August 1, 2003
Cinema Electric, Inc.
Los Angeles Center Studios
0000 X. 0xx Xxxxxx
Xxxxxxxx Xxxxxxxx, Xxxxx X-000
Xxx Xxxxxxx, Xxxxxxxxxx, XXX 00000
Attention: Xxxxx X. Xxxxxxxx, CEO
Brenex Oil Corporation
0000 Xxxxx Xxxxxxxx Xx., Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
Attn: Xxxxxxxx Xxxxxxxx
Re: Memorandum of Understanding for the merger of a to be organized
wholly-owned subsidiary ("Subsidiary") of Brenex Oil Corporation, a Utah
corporation ("Brenex" or the "Company"), with and into Cinema Electric,
Inc., a Delaware Corporation ("Cinema").
Dear Xx. Xxxxxxxx and Xx. Xxxxxxxx:
This letter will confirm the following general terms upon which the
Boards of Directors of Brenex and Cinema will adopt a Plan and Agreement of
Merger (the "Plan of Merger") and whereby Subsidiary will merge with and into
Cinema with Cinema being the surviving corporation and whereby Cinema will
become a wholly-owned subsidiary of Brenex, on the closing of the Plan of
Merger (the "Closing").
We propose that a definitive agreement approved by your respective
Boards of Directors be negotiated and executed and which will set forth in
detail your intent, upon the following general terms and conditions.
A. The Merger.
(i) Brenex shall incorporate Subsidiary in the State of
Nevada;
(ii) Brenex will complete a forward split of its common shares
on the basis of one pre-split share to thirty post-split
shares;
(iii) Brenex shall issue approximately 3,333,333 shares or
approximately 10.2% of its pre-merger issued and
outstanding shares of $0.001 par value common voting stock
("Common Stock") in exchange for the rights of Universal
Communication Systems, Inc., a Nevada Corporation
("UCSI"), pursuant to the terms of that certain Letter of
Intent between UCSI and Cinema dated April 29, 2003 and
attached hereto as Exhibit A.
(iv) Brenex shall issue approximately 33,333,333 shares or
approximately 48.1% of its post-merger Common Stock in
exchange for all of the issued and outstanding Shares of
Cinema.
(v) At Closing the existing stockholders of Brenex shall own
approximately 32,014,210 shares or approximately 46.2% of
its Common Stock;
(vi) At Closing, Xxxxx Xxxxxxxx shall execute a 5 year
employment agreement to serve as Chief Executive Officer
of Xxxxxx and in addition to any other consideration
therein shall receive an option to purchase 5,000,000
shares of Common Stock at an exercise price of
$0.01/share.
(vii) Upon Closing, Cinema shall pay to Xxxxxx Services, Inc.,
a Utah corporation ("Xxxxxx"), $50,000, in consideration
of their payment and personal indemnification of Brenex,
Subsidiary and Cinema of any and all past liabilities of
any type or nature whatsoever of Brenex or Subsidiary
existing at Closing, which will include the expenses of
Brenex and Subsidiary related to the Plan of Merger, as
set forth in Exhibit B, and the compromise and settlement
of any amounts due and owing for advances of Xxxxxx or
otherwise that were incurred prior to Closing by Brenex or
Subsidiary and/or the other expenses set forth in Exhibit
B attached hereto and incorporated herein by reference;
and
(vi) The Merger is intended to be a tax-free reorganization
under the Internal Revenue Code.
B. Definitive Agreement.
The definitive agreement shall include, contain or provide:
(i) Representations and Warranties. Customary and usual
representations and warranties by the parties, and the
principal executive officer of each of the parties shall
certify these representations and warranties "to the best
of his personal knowledge and information."
(ii) Opinions of Counsel. For the delivery at Closing of
favorable opinions of counsel for the corporate parties
with respect to customary and usual matters of law covered
under similar plans and parties.
(iii) Financial and Other Information.
(a) The examination and inspection of the books and
records of each of the parties prior to Closing; the
delivery no later than at Closing of customary
schedules listing each party's material contracts;
real and personal properties; pending, threatened and
contemplated legal proceedings; employees; assets and
liabilities, including contingencies and commitments;
and other information reasonably requested;
(b) Brenex shall provide audited financial statements
consisting of a balance sheet and a related statement
of income for the period then ended which fairly
present the financial condition of each as of their
respective dates and for the periods involved, and
such statements shall be prepared in accordance with
generally accepted accounting principles consistently
applied, on Closing, for such period or periods as
shall be set forth in the definitive agreement; and
(c) The financial statements of Brenex and/or Subsidiary
shall reflect no liabilities and no assets at Closing
or satisfactory evidence of payment of all
liabilities shall be provided.
(iv) Expenses. In the event of the termination of the Plan of
Merger or this Memorandum of Understanding for any reason,
the retainer due in escrow upon signing the Memorandum of
Understanding will be returned to Cinema from the Xxxxxxx
X. Xxxxxxxxxx Trust, less any fees incurred by Xx.
Xxxxxxxxxx in conjunction with the preparation of the Plan
of Merger not to exceed $10,000 plus the actual expenses
incurred in completing the transaction (fax, mail, Fedex,
etc.) and the costs of printing new stock certificates.
(v) Conduct of Business of Brenex and Cinema Pending Closing.
Until consummation or termination of the Plan of Merger,
Brenex, Subsidiary and Cinema will conduct business only
in the ordinary course and none of the assets of Brenex,
Subsidiary or Cinema shall be sold or disposed of except
in the ordinary course of business or with the written
consent of the other party.
(vi) Other.
(a) Xxxxxx, Subsidiary and Cinema shall have received all
permits, authorizations, regulatory approvals and
third party consents necessary for the consummation
of the change of domicile and/or the Closing of the
Plan of Merger, and all applicable legal requirements
shall have been satisfied.
(b) The definitive agreement shall be executed as soon as
practicable, and Xxxxxx, Subsidiary and Cinema shall
instruct their respective legal counsel to
immediately prepare all necessary documentation upon
the execution of this Memorandum of Understanding.
(c) The Boards of Directors of Brenex, Subsidiary and
Cinema shall have approved the definitive agreement.
(d) Included in the Plan of Merger between Brenex,
Subsidiary and Cinema shall be a no reverse split
clause that guarantees replacement of the shares of
common stock that are still owned at the time of any
such reverse split by pre- Plan of Merger Brenex
stockholders in the event that Brenex completes a
reverse split that affects its outstanding common
stock within 24 months of Closing;
(e) The pre-Closing officers, directors, and the holders
of 5% or more of Brenex Common Stock shall execute an
agreement to the effect that they will not sell or
otherwise dispose of any equity securities of Brenex
for a period of 1 year (the "Lock-up Period")
following the Closing. The certificates representing
the shares of Common Stock beneficially owned by such
officers, directors and 5% shareholders shall be held
by a mutually acceptable escrow agent during the
Lock-up Period.
(f) All notices or other information deemed required or
necessary to be given to any of the parties shall be
given at the following addresses.
Brenex Oil Corporation
0000 Xxxxx Xxxxxxxx Xx., Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
Subsidiary
0000 Xxxxx Xxxxxxxx Xx., Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
Xxxxxxx X. Xxxxxxxxxx, Esq.
000 Xxxx 000 Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
Cinema Electric, Inc. ("Cinema ")
Los Angeles Center Studios
0000 X. 0xx Xxxxxx
Xxxxxxxx Xxxxxxxx, Xxxxx X-000
Xxx Xxxxxxx, Xxxxxxxxxx, XXX
00000
Xxxxxxx Xxxxx, Esq.
Xxxxx & Xxxxxxx LLP
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
(g) Any finder's fee or similar payment with respect to
the Plan of Merger shall be paid by the party or
parties agreeing to such fee or payment.
(h) The definitive agreement shall contain customary and
usual indemnification and hold harmless provisions.
(i) The transactions which are contemplated herein, to
the extent permitted, shall be governed by and
construed in accordance with the laws of the State of
the Delaware.
(j) Each party and its agents, attorneys and
representatives shall have full and free access to
the properties, books and records of the other party
(the confidentiality of which the investigating party
agrees to retain) for purposes of conducting
investigations of the other party.
(k) The substance of any public announcement with respect
to the exchange, other than notices required by law,
shall be approved in advance by all parties or their
duly authorized representatives.
(l) In the event of the abandonment of this Memorandum of
Understanding prior to the execution of the Plan of
Merger, except as provided in paragraph B (iv), each
party shall bear and pay its own costs and expenses
and shall indemnify and hold the other parties
harmless therefrom. Following execution and delivery
of the Plan of Merger, it will control the rights of
the parties in this respect.
Except as provided in paragraphs B (iv), (v) and (vi) (l), this letter
merely evidences the intention of the parties hereto and is not intended to be
legally binding. The proposed agreement contemplated herein may be terminated
by any of the parties at any time prior to the execution of the definitive
agreement, which shall be controlling thereafter, and each of the parties
agrees to hold the others harmless for any attorney's fees, accountant's fees,
expenses or other damages which may be incurred by failure to consummate the
Plan of Merger, except as provided in paragraph B (iv).
C. Counterparts. This Memorandum of Understanding may be executed in
any number of counterparts and each such counterpart shall be deemed to be an
original instrument, but all of such counterparts together shall constitute
but one agreement.
D. Confidentiality. By its execution hereof, Xxxxxx acknowledges to
and agrees with Cinema that in the exercise of the several rights granted to
it pursuant to this Memorandum of Understanding, Brenex, and/or its agents and
affiliates, may become familiar with or aware of certain Confidential
Information (as such term is hereinafter defined) disclosed by Cinema or one
or more of its officers, directors, employees, shareholders, partners, agents
or representatives (each of such relationships being defined herein as an
"Affiliate"). Accordingly, Xxxxxx hereby agrees that any and all
Confidential Information disclosed or furnished to it, or to any of its
Affiliates, by Cinema or any of its Affiliates, is and shall remain
proprietary to Cinema. Neither Brenex, nor any Affiliate of Brenex, shall
have any rights to distribute or divulge any of such Confidential Information
to any third party without Cinema 's prior consent, or to use any of such
Confidential Information in any way detrimental to Cinema or any of its
Affiliates, or in any way which would otherwise destroy, injure or impair any
of Cinema 's or its Affiliates' rights in or in respect of any such
Confidential Information including, without limitation, by using any of such
Confidential information to solicit away from Cinema any of its employees,
contractors, customers or vendors or other business relationships, or to
establish or assist any person or entity which is or will be, directly or
indirectly, in competition with Cinema . For purposes of this Agreement, the
term "Confidential Information" shall mean any and all proprietary information
belonging to Cinema, whether tangible or intangible, written or oral,
including, without limitation, any intellectual property rights, books and
records, computer software and files, lists of (or proprietary information
concerning) its customers, suppliers, vendors and other business
relationships, and any other item which may properly be classified as a
protected trade secret. Xxxxxx expressly agrees and understands that its
agreement to abide by the provisions of this Section D constitute a material
part of the consideration inducing Cinema to enter into this Memorandum of
Understanding and consider the transactions contemplated herein, and that any
violation of such provisions could create immediate and irreparable harm to
Cinema. In the event of any breach of this Section D, the parties hereby
agree that, in addition to whatever other remedies may be available to Cinema,
it shall be entitled to seek injunctive and other equitable relief, and Brenex
hereby waives any bonding or other requirement as a precursor thereto.
If the foregoing correctly sets forth the substance of the understanding
of the parties, please execute this Memorandum of Understanding in duplicate,
retain one copy for your records, and return one to Xxxxxxx X. Xxxxx at his
address, which is c/x Xxxxx & Xxxxxxx LLP, 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, XX
00000, and one to Xxxxxxx X. Xxxxxxxxxx, Esq. at his address, which is Suite
000 Xxxxxx Xxxxxxxx, 000 Xxxx 000 Xxxxx, Xxxx Xxxx Xxxx, Xxxx 00000; you may
send one signed copy by facsimile transmission to 000-000-0000.
Very truly yours,
XXXXX & XXXXXXX LLP
/s/ Xxxxxxx X. Xxxxx
-------------------------
Xxxxxxx X. Xxxxx, Partner
Accepted this 1st day of August 2003.
Cinema Electric, Inc.,
a Delaware Corporation
/s/ Xxxxx X. Xxxxxxxx
-----------------------------
Xxxxx X. Xxxxxxxx, CEO
Brenex Oil Corporation,
a Utah Corporation
/s/ Xxxxxxxx X. Xxxxxxxx
------------------------------
Xxxxxxxx X. Xxxxxxxx, Secretary
Universal Communication Systems, Inc.,
a Nevada Corporation
/s/ Xxxxxxx Xxxxxxx
-------------------------------
Xxxxxxx Xxxxxxx, CEO
Xxxxxx Services, Inc.,
a Utah Corporation
/s/ Xxxx X. Xxxxxx
-------------------------------
Xxxx X. Xxxxxx
EXHIBIT "B"
The following expenses will be included and paid by Xxxxxx Services in
conjunction with the Plan of Merger, assuming receipt by the Xxxxxxx X.
Xxxxxxxxxx, Esq. Trust Account of the $10,000 retainer and receipt by Xxxxxx
Services of the $50,000 less the expenses incurred in paragraph B (iv) upon
Closing:
Legal work to be completed by Xxxxxxx X. Xxxxxxxxxx, Esq.
pursuant to his engagement letter.
- Incorporation of Subsidiary.
- Plan of Merger.
Execution of Closing documents by officers and directors of
Xxxxxx, Subsidiary and Cinema .
- Brenex officers and directors and/or the officers and
directors of the Subsidiary will offer resignations.
- Close of escrow on funds and transfer of shares.
Post-Plan of Merger filings are made, with the following
agencies (usually takes 7 to 10 business days).
- Articles of Amendment reflecting new name "Cinema
Electric, Inc.".
- Certificate of Designation define rights, title, and
preferences for classes of stock or warrants that are
authorized (pre-Plan of Merger task).
- National Quotation Bureau ("NQB") new cusip number.
- National Association of Securities Dealers ("NASD")
request new symbol submit top three choices.
- S&P filing. This does not include the filing fees.
- New 15c2-11 delivered to broker.
The following expenses will be included and paid by Cinema, in
conjunction with the Plan of Merger:
Order and issue new certificates;
Cinema audited Financial Statements for the most recent year
end and interim statements subsequent to the fiscal year end for the most
recent period ended; and
Pro forma combined balance sheet taking into consideration the
Plan of Merger.
