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Exhibit 10.1
ZYMETX PURCHASE PARTNERS
December 22, 1995
Xx. Xxxxxxx Xxxxxxx, M.D. Xx. Xxxxx Xxxxxxxxxx
President President and CEO
Oklahoma Medical Research Foundation ZymeTx, Inc.
Mr. Xxxxxx XxXxxxx
Vice President
Presbyterian Health Foundation
Dear Sirs:
The purpose of this letter is to outline the following: (1) the terms
by which ZymeTx Purchase Partners ("ZPP"), a New York Partnership to be formed
by Xxxxx Xxxxxxxxx ("Xxxxxxxxx") and ML Oklahoma Venture Partners, L.P.
("MLOK"), shall purchase 63% of the fully diluted outstanding common stock of
ZymeTx, Inc. ("ZymeTx"or "the Company"); (2) the terms by which Oklahoma
Medical Research Foundation ("OMRF") shall license its viral diagnostic and
therapeutic intellectual property ("IP") to ZymeTx; (3) the terms by which ZPP,
OMRF, and Presbyterian Health Foundation ("PHF") shall jointly provide bridge
financing to ZymeTx; and (4) the terms by which OMRF shall provide ongoing
developmental support and PHF shall provide leased research and manufacturing
facilities in the Oklahoma Biomedical Research Park ("OBRP"). These terms
contemplate that ZymeTx shall separately enter into an engagement letter with
Xxxxxxx Xxxxx Securities for the completion of a private placement (the Private
Offering) of between 4,156,250 and 7,906,250 shares of convertible preferred
stock of the Company.
This letter is a non-binding indication of interest for purposes of
clarification of the terms herein. Any contractual relationships by the
parties to this letter are subject to (i) due diligence by all parties, (ii)
boards of directors and/or investment/finance committees approval by all
parties, (iii) completion of all necessary definitive contractual agreements
satisfactory to all parties and (iv) the absence of any material adverse
changes in ZymeTx's prospects.
Due to the short time-frame for these proposed transactions, we are
proposing the following time schedule be approved with the signing of this
letter:
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ITEM DUE DATE
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1. Sign this letter of intent December 22, 1995
2. First draft of the following:
a. Acquisition Agreement December 29, 1995
b. Bridge Financing Agreement
c. ZPP Partnership Agreement
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3. First draft of the following:
a. Private Placement Memorandum January 5, 1996
b. Facilities and Support Agreements
c. STS engagement letter
d. Technology License Agreement
4. Complete the following:
a. Acquisition by ZPP January 10, 1996
b. First Bridge Installment
c. STS engagement letter
d. Formation of ZPP
5. Complete the following:
a. Facilities and Support Agreements January 31, 1996
b. Private Placement Memorandum
c. Technology License Agreement
6. Projected First Closing 90 Days From Completion of Offering
Memorandum
7. Projected Second Closing 60 Days Thereafter
The following outlines the terms by which ZPP shall acquire 63.0% of
ZymeTx's fully diluted common stock ownership:
1. Pre-acquisition articles of incorporation: The authorized capital stock of ZymeTx shall
be changed to the following:
a. Common Stock 14.1 million shares
b. Redeemable Preferred .2 million
shares
c. Convertible Preferred 8.0
million shares
The par value of all three classes of stock shall
be $0.001 per share.
2. Pre-acquisition change in holdings: The holdings of ZymeTx common stock
ownership shall be changed to the following:
OMRF 612,500 shares
Other non-mgmt. 59,833 shares
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Total outstanding 672,333 shares
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3. Pre-acquisition Mgmt. Stock Option Pool: The Mgmt. ISOP pool shall be re-sized to
900,000 shares and the parties shall mutually
agree as to immediate allocations and vesting
timing and percentages.
4. Pre-acquisition restructuring agreement: OMRF shall agree to the following conversion
of its estimated $1.75 million in debt
advancements, subject to the successful
completion of the Private Offering outlined below
in 15 and 16:
a. $825,000 to be paid out of the use of
proceeds of the Private Offering.
b. $425,000 to be converted to a technology
license note per the Technology License terms
outlined in 8.and 9. below.
c. $500,000 to be converted into Redeemable
Convertible Preferred Stock concurrent with
the first closing of the Private Offering. The
terms of this stock are outlined in 5. Below.
d. OMRF agrees to purchase $325,000 of units
in the offering, or 406,250 shares at $0.80/share.
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5. Redeemable Convertible Preferred Stock: The Redeemable Convertible Preferred Stock
of which OMRF shall convert $.50 million (156,250
shares at the rate of $3.20 per share) of its
existing outstanding indebtedness to, shall
accrue cumulative dividends starting on the 36th
month after issuance at the rate of 6% per annum.
The Redeemable Preferred Stock shall be
mandatorially redeemable by the Company at the
rate of 20% of Free Cash Flow.
Free Cash Flow shall be defined as
CUMULATIVE positive earnings before interest,
taxes and depreciation less capital expenditures
and less debt service on outstanding
indebtedness. The Company shall agree to limit
other outstanding indebtedness to that necessary
for working capital and capital improvements in
the ordinary course of business.
OMRF can convert the 156,250 shares of
Preferred Stock at any time into common stock at
the rate of one to one.
6. Acquisition of Common Stock by ZPP: ZPP shall purchase 3,000,000 shares of
common stock at par value.
7. Technology License Cancellation: In the event the Private Offering is not
completed or alternative funding arranged to the
satisfaction of OMRF, OMRF shall have the right
to cancel the Technology License Agreement
outlined in Number 9 below.
The following outlines the terms by which OMRF shall license its viral
diagnostic and therapeutic IP to the Company:
8. IP Note Payable: In conjunction with the signing of the
license agreement outlined in 9. below, OMRF
shall convert $425,000 of its outstanding
indebtedness to a 7.25 year IP note payable. The
note shall be secured by the IP. The note shall
be interest free for the first 24 months,
interest only (payable quarterly) for months 25
through 36 at the rate of 8% per annum and,
beginning in the 37th month, all interest (at the
rate of 8% per annum) and principal shall be paid
quarterly with principal amortized on a straight-
line basis of $25,000 per quarter for 17
quarters. OMRF shall receive warrants totalling
22,667 shares at $0.80 per share in compensation
for the two years deferred interest.
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9. License: The Company shall receive a perpetual,
exclusive license to all OMRF IP related to viral
diagnostics and therapeutics stemming from the
Symex and/or ZymeTx research programs. The
license shall remain in force as long as the
Company performs on the note outlined in 8.
above. Once the note is paid in full, the
Company's exclusive, perpetual license shall be
freely transferable.
10. Royalty: The Company shall pay a 2.0% royalty on all
net sales of Company products which utilize
licensed diagnostic and therapeutic technology
developed from OMRF's labs up to the date of
closing. Such royalties will be reduced on a
cumulative basis by any royalties paid to Biota
Holdings, Ltd. or its affiliates.
The following outlines the terms by which ZPP, OMRF and PHF shall
provide bridge financing to the Company for up to five (5) months beginning
January 1, 1996:
11. Bridge Note Advances: On the 15th of each month, beginning in
January, 1996, for a maximum of five (5) months,
ZPP, OMRF and PHF shall make bridge advances to
the Company as follows:
ZPP $30,000
OMRF $17,500
PHF $17,500
The maximum bridge note advances shall be
$325,000.
12. Bridge Note Terms: The bridge notes shall accrue interest at
the rate of 8% and all interest and principal
shall be due and payable on the earlier of (i)
the closing of the Private Offering or (ii) 24
months. However, in the event OMRF chooses to
license the technology to another third party,
the 24 month term shall be extended as long as
the bridge note holders are receiving all product
proceeds until the notes are paid in full.
13. Bridge Note Security: The bridge notes shall be secured pro-rata
by the holders by the IP of OMRF and the Company
related to viral diagnostics and therapeutics.
This security shall be senior to all other
indebtedness. In the event the Offering is not
consummated AND OMRF determines the best exit
alternative is a technology license with little
upfront cash payments insufficient to retire the
bridge notes, the holders of those notes shall
receive all royalties until such notes are paid,
with interest, in full.
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14. Bridge Warrants The Company shall issue warrants equal to
one share for each $1.00 of bridge notes
commitments (a total of 325,000 warrant shares),
such warrants exercisable for a period of 7 years
at $0.80 per share. The warrants shall have full
anti-dilution protection and shall be exercisable
net of issuance.
This term sheet is predicated on the fact that the strategic plan of the
Company is to operate in an efficient "virtual company" atmosphere. Therefore,
the following outlines the terms by which OMRF shall provide developmental
support and PHF shall provide research and manufacturing space on a leased
basis:
15. PHF Lease of 8th and Lincoln Research PHF shall lease approximately 10,000 square
Center: feet of space to the Company, with a buildout
allowance of $33.90 per square feet. The lease
shall be a 10 year lease with no rent the first
two years and rent at the rate of $15.00 per
square feet thereafter. Such lease rate shall be
all inclusive and cover rent, utilities, taxes,
and building operating costs up to $4.50 per
square foot. To the extent the actual buildout
and leasehold improvements exceed $33.90 per
square foot, PHF shall finance the overage for 5
years, interest only the first two years and a
level 36 month amortization thereafter at the
rate of 10% per annum. PHF shall receive Rent
Warrants totalling one warrant share for each
$3.00 of deferred rent in the first two years,
such warrants exercisable for a period of five
years at $0.80 per share. The total lease
warrants shall equal 80,000 shares.
16. OMRF employee leasing: OMRF shall hire all Company employees and
cover them on OMRF's benefits plans and lease
them to the Company at actual cost.
17. OMRF purchasing: OMRF shall allow the Company to utilize its
vendors for purchasing purposes and the Company
shall reimburse OMRF, at cost, on terms identical
to those received by OMRF from its vendors.
18. OMRF MIS: OMRF shall allow the Company to utilize its
MIS systems, at cost.
19. OMRF Scientific Collaboration: The Company shall have access on an "as
available basis", at cost, to OMRF scientists
and labs (including but not limited to
specialized equipment) for purposes of furthering
the licensed technology. The parties shall agree
to negotiate in good faith in determining what
"as available" means.
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Please find attached to this letter schedules outlining the
capitalization per this letter.
If the above terms are consistent with our mutual understanding, please
sign below and return to me by facsimile. This term sheet is non-binding and
is subject to (i) the completion of due diligence, (ii) the approval by each
parties' respective boards of directors and/or investment committee, (iii) the
completion of all definitive agreements satisfactory to all parties and (iv)
the absence of any adverse material changes in the Company's prospects.
Sincerely,
ZymTx Purchase Partners, by:
/s/ XXXXX XXXXXXXXX
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Xxxxx Xxxxxxxxx
Proforma General Partner
/s/ XXX X. XXXXXXX
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Xxx X. Xxxxxxx
Consultant to ML Oklahoma Venture Partners, L.P.
Proforma General Partner
enclosures
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Agreed to this 20th day of December, 1996
/s/ XXXXXXX XXXXXXX
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Xx. Xxxxxxx Xxxxxxx, President
Oklahoma Medical Research Foundation
/s/ XXXXXX XXXXXXX
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Mr. Xxxxxx XxXxxxx, Vice President
Presbyterian Health Foundation
/s/ XXXXX XXXXXXXXXX
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Xx. Xxxxx Xxxxxxxxxx, President
ZymeTx, Inc.
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