August 1, 2001
Xxxx Xxxxxx, President
Parsecom, Inc.
000 Xxxxxx Xxxxxx X
Xxxxxxx, Xxxxxxx
X0X 0X0 Xxxxxx
Re: Letter of Intent between Organik Technologies, Inc., and Newco, Inc.
Dear Xx. Xxxxxx:
This letter, when countersigned by you, will confirm our agreement for Organik
Technologies, Inc. ("ORGK"), to acquire, in the transaction described below (the
"Acquisition"), all of the outstanding shares of Common Stock of Newco, Inc.
("Newco"). This letter represents our agreement to proceed in good faith to
negotiate and enter into a definitive agreement in form acceptable to us. This
Letter of Intent is subject to satisfaction of those conditions set forth in
Paragraphs 6 AND 7 herein.
1. Authorized and Outstanding Securities of ORGK.
ORGK has outstanding not more than 10,000,000 shares of Common Stock,
no par value and is authorized to issue a total of 50,000,000 shares
of Common Stock. In addition, ORGK has authorized 10,000,000 shares of
Preferred Stock, no par value, of which 11,500 shares have been
issued. No further securities, rights, options, or warrants would be
issued prior to the closing contemplated herein.
2. Authorized and Outstanding Securities of Newco.
Newco will have approximately outstanding 10,000 shares of Common
Stock, and is authorized to issue a total of 25,000 of Common Stock.
Newco has no other securities, or rights, or options, or warrants to
purchase securities, outstanding, and no such securities, rights, or
Letter to Xxxx Xxxxxx, President
Re: Letter of Intent between ORGK and Newco
August 1, 2001
Page 2
options, or warrants would be issued prior to the Closing contemplated
herein.
3. Purchase of ORGK Common Stock.
Upon execution of this Letter of Intent by the parties hereto, Newco
shall purchase from ORGK 8,000,000 shares of ORGK Common Stock at
$.005 per share for a total consideration of $40,000. XXXX agrees to
use the $40,000 only for expenses relating to the acquisition of Newco
by ORGK. The expenses shall include legal, accounting, transfer agent
and consulting costs. The $40,000 shall be placed into a special bank
account requiring two signatures for all transactions. The initial
signatories shall be Xxxx Xxxxxx and X.X. Xxxxxxx.
4. Fundamental Terms.
The acquisition of Newco is intended to be a tax-free exchange of
voting stock whereby the shareholders of Newco would exchange all of
the currently outstanding shares of Newco's Common Stock for shares of
ORGK of approximately 8,600,000 shares after a twenty-to-one (20-to-1)
reverse split of the issued and outstanding Common Stock of ORGK. Such
transaction is intended to comply with the provisions of Section
368(a)(1)(B) of the Internal Revenue Code. At the closing, as to be
defined in the Agreement, ORGK will succeed to ownership of all of the
presently outstanding stock of Newco by an acquisition of such stock
from the holders thereof. As consideration for such transaction, ORGK
will deliver to Newco shareholders 8,600,000 shares of newly issued
shares of Common Stock of ORGK and 500,000 of newly issued shares to
Crosspointe, LLC. The shares to be issued by ORGK are not intended to
be registered with the Securities and Exchange Commission ("SEC") nor
qualified with any state securities agency, but are intended to be
issued in compliance with private placement exemptions under both
State and Federal securities law. The transaction will result in Newco
becoming a wholly owned subsidiary of ORGK.
After the transaction, the current shareholders of ORGK will own
approximately 500,000 shares, Newco will own 9,000,000 and
Crosspointe, LLC, will own 500,000 shares, for an aggregate of
approximately 10,000,000 shares issued and outstanding.
Letter to Xxxx Xxxxxx, President
Re: Letter of Intent between ORGK and Newco
August 1, 2001
Page 3
5. Definitive Agreement.
We mutually agree to proceed in good faith toward negotiation and
execution of a definitive agreement (the "Agreement"), which shall
provide for the Acquisition, and contain representations, conditions,
covenants and the like typical in such transactions.
6. Conditions Precedent to Newco's Obligations.
The obligations of Newco to consummate the Acquisition shall be
conditioned upon the following:
(a) A complete review by Newco of the books, records, business and
affairs of ORGK and the absence, upon completion of such review,
of any material deficiencies, liabilities or legal impediments
affecting ORGK or the Acquisition. As used herein, the term
"material" shall mean any deficiency, liability or impediment
which substantially increases the financial risks to Newco,
actual or potential liabilities which in Newco's reasonable
judgment exposes Newco to unacceptably high risk or impediments
which would make the consummation of the Acquisition
exceptionally difficult or expensive. ORGK agrees to provide to
Newco and its agents, complete access to all of ORGK's books,
records and personnel for purposes of conducting Newco's due
diligence investigation. Xxxxx agrees that all information so
provided by ORGK and identified as "confidential" by ORGK, will
be treated by Newco as such, and all such information will be
utilized by Newco for the sole and limited purpose of its due
diligence investigation relating to the Acquisition. Furthermore,
if Xxxxx should decide not to go forward with the Acquisition, it
will return to ORGK all such confidential documents (and all
copies thereof) in Newco's possession, or will certify to ORGK
that all of such documents not returned to ORGK have been
destroyed by Newco, whichever disposition ORGK directs.
(b) Negotiation and execution of the Agreement with terms, provisions
and conditions mutually acceptable to all parties to this Letter
of Intent.
(c) Approval of the Acquisition by the Board of Directors of Newco.
Letter to Xxxx Xxxxxx, President
Re: Letter of Intent between ORGK and Newco
August 1, 2001
Page 4
(d) If necessary, approval of the Acquisition by shareholders of
Newco.
(e) Receipt of all necessary approvals of regulatory authorities
having jurisdiction over the Acquisition.
(f) There shall be no material adverse change in the business, assets
or financial condition of ORGK through the Closing date.
(g) Appropriate confirmations shall be given as to compliance with
representations, warranties and covenants, and opinions of
counsel, at the Closing of the Acquisition as is customary in
similar agreements.
7. Conditions Precedent to ORGK's Obligations.
The obligations of ORGK to consummate the Acquisition shall be conditioned upon
the following:
(a) A complete review by ORGK of the books, records, business and
affairs of Newco and the absence, upon completion of such review,
of any material deficiencies, liabilities or legal impediments
affecting Newco or the Acquisition. As used herein, the term
"material" shall mean any deficiency, liability or impediment
which substantially increases the financial risks to ORGK, actual
or potential liabilities which in ORGK's reasonable judgment
exposes ORGK to unacceptably high risk or impediments which would
make the consummation of the Acquisition exceptionally difficult
or expensive. Newco agrees to provide to ORGK and its agents,
complete access to all of Newco's books, records and personnel
for purposes of conducting ORGK's due diligence investigation.
XXXX agrees that all information so provided by Xxxxx and
identified as "confidential" by Xxxxx, will be treated by ORGK as
such, and all such information will be utilized by ORGK for the
sole and limited purpose of its due diligence investigation
relating to the Acquisition. Furthermore, if ORGK should decide
not to go forward with the Acquisition, it will return to Newco
all such confidential documents (and all copies thereof) in
ORGK's possession, or will certify to Newco that all of such
documents not returned to Newco have been destroyed by ORGK,
whichever disposition Newco directs.
Letter to Xxxx Xxxxxx, President
Re: Letter of Intent between ORGK and Newco
August 1, 2001
Page 5
(b) Negotiation and execution of the Agreement with terms, provisions
and conditions mutually acceptable to all parties to this Letter
of Intent.
(c) Approval of the Acquisition by the Board of Directors of ORGK.
(d) If necessary, approval of the Acquisition by shareholders of
ORGK.
(e) Receipt of all necessary approvals of regulatory authorities
having jurisdiction over the Acquisition.
(f) There shall be no material adverse change in the business assets
or financial condition of Newco through the Closing date.
(g) Appropriate confirmations shall be given as to compliance with
representations, warranties and covenants, and opinions of
counsel, at the Closing of the Acquisition as is customary in
similar agreements.
8. Covenants.
Pending execution of the Agreement (or termination of this Letter of
Intent, as herein provided), Newco and ORGK agree that they will:
(a) As soon as possible, ORGK will provide Newco with financial
statements of ORGK and its affiliates for the fiscal years ending
December 31, 1999 and 2000. Newco shall provide ORGK with
financial statements of Newco for the fiscal years ending
December 31, 1999 and 2000. Since the date of such financial
statements, Newco and ORGK have not, and through the Closing,
will not have entered into any transactions or contracts other
than in the ordinary course of its business.
(b) Conduct its business only in the ordinary course, and not engage
in any extraordinary transactions without the other party's prior
consent, which consent shall not be unreasonably withheld.
(c) Not dispose of any assets of Newco or ORGK, except in the
ordinary course of business without the other parties prior
consent, which consent shall not be unreasonably withheld.
Letter to Xxxx Xxxxxx, President
Re: Letter of Intent between ORGK and Newco
August 1, 2001
Page 6
(d) Not materially increase the annual level of compensation of any
employee or officer or director of Newco or ORGK except for
normal and customary raises. Furthermore, neither party hereto
shall grant any unusual or extraordinary bonuses, benefits or
other forms of direct or indirect compensation to any employee
except in amounts in keeping with past practices.
(e) Neither party shall issue any equity securities or any securities
convertible or exercisable into equity securities without the
other party's prior consent, which consent shall not be
unreasonably withheld.
(f) Not pay any dividends, redeem any securities or other-wise cause
assets of ORGK or Newco to be distributed to any of its
shareholders except in the ordinary course of business or by way
of compensation of employees who are also shareholders within the
limitations set forth above.
(g) Not borrow any funds, under existing lines of credit or
otherwise, except as reasonably necessary for the ordinary
operation of ORGK's and Newco's business in a manner, and in
amounts, in keeping with the ordinary operation of the business,
without the other party's prior consent, which consent shall not
be unreasonably withheld.
9. Closing.
Subject to completion of the Agreement referred to in Paragraph 5
hereof, and compliance with all conditions to consummation of the
Acquisition, the Agreement will be executed between the parties at a
time mutually agreeable to the parties hereto, with the Closing of the
Acquisition to occur no later than 90 days after the date of this
Letter of Intent, subject to extension by mutual agreement of the
parties.
10. Finders.
Both ORGK and Newco represent that there are no finders or finders fee
associated with this Acquisition.
Letter to Xxxx Xxxxxx, President
Re: Letter of Intent between ORGK and Newco
August 1, 2001
Page 7
11. Non-Disclosure.
Neither party will make any public disclosure of this proposed
transaction or the fact that discussions are taking place without the
prior consent of the other party hereto, which shall not be
unreasonably withheld, provided, that the foregoing shall not preclude
either party from making any disclosure which, in the opinion of its
counsel, are required to be made under applicable Federal and State
securities laws.
12. Approval.
This Letter of Intent is intended to serve as the basis for the
preparation of a definitive agreement containing the foregoing
provisions and such other provisions, representations and warranties
as shall be agreed upon by the parties, which will be submitted to the
Boards of Directors of ORGK and Newco and for their respective
approvals. The definitive agreement may be subject to approval by the
shareholders of ORGK, which approval may be obtained before or after
execution by the parties thereto. Such Agreement shall also be subject
to the approval of counsel for each party as to form, substance, tax
effects and legality.
13. Expenses.
Each party to this Letter of Intent shall bear its own expenses
relating to and incurred in regard to this Acquisition.
14. Arbitration.
In the event that there shall be any dispute arising out of or
relating to this Letter of Intent, the parties agree that within 30
days such dispute shall be submitted to binding arbitration or such
other non-judicial procedures as the parties may agree to at the time,
(such as use of a "Rent-a-Judge") and such dispute resolution shall
occur in San Francisco, California. Arbitration shall be under the
auspices and pursuant to the rules of, the American Arbitration
Association as then in effect, before a tribunal of one arbitrator,
who is mutually agreeable to each of the parties to the dispute. Any
award issued as a result of such arbitration or other non-judicial
procedure shall be final and binding between the parties, and shall be
enforceable by any court having jurisdiction over the party against
whom enforcement is sought. The parties hereto acknowledge that the
purpose of this Paragraph 14 is to prevent the instigation of
Letter to Xxxx Xxxxxx, President
Re: Letter of Intent between ORGK and Newco
August 1, 2001
Page 8
litigation or other judicial processes to resolve any disputes arising
out of or relating to this Letter of Intent except for the purpose of
enforcing a non-judicial judgment.
If the foregoing proposal sets forth your understanding of the arrangement
between the parties, please signify your concurrence with the terms hereof on
behalf of Newco and its shareholders, on the enclosed copy of this letter
Very truly yours,
ORGANIK TECHNOLOGIES, INC.
By: /s/ X X Xxxxxxx
------------------------
X.X. Xxxxxxx, President
Approved and Accepted By:
NEWCO, INC.
By: /s/ Xxxx Xxxxxx Dated: August 3, 2001
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Xxxx Xxxxxx, President
