LETTER OF INTENT
The
purpose of this Letter of Intent is to establish the basic points of agreement
between Vinyl Trends, Inc., hereinafter referred to as “Seller”, and 360
Interchange, Inc., hereinafter referred to as “Buyer”, concerning the
formalizing of their relationship such that Buyer will purchase all of the
shares of Seller as set forth below. It is agreed that this instrument
represents an outline for discussion and an aid for the composition of a formal
and binding agreement between these parties. It is not intended that this
instrument will be a binding agreement.
1.
Structure
of Transaction:
This
will be a transaction in which Buyer will acquire all the shares of a converted
unlimited liability corporation of the Seller, hereinafter referred to as the
“Business”. Buyer shall be entitled to have the shares transferred into Xxxxx’s
own name or a separate entity as it shall elect.
2.
Cash
Payment:
At
closing, Seller shall receive Buyer’s promissory note in the sum of CDN
$600,000. The payment terms will be CDN $150,000 within four months of closing
and the balance of CDN $450,000 payable in quarterly installments of CDN $37,500
commencing three months after the initial payment. Interest will not accrue
on
said sum.
3.
Share
Issuance:
Buyer
shall agree to issue and Seller shall receive common stock in Buyer with a
value
totaling USD $5,000,000, with a cap of 5,000,000 shares. The value of common
shares that Buyer will issue to Seller will be reduced by $5,000,000 minus
five
times the after-tax net income (in U.S. Dollars) of Seller for the year ended
December 31, 2007 and prepared pursuant to US Generally Accepted Accounting
Principles with no increase or decrease for income or expense items outside
the
ordinary course of business. In particular, but not so as to limit the
foregoing, future year sales will not be treated as current year sales and
expenditures on capital assets will be amortized over their useful life. Subject
to pre-approval by Xxxxx, certain Seller’s expenses incurred in 2007 which will
not benefit 2007 but will benefit 2008 and beyond may be excluded from the
net
income amount. The number of shares to be issued to Seller will be based on
the
value as determined by the formula mentioned formerly divided by the share
value
of Buyer on February 15, 2008. The shares will be issued to Seller at the later
of February 16, 2008 or the close of Xxxxx's audit of the Business’ December 31,
2007 financial statements if Buyer elects to have the Business audited by
outside auditors.
4.
Employment
Agreement:
This
sale is contingent upon Buyer and Seller’s principals, Xxx Xxxxxxx and Xxxxxxx
Xxxxxxx, entering into employment agreements for 2007 and a minimum of five
years commencing January 1, 2008. It is understood the employment agreement
with
Xxx Xxxxxxx will include a base salary of USD $100,000. Xxx will be entitled
to
receive 10% of the net income of the Business for calendar year 2008 that is
in
excess of USD $250,000 net income. Xxx will receive 300,000 stock options,
subject to the terms of the Buyer’s stock option agreement. Both of the Kuepfers
will be agreeing to restrictive covenants to not compete. The agreements will
also entail Xxx Xxxxxxx buying key man life insurance as of the effective date
of the transaction and for the term of the employment agreement with limits
to
be agreed upon between the parties. Xxx’s completion of a full five years of
employment is pivotal to the value of the Business to Buyer and the agreement
will contain an appropriate adjustment to the purchase price for the Business
should Xxx fail to complete his performance for reasons within or beyond his
control. Buyer is also intending to employ other existing employees of the
Business and include them in Buyer’s stock option incentive plan for employees.
| Letter of Intent -1- |
Xxxxx,
Xxxxx, Saladoff
BRIDGES
& XXXXXX
A
Professional Corporation
515
EAST MAIN STREET
ASHLAND,
OREGON 00000
(000)
000-0000 FAX (000) 000-0000
xxx.xxxxxxxxxx.xxx
|
|
5.
Audits
and Records:
Buyer
shall be entitled to audit all of Seller’s financial statements and financial
records for the fiscal years ending July 31, 2004 to the present and Seller
will
fully cooperate in that regard. Seller shall also provide to Buyer detailed
inventory listings and Buyer shall be entitled to audit inventory amounts with
observation and testing by Buyer’s auditors. All of these audits will be at
Buyer’s expense.
6.
Closing:
This
transaction shall close in escrow at __________________________ on
______________,
2007. Buyer shall receive possession of the Business, and be entitled to all
income therefrom, effective _____________.
7.
Indemnification:
Seller
will indemnify and hold Buyer harmless from all liability and claims which
arise
as a result of acts or omissions of Seller in connection with the operation
of
the Business. In particular, this indemnification will include protection
against all claims of patent violation, copyright infringement, and unfair
trade
practices of any sort. The indemnification will include reimbursement of all
costs of defense incurred by Xxxxx.
8.
Confidentiality:
It is
agreed that the composition and performance of this agreement will entail
substantial sharing of information needed to be kept confidential and neither
party will divulge any information received to third parties without the prior
written consent of the party providing the confidential
information.
9.
Representations:
Seller
represents that it has the unencumbered right to make this sale and that it
has
clear title to all assets comprising the Business. Seller has not received
any
notice of violation of the laws of any government entity affecting the Business
or its operation. There are no claims, suits, or other proceedings pending
or,
to the best of Seller’s knowledge, threatened against or affecting the Business.
Seller is duly incorporated and in good standing under the laws of the province
of Ontario, Canada. The officers executing this document have full authority
and
legal capacity to execute same. All financial records delivered are accurate
and
complete to the best knowledge of Seller.
10.
Operation
of the Business:
Prior
to closing, and until possession of the Business is delivered to Buyer, Seller
will operate the Business in the usual manner and endeavor to maintain good
relations with employees, suppliers, and customers.
DATED
this 8th day of February 2007.
|
Vinyl
Trends, Inc.
|
360
Interchange, Inc.
|
|
|
By:_/S/
VINYL TRENDS, INC.
|
By:
/S/ 360 INTERCHANGE, INC.
|
| Letter of Intent -2- |
Davis,
Xxxxx, Saladoff
BRIDGES
& XXXXXX
A
Professional Corporation
515
EAST MAIN STREET
ASHLAND,
OREGON 00000
(000)
000-0000 FAX (000) 000-0000
xxx.xxxxxxxxxx.xxx
|
|
