April 16, 1997
DeltaPoint, Inc.
22 Lower Ragsdale Drive
Monterey, CA 93940
Ladies and Gentlemen:
This Letter of Intent summarizes the principal terms and conditions of the
proposed acquisition by DeltaPoint, Inc. ("Purchaser") of all the issued and
outstanding capital stock of Inlet Divestiture Corp. ("IDC"). All of such
capital stock is owned by Inlet, Inc. ("Seller"). The sole significant asset of
IDC is its ownership of a software program called CurrentIssue 3.0 ("Product").
1. STOCK TO BE PURCHASED. The stock to be purchased is all of the issued and
outstanding capital stock, being common stock, of IDC ("IDC Stock"). Seller
is the owner of one hundred percent (100%) of the issued and outstanding
capital stock of IDC.
2. PURCHASE PRICE. The purchase price to be paid to Seller for the IDC Stock
("Purchase Price") by Purchaser and the manner of payment of the Purchase
Price is as follows:
a. The cash sum of $25,000.00 upon the execution of this Letter of Intent
for non-recurring engineering expenses;
b. The cash sum of $25,000.00 on or before thirty (30) days from the date
of this Letter of Intent for non-recurring engineering expenses;
c. The cash sum of $25,000.00 on or before sixty (60) days from the date
of this Letter of Intent for non-recurring engineering expenses;
d. The cash sum of $50,000.00 on the earlier of: (i) the execution by
Purchaser and IDC of the OEM Agreement described in paragraph 6 herein,
or (ii) the fifteenth (15th) day following the closing on an equity
investment in Purchaser ("Closing");
e. The cash sum of $175,000.00 on or before the fifteenth (15th) day
after the Closing;
f. The cash sum of $175,000.00 on or before the forty-fifth (45th) day
after the
Closing;
g. The cash sum of $175,000.00 on or before the seventy-fifth (75th) day
after the Closing;
h. The cash sum of $175,000.00 on or before the one hundred and fifth
(105th) day after the Closing;
i. 260,000 shares of Purchaser's common stock on the date of closing on
the transfer of the IDC Stock to Purchaser; and
j. Beginning with the date of transfer of the IDC Stock to Purchaser,
royalties in an amount equal to five percent (5%) of the net revenues
from all sales, leases, licenses, sublicenses or other transactions
pursuant to which units of the Product are distributed.
3. OTHER NEGOTIATIONS. From the date of Purchaser's execution of this Letter
of Intent until the earliest of (a) the closing on the purchase and sale of
the IDC Stock, (b) ninety (90) days from the date hereof, (c) the
abandonment of this Letter of Intent by agreement of the parties, (d) the
termination of this Letter of Intent by Seller as provided for herein or
(e) the failure of the conditions set forth in paragraphs 8g, 8h, 9d or 9e
below, neither Seller, IDC, nor any agent, employee, representative,
officer, director or stockholder thereof, shall solicit any offer from any
other person or entity for acquisition or disposition of the capital stock
of IDC or the rights to the Product, nor shall Seller or IDC, its agents,
representatives, officers, directors or stockholders enter into any
negotiations or provide information with respect to any such acquisition
without the written consent of Purchaser.
4. CONFIDENTIALITY. Any press releases or other publicity relating to this
Letter of Intent and the transactions proposed herein shall be subject to
prior review and coordination between Purchaser and Seller and subject to
their respective disclosure obligations, if any, under applicable securities
laws and regulations and further subject to such disclosure as may be
necessary to satisfy the conditions of this letter of intent and the
transaction proposed herein.
Seller for itself, its agents, representatives, partners, principles,
stockholders, directors, officers and partners, both limited and general,
acknowledges that as part of the discussions, negotiations and inspections
to be conducted by Seller and Purchaser, Seller may become privy to certain
confidential information of Purchaser and that any communication of such
confidential information to third parties (whether such communication is
authorized by the other or not) could injure Purchaser. Seller, for
itself, its agents, representatives, principals, stockholders, directors,
officers and partners, both limited and general, therefore, agrees to take
all necessary and reasonable steps to insure that any information obtained
by Seller, its agents, representatives, principles,
stockholders, directors, officers or partners, both limited and general,
about Purchaser or about Purchaser's agents, attorneys, representatives or
business, including information about loans or finances of Purchaser and any
other information designated as confidential by Purchaser shall remain
confidential and shall not be disclosed or revealed to outside sources.
Purchaser for itself, its agents and representatives acknowledges that as
part of the discussions, negotiations and inspections to be conducted by
Purchaser and Seller, Purchaser may become privy to certain confidential
information of Seller and IDC and that any communication of such
confidential information to third parties (whether such communication is
authorized by the other or not) could injure Seller and IDC. Purchaser,
for itself, its agents and representatives, therefore, agrees to take all
necessary and reasonable steps to insure that any information obtained by
Purchaser, its agents and representatives, about Seller or IDC or about any
of Seller's or IDC's employees, officers, agents, attorneys, representatives
or business, including information about processes, programs, techniques,
designs, concepts, inventions, trade secrets, customer lists, identity of
customers, profile of customers, identity of past, present, or prospective
security holders, borrowers, prospects or associates of Seller or IDC and
any and all knowledge as to any loans, earnings or finances of Seller or
IDC, and any other information designated as confidential by Seller or IDC,
shall remain confidential and shall not be disclosed or revealed to outside
sources.
5. TERMINATION. Seller shall have the right to terminate any and all
obligations hereunder of Seller and IDC, in the event that Purchaser has not
made substantial progress to complete and close the follow-on offering
within sixty (60) days from the date hereof. Notwithstanding termination of
this Letter of Intent whether by Seller, by mutual agreement of Seller and
Purchaser, by failure of any condition or otherwise, Purchaser shall remain
obligated to make payment of and Seller shall be entitled to retain the
$25,000.00 cash payments of paragraphs 2a, 2b and 2c above; provided,
however, should Seller terminate this Letter of Intent under this Section 5
and should there not then be an OEM Agreement between Seller and Purchaser
executed by both Seller and Purchaser, Seller shall return to Purchaser any
cash payments made by Purchaser to Seller under paragraphs 2a, 2b and 2c
above.
6. OEM AGREEMENT. Commencing with the date hereof, IDC and Purchaser agree to
negotiate a distribution agreement to provide Purchaser with the exclusive
right to distribute the Product, new versions, translations and derivatives
of the Product ("OEM Agreement"). Should IDC and Purchaser fail to execute
and
deliver the OEM Agreement within twenty-one (21) days from the date hereof,
neither Purchaser nor IDC shall have any further obligation to proceed with
such negotiations or enter into such an OEM Agreement. Any such OEM
Agreement shall expire upon closing on the transfer of the IDC Stock. If
the closing on the transfer of the IDC Stock does not occur, the OEM
Agreement shall continue in force and effect and any payments made by
Purchaser under paragraph 2d above shall be credited against the royalty
payments due to IDC under the OEM Agreement.
7. SPECIAL PROVISIONS.
a. Any royalties payable in connection with the purchase and sale of the
IDC Stock shall include the following terms:
(1) Purchaser shall not be required to pay royalties in excess of
$4,000,000.00 in the aggregate. Upon mutual agreement of
Purchaser and Seller, Purchaser may terminate its royalty payment
obligation under paragraph 2j: (i) during the first twelve (12)
months after the closing on the transfer of the IDC Stock by
payment of the difference between $2,000,000.00 and the then
aggregate of all royalties paid pursuant to paragraph 2j and
(ii) during the second twelve (12) months after the closing on
the transfer of the IDC Stock by payment of the difference between
$3,000,000.00 and the then aggregate of all royalties paid under
paragraph 2j above; and
(2) Purchaser shall pay fifty percent (50%) of the amount of any
royalties due pursuant to paragraph 2j and any termination
payments made pursuant to paragraph 7a.(1) in Purchaser's common
stock to be valued at the average closing price of such common
stock over the ten (10) trading days preceding payment.
b. The shares of Purchaser's common stock to be delivered pursuant to
paragraph 2i above, shall be registered pursuant to an effective
registration statement under the Securities Act of 1993, as amended
("Securities Act") so that they are freely tradable. Seller and
Purchaser acknowledge that Seller may be required to refrain from
selling the common stock of Purchaser for a reasonable period of time
following the closing on the sale of the IDC stock and that Seller will
be entitled to make sale of Purchaser's stock prior to the expiration
of said period in the event that sales of Purchaser's common stock are
made by certain identified investors or management individuals in
certain stated volumes.
8. CONDITIONS TO SELLER'S OBLIGATIONS. Seller's and IDC's obligations to sell
the IDC
Stock are subject to:
a. Negotiation, execution and delivery of a definitive agreement for the
purchase and sale of the IDC stock;
b. Approval by Seller's and IDC's board of directors of the transactions
set forth in this Letter of Intent within fifteen (15) days of the
date hereof and approval by Seller's and IDC's board of directors of
the definitive agreement for the purchase and sale of the IDC Stock;
c. Approval by each and all of Seller's shareholders of the transactions
set forth in this Letter of Intent within fifteen days of the date
hereof;
d. Completion of due diligence investigations by Seller to determine that
no development has occurred or information has been discovered that
has, or is reasonably likely to have, or indicates, a material adverse
effect on the business, assets or finances of Purchaser concerning the
transactions set forth in this Letter of Intent within fifteen days of
the date hereof;
e. Closing on an additional equity investment in Purchaser on or before
ninety (90) days from the date hereof;
Delivery by Purchaser to Seller of a perpetual site license for the Product
and any derivatives thereof;
Negotiation, execution and delivery, within twenty-one (21) days from the
date hereof, of an agreement between Seller and Purchaser for provision
of development services by Seller for the Product to include a term of
up to three (3) years and management of the Seller's development
services by Todd Millard which agreement shall be valid and effective
at such time and if all the conditions to performance of Seller, IDC
and Purchaser hereunder have been satisfied and this Letter of Intent
has not been terminated;
Negotiation, execution and delivery, within twenty-one (21) days from the
date hereof, of reasonable non-compete agreements, between Purchaser,
Seller, IDC, Todd Millard and Terry Millard regarding the Product which
agreements shall be valid and effective at such time and if all the
conditions to performance of Seller, IDC and Purchaser hereunder have
been satisfied and this Letter of Intent has not been terminated; and
i. Timely receipt by Seller of any cash payments due to Seller hereunder
before the closing on the sale and transfer of the IDC Stock.
9. CONDITIONS TO PURCHASER'S OBLIGATIONS. Purchaser's obligations to purchase
the IDC Stock are subject to:
a. Negotiation, execution and delivery of a definitive agreement for the
purchase and sale of the IDC Stock;
b. Completion of due diligence investigations by Purchaser regarding the
Product within fifteen (15) days of the date hereof;
Approval of the purchase by Purchaser's board of directors within fifteen
(15) days of the date hereof;
Negotiation, execution and delivery, within twenty-one (21) days of the
date hereof, of an agreement between Seller and Purchaser for provision
of development services by Seller for the Product to include a term of
up to three years and management of the Seller's development services
by Todd Millard which agreement shall be valid and effective at such
time and if all the conditions to performance of Seller, IDC and
Purchaser hereunder have been satisfied and this Letter of Intent has
not been terminated;
Negotiation, execution and delivery, within twenty-one (21) days of the
date hereof, of reasonable non-compete agreements, between Purchaser,
Seller, IDC, Todd Millard and Terry Millard regarding the Product which
agreements shall be valid and effective at such time and if all the
conditions to performance of Seller, IDC and Purchaser hereunder have
been satisfied and this Letter of Intent has not been terminated; and
f. Closing on an additional equity investment in Purchaser on or before
ninety (90) days from the date hereof.
10. INDEMNIFICATION. Seller and IDC understand that Purchaser intends to make
reference to or use of this Letter of Intent in connection with Seller's
efforts to secure additional equity investment through the Purchaser's
proposed public offering which reference or use is hereby authorized by
Seller and IDC for that express purpose only. Purchaser agrees to indemnify
and hold harmless each of Seller and IDC, their shareholders, officers,
directors and employees from and against any and all claims, liabilities,
losses, damages and costs, including reasonable attorneys' fees, arising out
of or resulting from Purchaser's use of or reference to this Letter of
Intent or any of its contents in connection with the proposed public
offering or otherwise including any reliance thereon by third parties.
11. CLOSING. The parties shall close on the purchase and sale of the IDC stock
on or before one hundred twenty (120) days from the date hereof or this
Letter of Intent shall then terminate.
12. EXPENSES. Each of the parties hereto shall pay its own expenses incident
to negotiating, entering into and carrying out the purchase and sale and
related matters.
13. MISCELLANEOUS. This Letter of Intent shall be deemed to be made in and
shall be construed pursuant to the laws of the State of Iowa without regard
to conflicts of laws provisions. This Letter of Intent sets forth the
entire and integrated agreement between the parties hereto and supersedes
all prior negotiations, representations or agreements, whether written or
oral.
Please confirm by signing and returning a copy of this Letter no later
than April 16, 1997, that the foregoing reflects our mutual understanding and
sets forth the basis for proceeding to negotiate the agreements outlined.
DELTAPOINT, INC.
BY: /s/ Jeffrey F. Ait
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NAME Jeffrey F. Ait
CEO
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TITLE
The foregoing reflects our mutual understanding and sets forth the basis
for proceeding to negotiate the agreements outlined above.
DATED: April 16, 1997
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INLET, INC.
BY: /s/ Terry Millard
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NAME Terry Millard
President
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TITLE
INLET DIVESTITURE CORP.
BY: /s/ Terry Millard
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NAME Terry Millard
President
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TITLE
Terry Millard and Todd Millard sign for the purpose of indicating their
intention and willingness to negotiate the non-compete agreements contemplated
by paragraph 9e above in connection with the purchase and sale of the IDC Stock.
/s/ Terry Millard
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TERRY MILLARD
/s/ Todd Millard
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TODD MILLARD