LETTER OF INTENT
SECURITIES PURCHASE AGREEMENT BETWEEN
AN INVESTMENT GROUP LED BY XXXX X. XXXXXX AND TOTAL CONTROL PRODUCTS
AUGUST 1, 1997
(NOTE: ALL FIGURES ARE IN U.S. DOLLARS)
I. SECURITIES
A. ASSETS OF XXXXXX MANUFACTURING SYSTEMS:
An investment group led by Xxxx X. Xxxxxx (the Acquirers) will
purchase all of the assets of Xxxxxx Manufacturing Systems including
all intellectual property, office and equipment, customer and prospect
base, rights to business and customer access, and all worldwide
distribution rights, for a total price of $4 million plus net book
value of current assets as of July 31, 1997.
Net book value is defined as including but not limited to the net of
receivables, payables, deferred income, dealer commissions, vacation
accruals and similar unpaid benefits excluding fixed assets described
above.
TCP agrees to release the TMS employees plus those Xxxxxx Industrial
Software employees who are currently working in the TMS group, to be
able to work for TMS after the acquisition by the Acquirers. The
Acquirers will agree not to recruit any additional TCP employees
without the consent of TCP management for a period of 24 months after
closing. TCP agrees to guarantee TMS line of credit of $200,000 for 3
months after closing, and to provide accounting and invoicing services
on behalf of TMS for 3 months after closing.
B. PAYMENT:
TCP will receive $2 million in cash, and $2 million in the form of a
Note from Xxxx Xxxxxx, which will be secured by 250,000 shares of Xxxx
Xxxxxx'x TCP-convertible stock. Payments owed to Xxxxxx Xxxx and
Xxxxxxx Xxxxx in conjunction with this transaction will be paid by the
Acquirers.
In the event that the TMS business is acquired in total on or before
March 31, 1998, by any of the companies on the attached list, the
Aquirers agree to share equally with TCP all proceeds of such
transaction in excess of the purchase price, all costs related to the
transaction, all net profits earned and all additional capital
investments made between August 1, 1997 and March 1, 1998.
C. PAYABLES AND RECEIVABLES:
TCP will transfer to the Acquirers ownership of all payables and
receivables related to the TMS business as of August 1. After August
1, assuming a closing is completed, all newly booked receivables and
all newly booked payables will also accrue to the Acquirers.
D. LIMITED LICENSE FOR PROCESS WINDOW AND WALTZ:
TCP will agree to grant TMS, Inc. a limited license to distribute
and/or private label the Process Window and Waltz software to TMS
customers worldwide, on terms similar to a typical master distributor
contract at a 50% discount.
II. INTEREST AND REDEMPTION
A. INTEREST:
The Xxxxxx Note will bear term interest at a rate of 8% compounded per
annum.
B. REDEMPTION:
The Note will be subject to redemption at the option of the borrower,
at the earlier of a liquidity event (defined below) or in equal parts
at the end of years two, three, four, five and six. The redemption
price will equal the loan amount plus accumulated interest.
C. DEFINITION OF A LIQUIDITY EVENT:
a) A sale or merger (wherein a change of control occurs), b) a
dissolution or winding up, or, c) an initial public offering.
III. FEES
A. TRANSACTIONS FEES AND COSTS:
Costs and fees related to legal accounting and due diligence
activities will be borne respectively by the parties incurring those
costs. The Acquirers will assume the costs and responsibilities for
developing and preparing all documents.
IV. CLOSING
A. Subject to completion of final due diligence, the closing date of this
transaction will be at a place and on a date mutually acceptable to
TCP and the Acquirers, preferably before August 26, 1997.
B. It is understood and agreed that the obligations of the Acquirers to
proceed with this transaction are subject to no substantive negative
change in the TMS business, satisfactory completion of its due
diligence review of TMS, and negotiation, execution, and delivery of
definitive legal documents reflecting the foregoing terms.
Upon acceptance of this term sheet, the Acquirers will consult to a
due diligence review of the TMS, Inc. and preparation of legal
documents relating to this transaction.
C. To the extent permitted by law or subject to the fiduciary duties of
the Total Control Products board of directors, Total Control Products
agrees that during the period of time between acceptance of this
Letter of Intent and 60 days after the closing date specified in
Section IV Paragraph A above, it will not enter into or continue
discussions with any third party, either agent or principal,
concerning possible investment, initial public offering, merger,
acquisition, or other business accommodation relating to the TESS
assets specified in I.A. If the Aquirers should abandon the pursuit
of this agreement for any reason, or alters its terms substantially,
it will release TCP from the commitment not to enter into discussions
with other potential partners.
D. TCP agrees to provide the Acquirers with the information necessary to
complete a final due diligence review satisfactory to Acquirers. The
Acquirers and TCP agree that they will use their best efforts to
negotiate in good faith the terms of definitive documentation
incorporating the provisions of this Letter of Intent, and TCP agrees
that it will make the personnel and business records of TMS available
to the Acquirers and their representatives during normal business
hours.
E. As a sign of its good faith and desire to proceed with consummation of
an investment in TMS on the terms set forth in this Letter of Intent,
and no payment for an option from TCP to consummate such an
investment, the Acquirers hereby attach a check, payable to TCP, in
the amount of $5,000. In the event the Acquirers purchase the assets
hereto described, such amount shall be credited against the purchase
price of such securities. In the event TCP observes all of the
provisions of this term sheet, and Acquirers decide not to proceed
with the investment herein contemplated, such amount shall be retained
by TCP, TCP acknowledges receipt of such payment and the grant of such
option.
F. This offer will expire if not accepted by August 4, 1997.
AGREED AND ACCEPTED: THE XXXXXX INVESTOR
GROUP:
Total Control Products, Inc. By: Xxxx X. Xxxxxx
/s/Nic Gihl /s/Xxxx X. Xxxxxx
______________________ _____________________
By: Nic Gihl By: Xxxx X. Xxxxxx
