March 8, 1995
Fab-Tech Industries of Brevard, Inc.
515 Gus Hipp Boulevard
Rockledge, Florida 32955
Gentlemen:
This will confirm our understanding concerning the proposed acquisition of
the assets and the business operations of Fab-Tech Industries of Brevard, Inc.
("Fab-Tech") by a subsidiary of DynEco Corporation to be organized (collectively
"DynEco") (hereinafter referred to as the "Transaction"). This letter does not
contain all matters upon which agreement must be reached in order for the
Transaction to be consummated, but is intended solely as an outline of certain
material provisions. The essential terms of our understanding are as follows:
(a) ASSETS TO BE PURCHASED. All Fab-Tech assets necessary to conduct the
business of Fab-Tech in the manner in which it is presently conducted
(the "Fab-Tech Assets"). Such categories of Fab-Tech Assets include,
but are not limited to, the assets disclosed in the Fab-Tech "For
management purposes only" Financial Statements for the Fab-Tech fiscal
year ended December 31, 1994, a copy of which is appended hereto as
"Appendix A" (herein the "Fab-Tech Financial Statements").
(b) PURCHASE PRICE. The purchase price for the Fab-Tech Assets shall be
paid as follows:
(i) cash in the amount of $2,250,000 ($U.S.) paid as follows:
(a) $750,000 cash paid at Closing, and
(b) $1,500,000 represented by the delivery of a nonnegotiable
promissory note bearing six (6%) percent annual interest due
and payable on November 30, 1995 (the "Buyer Note"), which
Buyer Note will be secured by the Fab-Tech Assets in a
manner and form acceptable to Fab-Tech; and
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(ii) assumption and payment according to their terms certain Fab-Tech
liabilities identified in the Fab-Tech Financial Statements,
namely:
(a) accounts payable - trade,
(b) payroll taxes payable,
(c) accrued expenses,
(d) SBA loan, and
(e) leases and notes payable; and
(iii) payment of (a) note(s) payable stockholders in the amount of
$93,549 and (b) note(s) payable K. Huber in the amount of
$142,490.69 identified in the Fab-Tech Financial Statements,
in cash or shares of DynEco Common Stock (at an agreed fair
market value at Closing) at the sole option of Fab-Tech;
collectively the "Purchase Price." The "Purchase Price" amount is
based upon the premise that at Closing, the total dollar amount of the
Fab-Tech Assets shall not be less than $1,609,826 and the total dollar
amount of Fab-Tech liabilities shall not be more than $1,142,846. To
the extent that the total dollar amount of the Fab-Tech Assets and/or
liabilities is greater or less than such respective amounts, the cash
amount paid at Closing by DynEco will be adjusted to reflect such
increase or decrease.
(c) CLOSING. Closing of the Transaction shall occur no later than June
30, 1995 (herein the "Closing").
(d) TRANSITIONAL CORPORATE SERVICES. At DynEco's sole option, Fab-Tech
will agree to provide certain transitional services (including, but to
limited to information, centralized procurement, transportation,
personnel) with respect to Fab-Tech for a time period up to three (3)
months after consummation of the Transaction.
(e) KEY EMPLOYEES. At DynEco's sole option but as a requirement with
respect to the Transaction, DynEco will cause its wholly-owned
subsidiary organized to acquire the Fab-Tech Assets and operate the
Fab-Tech business so acquired (the "Subsidiary") to enter into 5-year
employment agreements with Robert Huber, Karl Huber and Jane Huber the
terms and conditions of which shall contemplate that (i) Messrs.
Hubers' and Ms. Huber's annual salaries shall commence at $78,000 and
$49,400, respectively, with annual salary increases of eight (8%)
percent per year of employment; (ii) that Messrs. Huber and Ms. Huber
shall participate in a Subsidiary bonus
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plan which will pay them an annual amount equal to four (4%) percent
and two (2%) percent, respectively, of the gross operating profit
(before income taxes) in excess of $200,000 annually with respect
to the business operations of the Subsidiary; and (iii) DynEco will
adopt a stock option plan and grant stock options as follows: to
Robert and Jane Huber, and Karl Huber, respectively, an option to
purchase 10,000 restricted shares of DynEco Common Stock at Closing
and an additional 10,000 shares at the first, second, third and
fourth anniversary of their employment priced at $1.00 per share.
1. Upon your signing this letter, DynEco and Fab-Tech shall jointly
prepare and cause the issuance of a press release briefly describing the
intention of the parties contained herein.
2. Following the execution of this letter, DynEco and Fab-Tech will cause
their respective officers, employees, counsel, agents, investment bankers,
accountants, and other representatives working on the Transaction to cooperate
with each other with respect to the Transaction until the Transaction is
consummated or negotiations with respect thereto are terminated.
3. Following the execution of this letter, Fab-Tech agrees that until the
Transaction is consummated or negotiations with respect thereto are terminated,
to conduct the Fab-Tech business and operations in all respects only in the
ordinary course unless otherwise consented to in writing by DynEco. The
financial operations and condition of Fab-Tech shall not materially and
substantially differ at the time of Closing from that disclosed in the Fab-Tech
Financial Statements except as may be necessary to operate the Fab-Tech business
operations during its continued growth determined in the sole discretion by Fab-
Tech.
4. Following the execution of this letter, Fab-Tech agrees that until the
Transaction is consummated or negotiations with respect thereto are terminated,
Fab-Tech will afford to the officers, employees, counsel, agents, accountants,
and other representatives of DynEco working on the Transaction and lenders,
investment bankers, and prospective lenders and investment bankers of DynEco
free and full access to the Fab-Tech plant, properties, books, and records, and
will permit them to make extracts from and copies of such books and records, and
will from time to time furnish them with such additional financial and operating
data and other information as to Fab-Tech's financial condition, results of
operations, business, properties, assets, liabilities, or future prospects as
they from time to time may request.
5. The parties acknowledge that DynEco may finance the consummation of
the Transaction through the offer and sale of securities which may be required
to be registered under the provisions of the Securities Act of 1933,
as amended. In order for
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DynEco to file a registration statement with respect to such securities with
the Securities and Exchange Commission ("SEC"), the SEC may require the
filing of up to three (3) years of audited financial statements relating to
Fab-Tech. Further, DynEco may be required to register a class of its
securities under the provisions of the Securities Exchange Act of 1934, as
amended, which registration may require the filing of up to three (3) years
of audited financial statements relating to Fab-Tech. Accordingly, Fab-Tech
agrees to the publication of such Fab-Tech financial statements as may be
required by the SEC in connection with such registrations filed with the SEC.
6. In the event Fab-Tech does not have three (3) years of audited
financial statements relating to Fab-Tech, Fab-Tech agrees to permit DynEco's
independent certified accountants to perform a three (3) year audit of Fab-Tech
the cost of which shall be solely borne by DynEco. In the event Fab-Tech's
fiscal year or any quarter thereof ends at December 31, 1994, Fab-Tech shall
permit such accountants to immediately prepare an audited balance sheet relating
to Fab-Tech the cost of which shall be reimbursed to Fab-Tech by DynEco.
Further, such accountants shall assist Fab-Tech management to prepare such
interim financial statements of Fab-Tech as may be required to be filed with the
SEC in connection with such registrations referred to in paragraph 6 above, the
cost of which shall be borne by DynEco.
7. Each party shall insure that all confidential information which such
party or any of its respective officers, directors, employees, counsel, agents,
or accountants and, in the case of DynEco, its lenders, investment bankers, or
prospective lenders and investment bankers may now possess or may hereafter
create or obtain relating to the financial condition, results of operations,
business, properties, assets, liabilities, or future prospects of the other
party, any affiliate of the other party, or any customer or supplier of such
other party or any such affiliate shall not be published, disclosed, or made
accessible by any of them to any other person or entity at any time or used by
any of them, in each case without the prior written consent of the other party;
provided, however, that the restrictions of this paragraph 7 shall not apply (a)
as may otherwise be required by law, (b) as may be necessary or appropriate in
connection with the enforcement of this letter of intent, (c) to the extent such
information shall have otherwise become publicly available, (d) as to DynEco, to
disclose by or on its behalf to lenders, investment bankers or to others whose
consent may be required or desirable in connection with obtaining the financing
or consents which are required or desirable to consummate the Transaction. Each
party shall, and shall cause all of such other persons and entities who received
confidential information and data from it to, deliver to the other party all
tangible evidence of such confidential information to which the restrictions of
the foregoing sentence apply at such time as negotiations with respect to the
Transaction are terminated
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before the parties enter into any formal agreement as contemplated by this
letter of intent. For purposes of implementation of the confidentiality
requirement of this paragraph 7 with respect to DynEco, DynEco represents
that all Fab-Tech confidential information and data will be kept under the
joint custody and control of Mark J. Vieno, Esq. and Perry Silverman, CPA.
8. It is understood that this is a letter of intent only and while the
parties hereto agree in principle to the contents hereof and agree to proceed in
good faith to work out the details of the Transaction, neither of them shall
have any legal obligation to the other as result of this letter of intent (other
than those obligations contained in this paragraph or paragraph 7, and the
obligations contained in paragraph 7 and the last sentence of this paragraph
shall continue to apply after negotiations with respect to the Transaction are
terminated). Accordingly, except as set forth in the preceding sentence, this
letter of intent does not constitute a binding agreement nor does it constitute
an agreement to enter an agreement and the terms hereof are subject to the
execution and delivery of formal agreements. However in consideration of
DynEco, during the pendency of the execution and delivery of the formal writing
which shall constitute the binding agreement with respect to the Transaction,
Fab-Tech agrees that it will not enter into any discussions and/or negotiations
whatever with any person with respect to the sale.
9. This letter of intent may not be assigned by either of the parties
hereto.
10. Neither party shall be responsible for any of the other's expenses in
connection with the negotiations, investigation, documents, or transactions
contemplated hereby.
11. Upon execution and delivery of this Letter of Intent, DynEco shall
diligently proceed with its due diligence investigation of the Fab-Tech Assets
and business operations.
If this letter accurately reflects our understanding, please so indicate by
a signing the original and duplicate of this letter, and returning a fully
executed copy to me, so that we can promptly commence work on the formal
documents relating to the Transaction.
Very truly yours,
DYNECO CORPORATION
By: /s/ RICHARD D. BESSER
------------------------------------
Richard D. Besser
Chief Executive Officer and President
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-Acceptance-
Accepted and agreed to March 10, 1995.
FAB-TECH INDUSTRIES OF BREVARD, INC.
By /s/ JANE E. VELLUTO
-------------------------------------
President
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