EXHIBIT 6.8
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Xxxxxx Ventures Corp
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
000-000-0000
000-000-0000 fax
August 30, 1999
Xx. Xxxx Xxxxxx, President
NuCycle Therapy, Inc... f/k/a Phytotech, Inc.
0 Xxxx Xxxx Xxxxxx
Xxxxxxxx Xxxxxxxx, XX 00000
Dear Xx. Xxxxxx:
This letter will set forth the approximate terms of a transaction or
transactions to be consummated by, between and among NuCycle Therapy, Inc. (the
"Company"), Xxxxxx Ventures Corp ("Xxxxxx") and a public corporation (the
"Public Shell") to be introduced by Xxxxxx. The letter and the terms and
conditions set forth herein are expressions of the parties intent only and are
not intended to be a final and binding contract. Completion of the transactions
will be dependent upon a number of conditions precedent including but not
limited to approval of the United States Bankruptcy Court of a formal plan of
reorganization upon terms acceptable to Xxxxxx and the negotiation, preparation
and execution of definitive agreements and other documents encompassing the
terms herein approved by both parties and their respective counsel.
I. Assumptions.
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The Company will submit a plan of reorganization (the "Plan") to the
UnitedStates Bankruptcy Court not later than November 1, 1999. The plan of
reorganization will contain provisions substantially as follows:
1. All secured debt will be converted into Preferred Stock
convertible into approximately 884,572 shares of Common stock.
2. All unsecured debt and accounts payable will be settled or
converted into not more than 572,088 shares of Common stock.
3. All existing common and preferred stock will be converted into not
more than 1,550,000 shares of Common stock of one class. Not more
than 80,000 shares will be issued to Rutgers University in
connection with the transfer of certain intellectual property
rights to the Company.
4. All existing warrants and options are cancelled and replaced with
new warrants to purchase not more than 460,000 shares with an
exercise price of not less than $8.00 per share. 150,000 warrants
will be issued to IK Capital Inc with an
Xx. Xxxx Xxxxxx
August 30, 1999
Page 2
exercise price equal to the conversion price of the notes issued
in connection with the new financing. The warrants will not
provide for cashless exercise.
5. Upon consummation of the plan the company will have net working
capital of not less than $400,000, long term debt of not more than
$150,000 and net worth of not less than $500,000.
II. Going Public Transaction
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Xxxxxx will assist the Company in arranging for a "Going Public
Event". A Going Public Event shall mean any event after which the new common
stock of the Company outstanding after the approval of the Plan ("Newco Stock")
shall become publicly traded, including but not limited to (1) the filing of a
Form 10-SB and form 15C-211 and the commencement of public trading of the
Company's common stock, (2) a merger or acquisition by an existing Public
corporation, (3) a merger with a subsidiary of a Public corporation or a Public
Shell and subsequent Spin-Off of the subsidiary's stock to the Public Shell's
shareholders. The Going Public Event shall be upon terms substantially as
follows:
1. The current and new shareholders of the Company after completion
of the Bankruptcy Reorganization would receive Newco Stock such
that their combined equity will be approximately 65% of the
available equity in the case of Spin-Off or merger and 75% in the
case of a Form 10-SB filing, including shares held for conversion
of the convertible Preferred stock issued in connection with the
Plan.
2. The officers and directors of the Company would assume similar
positions with Newco along with representatives on the Board of
Directors of the Public Shell and Xxxxxx.
3. In the event of a Spin-Off transaction, the Public Shell will
declare a stock dividend (the "Spin-off") of Newco Stock and
thereafter distribute up to 10% of the Newco Stock to its
shareholders.
4. The Company and the Public Shell, if necessary, will cooperate in
the filing of a Registration Statement or Form 10 covering the
Newco Stock, and use their best efforts to create a public trading
market for Newco. The Company agrees that all Newco Stock or
convertible equities will be restricted or otherwise locked up for
the period of time sufficient to establish an orderly market for
Newco Stock, which shall be not less than 12 months after the
Going Public Event.
5. The costs of the registration statement and/or Form 10 and related
legal services will be borne by the Company or Newco.
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Xx Xxxx Xxxxxx
August 30, 1999
Page 3
6. If market conditions permit additional Newco Stock will be sold
directly to the public upon prices and terms to be determined.
III. New Financing
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Upon completion of the Going Public Event, Xxxxxx or its successors or
assigns will purchase a new issue of Company or Newco convertible subordinated
notes in the minimum amount of $300,000 and up to a maximum amount of $500,000.
The Notes will be convertible into Newco Stock at a price of $2.00 per share or
85% of the then current market price of Newco Stock. Interest at the rate of 8%
will accrue for the first twelve 12 months and be payable semi-annually
thereafter.
IV. Transaction Fees and Expenses
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In connection with the Going Public Event and related financing the
Company agrees to issue an aggregate of not less than 35% of issued and
outstanding Newco Stock to Xxxxxx and the Pubic Shell in the case of a Merger or
Spin-Off and 25% in the case of a Form 10 filing. The Company acknowledges that
Xxxxxx, its successors or assigns, and the Public Shell may allocate the Newco
Stock, by, between and among Xxxxxx, the Public Shell and the shareholders in
any manner in their sole discretion. The Public Shell may be an existing client
of Xxxxxx. Xxxxxx may have a significant equity stake in the Public Shell and
that in addition to any other fees, expenses or other consideration payable
hereunder that Xxxxxx may receive cash remuneration, shares of stock or other
securities from the Public Shell or Newco Stock.
Notwithstanding the foregoing, the Company agrees that upon completion
of the Plan, in the event the Going Public Event is not completed for any
reason, Xxxxxx, or its successors or assigns, will receive minimum transaction
fees and reimbursements as follows:
1. Newco Stock equal to 5% of the outstanding shares.
2. Reimbursement of expenses and costs in an amount not to exceed
$25,000.
V. Conditions Precedent
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Completion of the transactions contemplated herein will be dependent
upon a number of conditions precedent including; (i) satisfactory completion of
a due diligence review of the Company assets, including intellectual property,
liabilities and operations, (ii) approval of the Bankruptcy Reorganization Plan,
(iii) commencement of shipments of commercial quantities of the Company's
products, (iv) no material change in the business, assets, shareholdings and
prospects of the Company, (v) completion of audited financing statement for
period ended March 31, 1999, (vi) the parties shall have executed definitive
agreements and related documentation containing representations, warranties,
covenants, terms and conditions customary for transactions of this nature and
otherwise satisfactory to counsel for both sides, (vi) the parties shall have
obtained all court, shareholder and/or board approvals as are necessary.
VI. Other matters
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Xx. Xxxx Xxxxxx
August 30, 1999
Page 4
In connection with Xxxxxx'x activities on the company's behalf, the
Company will cooperate with Xxxxxx and will furnish Xxxxxx all information and
data concerning the Company, the Company's financing requirements, financing
strategies and to the extent available, access to the Company's officers,
directors, employees, independent accountants and legal counsel. The company
represents and warrants that it will use its best efforts to ensure that all
information made available to Xxxxxx will at all times during the period of
engagement by Xxxxxx hereunder be complete and correct in all material respects
and will not contain any untrue statement of a material fact or omit a material
fact in order to make the statement therein misleading or fail to state any
facts or circumstances of a material nature and will notify Xxxxxx in writing of
any changes or developments which might render any information previously made
available to Xxxxxx by the Company not correct in any material respect.
If the above is in accordance with your understanding please so
indicate your agreement by signing in the place provided below and in addition
make a good faith deposit towards our due diligence expenses in the amount of
$15,000. This due diligence deposit will not be refundable in the event that
the transactions contemplated hereunder do not close.
This agreement is made subject to approval of the Bankruptcy Court.
Xxxxxx Ventures Corp
By: /s/ Xxxxxxx X. Xx Xxxx
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Xxxxxxx X. Xx Xxxx
Agreed to an accepted
Nucyle Therapy, Inc.
f/k/a Phytotech Inc.
By: /s/ Xxxx Xxxxxx
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Xxxx Xxxxxx, Pres.
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