STATE OF NORTH CAROLINA
COUNTY OF WAKE
Term Sheet/Letter of Agreement
to merge OxiDyn, Incorporated into Cyclopss Corporation
THIS AGREEMENT ("Agreement") made and entered into as of the 6th day of
October, 2000, ("Effective Date") by and between OxiDyn Incorporated, a North
Carolina corporation having its principal place of business at One North
Commerce Center, 0000 Xxxxxxx Xxxxxxxxx, Xxxxxxx, XX 00000, (hereafter referred
to as "OxiDyn") and Cyclopss Corporation, of 0000 Xxxx 0000 Xxxxx, Xxxx Xxxx
Xxxx, XX 00000, (hereafter referred to as "Cyclopss"), both being parties
hereunder.
WITNESSETH
WHEREAS, XxxXxx and Cyclopss both have a continuing interest in
consolidating their respective companies into one, and
WHEREAS, at the present time, the respective parties have engaged in
detailed and confidential discussions regarding such consolidation, believing it
to be in the best interests of the shareholders of each corporation, and
WHEREAS, certain information has been divulged to enable clear
understanding by both parties about the other party's business to enable a
decision on such consolidation of the companies, and additional information will
be divulged between the parties to enable further understanding to complete the
proposed consolidation transaction, and
WHEREAS, Cyclopss and XxxXxx have reached agreement to disclose to one
another certain confidential and proprietary information under the terms of a
certain agreement called the Confidential Nondisclosure Agreement dated
September 1 I, 2000 ("Nondisclosure"), and
WHEREAS, the parties have reached agreement on the terms and conditions of
such proposed consolidation of the two companies into one.
NOW THEREFORE, in consideration of the mutual covenants and promises set
forth herein, and other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Closing Date. Both parties to this Agreement, acting in good faith,
will endeavor to complete the transaction contemplated hereunder within
seventy-five days from the Effective Date, but in no event later than December
31, 2000.
2. Valuation of OxiDyn. XxxXxx's valuation shall be determined by XxxXxx's
auditors and confirmed by Cyclopss' auditors, estimated to be approximately One
Million, Fifty Thousand
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Dollars (1,050,000) as of the Effective Date of this agreement, based on the
assets of OxiDyn plus the conversion of certain indebtedness of OxiDyn into
equity in OxiDyn ("OxiDyn Valuation").
3. Valuation of Cyclopss. Cyclopss valuation will be determined by the
price of its common stock ("Stock Price") which shall be the lower of (i) the
fifteen-day trading price average of Cyclopss common stock (determined on a bid
price basis) for the period immediately preceding the Effective Date, or (ii)
the thirty-day trading price average determined in like manner times the total
number of issued and outstanding shares of Cyclopss common stock as of the
Effective Date.
4. Exchange of Stock. On the Closing Date Cyclopss will deliver to OxiDyn
shareholders that number of common shares of Cyclopss represented by dividing
the OxiDyn Valuation by the Stock Price. OxiDyn shall deliver, on the Closing
Date, all of its outstanding and issued stock to Cyclopss.
a. In the event that the price of Cyclopss' common stock
(calculated using the fifteen (15) and thirty (30) day periods
immediately prior to the Closing Date) is lower than the Stock
Price, then the number of shares issuable to Oxidyn's
shareholders shall be increased to reflect such reduction in
trading price average. The stock price which causes such an
increase in issuable shares to OxiDyn's shareholders shall be
called the "Revised Stock Price."
b. In no event will the number of shares of Cyclopss common stock
issuable to OxiDyn shareholders be reduced as a result of
upward changes in the trading price average in Cyclopss common
stock.
5. Performance Incentive. On the Closing Date, Cyclopss will grant options
to OxiDyn shareholders to purchase One Million (1,000,000) additional shares of
Cyclopss common stock at the Stock Price or the Revised Stock Price, whichever
is applicable.
6. Delivery and Conditions for Performance Incentive. Options under
Paragraph 5 shall become exercisable on December 31, 2001 and have a term of 5
years, but only if:
a. OxiDyn and/or its employees (operating as a wholly-owned
subsidiary of Cyclopss) delivers not less than Two Hundred
Thousand Dollars ($200,000) in cash or cash equivalents ("Cash
Flow") from the Effective Date through December 31, 2001.
b. Such Cash Flow shall include all sources which result from
OxiDyn or its former employees activities, but shall not
include monies delivered by Cyclopss businesses in existence
prior to the Effective Date.
7. Costs. During the period between the Effective Date and the Closing
Date, XxxXxx's business costs, including costs necessary to prepare to close on
the contemplated transaction, shall
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be paid by XxxXxx. Such costs shall be considered part of the assets
purchased by Cyclopss in the transaction.
a. In order to provide funding for such costs, Cyclopss will
conduct a Private Placement ("PP") of between Two Hundred
Thousand Dollars ($ 200,000) and Three Hundred Fifty Thousand
Dollars ($350,000) of Cyclopss common stock at a price per
share equal to the average trading price as determined in
Paragraph 1 above.
b. All such funds and common stock will be held in escrow.
c. The escrow fund will be drawn down and payable to OxiDyn at
the rate of $40,000 per month, the first month payable on the
Effective Date, until the Closing Date.
d. At each release of funds from the escrow, a corresponding
number of shares of Cyclopss common stock shall also be
released to PP participants.
e. On the Closing Date, any remaining shares of Cyclopss common
stock will be distributed to PP participants and remaining
funds will be released to the merged corporations.
f. In the event the parties agree to extend the Closing Date by
mutual written agreement, the remaining funds and such common
stock of Cyclopss shall be retained in escrow until a closing
does occur and the draw down of funds shall continue at the
rate of $40,000 per month along with the corresponding release
of shares, unless changed by mutual agreement between the
parties.
8. Holding Period. Any shares of Cyclopss common stock issued on the
Closing Date shall be restricted for a period of one (1) year from the Closing
Date (the "Lock Out Period"). In the event that Cyclopss files a registration
statement with the Securities and Exchange Commission during the Lock Out
Period, then such stock, including stock issued in accordance with Paragraph 7e
hereunder, shall be included in the registration.
9. Stock in Escrow. On the Closing Date, Cyclopss shall deliver all stock,
options for stock, and pertinent documents for both under paragraphs 4, 5, and
7,e to an escrow agent to be named by XxxXxx. The escrow agent named by XxxXxx
shall, after receiving the stock and associated materials, hold it until the end
of the Lock Out Period, or until such stock is included in a registration under
Paragraph 8 hereunder.
10. Management and Operations. On the Closing Date, the Chief Executive
Officer of OxiDyn, Xxxx X. Xxxxxxx, will become the Chief Executive Officer of
Cyclopss, and will immediately begin active management of the combined
companies.
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a. On or about the Effective Date, the parties will negotiate a
three-year employment contract with Xx. Xxxxxxx as part of the
contemplated transaction.
b. In addition, an employment agreement with Xxxxxxxx will be
negotiated with Xxxxxxx X. Xxxxxxxx, who is the Chief
Executive Officer of Cyclopss effective as of the Closing
Date.
c. During the period between the Effective Date and the Closing
Date, Xx. Xxxxxxx shall act in the capacity of Acting Chief
Operating Officer and Xx. Xxxxxxxx shall act in the capacity
of Acting Chief Executive Officer and both shall act in the
best interests of Cyclopss and XxxXxx.
d. At closing, Cyclopss shall provide for the election of two
members of its Board of Directors, which initially shall be
Xxxx X. Xxxxxxx and Xxxxxx X.
Xxxxxx.
11. Place of Business. During the period from the Effective Date and
continuing for a period of not more than six months thereafter, the offices of
OxiDyn and Cyclopss shall be considered to be located at both locations
stipulated in the preamble to this Agreement.
12. Regulated Transaction. This Agreement shall be subject to all
requirements and filings of the Securities and Exchange Commission of the United
States of America.
13. Conditions to Closing. The transaction contemplated and the Closing
Date hereunder, are subject to the following conditions:
a. Completion of satisfactory due diligence by both parties, and
b. Ratification of the contemplated transaction by the respective
Boards of Directors of the parties hereto.
14. No Material Change. The parties represent that, between the date
hereof and the Closing Date, there will be no material change in the structure,
operations, and management of the respective companies, except as otherwise
provided herein.
15. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of North Carolina.
16. Invalidity. Any provision of this Agreement which may be determined by
a court of competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating
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the remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives.
OxiDyn, Incorporated Cyclopss Corporation
By: /s/ Xxxx X. Xxxxxxx By: /s/ Xxxxxxx X. Xxxxxxxx
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Xxxx X. Xxxxxxx Xxxxxxx X. Xxxxxxxx
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