Letter of Intent For Proposed Joint Venture Among Graphene Sensors And Meditel

Vancouver, Canada, March 30, 2015 (Newswire.com) - I. Purpose
This Letter of Intent (“Letter”) is intended to facilitate further discussions among Graphene Sensors (GS7) and Meditel concerning the creation of a Joint Venture for the purpose of engaging in the medical monitoring business. Except as otherwise expressly provided in Paragraph VII(A) below, herein, this Letter is  intended to be binding on any party, but shall serve as the basis of definitive agreements (“Definitive Agreements”), drafts of which have been provided by, Graphene Sensors and Meditel.

II. Proposed Structure
A. As soon as practicable after this Letter is executed and delivered by the parties, Graphene Sensors  will form a new limited liability company (“Single Member LLC”) under Delaware law which will be qualified to transact business Single Member LLC will be a disregarded entity for federal tax purposes and will not have a taxpayer identification number. The Single Member LLC will be funded initially by Graphene Sensors with a contribution of $36,000,000 in cash in exchange for the issuance of a leasing license for the GS7 Sensor.

This Letter of Intent is intended to facilitate further discussions among Graphene Sensors (GS7) and Meditel concerning the creation of a Joint Venture for the purpose of engaging in the medical monitoring business

Dr. Harold Finchley, Co-Founder

B. On a date and time mutually acceptable to the parties, and presently anticipated to be June 1, 2015, will transfer pursuant to a Limited Liability Company Contribution and Subscription Agreement certain assets (“Asset Contribution”) from GS7 to the Single Member LLC. These assets will include floating pipeline loans, tangible assets, including, furniture, fixtures, equipment, certain employees of Graphene Sensors  (other than the Transferred Employees as defined hereunder) and other intangible assets identified by the parties which the parties expect to have a fair market value of Thirty Six Million Six Hundred Thousand Dollars.

C. Graphene Sensors will sell to (the “Sale”) Meditel, and Meditel will purchase, a 20% interest in the Single Member LLC. Upon the consummation of the Sale, the Single Member LLC shall be defined herein as the “Joint Venture.” The parties will cause the Joint Venture to obtain its own tax payer identification number. The Sale and the Asset Contribution shall be contingent upon: (i) Graphene Sensors and Meditel entering into a mutually satisfactory operating agreement with respect to the Joint Venture (the “Operating Agreement”); (ii) Graphene Sensors being comfortable that, upon the occurrence of the Sale, the Joint Venture will be an operating subsidiary  exempt from state licensing requirements and otherwise fully authorized to engage in the medical monitoring business in ; (iii)  (iv) a mutually acceptable Assignment and Bill of Sale between Graphene Sensors and Meditel ; (v) a mutually acceptable Service Agreement (“Service Agreement”) (with a reasonable administrative fee not to exceed $2,000, 000 annually, with annual adjustments not to exceed 3% per year) between the Joint Venture and the Bank; (vi) a mutually acceptable Credit Agreement between the Joint Venture and the Bank; (vii) a mutually acceptable Pledge and Security Agreement between the Bank and the Joint Venture; (viii) a mutually acceptable demand note made by the Joint Venture in the principal amount of $10 million; and  the following shall apply:

1. The Operating Agreement will provide for the timely distribution of financial statements, audits and reports and internal controls which will permit Graphene Sensors to comply with its SEC reporting and other requirements.

2. No legal opinions will be required by counsel for any of the parties in connection with the transactions contemplated by the Letter and the Definitive Agreements.

3. Except as provided herein, the economics and business terms in the Definitive Agreements shall reflect the pro-forma information prepared by Ventures and reviewed by Graphene Sensors.

4. Contributed Property to the Joint Venture will be treated under the traditional method defined in Treasury Regulation Section 1.704-3(b). The Operating Committee, as defined in the Operating Agreement, shall be required to approve the filing of any federal or state income tax return, the making of any tax election, compromising or settling any tax controversy, extending any statute of limitations relating to a tax matter, selecting or varying depreciation or accounting methods, changing the fiscal year of the Joint Venture or making any other material decision with respect to the treatment of any transaction of the Joint Venture for tax purposes.

D. Additionally Graphene Sensors will own a 30.9% interest in the Joint Venture.

E. The Joint Venture will reimburse Graphene Sensors its costs related to the formation of the Single Member LLC and in connection with Asset Capitalization. The Joint Venture will reimburse Graphene Sensors in connection with its costs. Additionally, no start-up fee will be paid by the Joint Venture to the Bank or Meditel.

III. Disclosure
Graphene Sensors and Meditel have previously executed a confidentiality agreement that will govern all aspects of these negotiations and the Definitive Agreements. Notwithstanding anything therein to the contrary, the parties agree that a mutually acceptable press release describing the Letter may be issued by Graphene Sensors at the close of business Monday, February 27, 2015 and may be discussed by Graphene Sensors during its call with analysts on Monday, June 1, 2015.

IV. Transition Period
A. The period from the date of this Letter until the date of the Sale shall be defined herein as the Transition Period.

B. During the Transition Period, Graphene Sensors and the Meditel will mutually agree on certain production costs being shared being during such Transition Period in accordance with its standard practices. Such operational costs shall be transferred and assigned by the Bank to the Joint Venture upon the date of the Sale.

C. Any leasing applications from Meditel that are received by the Bank during the Transition Period — or in the case of purchases, prior to the date on which the Joint Venture receives Approval — and remain unused at the time of the Sale — or, in the case of, at the time the Joint Venture receives Approval — will be sold to the Meditel according to the terms outlined.

D. The parties acknowledge and agree that the “fully-committed” leasing of the GS7 sensor of Graphene Sensors on the date of this Letter shall be retained by Graphene Sensors, and any fees related thereto will remain with Graphene Sensors.

V. Additional Terms
A. The parties anticipate that the Operating Agreement will provide that a termination fee (“Termination Fee”) will be payable by Meditel to Graphene Sensors in certain instances set forth therein. The Termination Fee will be the greater of: (i) the amount generated by multiplying the Joint Venture highest annual profit (for either a partial or a full calendar year) during the previous three years by 1.0 (provided, that if the Termination Date is after the third anniversary of the date the Joint Venture commences accepting loan applications, the multiplier applied to the profit shall be 0.5 instead of 1.0); or (ii) $1,800,000 if the Termination Date is before the third (3rd) anniversary of the Asset Contribution by Graphene Sensors to the Joint Venture.

B. All leases, debts, and obligations of, and all claims against (both final and contingent, direct and indirect), Graphene Sensors, shall not be assigned to, or assumed by, the Joint Venture, except as otherwise expressly agreed to in the Definitive Agreements.

VI. Due Diligence
Each of the parties reserves the right to complete additional due diligence to refine its understanding of this opportunity. This due diligence for the Bank and includes, but is not limited to, the following activities:

1. Interview existing personnel of Graphene Sensors.

2. Review Graphene Sensors audited financial statements from 2013, 2014 and 2015, including income statements, balance sheet, pipeline reports and asset lists.

3. Review the lease agreements and the intellectual property currently held by Graphene Sensors.

4. Review of publicly disclosed SEC documents regarding the background of officers and directors of Graphene Sensors.

5. Review the floating pipeline of Graphene Sensors to ensure that the pipeline loans transferred to the Joint Venture are able to be processed and funded according to the Bank’s investor guidelines.

Upon mutual acceptance of these terms, Meditel will commence its due diligence. Simultaneous with the due diligence, Meditel shall prepare revised drafts of the Definitive Agreements with respect to the Joint Venture for review and execution as soon as practicable. The due diligence shall be completed on or before June 1, 2015.

VII. Non-Binding Statement of Certain Proposed Terms
A. Except as provided in paragraph IX, this Letter constitutes a non-binding offer that may be cancelled or retracted by any party at any time prior to the execution of the Definitive Agreements. It is expressly agreed that the terms of the Definitive Agreements must be acceptable to each party in that party’s commercially reasonable discretion. It is expressly agreed and understood that the aggregate amounts to be paid by the Bank and Meditel must comply in all respects with applicable laws and regulations, including without limitation the Federal Development’s Regulation X, as well as all capital and other requirements of the Office of the Comptroller of the Currency; provided that the Bank and Graphene Sensors have no reasonable basis to conclude that the proposed terms hereof are not in compliance with such applicable laws and regulations.

B. This binding offer will expire if not accepted by Graphene Sensors by 5:00 PM CST on June 2, 2015.

VIII.  Applicable Law and Forum
This Letter shall be construed in accordance with Delaware law. Any dispute hereunder shall be litigated exclusively in a court of competent jurisdiction located in the State of Delaware.

IX. Binding Provisions
Notwithstanding anything herein to the contrary, the following provisions herein shall be binding: Paragraphs III, IV(D), VI and IX. In the event that Definitive Agreements are not entered into by June 1, 2015, any of the parties may, by written notice to the other parties, discontinue and otherwise terminate the arrangements described in paragraphs IV(A), (B) and (C). . In addition to the foregoing, the parties hereto acknowledge that they have an obligation to negotiate in good faith and dedicate adequate resources and use commercially reasonable efforts in connection with the consummating of the transactions contemplated in this Letter.

IN WITNESS WHEREOF, the duly authorized representative of the undersigned parties has entered into this Agreement to be effective this March 25, 2015.