Paligent Inc. SALVATORE A. BUCCI President and Chief Executive Officer

Exhibit 10.13

 

Paligent Inc.

 

SALVATORE A. BUCCI

President and Chief Executive Officer

(212) 755-4989

sabucci@att.net

 

April 24,2006

 

Mr. Gareb Shamus

Chief Executive Officer

International Fight League, Inc.

145 West 57th Street, 8th Floor

New York, New York 10019

 

Mr. Richard J. Kurtz

270 Sylvan Avenue

Englewood Cliffs, New Jersey 07632

 

Dear Messrs. Shamus and Kurtz:

 

This Letter Agreement setsforth the principal terms upon which Paligent Inc., a Delaware corporation (“Paligent”or the “Company”), is prepared to acquire 100% of the common stock andpreferred stock (collectively, the “Capital Stock”) of International FightLeague, Inc., a Delaware corporation (“IFL”) and Richard J. Kurtz isprepared to invest $1.0 million in IFL in contemplation of the Acquisition (ashereinafter defined). Subject to the provisions hereof, Paligent, IFL and Mr. Kurtzmutually agree to negotiate in good faith towards the execution of mutuallysatisfactory definitive agreement in an expeditious manner.

 

1.     TransactionTerms.

 

•              Transaction Overview. Paligent proposes toacquire (the “Acquisition”) all of the issued and outstanding Capital Stock of IFLin consideration of the issuance to the stockholders of IFL (the “Sellers”) of sharesof common stock of Paligent (“Shares”) in an amount such that Sellers will own 95%of the issued and outstanding Shares of the post-acquisition Company (“Survivor”).

 

•              Investmentby Richard J. Kurtz. Upon the execution of thisLetter Agreement, Richard J. Kurtz will acquire Series A Preferred Stockof IFL having an initial liquidation preference equal to $1.0 million. Theshares of Series A Preferred Stock will constitute 14.23% of theoutstanding Capital Stock of IFL [after giving effect to the assumed conversion(to common stock) of the 6,777,778 shares of Series A Preferred Stock ofIFL previously issued and the effect of the 2 million shares of common stock setaside by IFL for

 

10 East 53rdStreet, 33rd Floor • New York, New York 10022

FAX (212)755-5463

 



 

option grants]. The aggregate purchase price of theshares of Series A Preferred Stock is $1.0 million.

 

•              Debt conversion by Richard J. Kurtz. Presently Mr. Kurtz isowed approximately $600,000 from Paligent pursuant to a demand promissory note.At the time of the Acquisition, Mr. Kurtz will convert this indebtednessinto f Shares of the Survivor such that Mr. Kurtz will acquire 3.78% ofthe Shares of the Survivor (calculated on a fully diluted basis) in exchangefor converting such debt.

 

•              Directors. After the Acquisition, the Survivor’s board ofdirectors shall consist of five persons: Kurt Otto, Gareb Shamus, Michael Molnar, Richard J. Kurtz and SalvatoreA. Bucci. Each of Messrs. Otto, Shamus, Molnar, Kurtz and Bucci will agreeto vote their respective shares of Survivor Shares for the election of theaforesaid directors (and for successors elected by their unanimous selection.

 

•              Reverse Stock Split. At the time of theAcquisition, Survivor shall effect a 1 for 20 reverse split of the Shares.

 

•              Option Pool. Option grants by Paligent and IFL prior to theAcquisition shall survive the merger, subject to the effect of the reversesplit of Shares.

 

•              Name Change. At the time of the Acquisition, Survivor shall changeits name to International Fight League, Inc.

 

2.             Conditions to Closing. The closing of the Acquisition will be subject to thefollowing conditions, which are expected to include, but not to be limited to, (a) completionof satisfactory documentation, (b) completion of due diligence of IFL byPaligent, (c) no material adverse change in either Paligent or IFL, (d) approvalof the board of directors of Paligent, (e) delivery of audited financialstatements of IFL for any fiscal years of operation prior to 2006 and unauditedfinancial statements through the fiscal quarter preceding the Closing, (f) thereceipt by the Company of a fairness opinion, and (g) approval of thestockholders of Paligent, to the extent required.

 

3.             Definitive Agreements. All of the terms and conditions of the proposedAcquisition shall be set forth in definitive written agreements among theparties containing, among other things, agreements, representations,warranties, covenants, and indemnities, appropriate conditions to closing onthe part of both parties as set forth above and appropriate contractualprovisions customarily found in agreements of such type or as otherwiseappropriate. The parties shall simultaneously (i) commence negotiation andpreparation of definitive agreements embodying the foregoing and such othermatters as the parties deem appropriate and (ii) commence their duediligence reviews so that the parties can simultaneously sign such definitiveagreements contemplated by this Letter Agreement within sixty (60) days of thedate hereof;

 

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provided, however, to the extent that the partiesare diligently conducting due diligence and negotiating definitive agreementssuch sixty (60) days shall be extended for such period as agreed to by theparties.

 

4.             Due Diligence; Confidentiality. It is agreed that the consummation of theAcquisition shall in all respects be subject to the completion of asatisfactory due diligence review by Paligent. It is further agreed that,except as required by law or applicable rule or regulation, neitherPaligent nor IFL, without the consent of the other, shall (i) divulge,directly or indirectly, to any person (other than to its respective directors,officers, employees, representatives or agents) any non-public informationregarding the other company’s business, assets or operations, or (ii) usesuch non-public information for any purpose other than evaluating the proposedAcquisition and negotiating definitive agreements.

 

5.             Access. Each party shall be given access by the other partyto all information, documentation, and personnel it reasonably requires for thecarrying out of its due diligence effort. In connection therewith, it isunderstood that, pending the execution of definitive agreement, that eachcompany and their directors, officers, agents, attorneys, accountants and otherrepresentatives (upon reasonable prior notice and during normal business hours)shall have full access to the employees and financial, legal and otherrepresentatives of the other company with knowledge of the company’s businessand operations (which persons will be instructed by management to make full andcandid disclosure of all information reasonably requested), and to the books,records and properties relating to the company’s business and operations.

 

6.             Public Announcements/Information. It is understood that the Company is subject to thepublic reporting requirements of the Securities Exchange Act of 1934, asamended, and, therefore, may be required to make appropriate publicannouncements of this Letter Agreement and the transactions pertaining thereto.No other announcements, except as may be required in the opinion of legalcounsel to the disclosing party to comply with applicable laws, shall be madeof the transaction by any party or their representatives without the express priorwritten consent of the other party. IFL acknowledges that it, together with itsdirectors, officers, employees and representatives who are apprised of thismatter, have been advised that the United States securities laws prohibit anyperson who possesses or is in privy with a person who possesses material non-publicinformation about a company from purchasing or selling securities of suchcompany.

 

7.             Conduct of Business. Upon acceptance hereof and pending the execution ofdefinitive agreements, each of the Company and IFL will conduct its businessesdiligently, in good faith and in the ordinary course of business consistentwith prior practice. Without limiting the foregoing, neither the Company nor IFLshall, without the prior written consent of the other (which consent shall notbe unreasonably withheld or delayed):

 

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(a)           declare or pay any dividend or otherdistribution with respect to its shares of common stock;

 

(b)           amend its Certificate of Incorporation orBy-laws; or

 

(c)           issue or sell or agree to issue or sell anyof its securities or options (in excess of the 2 million common stock optionspresently authorized), warrants or other rights to purchase such securitiesexcept for shares issued upon exercise of options currently authorized oroutstanding and warrants currently outstanding.

 

8.             Exclusivity. The Company and IFL agree that, until such time asthis Letter Agreement has terminated in accordance with the provisions ofparagraph 11 hereof, neither they nor any of their representatives, officers,directors, agents, equityholders or affiliates shall initiate, solicit,entertain, negotiate, accept or discuss, directly or indirectly, any proposalor offer, including any existing offer or proposal (an “Acquisition Proposal”),to acquire all or any significant part of the business and properties of theCompany or IFL, whether by merger, purchase of units purchase of assets orotherwise, or provide any non-public information to any third party in connectionwith an Acquisition Proposal or enter into any agreement, arrangement orunderstanding requiring them to abandon, terminate or fail to consummate theAcquisition. The Company and IFL represent that neither they nor any of theirequityholders or affiliates is party to or bound by any agreement with respectto an Acquisition Proposal other than under this Letter Agreement. IFL agreesto immediately notify Paligent if IFL or any of its representatives, directors,officers or agents receive any indications of interest or any AcquisitionProposal, and will communicate to Paligent in reasonable detail the terms andconditions of any such indication or Acquisition Proposal as well as theidentity of the person or entity making such indication or Acquisition Proposal.Furthermore, IFL agrees that, until such time as this Letter Agreement hasterminated in accordance with the provisions of paragraph 11 hereof, neither itnor any of its representatives, officers, directors, agents or affiliates shallinitiate, solicit, entertain, negotiate, accept or discuss, directly orindirectly, any proposal or offer to raise capital for IFL through the issuanceof debt securities, capitalized leases, preferred or common interests or unitsor any similar instruments except in connection with the Acquisition or withthe express written consent of Paligent.

 

9.             Paligent Agreements. Without the prior written consent of IFL (whichconsent shall not be unreasonably withheld or delayed) Paligent shall not enterinto any agreement (written or oral) or transaction or waive, relinquish,terminate or forebear the enforcement of any right including any agreementinvolving the sale, acquisition, license or lease of any assets.

 

10.           Finders. Neither party hereto dealt with any finder, businessbroker, or investment banker (“Finder”) in connection with the proposedAcquisition and each party shall be solely responsible for, and shall indemnifyand hold the other party harmless from, any claims which

 

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may be made arising out of or in connectionwith its own acts made or alleged to have been made with any Finder.

 

11.           Termination. Notwithstanding anything to the contrary herein, Paligenthas the right in its sole discretion for any reason whatsoever, or for noreason, without prior notice to IFL, and without liability to IFL, to terminatethis Letter Agreement and abandon all discussions, negotiations and relatedactivities respecting the Acquisition.

 

12.           Binding and Non-Binding Effect. This Letter Agreement is binding upon the parties tothe extent set forth herein. The rights and obligations of the parties withrespect to the Acquisition shall only be as set forth herein and as set forth inthe acquisition agreement, if and when it is executed by the parties thereto,and subject to the conditions set forth therein. If, due to no fault ofPaligent, the acquisition of IFL is not consummated within 270 days of the datehereof, the shares of Series A Preferred Stock acquired by Mr. Kurtzupon the execution of this Letter Agreement will constitute 25% of theoutstanding Capital Stock of IFL [after giving effect to the assumed conversion(to common stock) of the 6,777,778 shares of Series A Preferred Stock ofIFL previously issued and the effect of the 2 million shares of common stockset aside by IFL for option grants] with no additional consideration payable byMr. Kurtz. This Letter Agreement may be amended, modified, orsupplemented in writing by the parties.

 

13.           Governing Law. This Letter Agreement shall be governed by andconstrued in accordance with the internal laws of the State of New York,without regard to the conflict of laws principles thereof.

 

14.           Arbitration. Any controversy or claim arising or relating to thisLetter Agreement and its formation, breach, performance and application shallbe submitted to binding arbitration under the Commercial Arbitration Rules ofthe American Arbitration Association in the City of New York, New York. Theparties shall cooperate in good faith to agree on a single arbitrator topreside over the proceeding. The decision of the arbitrator shall be binding onthe parties, and judgment in accordance with that decision may be enteredin any court having jurisdiction thereof. The arbitrator shall be empowered toaward specific performance, injunctive relief and damages (but not exemplarydamage). The prevailing party shall be entitled to collect reasonable attorneys’fees and costs incurred in the course of prosecuting or defending the claim.

 

15.           Representations and Warranties. Each party hereby warrants and represents to theother that (i) all necessary action has been taken to authorize theexecution of this Letter Agreement, (ii) the person executing this Letter Agreementhas been duly authorized to do so, and (iii) upon execution, this Letter Agreementshall be the legal, valid and binding obligation of such party, enforceableagainst it in accordance with its terms.

 

By signing a copy of thisLetter Agreement and returning it to the undersigned, you indicate that theabove is acceptable to you and has been approved by your (in the case of Mr.

 

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Kurtz) or your Board ofDirectors (in the case of IFL). This Letter Agreement will be void unless it isfully executed and returned to the undersigned by 5:00 p.m. Eastern Timeon April 25, 2006.

 

This Letter Agreement may besigned in counterparts, each of which is an original document, and all of whichform one agreement.

 

 

Very truly yours,

 

 

 

PALIGENT INC.

 

 

 

 

 

By:

/s/ Salvatore A. Bucci

 

 

 

Salvatore A. Bucci

 

 

President and Chief Executive Officer

 

 

 

 

READ AND ACCEPTED

READ AND ACCEPTED

this 25th day of April 2006

this 25th day of April 2006

 

 

INTERNATIONAL FIGHT LEAGUE, INC.

RICHARD J. KURTZ

 

 

 

 

By:

/s/ Gareb Shamus

 

/s/ Richard J. Kurtz

 

 

Gareb Shamus

Richard J. Kurtz

 

Chief Executive Officer

 

 

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