EXHIBIT 10.2
MEMORANDUM OF UNDERSTANDING
Dated: October 8, 2003
Between: Nova Communications Ltd.
000 Xxxxxxx Xxx., Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000 ("Nova")
And PowerSki International Corporation
000 X- Xxxxx Xxxxxxx
Xxx Xxxxxxxx, Xxxxxxxxxx ("PowerSki")
Nova and PowerSki have had discussions regarding a possible merger and
have previously entered into a Letter of Intent dated May 2, 2003 ("Letter of
Intent") regarding such possible merger ("Merger"). Nova and PowerSki have
subsequently had discussions which have resulted in an more complete
understanding between them regarding the Merger. In order to assure that they
have a mutual understanding of the general terms and conditions of the Merger,
Nova and PowerSki have entered into this Memorandum of Understanding.
It is agreed that this Memorandum of Understanding shall be a binding
and legally enforceable agreement as it pertains to the obligation of PowerSki
pursuant to Section 4 to repay to Nova all funds advanced by Nova to PowerSki
pursuant to Section 3 of this Memorandum of Understanding.
1. PowerSki and Nova shall enter into an Agreement and Plan of Merger
pursuant to which PowerSki will be merged into Nova with Nova being the
surviving corporation. Upon completion of the Merger, Nova will change its name
to PowerSki International Corporation.
2. Under the terms of the proposed Agreement and Plan of Merger, Nova
will issue to the shareholders of PowerSki shares of the common stock of Nova
("Shares") such that the shareholders of PowerSki will hold 80% of the issued
and outstanding common stock of Nova at consummation of the Merger. PowerSki
understands that the Shares may be deemed "restricted securities" under the
Securities Act of 1933 and the subsequent transfers of the Shares will be
subject to the requirements of the Securities Act of 1933.
3. Prior to the execution of the Agreement and Plan of Merger, Nova
shall provide working capital funding ("Funding") to PowerSki up to an aggregate
of $2,000,000. The Funding will occur according to the following schedule:
(a) A minimum of $1,000,000 will be tendered to PowerSki
within 30 days of the date of this Memorandum of
Understanding;
(b) An additional $1,000,000 will be tendered to PowerSki
on or before December 31, 2003;
4. In the event that Nova and PowerSki do not execute, for any reason
whatsoever, a definitive Agreement and Plan of Merger on or before December 31,
2003, PowerSki agrees to repay to Nova all of the Funding tendered by Nova up to
the date that Nova and PowerSki determine that a definitive Agreement and Plan
of Merger will not be executed. The obligation of PowerSki to repay Nova under
this Section 4 will be represented by a Promissory Note in favor of Nova bearing
simple interest at the rate of 10% per annum with the entire principal and
interest due and payable in a lump sum on the last day of the twelfth month
following the date of the Promissory Note.
5. The definitive Agreement and Plan of Merger will provide that the
current senior management of PowerSki will be employed by Nova, as the surviving
corporation, in similar senior management capacities subject to mutually
acceptable terms and conditions of such employment.
6. It is agreed that the Licensing Agreement between HydroForce and
PowerSki will be have amended prior to the execution of the definitive Agreement
and Plan of Merger to include a guaranteed minimum production schedule or a
minimum royalty fee to be paid in lieu thereof.
7. The Agreement and Plan of Merger will contain the usual and
customary warranties and representations of parties to agreements of the sort
contemplated by this Memorandum of Understanding.
8. It is agreed that Nova and PowerSki will each bear their own
expenses incurred in connection with the preparation of the definitive Agreement
and Plan of Merger, including fees of their respective attorneys, accountants
and other advisors.
9. It is understood that this Memorandum of Understanding is a
statement of the mutual understanding of the parties at this time regarding the
matters addressed herein. The definitive Agreement and Plan of Merger is subject
to the review and approval of the the respective legal counsel and the boards of
directors and/or the shareholders of Nova and PowerSki, respectively, as the
case may be. It is understood that except for the provisions of Section 4, which
is binding on PowerSki, neither Nova nor PowerSki will be bound to the other by
this Memorandum of Understanding for damages, expenses, failure to execute a
definitive Agreement and Plan of Merger, or in any other way.
Nova Communications Ltd. PowerSki International Corporation
By: By:
----------------------------- --------------------------------------
Xxxxxxx X. Xxxx, President Xxxxxx X. Xxxxxxxxxx, Chief Executive
Officer
