EXHIBIT 10.1
Letter of Intent between Xxxxx Biometry, Inc. and Digital Card Systems, Inc.
Xx. Xxxxxxx Benz
Chairman
Digital Card Systems, Inc.
0 Xxxxxxxxxx Xxxx Xxxx
Xxxxxx, XX 00000
LETTER OF INTENT
Dear Xxxxxxx:
This letter summarizes the principal terms of a proposed merger (the
"Merger") between Xxxxx Biometry, Inc., a Florida corporation ("Xxxxx"), and
Digital Card Systems, Inc., a Delaware corporation, and its subsidiaries and
affiliates (collectively "DCS"), together referred to as the parties
("Parties").
Merger. DCS and Xxxxx hereby acknowledge their intention to consolidate, combine
and otherwise merge their respective companies as quickly as reasonably
possible, leaving Xxxxx as the surviving entity. The parties also agree to merge
in a stock exchange or such other method which provides the most tax efficient
application for their respective shareholders. Accordingly, the parties have
agreed to merge upon achievement of the following conditions precedent:
(a) The Boards of Directors of each such company shall approve each and
all transactions as required by law and by their respective articles
of incorporation, bylaws, and other corporate documentation.
(b) DCS shall arrange to acquire one or more synergistic
operating businesses ("Acquisition(s)") with revenues which, when
combined with DCS revenues, shall aggregate to at least US$ 8
million in operating revenues.
(c) Xxxxx shall, with DCS's cooperation, obtain audited
financial statements of DCS in detail and for periods reasonably
satisfactory to Xxxxx.
(d) Xxxxx shall obtain a "fairness" opinion as to the
transaction in form and substance reasonably satisfactory to Xxxxx.
(e) Xxxxx, in cooperation with DCS, shall obtain at least $5
million in financing to be used for Acquisition(s) and working
capital. The Parties shall use their best efforts to structure
equity-based financing.
(f) The parties will enter into a Definitive Agreement of
Merger ("Agreement") not later than December 31, 2005, or upon such
date as the parties my otherwise mutually agree.
(g) The parties will have secured approval of the merger by
their respective shareholders.
(h) The merger shall have been declared effective by the
Securities And Exchange Commission and such other regulatory
agencies as may be required by law.
(i) Such other conditions as are customary for such
transactions.
2. Stock Transfer. Upon the effective date of the merger, DCS
shareholders shall receive 25 million shares of Xxxxx common stock. As of
September 30, 2005, existing Xxxxx shareholders held 26,291,263 shares, less
760,000 that the board of directors has voted to cancel, of common stock. It is
the intention of the Parties that existing Xxxxx shareholders and DCS
shareholders shall be equally diluted by any Acquisition(s) and/or the financing
set forth in paragraph 1(d) above, and/or any other equity issuances occurring
in the ordinary course of Xxxxx operating its business, or raising capital,
prior to the merger.
3. Titles & Positions; Board of Directors Following the effective date
of the merger:
(a) Xxxxxxx Benz shall become the Co-Chairman and Chief
Executive Officer and Xxxxx XxXxxxx shall become the President of Xxxxx, each
with all rights and responsibilities and salary appurtenant to such position,
including the holding of a seat on the Board of Directors of Xxxxx. Each of the
titles and positions shall be further spelled out in definitive acquisition
documents.
(b) Each of Xxxxx and DCS shall be entitled to nominate two
persons to the Board of Directors, and the Board as then constituted shall then
nominate a fifth person to complete a five person Board of Directors.
(c) Xxxxx shall be entitled to nominate its person to become
CFO, and DCS shall be entitled to nominate its person to become CTO of Xxxxx.
4. Listing on National Exchange or Market. It is the intention of the
parties that the Board of Directors of the merged entity shall, as promptly as
possible following the effective date of Merger, have the Company listed on a
national market or exchange, as the Board shall determine.
5. Confidentiality; Access to Information. Each of companies identified
herein, and each of their directors, officers and employees shall hold
confidential the terms and conditions of this letter and the Agreement. From and
after the date of the execution of this letter, to and including the time at
which negotiations are terminated, each of the parties, acknowledging the prior
execution of a mutual Non-Disclosure Agreement, will be given reasonable access
to all
books, records, facilities, contractual agreements and commitments, and all
other documents that would have a bearing on the financing and operations of
Xxxxx and DCS, in order for each of the parties to conduct an appropriate due
diligence investigation.
6. Standstill; Consideration; Use For a period extending until June 30,
2006, or such earlier date if the parties terminate negotiations, DCS, shall
not, directly or indirectly, initiate, entertain, encourage or discuss with any
third party any transaction, in single or multiple steps, which would undermine,
confuse, interfere with or otherwise work against the transaction described in
this letter of intent. As consideration for this Standstill and as an evidence
of its good faith commitment to complete the transactions contemplated in this
letter of intent, Xxxxx agrees to deliver to DCS, within five (5) business days
following execution of this Letter of Intent, by bank check or other acceptable
transfer means, a good faith money deposit of one hundred thousand dollars
($100,000) ("Good Faith Deposit"). DSC shall return the Good Faith Deposit to
Xxxxx if: (a) Xxxxx shall, with Cause, decline to proceed with the transactions
described in this Letter of Intent; or, (b) DCS shall, without Cause, decline to
proceed with the transactions contemplated by this Letter of Intent. For the
purpose of proper due diligence cause shall be defined as a blatant
misrepresentation of material facts. DCS agrees to use the capital toward
professional fees and working capital in conjunction with the proposed merger.
7. Non-Binding and Binding Provisions; Controlling Law: With the
exception of paragraphs 5 and 6 above, the terms of this letter of intent are
NON-BINDING and for discussion purposes only. With the exception of paragraphs 5
and 6, NO legally binding obligations on the parties will be created, implied or
inferred until the Agreement is executed regarding the subject matter of this
letter, and containing all other essential terms of an agreed upon transaction
and delivered by all parties. Any dispute arising between the parties in
connection with paragraphs 5 and/or 6 of this letter of intent shall be resolved
pursuant to, construed under the laws of, and resolved in the courts of the
State of New Hampshire, without regard to jurisdictional issues.
If the terms of this proposed Merger are satisfactory, please indicate
by signing the Letter of Intent and faxing a copy to Xxxxx no later than
November 25, 2005, as time is of the essence in closing the transactions
contemplated herein.
XXXXX BIOMETRY, INC.
By:___________________________________
Xxxxx XxXxxxx
Chief Executive Officer
Acknowledged and agreed to:
DIGITAL CARD SYSTEMS, INC.
By:___________________________________
Xxxxxxx Benz
Chairman
