March 24, 2005
EXHIBIT
10.2
March 24,
2005
Xxx
Xxxx
Chief
Executive Officer
Bioaccelerate
Holdings, Inc.
000 Xxxxx
Xxxxxx, 00xx Xxxxx
Xxx Xxxx,
XX 00000-0000
Xxxxxxx
Xxxx
Chief
Executive Officer
000 Xxxxx
Xxxxxx, 00xx Xxxxx
Xxx Xxxx,
XX, 00000-0000
Dear
Mssrs. Xxxx and Xxxx:
This
letter sets forth our understanding of certain terms and conditions regarding
the investment by Bioaccelerate Holdings, Inc. (“Bioaccelerate”),
parent of Inncardio, Inc. (“Inncardio”), in
Cengent Therapeutics, Inc. (“Cengent”) as
contemplated in that certain letter of intent dated February 9, 2005 and
executed by Inncardio, Bioaccelerate and Cengent (the “LOI”) and
that certain Agreement and Plan of Merger executed the date hereof by Cengent,
Inncardio and Cengent Acquisition Corp. (the “Merger
Agreement”).
Bioaccelerate
hereby agrees to invest a minimum of $500,000 per month in Cengent to fund
working capital and other needs until the earlier to occur of (i) the
termination of the Merger Agreement or (ii) the date of the Closing (as defined
in the Merger Agreement) (individually, a “Working
Capital Advance”;
collectively, the “Working
Capital Advances”) in
senior secured convertible promissory notes (the “Notes”) and
warrants to purchase Common Stock of Cengent (the “Warrants”)
pursuant to the terms and conditions of that certain Note and Warrant Purchase
Agreement dated October 29, 2004 by and between Cengent and the lenders listed
therein, as amended by Amendment No. 1 to Note and Warrant Purchase Agreement
dated January 31, 2005 and Amendment No. 2 to Note and Warrant Purchase
Agreement dated February 24, 2005 (collectively, the “Purchase
Agreement”).
Bioaccelerate has agreed to the Company’s budget for ordinary course of business
expenditures, which is attached to this letter agreement and is deemed
incorporated herein by reference (the “Company
Budget”),
provided, that in no event shall Bioaccelerate be obligated to invest more than
$500,000 per month in Cengent pursuant to this Agreement. Other than the Company
Budget, Bioaccelerate shall have no obligation to make any investment whatsoever
except upon mutual agreement with the Company concerning the budget for the
succeeding month and the application of Bioaccelerate’s investment for those
budgeted items.
Bioaccelerate
shall deliver to Cengent via wire transfer to a bank account designated by
Cengent each Working Capital Advance, with the first Working Capital Advance due
upon the execution of the Merger Agreement by Cengent, Inncardio and Cengent
Acquisition Corp. and each Working Capital Advance thereafter due on the same
date of the succeeding month(each, a “Payment
Date”).
Bioaccelerate acknowledges and agrees that nothing herein prevents or limits
Cengent’s existing investors from providing additional investments in Cengent
pursuant to the Purchase Agreement.
Upon the
Closing, Bioaccelerate shall (1) transfer the full amount of the principal and
interest under the Notes for the Working Capital Advances to the Convertible
Credit Line Facility, (2) any such Notes shall be deemed paid in full, cancelled
and be of no further force and effect, and (3) any Warrants issued under the
Purchase Agreement shall be cancelled and be of no further force and effect. In
addition, upon the Closing, Bioaccelerate shall have no rights under, or be
considered a party to, the Purchase Agreement or other transactions agreements
set forth therein, including, without limitation, the right to participate in a
2.5 times liquidation preference upon any change of control of Cengent as set
forth in the Notes. In the event the Closing does not occur, Bioaccelerate shall
retain the full rights of a lender set forth in the Purchase Agreement and as a
holder of the Notes and Warrants, subject to the limitations set forth below in
this letter agreement.
In the
event Bioaccelerate fails to deliver the Working Capital Advances on each
Payment Date as it is required to do pursuant to this letter agreement, and such
failure shall continue, without cure, for three (3) business days after receipt
by Bioaccelerate of written notice of such failure, the Merger Agreement shall
automatically and immediately terminate without any notice or action required by
Cengent; provided, that, Cengent may provide written notice to Bioaccelerate and
Inncardio, before such termination takes effect, that Cengent desires that the
Merger Agreement remain in effect. In the event such written notice is provided
by Cengent to continue the Merger Agreement, the parties hereby agree that the
Merger Agreement shall not have been considered terminated and shall be deemed
to continue in full force and effect. If, prior
to Closing, the Merger Agreement is terminated due to Bioaccelerate’s breach of
its obligation to deliver any Working Capital Advance in accordance with the
terms of this letter agreement, the parties hereby agree that (1) the Company
shall retain the initial Working Capital Advance in full satisfaction of any
damages the Company may have suffered due to Bioaccelerate’s breach and the
Company shall have no obligation to repay the initial Working Capital Advance or
any interest on such Working Capital Advance and any Note evidencing such
Working Capital Advance shall be cancelled and be of no further force and
effect; (2) any Warrants issued in connection with such initial Working Capital
Advance (but no other Warrants issued in connection with Working Capital
Advances by Bioaccelerate) shall be cancelled and be of no further force and
effect; (3) Bioaccelerate shall have no obligation to make any further Working
Capital Advance; (4) the Company shall repay all other Working Capital Advances
and any interest thereon upon termination of the Merger Agreement in accordance
with the terms and conditions of the Purchase Agreement; and (5) Bioaccelerate
shall have no further obligations or liabilities under or in respect of this
letter agreement or the Purchase Agreement. If, prior to Closing, the Merger
Agreement is terminated for any other reason, the parties hereby agree that (1)
Bioaccelerate shall have no obligation to make any further Working Capital
Advance; (2) the Company shall repay all Working Capital Advances by
Bioaccelerate and any interest thereon upon termination of the Merger Agreement
in accordance with the terms and conditions of the Purchase Agreement; and (3)
Bioaccelerate shall have no further obligations or liabilities under or in
respect of this letter agreement or the Purchase Agreement.
This
letter agreement may be executed in two or more counterparts, each of which
taken together will constitute one letter agreement among the parties hereto and
their successors and assigns. This letter agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
transactions negotiated, executed, delivered and wholly performed within such
State without reference to the conflicts of laws provisions thereof. None of the
parties hereto may assign its rights hereunder without the consent of the other
parties. All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (i) upon personal delivery to the party to be
notified, (ii) when sent by confirmed telex or facsimile if sent during normal
business hours of the recipient, if not, then on the next business day; (iii)
five days after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iv) one day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the address as set
forth in this letter agreement or at such other address as such party may
designate by five (5) days advance written notice to the other parties hereto.
Each party hereto agrees to execute and deliver all such other and additional
instruments and documents and do all such other acts and things as may be
reasonably necessary to effectuate the transactions contemplated by this letter
agreement.
******
If the
terms of our understanding have been correctly set forth, please confirm this by
executing this letter agreement and returning to us the an executed copy of this
letter agreement.
Very
truly yours,
Cengent
Therapeutics Inc.
By:
_________________________________
Xxxxxx
Xxxxxxx, Ph.D.
President
Agreed
and Acknowledged:
Bioaccelerate
Holdings, Inc.
By:
_________________________________
Xxx
Xxxx
Chief
Executive Officer
By:
_________________________________
Xxxxxxx
Xxxx
Chief
Executive Officer
