HEADS OF AGREEMENT
Heads of Agreement BETWEEN
1. EN FUELS LIMITED, a company registered in England and Wales under company
number 05843634 whose registered office is at 30 St. Mary Axe, London, EC3A
8EP
and
2. MED-TECH SOLUTIONS, INC. ("Med-Tech") (a company incorporated in Nevada
USA) having its principal office at Suite 2200-1177 West Hastings Street,
Vancouver, British Columbia, Canada, V6E 2K3
1. Business Co-operation
1.1 The Parties intend to collaborate in addressing the international markets
for the production and downstream supply and distribution of bio-diesel
products. These Heads of Agreement summarise the business terms agreed, in
principle, between the Parties and are intended to provide a basis for the
preparation of detailed and legally binding agreements ("Formal
Agreements").
1.2 En Fuels has been established by its founders with the intention that it
shall provide a vehicle for the construction, ownership, and management and
operation of refineries producing bio-diesel products. In addition to the
application of its own management know how and expertise in the start up
phase of its business En Fuels will need to utilise know how, technology,
engineering and construction expertise to be acquired from, or licensed by,
third parties. En Fuels is engaged in discussions with producers for the
long term supply of raw materials at advantageous prices and, with
prospective customers (oil companies), for the long term supply of certain
minimum quantities of bio-diesel products. In the initial period of its
business plan ("Business Plan") En Fuels plans to construct two refineries,
one in Italy and one in the United Kingdom. Discussions are well advanced
for the acquisition of interests in the sites which have been identified
and the necessary planning consents, licences and approvals.
1.3 Although government backed financial assistance in the form of grants and
soft loans should be available for the construction and development of the
refineries, En Fuels will need substantial financial support from other
sources to deliver its Business Plan. Med-Tech, as a Development Stage
Enterprise company quoted on the Nasdaq OTC Bulletin Board, has access to
the capital markets. It intends to provide financing for the start-up and
operation of En Fuels' intended business activities over the initial period
covered by the Business Plan. Med-Tech intends to raise the requisite funds
through an increase in its authorised share capital and the issue of new
shares to interested investors by private placement.
2. Financing
2.1 Based on the Business Plan, it is estimated that En Fuels will require
funding in the initial years of its business development in an amount of
US$35,019,999. Such amount may need to be revised upwards prior to or
following signature of, the Formal Agreements. Med-Tech has indicated that
such additional funding will be made available subject to and dependent
upon, agreement between the parties as to the amount involved and to
investor commitment.
2.2 Med-Tech will provide initial funding of US$3,000,000 ("Initial Funding")
to assist En Fuels in meeting project start up costs as identified in the
Business Plan. The release of the Initial Funding will be conditional upon
En Fuels having signed agreements and / or having letters of intent in
place, with third parties relating to site acquisition, necessary licences
and permits including planning consents, provision of engineering services,
licensing of technology, supply of raw materials and customer supply
contracts. Details of the documents required as a prerequisite to release
of the Initial Funding are set out in Attachment A. The Initial Funding
shall be remitted by Med-Tech to a separately designated En Fuels account
and shall represent working capital to be used to cover costs and overheads
to be incurred during the initial start up phase, including employee wages,
fees and deposits to be paid to third parties and other amounts required
pursuant to the documents referred to in Attachment A. In advance of the
release of the Initial Funding parties shall agree upon a schedule of the
overheads and expenses to be disbursed out of the Initial Funding during
the first start up year (being for this purpose the year commencing on the
date when the amount of the Initial Funding is transferred to En Fuels).
Any payments not covered by the schedule shall be separately agreed with
the Med-Tech director to be appointed to the board of En Fuels (see para
3.2).
2.3 The availability of and access to the main financing package ("Main
Funding") amounting to US$36,666,666 gross, or such larger amount as may be
agreed, shall be contingent upon Med-Tech successfully raising the
necessary funds in the capital markets. In the Formal Agreements, parties
shall agree upon a period of time ("Funding Period") calculated from date
of release of the Initial Funding, within which Med-Tech will be required
to raise the main financing. The Main Funding shall become available to En
Fuels subject to appropriate and necessary accounting procedures after the
date ("Closing Date") upon which Med-Tech completes the acquisition of the
entire share capital of En Fuels (see para.3).
2.4 Med-Tech, through its authorised representatives has indicated to En Fuels
that, having regard to its existing sources of financial support, it is
confident of success in raising the Main Funding. However, it is
acknowledged that success will depend, to an extent, upon business
confidence and may be affected by volatility in the markets. If Med-Tech is
unsuccessful in raising the Main Funding the parties shall endeavour, in
good faith, to arrive at an alternative solution. However, if following
such endeavours, the parties cannot arrive at an alternative solution the
Formal Agreements may be terminated without either party having any
liability to the other except as provided in para 2.5 below. For the
avoidance of doubt, if Med-Tech fails to raise the full amount of the Main
Funding, except as stated in para 2.5 below, En Fuels shall have no
liability to return any expended or unexpended part of the Initial Funding.
2.5 The Formal Agreements shall contain provisions intended to ensure that in
the period between the release of the Initial Funding and Closing Date En
Fuels is managed diligently and in a manner consistent with achieving the
objectives of the Business Plan including implementation of the provisions
of the various agreements and letters of intent referred to in Attachment
A. En Fuels and its shareholders shall accept responsibility and liability
for any material failure to manage the business diligently and otherwise as
stated above including, in such circumstances, an obligation to refund all
of the Initial Funding.
3. En Fuels Share Acquisition
3.1 The Formal Agreements shall provide that Med-Tech will acquire the entire
authorised and issued share capital of En Fuels. The consideration to be
extended to En Fuels shareholders for the transfer of their shares shall be
the allotment of stock units in Med-Tech. En Fuels will undertake a
restructuring of its share capital involving both an increase in its
authorised and issued share capital and a division of its authorised share
capital, as increased, into a larger number units of a lower nominal value
per share. On release of the Initial Funding Med-Tech shall acquire, shares
equal to an initial 18% interest in, or contract notes or options to
acquire 18% of, En Fuels restructured share capital. The remaining shares
in the restructured share capital of En Fuels, not being shares already
transferred to Med-Tech, shall be transferred in the case of pre-existing
shares, or allotted in the case of new shares resulting from an increase in
share capital, to Med-Tech on Closing Date. On Closing Date En Fuels shall
deliver to Med-Tech share transfer forms signed by its shareholders and/or
allotment letters in respect of the relevant number of new shares. Closing
Date shall be a date as soon as practicable, allowing for any necessary
filings pursuant to Nasdaq regulations, after Med-Tech is able to announce
that it has raised the full amount of the Main Funding. It is the intention
of both parties that Closing Date shall be no later than 3 months after the
release of the Initial Funding. Details of the existing share capital, the
proposed restructured share capital and the identity of the current and
intended shareholders and their respective holdings are set out in
Attachment B. All En Fuels shareholders registered in its share register at
the date of the Formal Agreements will be parties to and required to sign
the Formal Agreements.
3.2 As and with effect from the date of release of the Initial Funding Med-Tech
shall be entitled to nominate and appoint a single director to the board of
directors of En Fuels.
3.3 The Formal Agreements shall contain provisions which ensure that, except
for the capital increases contemplated in this Heads of Agreement (para
3.1), En Fuels will not allow its share capital to be increased or allow
any pre-emptive rights options or warrants to be granted affecting or
having potential to affect its share capital or extend any rights to third
parties or make decisions or enter into discussions with third parties or
take any other action which would or would be likely to prevent
implementation of, the transactions in the manner envisaged by this Heads
of Agreement. The obligation to transfer or allot to Med-Tech that
proportion of En Fuels's share capital not already vested in Med-Tech on
Closing Date (see para 3.1) shall be expressed in the agreements as
conditional solely upon Med-Tech raising the necessary funds and, subject
only to that condition, shall represent an irrevocable commitment by En
Fuels and its shareholders to Med-Tech.
3.4 Med-Tech shall be entitled to receive and retain 18% of En Fuel's share
capital following release of the Initial Funding whether or not it succeeds
in raising the Main Funding. Therefore if Med-Tech fails to raise the Main
Funding having elected to receive contract notes or share options at the
Initial Funding stage En Fuel shall nevertheless procure the transfer of
18% of its share capital to Med-Tech and shall enter Med-Tech as a
shareholder in its share register. In such circumstances any additional
consideration, to be paid by Med-Tech to En Fuel shareholders for
transferring 18% of the shares shall be an amount limited to the par
(nominal) value of such shares.
4. Med-Tech Shares
On Closing Date Med-Tech shall issue and allot shares in its share capital
to the current founder shareholders of En Fuels in consideration of the
transfer to Med-Tech of the shares registered in such founders named in the
share register of En Fuels. The percentage of shares to be so
allotted/transferred will amount to 32% of the entire share capital of
Med-Tech at Closing Date. Med-Tech's existing authorised share capital
shall be increased to accommodate the transactions now contemplated.
Details of Med-Tech's existing and proposed increased share capital are set
out in Attachment C.
5. En Fuels Subsidiaries
5.1 The En Fuels Business Plan provides for the construction and subsequent
operation of refineries in Italy and the United Kingdom. In Italy En Fuels
will deliver the objectives in its Business Plan through the establishment
of a majority owned subsidiary company which will acquire a refinery site,
organise all necessary approvals prior to construction, authorise and
manage construction of the refinery. It is also envisaged that the Italian
operating company will sign a joint venture agreement with a major Italian
based supplier of petroleum products. En Fuels will take and maintain a
controlling interest in the joint venture. In the United Kingdom it is
envisaged that En Fuels will manage its business through a wholly owned
subsidiary to be known as En Fuels UK Limited. Parties shall agree upon the
operating roles and management procedures of the subsidiaries. In
particular parties shall agree upon the terms and conditions which are to
apply to the joint venture in Italy.
5.2 The Formal Agreements shall contain a provision which will stipulate that
except as provided in the Business Plan and/or as agreed by the parties, En
Fuels shall not prior to Closing Date establish subsidiary companies,
affiliates or other business partnerships.
6. Overall Objectives
Parties recognise that so far as practicable the business activities of En
Fuels and its subsidiaries are to be promoted and developed in a manner
which is in the best interests of Med-Tech. Med-Tech recognises that En
Fuels operations may require continuing financial support and, subject to
decisions of its shareholders will use its best endeavours to provide such
support. The Formal Agreements shall contain appropriate and reasonable
provisions to facilitate the proper and effective management by Med-Tech of
its subsidiaries activities and to ensure, so far as practicable, that
Med-Techs best financial interests are served in the conduct of En Fuels'
business. Such provisions shall include, but not necessarily be limited to,
the provisions outlined in Schedule E.
7. Med-Tech Share restrictions
Shares issued by Med-Tech at closing for the shareholders of En Fuels will
be subject to both a two year restriction, the 144 Rule and such US laws
and Nasdaq regulations which apply to the sale and/or transfer of
shares/stock units.
8. Formal Agreements
It is envisaged that the Formal Agreements will consist of a Share
Acquisition Agreement ("SAA") which will provide for the acquisition of En
Fuels shares by Med-Tech and the allotment of shares in Med-Tech to En
Fuels's shareholders in consideration for the transfer of their shares in
En Fuels. The parties to the SAA will be En Fuels shareholders as sellers,
and Med-Tech as purchaser. The SAA will contain, as necessary, by
attachment, details of the various matters addressed in principle in this
Heads of Agreement, and in particular copies of the various agreements and
letters of intent referred to in Attachment A as well as copies of business
plans, the proposed structure for the group, including En Fuels and its
subsidiaries, and details of the joint venture agreement proposed for En
Fuels Italy srl.
"The parties intend that the formal agreements shall be signed and
exchanged not later than 1 October 2006."
9. Status of Heads of Agreement
This document is not intended by the parties to create legally binding
commitments. Neither party shall be entitled to enforce its contents or
take any action pursuant to the contents for the recovery of any actual or
alleged loss, claim, damage or liability including incurred costs, and
whether or not they have acted to their detriment in reliance upon any of
its contents.
SIGNED AS AND FOR A RECORD OF THE PARTIES INTENTIONS SUBJECT TO FORMAL
CONTRACTS
SIGNED for and on behalf of )
Med-Tech
)
SIGNED for and on behalf of )
En Fuels
)
Dated )
List of Attachments
Attachment A Conditions Precedent to Release of Financing
Conditions Precedent to Full Acquisition
Attachment B En Fuels Existing and Proposed Increase in Share Capital
Attachment C Med-Tech current Share Capital and proposed increase in
Share Capital
Attachment D Management provisions
Attachment A
Conditions Precedent to Release of Financing
No. Condition
1 Management Contract with Tony Higson / Deltas C.V. to be signed
2 Management Contract with Chris Slack / W4B Ltd. to be signed
3 Engineering management contracts with T&S Lugano to be in place and owned
by En Fuels
4 License agreement with Rebis to be in place and owned by En Fuels
5 Italian LOI for a J.V. project in the south of Italy to be in place and
owned by En Fuels
6 LOI for the acquisition of a suitable site for the Italian J.V. project to
be in place and owned by En Fuels
7 LOI for suitable oil supply for the Italian J.V. project to be in place and
owned by En Fuels
8 Letter from the Directors stating that they "will undertake to arrange a
suitable J.V. partner that will provide off-take of bio-diesel produced"
9 Warranties from the Directors stating that they will (a) use their best
endeavours to meet their business obligations (b) En Fuels Ltd. and all
subsidiaries are and will be as stated (c) all other information supplied
is accurate
10 Med-Tech representative director to be appointed
11 Share Acquisition Agreement to be signed by all parties
No. Condition
1 All the above conditions to be satisfied
2 All subsidiary companies to be in place
3 Italian J.V. site acquired or under option
4 Suitable oil supply contract for Italian J.V. to be in place and owned by
En Fuels
5 Suitable offtake contract for Italian J.V. to be in place and owned by En
Fuels
6 Employment Contract with suitable main board CEO to be signed
7 Employment Contract with suitable main board CFO to be signed
8 Employment Contract with Antonio Fiore to be signed by Italian Subsidiary
9 Employment Contract with suitable CFO to be signed by Italian Subsidiary
10 Med-Tech to have successfully raised an additional $36,666,666 gross
Conditions Precedent to Full Acquisition
Attachment B
En Fuels Ltd
Existing & Proposed Increase in Share Capital
En Fuels Ltd share structure
- --------------------------------------------------------------------------------
Name Shares Percentage
- --------------------------------------------------------------------------------
SERGIO FRIGERIO 16,500 16.5
TONY HIGSON 16,500 16.5
CHRIS SLACK 8,000 8.0
HONEYSUCKLE 7,000 7.0
T&S 3,000 3.0
DELTAS 31,000 31.0
(MEDTECH) (18,000) (18.0)
- --------------------------------------------------------------------------------
Total 100,000 100.0
Attachment C
Med-Tech Share Capital
Current Share Capital
- --------------------------------------------------------------------------------
100,000,000 Authorised
10,100,000 Issued and outstanding
Proposed Increase in Share Capital
- --------------------------------------------------------------------------------
500,000,000 Authorised
52,070,370 Issued and outstanding
28,444,444 Issued in two private placements
39,418,736 Issued to the shareholders of En Fuel Ltd
750,000 Issued to new MT management
2,500,000 Reserved for issue to En Fuel Management
----------------
123,183,550 Total issued and outstanding
Attachment D
Management Provisions
1. Provisions relating to the maintenance prior to Closing Date of accurate
and complete accounting and other financial records including the
submission of regular management accounts for consideration by Med-Tech
officers.
2. Signature of a management agreement which will provide for the appointment
of one independent director (including alternates) to the board of En Fuels
and its subsidiaries nominated by Med-Tech shareholders and being directors
other than En Fuels directors elected to the board of Med-Tech. The
management agreement to provide for regular review meetings between the
independent Med-Tech director and/or officer and En Fuels personnel.
3. Director Service Agreements/Employment Contracts for key Med-Tech personnel
which provide for the commitment by En Fuels personnel to the delivery of
the En Fuels Business Plan on a full time or part time and exclusive or
non-exclusive basis to be agreed and set out in those Director Service
Agreements/Employment Contracts, as appropriate. Such agreements to be for
the minimum period required to deliver the initial business plan but
subject to continuation based on periodic performance reviews.
4. Policy and Procedures document to apply to all En Fuels personnel including
directors covering:-
o Accounting processes in particular policies restricting sale or pledging of
assets without Med-Tech board approval including independent directors.
o Compliance with all relevant laws and regulations including US laws
governing the conduct of business by US registered companies and their
subsidiaries, SEC regulations and best practice corporate governance and
social responsibility obligations.
o Confidentiality.
o Protection of En Fuels owned intellectual property and third party IPR.