STRICTLY CONFIDENTIAL

 

August 7, 2012

 

St. Joseph, Inc.

4870 S. Lewis, Suite 250

Tulsa, OK

United States

Attention: Mr. Gerald McIlhargey, CEO

 

STRICTLY CONFIDENTIAL

SUBJECT TO CONTRACT

 

Dear Sirs,

 

Project “DOUBLE-ACE”

 

This letter serves as a non-binding letter of intent between Karavos Holdings
Limited (collectively “we” or the “Arranger”) and St. Joseph, Inc. (the
“Company”), a corporation established under the laws of the State of Colorado,
United States and having a place of business at 4870 S. Lewis, Suite 250 Tulsa,
OK, United States whereby the Arranger hereby proposes to the Company to procure
acquisition of not less than 80% of the issued share capital on a fully diluted
basis in the Company, by way of subscription of new shares and/or (if thought
desirable) derivative instruments convertible into shares of the Company,
together with all rights, benefits and interests thereof or arising therefrom or
in connection thereto, and free from liens, charges, encumbrances or third party
rights by a US corporation (“Investor”), in consideration for which we shall
procure the Investor to transfer and assign of all its beneficial interests
(“Business Cos Interests”) of and in a group of limited liability companies
providing telecom-related voice and data services in the United States
(“Business Cos”), such Business Cos’ Interests representing fifty percent (50%)
of all issued membership interests of Business Cos, whether by way of transfer
and assignment of the entire issued share capital of the immediate holding
company which is the registered owner of the Business Cos Interests or
otherwise, upon the terms and conditions as set forth below:

 

1.Structure. At present, we are structuring the transaction as a procurement of
sale of the Business Cos Interests to the Company, in consideration for which
the Company shall issue and allot to the Investor, or as we direct, (i) common
shares or (ii) convertible preferred shares, which shares will be identical to
the common shares of the Company except that they will have a conversion feature
permitting the holder of such shares to convert them into an aggregate number of
common shares, so that in each case the Investor (or the holders thereof) shall
hold collectively not less than eighty (80%) of the total issued and outstanding
shares of the Company on a fully-diluted and converted basis (after taking into
consideration the existing shares, options and other interests in the Company
and the stock issuance pursuant to the Concurrent Equity Financing as further
described below). We may, however, opt for another form of transaction, based
upon a review of the proposed tax, financial, corporate and legal structures,
and other legitimate considerations of the Arranger or the Investor (and such
transaction, in any form whatsoever, being referred to herein as an
“acquisition”).

 

2.Business Cos. The Business Cos are limited liability companies which are
engaged in the business of providing telecommunications (both voice and data)
services in the United States, servicing the needs of independent local exchange
carrier, competitive exchange carrier and interexchange carrier markets, as well
as wireless carriers, corporate enterprise and residential customers nationally.

 

 

 

 

STRICTLY CONFIDENTIAL

 

3.Management of the Company. All normal or ordinary business, operations and
activities of the Company and its subsidiaries shall be managed and carried out
by the board of directors of the Company (the “Board”, and each member thereof,
a “Director”), in which, unless the Investor otherwise agrees, all Directors
will, upon the consummation of the transactions contemplated hereby (the
“Closing”), be nominated by the Investor.

 

4.Due Diligence. Upon your execution of this Letter of Intent and our obtaining
approval of this Letter of Intent by the Board of directors of Investor, we will
commence a formal due diligence process (“Due Diligence Exercise”) which is
expected to take approximately [six] weeks (“Due Diligence Period”). During the
Due Diligence Period and during the time that negotiation and drafting of the
Definitive Agreement (as defined in paragraph 5 below) is in progress, the
Company will allow us and the Investor and our agents, lawyers, accountants and
advisors (“Advisors”) full and complete access to the Company’s books, records,
information and data relating to the business affairs, financial legal,
structural and regulatory conditions of the Company and its current business of
recruiting and placement of professional technical personnel as well as finance
and accountant personnel on a temporary and permanent basis (“Existing Company
Business”). You will use your best endeavours to ensure that any information
provided to us or our Advisors is accurate and not misleading.       During the
Due Diligence Period, we will use our reasonable endeavours to procure the
Company’s access to the financial, legal and operational affairs of the Investor
and the Business Cos to enable a comparable due diligence exercise on the
Business Cos to be undertaken by the Company. 

  

5.Definitive Agreement. Following completion of the Due Diligence Period (or
earlier, if we are at our sole discretion so decide), and subject to the results
of the Due Diligence being satisfactory to us and the Investor, we will begin
preparation of the legally binding agreement (the “Definitive Agreement”) with
the Closing to occur subject to the events listed in Annexure A hereto and such
other conditions customary to the nature of the acquisition.       Nevertheless,
execution of the Definitive Agreement will be conditional upon (i) the Investor
being satisfied with the results of the Due Diligence Exercise on the Company
and its subsidiaries; (ii) the Company being satisfied with the results of the
Due Diligence Exercise on Business Cos; and (iii) the Company having raised
Concurrent Equity Financing (as defined in paragraph 6 below) and the cash
proceeds of such Concurrent Equity Financing having been placed in escrow by the
date of execution of the Definitive Agreement, with the terms of such escrow and
of the release of the Concurrent Equity Financing to the Company being
satisfactory to us. The Definitive Agreement shall contain customary
representations, warranties, covenants, undertakings and indemnities, including
by the Company’s principal shareholders, together with any non-competition
agreements required by us relating to the existing Company’s business and
restraints on the disposal by the Company’s principal shareholders of shares in
the Company post-closing for an agreed period. 

 

 

 

 

STRICTLY CONFIDENTIAL

 

Closing of the subscription of new shares and, if any, derivative instruments
convertible into shares of the Company and closing of the Concurrent Equity
Financing shall be conducted simultaneously and inter-conditional with every
other condition to be agreed between the Arranger, the Investor and the Company,
including but not limited to those listed in Annex A.

 

6.Concurrent Equity Financing. Concurrently with the Due Diligence Exercises and
drafting of the Definitive Agreements, the Company shall take steps necessary to
raise equity financing (“Concurrent Equity Financing”) of not less than
US$14,000,000, net of issuing and other expenses, by way of issuance of not more
than 18,000,000 new shares.

 

The Concurrent Equity Financing shall in no event result in the percentage
ownership to be held by the Investor (or as it directs) in the Company being
less than 80% of the entire issued and outstanding stock of the Company, on a
fully diluted basis, on Closing.

 

No subscriber to the Concurrent Equity Financing shall obtain any preferential
rights, or rights beyond Closing to, the allotment and issue of additional
shares, or giving them rights in priority to, or in excess of those held by, the
Investor (or as it directs).

 

7.Exclusivity. The parties acknowledge that further evaluation of the possible
acquisition of the Company’s business and assets could result in the Arranger
and the Investor and the Company incurring significant expense. Each party will
be required, among other things, to retain lawyers and accountants and to
continue to employ the services of its consultants and to divert certain of its
internal corporate resources for consideration of the proposed acquisition. In
light of these expenses, and in recognition that the further exploration of the
proposed acquisition will benefit the Company and the Arranger and the Investor,
the parties hereby agree that, for a period extending from the date hereof until
the earlier of (i) the mutual termination of negotiations hereunder, (ii) the
signing of the Definitive Agreement and (iii) the date falling six months from
the date of acceptance of this Letter of Intent (the “Negotiation Period”),

 

(a)the Company shall grant to the Arranger an exclusive right to negotiate for
the transactions contemplated hereby and shall not authorise and shall use its
best efforts not to permit any of its directors, officers, employees, agents or
representatives of the Company or its beneficial owner or his affiliates to
directly or indirectly, solicit, initiate, facilitate or encourage (including by
way of furnishing or disclosing information) any merger, consolidation or other
business combination involving the Company, acquisition of or any other form of
dealing with all or any significant portion of the Company, or inquiries or
proposals concerning or which could reasonably be expected to lead to, any of
the foregoing (an “Acquisition Transaction”) or negotiate, explore or otherwise
communicate in any way with any third party (other than the Arranger or its
affiliates) with respect to any Acquisition Transaction or enter into any
agreement, arrangement or understanding requiring it to abandon, terminate or
fail to consummate the proposed transaction with the Arranger; and

 

 

 

 

STRICTLY CONFIDENTIAL

 

(b)the Arranger agrees that it shall pursue its due diligence and other
activities in connection with the potential acquisition of the Company in good
faith and with diligence.

 

If either party shall be in breach of the obligations above, then the breaching
party shall be liable to indemnify the non-breaching party against all claims,
liabilities, costs and expenses suffered or incurred therefor, in an aggregate
amount not to exceed US $100,000. The Company shall promptly advise the Arranger
of all the material terms and conditions of any inquiries or proposals relating
to an Acquisition Transaction and the identity of the party making any such
inquiry or proposal or on whose behalf such inquiry or proposal is being made.
The Definitive Agreement will incorporate agreements of the parties extending
this undertaking through the Closing date.

 

8.Operation of the Business. The proposed terms and conditions set forth herein
are based upon the assumptions that (i) the Company will continue to maintain
its status as a public reporting company, with its shares available for
quotation and trading at the OTCBB, (ii) it will continue to carry on the
Existing Company Business in the ordinary course of business consistent with the
its past practice, and (iii) its financial position shall not materially
deteriorate from that as at [31 March 2012]. Without prejudice to the generality
of the foregoing, the Company shall (a) not enter into or amend any existing
agreements and contracts (otherwise than in the ordinary course of business)
including but not limited to agreements with its directors or officers or
employees, (b) enter into any new transaction or arrangement other than in the
ordinary course of business, (c) issue or agree to issue any shares, warrants or
other securities or loan capital or grant or agree to grant any option over or
right to acquire or convertible into any share or loan capital or otherwise take
any action which may result in the Investor acquiring a percentage interest in
the Company (on a fully diluted basis) lower than that contemplated in this
Letter of Intent or the Company reducing its interest in any subsidiary, (d)
declare pay or make any dividends or other distributions, or (e) become and
remain as the sole legal and beneficial owner of all registrable and
non-registrable intellectual and other intangible property rights (including but
not limited to domain names) created, developed, used or adapted by the business
or operation of the Company. Should the Company decide to proceed otherwise, the
Company shall promptly notify the Arranger of its intention to do so and shall
not proceed thereof without prior written consent of the Arranger.

 

  9. Confidentiality

 

9.1Each of the Arranger and the Company (each, a “Party”) shall not, without the
prior written approval of the other Party, disclose or use for any purpose as
contemplated in this Letter of Intent, the other Party’s Confidential
Information.

 

 

 

 

STRICTLY CONFIDENTIAL

 

9.2Each Party shall take reasonable steps to ensure that its employees, servants
and agents and any contractors or sub-contractors engaged for the purpose of the
transactions contemplated in this Letter of Intent, do not make public, disclose
or use for any other purpose the other Party’s Confidential Information.

 

9.3Each Party (in this paragraph, “recipient Party”) shall on demand from the
other Party return to the other Party, or, at the option of the other Party,
destroy, any documents, records or materials supplied by the other Party to the
recipient Party in connection with the transactions contemplated by this Letter
of Intent.

 

9.4For the purpose of this Clause 9, “Confidential Information” means the
confidential information of a Party which relate to the subject matter of this
Letter of Intent and the Due Diligence Exercise and includes information
relating to:

 

(a)the business, financial and operational information and plans of the Company;

 

(b)the business, financial and operational information of the Investor and the
Business Cos (which for this purpose shall be deemed and agreed to be
Confidential Information of the Arranger);

 

(c)any information proprietary to, or otherwise designated in writing as
confidential by, the disclosing Party; and

 

(d)the subject matter of this Letter of Intent and/or the Definitive Agreement
to be entered into between the Parties (if any) and the identity of the Parties

 

but excluding any information which:

 

(a)is in or comes into public domain prior to the disclosure by the disclosing
Party thereof;

 

(b)is independently developed by the disclosing Party without breach of this
paragraph;

 

(c)is received by the disclosing Party without confidentiality limitation from a
third party; or

 

(d)is required to be disclosed pursuant to a statutory obligation, the rules and
regulations of applicable stock exchanges, any other federal, state or foreign
regulatory agency, FINRA and/or any stock exchange where the securities of the
Company or the Business Cos are or may become listed, the order of a court of
competent jurisdiction or that of a competent regulatory body.

 

 

 

 

STRICTLY CONFIDENTIAL

 

Notwithstanding Clause 9.4(d), the Company acknowledges and agrees that it will,
if required by the Investor and/or the Business Cos, enter into separate
confidentiality agreements with them on such terms as they may require agreeing
to keep confidential, and use only for the purposes of assessing whether to
proceed with the transactions contemplated herein, all information supplied by
them relating to their business affairs, financial, legal and other conditions
of their business, or of which the Company may become aware, pursuant to the Due
Diligence exercise to be carried out by the Company.

 

10.No Trading. The Arranger acknowledges to and agrees with the Company that,
unless and until the information contained herein, in any Definitive Agreement,
or in any other document, instrument, due diligence or other record, or any
other item containing Confidential Information, becomes publicly disclosed as
appropriate, no officer, director, equity owner, partner, employee, contractor
or other person may lawfully engage in purchase and sale transactions of the
equity securities of the Company listed on any stock exchange or other public
market.      11.Public Disclosure. Neither the Arranger nor the Company may
issue, approve or make, or cause, permit or suffer any agent or employee thereof
to issue, approve or make, any news release or other public announcement or any
other form of disclosure concerning this Letter of Intent and/or the Definitive
Agreement or any of the content thereof or the identity of the parties thereto
without the prior written consent of the other party. This restriction survives
termination of this Letter of Intent (by reason of breach or entering into of
the Definitive Agreement or otherwise). 

 

12.Costs. Each party shall be solely responsible for bearing their own costs and
expenses incurred in relation to this Letter of Intent and the transactions
contemplated herein, including the costs of the Due Diligence exercise to be
undertaken by it, whether or not the Definitive Agreement is entered into.

 

13.Governing Law. This Letter of Intent shall be governed by, and construed in
accordance with, the laws of the Hong Kong SAR, without regard to the principles
of conflicts of laws applied thereby, and shall supersede any and all prior
written or oral agreements between the parties hereto. No change, modification,
alteration, or addition to any provision of this Letter of Intent shall be
binding unless in writing and signed by an authorised representative of each of
the parties hereto.

 

14.Counterparts. Acceptance of this Letter of Intent may be executed in any
number of counterparts, each of which when delivered shall be deemed an original
and all of which together shall constitute one and the same document. Signatures
may be made by facsimile transmission.

 

15.Binding / Non-Binding Effect. Except for this paragraph and the provisions of
paragraphs 7 through 14 (the “Binding Provisions”), this Letter of Intent and
all discussions and negotiations relating to the proposed transactions are not
intended to constitute a binding agreement or enforceable rights for obligations
between the parties, but reflects only the interest of the parties to proceed
with the negotiation of the transactions described above. All references herein
to the parties’ obligations and commitments (except as set out in the Binding
Provisions) shall be interpreted to mean intended obligations and commitments.
Neither party shall have any liability to the other party if a party fails to
proceed with the transaction for any reason; provided, however, that nothing
herein shall relieve a party of any liability for breach of any of the binding
provisions.

 

 

 

 

STRICTLY CONFIDENTIAL

 

The basic terms and conditions as outlined above are open for acceptance by
having one copy of this Letter of Intent signed and returned to the Arranger on
or before September 30, 2012, beyond which the same shall automatically lapse
and (save the Binding Provisions) cease to be in effect. We sincerely look
forward to working with you on this transaction with the strong belief that it
will be mutually beneficial for all parties involved.

 

Yours sincerely,

For and on behalf of

KARAVOS HOLDINGS LIMITED

We, the undersigned, hereby acknowledge and confirm our acceptance to this
Letter of Intent.

 

[sig1.jpg]     Name:   For and on behalf of Title: Director   ST. JOSEPH, INC.  
        /s/ Gerald McIlhargey     Name: Gerald McIlhargey     Title: President  
  Date: August 7, 2012

  

 

 

 

STRICTLY CONFIDENTIAL

 

ANNEXA Conditions Precedent

 

(in this Annexure A, any reference to “Company” shall mean each of the Company
and any of its subsidiaries)

 

(i)each of Arranger and Investor having satisfied themselves with the results of
their financial, operational and legal due diligence on the Company and its
subsidiaries;

  

(ii)the Company having satisfied itself with the results of their financial,
operational and legal due diligence on Business Cos;

  

(iii)approval from the board of directors (or its designated committee) and the
equity holders of the Investor (and their respective holding companies, if so
required) has been obtained;

  

(iv)approval from the Board of Managers (or their designated committees) and the
equity holders of the Business Cos (if so required) has been obtained;

  

(v)approval from the board of directors (or its designated committee) and the
equity holders of the Company (if so required) has been obtained;

  

(vi)all necessary regulatory approvals to enter into and consummate the
transactions provided in the Definitive Agreement shall have been obtained, and
all applicable publication and other requirements under the applicable laws,
rules and regulations have been fully satisfied or complied with, as applicable;
and

  

(vii)employment contracts with the key people of the Company on terms
satisfactory to the Investor and the Company (and which include customary
confidentiality, irrevocable assignment of intellectual property,
non-solicitation and non-competition covenants) have been executed.