Exhibit 2(iii)
TERM SHEET
(▇▇▇▇ Technology, Inc. Acquisition of Atmospheric Glow Technologies, LLC)
July 3, 2002
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1) Acquisition. Atmospheric Glow Technologies, LLC, a Tennessee Limited
Liability Company ("A-GTech") will transfer all of its non-cash assets and
intellectual property to ▇▇▇▇ Technology, Inc., a Delaware corporation
("▇▇▇▇"), in exchange for stock of ▇▇▇▇ in a transaction qualifying under
Section 351 of the Internal Revenue Code of 1986, as amended, provided
however, if and to the extent A-GTech has cash on hand in excess of $25,000
at closing, A-GTech agrees to transfer its cash in excess of $25,000 to
▇▇▇▇ as a part of this transaction. A-GTech.
2) Assumption of Liabilities. ▇▇▇▇ shall assume the liabilities of A-GTech
listed on Exhibit "A" to this Term Sheet.
3) Assignment of Contracts. If the consent or approval of any third party is
required for ▇▇▇▇ to assume any of A-GTech's contract rights, then A-GTech
shall obtain the consent or approval of any such party for the assignment
of such contract.
4) Purchase Price. ▇▇▇▇ shall issue to A-GTech a total of 87,456,629 of ▇▇▇▇'▇
Common Shares and 500,000 of ▇▇▇▇'▇ Class B Common Shares, further
described in Section 8 hereof (the "Acquired Shares"), and will advance
$1,500,000 in cash prior to the Closing (as defined below) to allow A-GTech
to fulfill a stock redemption and acquisition agreement with A3
Technologies, Inc. ("A3") and its shareholders, as consideration for
A-GTech's assets pursuant to this asset acquisition.
5) Restriction of Transferability. A-GTech shall not transfer or assign the
Acquired Shares for a period of 12 months following the Closing or as
otherwise prohibited by applicable federal and state securities laws (the
"Restriction Period"). However, the Acquired Shares may be distributed to
A-GTech's members in the event that A-GTech dissolves.
6) Piggyback Registration Rights. Beginning at the end of the Restriction
Period and continuing for additional twelve months, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇
▇▇▇▇▇▇ (up to 18 million shares) and A-GTech (as to all of its shares)
shall have piggyback registration rights as permitted under applicable
federal and state securities laws. ▇▇▇▇ shall have no obligation to begin
or complete a registration of its securities.
7) Conversion of Class B Common Shares. At the Closing, ▇▇▇ ▇▇▇▇▇▇ agrees to
convert all but 250,000 of his ▇▇▇▇ Class B Common Shares to ▇▇▇▇ Common
Shares.
8) Issuance of Class B Common Shares. At the Closing, ▇▇▇▇ shall issue a total
of 500,000 Class B Common Shares, to A-GTech. Additionally, ▇▇. ▇▇▇▇▇▇, the
holder
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of 250,000 Class B Common Shares agrees to approve the issuance of the
Class B Common Shares described in this section as required by ▇▇▇▇'▇
Certificate of Incorporation. ▇▇. ▇▇▇▇▇▇ and A-GTech agree to enter into a
voting agreement that will require ▇▇. ▇▇▇▇▇▇ to vote his Class B Common
Shares to elect one designee of A-GTech to the ▇▇▇▇ Board of Directors
during the three years subsequent to the Closing. A-GTech agrees to appoint
▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as two of their 5 designees to
the board during this three-year period.
9) Post Closing Board of Directors. In conjunction with the transactions
contemplated hereby, ▇▇▇▇'▇ Board of Directors shall adopt a resolution
increasing the number of directors to nine, of which six directors will be
elected by the holder(s) of Class B Common Shares and three directors will
be elected by the holder(s) of Common Shares.
10) ▇▇▇▇ Private Placement. ▇▇▇▇ shall complete a private placement, prior to
or simultaneously with the Closing, of a minimum of $6,500,000 of cash,
some of which may be the conversion of currently outstanding ▇▇▇▇ debt into
Common Shares (the "Private Placement"). In conjunction with the Private
Placement, ▇▇▇▇ shall not issue more than 115,000,000 Common Shares.
11) Lanrick Option: The Lanrick Group, owned by ▇▇▇ ▇▇▇▇▇▇, or its assignees,
shall have the right to invest an additional $500,000 in ▇▇▇▇ for period of
three years from the Closing, such investment being in exchange for ▇▇▇▇
Common Shares at a purchase price of $0.07 per share.
12) Divestiture of Certain Assets. Prior to Closing and as soon as practical,
▇▇▇▇ shall sell, transfer or assign all assets, stock or any ownership
interest of any type, and extinguish all liabilities, guarantees or
obligations of any type, associated with its ownership and acquisition of
LandOak Company, Inc, and MidSouth Sign Company, Inc. unless otherwise
agreed by A-GTech prior to the Closing.
13) No Additional Acquisitions. ▇▇▇▇ shall not acquire, enter into a
contract to acquire or enter into negotiations to acquire, any other
business or company prior to the Closing, without the consent of A-GTech.
14) License Agreement with Brother. ▇▇▇▇ shall not sell, transfer or assign any
right, contract, license, royalty or other agreement, that entitles it to
receive royalties, commissions, license payments, fees or other
consideration for the use of any of ▇▇▇▇ intellectual property (including
all patents and other intellectual property or process of any type) by
Brother Industries, Ltd.
15) Name Change. Subsequent to or in conjunction with the Closing, ▇▇▇▇ will
change its name to a name more reflective of the new line of business
acquired from A-GTech.
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16) Employment Agreements. Prior to Closing and effective upon Closing, ▇▇▇▇
shall enter into employment, non-compete, non-solicitation, non-raid and
confidentiality agreements with key employees of A-GTech (the "Employment
Agreements").
17) Termination of ▇▇▇▇'▇ Employees. Prior to Closing, ▇▇▇▇ shall terminate all
of its employees and extinguish any liability under any employment
agreement with any terminated employee, except as approved by A-GTech.
18) UTRC Approval. A-GTech shall obtain the approval of the University of
Tennessee Research Corporation ("UTRC") to the transactions contemplated
hereby, if required or considered prudent by ▇▇▇▇.
19) Restriction on ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Sale of Stock. ▇▇▇▇ has entered into an
agreement with ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, which is hereby approved by A-GTech, that
restricts ▇▇. ▇▇▇▇'▇ ability to sell ▇▇▇▇ stock in the marketplace.
20) Bridge Funding. ▇▇▇▇ shall provide A-GTech with $50,000 on July 15, 2002,
and an additional $50,000 each 30 days until the Closing (the "Bridge
Funding"). It is acknowledged that ▇▇▇▇ has advanced A-GTech a total of
$283,000 as of June 30, 2002. Additionally, $1,500,000 of cash is to be
advanced prior to the Closing to allow A-GTech fulfill a stock redemption
and acquisition agreement with A3 Technologies, Inc and its shareholders.
21) Testing Equipment. Prior to July 31, 2002 ▇▇▇▇ shall obtain or arrange
financing for A-GTech to acquire testing equipment costing $225,000.
22) TCRD Funding of the Testing Equipment. If the Tennessee Center for Research
and Development ("TCRD") funds the testing equipment contemplated by
Section 21, then TCRD shall have the right to invest in the early round of
the Private Placement described in Section 10. TCRD shall have the right to
convert its Promissory Note (up to the lesser of the outstanding balance as
of the date of Closing or $225,000) into shares of ▇▇▇▇ valued at seven
cents ($0.07) per share, but only in the event TCRD provides written notice
to ▇▇▇▇ of its desire to convert its debt to stock prior to August 1, 2002.
The conversion, if any, shall be effective at Closing. The conversion right
shall be non-assignable.
23) Due Diligence. Each party shall be permitted to engage in due diligence to
its sole satisfaction, and require the delivery of such documents and other
items as may be reasonably necessary to complete such due diligence, as
follows:
a) A-GTech shall:
i) permit ▇▇▇▇ to inspect all books, records, contracts, leases and
other documents and items as may be reasonably necessary for ▇▇▇▇ to
complete its due diligence (provided that A-GTech shall only be
required to make such items available during regular hours of
business operations); and
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ii) deliver all regularly prepared financial statements to ▇▇▇▇ as soon
as such statements are available.
b) ▇▇▇▇ shall:
i) permit A-GTech to inspect all books, records, contracts, leases and
other documents and items as may be reasonably necessary for A-GTech
to complete its due diligence (provided that ▇▇▇▇ shall only be
required to make such items available during regular hours of
business operations); and
ii) deliver audited financial statements for the fiscal year ending
March 31, 2002, as soon as possible (but no later than the Closing).
With regard to the audit, ▇▇▇▇ agrees that:
(1) the auditor shall be engaged to search for contingencies and
unrecorded liabilities as part of the audit;
(2) A-GTech shall agree upon the audit procedures to be utilized;
and
(3) A-GTech shall approve the form of engagement letter and the
accounting firm engaged to perform the audit, if other than
▇▇▇▇▇▇▇ & Justice.
24) Warranties and Representations by A-GTech. A-GTech shall warrant and
represent to ▇▇▇▇ at the time of Closing:
a) that director, governor and/or member approval for the transactions
contemplated hereby to the extent required has been obtained;
b) that there has been no material adverse change in A-GTech's financial
position or operations prior to Closing; and
c) such other warranties and representations as are customary for
transactions of this size and type.
25) Warranties and Representations by ▇▇▇▇. ▇▇▇▇ shall warrant and represent to
A-GTech at the time of Closing:
a) that director and/or shareholder approval for the transactions
contemplated hereby to the extent required has been obtained;
b) that, except for the divestitures which are described herein and of
which A-GTech is aware, there has been no material adverse change in
▇▇▇▇'▇ financial position or operations prior to Closing;
c) that there will be no more than 255,000,000 of ▇▇▇▇ Common Shares issued
and outstanding immediately subsequent to the Closing;
d) that there will be 400,000,000 ▇▇▇▇ Common Shares authorized immediately
subsequent to the Closing;
e) that there will be 750,000 of ▇▇▇▇ Class B Common Shares issued and
outstanding immediately subsequent to the Closing;
f) that there are no agreements, except as otherwise disclosed, to issue
any additional shares of ▇▇▇▇ stock or other security other than those
agreements specifically contemplated by the transactions contemplated by
this Term Sheet
g) that it has net current assets including at least $5,000,000 in cash,
advances to A-GTech and cash equivalents;
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h) that it has a net operating loss carry forward of at least $4,000,000,
which can be used to offset any future income or capital gains of
▇▇▇▇, assuming no change in existing law;
i) that it has a Federal income tax credit of at least $100,000 available
to offset any future income or capital gains of ▇▇▇▇, assuming no
change in existing law;
j) that ▇▇▇▇ has no liabilities except for those expressly approved by
A-GTech and listed on Exhibit "B";
k) that ▇▇▇▇ is not involved in any litigation, and that ▇▇▇▇ does not
know of any potential litigation against it, as of the Closing;
l) that all requirements under applicable federal and state securities
laws have been fully satisfied, including, but not limited to, ▇▇▇▇'▇
compliance with all required filings with the Securities and Exchange
Commission;
m) all other standard representations and warranties regarding compliance
with federal and state securities laws;
n) that ▇▇▇▇ has no contingent liabilities that have not been disclosed,
in writing, to A-GTech and listed on Exhibit "B";
o) such other warranties and representations as are customary for
transactions of this size and type; and
p) all third party indemnifications of ▇▇▇▇ and guarantees of ▇▇▇▇'▇
obligations (until paid) will remain in effect.
26) Indemnification. Each party shall indemnify the other at the Closing as
follows:
a) A-GTech shall indemnify and hold ▇▇▇▇ harmless from:
i) any and all liabilities incurred which do not arise out of its
ordinary course of business, liabilities incurred in the ordinary
course of business exceeding a total of $ 50,000 or which are not
incurred in the ordinary course of business and which are not
disclosed on Exhibit "A";
ii) any and all liabilities arising from any negligent or fraudulent
act on the part of A-GTech; and
iii) such other items as are customary in transactions of this size
and type.
b) ▇▇▇▇ shall indemnify and hold A-GTech harmless from:
i) any and all liabilities incurred which do not arise out of its
ordinary course of business, liabilities incurred in the ordinary
course of business exceeding a total of $50,000 or which are not
incurred in the ordinary course of business and which are not
disclosed on Exhibit "B";
ii) any and all liabilities arising from any negligent or fraudulent
act on the part of ▇▇▇▇; and
iii) such other items as are customary in transactions of this size
and type.
27) Federal, State and Regulatory Approval. Each party shall use its best
efforts to obtain all necessary federal, state and regulatory approval for
the transactions contemplated hereby.
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28) Closing. The closing of the transactions contemplated hereby shall take
place by September 30, 2002, in Knoxville, Tennessee (the "Closing"). The
Closing shall, in no event, take place later than December 31, 2002, unless
otherwise agreed in writing by the parties.
29) Closing Documents. A-GTech and ▇▇▇▇ will enter into an Agreement to
transfer assets and other documents necessary to consummate the
transactions contemplated by this Term Sheet (the "Closing Documents"),
pursuant to which each party thereto will make various representations and
warranties as well as covenants described herein and which are typical for
asset purchases and which are not described herein. The Closing Documents
shall be prepared by ▇▇▇▇'▇ counsel, and shall be circulated to A-GTech as
soon as possible for its review and comments. The Closing Documents shall
be reasonably approved by the parties.
30) Failure to Close. If this transaction fails to close for any reason, then
the Bridge Funding, the funds advanced to date by ▇▇▇▇ to A-GTech and the
$1,500,000, if paid, shall be either repaid or converted into an ownership
interest in A-GTech based on a pre-money value of A-GTech of $5,000,000,
solely at the option of ▇▇▇▇.
31) Public Disclosure. Information regarding the transactions contemplated
hereby may be disclosed by ▇▇▇▇ and A-GTech to their respective boards,
members, shareholders, creditors, senior management personnel and legal,
accounting and financial advisors on a "need to know" basis only. If ▇▇▇▇
in good faith makes a determination that ▇▇▇▇ should publicly disclose
information about the contemplated transactions under federal securities
laws, ▇▇▇▇ need not seek permission from A-GTech for such disclosure. In
addition, to avoid any potential conflict of interest situations, full
disclosure of ▇▇. ▇▇▇ ▇▇▇▇▇▇▇'▇ (a director of ▇▇▇▇) involvement in both
▇▇▇▇ and A-GTech will be fully disclosed.
32) Confidentiality. Unless and until the proposed transactions are
consummated, neither party shall disclose, and shall cause its directors,
officers, governors, members, shareholders, employees, agents and advisors
not to disclose, without the disclosing party's consent, any Confidential
Information obtained from the other party in the course of such
investigations, except as may be required by law or as described in Section
32 hereof. "Confidential information" means any information about a party,
its assets or business clearly marked "confidential" or identified in
writing as such to a party by the disclosing party upon disclosure, unless
(a) such information is already known to the receiving party or its
representatives or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of the receiving
party or its representatives, (b) the use of such information is necessary
or appropriate in making any filing or obtaining any consent or approval
required for the consummation of the contemplated transactions, or (c) the
furnishing or use of such information is required by or necessary or
appropriate in connection with legal proceedings. The existence and terms
of this Term Sheet and the proposed transactions shall be considered
Confidential Information.
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33) Exclusivity. If this proposal is accepted, ▇▇▇▇ expects to devote
significant time and expense pursuing the proposed transactions. Therefore,
until the transactions proposed in this letter are consummated or until
they are abandoned, A-GTech and its owners agree that they, either directly
or through a representative or agent, will not solicit or negotiate any
offers or proposals from any party (other than ▇▇▇▇) for the sale of any of
A-GTech assets (other than sales in the ordinary course of business) or for
the sale of any ownership interest in A-GTech or merger or consolidation of
A-GTech with or into another entity unrelated to ▇▇▇▇. However, this
provision shall not prevent A-GTech from entering into agreements, forming
joint ventures and entering into strategic alliances in furtherance of
A-GTech's business plan, with approval by ▇▇▇▇ which shall not be
unreasonably withheld. A-GTech will immediately notify ▇▇▇▇ regarding any
contact between A-GTech or its owners, representatives or agents regarding
any such offer or proposal or related inquiry.
34) Binding Effect. Except as expressly provided below, this is a non-binding
expression of the terms and conditions under which ▇▇▇▇ is willing to
acquire the assets of A-GTech, and nothing in this Term Sheet shall be
construed to obligate ▇▇▇▇ to purchase the assets or provide funds to
A-GTech. If this Term Sheet is accepted by both A-GTech and ▇▇▇▇ by July 1,
2002, such acceptance shall signify an intent by each of them to negotiate
in good faith a comprehensive Asset Purchase Agreement which agreement will
incorporate both the terms and provisions stated in this Term Sheet as well
as terms and provisions not stated in this Term Sheet, but which would
customarily be included in an asset purchase agreement for a transaction of
this scope and complexity. Sections 1 through 29 of this Term Sheet do not
create, and are not intended to create, any binding legal or contractual
obligations on the part of either ▇▇▇▇ or A-GTech, but are intended to
merely reflect the intention of the parties to negotiate in good faith for
the preparation, execution and delivery of the Closing Documents. Sections
30 through 35 of this letter are intended to create binding legal and
contractual obligations upon the parties with respect to the matters
undertaken pursuant thereto, and upon the breach by a party of its
obligations under any of Sections 30 through 35 in any material respect,
the injured party shall have such rights and remedies with respect thereto
as are available generally for breach of contract.
35) Governing Law. The interpretation and enforceability of this Term Sheet
shall be governed by the laws of the State of Tennessee.
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This Term Sheet is agreed to and accepted as of this 3rd day of July 2002.
Atmospheric Glow Technologies, LLC ▇▇▇▇ Technology, Inc.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇▇▇▇ By: /s / ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Chief Manager President and CEO
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