Exhibit 10.1
BUSINESS OUTSOURCING SERVICE, INC..
0000 XX 0XX XXXXXX, XXXXX 0000 XXXXXXXX XX 00000
August 4, 2011
TO: Xx. Xxxxx Xxxxxx
c/o The Sheba Medical Centre at Tel Hashome
AND TO: Xxxxx Xxxxxx
Israel
Dear Mesdames:
RE: ORGENESIS TRANSACTION
This letter sets out our intent ("LOI") reached among Business Outsourcing
Service Inc. ("Pubco") and Xx. Xxxxx Xxxxxx ("Xxxxxx") regarding Xxxxxx becoming
engaged and employed in development on behalf of a fully owned Israeli
subsidiary of Pubco (the "Israeli Sub") of the Orgenesis Business (as defined
below), including know-how, patents, agreements and all other assets (the
"Orgenesis KnowHow", including, without limitation, the patents listed on
Schedule A attached) upon the terms and conditions set forth in this Agreement.
Pubco is a company traded on the non-NASDAQ Over the Counter Bulletin Board. It
is hereby clarified that to date, no business has been conducted with respect to
the Orgenesis KnowHow other than research and development performed at Sheba (as
defined below) work on patent filings and related matters concerning the
Orgenesis KnowHow.
LICENSE; PUBCO SHARE CAPITAL
1. Xxxxxx hereby agrees to use commercially reasonable efforts to cause Sheba
to license to Pubco (or to the Israeli Sub) all the Orgenesis KnowHow on
the terms and subject to the conditions of a license agreement (the
"License Agreement") to be entered into with Sheba, which include the
commercial terms set out in this LOI (the "Transaction"). The
commercialization of the Orgenesis KnowHow will be referred to as the
"Orgenesis Business".
2. The total common share fully diluted position of Pubco after the First
Financing (described below) will be such that the Financing shares and
warrants will be newly issued restricted securities which together with
current shareholders of Pubco will have 66.5% of Pubco shares (assuming
exercise of all warrants attached to the Financing), and Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C. patent attorney in the United States
("Patentco") will have 2.5%, provided Patentco release Xxxxxx (and her
family members) and Pubco from any claims in respect of the work done for
the Orgenesis KnowHow, other than the payment of up to an additional
$130,000 as contemplated in this LOI.
3. Post Closing and after all Financing dilution and accounting for all stock
options, the fully diluted share capital of Pubco will be
(a) Current Pubco shareholders - 46,626,951 shares of Common Stock
representing (post 35:1 forward split) (83.8%) and together with the
holdings of the Financing investors (assuming full investment of $1.5
million): 48,126,951 shares of Common Stock representing (post 35:1
forward split) - 86.5%;
(b) Xxxxxx 5% in options as further described below;
(c) Patentco 2.5%; and
(d) Xxxxx Xxxxxx 6% % in options as further described below
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4. As part of the transaction Pubco will enter in a license agreement with The
Sheba Medical Centre ("Sheba") at Tel Hashomer. Under the license
agreement, Pubco will:
(a) provide to Sheba a net sales royalty of three and one half (3.5%)
percent of the net sales received by Pubco, Israeli Sub or their
affiliates generated through the Orgenesis Business;
(b) pay to Sheba sixteen (16%) percent of all sublicensing fees received
for the Orgenesis Business where Pubco, Israeli Sub or their
affiliates, as applicable, is not directly or indirectly selling
products;
(c) pay to Sheba an annual license fee of $15,000; and
(d) pay to Sheba the following milestone payments: (A) $50,000 on the date
of initiation of phase I clinical trials in human subjects, (B)
$50,000 on the date of initiation of phase II clinical trials in human
subjects, (C) one hundred and $150,000 on the date of initiation of
phase III clinical trials in human subjects, (D) $750,000 on the date
of initiation of issuance of an approval for marketing of the first
Product by the FDA or any other equivalent authority, (E) one time
payment of $2,000,000, when worldwide Net Sales of products have
reached the amount of $150,000,000 for the first time
5. In the event of an Exit, Sheba shall be entitled to choose, in its sole
discretion, whether to receive a one time payment, based on the value X
common shares (being equivalent to 10% of the share capital of Pubco
immediately following the Closing); if it does, then there will be no
further obligation to pay royalties, sublicensing fees or milestone
payments. "Exit" means the purchase of all of the outstanding Pubco shares
and/or consolidation of Pubco or Israeli Sub into or with another
corporation.
EQUITY FINANCING
6. Pubco will complete a financing of $500,000 (the "Financing") prior to or
upon Closing. The First Financing will consist of 500,000 units issued at
$1 each, each unit comprising one common share and 2 common share purchase
warrants. Each common share purchase warrant is exercisable for one
additional common share each for $1. Investors will commit to exercising
their warrants for additional equity of $1,000,000 upon the Company
reaching certain milestones as set out in Schedule B attached.
7. The Financing net proceeds will be used for advance of the Orgenesis
Business and for working capital, including payment of salaries and bonuses
to employees on the basis of a budget to be agreed upon between Ferber, the
Financing Investors and Pubco prior to signing the definitive agreements.
8. $80,000 of the Financing will be used to pay Patentco, at or promptly
following the Closing, for their work in the Orgenesis patent registration.
In addition, Patentco will be issued 2.5% of the equity common shares
issued and outstanding on Closing as set forth above, and will be paid
$50,000 upon the earlier of: (i) Exit, (ii) If Pubco sublicenses the
technology, or (iii) $20,000 upon each of the following milestones (up to
$50,000 in total): (i) initiation of phase I clinical trials in human
subjects; (ii) initiation of phase II clinical trials in human subjects;
(iii) initiation of phase III clinical trials in human subjects.
9. $50,000 will be used to pay, at or promptly following the Closing, legal
fees of Xxxxxx incurred in connection with the Transaction and the
Orgenesis KnowHow.
CLOSING AND DEFINITIVE AGREEMENTS
10. Closing of the transactions contemplated herein (the "Closing") will occur
on or before September 30, 2011 or on such other date as the parties may
agree, at such place and time as the parties may agree.
11. The parties agree to instruct their attorneys to co-operate and complete
comprehensive and definitive agreements for the Transaction upon completion
of the 15 day due diligence period set out below. The definitive agreements
will contain terms and representations customary for agreements governing
the purchase and sale of a business in New York, as prepared by commercial
legal counsel of good reputation.
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DUE DILIGENCE
12. Pubco and Xxxxxx will each have the right to conduct due diligence on the
other in connection with the transactions contemplated hereunder. Each of
Pubco and Xxxxxx and their respective accountants, legal counsel and other
representatives will have full access during normal business hours to the
management, properties, books, records, contracts, commitments and other
documents of the other and their subsidiaries in connection with the
transactions contemplated herein. The due diligence period will terminate
15 days execution of this LOI.
CLOSING CONDITIONS
13. This LOI and the Closing hereof is subject to the following:
(a) the Financing being closed or funds being held in escrow pending the
Closing;
(b) Pubco will have no obligations or liabilities of any type or nature
whatsoever, contingent or otherwise, known or unknown, except for
professional fees incurred by Pubco and the Financing investors in
connection with the Transaction, which fees shall not exceed $50,000.
(c) Pubco will be up to date in its filings with the SEC, which complied
in all material respects with the applicable securities law
requirements, Pubco will be compliant with all listing requirements
and have not received communications regarding the intention to
suspend or delist Pubco's shares from the market, and the
capitalization of Pubco will be as described above. Pubco will provide
representations that the above is true and correct as of the Closing;
(d) Pubco having entered a satisfactory licensing agreement with Sheba
based on the commercial terms set forth in this LOI;
(e) Pubco will have undertaken to xxxxx Xxxxxx, as additional incentive in
connection with her employment with Israeli Sub an option to acquire
5% of Pubco's outstanding share capital at Closing at an exercise
price per share equal to the par value thereof for a total of
$2,781.905, and which shall vest monthly over a period of 12 months
following the Closing.
(f) Pubco will have undertaken to xxxxx Xxxxxx, in consideration for her
service as member of Pubco Board, an option to acquire 6% of Pubco's
outstanding share capital at Closing. Such options shall be granted
under the Capital Gains Track of Section 102 of the Israeli Income Tax
Ordinance and in connection therewith, the share option plan shall be
adopted by Pubco and filed with the Israeli tax authorities and the
option shall be granted within 90 days following the Closing;
(g) Xxxxxx will have entered into an employment agreement with Israeli Sub
for being employed 50% of her business time, on terms satisfactory to
both parties;
(h) Each of Xxxxxx, Xxxxxx and Patentco will have their shares held in
escrow in order to ensure compliance with the no sale limitation
whereby they may not sell any shares of Pubco for 2 years from
Closing. While held in escrow, the above shareholders shall have
voting rights for their shares, and distributions of Pubco shares made
in respect to their respective shares shall be distributed to the
escrow agent to be held pursuant to the same terms and conditions the
escrow agent holds the original shares on account of such
shareholders. All other distributions made in respect to such shares
shall be distributed directly to the applicable shareholder for their
own account;
(i) Pubco will have restructured on an approximately 35 for one forward
stock split;
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(j) Pubco having delivered to Xxxxxx a legal opinion of its counsel, in
form and substance acceptable to Xxxxxx as to, among other things, the
capitalization and valid issuance of the shares of Pubco;
(k) Xxxxxx and two or four additional directors approved by Xxxxxx and by
the Financing investors and current shareholders of Pubco will be
appointed to Pubco's Board of Directors. Until the first anniversary
following the Closing the removal, replacement and appointment of
Pubco's Board of Directors will be decided jointly by Ferber and
holders of majority of the shares held by the Financing investors and
current shareholders of Pubco; Thereafter Pubco will be entitled to
remove, replace and appointment Pubco Board representatives; and
(l) all representations and warranties contained herein and to be
contained in the definitive agreements shall be true and correct at
the date of Closing.
STANDSTILL LOI AND CONFIDENTIALITY
14. Each of Xxxxxx and Xxxxxx agrees that they will not disclose any of the
terms of this letter LOI for a period ending on the earlier of 60 days
after its execution and the date that definitive agreements regarding the
Transaction are signed, to any party except to professional advisors who
advise them on the Transaction and to Sheba. Any professional advisors and
Sheba so informed of the terms hereof will be instructed to keep the terms
of this letter LOI completely confidential. Each of Xxxxxx and Xxxxxx
further agrees not to trade in the securities of Pubco until after Closing
or the termination of this LOI. In addition, they agree that they will not
for a period of 75 days after execution hereof, negotiate with any party
other than Pubco as to the disposition or development or joint venture of
the Orgenesis KnowHow. The parties may extend the term of this clause by
mutual written agreement.
PRE AND POST CLOSING COVENANTS
15. Pubco, Xxxxxx and Xxxxxx hereby covenant to the other as follows:
(a) until Closing they will not take any action that could reasonably have
a material adverse effect on the Orgenesis Business; and
(b) Each of Xxxxxx and Xxxxxx acknowledges that Pubco will be required to
provide substantial disclosure about the Orgenesis Business to the SEC
and they agree to fully co-operate to provide in a timely manner such
information and disclosure about the Orgenesis KnowHow and Orgenesis
Business as Pubco's legal counsel and auditors may reasonably request
in order to comply with such legal requirements.
BINDING AGREEMENT
16. This LOI is intended to be a non-binding agreement between the parties,
except for the provisions of Section 15 (Standstill LOI and
Confidentiality).
GENERAL
17. All dollar references are United States dollars. VAT will be added to
amounts payable hereunder to the extent applicable.
18. At the Closing, Pubco will pay the legal costs of the Transaction incurred
by it and the Financing investors up to the aggregate amount set forth in
Section 13(b) and the cost of the Xxxxxx incurred in connection with its
due diligence review of Pubco up to an aggregate amount of $5,000, and
subject to Section 9, Xxxxxx will pay the other costs incurred by her in
connection with this Agreement.
If the foregoing correctly sets out the terms of our intentions, please execute
this letter in the space provided.
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BUSINESS OUTSOURCING SERVICE, INC.
Per: /s/ Xxxxxxxx Xxxxxx
----------------------------------
Authorized Signatory
/s/ Xx. Xxxxx Xxxxxx
--------------------------------------
Xx. Xxxxx Xxxxxx
/s/ Xxxxx Xxxxxx
--------------------------------------
Xxxxx Xxxxxx
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SCHEDULE A
INTELLECTUAL PROPERTY OF ORGENESIS
The technology is secured by US and European patents application, some issued
(see list below) additional applied in November 2004.
METHODS OF INDUCING REGULATED PANCREATIC HORMONE PRODUCTION
Country Name Application Status Case/SubCase
------------ ------------------ ------------
Australia Granted 21415-501 PRO/004
Canada Pending 21415-501 PRO/008
European Patent Convention Granted 21415-501 PRO/019
France Granted 21415-501 PRO/022
Germany Granted 21415-501 PRO/016
Italy Granted 21415-501 PRO/031
Japan Published 21415-501 PRO/032
Patent Cooperation Treaty National 21415-501 PRO/061
United Kingdom Granted 21415-501 PRO/023
METHODS OF INDUCING REGULATED PANCREATIC HORMONE PRODUCTION
IN NON-PANCREATIC ISLET TISSUES
Country Name Application Status Case/SubCase
------------ ------------------ ------------
United States of America Granted 21415-501/
United States of America Published 21415-501 CIP/
United States of America Pending 21415-501 DIV/
Australia Pending 21415-501 PRO B/004
European Patent Convention Published 21415-501 PRO B/019
Japan Published 21415-501 PRO B/032
Patent Cooperation Treaty Published 21415-501 PRO B/061
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SCHEDULE B
MILESTONES
1. The Investors will exercise their warrants for additional equity of
$500,000, upon the earlier of: (i) Pubco or Israeli Sub signing an
agreement with a clinical center, and (ii) 6 months following the Closing.
2. The Investors will exercise their warrants for additional equity of
$500,000, upon the feasibility of enhancement of cell propogation
capability.
