March 24, 1997
Xx. Xxxxxxxx Xxx-Xxxx, President
XX Xxxxxxx-Vision Expedition, Inc.
0000 X. Xxxxxxx Xxxx., Xxxxx 000
Xxx Xxxxxxx, XX 00000
Dear Xx. Xxx-Xxxx:
The purpose of this letter is to confirm certain tentative agreements
resulting from the various discussions that we have held with you with respect
to the proposed merger of X. X. Xxxxxxx- Vision Expedition, Inc. ("CLTVEI") into
a wholly-owned subsidiary ("TCC Sub") of Tsunami Capital Corporation ("TCC") to
be formed. At the Closing, the TCC Sub will be the surviving entity and the
shareholders of CLTVEI will have their shares exchanged for such number of
shares of TCC common stock as will aggregate not less than 61.4% of the shares
of TCC common stock outstanding upon the Closing (excluding any shares then
issued and outstanding pursuant to the exercise of outstanding options). The
objective of our discussions has been the formation and execution of and
performance under, as soon as feasible, a definitive merger agreement ("Merger
Agreement") between the TCC Sub and CLTVEI. Among other things, the Merger
Agreement would provide for the various matters set forth below.
Parties
-------
The parties to the Merger Agreement shall be the TCC Sub and CLTVEI.
Structure of The Transaction
----------------------------
At the Closing, all of the outstanding shares of the common stock of
CLTVEI ("CLTVEI Stock"), which shall, upon the Closing, be the only class of the
capital stock of CLTVEI then outstanding, be exchanged for an aggregate
14,067,000 shares of the common stock, without par value, of TCC (which shall
result in 61.4% ownership by the shareholders of CLTVEI, 33.4% ownership by the
existing TCC shareholders and 5.2% ownership by Paradise Valley Securities,
Inc.). The transaction would be structured so as to qualify as a tax-free
reorganization under the provisions of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended.
Merger Agreement
----------------
Upon the execution of this letter by you and the return of a signed
copy to us, respective counsel for the parties shall prepare and the parties
shall execute a Merger Agreement containing provisions in accordance with this
letter and such further provisions as the parties shall deem necessary or as
counsel may advise, but which shall in any event be mutually approved by the
parties
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thereto. The Merger Agreement shall contain the normal and usual representations
and warranties, including those with respect to the absence of known material
undisclosed liabilities, etc., as well as such others which counsel may advise.
The Merger Agreement shall also provide that, pending the Closing, the
representatives of the TCC Sub and CLTVEI shall have at all times access to the
books and records of CLTVEI and of TCC, respectively, and shall receive such
further information as they shall from time to time reasonably request. Any
examination, inquiry or investigation conducted by such representatives shall be
conducted in a reasonable manner. Should the transaction contemplated hereby not
be consummated for any reason, and in any event pending the Closing, all
information so acquired (unless ascertainable from public or published
information) shall be kept confidential and not used for any other purpose. All
documents received by either party shall be returned to the party providing the
documents should the transaction not be consummated.
The Merger Agreement shall also provide that the respective obligations
of the parties shall be subject to (a) a favorable review by respective counsel
of such matters as corporate status and proceedings, ownership of assets and the
like; (b) the receipt of the most recent audited financial statements of TCC and
XXXXXX and of any interim statements subsequently issued or prepared; (c) TCC's
reports filed with the SEC showing a financial and business condition acceptable
to the respective parties; and (d) the approval, if required, of all cognizant
regulatory bodies.
As a further condition, the Merger Agreement shall provide that upon
the Closing the amount of unrestricted cash owned by TCC shall be not less than
$800,000, which amount shall be in excess of all other assets including those
required to discharge all liabilities, claims or liens in full, and exclusive of
the proceeds of any exercise of any stock purchase warrants or other stock
purchase rights. The preceding sentence does not modify the foregoing provision
that TCC's financial condition shall be acceptable to CLTVEI.
The Merger Agreement shall also provide that, as an inducement to
CLTVEI, any person or persons holding any demand registration rights or any
rights to nominate any director of TCC (other than rights arising out of the
holding of voting stock) shall surrender the same and release TCC from any
obligations in connection therewith.
Private Placement
-----------------
The Closing shall be subject to the condition that there shall be an
agreement in effect between TCC and Paradise Valley Securities, Inc. ("PVSI")
with respect to a future private placement of securities by TCC in which PVSI
will be the exclusive placement agent, such agreement to be substantially in the
terms attached hereto as Exhibit 1.
Capitalization of TCC
---------------------
The obligations of CLTVEI under the Merger Agreement would be subject
to the condition
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that the authorized capital stock of TCC be 200,000,000 shares of common stock,
of which no more than 7,644,534 shall be outstanding at the Closing and options
for the purchase of no more than 1,063,000 additional common shares), and
10,000,000 shares of preferred stock, none of which shall be outstanding, and
there shall be no outstanding options, warrants, rights or commitments to
acquire or issue any stock except for the options mentioned above.
Events Subsequent to the Execution of this Letter
-------------------------------------------------
It is contemplated that pending the preparation of the Merger
Agreement, the following events will occur (which are described herein as a
guide to the parties and not as any limitation of the provisions of the Merger
Agreement).
1. Bridge Financing. Concurrently herewith, TCC is lending $500,000 to
CLTVEI pursuant to the terms of a promissory note attached hereto as Exhibit 2.
The promissory note shall be due December 31, 1997 and shall bear interest at
the rate of 10% per annum.
2. Compliance with Securities Act. TCC will prepare and distribute an
appropriate offering document to each of the shareholders of CLTVEI or comply
with any other applicable securities law exemption in order to comply with all
federal and state securities laws and the rules and regulations promulgated
thereunder with respect to the issuance to the shareholders of CLTVEI and
registration (or exemption therefrom) of the TCC Stock. It is understood that
all of the securities proposed to be issued by TCC will be restricted within the
meaning of the federal securities laws. The parties acknowledge that they are
familiar with the nature of such restrictions and with the provisions of SEC
Rule 144.
3. Exchange Act Obligations. Pending the Closing, TCC will prepare and
duly file such reports and/or other documents as are required by federal and
state securities laws and the rules and regulations promulgated thereunder. At
the Closing, TCC and its controlling persons will deliver duly executed
indemnification agreements to CLTVEI with respect thereto and, TCC's counsel
will deliver their opinion to CLTVEI to the effect that such reports or other
documents are in full compliance with such laws, rules and regulations, all to
be in such form as counsel to CLTVEI may reasonably require.
4. Conduct of Business. Pending the Closing, CLTVEI will conduct its
business in the normal course and TCC will conduct no business.
5. Shareholder and Director Action. TCC will accomplish such Director
and/or Shareholder and other action as shall be necessary to authorize the
proposed transaction.
6. Directors of TCC. TCC will cause persons nominated by CLTVEI to
constitute the entire Board of Directors of TCC immediately upon the Closing;
provided that the existing Board of Directors of TCC shall have the right to
appoint one nominee to the Board of Directors who shall be acceptable to CLTVEI.
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Specific Agreements
-------------------
In consideration of the substantial expenditures of time, effort and
money to be undertaken by the parties in connection with the proposed
transaction, it is specifically agreed that neither TCC nor CLTVEI shall from
the date hereof until July 31, 1997 (provided that, in the case of any
withdrawal by CLTVEI, the Bridge Financing is repaid in full), enter into or
conduct any discussions with a view to any transaction in which any shares of
TCC stock will be issued to any non-party or in which any non-party will acquire
all or substantially all of the assets and business of CLTVEI, or CLTVEI Stock
held by any of its shareholders, or any newly issued CLTVEI Stock, except upon
the exercise of presently outstanding options, warrants or other rights for the
TCC Stock.
Except for the specific agreement set forth in the immediately
preceding paragraph and the confidentiality provisions in the first full
paragraph on page 2, this letter is intended to be, and shall be construed only
as, a letter of intent summarizing our discussions to date and not as an offer
to purchase any CLTVEI or TCC stock or as a merger agreement with respect to
CLTVEI and the TCC Sub.
If the foregoing is in accord with the understandings of CLTVEI, please
so indicate by signing a copy of this letter and returning it to us, whereupon
it shall constitute a letter of intent between the parties in accordance with
its terms and the parties will instruct counsel to prepare the Merger Agreement.
Very truly yours,
TSUNAMI CAPITAL CORPORATION
/s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxxxx, Vice President
The foregoing is confirmed
as of March 24, 1997
/s/ Xxxxxxxx Xxx-Xxxx
Xxxxxxxx Xxx-Xxxx, on behalf of XX Xxxxxxx-Vision
Expedition, Inc., as its President.
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March 24, 1997
Xxxxxxx Xxxxxxxxx, President
TSUNAMI CAPITAL CORPORATION
00000 X. Xxxxx Xxxx., Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Dear Xx. Xxxxxxxxx:
Paradise Valley Securities, Inc. ("Paradise") desires to act as the
exclusive placement agent for Tsunami Capital Corporation, a Colorado
corporation (the "Company"), in connection with a private placement to be
conducted by the Company shortly after the completion of the Company's merger
with XX Xxxxxxx-Vision Expedition, Inc., a California corporation ("CLTVEI").
The parties hereto acknowledge the Company and CLTVEI have entered into a Letter
of Intent of even date herewith and further acknowledge and agree that they have
entered into this agreement based on the representations and agreements set
forth in such Letter of Intent.
Upon completion of the transactions outlined in the Letter of Intent,
Paradise hereby agrees and commits, during the term of this agreement, to
conduct a private placement of securities, on behalf of the Company, acting as
its exclusive private placement agent, such private placement to raise minimum
gross proceeds of at least $1,000,000. Such private placement would be made
generally on the usual and customary terms and conditions of Paradise for
private placements, however, the parties understand and agree that the specific
terms and conditions of the private placement shall be subject to a separate
agreement which will specify, amount other things, the security to be sold, the
price at which the security shall be sold and the compensation to be paid
Paradise.
As compensation for Paradise's agreement to conduct a private placement
on the Company's behalf, the Company hereby agrees upon completion of such
private placement to issue to Paradise 1,200,000 shares of the Company's common
stock, without par value, which number of shares will amount to 5.2% of the
outstanding common stock of TCC after the merger with CLTVEI.
EXHIBIT 1
Xxxxxxx Xxxxxxxxx, President
page 2
The term of this Agreement shall be nine (9) months from the date
hereof.
This Agreement is entered into in order to induce XXXXXX to enter into
the Letter of Intent and consummate the transactions contemplated thereby, and
CLTVEI is a third-party beneficiary hereof.
If the foregoing correctly sets forth the terms of our agreement,
please execute and return to me the enclosed copy of this letter.
Very truly yours,
PARADISE VALLEY SECURITIES, INC.
Xxxxxxx X. Xxxxxxxxx, Vice-President
AGREED TO AND ACCEPTED BY:
TSUNAMI CAPITAL CORPORATION
--------------------------------------------
Xxxxxxx Xxxxxxxxx, President
Dated: _____________________________________
ACCEPTED BY:
X X XXXXXXX-VISION EXPEDITION, INC.
------------------------------------
Xxxxxxxx Xxx-Xxxx, President
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NEITHER THIS NOTE NOR THE SHARES ISSUABLE UPON ITS CONVERSION HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED (THE "SECURITIES ACT") OR
THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE MAKER THAT SUCH
REGISTRATION IS NOT REQUIRED.
PROMISSORY NOTE
$500,000.00 March 24, 1997
Los Angeles, California
FOR VALUE RECEIVED, XX XXXXXXX-VISION EXPEDITION, INC., a California
corporation, promises to pay to the order of Tsunami Capital Corporation (the
"Lender") at its principal office or at Lender's option via wire transfer
pursuant to wire transfer instructions given by Lender to Maker prior to the due
date, the sum of Five Hundred Thousand Dollars ($500,000), together with
interest thereon at the rate of ten percent (10%) per annum from the date hereof
until paid; provided that upon the occurrence of a Default (hereinbelow
defined), interest shall accrue on the balance of any unpaid principal and
accrued interest at the rate of eighteen percent (18%) per annum until such
balance is paid.
Principal and accrued interest shall be payable on December 31, 1997.
This Note may be prepaid in whole or in part at any time and from time to time.
If Maker fails to fully and timely pay the principal or the accrued
interest of this Note within ten (10) days of the due date hereunder, the holder
hereof will be entitled to exercise any and all rights and remedies arising
under this Note or as is otherwise available at law or equity, including without
limitation, at the holder's sole option, convert all or any part of this Note
into shares of the Maker's common stock. No waiver of any payment or other right
under this Note or any other related agreement shall operate as a waiver of any
of the payments or rights.
The holder hereof may, at any time after this Note is in Default
(hereinbelow defined) and prior to January 31, 1998, convert all or a part of
this Note into shares of the Maker's common stock. The number of shares of the
Maker's common stock into which this Note may be converted shall be determined
by dividing the principal amount of and the unpaid accrued interest under the
Note by $1.00. Before any holder hereof shall be entitled to convert this Note
into shares of the common stock of the Maker, he shall surrender this Note
together with a duly executed written notice stating the amount of this Note to
be converted and the number of shares of common stock which shall be issued upon
such conversion.
EXHIBIT 2
The occurrence of any of the events specified below shall constitute a
default under this Note ("Default"), and the holder of this Note may, so long as
such condition exists, declare the entire principal amount and accrued interest
thereon immediately due and payable, without notice to the Maker:
(i) Default in the payment of the principal or accrued
interest of this Note when due and payable, which is not cured within
ten (10) days; or
(ii) the institution by the Maker of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by it to
institution of bankruptcy or insolvency proceedings against it or the
filing by it of a petition or answer or consent seeking reorganization
or release under the federal Bankruptcy Act, or any other applicable
federal or state law, or the consent by it to the filing by any such
petitioner of the appointment of a receiver, liquidator, assignee,
trustee or other similar official of the Maker, or of any substantial
part of its property, or the making by it of an assignment for the
benefit of creditors, or the taking of corporate action by the Maker in
furtherance of any such action; or
(iii) If, within sixty (60) days after the commencement of an
action against the Maker (and service of process in connection
therewith on the Maker) seeking any bankruptcy, insolvency,
reorganization, liquidation, dissolution or similar relief, under any
present or future statute, law or regulation, such action shall not
have been resolved in favor of the Maker or all orders or proceedings
thereunder affecting the operations or the business of the Maker
stayed, or if the stay of any such order or proceeding shall thereafter
be set aside, or if, within sixty (60) days after the appointment
without the consent or acquiescence of the Maker of any trustee,
receiver or liquidator of the Company or of all or any substantial part
of the properties of the Maker, such appointment shall not have been
vacated.
Maker and each surety, endorser, guarantor and any other party liable
for payment of any sums due hereunder, jointly and severally waive demand for
payment, presentment, protest, notice of protest and non-payment, or any other
notice of default, notice of acceleration and intention to accelerate, and agree
that their liability under this Note shall not be affected by any renewal or
extension of the time of payment hereof, or in any indulgences, or by the
failure to collect or for lack of diligence to bring a suit on this Note or any
renewal hereof, and hereby consent to any and all renewals, extensions,
indulgences, releases or changes, regardless of the number of such renewals,
extensions, indulgences, releases or changes.
This Note shall be construed according to laws of the State of Arizona
and any action to enforce this Note shall be commenced and maintained in any
state or federal court in the State of Arizona.
If this Note is placed in the hands of an attorney for collection after
default, the Maker, as well as all persons to become liable hereon, agrees to
pay, in addition to the unpaid principal
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and interest due hereon, all costs and reasonable attorney's fees incurred by
the holder hereof in collecting or enforcing the payment of this Note.
Time is of the essence under this Note.
Maker:
XX XXXXXXX-VISION EXPEDITION, INC.
----------------------------------
Xxxxxxx Xxx-Xxxx, President
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