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EXHIBIT 1
LETTER OF INTENT
This Letter of Intent ("LOI") is entered into and effective the 24th
day of August, 1999 between Pacific Softworks, Inc. ("Pacific") a California
corporation, and ApplianceWare, Inc. ("Xxxx"), a California corporation,
collectively (the "Parties") under the following terms and conditions.
1. Pacific, through its wholly owned subsidiary Pacific Acquisition Corp
("PAC"), will issue 1,846,154 shares of Pacific common stock in
exchange for the acquisition of 100% of the stock of Xxxx (the
"Acquisition"). As of August 24, 1999, the date of approval by
Pacific's Board of Directors, this Acquisition is valued at $12,000,000
as based upon Pacific's closing price of $6.50 per share on that date.
The parties hereto contemplate that the Acquisition will be structured
as an IRS Code 368(a) tax free reorganization with an effective date of
October 1, 1999 and a closing date no later than October 31, 1999.
2. Pacific shall form a US subsidiary tentatively known as Appliance Net
("Appliance"). Xxxx'x stockholders' shall participate in the ownership
of Appliance proportionate to (1) Pacific's ownership in Appliance and
(2) the shares of Appliance in any dividend trust deemed to be a
dividend return for the beneficial ownership of Pacific's stockholders.
Xxxx'x stockholders will own, through attribution, a pro rata portion
of the shares held by Pacific prior to declaration of the dividend and
the shares of the dividend trust as based upon Xxxx'x ownership of the
shares in Pacific prior to the dividend.
3. Xxxx shall have free and clear title to certain intellectual property
and software technology without any liabilities or commitments other
than what may be disclosed during the diligence to be performed by the
Parties prior to consummation of the Acquisition.
4. Xxxx shall have acquired and established certain operating rights
("Operating Rights") with respect to the software technology and the
marketing of software technology and related services, and the design,
manufacture and distribution of hardware.
5. Upon completion of the acquisition of Xxxx by Pacific, Pacific shall
elect one of Xxxx'x existing stockholders, Xx. Xxx Xxxxxxxxx or his
designee, on the Board of Directors of Pacific and Appliance.
6. In selecting the Chief Executive Officer and any Vice Presidents for
Pacific and Appliance, Xxxx'x existing stockholders, as represented by
Xx. Xxx Xxxxxxxxx or his designee, will be given the right to
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participate in the selection, choice and recommendation for employment
of any candidates. Pacific may not proceed in the selection process
without resolution and agreement by said representative of Xxxx'x
existing stockholders whose approval may not be unreasonably withheld.
7. The Parties represent and warrant that no brokers, investment bankers
or other "finders" are involved in introducing the Parties to each
other and that no brokers fees, investment bankers or other finders are
owed to any person.
8. This LOI is further subject to and conditioned upon the satisfaction of
the following conditions:
(a) The negotiation, execution and delivery of a definitive
binding written agreement and such other documentation as may
be necessary or appropriate (the "Acquisition Agreement"), all
in form and substance satisfactory to the Parties, and will
include customary representations and warranties which shall
survive the closing of the Acquisition as well as customary
conditions precedent and indemnification;
(b) The completion by the Parties and their respective
accountants, counsel and other experts of a customary due
diligence investigation with respect to the business and
affairs (including business, financial and legal matters) of
Pacific, and Xxxx and the resolution, in a manner satisfactory
to the Parties of any and all issues raised as a result of
such investigation; including but not limited to Pacific's
anticipation that the Acquisition will yield at least $2.0
million in Earnings Before Interest and Taxes ("EBIT") during
the first year following the effective date of the
Acquisition.
(c) The receipt of all necessary and appropriate corporate
stockholder, and governmental approvals by the Parties to
enter into, and consummate the transactions contemplated by
the Acquisition;
(d) The obtaining of such consents and approvals from third
parties as may be required in order lawfully to consummate the
Acquisition without violating any contract or rights of third
parties; and
(e) The occurrence prior to the Closing Date (as defined within
the Acquisition Agreement) of no material adverse change in
the financial condition, business or prospects of any of the
Parties and no threatened litigation with respect to the
transactions contemplated hereby or otherwise with respect to
any of the Parties.
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9. The Parties represent to each other that each has the necessary power
and authority to execute and deliver this LOI. By executing and
delivering this LOI the Parties represent that to their knowledge
neither of the Parties nor any stockholder of the Parties is in
violation of, breach of or default under any material contract,
agreement or understanding, whether oral or written, to which the
Parties or stockholders is a party.
10. This LOI is only an expression of mutual interest by the Parties
concerning some aspects of the proposed transactions described herein,
it being understood that all of the material terms of such proposed
transactions are not yet agreed upon among the Parties and still must
be agreed upon mutual satisfaction of the Parties.
11. For and during the period of time commencing with the date hereof and
ending on the expiration date of this LOI, or the close of the
Acquisition (whichever occurs first) (the "Lock-Up Period") none the
Parties shall permit any officers, directors, stockholders, employees,
agents or representatives (including without limitation, investment
bankers, attorneys and accountants) to, directly or indirectly
(1) initiate contact with, (2) make, solicit or encourage any inquiries
or proposals by, (3) enter into or participate in any discussions or
negotiations with any other entity with respect to an acquisition
of Xxxx, or (4) disclose any of the terms and conditions of the
Acquisition or other information not customarily disclosed concerning
the business and properties of Xxxx or Pacific hereto without the
prior approval of the Parties.
12. It is the further understanding and agreement of the Parties except as
explicitly otherwise set forth in this LOI that (1) no liabilities or
obligations of any kind whatsoever are intended to be created hereby
among the Parties; (2) this LOI is not intended to constitute a legally
binding contract or to consummate the proposed transactions described
herein and is not an agreement to enter into a legally binding
agreement, (3) any binding legal obligation of any nature among the
Parties shall be only set forth in the definitive agreement; (4) no
party may claim any legal rights against the other by reason
of the execution of this LOI or by taking any action in reliance
thereon and (5) each Party shall bear their own costs in connection
with this LOI, any due diligence and the Acquisition contemplated
thereby.
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13. Pacific and Xxxx intend in good faith to use their best efforts to
proceed promptly with the negotiation, execution and the delivery of
the definitive agreement and the closing transactions contemplated by
this LOI. This LOI shall terminate and shall be of no further force or
effect if the Acquisition Agreement has not been approved by Pacific's
and Xxxx'x Boards of Directors, all required regulatory agencies and,
if required, submitted to the stockholders of Pacific and Xxxx for
approval no later than October 31, 1999 or any other date that may be
mutually acceptable to the Parties.
AGREED: AGREED:
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Xxxxx X. Xxxxxxx Xxx Xxxxxxxxx
Chief Executive Officer Chairman and CEO
Pacific Softworks, Inc. ApplianceWare, Inc.
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