Exhibit 10.1

 

 

September 11, 2012

 

Sarav Patel, President Samir Patel, Vice-President Marlex Pharmaceuticals, Inc.
Marlex Pharmaceuticals, Inc. 50 McCullough Drive 50 McCullough Drive New Castle,
DE 19720 New Castle, DE 19720

 

Re: Acquisition by ScripsAmerica, Inc. of Marlex Pharmaceuticals, Inc. by
tax-exempt reverse triangular merger (under IRC Sec. 358(a)(1)(A)

 

Dear Messrs. Patel and Patel:

 

This is to serve as an initially Letter of Intent which shall become a Final
Agreement upon the occurrence of certain conditions precedent (Article III). If
and when the conditions precedent are met, this shall become a Final Agreement,
and a binding agreement upon both parties, until superseded by a more formal
Reorganization Agreement for the acquisition by ScripsAmerica, Inc.
(“ScripsAmerica”) of Marlex Pharmaceuticals, Inc. (“Marlex”).

 

I

HOLDING COMPANY STRUCTURE

 

It is the intent of ScripsAmerica to develop its corporate structure as a
holding company, with operating subsidiaries. As the holding company,
ScripsAmerica will be the “parent” of the group and will provide “staff”
functions to the operating subsidiaries, which will perform “line” functions.
The “staff” functions to be provided by ScripsAmerica will include maintaining
the publicly trading status of the group, securing financing for needs of the
group members, providing legal and accounting services to the group members,
providing investor relations/public relations to the group, providing marketing
and advertising to the group, managing the group to best reduce operating costs
and maximizing profitability, and securing growth of the group through
acquisitions.

 

 

 

II

ACQUISITION OF MARLEX; REVERSE TRIANGULAR MERGER

 

In order to best maintain the approvals, licenses, business relationships, etc.
of Marlex, it is desirable to have the acquisition structured so that the
existing Marlex entity is acquired and maintained. This would normally be
structured as a tax free “stock-for-stock” exchange; ScripsAmerica would issue
shares of its stock to the shareholders of Marlex in exchange for 100% of their
shares of Marlex, resulting in the Marlex shareholders becoming shareholders of
ScripsAmerica and ScripsAmerica becoming the sole shareholder, and owner, of
Marlex. Here, however, Marlex has debt which has been personally guaranteed,
which will be paid off by ScripsAmerica, initially by loans as provided in
Article VI. In addition, the officers of Marlex will receive employment
agreements and various fringe benefits, which the I.R.S. might regard as taxable
boot. A stock-for-stock exchange, known as a 368(a)(1)(B) Reorganization, is tax
free, BUT there can be no boot at all. That is, any boot at all destroys the tax
free status of the exchange. Because of the risk that the I.R.S. might try to
find boot and destroy the tax free status of transaction, an alternative
acquisition must be structured.

 

Obviously, we cannot use a stock-for-assets acquisition and maintain the current
Marlex entity; that would require forming a new operating subsidiary for
ScripsAmerica which would replace Marlex.

 

In order to avoid this problem, while maintaining the current Marlex entity,
ScripsAmerica will structure the acquisition of Marlex as a reverse triangular
merger. As a “merger” it falls under Section 368(a)(1)(A) of the Internal
Revenue Code. As a “triangle” the acquisition will involve three (3) companies.
As a “reverse” merger, Marlex will survive the merger rather than being merged.
The procedure will be as follows:

 

1. ScripsAmerica will form a new subsidiary, “Pharmaceuticals Acquisition, Inc.

2. ScripsAmerica will capitalize Pharmaceuticals Acquisition, Inc. with
sufficient shares of its common stock to accomplish the merger/acquisition.

3. Pharmaceuticals Acquisition, Inc. will merge with and into Marlex; Marlex
will be the surviving corporation and Pharmaceuticals Acquisition, Inc. will be
the merging corporation.

4. In the merger, the Marlex shareholders will receive shares of ScripsAmerica
and their shares of Marlex will be canceled. The loans by ScripsAmerica to
Marlex (Article VI) will be converted to a capital contribution to Marlex.

 

III

CONSIDERATION FOR ACQUISITION/SHARES TO BE ISSUED BY SCRIPS/AMERICA

 

The parties have negotiated on the basis of general, unaudited, financial
information supplied by Marlex. Subject to approximate (+/- 20%) confirmation of
such financial information by the audited financial statements to be supplied by
Marlex (see below) ScripsAmerica shall issue, to the shareholders of Marlex in
the merger, that number of shares of ScripsAmerica’s Common Stock calculated by
dividing the agreed purchase value, Five Million Dollars ($5,000,000), by the
lesser of:

(i) the Market Value of the shares on the date of the signing of this Letter of
Intent, or

(ii) the Market Value of the shares on the date the Merger is closed; but

 

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(iii) in no event, less than $.174 (Seventeen and Four-tenths Cents) per share.

“Market Value” shall mean the average Closing Sale Price for the five (5)
consecutive trading days up to and including the day of the calculation.

 

When issued, the shares shall be legally authorized, validly issued and
fully-paid and non-assessable. When issued, the shares of ScripsAmerica’s Common
Stock shall not be registered for trading/transfer, but shall be restricted as
to further transfer pursuant to applicable rules and regulations of the
Securities and Exchange Commission (“SEC”) (e.g., Rule 144).

 

During the period prior to Closing, ScripsAmerica may, in its sole discretion,
loan funds to Marlex.The parties have agreed that until Closing, if and when it
may occur, such loans shall be loans, in fact, and not equity nor contributions
to capital. Furthermore, the improvement (increase) in equity of Marlex,
resulting from the loans and corresponding repayment of existing debt, shall be
deemed offset by the loans by ScripsAmerica and no adjustment to the purchase
price shall be made on account of such.

 

IV

INTERIM CONDUCT OF BUSINESS BY MARLEX

 

Pending the execution of the formal Plan of Reorganization, and thereafter until
Closing, Marlex shall conduct its business in the ordinary course, so as to
retain suppliers and customers, retain management and employees, continue
selling and marketing, collect receivables and maintain payment of debts in the
ordinary course and as scheduled, timely pay all taxes including payroll taxes,
and maintain all approvals, licenses, authorities to do business, etc.

 

V

PRE-CLOSING, INTERIM LOANS BY SCRIPSAMERICA

 

During the period prior to Closing, ScripsAmerica may, in its sole discretion,
loan funds to Marlex. The parties have agreed that until Closing, if and when it
may occur, such loans shall be loans, in fact, and not equity nor contributions
to capital. At Closing, however, all loans shall be converted to capital
contributions by ScripsAmerica to Marlex.

 

VI

FORMAL PLAN OF REORGANIZATION

 

The reverse triangular merger outlined in this Letter of Intent shall be
formalized and detailed in a Reorganization Agreement which shall supersede this
Letter of Intent. The parties agree to complete the negotiations in good faith,
with all deliberate speed, and to execute the Reorganization Agreement. The
Reorganization Agreement shall contain the usual warranties and representations
as determined by our respective attorneys and as mutually acceptable. The Marlex
shareholders shall warrant their legal title and beneficial ownership of all
shares delivered, free of all adverse claims thereto and free and clear of all
liens, encumbrances, hypothecations and security interests. All shares of
ScripsAmerica’s Common Stock being acquired by the Marlex shareholders shall be
legally authorized and fully-paid and non-assessable.

 

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VII

EMPLOYMENT AGREEMENTS

 

The current management of Marlex will remain the management of Marlex following
the acquisition. At the present time, such management is employed on oral
employment agreements. At Closing, the primary officers of Marlex shall be given
Employment Agreements consistent with those given to the executives of
ScripsAmerica, with the compensation and benefits to be subject to the
Compensation Committee of the Board of Directors of ScripsAmerica, but which
compensation and benefits shall also be consistent with that paid to executives
of ScripsAmerica.

 

SECTION VIII

CLOSING

 

The parties intend that the Closing of the reverse triangular merger transaction
occur on or before December 31, 2012 or as soon thereafter as possible,
recognizing that the two (2) primary conditions for such Closing are (i) the
securing of audited financial statements and reviewed stub period financial
statements, by Marlex, and (ii) the securing of the funds necessary for Closing,
by ScripsAmerica. The parties recognize that the Closing cannot occur until
Marlex’s financial statements are available for the preparation and filing of
appropriate SEC filings and the Closing shall be delayed as may be necessary to
obtain such financial statements.

 

Subject to the postponement rights of ScripsAmerica, Closing shall be held at a
mutually selected date, time and place on or before December 31, 2012. If the
parties are unable to agree on a date, time and place, closing shall be held on
December 31, 2012 at the offices of ScripsAmerica at 77 McCullough Drive, Suite
7, New Castle, DE 19720. Notwithstanding the foregoing, ScripsAmerica shall have
the right to postpone Closing up to February 28, 2013, in the event that it
requires time to meet (i) filing requirements for the SEC with respect to the
acquisition of Marlex and the consolidation of financial statements, and
preparation of pro formas, or (ii) completion and closing of the financing
required for the Closing of the merger.

 

At Closing, the parties shall agree upon the allocation of the purchase price to
the assets of Marlex, including the value of “goodwill”, if any, using the
$5,000,000 valuation.

 

IX

FAILURE OF MARLEX TO CLOSE

 

In the event that a formal Plan of Reorganization is executed, and the period
for closing has elapsed, and Marlex neglects, fails, or refuses to close the
acquisition by ScripsAmerica, Inc., then:

 

1. All loans, advances or financial accommodation made to, or on behalf of, or
for the benefit of, Marlex, shall be due and payable. All cash loans and
advances shall be repaid, in full, with interest at the rate of 3.5% simple
interest per annum. Terms for repayment will be negotiated by the parties. All
financial accommodations shall be terminated.

 

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2. Marlex shall pay a break-up fee, not as a penalty but to compensate
ScripsAmerica for (i) the time expended by its management and executives, (ii)
legal and accounting fees and costs incurred with respect to the proposed
acquisition, and (iii) all other costs, expenses and losses, including “loss of
benefit”, of Twenty Five Thousand Dollars ($25,000) with payment terms to be
negotiated by the parties.

 

X

FAILURE OF SCRIPSAMERICA TO CLOSE

 

In the event that a formal Plan of Reorganization is executed, and the period
for closing (including any extension to February 28, 2013) has elapsed, and
ScripsAmerica neglects, fails, or refuses to close the acquisition by
ScripsAmerica, Inc., then all loans, advances or financial accommodation made by
ScripsAmerica to, or on behalf of, or for the benefit of, Marlex, shall be
immediately converted to a capital contribution to Marlex.

 

XI

RIGHT OF FIRST REFUSAL

 

From the date of signing this document until closing of the final agreement
ScripsAmerica shall have the “Right of First Refusal” should Marlex receive
another offer from a third party for the purchase of Marlex.

 

 

Yours truly,

 

SCRIPSAMERICA, INC.

 

 

By: /s/ Robert Schneiderman   Robert Schneiderman, President/CEO        

 

 

AGREED AND ACCEPTED:

 

Date: September 11, 2012

 

MARLEX PHARMACEUTICALS, INC.

 

 

By: /s/ Sarav Patel   Sarav Patel, President        

 

 

  /s/ Sarav Patel   Samir Patel, Individually        

 

 

  /s/ Samir Patel   Samir Patel, Individually        

 

 

 

 

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