EXHIBIT 7.1
Xxxxxx X. Xxxx
0000 Xxxx Xxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
March 24, 2000
Board of Directors
Arizona Instrument Corporation
0000 Xxxx 0xx Xxxxxx
Tempe, AZ 85281
Gentlemen:
The purpose of this letter is to propose a merger/business combination
transaction (the "Business Combination") between Arizona Instrument Corporation
("AZI") and a corporation ("NewCo") to be formed and owned by Xxxxxx X. Xxxx,
Xxxxxx X. Xxxxxxxx, and X. Xxxxx Xxxx (the "Proposing Parties"). This letter
sets forth certain details of the proposed offer.
1. Consideration. In the Business Combination, all of the common stock of AZI
will be acquired by NewCo in exchange for $5.00 per share in cash, based on the
approximately 1,363,514 share of AZI common stock outstanding as of January 31,
2000.
2. Financing for the Transaction. The Proposing Parties have arranged to
complete the Business Combination with financing provided primarily by Imperial
Bank and the Proposing Parties which will be supplemented with financing from a
source of mezzanine funding (all financing sources together referred to as the
"Financing Parties"). As further described below, the Financing Parties'
commitment to provide the financing for the Business Combination is subject to
the satisfactory completion of their due diligence investigation.
3. Acquisition Agreement. AZI, XxxXx, and the Proposing Parties agree to act in
good faith to negotiate and cause the execution of a definitive acquisition
agreement (the "Acquisition Agreement") at or before the end of the Due
Diligence Period (as defined herein). The Acquisition Agreement will contain
representations, warranties, covenants and conditions to be agreed upon by the
parties customary for transaction of the type contemplated in accordance with
this letter of intent. The Acquisition Agreement shall provide that the
Proposing Parties and NewCo shall be entitled to a termination fee not to exceed
the lesser of their out-of-pocket expenses or $100,000 in the event that (a) AZI
accepts a proposal that would, if consummated, result in a transaction more
favorable to AZI's stockholders from a financial point of view than the
transaction contemplated by the Acquisition Agreement, (b) AZI's Board of
Directors shall have withdrawn or adversely modified its recommendation of the
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Acquisition Agreement to the AZI stockholders, or (c) AZI's Board of Directors
shall have recommended to the AZI stockholders that they approve a proposal
other than the transaction contemplated by the Acquisition Agreement.
4. Contingencies. This offer is subject to (a) the satisfactory completion of a
due diligence investigation by the Financing Parties during the due diligence
period (the "Due Diligence Period") of thirty days that shall commence on the
date. XXX accepts this letter of intent, (b) the negotiation and execution of
the Acquisition Agreement, (c) the receipt by the Board of Directors of a
fairness opinion that the transaction is fair to AZI's stockholders from a
financial point of view, and (d) obtaining all third-party consents required to
complete the Business Combination including approval by the stockholders and the
disinterested members of the Board of Directors (the "Disinterested Directors")
of AZI in accordance with the AZI Certificate of Incorporation and Bylaws.
5. Benefits of the Business Combination. The Business Combination will provide
benefits to the stockholders associated with AZI including the following:
a. The Business Combination values the AZI common stock at $5.00 per
share, which represents a significant (43%) premium to the last bid
price of the AZI common stock of $3.50 on January 27, 2000.
b. The Business Combination will provide valuable liquidity for AZI
stockholders.
c. The present business of AZI would not be disrupted because NewCo
plans to continue such business in the same location and in
substantially the same manner for the foreseeable future.
d. There would be a greater likelihood that AZI's officers and other
employees would continue in their present terms for the foreseeable
future.
e. The customers and vendors of AZI will benefit from the Business
Combination because the relationship they have with AZI will not be
disrupted based on the foregoing plans to continue AZI's business in
substantially the same manner and retain AZI's personnel.
6. Communications. Without the prior consent of the parties hereto, between the
date hereof and the execution date of the Acquisition Agreement, neither AZI,
NewCo or the Proposing Parties nor any of the officers, directors, employees,
affiliates, stockholders or agents of any of them, shall make any statement or
public announcement or any release to trade publications or through the press or
otherwise, or make any statement to any competitor, customer or any other third
party, with respect to the transaction contemplated hereby; provided, however,
that nothing contained herein shall prevent (a) a party from communicating with
those employees who will be involved in facilitating the closing of the
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transaction contemplated hereby, (b) a party from disclosing this transaction to
its lenders or advisors and as required by law, or (c) responding to or
negotiating with other possible acquiring parties.
7. No Solicitation. XXX agrees that the Disinterested Directors and it shall
not, prior to the execution date of the Acquisition Agreement, directly or
indirectly, initiate, encourage or solicit the making, submission or
announcement of any Acquisition Proposal. As used herein, the term "Acquisition
Proposal" means and includes any offer, indication of interest or proposal
(other than by NewCo or the Proposing Parties) (a) to acquire thirty percent or
more of AZI's assets or (b) relating to a transaction which would upon the
consummation thereof result in any person beneficially owning thirty percent or
more of the capital stock of AZI, in either case whether by merger,
consolidation, share exchange, reorganization or other business combination,
purchase of assets, tender or exchange offer or otherwise.
8. Expenses. Each party will be responsible for all of its respective expenses
incurred in connection with this transaction. AZI shall be responsible for all
of the expenses incurred to file with Securities and Exchange Commission the
proxy statement and Schedule 13E-3 required to be filed on behalf of all of the
parties in connection with the Business Combination. If AZI violates paragraph 7
hereof, it shall reimburse to NewCo and the Proposing Parties all of the
expenses not exceeding $100,000 they have incurred in connection with this
transaction from the date hereof through the end of the Due Diligence Period.
9. Termination. Except for paragraphs 6 and 8 hereof, this letter of intent will
automatically terminate and be of no further force and effect upon the earliest
of (a) execution of a definitive Acquisition Agreement, (b) mutual agreement of
all of the parties to terminate this letter of intent, and (c) the end of the
Due Diligence Period. Notwithstanding anything in the previous sentence, the
termination of this letter agreement shall not affect any rights a party has
with respect to the breach of this letter of intent by another party prior to
such termination.
This letter of intent is intended to be, and shall be construed only as a letter
of intent and except for paragraphs 6, 8 and 9 shall not impose any binding
obligations on any person. Except as provided in the immediately preceding
sentence, it is understood that the rights and obligations of the parties remain
to be defined in a definitive Acquisition Agreement into which this letter of
intent shall be merged.
If you are in agreement with the terms set forth above and desire to proceed
with the Business Combination on that basis, please sign this letter of intent
in the space provided below and return it to the undersigned. The offer in this
letter of intent will expire at 5:00 p.m., Arizona time, on February 10, 2000,
unless this letter of intent is signed by AZI on the appropriate line below and
returned to the undersigned such that it is received prior to such time.
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Sincerely, Accepted and Agreed as of
January 31, 2000
Arizona Instrument Corporation
/s/ Xxxxxx X. Xxxx
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By /s/ X. Xxxxxx Xxxxxxx
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Xxxxxx X. Xxxx on behalf of myself, Director
the other Proposing Parties and NewCo Chairman, The Special Committee
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