EXHIBIT 10.2
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LETTER OF INTENT TO ACQUIRE QVERGENT RADIO CORP.
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Qvergent Radio Corp.
P.O. Box 1316
Laguna Beach, California 92652
October 11, 2000
PERSONAL AND CONFIDENTIAL
ePromo.com, Inc.
11930 Menaul Blvd. NE, Ste. 107
Albuquerque, New Mexico 87112
Re: Proposed Acquisition of Qvergent Radio Corp. by ePromo.com, Inc.
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Gentlemen:
This letter of intent will confirm the mutual intentions of ePromo.com,
Inc., a Nevada corporation, ("Acquiror") for the acquisition by Acquiror of
Qvergent Radio Corp., a Delaware corporation ("Target") and certain related
matters.
The terms of the proposed merger (the "Merger") will be pursuant to and
are subject to the execution of a definitive agreement to be entered into by the
parties (the "Acquisition Agreement"). The principal terms of such Acquisition
Agreement will include the following:
1. The Merger. At the closing of the Merger, Target will merge with and
into a wholly-owned subsidiary of Acquiror ("Merger Sub"), with Target remaining
as the surviving corporation.
1.2Consideration to be paid in the Merger. The following ePromo.com
shareholders (the "CD Promo Shareholders") own a total of eight million three
hundred seventy-eight thousand five hundred ninety (8,378,590) shares of
ePromo.com common stock:
Darren Everitt 2,285,070 shares
Karl Heimer Karlsson 2,285,070 shares
David Beasley 761,690 shares
John Stephens 761,690 shares
Arnar Gunnlaugsson 1,523,380 shares
Domain Decision Ltd 761,690 shares
Subject to upward adjustment as described herein, the purchase price (the
"Purchase Price") payable in the Merger shall be four million one hundred
eighty-nine thousand two hundred ninety-five (4,189,295) shares of the CD Promo
Shareholders common stock (the "Initial Shares"). The Initial Shares payable to
the Target's shareholders shall not be newly issued shares of Acquiror, but
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already existing shares owned by the CD Promo Shareholders. Acquiror, the CD
Promo Shareholders and QRC will identify a legal and contractual mechanism for
the CD Promo Shareholders to give back a portion of their shares to Acquiror in
order for Acquiror to fulfill its obligation to purchase Target.
3. Other Negotiations. After signing this letter, Target will not
initiate or, subject to the fiduciary obligations of Target's officers and
directors, hold discussions concerning the sale or acquisition of Target or its
assets with any party other than Acquiror; provided, however, that if the
Acquisition Agreement has not been executed by October 31, 2000 (or such later
date as the parties may agree), these restrictions will no longer apply.
Provided further, that this restriction shall be subject to a limited "fiduciary
out" which allows Target to negotiate and provide information in response to an
unsolicited superior proposal if required by such fiduciary duties.
4. No Public Announcement; No Disclosure. The parties shall make no
public announcement concerning this letter, their discussions or any other
memos, letters or agreements between the parties relating to any acquisition
unless disclosure is required under applicable law. Under no circumstances will
either party discuss or disclose the existence or terms of this letter (or that
the parties are holding discussions) with or to any third party other than such
legal, accounting and financial advisors of the parties who have a need to know
such information solely for purposes of assisting with respect to the Merger.
5. Due Diligence. At such time prior to the closing of the Merger as
may be reasonably requested, each party shall make available to the other party
and the other party's employees, agents and representatives all information
concerning the operation, business and prospects of such party as may be
reasonably requested by the other party, including, without limitation, making
the working papers of such party's independent certified public accountants
available for inspection by the other party's independent certified public
accountants. Each party will cooperate with the other party for the purpose of
permitting the other party to discuss such party's business and prospects with
such party's customers, creditors, suppliers and other persons having business
dealings with such party.
6. Principal Representations and Warranties.
(a) Acquiror. Acquiror will deliver copies of its most recent
reports on Forms 10-K, 10-Q and 8-K to Target, and warrant that such
documents, taken together, are free\ from material misstatements and
omissions. Additionally, the Acquisition Agreement will contain
customary representations and warranties of Acquiror covering, among
other things.
(i) The due incorporation and good standing of Acquiror.
(ii) Acquiror's title to its assets,including its intellectual
property, free of all liens and encumbrances.
(iii) Compliance, in all material respects, with all laws and
governmental regulations applicable to Acquiror's business and
operations.
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(iv) The absence of undisclosed pending claims, litigation,
contract defaults, etc.
(b) Target. The Acquisition Agreement will contain customary
representations and warranties of Target covering, among other
things.
(i) The due incorporation and good standing of Target.
(ii) The accuracy of all financial statements of Target
submitted to Target and the absence of undisclosed liabilities.
(iii)Target's title to its assets, including its intellectual
property, free of all liens and encumbrances.
(iv) Compliance, in all material respects, with all laws and
governmental regulations applicable to Target's business and
operations.
(v) The absence of undisclosed pending claims, litigation,
contract defaults\, etc.
7. Acquiror's Conditions to Close Merger. In addition to such other
conditions to closing as are usual in a merger transaction, the following will
be conditions to the closing of the Merger by Acquiror (which Acquiror may
waive, in Acquiror's sole discretion):
(a) The representation of warranties of Target are true in all
material respects on the date of the closing.
(b) The closing of the Merger shall have occurred on or before
October 31, 2000.
(c) An opinion of counsel for Target, satisfactory to Acquiror, as
to matters usual in a merger transaction.
(d) Approval of the Merger by the board of directors and
shareholders of Target.
(e) Execution and delivery, on or before October 31, 2000, of a
definitive and binding Acquisition Agreement setting forth all
material terms of the Merger.
(f) Compliance with applicable federal and state securities laws.
8. Target's Conditions to Close Acquisition. In addition to such other
conditions to closing as are usual in a merger transaction, the following will
be conditions to the closing of the Merger by Target (which Target may waive, in
Target's sole discretion):
(a) The representations and warranties of Acquiror are true in all
material respects on the date of the closing.
(b) The approval of the Merger by the board of directors of
Acquiror.
(c) The closing of the Merger shall have occurred on or before
September 30, 2000.
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(d) An opinion of counsel for Acquiror, satisfactory to Target, as
to matters usual in an acquisition transaction.
(e) Execution and delivery, on or before September 25, 2000, of a
definitive and binding Acquisition Agreement setting forth all
material terms of the Merger.
(f) Greg Barela shall be provided with an employment agreement to
serve as Chief Executive Officer of Acquiror on such terms and
conditions as are acceptable to both Target and Acquiror.
(g) Approval of the Merger by the board of directors and
shareholders of Target.
(h) Compliance with applicable federal and state securities laws.
9. Treatment of Target Accounts Payable. Acquiror acknowledges that
Target has accumulated approximately one hundred thousand dollars ($100,000) of
accounts payable. Acquiror agrees to assume the obligation to pay these accounts
payable upon consummation of the Merger.
10.Registration Rights. Certain of Target's employees (the "Founders")
shall be given registration rights with respect to certain Acquiror common
shares received and equaling approximately $180,000 in value and comprising a
portion of the Purchase Price. The registration rights shall be specified in the
form of a registration rights agreement (the "Registration Rights Agreement")
and shall allow for the Founders to elect to have their shares of Acquiror
common stock registered as soon as practicable following the Merger.
11.Continued Funding of Target. In connection with the Merger,
Acquiror shall covenant and agree to supply working capital to Target following
the closing of the Merger at the level of at least $100,000 per month for a
period of twelve (12) consecutive months.
12.Confidentiality. The parties to this letter of intent shall exert
reasonable efforts to preserve and contain all proprietary information and trade
secrets of the other party received or confirmed in documentary form related to
the merger transaction and shall not disclose to any third party or use any such
proprietary information or trade secret for personal advantage, except that the
receiving party shall be free to use and disclose all or any of such proprietary
information and trade secrets which (a) were already in the receiving party's
possession at the time of disclosure by the disclosing party; (b) are a matter
of public knowledge; (c) hereunder are hereafter published other than through
the receiving party; or (d) are lawfully obtained by the receiving party from a
third party without restrictions of confidentiality.
13.Expenses. Acquiror will ultimately be responsible for payment the
expenses in connection with the transactions contemplated hereby. Target's
attorneys shall draft the definitive documents. Acquiror shall assume payment to
Target's attorneys upon consummation of the Merger.
14.Tax Consequences. It is currently contemplated that the parties
will desire the Merger to constitute a reorganization described in section
368(a) of the Internal Revenue Code. The parties will consent to such reasonable
changes in the terms outlined above as such changes may be requested in order to
obtain such income tax treatment.
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15.Governing Law. This letter shall be governed by the internal laws
of the State of California applicable to contracts wholly executed and performed
therein.
16.Closing Date. The parties shall use their best efforts to close the
Merger by October 31, 2000.
* * *
The foregoing letter of intent is a non-binding proposal only, and is
not and should not be construed as an offer or commitment by Acquiror with
respect to the transactions contemplated hereby except as set forth in this
paragraph. This letter of intent is not intended to set forth binding
obligations of Acquiror or Target, except for paragraphs 3, 4 and 12, and all
rights and obligations of Acquiror and Target are subject to negotiation,
execution and delivery of a definitive Acquisition Agreement.
Notwithstanding the delivery of this letter of intent or any past,
present or future approvals by the management, board of directors, or
stockholders of any party to the proposed transaction (or any related person or
entity) or any other past, present or future written or oral indication of
assent, or indications of results of negotiations or agreement, no party to the
proposed transaction (and no person or entity related to any such party) will be
under any legal obligation, except as expressly provided herein, with respect to
the proposed transaction or any similar transaction, and no offer or binding
commitment of any nature whatsoever shall be implied, unless and until the
formal agreement providing for the transaction has been executed and delivered
by all parties thereto.
Upon the execution of a definitive Acquisition Agreement relating to
the matters set forth herein, the provisions of this letter of intent and all
prior discussions will merge into such agreement.
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If you are in agreement with the foregoing, please confirm such
agreement by signing and returning to us the enclosed copy of this letter.
Very truly yours,
Qvergert Radio Corp., a Delaware corporation
By:
Name: _____________________________
Title: ______________________________
Agreed in principal
ePromo.com, Inc., a Nevada corporation
By:
Name: _____________________________
Title: ______________________________
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