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EXHIBIT 10(vii)
January 7, 1997
Receptagen Ltd.
000 X Xxxxxx
Xxxxx 000
Xxxxxxx, XX 980
Dear Sirs:
Re: Receptagen Ltd. ("Receptagen" or the "Company")
This letter, together with the attached schedules, is a follow-up to our letter
dated December 16, 1996 and will serve to summarize our discussions in Palm
Beach on December 30, 1996.
We would ask you to signify your agreement to the terms outlined in the
attached term sheet by signing the enclosed duplicate copy of this letter prior
to January 8, 1997 at 10:00 A.M. (Palm Beach time). Upon receipt of the
executed letter, we shall prepare the necessary News Release together with you.
We shall then instruct our respective legal counsel to prepare the appropriate
documentation and obtain the necessary approvals and/or exemptions from the
shareholders and the regulators.
Yours truly,
INTERUNION FINANCIAL CORPORATION
/s/ Xxxxxxx Xxxxxxxxx
--------------------------
Xxxxxxx Xxxxxxxxx
President and C.E.O. Accepted
this 19th day of January 1997
Receptagen Ltd.
Per: /s/ Xxxxxx Xxxxxxx
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Encls.: Schedules "A", "B", "C"
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Schedule "A"
RECEPTAGEN LTD. ("Receptagen")
RECAPITALIZATION PLAN
PROPOSED RESTRUCTURING:
ROLLOVER OF DEBT: All trade creditors, excluding:
the University of Washington and the
National Research Council, the Biomedical
Research Centre (BRC) at the University of
B.C., and the Brooklyn Health Service
Center at the State University of New York,
agree to exchange debt of approximately
C$7,000,000 for InterUnion Financial
Corporation ("IUFC") shares. (Terms as
outlined below).
BRIDGE FINANCING: IUFC will guarantee a commitment from New
Researches Corp. ("NRC") to make available
to Receptagen up to C$300,000, starting
immediately upon completion of the due
diligence, but not later than January 25,
1997. The proceeds of the bridge financing
will be disbursed by IUFC upon instructions
from Receptagen. This credit facility will
be exchangeable for a convertible debenture
of Receptagen.
PRIVATE PLACEMENT: Receptagen to complete a Private Placement
of Special Warrants for aggregate proceeds
of up to C$2,500,000. (Terms as outlined
below)
BOARD OF DIRECTORS: As agreed by the Company and IUFC; IUFC will
have a minimum of one nominee on the Board
of directors.
DUE DILIGENCE: To commence immediately
EXPENSES AND
LEGAL FEES: To be paid by Receptagen
CLOSING DATE: February 14, 1997
ROLLOVER OF DEBT:
TRANSACTION #1:
AMOUNT: Approximately C$7,000,000
CONVERSION OF DEBT: Trade creditors will receive C$0.10 per
C$1.00 in IUFC Common Shares under
Regulation "S".
PRICE OF
COMMON SHARES: US$5.00 per IUFC Common Share
NUMBER OF
COMMON SHARES: Approximately 105,000 IUFC Common Shares
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TRANSACTION #2:
ROLLOVER OF DEBT: IUFC will receive C$0.10 per C$1.00 of debt.
CONVERSION OF PRICE: Maximum discount allowed by the Toronto
Stock Exchange but not greater than C$0.07
per Common Share
NUMBER OF
COMMON SHARES: Approximately 9,300,000 Common Shares of
Receptagen together with the same number of
Common Share Purchase Warrants ("Units
'A'")
QUALIFICATION: All the Units 'A' will qualify under the
Prospectus to be filed with the Ontario
Securities Commission, as outlined in
Schedule "C".
ADVISOR: Credifinance Capital Inc.
ADVISOR'S FEE: 10% of the amount of the debt, payable by
Receptagen
CLOSING DATE: January 25, 1997
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SCHEDULE "B"
RECEPTAGEN LTD.
BRIDGE FINANCING:
AMOUNT: Up to C$300,000 in the form of a revolving
credit facility, exchangeable into a
convertible debenture of Receptagen.
CONVERSION OF
THE LOAN: IUFC will convert the amount of funds
advanced to the Company into Receptagen
Common Shares together with the same number
of Common Share Purchase Warrants ("Units
'B'"). The exercise price of the Warrant
will be the same as the conversion price.
The Units "B" underlying the convertible
debenture will be qualified by way of
Prospectus.
CONVERSION PRICE: C$0.07 per Common Share
NUMBER OF
COMMON SHARES: Up to 4,285,000 Common Shares
NUMBER OF WARRANTS: Up to 4,285,000 Warrants
COMMENCEMENT DATE: Immediately upon finalizing due diligence,
but not later than January 25, 1997.
SECURITY: General Security Agreement on the assets of
the Company and Undertaking from the
Company and its subsidiaries in a form
acceptable to the Lender and its legal
counsel. The Security will specifically
include all rights to Receptagen's
intellectual property.
ADVISOR: Credifinance Capital Inc.
ADVISOR'S FEE: 10% of the amount of the line of credit,
in cash
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SCHEDULE "C"
RECEPTAGEN LTD.
PRIVATE PLACEMENT OFFERING
ISSUER: Receptagen
OFFERING: Private Placement of o Special Warrants
AMOUNT: Up to C$2,500,000
OFFERING PRICE: - per special warrant The Offering
Price will be the closing market price of
the Common Shares of the Company on the
Toronto Stock Exchange for the business day
immediately prior to the Company's press
release announcing the warrant
restructuring less the maximum discount
allowed.
USE OF PROCEEDS: The proceeds will be used to fund research
and development. Pending use for these
purposes, the proceeds will be added to the
working capital of the Company.
TERMS OF
DISBURSEMENT: The offering is subject to the Company
converting its trade payables into Common
shares of IUFC. Funds will be disbursed to
the Company only if creditors of Receptagen
accept the terms of conversion of the
Company debt.
LISTING: The Common Shares of the Company are listed
on the Toronto Stock Exchange (symbol
"RCG")
JURISDICTION: Ontario and such other jurisdictions as
agreed to by the Company and the Agent.
MINIMUM Special Warrants
SUBSCRIPTION: ($- per purchaser)
SPECIAL WARRANTS: Each Special Warrant will be exercisable,
without payment of additional
consideration, for one Unit 'C', with each
Unit 'C' consisting of one Common share of
the Company and one transferable Share
Purchase Warrant exercisable into one
common share at C$o per common Share for
two years.
PROSPECTUS FILING: The Company and the Agent agree to prepare
and file a final prospectus (the
"Prospectus") for the Common Shares to be
issued upon the exercise of the Special
Warrants with the Ontario Securities
Commission and the Company agrees to use
its best efforts to obtain receipts
therefor on or before 5:00 P.M. (Toronto
time) on o, 1997 (the "Qualification
Date").
EXERCISE OF
SPECIAL WARRANTS: The purchaser will be entitled to exercise
the Special Warrants for Common Shares at
any time or prior to 5:00 p.m. (Toronto
time) on the earlier of (I) the sixth
business day following the date that a
receipt is
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issued for the Prospectus by the Ontario
Securities Commission and (ii) o, 1997 (the
"Expiry Date"). Any Special Warrants not
exercised by the Expiry Date shall be
deemed to be exercised by the holder
thereof, without further action on the
holder's part immediately prior thereto.
PENALTY: If the Prospectus is not filed and receipts
issued therefor by the Ontario Securities
Commission on or before the Qualification
Date, each Special Warrant shall be
exercisable for 1.1 Common Share without
payment of additional consideration.
AGENT: Credifinance Securities Limited
AGENT'S COMPENSATION: 7.50% of the total gross proceeds realized
by the Company upon the sale of the Special
Warrants.
AGENT'S WARRANTS: Subject to entering into a standard agency
agreement (which will be subject to
standard industry outs), the Agent will
receive a two year non-transferrable
warrant to buy that number of Common Shares
of the Company that is equal to 10% of the
number of Common Shares forming part of the
Units issuable on exercise of the Special
Warrants sold pursuant to the Offering. The
exercise price of the Warrant shall be that
of Offering Price.
CLOSING DATE: February 14, 1997 or such other date as
agreed by the Company and the Agent.
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