EXHIBIT 10.2
XDOGS, Inc.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
August 7, 2003
Xx. Xxxxxxxx Xxxxxxx
President and CEO
Xxxxxxxx Xxxxxxx, LLC
000 X. Xxxxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Dear Xx. Xxxxxxx:
This letter sets forth certain terms and conditions under which the
business and operations of Xxxxxxxx Xxxxxxx, LLC, ("the Company") a California
limited liability company, will be acquired by XDOGS, Inc. ("XDGI"). The
transaction will be structured as an exchange of currency and securities. This
Letter of Intent ("Letter") will expire at 5:00 p.m., PST time, on August 8th,
2003 unless fully executed by both parties listed below.
1. Consideration: As of the date that this Letter shall be executed by both
the Company and XDGI (the "Execution Date"), XDGI and one or more persons
designated by XDGI shall be granted a ninety (90) day option (the "Option") to
acquire a maximum of 25% of the fully-diluted capital stock of the Company, in
consideration of the sum of $250,000, payable in cash (the "Option Price"). In
full consideration of the Option, XDGI shall pay for the audit of the financial
statements of the Company, as contemplated below. The Deposit shall be used
solely for the purpose of paying accounting fees required to effect the "Merger"
transaction described below. The Option shall expire, if not fully exercised,
ninety (90) days following the Execution Date.
2. Merger. It is contemplated that simultaneous with the exercise of the
Option and payment of the $250,000 Option Price, the Company and Xxxxxxxx
Xxxxxxx (the "Principal") shall execute an agreement and plan of merger with
XDGI and a newly formed California merger subsidiary of XDGI ("Mergerco")
pursuant to which the Company and Mergerco shall be merged, with the Company as
the surviving corporation of the Merger. In consideration for the Merger, the
Principal or her designees shall receive seventy-five (75%) percent of the
fully-diluted capital stock of XDGI, with the remaining twenty-five (25%)
percent to be owned the existing stockholders of XDGI. The Principal will be
issued an amount of common shares of XDGI to effect this 75% equity stake. This
transaction will be a tax-free reorganization pursuant to Section 368 of the
Internal Revenue Code of 1986. Prior to consummation of the Merger, the Company
shall provide XDGI with audited financial statements of the Company for the two
fiscal years ended December 31, 2002 and for the six months ended June 30, 2003;
which financial statements shall be in accordance with Regulation S-X, as
promulgated under the Securities Act of 1933, as amended. In the event that, for
any reason, the Company shall be unable to furnish such financial statements,
XDGI may terminate this Letter and the Merger Agreement without any further
liability.
3. Adjustment of Existing Capital Structure: The existing capital structure
of XDGI which, totals 200,000,000 authorized shares of common stock, with
32,000,000 issued and outstanding as of the Execution Date of this Letter.
4. Selection of Directors: Upon completion of the Merger, XDGI and its
Company subsidiary shall have a seven person board of directors, of which the
Principal shall be entitled to designate not less than four persons acceptable
to her. The remaining three directors shall be Xxxx Xxxxxxxxx and two other
independent directors within the meaning of the Sarbanes Oxley Act of 2002, who
shall be acceptable to XDOGS and its financial advisors.
5. General: The definitive Merger agreement will include provisions
assuring compliance with the conditions referred to above and in addition will
have normal representations, warranties and covenants as are normally included
in agreements of this type.
6. Access: XDGI and its attorneys, accountants, financial advisors,
consultants, representatives and agents (collectively, the "XDGI Agents") shall
have access, from the Execution Date to the closing date of the Merger, to all
of the books and records, employees and premises of the Company, and shall be
furnished with such information and materials as shall reasonably be requested
from time to time during such period with respect to the financial condition,
business, properties and operations of the Company.
7. Confidentiality: All information furnished or disclosed by either party
hereto to the other party or its Agents as a result of the discussions leading
to this offer or otherwise so furnished or disclosed prior to the execution of a
definitive acquisition agreement shall be treated as the sole property of the
party furnishing or disclosing the information. If the parties shall fail to
execute a definitive acquisition agreement on or before 180 days from the
execution date of this agreement, each party shall return to the other party all
documents or other materials furnished to such party by the other party that
contain, reflect, or refer to confidential information of the other party and
all copies thereof. Each party shall use its best efforts to keep confidential
all confidential information disclosed or furnished to it by the other party,
shall, to the maximum extent possible, restrict knowledge of such confidential
information to its officers, employees, and professional advisors who are
directly involved in the transaction, and shall not directly or indirectly use
such confidential information for any competitive or other commercial purpose.
The obligation to keep such information confidential shall not apply to (a) any
information which (i) any party can establish was already in its possession
prior to disclosure thereof by the party furnishing the information; or (ii) was
then generally known to the public; or (iii) became known to the public through
no fault of such party; or (b) disclosures in accordance with an order of a
court of competent jurisdiction.
8. Conduct of Business: Between the date hereof and the closing date, XDGI
and the the Company shall (a) each conduct their business and operations in the
ordinary and usual course, consistent with past practice; (b) not engage in any
extraordinary transactions; (c) not make any dividends or distributions; and (d)
use their best efforts to preserve intact their business organization, keep
available the services of their employees and maintain satisfactory
relationships with suppliers, contractors, licensors, lenders, customers and
others having business relationships with them except as otherwise provided
herein.
9. Communications: Without the prior written consent of the parties hereto,
between the date hereof and the closing date, neither the Company nor XDGI, nor
any of the officers, directors, employees, affiliates, stockholders or Agents of
either of them, shall make any statement or public announcement or any release
to trade publications or through the press or otherwise, or make any statement
to any competitor, customer or any other third party, with respect to the
transaction contemplated hereby; provided, however, that nothing contained
herein shall prevent (i) a party from communicating with those employees who
will be involved in facilitating the closing of the transaction contemplated
hereby; (ii) either the Company or XDGI from disclosing this transaction to its
lenders and investment bankers; and (iii) the disclosure of this transaction by
the Company or XDGI as required by law.
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10. Expenses: Except for the Deposit, each party shall be responsible for
all of its own expenses incurred in connection with the transaction contemplated
by this Letter, including the fees and disbursements of counsel, outside
accountants, and any brokers and financial advisors.
11. Termination: Except for Section 12 and Section 6(as to
confidentiality), this letter will automatically terminate and be of no further
force and effect upon the earliest to occur of (a) the execution of a definitive
Merger Agreement, (b) the mutual agreement of the Company and XDGI to terminate
this letter, and (c) expiration of the ninety (90) day Option Period.
12. Examination: Based upon our discussions and the business and financial
information and forecasts which you have submitted to us, and in reliance upon
those representations, we hereby confirm in principle our interest in merging
our enterprises under the guidelines set forth in this Letter. Prior to the
completion of the merger described herein, XDOGS must be satisfied in its sole
discretion as to the following: (i) due diligence on the Company's business,
officers, directors; (ii) the proposed use of proceeds; (iii) audited financials
to be presented upon completion. (iv) any and all legal and financial matters
and any other requests made by XDOGS and its successors for due diligence.
13. Intent: This letter is intended to be, and shall be construed as, only
a letter of intent, and shall not impose any binding obligations on any person.
It is understood that the rights and obligations of the parties remain to be
defined in a definitive Merger Agreement into which this letter shall be merged.
If you are in agreement with the terms set forth above and desire to
proceed with the transaction on that basis, please sign this letter agreement in
the space provided below and return an executed copy to us at the address set
forth above.
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XDOGS, INC. XXXXXXXX XXXXXXX, LLC
By: /s/ Xxxx Xxxxxxxxx By: /s/ Xxxxxxxx Xxxxxxx
-------------------------------- ------------------------------
Name: Xxxx Xxxxxxxxx Name: Xxxxxxxx Xxxxxxx
Its: President and Its: President and
Chief Executive Officer Chief Executive Officer
Date: August 7, 2003 Date: August 7, 2003
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