EXHIBIT 99.2
Letter of Intent Dated January 17, 2001 between Xxxxx Foods, Inc. and Forest
Lake Partners LLC
PERSONAL & CONFIDENTIAL
January 17, 2001
Mr. Xxxx Xxxxx
Chairman of the Board
Xxxxx Foods, Inc.
0000 Xxxxx Xxxxxxx Xxxxxx #000
Xxxxxxx, Xxxxxxxx 00000
Re: Purchase of Stock of Xxxxx Foods Incorporated
Dear Xx. Xxxxx:
The purpose of this letter is to set forth the non-binding intention of
Forest Lake Partners LLC or its designee(s) ("Buyer") to acquire from the
shareholders one hundred percent (100%), on a fully-diluted basis, of the
capital stock (the "Shares") of Xxxxx Foods Incorporated, a Delaware
corporation (the "Company"). We intend that a definitive merger agreement
(the "Merger Agreement") will be executed by the Company on or about
February 16, 2001 and that a closing of the transaction shall occur no later
than February 28, 2001 (the "Closing Date").
The specific terms and conditions of the proposal are as follows:
1. Purchase of Shares. Subject to the other terms and conditions of
this letter, on the Closing Date, it is anticipated that the Shares shall be
acquired via a merger of the Company with Buyer (the "Merger") pursuant to
which the shareholders of the Company shall receive cash in exchange for the
Shares owned by them. It is our understanding the Company has properly
accrued for all amounts owed to current and previous management.
2. Purchase Price. The purchase price ("Purchase Price") for the
Shares shall be sixty two and one-half cents ($0.625) per share, provided
that the net worth of the Company (defined as book value of the Company's
assets over the book value of the Company's liabilities on the Closing Date)
is not materially different from the net worth as of October 28, 2000 of
approximately one million one hundred thousand dollars ($1,100,000).
3. Manner of Payment. The Purchase Price will be paid by Buyer on
the Closing Date by wire transfer of same-day funds in the amount of sixty
two and one-half cents ($0.625) per share as directed by the Company for the
benefit of the shareholders. It is our understanding that the Company has
four million three hundred thousand (4,300,000) shares outstanding and six
hundred thousand (600,000) in options for a total of four million nine
hundred thousand (4,900,000) shares outstanding on a fully-diluted basis.
4. Definitive Agreements. As soon as practical after acceptance
hereof, the parties will negotiate diligently and in good faith toward the
execution of a definitive Merger Agreement. The Merger Agreement shall only
be binding when executed by both the Buyer and the Company. The Merger
Agreement will set forth the terms described herein and also will contain
the normal representations, warranties, indemnities, assurances, conditions
and covenants customary for a transaction of this type and such other terms
as either the Buyer or the other parties to the transaction reasonably
require. Also, it is anticipated that Buyer will at the time of entering
into the Merger Agreement provide for xxxxxxx money of one hundred thousand
dollars ($100,000) subject to such customary and reasonable conditions with
respect to its return as Buyer shall require. This letter of intent shall
not be construed as creating an obligation on the part of any shareholder of
the Company to vote in favor of approval of the Merger.
5. Carry On in Ordinary Course. From the date of execution hereof
and until the execution of the Merger Agreement or termination of
negotiations as provided in Section 8, whichever first occurs, the Company
shall conduct and carry on the Company's business only in the ordinary
course of business. Until such time, the Company also shall use its
commercially reasonable efforts to preserve the Company's relationships,
customers, clients and employees and to preserve for Buyer the integrity and
reputation of the Company.
6. Exclusive Dealing. From the date of execution hereof and until
the execution of the Merger Agreement or the termination of negotiations as
provided in Section 8, whichever first occurs, the Company (and its
shareholders, agents and representatives) will not take, directly or
indirectly, any action to initiate, continue, assist, solicit, or encourage
any offer or inquiry from any person to engage in any Business Combination
(as defined below), except if the Company's Board of Directors (the "Board")
determines such action is required by fiduciary duties of the Board (any
such determination to be referred to as an "Exercise" of the "Board's
Duties"). If the Company (or its shareholders, agents or representatives)
receive from any person any offer, inquiry or informational request with
respect to any Business Combination, the Company will promptly advise Buyer
of such offer, inquiry, or request and deliver a copy of any such written
offer, inquiry or informational request. For purposes hereof, "Business
Combination" means (a) any merger, consolidation, share exchange,
combination or other similar transaction to which the Company is a party,
(b) any sale, dividend, split or other disposition of capital stock or other
equity interest of Company, (c) or any sale, lease, exchange, mortgage,
pledge, transfer or other disposition of 10% or more of the assets of the
Company, in a single transaction or series of transactions; or (d) any
tender offer or exchange offer for 10% or more of the outstanding shares of
capital stock of the Company or the filing of a registration statement under
the Securities Act of 1933, as amended, in connection therewith. For
purposes of this Section 6 and Section 8, the "Company" shall mean the
Company and its subsidiaries, taken as a whole.
In addition, from the date of your execution hereof and until the
execution of the Merger Agreement or the termination of negotiations as
provided in Section 8, whichever first occurs, the Company will not issue
any additional shares of capital stock, or securities or other instruments
convertible into capital stock, of the Company.
7. Due Diligence. The consummation of the transaction shall be
subject to the completion of such legal, accounting and business due
diligence as is satisfactory to Buyer in its sole discretion. Promptly
following execution and delivery of this letter, the Company will provide
Buyer and its representatives with full access, upon reasonable prior
notice, to the Company's assets, properties, contracts, books, records,
personnel and key customers and all such other information and data
concerning the Company and the operation of the Company as Buyer or its
representatives reasonably may request in connection with such
investigation. Buyer acknowledges it has entered into a Confidentiality
Agreement, dated November 14, 2000, with you and agrees that our due
diligence will be conducted in accordance with and governed by the terms
thereof.
8. Binding Effect; Termination.
(a) This letter is not intended to constitute a binding and
enforceable contract (except for the provisions of Sections 5, 6, 7 and the
provisions of this Section 8). Rather, it is a letter of understanding
which, if accepted by you, will obligate the Buyer and the Company (and its
shareholders) to negotiate diligently and in good faith with the other for
the purchase and sale of the Shares until February 16, 2001, or such time as
either party notifies the other in writing that it desires in good faith to
terminate negotiations, whichever first occurs.
(b) In the event that (i) the Company breaches any provision of
Section 6 or this Section 8, (ii) the Company attempts to renegotiate any of
the material terms or conditions contained in this letter, (iii) the
Company's board of directors Exercises the Board's Duties in accordance with
Section 6 hereof, or (iv) the Company enters into any agreement or
understanding with a third-party to enter into any Business Combination
within 180 days after the expiration or termination of this letter and
subsequently closes such Business Combination (regardless of whether such
closing occurs within such 180-day period), then the Company shall pay
Buyer, in cash, and immediately upon the presentation of Buyer's invoices
therefor, an amount equal to the aggregate amount of Buyer's costs, fees and
expenses of counsel, accountants, financing sources and other experts and
advisors incurred in connection with the investigation, negotiation,
documentation, financing and consummation of the transactions contemplated
by this letter, including the commitment, legal and other costs, fees and
expenses of financing sources for which Buyer is responsible (collectively,
the "Buyer's Costs") plus $25,000. The payment of such amount pursuant to
this Section 8(b) shall be the sole and exclusive remedy available to the
Buyer in connection with the foregoing enumerated reasons for termination of
negotiations between Buyer and the Company relating to the Merger Agreement.
(c) If by February 16, 2001 (i) Buyer is ready, willing and able to
sign the Merger Agreement in form and substance reasonably satisfactory to
the Company, subject only to the Buyer's ability to obtain voting power with
regard to least 17.5% of the Company's issued and outstanding voting shares
("Minimum Voting Power") in the form of: (A) shares or commitments to
immediately sell shares (in either case at the price per share to be paid to
all shareholders pursuant to the Merger Agreement) or (B) agreements to vote
in favor of approval of the Merger (in each case in a form reasonably
acceptable to Buyer), and (ii) the Company is unable to deliver Minimum
Voting Power, the Company shall pay Buyer the Buyer's Costs plus $25,000.
The payment of such amount pursuant to this Section 8(c) shall be the sole
and exclusive remedy available to the Buyer in connection with the foregoing
enumerated reasons for termination of negotiations between Buyer and the
Company relating to the Merger Agreement.
(d) The Merger Agreement will contain provision similar to the
provision contained in Section 8(b); however, the payment to Buyer under the
Merger Agreement will be for a flat termination fee of $200,000 plus Buyer's
Costs up to $100,000. In addition, the Merger Agreement will contain a
condition which permits the Buyer to terminate the Merger Agreement and
receive a flat termination fee of $150,000 (which shall be payable in cash
within 60days after the Merger Agreement is terminated) if the Buyer has
waived any remaining due diligence condition contained in the Merger
Agreement (or such condition has expired according to its terms), and the
Company is unable to promptly thereafter deliver to the Buyer voting power
(in addition to the voting power contemplated by Section 8(c) above) with
regard to least 42% of the Company's issued and outstanding voting shares in
the form of: (A) shares or commitments to immediately sell shares (in either
case at the price per share to be paid to all shareholders pursuant to the
Merger Agreement) or (B) agreements to vote in favor of approval of the
Merger in a form reasonably acceptable to Buyer. Buyer acknowledges that
the sale of shares referenced in the preceding sentence will be effected
without a written purchase agreement. The Merger Agreement will contain a
provision which states that the Buyer shall be entitled to exercise one, but
not both, of the remedies described in the first two sentences of this
Section 8(d). Except for the foregoing, the Merger Agreement will provide
that each party is responsible for the payment of its own respective costs
and expenses.
(e) In the event that the Buyer (i) breaches any provision of
this Section 8, or (ii) subject to Section 7 of this letter (and the
resulting impact of the Buyer's due diligence investigation on the terms and
conditions of this letter), attempts to renegotiate any of the material
terms or conditions contained in this letter, then Buyer shall pay the
Company, in cash and immediately upon the presentation of the Company's
invoices therefor, an amount equal to the aggregate amount of the Company's
costs, fees and expenses of counsel, accountants, and other experts and
advisors incurred in connection with the investigation, negotiation,
documentation and consummation of the transactions contemplated by this
letter, up to a maximum amount of $50,000 (collectively, the "Company
Costs"). The payment of the Company Costs pursuant to this Section 8 shall
be the sole and exclusive remedy available to the Company in connection with
foregoing enumerated reasons for termination of negotiations between Buyer
and the Company relating to the Merger Agreement.
9. Miscellaneous. This letter may be executed by facsimile and may
be executed in two counterparts, each of which shall be deemed an original,
but which together shall constitute one and the same instrument.
If the foregoing terms are acceptable to the Company, please so
acknowledge by executing and returning the this letter by facsimile to (630)
684-9114 not later than 5:00 p.m. on January 17, 2000.
Very truly yours,
Forest Lake Partners LLC
By: /s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------
Xxxxxxx X. Xxxxxxxxx, Manager
Agreed and accepted by the Company this 17th day of January, 2001.
Xxxxx Foods, Inc.
By: /s/ Xxxx Xxxxx
---------------------------------
Xxxx Xxxxx, Chairman of the Board
