Exhibit 10.24
 
DVTEL, INC.

STRICTLY CONFIDENTIAL

October 24, 2011

Suspect Detection Systems Inc.
150 West 56th Street
Suite 4005
New York, New York 10019
Attention:  Yoav Krill, Chairman of the Board

Re: Merger Proposal

Dear Mr. Krill,

 
This letter is intended to summarize our discussions to date with respect to the
principal terms of a proposal being considered by DVTel, Inc., a Delaware
corporation (“DVTel”), and Suspect Detection Systems Inc., a Delaware
corporation (“SDS” or the “Company”), regarding the possible merger of a wholly
owned subsidiary of SDS with and into DVTel (the “Merger”).  The Merger and the
other transactions described in this letter are referred to collectively as the
“Transaction,” and DVTel and SDS are referred to collectively as the “Parties.”
 
1. Merger.
 
(a) Subject to the satisfaction of the conditions described in this letter and
other conditions that will be included in the definitive agreement, at the
closing of the Transaction, a newly formed wholly owned subsidiary of SDS
(“Merger Sub”) would merge with and into DVTel, with DVTel surviving the
Merger.  As a result of the Merger, DVTel would become a wholly owned subsidiary
of SDS, and all outstanding shares and options, warrants or rights to receive
shares of DVTel would be cancelled and converted into shares and options,
warrants or rights to receive shares of SDS common stock, such that immediately
after the Merger, the shares and options, warrants or rights to receive shares
of SDS issued in exchange for the DVTel shares and options, warrants or rights
to receive shares would constitute 85% of the fully diluted capital stock of SDS
before giving effect to the New Money Financing described below.  For the
avoidance of doubt, such 85% shall be calculated after giving effect to dilution
for any and all options, warrants, convertible debt or other rights of any type
to receive shares of SDS, and whether or not vested or presently exercisable.
 
(b) The foregoing is based on information currently available to us and is
subject to further due diligence and validation of our working assumptions. We
assume that as of immediately prior to closing, SDS shall be debt free and shall
have, in the reasonable judgment of DVTel, sufficient working capital (taking
into account the New Money Financing).
 
(c) As a condition to the consummation of the Merger, concurrently with and
after giving effect to, the closing of the Merger, investors shall make an
investment in SDS in an amount to be determined by DVTel and on terms which are
acceptable to DVTel in its sole discretion, provided, however, that the gross
amount of said investment shall not be less than $5,000,000 (the “New Money
Financing”).
 
 
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2. Proposed Definitive Agreement. As soon as reasonably practicable after the
execution of this letter, the Parties shall commence to negotiate a definitive
merger agreement (the “Definitive Agreement”) relating to the Transaction. The
Definitive Agreement would include the terms summarized in this letter and such
other representations, warranties, conditions, covenants, indemnities and other
terms that are customary for transactions of this kind and are not inconsistent
with this letter.  If the Definitive Agreement is not executed and delivered on
or prior to the 120th day after the date hereof, this letter shall terminate and
have no further force and effect other than as provided for herein.
 
3. Conditions. DVTel’s obligation to close the proposed Transaction will be
subject to customary conditions, including but not limited to:
 
(a) The results of the due diligence to be conducted by the Parties and their
respective counsel, accountants and other representatives being satisfactory to
such Party in its discretion;
 
(b) SDS’s receipt of the cash proceeds from the New Money Financing at the
closing of the Transaction;
 
(c) completion of SDS’s acquisition of the remaining shares which it does not
already own in its subsidiary Suspect Detection Services Ltd., resulting in
ownership by SDS of 100% of the share capital of such subsidiary at or prior to
the closing of the Transaction;
 
(d) the Board of Directors and stockholders of DVTel approving the Transaction;
 
(e) the Board of Directors of SDS approving the Transaction;
 
(f) the stockholders of SDS approving a reverse stock split and/or an increase
to the share capital of SDS in an amount necessary to permit SDS to consummate
the Transaction;
 
(g) the holders of the convertible debt of SDS fully converting into equity of
SDS (which conversion shall be effected prior to execution of the Definitive
Agreement); in the event that such conversion has not been effected prior to
execution of the Definitive Agreement, the percentage of the fully diluted
capital stock of SDS before giving effect to the New Money Financing to be
issued in exchange for the DVTel shares and options, warrants or rights to
receive shares shall be increased above 85% to a percentage reasonably
acceptable to DVTel to reflect the impact on the valuation of SDS of the debt
that shall remain outstanding;
 
(h) the Parties’ execution of the Definitive Agreement;
 
(i) the receipt of any regulatory approvals and third party consents, on terms
satisfactory to DVTel, including in particular the requisite approval as
described above of the stockholders of SDS and DVTel;
 
(j) if so required by DVTel, receipt of satisfactory fairness opinion(s) with
respect to the Merger;
 
(k) key employees of SDS, including Mr. Shabtai Shoval, Mr. Eran Drukman and
other employees to be identified by DVTel in the course of due diligence, being
subject to employment arrangements on terms acceptable to DVTel;
 
 
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(l)  the members of the executive management of SDS and its Board of Directors
resigning from their positions with SDS effective as of Closing without any
parachute or termination payments being due or payable, except that the
management team of Suspect Detection Services Ltd. shall continue to be engaged
in such positions in such company as agreed with DVTel;
 
(m) designees of DVTel being appointed, as of Closing, as members of the
executive management, including the CEO position, and the Board of Directors of
SDS; and
 
(n) there being no material adverse change in the business, results of
operations, prospects, condition (financial or otherwise) or assets of SDS.
 
4. Due Diligence; Timeline. From and after the date of this letter, the Parties
will authorize its and its subsidiaries’ management to allow the other Party and
its respective advisors reasonable access to its facilities, records, key
employees customers, suppliers and advisors for the purpose of its due diligence
review. The due diligence investigation will include, but is not limited to, a
complete review of the Party’s financial, legal, tax, intellectual property and
labor records and agreements, and any other matters as such Party’s accountants,
tax and legal counsel, and other advisors deem relevant.  SDS agrees to use its
commercially reasonable efforts to file the definitive proxy statement in
respect of the SDS share increase and/or stock split on or prior to the 30th day
after the date hereof.
 
5. Exclusivity.
 
In consideration of the expenses that DVTel has incurred and will incur in
connection with the proposed Transaction, SDS agrees that from the date hereof
until the earlier of (i) the expiration of 120 days after the date hereof and
(ii) DVTel informing SDS in writing that it is no longer interested in pursuing
the Transaction (such period, as it may be extended by agreement of the Parties
from time to time, the “Exclusivity Period”), none of SDS or any of its
representatives, officers, employees, directors, agents, stockholders,
subsidiaries or affiliates (SDS and all such persons and entities, the “SDS
Group”) shall initiate, solicit, entertain, negotiate, accept or discuss,
directly or indirectly, any proposal or offer to acquire all or any significant
part of the business and properties, capital stock or capital stock equivalents
of SDS, whether by merger, purchase of stock, purchase of assets, tender offer
or otherwise, or to issue or purchase any shares or other debt or equity
securities of SDS (each, an “Acquisition Proposal”), or provide any non-public
information to any third party in connection with an Acquisition Proposal or
enter into any agreement, arrangement or understanding requiring it to abandon,
terminate or fail to consummate the proposed Transaction with DVTel. SDS agrees
to immediately notify DVTel if any member of the SDS Group receives any
indications of interest, requests for information or offers in respect of an
Acquisition Proposal, and will communicate to DVTel in reasonable detail the
terms of any such indication, request or offer, and will provide DVTel with
copies of all written communications relating to any such indication, request or
offer. Immediately upon execution of this letter, SDS shall, and shall cause the
SDS Group to, terminate any and all existing discussions or negotiations with
any person or group of persons other than DVTel and its affiliates regarding an
Acquisition Proposal. SDS represents that no member of the SDS Group is party to
or bound by any agreement with respect to an Acquisition Proposal other than
under this letter.

 
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6. GOVERNING LAW; JURISDICTION; ENFORCEMENT. THIS LETTER SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT
GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
LAWS OF ANY JURISDICTION OTHER THAN THOSE OF THE STATE OF DELAWARE. Each of the
Parties irrevocably agrees that any action with respect to this letter and the
rights and obligations arising hereunder, or for recognition and enforcement of
any judgment in respect of this letter and the rights and obligations arising
hereunder brought by the other Party or its successors or assigns, shall be
brought and determined exclusively in the Delaware Court of Chancery and any
state appellate court therefrom within the State of Delaware and each Party
irrevocably submits to the exclusive jurisdiction of federal and state courts in
the State of Delaware for purposes of any action arising out of this letter or
any of the transactions contemplated hereby. Each of the Parties hereby waives,
and agrees not to assert in any such dispute, in each case to the fullest extent
permitted by applicable law, any claim that (a) such Party is not personally
subject to the jurisdiction of such courts, (b) such Party and such Party’s
property is immune from any legal process issued by such courts or (c) any
action commenced in such courts is brought in an inconvenient forum. The Parties
agree that irreparable damage would occur in the event that any of the
provisions of this letter were not performed in accordance with their specific
terms or were otherwise breached. Accordingly, each of the Parties shall be
entitled to specific performance of the terms hereof, including an injunction or
injunctions to prevent breaches of this letter and to enforce specifically the
terms and provisions of this letter in any appropriate Delaware or federal
court, this being in addition to any other remedy to which such party is
entitled at law or in equity. Each of the Parties hereby further waives (a) any
defense in any action for specific performance that a remedy at law, including
money damages, would be adequate and (b) any requirement under any law to post
security as a prerequisite to obtaining equitable relief.
 
7. Confidentiality. The due diligence information exchanged between the Parties
and their representatives is subject to the mutual confidentiality and non
disclosure agreement entered into between the Parties on August 4, 2011, which
continues in full force and effect, provided, however, that the Parties agree
that SDS may publicly disclose this letter and the terms of the Transaction if
and to the extent required by the rules and regulations of the United States
Securities and Exchange Commission, provided, further, that DVTel shall have the
reasonable advance opportunity to review and comment on any such disclosure, and
provided, further, that DVTel shall have the right to approve the language of
any such disclosure relating to DVTel.
 
8. No Third Party Beneficiaries. Except as specifically set forth or referred to
herein, nothing herein is intended or shall be construed to confer upon any
person or entity other than the Parties and their successors or assigns, any
rights or remedies under or by reason of this letter.
 
9. Expenses. The Parties will each pay their own transaction expenses, including
the fees and expenses of investment bankers and other advisors, incurred in
connection with the proposed Transaction.
 
 
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10. No Binding Agreement. This letter reflects the current intention of the
Parties, but for the avoidance of doubt neither this letter nor its acceptance
shall give rise to any legally binding or enforceable obligation or commitment
of any kind or nature on any Party, except with regard to Sections ‎5, 6, 7, 9
and 10 hereof, and either Party may abandon discussions with respect to the
Transaction at any time with no liability. No contract or agreement providing
for any transaction involving the Company shall be deemed to exist between DVTel
and any of its affiliates and SDS unless and until the Definitive Agreement has
been executed and delivered.
 
11. Miscellaneous. This letter may be executed in counterparts and by facsimile,
each of which shall be deemed to be an original, but all of which together shall
constitute one agreement.  The headings of the various sections of this letter
have been inserted for reference only and shall not be deemed to be a part of
this letter.

[SIGNATURE PAGE FOLLOWS]
 
 
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If you are in agreement with the terms set forth above and desire to proceed
with the proposed Transaction on that basis, please sign this letter in the
space provided below and return an executed copy to my attention.

 
 
Very truly yours,
 
DVTel Inc.
 
 
By: /s/ Yoav Stern         
Name: Yoav Stern
Chief Executive Officer

Agreed to and accepted:
Suspect Detection Systems Inc.
 
 
By: /s/ Yoav Krill      
Name: Yoav Krill
Chairman of the Board
   

 
 
 
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