Exhibit 10.1
November 6, 2001
Vitaquest International, Inc.
0 Xxxxxxxxx Xxxxx
Xxxx Xxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxx Xxxxxxx, President/CEO
Re: Proposed Transactions between Infotopia, Inc. and Vitaquest
International, Inc.
Dear Xx. Xxxxxxx:
This Letter of Intent sets forth the terms regarding the proposed
transactions (the "Transactions") between Infotopia, Inc., a Nevada corporation
("Infotopia") and Vitaquest International, Inc., a Delaware corporation
("Vitaquest"). This letter must be accepted by Vitaquest on or before the close
of business on November 6, 2001 (New York time), to constitute a binding
agreement in accordance with the terms provided herein.
1. Background.
A. Danmark Inc. d/b/a DMI and Beacon Marketing Services
(collectively, "DMI") have filed petitions for relief under Chapter 11 of the
United States Bankruptcy Code (the "Code") with the United States Bankruptcy
Court for the District of Maine (the "Court") on September 7, 2001, which
commenced the proceedings styled In re Danmark, Inc., Bankr. No. 01-21420 and In
re Beacon Marketing Services, Inc., Bankr. No. 01-21421 (together, the
"Bankruptcy Proceedings").
B. Vitaquest is a secured creditor of DMI in the aggregate principal
amount of $ ______________ plus ______________ or a total of $ ________________
(the "Debt"). Payment of the Debt is secured by a prior security interest on
DMI's assets set forth on Schedule "A" annexed hereto, as such schedule shall be
amended and modified up to the close of business on November 8, 2001 (the
"Assets"). Vitaquest is in the process of pursuing and obtaining a final
non-appealable order in the Bankruptcy Proceedings (the "Order") pursuant to
which Vitaquest will acquire substantially all of the Assets pursuant to a bid,
as a secured creditor, pursuant to Section 363(k)of the Code in a section 363
bankruptcy sale (the "Sale").
C. Vitaquest wishes to assign, and Infotopia wishes to purchase,
title to the Assets or at Infotopia's option, Vitaquest's rights under the
Order. If the Sale shall occur, Vitaquest will provide to Infotopia a copy of
the proposed Order prior to the Sale. Vitaquest agrees to seek to include in the
Order any provisions which Infotopia shall reasonably request, provided such
request does not adversely impact Vitaquest, the enforceability of the Order or
Vitaquest's interests in the Assets.
2. Assignment of Rights Under Order/Assets. Subject to the terms and
conditions set forth below, Vitaquest shall assign and transfer to Infotopia (i)
the Assets (excluding the "Chitosol" brand and such related assets, including
but not limited to, the Chitosol infomercial) or (ii) at Infotopia's request,
Vitaquest's rights to acquire the Assets (excluding the "Chitosol" brand and
such related assets, including but not limited to, the Chitosol infomercial)
pursuant to the Order (the "Rights"). In exchange for the purchase of the Assets
or the assignment of the Rights (excluding, in either case, the "Chitosol" brand
and such related assets, including but not limited to, the Chitosol infomercial,
which such "Chitosol" brand and such related assets shall be licensed by
Vitaquest to Infotopia at the Closing until such time as the Total Consideration
shall have been paid in full, at which time Vitaquest shall assign the
"Chitosol" brand and such related assets to Infotopia), as applicable, Infotopia
shall provide to Vitaquest the following consideration:
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Total Consideration to Vitaquest: Four Million Eight Hundred
Thousand Dollars, without interest, ($4,800,000.00) ("Total
Consideration") payable in accordance with the following schedule:
$500,000 upon closing of the assignment of the Assets or the Rights
(the "Closing");
$500,000 within 30 days following the Closing;
$1,000,000 within 60 days following the Closing; and
$500,000 at the end of each 30-day period thereafter until the Total
Consideration shall have been provided to Vitaquest, the final
payment being in the amount of the unpaid portion of the Total
Consideration.
To evidence Infotopia's obligations to Vitaquest, at the Closing,
Infotopia shall execute a promissory note payable to Vitaquest's order for the
balance of the Total Consideration outstanding ($4,300,000.00), such promissory
note shall be secured by a first priority security interest upon the Assets and
in all other assets of Infotopia, tangible and intangible. In order to
accomplish the foregoing, Infotopia shall also provide to Vitaquest such
security agreements, UCC-1 financing statements, UCC, tax, judgment and other
searches, opinion letters, corporate authorizations, and other documentation as
Vitaquest may reasonably request and Infotopia's counsel shall reasonably
approve.
At the Closing, Infotopia shall assign to Vitaquest for a period
terminating upon Vitaquest's receipt of payment in full of the Total
Consideration, the rights to payment described below and shall contact the
necessary third parties of such effect, which payments will be made directly to
Vitaquest instead of Infotopia; provided, however, that upon Vitaquest's receipt
of the payment in full of the Total Consideration, Vitaquest shall re-assign the
remaining payments to Infotopia, if any. Until the re-assignment becomes
effective, all payments with respect thereto received by Vitaquest shall be held
in trust for, and remitted to, Infotopia:
(a) Any payments in connection with In re Premier Membership
Services, LLC., Bankr. No. 00-35053 U.S. Bankruptcy
Court, Southern District of Florida; and
(b) Any payments or money returned by any credit card
processors, including but not limited to, Electronic Pay
Exchange and Xxxxxxx Bank (collectively "EPX") and
XxxXxxxxxx.xxx, on account of any excess holdback reserves
or escrow in connection with DMI.
Any such payments received and retained by Vitaquest shall be credited against
the Total Consideration (such credits to be applied against payments due in the
inverse order of maturity).
In addition, (i) any royalty payments due from Vitaquest to DMI
under a certain Exclusive License Agreement dated November 20, 2000 related
solely to sales by Vitaquest following the Closing, if any, shall be credited
against any remaining unpaid portion of the Total Consideration (such offset to
be applied against payments due in the inverse order of maturity).
In the event of any defaults under the promissory note or
corresponding security agreements (and/or any other related documents) and after
30-days' written notice to Infotopia and opportunity to cure, if not cured
within such period, the license to use the "Chitosol" brand and all assets
related to such "Chitosol" brand shall terminate and Vitaquest shall be entitled
to enforce its rights and remedies under the promissory note, the security
agreements (and any other related documents), and retain all consideration paid
to date subject to Infotopia's rights as a debtor under the Uniform Commercial
Code.
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3. Effect of Appeal or Inability to Obtain Order and Bidding.
X. Xxxxxxxxx agrees, at the Sale, to bid up to the full amount of
the Debt pursuant to Section 363(k) of the Code.
B. If Vitaquest obtains the Order, but the Order is appealed, but
not stayed, then Vitaquest shall, in its sole discretion exercised in good
faith, have the right, but not the obligation, to proceed to Closing
notwithstanding such appeal pursuant to section 363(m) of the Code. If Vitaquest
elects not to proceed to Closing both parties' obligations shall terminate, and
this Letter of Intent shall be void ab initio (other than Infotopia's
obligations of confidentiality set forth in paragraph 5 and each parties'
obligations of non-publicity and confidentiality set forth in paragraph 11).
C. If Vitaquest shall not obtain the Order by December 1, 2001,
Vitaquest shall move for relief from the automatic stay pursuant to section
362(d) of the Code. Thereafter, it shall seek to obtain possession of the Assets
under applicable law and realize thereon as a secured creditor by selling same
to Infotopia on the terms set forth relative to a Sale pursuant to the Order.
D. If, in exercise of reasonable good faith, Vitaquest shall be
unable to obtain the Order, or shall be otherwise unable to obtain possession
and control of the Assets by March 31, 2002, this Letter of Intent shall be void
ab initio (other than Infotopia's obligations of confidentiality set forth in
paragraph 5 and each party's obligations of non-publicity and confidentiality
set forth in paragraph 11).
4. Manufacturing Agreement. The parties shall negotiate a manufacturing
agreement regarding the sale by Vitaquest to Infotopia of dietary supplement
products. Such manufacturing agreement shall provide, among other things, for
payment in full to Vitaquest prior to shipment for any and all product purchased
from Vitaquest prior to shipment thereof.
5. Due Diligence. In order to facilitate the due diligence review by
Infotopia, Vitaquest shall attempt to arrange with DMI to grant to Infotopia,
and its respective representatives, access during business hours to all of DMI's
respective books and records with respect to the business, finances and
operations of DMI and will attempt to provide facilities for Infotopia to make
copies of any of the Information as it deems necessary desirable. Infotopia and
its representatives shall conduct their due diligence review in such a manner so
as not to interfere unduly with the operation of DMI's business. In connection
with such review, Infotopia and its representatives shall, with DMI's prior
consent, be permitted to contact and communicate with customers, employees,
suppliers and others whose business directly related to DMI and its operations.
Infotopia shall be required to execute a standard Confidentiality Agreement in
connection with its review. Infotopia agrees that it will (a) use all
information obtained in its due diligence review solely for the purpose of
evaluating the Transactions, (b) will hold such information in confidence, and
(c) will not disclose such information except to its employees, agents,
representatives and professionals involved in the Transactions, which persons
shall be advised by Infotopia of the foregoing obligations. Unless otherwise
agreed by Vitaquest in writing, Infotopia shall complete its due diligence
review by November 9th, 2001. Vitaquest shall use reasonable good faith efforts
to obtain the Order and/or the Assets. Notwithstanding the foregoing or anything
herein or in any other document to the contrary, Vitaquest makes no
representations or warranties regarding the Assets or the Order nor does
Vitaquest make any representations or warranties that it will obtain such Assets
or Order.
6. "No Shop" Clause. Prior to November 16, 2001 (or alternatively, if the
parties execute the Transaction Documents prior to November 16, 2001), Vitaquest
shall, (a) not make any disposition(s), pledge or hypothecation of the Assets or
the Rights, (b) enter into any agreement to do so or its interests therein and
(c) use commercially reasonable good faith efforts to obtain promptly any
consents or approvals required in connection with the Transactions.
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7. Management. Vitaquest shall be entitled to appoint one member to the
board of directors of Infotopia. Alternatively, Xx. Xxxxx Xxxxxxx, at his
option, may serve as an advisor to the board of directors of Infotopia and may
participate in any meetings held by the board of directors.
8. Conditions.
A. Infotopia. The obligation of Infotopia to consummate the
Transactions is subject to the following conditions:
(1) A due diligence period for review of all legal and financial
documents relating to DMI and its operations which, unless otherwise
agreed in writing, shall expire at the end of business of November
9, 2001 (New York time).
9. Transaction Documents. As soon as reasonably practicable after
Vitaquest's execution of this Letter of Intent, each of Infotopia and Vitaquest
shall use its reasonable commercial efforts to execute and deliver more detailed
agreements reflecting the terms set forth in this Letter of Intent
(collectively, the "Transaction Documents").
10. Termination. This Letter of Intent may be terminated and shall be
deemed void ab initio, (a) at any time by the mutual written agreement of
Infotopia and Vitaquest, and (b) at any time by a party hereto if the other
party hereto shall have materially breached any of its obligations or agreements
hereunder, and fails to cure such breach within 10 days after written notice
thereto, or (c) pursuant to the terms hereof.
11. Non-publicity and Confidentiality. Each of Infotopia and Vitaquest
agrees not to disclose the existence or contents of this letter agreement or the
Transactions without the prior written consent of the other party hereto, except
to its advisors and attorneys who or which have a need to know such information
and except as required by law.
12. Expenses; Brokers and Finders. Infotopia and Vitaquest shall each bear
their respective costs and expenses incurred in connection with the negotiation,
preparation and consummation of the Transactions. Each of the parties represents
that it has not engaged any broker or finder in connection with the Transactions
and agrees to indemnify and hold harmless the other party in connection
therewith.
13. Binding Nature; Covenant to Close. This Letter of Intent constitutes a
binding agreement between the parties hereto upon its execution. Each party
covenants to the other to use its commercially reasonable efforts to effect the
Transactions contemplated pursuant to this Letter of Intent and to satisfy the
conditions to closing the Transactions; provided, however, that if the Closing
shall occur prior to Vitaquest's receipt of the Order or grant of
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relief from the stay, then the documents executed shall be placed in escrow with
Xxxxx & Xxxxxxx LLP until the earlier of (a) Vitaquest's receipt of the Order or
grant of relief from the stay or (b) termination of this Letter of Intent
pursuant to paragraph 3(D).
14. Non-assignability: Governing Law. No party hereto may assign any of
its rights, or delegate any of its duties, hereunder without the prior written
consent of the other party hereto. This Letter of Intent shall be governed by
the internal laws of the State of New York, and any suit or action arising in
connection herewith shall be exclusively brought in the Federal or State courts
located in New York County, New York.
Please indicate your acceptance and approval of this letter agreement by
having it executed and dated where indicated below, and returning an executed
copy to me on or before the close of business on November 6, 2001 (New York
time).
Very truly yours,
Infotopia, Inc.
By: /s/ Xxxxxx Xxxxx
_______________________
Name: Xxxxxx Xxxxx
Title: CEO
ACCEPTED AND AGREED TO:
Vitaquest International Inc.
By: /s/ Xxxxx Xxxxxxx
______________________
Name: Xxxxx Xxxxxxx
Title: CEO
Dated: November 6, 2001
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