Exhibit 99.1
Advanced Technologies Group. Ltd.
00 Xxxxxxxx 0xx Xxxxx
Xxx Xxxx, X.X. 10004
000.000.0000 Fax: 000-000-0000
xxx.xxxxxxxx.xxx
December 3, 2006
Messrs. Xxxxxx Xxxxxxxxxxx and Xxxxxx Xxxxxx
Dialog International Inc.
0000 Xxxxxxx Xxxxxx
Xx. Xxx, Xxx Xxxxxx 00000
Re: Proposed Acquisition of Dialog International, Inc. (hereinafter "Dialog",
or "Acquiree") by Advanced Technologies Group, Ltd. (hereinafter "ATG")
Dear Messrs. Xxxxxxxxxxx and Xxxxxx:
This Letter sets forth the principal terms of the understanding between ATG and
Dialog concerning the exchange of all the issued and outstanding capital stock
of Dialog for the issuance of a number of shares of ATG's Common Stock as shall
be computed by the formula set forth herein below (the "Exchange Shares"). This
Letter is not a binding contract, and is subject to execution of a formal
Acquisition Agreement (the `Agreement) It is agreed that the Agreement shall
embody the terms and conditions set forth herein, as well as such additional
terms and provisions as are usual and customary to agreements of the nature
contemplated hereby.
The parties understand and agree as follows:
1. Dialog currently owns, or by the Closing Date shall own, not less than
FIFTY-ONE (51%) PER GENT of the total issued and outstanding capital stock
of OAO Star Galaxy. Inc., a corporation formed under the laws of the
Russian Federation, which, in turn owns ONE HUNDRED (100%) PER CENT of the
total issued and outstanding capital stock of COO Star Galaxy Managing
Company, Inc., a corporation formed under the laws of the Russian
Federation, and ZAO Aires. Inc., a corporation formed under the laws of the
Russian Federation, which operates a number of entertainment centers in
Russia, and has certain other activities, all as more specifically
described in the business plan delivered, or to be delivered, to the
Company (the "Star Operation") and the parties understand and agree that
the Dialog Operations shall continue to be operated exclusively by Dialog's
present management team (the "Dialog Management") and shall be operated
according to the terms and conditions set forth in the Agreement which
terms and conditions shall survive the closing of the contemplated
acquisition.
2. Dialog is a corporation duly organized. validly existing and a Certificate
of incorporation is issued pursuant to the provisions of the applicable
laws of the State of Delaware and a majority of the issued and outstanding
shares of common stock of Dialog are owned by you. Dialog continues to be a
corporation in good standing under the laws of its incorporation. None of
Dialog's securities are qualified to trade in any public market either in
the United States or elsewhere.
3. ATG is a corporation duly organized, validly existing by virtue of the laws
of Nevada. ATG has the subsidiaries and other business interests as have
been or may be described in the Agreement. ATG is in good standing under
the laws thereof. The authorized capital stock of ATG consists of
100,000,000 Shares of Common Stock, $.0001 par value per Share: 100,000,000
Shares of Series A, 13% Cumulative Convertible Preferred Stock: and
7.000,000 Shares of Series B. 6% cumulative Convertible Preferred Stock. As
of January 31, 2006, there were 17,263,140 shares of Common Stock issued
and outstanding; 880,566 Shares of Series A Preferred Stock outstanding,
with each such share convertible into 1 share of Common Stock; and
1,713,598 Shares of Series B Preferred Stock outstanding, with each such
share convertible into 1 share of Common Stock. In addition, ATG also had
outstanding as of January 31, 2006, 2,898.158 common Stock Purchase
Warrants, each granting the holder the right to purchase one additional
share of Common Stock at an exercise price of $5.00 per Share. ATG has
taken all requisite corporate action required under its Certificate of
Incorporation, Bylaws and/or the laws of the State of Nevada. to the extent
necessary to enter into this Agreement and carry out the terms and
conditions to be performed by it. Further, there exist no other agreements.
options tights or instruments that would require or permit ATG to issue any
additional securities of any class to any person or entity, except as
otherwise specified in the Agreement.
4. The parties desire and intend to enter into a transaction whereby ATS will
acquire 100% of the issued and outstanding securities of Dialog in exchange
for Exchange Shares. At the Closing of the transaction contemplated herein.
ATG will cause to be issued to the shareholders of Dialog (the
"Shareholders") the Exchange Shares in exchange for all of the issued and
outstanding shares of Dialog. The Exchange Shares shall be issued to the
Shareholders in proportion to their ownership of the Dialog shares being
exchanged. If actual certificates are not available ATG shall deliver
irrevocable instructions to its transfer agent to issue the Exchange
Shares.
5. The method of determination of the initial number of Exchange Shares to be
issued by ATG will be determined via separate agreement and parties
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hereby agree to set the formula prior to the execution of a formal
Acquisition Agreement (the "Agreement")- As an example below is listed one
of the possible forrnulas
Initial exchange Shares = (2 x Dialog's Gross 2006 Revenues) +
Dialog's Net Tangible Assets at December 31. 2006. with one Exchange
Share being issued for each dollar.
6. The parties confirm their understanding and intent that With respect to the
initial Exchange Shares deliverable at the Closing hereof. all of such
Exchange Shares shall be issued so that the Shareholders shall have all the
rights and entitlements of shareholders of ATG, but certificates
representing 50% therefore shall be held in escrow by an escrow agent
acceptable to all parties pursuant to a separate Escrow Agreement (the
"Dialog Escrow Shares") pending the re-calculation of the Exchange Shares
as discussed below.
7. The parties understand and agree that the number of Exchange Shares shall
be re-calculated at the end of 2008 based upon the audited financial
statements of Dialog for its 2008 fiscal year and an appropriate adjustment
to the number of Exchange Shares issueable shall then be made either
positively or negatively based upon Dialog's financial results at that
time. according to the following formula
Final Exchange Shares = [(2 x Dialog's Gross 2008 Revenues) + Dialog's
Net Tangible Assets at December 31. 2008] x Total Dialog Percentage of
Company Operations;
Total Dialog Percentage of Company Operations are equal to the actual
percentage of total net operating revenues attributable to Dialog and shall
be computed based upon the total Net Operating Revenues of both the Dialog
and of the PromotionStat as shall be determined by the Company's
independent certified public accountants as of December 31, 2008 (or in the
case of PromotionStat. as of January 31, 2009, based upon its current
fiscal year end).
8. The Exchange Shares will be subject to satisfaction of the registration
requirements under the Securities Act of 1933. as amended (the Act) and
confirmation that the transaction does not otherwise violate the Act or the
laws of any state having jurisdiction over either Acquiree or ATG. The
Exchange Shares will be "restricted securities" as that term is defined
under the Act and appropriate legends will be placed upon the certificates
representing the Exchange Shares and appropriate stop transfer instructions
shall be placed against them on the transfer books of ATG. Shareholders
shall each execute and deliver to ATG an Investment Letter for the Exchange
Shares in form and content satisfactory to Counsel for ATG.
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9. This exchange is intended to qualify as a tax-free reorganization under
Section 368 of the internal Revenue Code so that the Exchange Shares will
be received by the Shareholders on a tax-free, or tax-deferred basis
10. Effective the closing date of the proposed transaction, the Board of
Directors of Alt shall be expanded to seven (7) members which shall consist
of the three existing directors of ATG plus four additional directors that
shall be nominated by the present shareholders of Dialog.
11. It is expressly understood and agreed that if approval of the Agreement
requires the affirmative consent of shareholders, both Dialog and ATG shall
obtain such consent prior to the Closing Date. The officers and directors
of both Dialog and ATG agree that they will take all action necessary to
secure such consent prior to the Closing Dates. Further, such officers and
directors hereby irrevocably commit they shall vote any shares of their
respective companies owned by them in favor of the proposed transaction
12. With respect to the separate operations of both Dialog and PromotionStat,
it is understood and agreed that all operational decisions relating to such
companies shall be determined by the separate boards of directors of each
such subsidiary without interference by the directors of the other
subsidiary. In the event that the Board of Directors of ATG shall at any
time decide to take any action that may affect the operations or separate
assets of either subsidiary company then, in such event such action shall
require the unanimous affirmative vote of the entire Board of Directors.
13. The patties acknowledge that ATG may be required to make an appropriate
disclosure of the fact and pendency of the present negotiations between
Dialog and ATG and of the general provisions of this Letter. Such
disclosure is, or may, be required in order to comply with applicable state
or federal securities laws. The parties hereto expressly consent to such
disclosure pursuant to the reasonable direction of ATG and its counsel upon
and after consultation with Dialog regarding the nature and extent of such
disclosure.
14. The parties understand and agree that the following additional conditions
shall be conditions precedent to be met before a Closing of the transaction
contemplated hereby:
a. Dialog shall deliver to ATG audited financial statements for each of
the two most recent fiscal years since its inception or such lesser
period if it has not been in existence for less than two years. Such
financial statements shall be presented in conformity with generally
accepted accounting practices and specifically conforming with the
requirements of Regulation S-B, S-K and/or S-X, as such may be
applicable under the Securities Act of 1934, as amended. In the
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event that between the date of this letter and the Closing Date, as
defined in the Agreement Dialog shall have passed the end of its
fiscal year then the financial statements referred to herein shall be
audited statements for such newly concluded year as part of Dialog's
obligation hereunder. Dialog agrees to authorize its independent
accountants and other employees to cooperate fully with ATG's
employees, accountants and attorneys and to disclose all information
relevant to either the financial statements provided hereunder or to
ATG's due diligence investigation of Dialog.
b. Dialog shall deliver to ATG copies of its Articles of Incorporation
and By-Laws, including all amendments thereto and a certificate of
good standing in its state of incorporation and all other states where
it is required to be authorized to do business. All such certificates
shall be dated within 30 days of the Closing Date.
c. ATG shall deliver to Dialog copies of ifs Articles of incorporation
and By-Laws, including all amendments thereto and a certificate of
good standing in its jurisdiction of incorporation and alt other
states wherein it is required to be authorized to do business. All
such certificates shall be dated within 30 days of the Closing Date.
d. Such other opinions and documents as may be required by the formal
Agreement contemplated by this Letter.
e. The parties shall use their best efforts to enter into a formal
Agreement on or before December 31, 2006. and achieve a Closing of the
proposed transaction within 120 days thereafter.
f. Pending the Closing Date, neither ATG nor Dialog will incur any
indebtedness other than in the ordinary course of business, and will
not commit to any material undertakings, programs or projects without
the prior written consent of the other party.
g. Pending the execution of the Agreement and the consummation of the
transaction, ATG and Dialog shall each provide to the other and their
representatives, full access to their books and records, including,
without limitation, their books or original entry ledgers, minute
books, stockholders' lists, contracts, and all other documents
maintained by them in their business operations and reasonably
requested in connection with their due diligence investigation.
15. Each party hereto shall indemnify and hold harmless the other party at all
times after the date hereof against and in respect to any liability, damage
or deficiency, all actions, suits, proceedings, demands, assessments,
judgments, costs and expenses, including reasonable attorney's fees
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resulting from any misrepresentation, breach of covenant or warranty for
non-fulfillment of any agreement on the part of such party under this
Letter or the final Agreement contemplated hereby or from any
misrepresentation in or omission from any certificate furnished or to be
furnished to a party hereunder or under the terms of the final Agreement.
Subject to the terms of this Letter or the final Agreement contemplated
between the parties, the defaulting party shall reimburse the other party
on demand for any reasonable payments made by said party at any time after
the date of this Letter or of the Final Agreement in respect to any
liability or claim to which the foregoing indemnity relates, provided that
such payment is made after reasonable notice to the other party to defend
or satisfy the same and such party shall fail to do so.
If the foregoing accurately sets forth our understanding of the discussions and
intentions of the parties, please indicate the same by dating and executing this
letter where indicated below.
Very truly yours,
Advanced Technologies Group. Ltd.
By: /s/ Xxxx Xxxxxx
-------------------------------------
Xxxx Xxxxxx, President
December 3, 2006
ACCEPTED AND CONFIRMED:
Dialog International, Inc.
By /s/ Xxxxxx Xxxxxxxxxxx
-------------------------------------
Print Name: Xxxxxx Xxxxxxxxxxx
Print Title: President
December 3, 2006
ACCEPTED AND CONFIRMED BY THE UNDERSIGNED SHAREHOLDERS:
/s/ Xxxxxx Xxxxxxxxxxx
----------------------------------------
Xxxxxx Xxxxxxxxxxx
December 3, 2006
/s/ Xxxxxx Xxxxxx
----------------------------------------
Xxxxxx Xxxxxx
December 3, 2006
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