August 3, 2004
Avalanche Resources, Ltd.
0 Xxxxxxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx
Re: North American Technologies Group, Inc. (the "Company")
Gentlemen:
This letter sets forth our understanding regarding the proposed sale of
an aggregate of 25,651,515 shares (the "Shares") of common stock, par value
$.001 per share, of the Company by Avalanche Resources, Ltd. (the "Seller") to
[Xxxxxx Xxxxxxxx ("Xxxxxxxx"),] Crestview Capital Master, LLC ("Crestview"),
Xxxxxx Xxxxx ("Xxxxx"), Midsummer Investment, Ltd. ("Midsummer") and Islandia,
L.P. ("Islandia") (each, a "Purchaser" and collectively, the "Purchasers"). The
purpose of this letter is to outline the basic terms and conditions of the sale
based upon our discussions, financial materials which you have submitted to us
and representations which you have made to us with regard to the present and
proposed business activities of the Company, the Company's operations and its
financial condition.
1. Basic Terms. Subject to the terms and conditions herein, the Seller shall
sell and deliver to the respective Purchasers good, valid and marketable title
to the Shares, free and clear of all liabilities, obligations, claims, liens and
encumbrances, by delivering to the Purchasers stock certificates representing
the Shares, duly endorsed in blank or accompanied by one or more stock powers
duly endorsed in blank, and in form for transfer satisfactory to counsel for the
Purchasers. Each Purchaser shall purchase from the Seller, severally and not
jointly with the other Purchasers as follows:
(a) Xxxxxxxx: (i) 8,000,000 Shares at a purchase price per share
equal to $.25 and (ii) 6,060,606 Shares at a purchase price
per share equal to $.33.
(b) Crestview: 3,636,364 Shares at a purchase price per share
equal to $.33.
(c) Toibb: 909,091 Shares at a purchase price per share equal to
$.33.
(d) Midsummer: (i) 2,727,272 Shares at a purchase price per share
equal to $.33 and 1,818,182 Shares at a purchase price per
share equal to $.40.
(e) Islandia: (i) 1,500,000 Shares at a purchase price per share
equal to $.33 and 1,000,000 Shares at a purchase price per
share equal to $.40.
Notwithstanding the foregoing, the sale obligations of Avalanche shall
be conditioned upon all the Shares being sold concurrently at one closing. The
Shares are restricted shares and will be offered and sold pursuant to the
registration exemption provided by Section 4(1) of the Securities Act of 1933,
as amended and the requirements of any other applicable state securities laws
and the respective rules and regulations thereunder.
2. Binding Obligation. This letter is intended to be legally binding with
respect to the transactions described herein subject only to the good faith
negotiation and execution of formal definitive agreements in mutually
satisfactory form.
3. Governing Law. This letter of intent shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to any
requirements thereof which might otherwise cause the application of the law of
another jurisdiction. Any disagreement between or among the parties in the
process of developing definitive documentation shall be resolved by mutual
negotiation. If any party believes these negotiations have failed, definitive
provisions shall be decided by a binding arbitration before a single arbitrator
either selected unanimously by the parties or failing such unanimity, as
selected by the American Arbitration Association in Dallas, Texas.
4. Counterparts. This letter may be signed in two or more counterparts, each of
which shall constitute an original, and all of which together shall constitute
one and the same agreement.
5. Confidentiality. Each party at all times will hold and cause its employees
and advisors to hold in confidence all documents and information concerning the
other parties hereto which have been or will be furnished in connection with the
transactions contemplated hereby, except as may be necessary to facilitate
negotiations or filings with any regulatory agency or authority. If such
transactions are not consummated, such confidence will be maintained, except to
the extent such information (a) was previously known to the receiving party
prior to disclosure by the disclosing party, (b) is in the public domain through
no fault of the receiving party, (c) is lawfully acquired by the receiving party
from a third party under no obligation of confidence to the disclosing party or
(d) is required by law to be disclosed. Such documents and information will not
be used to the detriment of the disclosing party otherwise in any manner and all
documents, materials and other written information provided by the disclosing
party to the receiving party, including all copies and extracts thereof, will be
returned to the disclosing party promptly upon written request. The parties
agree that the provisions of this Section 5 shall be binding on the parties and
shall survive any termination of discussions or the contemplated transaction.
From the date of execution of this letter by the Seller until the earlier of (i)
the Closing Date or (ii) 90 days from the date hereof, neither the Seller, nor
any of its affiliates will (i) discuss, solicit, entertain, agree or negotiate
with any other third party with respect to any transaction related to the Common
Stock or (ii) buy or sell any Common Stock except if by exercise of warrants.
6. Public Announcement. Avalanche shall cause the Company to file a Form 8-K
current report with the SEC within four business days after the execution of
this agreement, summarizing the transactions contemplated hereby. The parties
hereto shall not provide or release any other information with respect to this
letter agreement or the transactions contemplated hereby, including any press
release, except as required by law.
7. Conditions. The closing of the transactions contemplated hereby is
conditional upon the following on or prior to the Closing Date: (i) satisfactory
completion of due diligence by the Purchasers, (ii) all lawsuits disclosed in
the Company's filings with the Securities and Exchange Commission (the "SEC")
shall be dismissed with prejudice, (iii) terms of the Sponsor Agreement,
including but not limited to the refinancing of the debt; withdrawal of the
buy/sell provision and change in purchase price for the option shall have
renegotiated on terms acceptable to the Purchasers, (iv) the Seller shall have
entered into a lock-up agreement, agreeing not to sell, transfer or otherwise
dispose of any the Company's securities owned by, or issuable to it (other than
the Shares to be sold to the Purchasers or acquired by exercise of warrants) for
a period of nine months following the Closing Date, whether or not otherwise
registered for resale, (v) at the closing, and in compliance with clause (vi)
below, the current officers and directors of the Company other than
______________ (the "Continuing Director") shall resign and the Continuing
Director shall elect to the Company's board of directors two individuals
designated by [Xxxxxxxx], two individuals designated by Sponsor and a new Chief
Executive Officer designated by [Xxxxxxxx], whereupon the Continuing Director
shall resign, (vi) the Seller shall cause the Company to file an information
statement on Schedule 14(f) with the SEC with respect to the new board members
and at least ten days shall have elapsed since the date such information
statement shall have been mailed to the Company's stockholders, (vii) the Seller
shall grant the Purchasers a right of first refusal with respect to any future
[private] sales of Common Stock by the Seller, (viii) Crestview, Midsummer,
Islandia, Sponsor, Tie Investors, Avalanche, Xxxxx Xxxxxx, Xxxxx Xxxxxxxx and
all other current board members and their respective affiliates shall have
exchanged mutual releases to the fullest extent permitted by law, and each shall
have further covenanted not to sue one another or to disparage one another in
connection with any of their past or present relationships with the Company, nor
to disparage the Company, and (ix) such other customary closing conditions and
deliveries as are usual for transactions of this type.
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8. Definitive Agreements. Upon execution hereof, the parties hereto agree to
proceed in good faith towards preparation of the definitive agreements,
including a common stock purchase agreement which shall contain, among other
things, appropriate representations and warranties of the parties hereto
(including a representation from the Seller that it is the sole owner of the
Shares, free of any liens, charges, encumbrances, rights of first refusal or
other adverse claims whatsoever), representations and warranties by the Company,
indemnification provisions, legal opinions, other clauses of the parties
reflecting the provisions set forth herein and other typical covenants, and
appropriate conditions of closings.
9. Breakup Fee. In reliance on the binding nature of this letter of intent, the
Purchasers will be expending substantial time and resources, including legal and
accounting expenses, to complete this transaction. Accordingly, if Avalanche for
any reason, other than breach by the Purchasers of the terms of this letter of
intent, or the failure of Purchasers to close as a result of the failure of a
closing condition, shall fail to close the transactions contemplated hereby,
Avalanche shall pay the Purchasers, pro rata in accordance with the dollar value
of their respective investments set forth above, the aggregate sum of $300,000.
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Please indicate your acceptance of this letter of intent by signing a
copy of the signature page of this letter and returning it to us at our address
set forth above. The terms of this letter of intent shall be subject to change
in the event Crestview Capital Master, LLC, on behalf of all of the Purchasers,
does not receive an executed copy of this letter from the Seller by August 4,
2004.
Very truly yours,
[Xxxxxx Xxxxxxxx]
CRESTVIEW CAPITAL MASTER, LLC
By: ______________________________________
Name:
Title:
MIDSUMMER INVESTMENT, LTD.
By: ______________________________________
Name:
Title:
ISLANDIA, L.P.
By: ______________________________________
Name:
Title
Accepted and agree to this ___ day of
_______, 2004.
AVALANCHE RESOURCES, LTD.
By: ______________________________________
Name:
Title:
