Exhibit 2.1
Letter Agreement dated as of February 23, 2001 between Arglen Acquisitions, LLC
and the Registrant.
PRIVATE & CONFIDENTIAL
From: Xxxxxxx Xxxx
To: Xxxxx Gyselen Cc. Xxx Xxxxxxx
Date: February 23, 2001
Subject: NOW Solutions, LLC
1. Ownership Structure:
Initial After 1 year After 2 years After 3 years
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VCSY 60% 55% 51% 51%
ARGLEN 35% 37% 38% 34%
MGMT.(1) 5% 8% 11% 15%
(1) If Management does not receive any or a portion of the additional reserved
equity as a consequence of not achieving pre-defined performance benchmarks, the
incremental equity that would have otherwise been earned by the management group
will then be allocated to ARGLEN.
2. VCSY Warrants
VCSY will xxxxx Xxxxxx that number of warrants to purchase 5% of the outstanding
share capital of VCSY (on a fully diluted basis), with anti-dilution protection.
The exercise price of the warrants will be $0.08, and exercisable for a period
of 5 years from the date they become unrestricted as described below:
1/3 of the warrants will be exercisable immediately. Arglen agrees that it will
not sell more than 150% of the average daily volume in any given week.
1/3 of the warrants will be exercisable after year 1.
1/3 of the warrants will be exercisable after year 2.
Arglen shall have reasonable piggyback registration rights with respect to the
shares underlying the warrants described in this paragraph and in paragraphs 3
and 4 below.
3. Minimum VCSY per share price at the End of Year 1
If during the last 90 trading day period in the first year, the per share value
of VCSY, adjusted for any forward or reverse splits and any other dilutive
effect, is less than $0.50, then VCSY will issue Arglen an additional 25,000,000
warrants at an exercise price of $0.08 exercisable for a period of five years
from the date they become unrestricted as described below:
1/3 of the warrants will be exercisable immediately. Arglen agrees that it will
not sell more than 150% of the average daily volume in any given week.
1/3 of the warrants will be exercisable after year 2.
1/3 of the warrants will be exercisable after year 3.
4. Minimum VCSY per share price at the End of Year 2
If during the last 90 trading day period in the second year, the per share value
of VCSY, adjusted for any forward or reverse splits and any other dilutive
effect, is less than $1.00, and Arglen has sold no more than 25% of the shares
previously issued to them, then VCSY will issue Arglen an additional 25,000,000
warrants at an exercise price of $0.08 exercisable for a period of five years
from the date they become unrestricted as described below:
1/3 of the warrants will be exercisable immediately. Arglen agrees that it will
not sell more than 150% of the average daily volume in any given week.
1/3 of the warrants will be exercisable after year 3.
1/3 of the warrants will be exercisable after year 4.
5. VCSY's INITIAL $ 1,000,000 INVESTMENT
When the initial bank loans are completely paid off, a special distribution
schedule will be mutually agreed to, based upon available existing cash flows
and future cash flow needs of the Company, to accelerate the return of VCSY's
initial $1,000,000 equity investment.
6. BANK DEFAULT
In the event that NOW Solutions does not have sufficient funds to repay the bank
debts or any line of credit, and a call is made against the LC or guarantor,
then the equity positions at the time of the cash call will remain the same
until all bank debts are brought current by NOW Solutions.
7. CORPORATE STRUCTURE
As a condition of the transaction between Arglen and your group, the LLC
operating agreement must be finalized before the Close Date with a special
provision whereby the LLC will convert to a C-corporation as soon as
practicable, with a shareholders agreement identical to the LLC operating
agreement except where it is not legally possible.
8. INITIAL $1 MILLION INVESTMENT
Under whatever conditions and comfort you require, the $1 million initial
investment amount will have to be available in NOW Solutions' bank account to
"SHOW" Coast the funds are present. That is one of their conditions.
If Coast is comfortable that the $1 million to be injected into NOW solutions
immediately upon the Close of this deal is held by your attorney, then that is
obviously fine with me as well. Your attorney however must confirm to me in
writing that the funds are in his possession pending closure of this deal.
9. LOAN GUARANTEE
Vertical agrees to guarantee up to $2.2 million of Now Solutions' loan from
Coast Business Credit with a cash pledge of no more than $1.5 million or such
other sums acceptable to Vertical and Coast Business Credit.
10. BEST EFFORTS
The parties agree to use best efforts to execute mutually acceptable document
within two (2) weeks.
Vertical Computer Systems, Inc.
By: Xxxxxxx Xxxx, its President
Accepted and Agreed:
ARGLEN Acquisitions
BY: Xxxxx Gyselen
