E-FINANCIAL XXXXX.XXX, INC.
0000 XXXXXXX XXXX XXXX, XXXXX 000
XXXXXXX XXXX, XXXXXXXXXX 00000
TELEPHONE: (000) 000-0000
January 19, 2000
Xxxxxxxx Xxxxxxx
President
Westcor Mortgage Inc.
#204, 0000 00 Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx X0X 0X0
Dear Xxx:
This Letter of Intent ("Letter") is intended to set forth the material terms and
conditions of what we hope you will find to be an acceptable agreement in
principle respecting the acquisition (the "Acquisition") by e-financial
xxxxx.xxx, Inc. ("Acquiror") of 100% of the outstanding stock of Westcor
Mortgage Inc. ("Acquiree") from the shareholders thereof (the "Vendors").
As we have discussed, we contemplate entering into a subsequent definitive
written agreement containing all of the material terms and conditions of the
proposed Acquisition (the "Definitive Agreement"), not later than 30 days
following the date hereof (the "Effective Date"), including, without limitation,
customary representations, warranties and conditions precedent appropriate to
the Acquisition. It is further contemplated that closing of the Acquisition
will take place on or before February 29, 2000 (the "Closing Date").
Subject to entering the Definitive Agreement and the terms and conditions
thereof, the terms of Acquisition shall be as follows:
1. Acquisition
As a result of the Acquisition, the Acquiree will become a wholly-owned
subsidiary of the Acquiror. The consideration for the Acquisition will be US
$2,200,000, payable as follows:
(a) deposit of US $50,000 worth of securities to be deposited into trust
with Xxxxx, Xxxxxx (solicitors for the Acquiror) upon execution of this Letter
as evidence of good faith and to be returned to the Acquiror on the Closing
Date;
(b) US $600,000 less a holdback equal to 10% of the accounts receivable of
the Acquiree as at the Effective Date to be paid on the Closing Date, with the
holdback to be applied to reimburse the Acquiror in respect of any accounts
receivable of the Acquiree as at the Closing Date which are not collected within
12 months thereafter;
(c) US $1,600,000 of shares of the Acquiror to be issued as at the Closing
Date, said shares to be issued at a deemed price equal to the average closing
price of the Acquiror's shares for the 20 trading days prior to the Closing
Date, said shares to be restricted shares under Rule 144 of the Securities Act
of 1933 and to be held in escrow pending any post closing purchase price
adjustment as a result of any liabilities or assets of the Acquiree existing at
the Effective Date which were not recorded, said adjustment to be concluded
within 12 months of the Closing Date.
In effecting the Acquisition, the Acquiror will, where reasonable, accommodate
the Vendors requests for structuring the consideration in a tax effective
manner.
2. Access
During the period commencing on the date of your execution and return to us of a
counterpart copy of this Letter through the earlier of the consummation or
termination of the Acquisition, the Acquiree shall continue to provide full and
unrestricted access and shall make available, or cause to be made available, to
Acquiror and its affiliates, agents and representatives (collectively, our
"Agents") such of the properties and other assets and such of the books,
documents and records of, and such other information (the "Information")
concerning Acquiree and any of its affiliated entities as any of our Agents may
request. Such Information and materials shall include, without limitation, any
and all audits or reports conducted by third persons (such as accountants'
reviews consultant's reports, governmental agency examination reports and
similar materials). Acquiree shall also instruct all of its officers,
employees, agents, accountants, outside counsel, affiliated entities, and other
persons connected with its officers, employees, agents, accountants, outside
counsel, affiliated entities and other persons connected with its business and
affairs (including third parties subject to its direction or authorization) to
respond promptly and fully to all inquiries made by our Agents regarding any
aspect of the assets, liabilities, business or affairs of Acquiree or any of its
affiliated entities.
3. Confidentiality
The parties to this letter shall continue to be subject to that certain
Confidentiality Agreement dated January 4, 2000 entered into by and between
Acquiree and Acquiror.
4. Conditions
The Acquisition will be subject, among other things, to the following conditions
precedent:
(a) each party completing a due diligence review of the other on terms
satisfactory to it on or before the Effective Date;
(b) the execution and delivery by the Acquiree and the Acquiror of a
Definitive Agreement in form and content mutually satisfactory to both Acquiree
and Acquiror;
(c) the approval of the Acquisition and the Definitive Agreement by the
Board of Directors of both the Acquiree and the Acquiror;
(d) the approval of the Acquisition and Definitive Agreement by the
shareholders of the Acquiree;
(e) the Approval of the Acquisition by all appropriate regulatory agencies,
and the satisfaction of such other requirements as may be imposed by applicable
law and regulations or by the respective articles of incorporation/charters and
bylaws of both Acquiree and Acquiror. In order to be acceptable, all such
approvals shall have been obtained without imposition of any unusual or unduly
burdensome conditions, as determined by and in the sole discretion of our group;
(f) the satisfaction of all other ordinary and customary conditions for
transactions similar to the Acquisition, including, without limitation, the
continued accuracy, on the Closing Date of each of the representations and
warranties of the parties to the Definitive Agreement, the receipt of favourable
opinions of counsel regarding the subject matter of the Acquisition, and the
receipt of reports of independent public accountants and other experts, as well
as the absence of any material adverse change in the business, prospects or
operations of Acquiree and its affiliated entities between the date of execution
of Definitive Agreement and the Closing Date;
(g) Xxxxxxxx Xxxxxxx entering into an employment agreement with the Acquiror
or its nominee; and
(h) the Acquiror having completed a financing of an amount sufficient to
enable it to complete the Acquisition.
5. Exclusivity
Until the Effective Date, Acquiree will conduct its business and affairs only in
the ordinary course as currently conducted and will not, without written prior
consent of Acquiror:
(a) change its existing operations, or its existing loan, investment or
management policies, except in the ordinary course of business; or
(b) authorize or knowingly permit any of its representatives, directly or
indirectly, to entertain, solicit or encourage, or participate in any
discussions or negotiations with, or provide any information to any corporation,
partnership, person, or other entity or group (other than Acquiror and its
representatives) concerning any Acquisition Proposal (as hereinafter defined)
other than the Acquisition Proposal set forth in this Agreement; or
(c) issue or sell any shares of any class of stock or other beneficial
interest or issue or grant any portion or right to purchase shares of any class
of stock or other beneficial interest in it, other than pursuant to options that
have been previously granted under existing employee stock options.
The Acquiree shall immediately notify the Acquiror if it becomes aware of any
inquiry regarding an Acquisition Proposal. For purposes of this Letter
"Acquisition Proposal" means any (i) proposal pursuant to which any corporation,
partnership, person or entity or group would acquire or participate in a merger
or other business combination involving Acquiree; (ii) proposal by which any
corporation, partnership, person, or other entity of group would acquire the
right to vote five percent or more of the capital stock of Acquiree entitles to
vote thereon for the election of directors, other than persons designated as
proxy holders by Acquiree's Board of Directors; (iii) acquisition of the assets
of Acquiree other than in the ordinary course of business; (iv) acquisition of
in excess of five percent of the outstanding capital stock of Acquiree, other
than as contemplated by this Letter; or (iv) any other reorganization or
recapitalization of Acquiree.
The foregoing Section 6(b) shall not be construed to prohibit the Board of
Directors of Acquiree from taking any action if such Board determines in good
faith and upon written advice of counsel, that such action is required for such
Board to comply with its fiduciary obligations.
6. Press Releases
No Press Release or Public announcement with respect to the Acquisition shall be
made without written consent of Acquiree and Acquiror.
7. Costs
Each party shall bear its own costs in respect of the Acquisition.
In the event that you find the foregoing proposal agreeable, kindly so indicate
by dating, executing and returning to us enclosed copy of this Letter.
Yours truly,
e-financial xxxxx.xxx, Inc.
Per: /s/ Xxxx Xxxxxx
Authorized Signatory
