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EXHIBIT 99.1
PRIVATE CAPITAL INVESTORS, INC.
511 N.E. 94TH STREET
MIAMI SHORES, FLORIDA 33138
May 2, 2001
Dr. Michael Cowpland
President and CEO
Zim Technologies International, Inc.
20 Colonnade Road, Suite 200
Nepean, Ontario Canada K2E7M6
RE: PROPOSED ACQUISITION OF ZIM TECHNOLOGIES INTERNATIONAL, INC.
("ZTI") BY PRIVATE CAPITAL INVESTORS, INC. ("PCI")
Dear Dr. Cowpland:
This letter confirms the understanding of ZTI and PCI with respect to
the proposed acquisition of ZTI by PCI (the "Acquisition").
This letter contains only a general summary of the terms of the
Acquisition and certain related transactions, and, except as provided in
Sections 7, 8, 9 and 10 below, is not intended as a binding agreement or an
agreement to agree. The definitive terms of the Acquisition and the related
transactions will be contained in a formal and binding acquisition agreement
(the "Acquisition Agreement") which will contain representations, warranties,
covenants, indemnifications and other provisions which are acceptable to the
parties in their sole discretion.
1. TERMS OF ACQUISITION.
PCI will acquire ZTI by purchase of all of the issued and
outstanding shares of ZTI, pursuant to which the shareholders of ZTI will
exchange their shares in ZTI for shares in PCI. The Acquisition is intended to
qualify as a tax-free transaction under Canadian law. The total issued and
outstanding shares of PCI following the Acquisition will consist of 38,386,376
shares, with 32,850,921 common shares to be held by the current ZTI
shareholders, approximately 4,000,000 common and special shares to be held by
the Investors (as defined below) and 1,535,455 common shares to be held by the
current PCI shareholders. All outstanding options to purchase shares of the
common stock of ZTI held by officers, directors, employees and consultants of
ZTI shall be exchanged for options to purchase an equal number of shares of the
common stock of PCI. The exercise price of the options will remain at the
current exercise price of CDN 1.00 per share.
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2. STRUCTURE OF ACQUISITION AND RELATED TRANSACTIONS.
The parties anticipate the Acquisition and related
transactions will involve the following principal steps:
(a) STOCK SPLIT. PCI will effect a stock split (the "Stock
Split"), so that PCI will have 1,535,455 common shares. At the
effective date of the Continuance, PCI's current shareholders will hold
these shares in the amounts set forth on Appendix A to this letter.
(b) ESTABLISHMENT OF SECONDARY MARKET IN PCI SHARES. PCI will
contact one or more market makers to establish a secondary market for
the shares of PCI, provided that ZTI has first approved such market
makers. One of these market makers will submit information regarding
PCI on Form 211 to NASDAQ to permit trading of the shares of PCI
through the OTC Bulletin Board. At the present time, a portion of the
PCI shares held by the current PCI shareholders may be resold to the
public under Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"). It is anticipated that the current shareholders of
PCI will sell a portion of these shares to the public in order to
initiate public trading in the shares of PCI, subject to the
limitations set forth in Section 3(a).
(c) PURCHASE OF SHARES IN ZTI BY INVESTORS. A group of
Canadian investors (the "Investors") will purchase up to CDN4,000,000
of the common and special shares of ZTI. Each special share will
convert into one common share of ZTI under certain conditions. As part
of the purchase, ZTI will agree that the Investors will receive
registration rights from PCI as part of the Acquisition. The sale of
the shares will be an exempt transaction under Section 72(1)(d) and (p)
of the SECURITIES ACT (Ontario).
(d) CHANGE OF PCI'S NAME. PCI will change its name to one
selected by ZTI. PCI will use its best efforts to complete the name
change as soon as possible, but in no event later than the closing of
the Acquisition.
(e) DUE DILIGENCE INVESTIGATIONS. The parties will undertake
due diligence investigations of each other.
(f) NEGOTIATION AND EXECUTION OF DEFINITIVE ACQUISITION
AGREEMENT. After the completion of due diligence investigations, the
parties will negotiate and execute the definitive Acquisition
Agreement.
(g) PREPARATION OF REGISTRATION STATEMENTS. PCI will prepare
registration statements to be filed with the Securities and Exchange
Commission (the "SEC") with respect to the transactions contemplated by
this letter. PCI will file these registration statements with the SEC
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after the execution of the definitive Acquisition Agreement. The
purpose of the registration statements will be:
(i) to register the distribution of the PCI shares
currently held by Global Intermatch Corp. ("Global")
to Global's shareholders (the "Spinoff");
(ii) to register the shares in PCI which will be deemed to
be issued to the shareholders of PCI as a result of
the continuance of PCI (the "Continuance") under the
Canadian Business Corporation Act ("CBCA"); and
(iii) to register the issuance of the shares of PCI to be
issued to the current shareholders of ZTI and the
Investors pursuant to the Acquisition. PCI will file
a similar document with the Ontario Securities
Commission ("OSC") as its preliminary prospectus
qualifying the conversion of the ZTI special shares
into common shares.
(h) SPINOFF OF PCI SHARES BY GLOBAL. Global will distribute
89,000 of its PCI shares to its shareholders. PCI will register the
distribution of the shares by Global under the Securities Act on Form
SB-2 to be filed with the SEC.
(i) CONTINUANCE. Prior to the consummation of the Acquisition,
PCI will file articles of continuance under the CBCA. As part of the
Continuance, PCI will change its name to one selected by ZTI. PCI will
register the Continuance under the Securities Act or Form S-4 to be
filed with the SEC.
(j) ACQUISITION OF ZTI. After the Continuance of PCI under the
CBCA, PCI will acquire all of the outstanding shares of ZTI in a share
exchange pursuant to an offer to acquire all shares of ZTI (a "takeover
bid" under the CBCA). PCI will register the issuance of its shares to
the ZTI shareholders under the Securities Act on Form S-4 to be filed
with the SEC.
(k) AMEX LISTING. After a sufficient number of PCI shares are
resold in the public market, PCI will seek to have its outstanding
shares listed on AMEX.
3. ADDITIONAL AGREEMENTS.
(a) LOCK-UP AGREEMENTS WITH CERTAIN PCI SHAREHOLDERS. The
Acquisition Agreement will provide that the shares of PCI held by
Stuart Cooper, Cooper Family Holdings, Pasadena Investments, Ltd.,
Thornhill Consulting, Ltd. and Global will be subject to the following
resale restrictions:
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(i) Except as provided below, the shares may not be
resold, without the consent of ZTI, until three
months after the listing of PCI's shares on the AMEX.
Notwithstanding the foregoing: (i) Global may donate
up to 90,000 of its PCI shares to one or more
charities; (ii) Global may sell up to 10,000 of its
PCI shares into the public market; (iii) Global may
transfer up to 1,000 of its PCI shares to the
transfer agent for PCI; (iv) Global may distribute
89,000 shares of PCI pursuant to the Spinoff; and (v)
Cooper Family Holdings or its beneficiaries may sell
up to 10,000 of its PCI shares into the public
market.
(ii) After the listing of PCI's shares, each shareholder
may resell four percent (4%) of their shares each
month, with such restrictions expiring two (2) years
after the listing of PCI's shares.
(iii) The foregoing limitations are in addition to any
restrictions imposed under Canadian law.
(b) REGISTRATION RIGHTS. The Acquisition Agreement will grant
registration rights to persons who are subject to resale restrictions under the
Securities Act following the consummation of the Acquisition. The grant of the
registration rights will be subject to customary terms and conditions.
4. CLOSING CONDITIONS.
(a) The definitive Acquisition Agreement will provide that the
obligation of PCI to consummate the transactions contemplated by the Acquisition
Agreement will be subject to the following conditions:
(i) the approval of the Continuation and Acquisition by a
majority of the holders of the outstanding common
stock of PCI, and
(ii) other customary conditions.
(b) The definitive Acquisition Agreement will provide that the
obligation of ZTI to consummate the transactions contemplated by the Acquisition
Agreement shall be subject to the following conditions:
(i) the consummation of the Stock Split.
(ii) the consummation of the Spinoff.
(iii) the consummation of the Continuation.
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(iv) the effectiveness of the registration statements
filed with the SEC.
(v) the qualification of the Acquisition as a tax-free
transaction under applicable Canadian income tax law.
(vi) other customary conditions.
5. DUE DILIGENCE INVESTIGATION BY ZTI. For a period of 30 days
following the date of this letter (the "Inspection Period"), ZTI and its
representatives may make such examinations and inspections of PCI as they may
reasonably require to analyze its financial condition, assets, legal matters,
business and affairs, so long as such examinations do not unreasonably interfere
with the conduct of its business. PCI shall additionally cause PCI's attorneys,
accountants and other advisors and agents to cooperate with ZTI in its
investigation and to make their files and work papers available to ZTI.
6. DUE DILIGENCE INVESTIGATION BY PCI. During the Inspection Period,
PCI and its representatives may make such examinations and inspections of ZTI as
they may reasonably require to analyze its financial condition, assets, legal
matters, business and affairs, so long as such examinations do not unreasonably
interfere with the conduct of its business. ZTI shall additionally cause ZTI's
attorneys, accountants and other advisors and agents to cooperate with PCI in
its investigation and to make their files and work papers available to PCI.
7. EXPENSES; FINDER'S FEES. Except as set forth in the letter agreement
dated April 18, 2001 between Cooper Consultants, Inc. and ZTI, each party agrees
to pay, without right of reimbursement from the other party and regardless of
whether or not the transactions contemplated by this letter are consummated, the
costs incurred by it in connection with this transaction, including attorney's
fees and other costs incident to the negotiation of the terms of the transaction
and the preparation of related documentation. Each party (the "Indemnifying
Party") will indemnify and hold the others harmless from any loss, liability or
expense (including without limitation attorneys' fees) arising from any claims
made by any broker or finder engaged (or who claims he was engaged) by the
Indemnifying Party.
8. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. None of the parties will
make any press release or other public disclosure of this letter without the
prior written consent of the other party, except as required by applicable law
or the requirements of any stock exchange or quotation system on which their
shares may then be traded. In this connection, the parties acknowledge that PCI
will be obligated to announce the execution of this letter through the issuance
of a press release and the filing of a Current Report on Form 8-K with the SEC.
PCI will provide ZTI with a copy of its proposed press release and Form 8-K
prior to their issuance and filing, and will make any changes to these items
which may be reasonably requested by PCI.
9. EXCLUSIVE DEALING. For a period of thirty (30) days from the date of
this letter, ZTI and PCI agree that neither of them will (i) enter into any
agreement for, or consummate, any merger, consolidation, amalgamation, share
exchange or similar transaction; (ii) sell all or substantially all of their
assets; or (iii) issue shares to one or more third parties in a transaction
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which could result in a change of control of PCI or ZTI, as applicable.
Additionally, none of ZTI and the officers and directors of ZTI, on the one
hand, and PCI and the officers and directors of PCI, on the other hand, shall
enter into negotiations, solicit, encourage or respond to offers for any such
transaction, except for the negotiations related to the consummation of the
transactions contemplated by this letter. The foregoing restriction shall not
apply to the proposed amalgamation of ZTI with companies controlled by Blake
Batson.
10. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. The parties acknowledge
that they have previously entered into confidentiality agreements and agree to
comply with the terms of such agreements.
11. NON-BINDING LETTER OF INTENT. The parties understand that the
Acquisition is subject to a number of contingencies, including without
limitation, completion of the due diligence investigations contemplated by
Sections 4 and 5 and the negotiation of the terms of the Acquisition Agreement.
Accordingly, there can be no assurance that the parties will sign the
Acquisition Agreement. In the event that the parties do not execute the
Acquisition Agreement within thirty (30) days from the date of this letter: (i)
this letter of intent shall be automatically canceled, except for the parties'
obligations under Sections 7, 8 and 10, which shall survive such cancellation;
and (ii) the parties shall be relieved of all other obligations under this
letter of intent, except for the parties' obligations under Sections 7, 8 and
10.
12. COUNTERPARTS. This letter may be signed in one or more
counterparts, each of which will be considered an original and all of which will
constitute the same document.
13. GOVERNING LAW. This letter shall be governed by the laws of Florida
without regard to its principles of conflicts of laws.
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If this letter correctly sets forth our understanding, please execute
the enclosed copy of this letter and return it to the undersigned. We look
forward to the successful consummation of this transaction.
Very truly yours,
PRIVATE CAPITAL INVESTORS, INC.
By: /s/ STUART D. COOPER
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Stuart D. Cooper, President
AGREED TO AND ACCEPTED
THIS 2ND DAY OF MAY, 2001:
ZIM TECHNOLOGIES INTERNATIONAL, INC.
By: /s/ MICHAEL COWPLAND
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Dr. Michael Cowpland, President and CEO
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APPENDIX A
SHAREHOLDERS OF PCI (POST-SPLIT)
Stuart Cooper 423,000
Cooper Family Holdings 423,000
Pasadina 48,000
Thornhill 430,000
Global 100,455
Purchasers from Cooper Family Holdings 10,000
Purchasers from Global 10,000
Donees of Global 90,000
Transfer Agent (from Global) 1,000
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TOTAL 1,535,455
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