ACQUISITION LETTER OF INTENT
Brooks Machine Co Inc. 1116 New Highway 7 Columbia TN 38401
Re: Acquisition of Assets Dear Mr. Ronnie Erwin
This letter sets forth the intent of Mark Witherow & Barry Wood (“Buyer”), to buy, and of Brooks Machine Co Inc. (“Seller”), to sell, all of the property and assets used by Seller in the operation of its business (the “Business”). This letter sets forth the proposed terms and conditions of the acquisition. 1. Purchase of Assets. At the closing (the “Closing”), subject to the satisfaction of all conditions precedent contained in the Purchase Agreement, the Purchaser will purchase from the seller, and the Seller will sell to the Purchaser, free and clear of any liens, charges, restrictions or encumbrances thereon, all of (the following assets). Final Balance Sheet Adjustments. (A) Promptly following the Closing Date, Seller, with the assistance of its independent public accountants and Buyer’s independent public accountants, would review the books and records of the Company and conduct a physical inventory on the basis of which would be prepared a balance sheet (the “Final Balance Sheet”) showing the actual net value of the assets acquired by Buyer. The parties hereto agree that the proposed distribution of assets on the Final Balance Sheet will be as follows:
Proposed Final Balance Sheet Assets Accounts Receivable Inventory Land Buildings Autos & Trucks Equipment Computer Equipment Furniture Leasehold Improvements Utility Deposits Less Accumulated Depreciation Total Assets Liabilities Accounts Payable Stockholder’s Equity Total Liabilities & Equity $1,646,393 $176,968 $410,171 $388,589 $111,018 $694,043 $243,352 $1,758,910 $102,785 $36,673 $430,085 $3,519 $(2,355,784) $1,823,361
Within (30) thirty days after the Closing Date, Seller’s independent public accountants would deliver a draft of the Final Balance Sheet to Buyer’s independent public accountants, who would conduct and deliver an audit of such Final Balance Sheet within the later of (60) sixty days after the Closing Date or (30) thirty days after receipt of the draft Final Balance Sheet. (B)To the extent that the value of the net assets shown on the audited Final Balance Sheet (the “Actual Net Asset Value”) was less than $1,646,393, the Purchase price would be reduced, dollar-for-dollar.
(C) The definitive agreement would contain provisions whereby either of the parties could object to the Final Balance Sheet and pursuant to which disputes regarding the Final Balance Sheet would be resolved. Price; Other Consideration; and Escrow. The aggregate consideration to be paid by Buyer for the Assets would be $Negotiated, (the “Estimated Purchase Price”), subject to adjustment if the net book value of the Assets determined in accordance with generally accepted accounting principles (“GAAP”) as of the Closing Date is less than $Negotiatied (the “Estimated Net Book Value”). Escrow at Closing. At the Closing, $100,000 in cash would be retained (the “Retainage”) by Buyer to be held by Buyer. The Retainage would (i) satisfy andy indemnification liabilities o Seller to Buyer arising out of the breach of any representation or warranty of Seller or any other provision contained in the definitive agreement , including but not limited to any environmental liabilities asserted against Buyer relating to periods prior to the Closing Date, (ii), reimburse Buyer for the amount of any receivable of Company which remained unpaid more than 90 days after its creation (upon receiving reimbursement, Buyer would convey all right, title and interest in such receivable to Seller) and (iii), reimburse to Buyer any amount by which the Purchase Price was reduced pursuant to the adjustment referred to in section B above. The Retainage would be held until expiration of the post-closing survival period for rep’s & warranties under the definitive amounts for which claims had been made by Buyer, would be delivered to Seller. The definitive agreement would contain provisions pursuant to which disputed regarding claims against the Retainage would be determined. IN the event the Retainage was insufficient to satisfy Seller’s indemnification or reimbursement liabilities to Buyer, Seller would remain liable for the deficiency.
2. Definitive Agreement. The Buyer and the Seller hereby agree to use reasonable diligence to commence good faith negotiations in order to execute and deliver a definitive asset purchase relating to the Acquisition (the “Purchase Agreement”) acceptable to parties hereto on or prior to December 31, 2008. All terms and conditions concerning the Acquisition shall be stated in the Purchase Agreement, including without limitation, representations, warranties, covenants and indemnities that are usual and customary in a transaction of this nature as such may be mutually agreed upon between the parties. Subject to the satisfaction of all conditions precedent contained in the Purchase Agreement, the Closing will take place no later than December 31, 2008 or as soon thereafter as possible, subject to the approvals of regulatory Board of Directors.
3. Assumed Liabilities; Liens and Encumbrances. At the Closing, Buyer shall assume all contracts and leases of the Business that are not past-due as of the Closing Date. Buyer shall assume all of Seller’s obligations for vacation and personal days and the employees’ past service for purposes of any future severance, and shall institute a medical plan for the employees that accepts all preexisting conditions and a 401(k) plan to which Seller can make a plan-to-plan transfer. As of the Closing Date, the Assets shall be free and clear of all liens and encumbrances, except as expressly agreed by Buyer in the Purchase Agreement. 4. Due Diligence; Exclusive Dealing. Pending the preparation of the Purchase Agreement, Seller will permit Buyer , its representatives, accountants, employees and counsel to examine the Business, the Business’ contracts, and the Business’ finances, and interview key officers and employees of Seller, it being understood that Buyer shall maintain the confidentiality of all information received and shall not provide such information to any third parties, other than to Buyer’s investors, financiers, shareholders, counsel and accountants, and that Buyer will promptly return to Seller all information (including all copies made by Buyer) Delivered by Seller to Buyer if the parties do not enter into a Purchase Agreement. Seller agrees that it shall not, between the date of this letter and the date that the Purchase Agreement is executed, directly or indirectly, attempt to sell, offer to sell, advertise for sale, entertain offers for sale, or take any steps to sell the Business. 5. Good Faith; Termination. Each of the parties agrees to proceed in good faith to negotiate, execute and deliver the Purchase Agreement (and to complete due diligence) within thirty (30) days of Seller’s Acceptance of this letter and to consummate the transactions contemplated by this letter. If the parties have not executed and delivered the Purchase Agreement within the thirty (30)-day period, either party may terminate this letter of intent by written notice to the other party, and neither Buyer nor Seller shall have any further rights against or obligations to the other arising out of the transactions contemplated by this letter. On Behalf of Buyer On Behalf of Seller
___________________ Mark Witherow
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___________________ Barry Wood