Letter of Intent
for the Purchase and Sale of Capital Stock
by and Between
IEG Holdings, Inc.
as Sellers
and
▇▇▇▇▇ Electronics, Inc.
as Purchaser
This Letter of Intent Agreement for the Purchase and Sale of Capital
Stock (the "Agreement") made between IEG Holdings, Inc. and its
shareholders ("Seller") and ▇▇▇▇▇ Electronics, Inc. ("Purchaser") is made
this 3rd day of March, 1999.
PRELIMINARY STATEMENT
Purchaser intends to purchase from Seller, and Seller intends to sell to
Purchaser, all of their respective right, title and interest in, to and
under the capital stock of IEG Holdings, Inc., a Florida corporation
consisting of educational and internet businesses and programs representing
approximately two million dollars in gross annual revenues (hereinafter
collectively referred to as the "Business"), which comprises all of the
shares of the Business, strictly in accordance with the terms and
provisions of this Agreement.
Purchaser is a company which is publicly traded via the over the counter
bulletin board market and Seller is a private company which has no publicly
traded stock.
This Agreement shall set forth the terms and conditions of a sale of stock
as specified herein, and the actual sale shall occur at the closing date
specified herein. This document shall not be deemed to create a binding
transaction. Each party may withdraw from undertaking this transaction
until the date of closing and the execution of all closing documents. This
Agreement sets forth the intended terms of a transaction that may be
subject to adjustments at closing based on the results of a due diligence
period referred to herein.
NOW THEREFORE, in consideration of the foregoing Preliminary Statement,
which is incorporated by reference with the same force and effect as if
fully set forth herein, and in consideration of the mutual promises and
covenants contained in this Agreement, Purchaser and Seller collectively
agree as follows:
1. Sale of the Stock. In consideration of the Purchase Price, as
herein defined, and the covenants, conditions, restrictions and agreements
stipulated to be paid and performed by Purchaser and Seller and upon the
terms and provisions of this Agreement, Seller agrees to sell to Purchaser,
and Purchaser agrees to purchase from Seller, all of the outstanding and
issued stock of the Business owned by Seller, which collectively is equal
to one hundred percent of the stock in the Business.
2. Purchase Price. The purchase price (collectively herein called the
Purchase Price) for the purchase and sale of the Seller's share of the
stock of the Business shall be the consideration set forth in Exhibit "A"
attached hereto and incorporated herein by reference.
The Purchase Price shall be paid in either stock or lawful money of the
United States of America by cash, cashier's check, treasurer's check, bank
check, certified check, wire transfer or other immediately available funds
of the United States or any combination thereof as specified in Exhibit "A"
attached hereto.
3. Creditors of Business; Indemnification. Seller agrees to and with
Purchaser that all existing creditors of Business who are owed $1,000.00 or
more by the Business as of this date, if any, are set forth on Exhibit "B"
of this Agreement, together with a description of the amounts due and owing
and the names of such creditors.
Seller expressly agrees to defend all actions against Purchaser
and/or the Business with respect to and shall pay, protect, indemnify and
save harmless Purchaser and/or the Business from and against any and all
liabilities, losses, damages, costs, expenses (including reasonable
attorney's fees and expenses), causes of action, suits, claims, demands or
judgments of any nature to which Purchaser and/or the Business, or any of
them is subject to because of actions by the Seller on behalf of the
Business prior to the closing.
The aforementioned indemnifications shall not be applied in favor of
an indemnitee as to actions of an indemnitor if such indemnitee had
specific knowledge of and did not object to, or concurred in, such actions
at or prior to the time the indemnitor took such actions.
4. Stock Power; Restrictive Covenant, Operation of the Business.
Stock Powers shall be delivered to Purchaser upon the payment of the
Purchase Price, together with all stock certificates representing the one
hundred percent of the stock in the Business.
A. Seller's Covenant Not to Compete. In order to induce the Purchaser
to purchase the shares of the Business, the Seller hereby agrees that until
the second anniversary of the closing under this Agreement, he will not,
individually or together with any one or more other persons or entities,
directly or indirectly, engage in or have any ownership interest in any
person, firm, corporation, partnership, association, agency or business
(whether as principal, agent, holder of any equity security or other
instrument convertible into an equity security, employee, consultant or
otherwise) that engages in a business similar to or competitive with the
business currently conducted by the Business and which is located or
operated within the same state as any current location of the Business or
any place where the Business has customers, or such other geographical area
as a court of competent jurisdiction would deem reasonable. The Sellers
agree that the period provided for and the area encompassed in this Section
are necessary and reasonable in order to protect the Purchaser and the
Business in the conduct of the Business' operation and are also as
consideration for the Purchaser's agreements in Section B. For the period
set forth in this Section, the Sellers, and each of them, hereby further
agree not to divulge, communicate, or use to the detriment of the Business
or the Purchaser, in any way, any confidential information or trade secrets
of the Business, including, without limitation, personnel information,
secret processes, know-how, customer lists, costs information and technical
data.
The Sellers acknowledge that the restrictions contained herein are
reasonable and necessary to protect the business and interest which the
Purchaser is acquiring pursuant to this Agreement and are also as
consideration for the Purchaser's agreements in Section B, and that any
violation of these restrictions will cause substantial irreparable injury
to the Business and the Purchaser. The Sellers therefore hereby agree
that the Business, the Purchaser, or any one or more of them, are entitled,
in addition to any and all other remedies, to preliminary and permanent
injunctive relief to prevent a breach or contemplated breach of this
Section. The existence or any claim or cause of action against the
Business or the Purchaser, whether predicated upon this Agreement or
otherwise, shall not constitute a defense to the enforcement by the
Business or the Buyer of the restrictions contained in this Section.
Notwithstanding the foregoing, neither ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ nor ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
shall be prohibited from pursuing business or obtaining interests in non-
educational entities that are not in competition with Purchaser or Seller,
however, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ must devote the majority of
their time and efforts to the operation of the Business.
B. Purchaser's Covenant Not to Compete. In order to induce the
Sellers to sell the shares of the Business, and in consideration of the
Sellers' agreements in Section A, the Purchaser hereby agrees that until
the second anniversary of the closing under this Agreement, it will not,
individually or acting together or with one or more other persons or
entities, directly or indirectly, engage in or have any ownership interest
in any person, firm, corporation, partnership, association, agency or
business (whether as principal, agent, holder of any equity security or
other instrument convertible into an equity security, employee, consultant
or otherwise) that engages in a business similar to that currently engaged
in by the Business. The Buyer agrees that the period provided for, and the
areas encompassed, in this Section are necessary and reasonable in order to
induce the Sellers to sell the shares of and to protect the Sellers'
interest following the sale and are also as consideration for the Sellers'
agreements in Section A. For the period of the covenant set forth in this
Section, the Purchaser hereby further agrees not to divulge, communicate,
or use to the detriment of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ or the Sellers in any way, any
confidential information or trade secrets, including, without limitation,
personnel information, secret processes, know-how, customer lists, cost
information and technical data.
The Purchaser acknowledges that the restrictions contained herein are
reasonable and necessary to protect the business and interest of the
Sellers following the sale of the Business' shares to the Purchaser
pursuant to this Agreement and are also as consideration for the Sellers'
agreements in Section A, and that any violation of these restrictions will
cause substantial irreparable injury to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and the Sellers.
The Purchaser therefore hereby agrees that the Sellers and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
or any one or more of them, are entitled, in addition to any and all other
remedies, to preliminary and permanent injunctive relief to prevent a
breach or contemplated breach of this Section. The existence of any claim
or cause of action against ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ or the Sellers, whether
predicated upon this Agreement or otherwise, shall not constitute a defense
to the enforcement by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ or the Sellers of the restrictions
contained in this Section.
C. Operation of the Business. The Purchaser and Seller agree that after
the closing of the transaction referenced in this Agreement, ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall maintain all daily operations of the
Business which shall include, but not be limited to, the following: (1)
hiring and firing decisions regarding the Business, (2) payment of all
bills regarding the Business, (3) determining acquisition candidates for
the Business, (4) determining salaries of employees of the Business. (5)
determining all employment contracts for the Business. In the event that
Seller determines that there is an acquisition candidate for the Business
to acquire, the Seller shall be authorized to negotiate on behalf of the
Business for stock acquisitions, however, no acquisition shall be permitted
for any business requiring shares of stock which are equal to more than
fifteen (15) times the revenue of the proposed acquisition. Seller shall
owe the purchaser a fiduciary duty to negotiate the most cost effective
acquisition price available and all approvals required by law shall be
obtained to effectuate an acquisition. It shall be presumed that any
acquisition based on the fifteen times revenues or less formula shall be
per se acceptable unless the stock of purchaser falls by one dollar per
share or more within thirty days after announcement of an acquisition based
on said formula, thereafter said formula will drop to thirteen times
revenues, then if there is another one dollar drop using said new formula
then the formula shall be eleven times revenues and if there is still a one
dollar drop using eleven times revenue formula, then a formula of ten times
revenues shall be employed. The formula for acquisitions shall not be
below ten times revenues until the Purchaser's or the Seller's individual
or combined revenues exceed twenty million dollars in annual sales. The
decision with regards to acquisition targets of the Business shall be in
the discretion of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇. The Seller shall
be responsible for paying 5% of the gross revenues of the Business to the
Purchaser within five days of the last day of each month, with payments not
beginning until six months from the date of the closing of this
transaction.
5. Representations and Warranties. The Seller represents and Warrants that
they are the only owners of the Business and that the Business is duly
organized under the laws of the state of Florida. The Seller further
represents and warrants that the financial statements attached as Exhibit
"C" hereto are correct and accurately reflect the financial condition of
the Seller as of the date of this Agreement. Within ninety days of the
date of this Agreement the Seller shall provide the Purchaser with audited
financials for the companies encompassed in the Business. The Seller
further represents that it has full authority to enter into the transaction
contemplated in this Agreement and that there are no lawsuits, liens,
threatened or pending claims, either administrative, civil, criminal or
otherwise against the Business or the Seller except as disclosed in Exhibit
"D" attached hereto. The Seller further represents that it and the
Business have been in compliance with all laws and regulations applicable
to it. It is further represented that any contracts, agreements,
assessments or obligations which the Business is subject to have been
disclosed in Exhibit "E" attached hereto. In addition, Seller represents
that the condition of the Business will not materially change between the
date of this Agreement and the date of the closing.
6. Spinoff. The Seller and Purchaser agree that so long as the price of
Purchaser's stock is traded in the open market at or above $3.00 per share,
then the Seller shall have no right to have the Business spun off as a
separately traded public entity. If, for a sixty day period during the
three years from the date of the closing of this transaction, the
Purchaser's stock is traded in the open market at below a price of $3.00
per share, then Seller shall have the right to have Seller and the Business
spun off as a separately traded public entity and upon the spin off, the
Purchaser shall have the choice of, five percent of the common stock of the
separately traded public entity or any shares of Purchaser that were used
to make acquisitions for the Seller/Business before the Seller and the
Business were spun off as a separately traded public entity.
7. The Closing. The closing (the Closing) for the matters
contemplated in connection with this Agreement shall occur on May 22, 1999
(the Closing Date), at the offices of Purchaser's Counsel or at such other
place and at such other time as shall be collectively agreed upon as the
Closing Date by Purchaser and Seller.
The parties agree that this closing may take place by documents being
executed in counterparts and facsimile copies having the same effect as
originals. Notwithstanding all other text in this paragraph number 7, no
closing shall take place until Purchaser has changed its name to a name
which reflects its involvement in the internet and the Purchaser must
revise its website to accurately and professionally reflect its
participation in the internet.
8. Notices. Any notice, demand or request shall be given in writing
and shall be deemed to have been duly given or made five (5) business days
after the date it is mailed by certified or registered mail addressed to
the parties to this Agreement. A copy of all notices, requests and demands
shall be sent on behalf of Seller to ▇▇. ▇▇▇ ▇▇▇▇, Esq. at Korn & ▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, telephone (▇▇▇)▇▇▇-▇▇▇▇ and fax
(▇▇▇)▇▇▇-▇▇▇▇ and a copy of all notices, requests and demands on behalf of
Purchase to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq. at Feingold & Kam, ▇▇▇▇ ▇▇▇ ▇▇▇▇. ▇▇▇▇▇
▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, telephone (▇▇▇)▇▇▇-▇▇▇▇ and fax (561)
▇▇▇-▇▇▇▇.
9. Modification and Amendment and Restrictions. This Agreement may be
modified, amended or otherwise changed only by an agreement in writing
which is executed and delivered by the parties hereto. Purchaser hereby
agrees that it is restricted from selling, encumbering or pledging any
stock that it receives in Seller unless there is a spin off or the return
of the Business to Seller from Purchaser. Purchaser further agrees that it
shall not undertake any acquisitions other than of businesses in the same
industry as Seller or Purchaser for a period of six months from the date of
closing. Purchaser shall not issue any stock outside of that already
authorized, for acquisitions other than new schools. Additionally,
Purchaser further agrees that neither ▇▇▇▇▇ ▇▇▇▇▇▇▇ nor ▇▇▇▇ ▇▇▇▇▇ or their
families shall sell their stock in the Purchaser for a period of one year
from the date of closing.
10. Further Acts, Instruments and Assurances. Purchaser and Seller
hereby covenant and shall do, execute, acknowledge and deliver any and all
further acts, instruments and assurances necessary for carrying out the
intention and facilitating the performance of this Agreement and the
transactions contemplated hereunder. Notwithstanding any provision to the
contrary herein, no action may be taken pursuant to this Agreement unless
approved by the action of the appropriate officer or the board of directors
as may be required by Delaware law since Purchaser is a corporation
organized and existing under the laws of the state of Delaware. Each party
hereto further assures the other that it has obtained the appropriate board
and/or shareholder approval to undertake the transaction contemplated
herein.
11. Waiver of Remedies. No remedy herein conferred or conferred by law
is intended to be exclusive of any other remedy, and each and every such
remedy shall be cumulative and shall be in addition to and not in exclusion
of any other remedy given hereunder or by law or now or hereafter existing
at law or in equity. No delay, act or omission by Purchaser or Seller to
exercise any right or power accruing in connection with this Agreement or
the transactions contemplated hereunder shall impair any such right or
power or shall be construed as a waiver thereof or an acquiescence therein;
and every power and remedy conferred herein or conferred by law may be
exercised from time to time and as often as may be deemed expedient.
12. Binding Effect/Due Diligence Period. Each provision of this
Agreement shall be a separate and independent covenant. The breach of any
provision shall not relieve Purchaser or Seller, as the case may be, from
their obligation to observe and perform each and every other provision of
this Agreement to be observed and performed. Notwithstanding the
foregoing, this Agreement shall not operate as a conveyance of stock, the
actual conveyance shall only occur upon the Closing taking place with the
execution of all necessary closing documents. The actual Purchase Price
paid may be adjusted based on any discrepancy found in the Exhibits
attached hereto during the due diligence period. The due diligence ("Due
Diligence") period shall be that period of time that elapses between the
date of this Agreement and the Closing Date. During the Due Diligence
period, the Purchaser and Seller shall be entitled to a copy of each and
every document requested from the other as well as having the opportunity
to have any professionals review their respective businesses, offices and
documents, upon reasonable notice. Failure to make any requested documents
available shall be grounds for voiding this entire Agreement at the
discretion of either party.
13. Separability. If any provision of this Agreement is held to be
invalid, illegal, non-binding and unenforceable, or any combination of the
foregoing, this Agreement shall be construed as if the offending provision
has not been herein contained.
14. Counterparts. This Agreement may be executed and delivered in
counterparts, each of which shall be an original and all of which shall
constitute one and the same instrument.
15. Entire Agreement. This Agreement contains the entire agreement
among Purchaser and Seller; there are no promises, agreements, covenants or
other conditions than those set forth herein.
16. Applicable Law. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Florida and venue
shall only be appropriate in Palm Beach County, Florida.
17. Successors and Assigns. This Agreement shall be binding upon
Seller and Purchaser and their respective successors and assigns.
18. Interpretation of this Agreement. Whenever used in this Agreement,
the singular shall include the plural; the plural shall include the
singular; the use of any gender shall include all genders; and person shall
mean any individual, partnership, corporation, trust, estate, joint
venture, syndicate or other entity or any combination of the foregoing.
19. Waiver of Conflict. The parties hereto acknowledge that ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, Esq. and Feingold & Kam have provided in the past and will
provide services in the future to the Purchaser and Seller and their
officers, directors, successors and assigns. It is specifically agreed
that each party has been fully advised of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇'▇ and ▇▇▇▇▇▇▇▇
& Kam's involvement with each party. For purposes of this Agreement, ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇ and Feingold & Kam have been counsel for the Purchaser. The
Seller has been given the opportunity to have independent legal counsel
review this Agreement on their behalf and attorney ▇▇▇ ▇▇▇▇, Esq. has acted
on behalf of the Seller. The parties hereto hereby waive any claims
regarding ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, and Feingold & Kam's representation of each
party in the past and in the future and each party has been given the
opportunity to have alternative counsel review and draft this Agreement.
The undersigned have executed the signature page hereinbelow to signify
their agreement to the terms and conditions set forth herein.
PURCHASER SELLER
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Chairman Sec/Treas
3/15/1999 3/15/99
/s/ ▇▇▇▇ ▇▇▇▇▇
President
3/15/99 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
Exhibits to be attached:
A- Purchase Price B- Creditors C- Financial Statements
D- Lawsuits, liens, pending or threatened claims
E- Contracts, agreements, assessments, obligations
Exhibit "A" - Purchase Price
The Purchaser shall pay to Seller a total of 5.35 million shares
of the Purchaser's stock assuming the receipt of two million dollars in
revenues from Seller. The payment shall be made by the Purchaser
permitting the Seller to convert all shares of IEG Holdings, Inc. or any of
its subsidiary stock into shares of ▇▇▇▇▇ Electronics, Inc. stock. All
stock so converted shall be restricted securities and not freely tradeable
unless subject to an exemption or a rule recognized under the Securities
Act of 1933 which would permit free trading. In the event any shares so
converted become free trading, the Seller represents and warrants that at
no time will the Seller sell any of its free trading shares at anytime that
the share price of ▇▇▇▇▇ Electronics, Inc. falls below a bid price of two
dollars per share. Notwithstanding the foregoing, the Seller shall be
entitled to five hundred thousand shares of registered free trading stock
with no selling restrictions. The Purchase Price paid at closing shall be
increased or decreased depending if the actual dollar amount of revenues
received from the Seller at closing is more or less than the dollar amount
of revenues referenced herein. As of the execution of this Agreement, the
Purchase Price is assumed to have a value of $16.05 million based on a
share price of $3.00 per share for Purchaser's stock, which was the price
of Purchaser's stock at the beginning of the acquisition discussions
between the parties. On the date of closing, the Seller shall be entitled
to the greater of 5.35 million shares of stock in Purchaser or $16.05
million worth of stock in Purchaser.
