to BUYER upon completion of the escrow terms.
ARTICLE III
Representations, Warranties, and Covenants of SELLERS
The SELLER makes these representations or warranties as officers and directors
of NOVA.and Expanded makes the representations and warranties as directors of
Expanded Systems Inc.an
SELLERS and Expanded hereby represent, warrant, and covenant to BUYER
as follows:
3.1 EXPANDED is a corporation duly organized, validly existing and in
good standing under the laws of Canada, and has the corporate power and
authority to carry on its business as it is now being conducted. The Articles
of Incorporation of EXPANDED and amendments, copies of which have been
delivered to BUYER, are complete and accurate, and the minute books of
EXPANDED, 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 EXPANDED.
3.2 The aggregate number of shares, which EXPANDED is authorized to
issue, is an unlimited number of shares with no value of which500,000 shares
are issued and outstanding. Such shares are fully paid and non-assessable.
EXPANDED 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.
3.3 The SELLER has 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 Stock free and clear of all liens and encumbrances as
of the closing date, and are authorized to sell the Shares to BUYER
3.5 EXPANDED shall not enter into or consummate any transactions other
than those required in the normal course of business, prior to the closing date
and will pay no dividend, or increase the compensation of officers and will not
enter into any other material business agreement or transaction, prior to the
closing date without written approval of Buyer.
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 The SELLER has made available to BUYER all of the corporate
books and pertinent records of EXPANDED for review such records and books are
subject to complete confidentiality and to be returned promptly if removed from
expanded premise if this agreement fails to close.
3.8 No representation or warranty by SELLERS in this Agreement or
any document or 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. All financial statements delivered by SELLERS to BUYER
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. The financial statements of EXPANDED have
been prepared in accordance with Canadian Generally Accepted Accounting
Principles and are un-audited. The Financial statements and books and records
of EXPANDED are accurate and in good order. They are available for a review by
BUYER and their SEC approved auditor. In the event the books and records of
EXPANDED and their Financial statements do not meet with the approval of the
above Auditor then this agreement becomes null and void. Any employment and
other agreements between the BUYER and the principles of EXPANDED shall also
become null and void.
3.10 Since the dates of the EXPANDED Financial Statements, there have
not been any material adverse changes in the business or condition, financial
or otherwise, of EXPANDED. EXPANDED does not have any material liabilities or
obligations, secured or unsecured, except as shown in the financial statements.
3.11 There are no pending legal proceedings or regulatory
proceedings involving EXPANDED, there are no legal proceedings or regulatory
proceedings involving material claims pending, or, to the knowledge of the
officers of NOVA and EXPANDED, threatened against EXPANDED or affecting any of
their assets or properties, and EXPANDED is not in any material breach or
violation of or default under any contract or instrument to which EXPANDED is a
party.
3.12 EXPANDED has no other employee benefit plan in effect at this time
other than its plan with Great West Life.
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 UTAH 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, or any SEC regulations.
4.4 The execution of this Agreement has been duly authorized and approved
by the Board of Directors of the BUYER.
4.5 The representations and warranties of BUYER shall be true and correct
as of the date hereof and as of the Closing Date.
4.6 BUYER represents that there are no legal, corporate or other
restrictions preventing the registration of shares contemplated in this
AGREEMENT and that there are no impediments to having the shares registered by
the SEC.
ARTICLE V
Obligations of the Parties Pending the Closing Date
5.1 At all times prior to the Closing Date during regular business
hours, Nova will arrange for the BUYER to examine the books and records of
EXPANDED and the BUYER will allow Nova to examine its books and records to the
extent the same are relevant to the purchase of the Stock 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 that is
confidential or proprietary information. During the term of this Agreement, and
for two years following the earlier of the Closing or the termination of this
Agreement, the recipient of such information shall protect such information
from disclosure to persons, other than members of its own or affiliated
organizations and its professional advisers, in the same manner as it protects
its own confidential or proprietary information from unauthorized disclosure,
and not use such information to the competitive detriment of the disclosing
party. In addition, if this Agreement is terminated for any reason, each party
shall promptly destroy, return, or cause to be returned all documents or other
written records of such confidential or proprietary information, together with
all copies of such writings and, in addition, shall either furnish or cause to
be furnished, or shall destroy, or shall maintain with such standard of care as
is exercised with respect to its own confidential or proprietary information,
all copies of all documents or other written records developed or prepared by
such party on the basis of such confidential or proprietary information. No
information shall be considered confidential or proprietary if it is (a)
information already in the possession of the party to whom disclosure is made,
(b) information acquired by the party to whom the disclosure is made from other
sources, or (c) information in the public domain or generally available to
interested persons or which at a later date passes into the public domain or
becomes available to the party to whom disclosure is made without any
wrongdoing by the party to whom the disclosure is made.
5.2 The SELLER 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 Prior to the execution of this document the STOCK and SHARES shall
be delivered pursuant to the Escrow Agreement attached as Exhibit "B". At the
closing date, the purchase and sale shall be affected with all necessary
documents being completed and delivered.
ARTICLE VII
Conditions Precedent to the
Consummation of the Purchase
The following are conditions precedent to the consummation of the
Agreement on or before the Closing Date:
7.1 The SELLER and BUYER shall each have performed and complied with
all of their respective obligations hereunder that are to be complied with or
performed on or before the Closing Date and SELLER 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 SELLER and by 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 of EXPANDED would materially and adversely affect the
business, assets, or financial position of EXPANDED.
7.4 No press release or public statement will be issued relating to the
transactions contemplated by this Agreement without prior approval of the other
party. However, either BUYER or SELLER 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 will give prior
written notice to the other party and opportunity to participate in such
release or statement.
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 SELLER and BUYER;
(b) By either party, if any condition set forth in Article VII relating to the
other party has not been met or has not been waived by the closing date;
(c) By BUYER and SELLER 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;
8.2 Any of the terms or conditions of this Agreement may be waived at
any time in writing by the party, which is entitled to the benefit thereof.
ARTICLE IX
Miscellaneous
9.1 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.
9.2 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.
9.3 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.
9.4 This Agreement may be amended only in writing duly executed by all
parties hereto.
9.5 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: NOVALINK FINANCE Ltd.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Copy to:
BUYERS:
To: WATCHOUT! Inc.
▇▇▇▇▇ ▇▇▇, ▇▇▇ - ▇▇▇ ▇▇▇. ▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇▇
Copy to:
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.
IN WITNESS WHEREOF, the parties have set their hands this __8th__ day of
March, 2001
SELLERS:
/S/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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Novalink Finance Ltd.
Expanded
/S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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/S/ ▇▇▇▇▇ ▇▇▇▇
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Directors of Expanded
BUYER:
/S/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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Watchout! Inc
EXHIBIT A
Buyer shall purchase 500,000 shares of Expanded Solution Inc., a Canada
Corporation, Inc. from Novalink Finance Ltd., in consideration for terms
outlined in the Asset Sale Agreement.