CAPITAL GROWTH, INC.
55 West 200 North
Provo, Utah 84601
Phone 801-377-1758
Fax 801-377-1773
Aug 7, 2000
Mr. Bill Spencer, President
Imagenetix, inc.
16935 W. Bernardo Drive
Suite 101
San Diego, CA 92127
Phone: 858-674-8455
Fax: 858-674-8460
RE: Proposed Exchange of shares of Capital Growth, Inc. ("Acquiror")
for all of the outstanding shares of Imagenetix, Inc. ("Acquiree")
Dear Mr. Spencer:
This letter will confirm the recent discussions we have had with you
relative to the proposed exchange of shares of the common stock of Capital
Growth, Inc. ("Acquiror") for all of the issued and outstanding common stock
of Imagenetix, Inc. (Acquiree). The objective of our discussions has been the
execution and consummation, as soon as feasible, of a formal agreement between
Acquiror and Acquiree (the "Exchange Agreement") which, among other things,
would provide for the various matters set forth below.
Acquiror will acquire all of the issued and outstanding common stock of
Acquiree from the shareholders of Acquiree (which will include existing
shareholders, shareholders from a private placement raise, and certain
consultants) in exchange for a maximum of 6,450,000 shares of the common
stock of Acquiror ("Common Stock") which will be delivered upon the closing of
this transaction (the "Closing Date"). You will need to provide us with the
names and addresses of the shareholders as soon as possible. This transaction
is intended to qualify as a tax-free reorganization under Section 368 of the
Internal Revenue Code such that the shares of Acquiror received by the
shareholders of Acquiree will be received on a tax-free basis. The shares to
be issued by Acquiror will be "restricted securities" as defined in Rule 144
under the Securities Act of 1933, and an appropriate legend will be placed on
the certificates representing such shares, and stop transfer orders placed
against them. Also, at Closing, options or warrants of Acquiree will be
exchanged for a like amount of options or warrants of Acquiror. Such new
option pricing, terms, and conditions will mirror those of Acquiree after
adjusting for any stock splits. Additionally, a maximum of 2,740,000 warrants,
225,000 options to Bill Spencer, and 300,000 employee stock options of
Acquiree will be exchanged for a like amount of options and warrants of
Acquiror.
Prior to or simultaneously with the closing, Acquiree will have completed
a Private Placement offering for a minimum of $500,000 and a maximum of
$1,400,000 in equity which funds shall be escrowed until the minimum is
raised.
At closing, Acquiror will be reorganized so that there will be 2,000,000
shares of Acquiror Common Stock outstanding and 393,750 warrants outstanding.
After the closing of this transaction, there will be a maximum of 8,450,000
shares outstanding. If the maximum is raised, the Closing ownership will be:
IMAGENETIX, INC. SHAREHOLDERS 5,050,000 Shares
PRIVATE PLACEMENT SHAREHOLDERS 1,400,000 Shares
From completion of a maximum $1,400,000 equity funding.
PUBLIC CO. SHAREHOLDERS 2,000,000 Shares
TOTAL 8,450,000 Shares
IMAGENETIX, INC. WARRANTHOLDERS 2,740,000 Warrants
Assumes the maximum is raised in the private placement and
Assumes up to 140,000 warrants to underwriter
BILL SPENCER STOCK OPTIONS 225,000 Options
EMPLOYEE STOCK OPTIONS 300,000 Options
PUBLIC CO. WARRANTHOLDERS 393,750 Warrants
TOTAL 3,658,750
The warrants will carry terms and conditions as agreed upon by both
acquiree and acquiror prior to the closing. The employee stock options will
be exercisable at $2.00 per share. Bill Spencer's options will be exercisable
at $1.00 per share.
Simultaneously with the closing, the authorized common shares shall be
50,000,000 shares.
The current officers and directors of Acquiror will submit their
resignation as officers and directors effective on the Closing Date.
On the Closing Date, Acquiror will have $11,000 liabilities and $0 assets
except as set forth in its 12/31/99 Audited Financial Statements and/or
interim Financial Statements.
Other terms of the Exchange Agreement will include:
Acquiror shall be in good standing in its state of domicile and shall not
be in violation of any Federal or State securities or other laws governing it.
Acquiror will be current in all of its filing requirements as to all tax,
securities or other reports required under laws to which it is subject, and
shall deliver copies of these reports to Acquiree along with copies of its
past and current audited financial statements.
Acquiror shall, at closing, be able to make customary representations,
including but not limited to, representations and warranties that it has no
liabilities and that it is not a party to any litigation.
There shall be no change in the current outstanding capital structure of
Acquiror including outstanding shares, options, warrants or related matters,
except referred to herein.
Acquiree shall be in good standing in its state of domicile and shall be
duly qualified to do business as a foreign corporation in those jurisdictions,
which require such qualification. Acquiree shall be free from any material
pending or threatened litigation, claims, or contingent liabilities.
Acquiree shall be current and in good standing with respect to all
material contracts to which it is a party.
The proposed transaction shall not violate any contract, agreement or
arrangement to which Acquiree is a party.
Acquiree shall designate all persons to be elected to the Board of
Directors of Acquiror at closing subject to the Acquirors shareholders'
approval, and the name of Acquiror will be changed to a name selected by
mutual consent of Acquiror and Acquiree.
No officer, director or controlling shareholder of Acquiree shall have a
criminal record, bankruptcy, SEC censure, disbarment, loss of his/her
professional license or be under investigation for any of the above.
Acquiror's Legal Counsel will prepare updated information at closing for
submission to Standard & Poors ("S & P") for an S & P Listing for Blue-Sky
purposes or to update the existing listing.
Acquiror's Legal Counsel will prepare 15C211 materials immediately
following the closing of this transaction.
Acquiree will immediately engage legal counsel to assist in expediting
the closing of this transaction.
Acquiree agrees to cooperate in providing and explaining information with
respect to the transaction contemplated herein. The information to be
provided shall be sufficient to allow Acquiror to apprise its shareholders of
the business of Acquiree in compliance with the requirements of the Federal
Securities laws, as applicable.
Prior to closing, Acquiree shall provide audited financial statements and
interim GAAP financial statements as required since inception which have been
prepared in accordance with generally accepted accounting principles ("GAAP")
and in compliance with Regulation S-X as promulgated by the Securities and
Exchange Commission.
As a condition to the Closing Acquiror will obtain majority shareholder
approval for the transaction.
As soon as practical after the execution hereof, Acquiror with Acquirees'
prior approval shall notify its shareholders of the proposed transaction.
Subsequent thereto, no party hereto shall release any information to the
public or the media without the consent of all other parties. Acquiror shall
submit to Acquiree, in advance of release, any proposed press release for its
reasonable prior approval.
After the closing of the Exchange Agreement:
Acquiree agrees to submit a timely completed Registration to the SEC and
to include shares, warrants, and options for resale of those shareholders,
warrant holders, and option-holders as agreed to between the Acquiror and
Acquiree. Acquiree will use its best efforts to keep the company and such
registration current for a period of no less than 12 months.
Acquiree agrees to update Market-Makers by submitting updated 15C211
information to them following the Closing.
Acquiree will submit the appropriate paperwork and fees to Standard &
Poors in order for the company's stock to be Blue-Skied for trading or updated
for continual trading.
Acquiree agrees that it will engage a financial public relations firm by
the closing date of this transaction who is mutually satisfactory to Acquiree
and the now existing Board of Directors of Acquiror. Such firm, or an
acceptable substitute firm, shall be continuously engaged for a minimum of
eighteen (18) months.
The parties hereto hereby agree to conduct their business in accordance
with the ordinary, usual and normal course of business heretofore conducted by
them. Thus, there may be no material adverse changes in the business of any
of the companies from the date hereof through the closing of this transaction.
Acquiror has not engaged any brokers or finders with respect to this
transaction, and if Acquiree has or intends to use any broker or finder,
Acquiree agrees to notify Acquiror in writing and Acquiree agrees to be
responsible for any fees or other expenses of such broker or finder.
All parties hereto agree to take whatever reasonable steps are required
to facilitate the consummation of the transaction contemplated herein,
including providing of information regarding the corporate parties hereto.
Upon the signing of this Letter of Intent, Acquiror and Acquiree will
provide to each other full access to their books and records and will furnish
financial and operating data and such other information with respect to their
business and assets as may reasonably be requested from time to time. If the
proposed transaction is not consummated, all parties shall keep confidential
any information (unless ascertainable from public findings or published
information) obtained concerning the other's operations, assets and business.
Upon the execution by you and return to us of this Letter of Intent,
counsel for Acquiror and Acquiree will prepare an Exchange Agreement, which
shall contain provisions in accord with this letter together with such further
appropriate terms and conditions as legal counsel and the parties may mutually
determine. The Exchange Agreement shall be subject to the approval of the
respective shareholders and boards of directors of Acquiror and Acquiree.
It is understood that the terms set forth in this letter may not
constitute all of the major terms which will be included in the Exchange
Agreement; and that the terms set forth herein are subject to further
discussion and negotiation. This letter is non-binding. This Letter of
Intent will be null and void, if the proposed transaction has not been closed
by Sept 15, 2000 or extended by both parties in writing.
If the foregoing accurately reflects our discussions, please execute and
return the undersigned one copy of this letter.
ACCEPTED AND AGREED TO AUGUST 31, 2000
CAPITAL GROWTH, INC. IMAGENETIX, INC.
By: /s/ David Nemelka By: /s/ Bill Spencer
David Nemelka, President Bill Spencer, President
