XXXXX XXXX
0000 Xxxx-Xxxx Xxxxx Xxxx, #0000
Xxxxxxx Xxxxx, XX 00000
Tel: 000.000.0000
Fax: 000.000.0000
January 24, 2002
HiEnergy Microdevices, Inc.
00 Xxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxx, President & CEO
Re: Proposed purchase of the stock of HiEnergy Microdevices, Inc.
Dear Xx. Xxxxx:
This letter is intended to set forth our agreement and intentions with respect
to the proposed acquisition by what we term "Newco," a publicly traded
corporation listed on the NASD's Over-the-Counter Bulletin Board ("OTC BB") to
be named later, of all of the stock (the "Stock) of HiEnergy Microdevices, Inc.,
a corporation incorporated pursuant to the laws of the State of Delaware
(hereinafter referred to as the "Vendor").
In anticipation of the business combination, we have identified and tentatively
negotiated for a suitable company qualified as set forth above and that meets
the registrant requirements set forth in Section IA of the General Instructions
for use of Form S-3 under the United States Federal Securities Act of 1933 (the
"Registrant Requirements").
The parties agree that the terms shall be subject to a definitive Agreement and
Plan of Reorganization (the "Agreement") between Newco and the Vendor which
shall include those provisions customarily found in such an agreement, including
without limitation, the following provisions:
1. Subject to the terms and conditions of the Agreement, Newco shall
agree to acquire the entire business of Vendor through a business combination
transaction at 12:00 p.m., no later than on the 30th day following the full
execution of this agreement, (and subject only to any delays caused by the
attorneys for HiEnergy) or such other date, time and place as the parties shall
agree to in writing (the "Closing Date"). Funds raised through a private
placement offering conducted by Newco shall be placed into escrow with a
HiEnergy Microdevices, Inc.
Page 2 of 5
mutually acceptable escrow agent pursuant to a mutually acceptable escrow
agreement within 20 days after the acceptance of this binding memorandum of
agreement. Newco shall issue common stock to the private placement investors
and funds shall be released from escrow only upon consummation of the business
combination between Newco and Vendor.
2. The closing of the Agreement shall be contingent on Newco complying
with the following conditions (the "Closing Conditions"):
(a) the sum of USD $1,000,000 shall be raised through a private
placement offering by Newco and held in escrow within 20 days from the
execution of this Letter of Intent and shall be paid to Newco subject to
the consummation of the business combination between Newco and Vendor
pursuant to the Agreement;
(b) the sum of USD $50,000, which shall be paid to the Vendor at
the time of execution of this letter and which shall be a non-refundable
deposit retained by Vendor in the event the Closing Date does not occur;
and
(c) a certificate for common shares in Newco, in the name of the
Vendor or such name as the Vendor shall direct in writing, representing
73.5% of the issued and outstanding capital of Newco as of the Closing
Date.
Vendor shall be entitled to reasonably object to the particular Newco purchased
for the purpose of performance under this agreement, provided such objection
shall be made no later than ten days after the name and corporate information is
provided to Vendor.
For certainty of control, as of the Closing Date, the last member of the Board
of Directors of Newco will appoint persons designated by Vendor to the Board,
and offer his or her resignation. Vendor shall be in complete control of Newco,
including the officers and Board of Directors, on the Closing Date.
Further, it is agreed by the parties that at no time subsequent to the Closing
Date shall the Vendor have less than a majority of the issued and outstanding
capital of the Purchaser unless agreed to in writing by the Vendor.
From the proceeds of the $1,000,000 tendered on the Closing Date, the $50,000
down payment shall be returned to Xx. Xxxxx Xxxx, and if, for any reason, there
is no Closing, the $50,000 shall not be returned, and shall be considered an
investment of $50,000 based upon a total capitalization of $3,000,000 of Vendor.
It is further agreed that such investment qualifies as
a transaction exempt from applicable federal and state securities registration
laws because Xx. Xxxx represents to the Vendor that he is an "accredited
investor" as that term is defined in Regulation D promulgated under the
Securities Act of 1933, and that no regulatory applications for approval thereof
shall be required to be submitted by the Vendor.
HiEnergy Microdevices, Inc.
Page 3 of 5
3. The Vendor and Newco shall each make such representations and
warranties in the Agreement as are reasonable and customary for agreements in
which substantially all of the assets of one entity are acquired in exchange for
a significant amount of the equity of the acquiring entity. Included in such
representations and warranties shall be representations concerning title to the
Assets and the stock of Newco to be issued; compliance by Vendor and Newco with
all statutes, by-laws, regulations, orders, covenants, or restrictions of all
federal, state, or local authorities applicable to the business; and possession
of the legal authority to consummate the transactions. As a part of the due
diligence to be conducted by each party in advance of the Closing Date, each
party hereby agrees to give to the other, the other's counsel, the other's
auditors and other representatives, full access during normal business hours to
all locations where business is conducted or the Assets are located and to all
relevant books and records. In addition, Vendor and Newco agree to promptly
advise the other in writing of any material change in the condition, financial
or otherwise, of its assets, its liabilities, or the Purchaser or Vendor. The
due diligence conducted by either side may result in enhancements to the
representations and warranties typically associated with a transaction of this
type.
4. The Agreement shall contain standard pre-closing covenants,
including the following mutual covenants that, during the period after the
execution of the Agreement and up to and including the Closing Date (the
"Interim Period"), neither party shall:
- sell or agree to sell or otherwise dispose of any of its assets, save
and except for those assets as may be disposed of by the Vendor in the
normal course of its management and operation of the business during
the Interim Period;
- acquire or agree to acquire additional assets, except those incidental
assets as may be required in connection with it's ongoing management
of the business during the Interim Period; and
- indemnify the other for any reasonable claims made by customers of the
business for deficiencies in finished goods supplied to them, provided
that such indemnity shall only extend to such claims which are
actually made by such customers.
5. The Agreement shall contain the following covenants of the Vendor
wherein the Vendor shall covenant that, on the Closing Date, it shall:
- deliver to Newco all necessary deeds, conveyances, bills of sale and
other documents necessary or reasonably required to transfer
effectively to Newco all of the Vendor's right, title and interest in
the Assets;
- deliver possession of the Assets to Newco free and clear of any
encumbrances;
- deliver all original books, records, documents, files and other data,
however recorded, relating to the assets; and
HiEnergy Microdevices, Inc.
Page 4 of 5
- furnish Newco with a certificate confirming that, to the best of the
Vendor's knowledge and belief, the representations and warranties of
the Vendor contained in the Agreement are true as of the Closing Date
and that the Vendor has complied with its covenants contained in the
Agreement.
6. The Agreement shall contain the following covenants of Newco,
wherein Newco shall covenant that, on the Closing Date, it shall:
- deliver to the Vendor the stock certificate representing the interest
in Newco to be acquired by the Vendor;
- have $1,000,000 in private placement funds held in escrow to be
released to Newco on the Closing Date;
- have a positive net worth;
- have no liabilities, contingent or otherwise, other than those set
forth on the financial statements of Xxxxx provided previously to
Vendor;
- be in compliance with all reporting obligations applicable to it
including the Registrant Requirements;
- execute all documents delivered pursuant to the Agreement which
require execution by Xxxxx; and
- furnish the Vendor with a certificate confirming that, to the best of
Newco's knowledge and belief, the representations and warranties
contained in the Agreement are true as of the Closing Date and that
Newco has complied with the covenants contained in the Agreement.
7. The representations, warranties, covenants and agreements contained
in the Agreement, and in any schedule thereto and in any documents to be
executed and delivered in connection with the completion of the transaction
shall survive closing and shall continue in full force and effect indefinitely.
8. The parties hereto agree to finalize, execute and deliver the final
Agreement to conform with this agreement, within twenty (20) days of the
execution of this letter of intent or such other later date or time as may be
required by the Vendor, and the parties shall agree in writing.
9. The Vendor hereby agrees that as of the date of acceptance of this
letter and until February 28, 2002, the Vendor will not solicit, consider or
accept any other offers to purchase any or all of the Assets or stock of the
vendor.
HiEnergy Microdevices, Inc.
Page 5 of 5
This agreement may be signed in counterparts, and facsimile signatures may be
used as originals. Modifications to this agreement shall be signed by the
parties to be charged.
If the foregoing is in accordance with your understanding, please execute the
attached copy of this letter and return it to the undersigned at your earliest
convenience.
Very truly yours,
/s/ Xxxxx Xxxx
------------------------------------
Xxxxx Xxxx
Iindividually and on behalf of Newco
The above mentioned terms are hereby accepted and agreed to as the date first
written above.
HiEnergy Microdevices, Inc.
Per: /s/ Xxxxx Xxxxx
--------------------------------
Xxxxx Xxxxx
President & CEO
