Binding Letter of Intent - Cheung Laboratories Inc. and Ardex Equipment LLC
ARDEX EQUIPMENT, LLC
[LETTERHEAD]
August 2, 1996
Dr. Augustine Y. Cheung, President
Cheung Laboratories, Inc.
10220 Old Columbia Road, Suite I
Columbia, MD 21046-1705
RE: Binding Letter of Intent
Rescission of Cheung Laboratories, Inc. Investment In Ardex Equipment,
LLC
Dear Dr. Cheung:
This letter will serve to set forth the background and confirm our discussions
to proceed in the following manner to rescind the transaction in which Cheung
Laboratories, Inc. ("CLI") invested $450,000 in Ardex Equipment, LLC ("Ardex")
stock ($400,000 purchased from Ardex and $50,000 from the principals of Ardex),
$50,000 of which has been repaid from Ardex and $400,000 of which remains as an
investment in Ardex in the form of 17.1111% of the present equity of Ardex.
1. CLI contracted to acquire a controlling interest in Ardex and provide
substantial funding to Ardex as part of implementing a business plan
for CLI's Industrial Division, which business plan involved a
significant investment in CLI by Mr. Gao Yu Wen. Mr. Gao has become
seriously ill, the Industrial Division is being closed and CLI has
entered into an agreement to redeem Mr. Gao's investment in CLI.
2. CLI desires to rescind the remaining $350,000 transaction with Ardex
and the $50,000 transaction with the principals as part of its general
restructuring pertaining to closing its Industrial Division. CLI
desires to cancel its contract to acquire a controlling interest in and
provide substantial funding to Ardex and be repaid its investment in
Ardex, all without prejudice to the business or opportunities of Ardex.
319383.001(B&F) 2
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3. $350,000 of the equity interest of CLI will be converted to a 5-year
negotiable promissory note payable by Ardex under the following terms
and conditions:
a. Interest to be paid at the rate of 8%.
b. The note is payable on an interest-only basis until principal
becomes due.
c. Principal becomes due and payable upon the first to occur of
any of the following:
(i) Public or private offerings successfully completed by
Ardex of $1.5 million in the aggregate or more;
(ii) Ninety (90) days following a year end of Ardex in
which sales for the year have been $3,000,000 or
more;
(iii) Ardex having a cash balance of $800,000 or more from
operations; or
(iv) A date 5 years from the date of the promissory note.
d. The promissory note to be the subject of a limited guaranty by
the three principals of Ardex in which each principal provides
a limited guaranty of one-third of the principal balance of
the note, the limited guaranty to be secured solely by the
interest each principal has in Ardex and the interest each
principal has in options to purchase CLI stock.
e. The principals will provide promissory notes of $50,000 in the
aggregate on the same terms and conditions as the Ardex
promissory notes, $22,500 payable by Joseph Colino
(representing the interest of Joseph Colino and Daniel
Alfieri), $12,500 payable by John Kohlman, and $15,000 payable
by Charles Shelton.
4. This transaction is to be implemented on or before August 31, 1996 by
the execution of detailed documents containing standard terms and
conditions and appropriate detailed terms and conditions to implement
this binding letter of intent.
Very truly yours,
/s/______________________
Joseph M. Colino
President
cc: Charles C. Shelton
John J. Kohlman
The above terms and conditions are agreed this 2nd day of August, 1996.
CHEUNG LABORATORIES, INC.
By: /s/ ______________________________
Dr. Augustine Y. Cheung, President
319383.001(B&F) 3