EXHIBIT 10.11
LETTER OF INTENT
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This Letter of Intent ("LOI") when executed, will memorialize the agreement of
Anuvu Incorporated, a California corporation ("Anuvu") and 618039 BC Limited,
Inc., ("618039 BC Limited"), a Delaware corporation. Should the terms and
conditions set forth in this LOI be fulfilled, Anuvu will divide itself into two
companies: "FuelCellCo" and "AutoCo". FuelCellCo will be a spinoff of Anuvu
owned by the shareholders of Anuvu and AutoCo will be the continuation of the
Anuvu entity itself. During this division process, Anuvu will transfer all Anuvu
fuel cell business and all of its assets including equipment, leases, and
property not including non fuel cell related intellectual property. ("Fuel Cell
Business") to FuelCellCo and all Anuvu non-fuel cell business ("Other Business")
to AutoCo. The Fuel Cell Business will then be transferred to 618039 BC Limited
as a wholly owned subsidiary of 618039 BC Limited. This will be accomplished via
merging FuelCellCo into 618039 BC Limited. This LOI refers to "Mergeco" as the
entity that will result from a merger of FuelCellCo into 618039 BC Limited. Thus
Mergeco is the new version of 618039 BC Limited after the acquisition of
FuelCellCo. These Transactions are collectively referred to herein as the
"Transaction". This LOI is intended to set forth certain basic terms of the
agreement reached to date and to serve as a basis for completing the definitive
agreements with respect to the Transaction. This LOI, once executed by all
parties constitutes a binding agreement with respect to the Transaction. Upon
preparation of the definitive agreements described herein, the parties intend
that this LOI will be superceded and replaced in its entirety. All dollar
amounts in this document are in US dollars.
1. Background.
1.1 Fuel Cell. Anuvu is a private company that is actively engaged in
research and development activities including the Fuel Cell Business and Other
Business which includes areas such as automobiles, boats and other vehicle
systems, circuit board technology and other matters. Anuvu owns proprietary
technology regarding such business, subject to certain license rights that Anuvu
is proposing to grant to Cell Power and certain other rights previously granted
to other parties. All of these other parties other than Cell Power have signed
agreements with Anuvu to return those rights with the exception of a three year
not-to-compete restriction under one kilowatt, an area not an ideal match for
the specific technology that Anuvu has developed. Approximately one year has
already transpired on the three-year not-to-compete under one kilowatt. Anuvu
has provided to 618039 BC Limited a detailed description of such third party
rights. 618039 BC Limited is a newly formed entity that desires to enter into
the manufacturing of fuel cells.
2. Businesses
2.1. Auto Business and Other Technologies. Any technology or other
intellectual property that Anuvu owns that is not associated with fuel cell
stacks will be transferred to AutoCo upon the formation of AutoCo. This
includes, among other things, the auto related technology that Anuvu has
developed. The Polyelectric technology that Anuvu has developed is useful within
fuel cells and within other applications. The use of the Polyelectric technology
in fuel cell stacks will be transferred to FuelCellCo and subsequently be
transferred to Mergco via the acquisition of FuelCellCo by 618039 BC Limited.
The use of the Polyelectric technology for all aspects other than fuel cell
stacks will be the property of AutoCo. It is the intent of AutoCo, among other
things, to produce automobiles and other transportation devices. AutoCo will
have the right to non-exclusively buy fuel cells from Mergeco at the lowest
price that Mergeco would sell fuel cells to others at the time, at the size and
in the quantities purchased by AutoCo.
2.2 Fuel Cell Business. FuelCellCo will be acquired by 618039 BC Limited
via a merger process, and FuelCellCo shareholders will receive shares in 618039
BC Limited in exchange for their shares of FuelCellCo. The numbers of shares of
618039 BC Limited distributed to the FuelCellCo shareholders will be
approximately 100% of the shares outstanding at the date of this document. The
shares will be issued and distributed as follows40% of the said shares upon the
closing of the spinoff of FuelCellCo30% of said shares upon the construction and
first operation of a Demonstration Fuel Cell Factory ("Demonstration Factory")
and 30% upon the sale of the one-hundredth fuel cell of at least five kilowatts
that are built by FuelCellCo/Mergco or built by a licensee of
FuelCellCo/Mergeco. The Demonstration Factory shall use equipment projected to
be the same as or similar to a mass production factory but with less automation,
with fewer instances of each type of equipment and with other abbreviations to a
mass production factory. The Demonstration Factory shall be capable of producing
at least 10 fuel cell stacks per day of five kilowatts each. Each of the Anuvu
employees, working at Anuvu at the time of the signing of the LOI, will be hired
by FuelCellCo effective at the time of the merger at their present salaries and
with a comparable benefit package. For reference, the total of the gross monthly
salaries of all current employees is approximately sixty eight thousand dollars
($68,000). The current management of 618039 BC Limited will control a Public
Offering ("Offering") to aid in raising funds for Mergeco. The current 618039 BC
Limited management will choose a Chief Financial Officer to coordinate the
Offering and a Controller to monitor the finances of FuelCellCo. The current
management of Anuvu will assist in other aspects of the business of FuelCellCo,
including operations, however 618039 BC Limited management will assist the Anuvu
marketing team in marketing and media relations. The current Anuvu management
will have a permanent seat on the 618039 BC Limited Board of Directors.
3. Demonstration Projects. FuelCellCo will create demonstration projects which
will allow the public and those involved in the Offering to witness the fuel
cells built with Anuvu developed technology in actual use. The current
management team of Anuvu will promote these demonstration projects to the public
with the approval and assistance of 618039 BC Limited and the media.
Approximately one demonstration project per month within budget restraints will
be completed and presented to the media until the time of the Offering. Due to
the limited time and funds available, the fuel cells and other hardware used for
one demonstration project may be used in another demonstration project. Each of
the demonstration projects will be on the order of, or similar in scope to the
following: golf cars, full automobiles, demonstration houses or representations
thereof, forklifts, tractors, motor scooters and boats. Current Anuvu management
will choose the demonstration project to release for public view each month
based on the current progress on projects under development.
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4. Interim Financing and Debt Refinancing.
4.1. Financing. 618039 BC Limited will provide two hundred thousand dollars
($200,000) upon the closing of the LOI and an additional two hundred thousand
dollars ($200,000) per month due each month at the date of closing of the LOI
and starting the month following the closing ("Interim Financing") until such
time as the funds raised from the Offering are available to FuelCellCo. The
Interim Financing will be given to Anuvu until such time as the Spinoff is
complete, at which time the monthly amount need only be raised for and received
by FuelCellCo. Should the initial payment not be made upon signing or should any
monthly Interim Financing payment not be transferred to the receiving party
prior to the end of each month, this LOI will be rendered invalid without
notice, the fuel cell rights and all other former Anuvu assets will revert to
AutoCo and any funds received to date from 618039 BC Limited will be credited
towards payments for a license granted to Cell Power. The Offering must generate
at least five million dollars, up to two million for the payment of Anuvu debt
and three million for enhancing the Fuel Cell Business.Any funds raised by the
Offering can contribute to the monthly minimum funding of two hundred thousand
dollars ($200,000). During an interim period of three months, the former
FuelCellCo employees, including Xxx Xxxxx, will work full time (or their normal
part time amount for those who are already part time) on projects related to and
for the benefit of FuelCellCo and 618039 BC Limited. AutoCo related activity by
the current Anuvu employees will essentially be frozen during this interim
period. Should the Interim Funding be interrupted, leading to a reversion of
fuel cell rights, the employees will be transferred to AutoCo and AutoCo will be
free to immediately follow its own fuel cell and vehicle related businesses.
4.2. Debt Refinancing. The current debt of Anuvu is approximately two
million two hundred thousand dollars ($2,200,000). This debt will merge with
FuelCellCo. 618039 BC Limited will provide refinancing for this debt if
necessary. A given creditor can be paid in stock if agreed to by that creditor.
Where required, the proceeds of the Offering will be used to pay the debt.
5. Due Diligence. Representatives of FuelCellCo, AutoCo, Anuvu, 618039 BC
Limited and Mergeco shall have access to (but may not retain copies, unless
specifically authorized by the other party) the books, records and other data
regarding the other parties following the date of this LOI in order that each
party may conduct such investigative due diligence as they deem sufficient for
the purpose of (i) verifying the assets and liabilities of each business and
(ii) otherwise obtaining such information as either shall deem necessary or
useful for the purpose of entering into the respective merger agreements and
closing the Transaction.
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6. Taxation and Securities Matters.
6.1. Securities Compliance. The Closing of the Transaction shall be subject
to any and all Federal and/or State securities laws and required consents,
including but not limited to, the submission of the required documents and
receipt of authorization by the California Department of Corporations and the
State of Delaware and any other appropriate NASD and SEC disclosures.
6.2. Tax-Free Exchange. FuelCellCo, AutoCo, Anuvu, 618039 BC Limited and
Mergeco shall use their best efforts to make the Transaction a tax-free exchange
to the Anuvu shareholders.
618039 BC Limited and Mergeco shall cooperate in good faith in assisting
Anuvu, FuelCellCo and their counsel in obtaining a private letter ruling from
the Internal Revenue Service confirming the tax-free nature of the Transaction;
provided, however, that obtaining such a letter ruling shall not be a condition
of the Transaction.
7. Closing. The parties will use their best efforts to agree upon and execute
final merger agreements and related documentation no later than October 31, 2001
and close the Transaction no later than December 31, 2001 (the "Closing");
provided, however, that in the event the IRS has not yet issued an acceptable
private letter ruling or State or Federal authorization has not been obtained
under applicable securities laws, the parties agree that the Closing may be
extended until such private letter ruling or authorization has been obtained.
The terms of the respective merger agreements shall be as set forth in this LOI.
The terms of the final merger agreements shall supersede all terms set forth in
this LOI.
8. Exclusivity. .Anuvu shall not solicit, initiate, or consider any proposal
for (i) the sale of any of its assets that relate to the Fuel Cell Business,
physical or intellectual, other than in the ordinary course of its business,
except for the Settlement and License Agreements with Cell Power or its
successors or assigns. Until the time of the merger, Anuvu may continue to sell
common shares of Anuvu stock up to the current authorized amount to contribute
to a reduction in the debt or to increase the funding available for operations.
Anuvu selling stock will not change the total number of shares of 618039 BC
Limited stock Anuvu shareholders or spin-off companies receive from the merger.
The pre-merger sale of Anuvu stock will simply decrease by dilution the amount
of 618039 BC Limited stock each individual Anuvu shareholder receives.
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9. Notices of Certain Events. Each party agrees to promptly provide notice to
the other parties of any material development, which would materially affect or
impact the Transaction.
10. Conduct of the Parties. From the date of this LOI to the Closing, each
party covenants and agrees to use their best efforts to:
a) carry on business as usual, in the regular and ordinary manner
consistent with past practice, and to use its good faith reasonable
efforts to preserve intact its relationships with third parties and
not to make any material change in the business as conducted as of the
date hereof, or to change the charter or bylaws thereof except as
contemplated herein; and
b) to maintain the respective assets in substantially their current
condition, normal wear and tear excepted.
11. Confidentiality. All parties, with respect to the Transaction, shall make
no public announcements, other than any internal communications necessary for
the purpose of completing the Transactions, without the prior written approval
of the other parties. In connection with the due diligence review under this
LOI, each party may receive proprietary information of the disclosing party. The
proprietary information shall be deemed to include notes, summaries, analysis,
and other materials, in whatever form, derived from such examination or
evaluation of the proprietary information. The proprietary information is
regarded by the disclosing party as highly valuable and is not known publicly.
The continued value depends in part on retaining its confidential nature.
Disclosing party is willing to provide access to the proprietary information
under this LOI on the condition that receiving party retain its confidentiality
and not use the proprietary information for any purpose other than completion of
such due diligence review. Receiving party shall not directly or indirectly
disclose or use, or permit the disclosure or use of, the proprietary information
for any other purpose without the prior written consent of the disclosing party,
except as and solely to the limited extent required by applicable law, or an
order of a court of appropriate jurisdiction.
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12. Definitive Agreement. Upon obtaining all necessary permits from the
California Department of Corporations and other required corporate and
regulatory approvals necessary to complete the Transaction, the parties shall
enter into definitive merger and other agreements to complete the Transaction.
The agreements shall contain the usual warranties, indemnities, limitations and
conditions.
13. Expenses. Each party will bear its own costs and expenses incurred in
connection with the Transaction.
14. Governing Law. This LOI shall be governed by and construed in accordance
with the laws of the State of California, without giving effect to principles of
conflicts of laws.
15. Counterparts. This LOI may be executed in separate counterparts which when
taken together shall constitute one original instrument.
16. Assignment of this agreement 618039 BC Limited may assign this LOI to
another Entity and if so all obligations and benefits of this LOI will be
transferred in entirety, including approximate percetage ownerships in the
Entity exchanged for FuelCellCo stock, thus the merger would be between
FuelCellCo and the Entity.
17.
a.) List of Payables
b.) What intellectual properties are in FuelCellCo
c.) Equipment, Land and Leases of FuelCellCo
d.) Agreements attached to FuelCellCo Intellectual Property
e.) Cell Power Agreements
618039 BC LIMITED, INC., ANUVU INCORPORATED,
a Delaware Corporation a California Corporation
By: ____________________________ By: __________________________
Its: ___________________________ Its: _________________________
Date: __________________________ Date: ________________________
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