February 26, 2003
James B. Wiegand, President
Akid Corporation
10077 E. County Line Road
Longmont, Colorado 80501
Re: Binding Letter of Intent
Dear Jim:
This Binding Letter of Intent ("Letter of Intent") sets forth the terms
upon which ACTON International, Ltd., a Nebraska corporation ("ACTON"), intends
to enter into a definitive agreement (the "Definitive Agreement") to merge ACTON
International, Ltd. into either ACTON Acquisition Corp. ("Merger Sub"), a
Colorado corporation to be formed as a wholly-owned subsidiary of Akid
Corporation, a Colorado corporation or Akid Corporation, a Colorado, corporation
(the acquiring entity will be referred to herein as "Akid"). The determination
of whether Merger Sub is a necessary intermediary step will be determined by
both party's attorneys. In either event, ACTON will be merged into Akid. The
proposed merger is hereinafter referred to as the "Transaction". This letter
also addresses certain additional matters related to the Transaction.
In consideration of the mutual covenants set forth below, ACTON and Akid
agree as follows:
1. Proposed Terms.
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Attached as Exhibit A is a Term Sheet for the Transaction. The Term Sheet
summarizes the current status of the agreement between ACTON and Akid with
respect to the Transaction. Although the parties hereby agree that they will
proceed with the Transaction on the terms set forth in the Term Sheet, the terms
contained in the Term Sheet are subject to change based upon new information
regarding tax or other issues discovered in the course of the parties'
respective due diligence review. The obligations of the parties to consummate
the Transaction will be subject in all respects to the satisfaction of the
conditions precedent contained herein.
2. Conditions Precedent to the Transaction.
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The respective obligations of ACTON and Akid to consummate the Transaction
are subject to the satisfaction of the following conditions precedent:
A. Due Diligence.
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Each party must complete its due diligence review of the other party's
business, financial condition, assets, contractual relationships,
compliance with laws and regulatory requirements, obligations (fixed and
contingent), liabilities, employee relationships, ongoing litigation or
threats of litigation and other matters pertaining to its business and
affairs and, based upon such review, must be satisfied, in its sole and
exclusive discretion, with the results thereof. Each party agrees to
provide to the other party and its agents complete and timely access to all
of such party's books, records, personnel and facilities for purposes of
conducting such review;
B. ACTON Audit.
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The independent auditors selected by ACTON must complete their audit
of the financial statements of ACTON for its fiscal year ended June 30,
2002 and the final audit report issued by such auditors may not contain any
material qualifications or exceptions.
C. Consents and Approvals.
--------------------------
The parties will have obtained all waivers, permits, consents,
approvals or other authorizations, and effected all registrations, filings
and notices, which are required on their respective part to consummate the
Transaction;
D. Representations and Warranties.
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The representations and warranties, in form and substance as are
customary for transactions of a nature comparable to the Transaction, of
ACTON and Akid, as the case may be, as made to the other in the Definitive
Agreement will be true and correct in all material respects, in each case
as of the date made by such party and as of the closing date of the
Transaction;
E. No Legal Proceedings Pending.
--------------------------------
No action, suit, claim, arbitration, investigation or other legal
proceeding will be pending or threatened before any governmental entity or
arbitrator wherein an unfavorable judgment, order, decree or determination
would prevent consummation of the Transaction or have a material adverse
effect on the business, operations, financial condition or contractual
relationships of either ACTON and Akid;
F. Corporate Approval.
----------------------
The Definitive Agreement and the Transaction must be approved by the
respective Boards of Directors of ACTON and Akid and by the holders of the
requisite percentage of shares of each of ACTON and Akid as prescribed by
applicable law and the respective charter documents of the parties as
necessary to authorize corporate approval thereof.
G. Merger Agreement.
--------------------
Within five (5) business days of the execution of this Letter of
Intent, Akid will provide ACTON with a Merger Agreement. The parties will
negotiate in good faith, based upon the terms provided in the attached Term
Sheet with the goal of executing the Merger Agreement within
H. Five (5) business days of its delivery to ACTON.
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The transaction will be consummated within five (5) business days of
the ACTON certified financial statements as provided above.
3. No Sales of Akid Stock.
--------------------------
James Wiegand will not sell or otherwise transfer, any shares of common
stock of Akid, except with the prior written agreement of ACTON, such agreement
not to be unreasonably withheld
4. Governing Law.
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This agreement will be governed by the internal laws of the State of
Nebraska applicable to contracts wholly executed and performed therein.
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5. Other Negotiations.
----------------------
Between the date hereof and March 31, 2003, or such earlier date as ACTON
and Akid mutually agree to discontinue their respective obligation to consummate
the Transaction due to the failure of any condition precedent set forth herein
to be satisfied as contemplated hereby (the "Expiration Date"), each of ACTON
and Akid will not (and each will use its respective best efforts to assure that
its officers, directors, employees, agents and affiliates do not on its behalf),
directly or indirectly, take any action to solicit, initiate, seek, encourage or
support any inquiry, proposal or offer from, furnish any information to, or
participate in any negotiations with, any corporation, partnership, person or
other entity or group (other than discussions with each other) regarding any
acquisition of ACTON or Akid, as the case may be, any merger or consolidation
with or involving ACTON or Akid, as the case may be, or any acquisition of any
material portion of the stock or assets of ACTON or Akid, as the case may be.
Each of ACTON and Akid agrees that any such negotiations in progress as of the
date hereof will be terminated or suspended during such period. In no event will
either ACTON or Akid accept or enter into an agreement concerning any such third
party transaction.
Please contact me if you have any questions regarding the content of this
letter. Otherwise, please indicate the concurrence of Akid with this letter by
executing two copies of it in the space provided below and returning one such
copy to me at your earliest convenience. I look forward to the successful
completion of the discussions contemplated by this letter.
Very truly yours,
ACTON International, Ltd.
By: /s/ Jonathan C. Lambert
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Jonathan C. Lambert, Chairman
BY: /s/ Lynn T. Leffert
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Lynn T. Leffert, Vice Chairman
AGREED TO AND ACCEPTED:
AKID CORPORATION
By: /s/ James B. Wiegand
-----------------------------
James B. Wiegand, President
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TERM SHEET
STRUCTURE
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o The Transaction will be accomplished through the merger of Akid, with and
into ACTON in a merger that qualifies for tax deferred treatment under the
Internal Revenue Code.
Terms:
1. Upon receipt of $15,000 cash earnest money Akid will do a 2 for 1
reverse stock split.
2. Immediately prior to the consummation of the Transaction, ACTON will
cause the purchase of 100,000 shares (post reverse split) of Jim Wiegand's
shares of Akid common stock for $37,500. The purchase price will be paid in
cash.
3. Subsequent to the consummation of the Transaction, the original Akid
stockholders will own 3.5% of the reconstituted company. In the event that
shares of the reconstituted company fail to trade on the OTCBB prior to
September 30, 2003, then in that event, as liquidated damages for the delay
suffered by ACTON, the original Akid shareholders will each return one-half
of their shares for cancellation, netting their stock ownership to 1.75% of
the reconstitued company. However, if a delay is caused by ACTON's failure
to provide documentation in a timely manner, then additional days will be
added to the September 30, 2003 deadline.
4. ACTON and Akid have a grace period of ten business days subsequent to
signing this Letter of Intent within which to terminate all obligations
within this Letter of Intent and have no obligations to the other party,
including but not limited to contractual damages.
REPRESENTATIONS AND WARRANTIES
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o The Definitive Agreement will contain customary representations and
warranties of each of Akid, ACTON and, if necessary, Merger Sub concerning
the following:
o Such party is duly incorporated and in good standing in the state of
its incorporation and is qualified and in good standing in each state
where it is required to be qualified as a foreign corporation to
conduct business in such state;
o Such party has the requisite corporate power and authority to enter
into the Definitive Agreement and to consummate the Transaction;
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o The execution and delivery of the Definitive Agreement by such party
and the consummation of the Transaction will not conflict with, or
result in any violation of, or default under (i) its Articles of
Incorporation or Bylaws, (ii) any lease or other agreement, to which
it is a party, or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to such party;
o Acton has delivered to Akid its audited financial statements for each
of its last three fiscal years and such financial statement, as
delivered, will have been prepared in accordance with generally
accepted accounting principles; Akid has delivered to ACTON its
audited financial statements dated April 31, 2002 and unaudited stub
periods as of July 31, and October 31, 2002;
o The capitalization of such party, including as to options, warrants
and other rights to acquire any equity interest in such party;
o The absence of any material changes in the business or financial
condition of such party since the date of its most recent audited
balance sheet and the absence of any undisclosed liabilities;
o Any material litigation or threatened litigation involving such party;
o The valid ownership of its tangible and intangible assets, without
infringement of the rights of third parties;
o Material contracts of such party and the due enforceability of such
contracts against the other parties thereto;
o Environmental and tax matters relating to such party;
o Such party's relations with its employees;
o Such party's maintenance of insurance coverage, including errors and
omissions and general liability insurance; and
o With respect to Akid, it must represent and warrant that it has timely
filed all reports, proxy statements, registration statements and other
documents required to be filed by it under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the regulations
promulgated thereunder, and that such documents, as of their
respective filing dates, complied in all material respects with the
requirements of the Exchange Act and did not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements made therein
not misleading.
EXEMPTION FROM REGISTRATION
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o The shares of Akid Common Stock issuable to the shareholders of Spooz will
be issued pursuant to Regulation D, as promulgated by the SEC under the
Securities Act of 1933, as amended.
COVENANTS
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o Prior to the closing of the Transaction, all indebtedness, if any, of Akid
will be forgiven and discharged by the obligee(s) thereof pursuant to a
written instrument executed by such obligee(s) in favor of Akid.
o Promptly following the signing of the Definitive Agreement, ACTON, if
required by applicable law, will prepare and file with the SEC preliminary
proxy materials to solicit shareholder approval of the Transaction and
other matters contemplated thereby and, promptly following the clearance of
such materials by the SEC for use in the shareholder solicitation, will
distribute the same to its shareholders and convene a meeting of its
shareholders in compliance with its charter, bylaws and applicable law.
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INDEMNIFICATION
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o Appropriate indemnification will be provided by the shareholders of each of
ACTON and Akid, as constituted immediately prior to the Transaction, to
provide adequate security to the other for existing claims against such
party and breaches of representations, warranties and covenants of such
party for a period of two years from the closing of the Transaction. No
claim will be made until the aggregate value of all claims of such party
exceeds $100,000.
FEES AND EXPENSES
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o The parties will pay their own fees and expenses incurred in connection
with the Transaction, including all reasonable legal and accounting fees
and expenses, whether or not the Transaction is consummated, and any
actions taken by either party in reliance on this Term Sheet will be at
such party's sole risk and expense.
DEFINITIVE AGREEMENT AND CLOSING
- --------------------------------
o The parties agree that they will proceed to negotiate the Definitive
Agreement governing the Transaction with the intent to finalize and execute
the agreement and consummate the transaction.
o Following the execution of the Definitive Agreement and if approval of the
holders of Akid and ACTON is required under applicable law, the parties
will cooperate with each other to promptly submit preliminary proxy
materials with the SEC and take such other actions as are necessary or
advisable to obtain shareholder approval of the Transaction.
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