Bedminster National Corp.
90 Washington Valley Road · Bedminster · NJ 07921 · Telephone (908) 719-8940
January 10, 2007
Mr. Michael Levin
Metropolitan Computing Corporation.
6 Great Meadow Lane
East Hanover , New Jersey 07936
Reference: Letter of Intent for Sale of Stock
Dear Mr. Levin:
Set forth herein are the principal terms and conditions upon which Bedminster National Corp. (“BNC” or “Buyer”), or a majority owned affiliate, proposes to negotiate the purchase (the “Transaction”) of shares of common stock of Metropolitan Computing Corporation (the “Company”) from you ( the “Seller”) comprising 80% of the total capital stock of the Company. This letter is intended only to set forth the terms upon which continuing negotiations of such proposed Transaction are to be conducted and does not constitute any commitment or agreement either to continue such negotiations for any period of time or to proceed with the contemplated Transaction. The actual structure of the Transaction shall be agreed upon by the parties in the Purchase Agreement. Neither Buyer nor the Seller shall have any binding obligations as a result of, or arising out of, this letter, except for obligations of confidentiality set forth in section 6(h) below. . This offer is derived from the Preliminary Balance Sheet and Draft Income Statement financial information provided to the Buyer.
1. Purchase Price; Payment . The Purchase Price will be a total of eight hundred thousand dollars ($800,000) for 80% of the total Common Stock of the Company on a fully diluted and as-converted basis. The purchase price will be paid to the Seller at closing (the “Closing”), as follows:
$600,000 in cash, by certified check, attorney trust check or wire transfer
$200,000 by promissory note, without recourse, having a term of 5 years and bearing interest at the rate of 8% per annum (“Buyer’s Note”). Buyer’s Note shall be paid solely from proceeds of a subordinated Promissory Note (the “Company Note”) from the Company to Buyer. The Company Note will be repaid solely from the profits of the Company. Seller shall look solely to the proceeds of the Company Note for repayment of Buyer’s Note. If such profits are not sufficient to repay the Company Note, Seller forfeits his right to repayment. The Company Note will have provisions for no penalty for early repayment in full or in part. The Company will make a reasonable effort to repay the Company Note as soon as possible. No distribution of profits of the Company will be made to the Buyer or Seller while either the Company Note or the Line (as defined below) is outstanding. Repayment of the Line (as defined below) will take precedence to repayment of the Company Note; however the Company shall attempt to repay the Company Note after the Line is terminated as soon as possible.
2. Line of Credit; Put .
(a) The Buyer agrees to provide a line of credit (“Line”) to the Company at closing of four hundred thousand dollars ($400,000) having a term of five years. The amounts drawn down under the Line shall bear an interest rate of 8%, and all amounts drawn down shall be repaid annually. The Line will be renewed if the Company’s equity has grown by 20% or more in the prior twelve-month period. If the Company’s equity has not grown by at least 20% over such period of time, in lieu of requiring payment in full, at the Buyer’s option, the Line may be converted to a term loan, payable in monthly installments of principal and interest over a term of not less than 18 months.
(b) The Line shall be secured by a pledge of the Seller Shares (as defined below). No distribution of profits of the Company shall be made to the Buyer or Seller while the Loan or the Line is outstanding. The Company will make a reasonable effort to repay the Loan or the Line as soon as possible. The Loan or the Line can not be deemed in default on a technicality if there are company assets to cover a scheduled payment.
(c) At any time after the third anniversary of the Closing :
(i) the Seller may put the Seller Shares to the Buyer and the Buyer must purchase the remaining shares of common stock of the Company held by the Seller (“Seller Shares”) at the Put Price. The Put Price shall be the greater of $200,000 plus 8% simple interest per annum from the date of closing or the per share amount based upon the average of two most recent years of the Company’s audited annual EBITDA multiplied by six (6);
(ii) The Buyer may require the Seller to sell the Seller Shares to Buyer at the Put Price b