LETTER OF INTENT FOR ASSETS REORGANIZATION OF PAY BY THE DAY HOLDINGS INC, HEREINAFTER PBDH.

This Memorandum summarizes the principal terms of a series of proposed transactions involving the entities listed on Exhibit A ("Participating Entities"). This Memorandum of Terms is intended solely as a summary of the terms that are currently proposed by the parties and shall not constitute a binding agreement except for the provisions under “Fees and Expenses”, "Exclusive Negotiations", "Confidentiality," and “Access”, which are intended and shall be the binding agreement of the parties. It is understood that any party may, at any time prior to execution of a definitive agreement, propose different or additional terms as may be necessary to achieve the overall plan as set out in the exhibits hereto. This Memorandum refers to entities that will be formed prior to or upon execution of a final agreement.

 

(all such parties being Participating Entities) and for that purpose to execute together with the other Participating Entities substantially the steps set out in this Memorandum.

 

In this Memorandum all the material parties referred to are Participating Entities, all the material assets referred to are Targeted Assets and “the enterprise” means the joint project to be undertaken as envisaged herein.

All of the proceeds from the transactions contemplated hereby will be used to support the development and deployment of the enterprise’s products and services as represented in Exhibit D (“Targeted Assets”).

From the date of this memorandum of terms until the earlier of (1) June 30, 2010 or (2) mutual written termination of our negotiations, neither the parties nor any of their respective equity holders, managers, directors, officers, employees or representatives will, directly or indirectly, solicit or participate in negotiations or such discussions with any person or entity other than PBDH with respect to any investment or recapitalization or acquisition as described herein, with the exception of investment(s) in Oteegee Innovations International. If the parties hereto have not closed $1,000,000 of the proposed First Phase financing by June 30, 2010, but continue to negotiate in good faith toward a closing, then the exclusivity period shall automatically be extended for an additional thirty (30) days. Notwithstanding anything in thi s paragraph, if the Preliminary funding is not forthcoming within 30 days, any party may terminate the negotiations in writing to all signatories.

None of the parties will issue any press release or other public announcement concerning the investment contemplated hereby without the approval of all others, and the parties will not disclose the existence or terms of this Memorandum to any person other than their respective managers, directors, officers, financial advisors, accountants and attorneys without the written consent of PBDH, Grail Semiconductor, Oteegee USA Holdings LLC and Entrepreneurs International Ltd.

During the period described in the paragraph entitled “Exclusive Negotiations,” the parties will mutually provide, at reasonable times and locations, and upon reasonable notice, access to its (i) properties, books, records, accounts and documents (except for Trade secret and filed and unfiled patentable materials not already in the public domain), (ii) employees, agents and advisors and (iii) customers, vendors, sales representatives and others having significant relationships with each party. During such period, each party will operate only in the ordinary course of business and shall not make any distributions or dividends (other than any required tax and filing distributions).

Each party shall indemnify all other parties for any finder's fees for which they are respectively responsible.

PBDH shall be responsible for all fees and expenses it incurs for itself and its subsidiaries. As described above at A(1)(b), PBDH will provide $150,000 to cover administrative and other organizational expenses for non-PBDH entities, including, but not limited to, reasonable legal and accounting fees and expenses. All payments made by PBDH for non-PBDH entities will be secured by convertible notes. If a closing does not occur, the notes will convert to equity according to the terms of the respective note, and such conversion will be the sole recourse of PBDH for all such expenditures. If a closing occurs for the transactions contemplated hereby, those notes will be cancelled.