October 21, 2005
PRIVATE AND CONFIDENTIAL
Island Corporation
260 Edgeley Blvd
Unit 32
Concord, Ontario
L4K 3Y4
Attn Norm Drolet
Ettore Naccarato
Dear Mr. Naccarato & Drolet
Re: Letter of Intent ("LOI") for the Acquisition of the shares of Island
Corporation ("ISLAND" or the "Company"). The purpose of this LOI is to set
forth certain nonbinding intentions of, and certain binding agreements between
On The Go Healthcare, Inc, (the "Purchaser") and the shareholders of ISLAND,
the Company, (the "Vendors"), (collectively, the "Parties") both personally
and in their capacity as trustees with respect to the transaction described
in subparagraph 1 of Part One of this LOI (the "Transaction").
Further details are provided in Schedule A to this LOI.
PART ONE - NONBINDING PROVISIONS
The following numbered paragraphs of this Part One (collectively, the
"Nonbinding Provisions") reflect the Purchaser's current intentions with
respect to the matters described herein, but the Parties acknowledge that
neither the Nonbinding Provisions nor any prior or subsequent course of
conduct or dealing between the Parties is intended to create or constitute
any legally binding obligation, and neither the Purchaser nor the Vendors
shall have any liability with respect to the Nonbinding Provisions. Whether
or not a fully-integrated, definitive agreement facilitating the sale by the
Vendors of the Company (the "Definitive Agreement") and other related documents
are prepared, authorized, executed or delivered by the Parties, no party to,
or recipient of, this LOI shall have any liability to any other party to, or
recipient of, this LOI based upon, arising from, or relating to the Nonbinding
Provisions. This LOI does not constitute an agreement to negotiate or
otherwise enter into any agreement relating to the acquisition by the Purchaser
of the Company.
1. The Transaction
The Transaction will entail the acquisition by the Purchaser of all
shares of the Company. If the proposed Transaction is consummated, the
Parties intend that the closing shall occur on or before
October 31, 2005, or another date agreed to by the Parties
(the "Closing Date").
2. Assumptions
This LOI is based on the understanding that the Company is a private
company incorporated under the laws Ontario and that management and the
board of directors control a majority of the stock needed in order to
approve the intended sale.
3. Proposed Financial Terms
The total consideration will be payable to the Vendors according to
the terms set forth on Schedule A of this LOI.
4. Conditions for Closing
The Purchaser and Vendors will be required to cooperate to satisfy the
Conditions set forth in Schedule B of this LOI, prior to the Closing
Date.
5. Proposed Form of Agreement
Following the execution of this LOI, the Purchaser and Vendors will
promptly begin negotiations with respect to a written Definitive
Agreement, containing agreed-upon representations, warranties,
conditions (including due diligence and certain other matters to be
mutually agreed to by the Purchaser and Vendors) in a mutually
acceptable form. The Parties agree that if a Definitive Agreement
is not executed by the Closing Date, this LOI shall terminate in
accordance with the provisions of subsection 9 of Part Two of this
LOI unless both Parties agree to extend the Closing Date. The
Parties agree that the closing and the funding of the Transaction
will occur simultaneously on the Closing Date.
6. Structure of Transaction
The Parties will do all things as necessary or desirable to give
effect to the Transaction, including any restructuring by mutual
agreement in writing to permit all advantages of the Income Tax
Act (Canada) and the United States Internal Revenue Code.
PART TWO - BINDING PROVISIONS
In consideration of the significant costs to be borne by the Purchaser and
Vendors in pursuing the proposed Transaction and further in consideration of
the mutual undertakings as to the matters described herein, upon execution by
the Purchaser and Vendors of this LOI or counterparts thereof, the following
numbered subparagraphs of this Part Two (collectively, the "Binding
Provisions") shall constitute a legally binding and enforceable agreement
between the Purchaser and the Vendors.
1. Access
The Vendors shall provide to the Purchaser or the Purchaser's
representative's reasonable access to all of the financial records
of the Company and all other such information as may be mutually
agreed upon in connection with the Purchaser's due diligence review.
The Purchaser shall have access to such records and information at a
mutually convenient location. All of the information provided to the
Purchaser and its professional advisors is and shall remain
confidential.
2. Exclusive Dealing
Unless and until the Binding Provisions are terminated pursuant to
subparagraph nine of Part Two of this LOI, the Vendors shall not
directly or indirectly solicit or encourage the submission of offers
from or negotiate with or in any manner encourage any proposal from
any other person or group relating to the sale of all or any portion
of the capital stock or assets of the Company.
3. Disclosure of Negotiations
Except as and to the extent required by law, without the prior written
consent of the other party, neither the Purchaser nor the Vendors nor
their representatives or affiliates shall directly or indirectly make
any public comment, statement or communication regarding any of the
terms, conditions or other aspects of the Transaction or other
pre-emptory or other related discussions between the Parties. If a
party is required by law to make any such disclosure, it shall first
provide to the other party the content of the proposed disclosure,
the reason why such disclosure is required, the time and place that
the disclosure will be made. Notwithstanding the foregoing, the
Vendors hereby grants permission to the Purchaser to disclose the
existence and terms of this LOI to recognized financial institutions
or other sources of capital in connection with the Purchaser's
attainment of acquisition financing (if required), as well as the
Purchaser's lawyers, accountants and professional advisors. The
Purchaser may file an 8k with the SEC giving an outline of the
transaction if it's lawyers fell it necessary to comply with
discloser requirements.
4. Costs
The Purchaser and Vendors shall each be responsible for, and bear all
of their own respective costs and expenses (including any commissions,
professional fees and other expenses of their representatives) incurred
in connection with pursuing or consummating the proposed Transaction
including the costs associated with the due diligence review.
5. Conduct of Business
While this LOI remains in effect:
(a) The Vendors agree to: (i) conduct its affairs only in the
ordinary course of business; (ii) continue to pay all of
the Company's customers, suppliers and other parties having
business relationships with the Company based on the same
terms that it normally exercises; (iii) continue to provide
the same terms of sale to its customers and continue to
make reasonable attempts to collect monies owed to it by
its customers; (iv) notify the Purchaser prior to incurring
any financial obligations to make capital expenditures,
enter into and/or guarantee leases, obtain third party
debt, enter into purchase commitments and any other
liabilities that would not arise in the ordinary course
of business; and (v) use all commercially reasonable
efforts to preserve the Company's business organization,
keep available the services of the Company's current
employees, preserve the Company's existing relationships
and maintain the goodwill that the Company enjoys with
these persons; and
(b) From the date hereof, the Vendors will not and, without
the prior written consent of the Purchaser, will not permit
the Company to: (i) declare, make or pay any dividends or
bonuses (except for bonuses that are normally paid in order
to reduce taxable income to the small business limit
according to the Income Tax Act (Canada); (ii) transfer any
asset or incur any liability except in the ordinary course
of business and consistent with the Company's past
practices; (iii) materially change the terms of any
agreement with any of the Company's customers, suppliers
or others having business relationships with the Company;
or (iv) change or make any offers to change any
compensation or rate of compensation payable to any of
the Company's directors, officers or key employees other
than in the ordinary course of business and consistent
with past practices.
6. Nonbinding Provisions Not Enforceable
The Nonbinding Provisions do not create nor constitute any legally
binding obligations between the Purchaser and Vendors and whether or
not the Definitive Agreement is prepared, authorized, executed or
delivered by the Parties, neither the Purchaser nor the Vendors shall
have any liability to any other party to this LOI based upon, arising
from, or relating to the Nonbinding Provisions. No prior or subsequent
course of conduct or dealing between the Parties, oral communications
or other actions not reduced to or reflected in writing and executed
by all of the Parties shall serve to modify this subparagraph in any
way or cause the Nonbinding Provisions or any provisions covering
the same subject matter to become in any sense legally binding and
enforceable.
7. Entire Agreement
The Binding Provisions constitute the entire agreement between the
Parties, superseding all prior oral or written agreements,
understandings, representations and warranties, courses of conduct
or dealings between the Parties on the subject matter hereof.
Except as otherwise provided herein, the Binding Provisions may be
amended or modified only by a written agreement executed by the
Parties.
8. Governing Law
The Binding Provisions shall be governed by and construed in accordance
with the laws of the Province of Ontario.
9. Termination
The Binding Provisions shall automatically terminate on the earlier of
the Closing Date or termination in writing by the Purchaser or Vendors.
Upon termination of the Binding Provisions, the Parties shall have no
further obligations hereunder, except as stated in subparagraphs
3 and 4 of this Part Two, which shall survive any such termination.
10.Counterparts and Facsimile Transmissions
This LOI may be executed in several counterparts, each of which so
executed will be deemed to be an original and such counterparts
together will constitute but one and the same instrument. The parties
agree that this LOI may be transmitted by facsimile or such similar
device and that the reproduction of signatures by facsimile or such
similar device will be treated as binding as if originals.
If you find the foregoing terms to be acceptable, please sign and date this
LOI in the space provided below to confirm the mutual agreements set forth
in the Binding Provisions.
The parties agree that this LOI shall be valid until 11:59 p.m. on the ...25th
day of October 2005 after which time, if not accepted; this LOI and all
related conditions shall be null and void.
Yours truly,
On The Go Healthcare, Inc.
/s/ Stuart Turk
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Stuart Turk - CEO
Witness:
/s/Randal A. Kalpin
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Name: Randal A. Kalpin
Date: Oct. 21, 2005
This LOI is hereby accepted and agreed upon by the undersigned.
ISLAND CORPORATION
/s/Norm Drolet /s/Ettore Naccarato
- -------------- --------------------
Norm Drolet Ettore Naccarato
Witness:
/s/ Robin Ricalis
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Name: Robin Ricalis
Date: Oct. 21, 2005
SCHEDULE A - TERM SHEET
Purchaser: On The Go Healthcare, Inc. (the "Purchaser")
Vendors: Island Corporation (the "Vendor")
Target Company: Island Corporation ("ISLAND" or the "Target Company").
Consideration: Allocation Shareholders
Certain shares As a Group Norm Drolet
100% Ettore Naccarato
Shareholders Purchase Price OGHC Shares on Closing
Norm Drolet $750,000 500,000
Ettore Naccarato $750,000 500,000
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Total Cash $1,500,000
Value of Shares Based on $1.10 USD 1,100,000 US$
Value in CDN$ @ 1.2 $1,320,000
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Total Value of the Transaction in CDN$ $2,820,000
On closing $1,000,000 in cash will be paid. An additional $200,000 in cash
will be paid in 2 equal payments subject to adjustment begging 90 days from
closing. An additional $300,000 will be paid in 12 equal installments of
$25,000 commencing January 31st, 2006. The Balance of the purchase price due
after closing shall be secured by way of security to the vendors.
Key employees will split a Maximum of 60,000 restricted shares of OGHC
The company will Issue a refundable goodwill deposit of 25,000 shares each
to Norm Drolet and Ettore Naccarato to be credited to the purchaser on
closing
SCHEDULE B:
CONDITIONS FOR CLOSING
Conditions
A. Meeting with the Vendors and touring the facilities
B. Delivery of the Vendors' certain Assets, free and clear of any
encumbrances.
C. The Purchaser at its sole discretion must be satisfied with the results of
its due diligence review to be completed by October 31, 2005 or 30 business
days after all requested information is provided and that the information
provided by the Vendors is a true representation of the condition of the
Target Company both financial and otherwise. This date can be extended by
mutual agreement between the Purchaser and Vendors.
D. The Vendors will warrant:
the collectibility of the accounts receivable net for an allowance of
doubtful accounts in accordance with US GAAP.
that Inventory will be current and marketable
that Furniture & Office Equipment will be free and clear of any
encumbrance.
E. If there is a material misrepresentation discovered after the signing of
the Definitive Agreement and before closing, the Purchaser may elect not
to complete the closing.
F. The Company will have normal and adequate working capital at the time of
closing, consistent with past business practices.
G. The Vendor agrees:
Norm Drolet and Ettore Naccarato will remain and continue to run the
ISLAND division for an agreed upon wage of $100,000 per year each for a
minimum of 3 years from time of closing. The terms of employment
benefits will be defined in the employment contract prior to closing.
H. Purchaser's Board of Directors approval.
I. The transaction is conditional upon the approval of Laurus Master Fund Ltd
prior to October 31, 2005
J. The transaction is conditional upon the approval by the Vendor of any
amendment to the quantum of the purchase price or the form of payment of
the purchase price.
K. The parties agree to sign a Section 85 Rollover Agreement or other
agreement as advised by the accountants of the Vendor in regards to the tax
planning for this transaction provided that any proposed tax planning does
not adversely affect the purchaser.
Non-Competition Agreement: As is customary with transactions of this
nature, the Definitive Agreement will require
the Vendors to enter into an appropriate
Non-compete Agreement to the benefit of the
Purchaser.
Due Diligence Information List: With timing that is mutually convenient to
both Parties, the Vendors will permit the
Purchaser or its representative's sufficient
access to its records to complete standard
due diligence procedures. Within 5 business
days of the execution of this LOI, the
Purchaser will provide a comprehensive due
diligence i