MEMORANDUM OF UNDERSTANDING
This updated Memorandum of Understanding (the "MOU") is made effective as
of February 22, 2008 (the "Effective Date"), by and among Stem Cell Therapy
International, Inc., a U.S. publicly traded corporation ("SCTI"), Xxxxxx Xxx,
Chairman and CEO of SCTI, and Dr. Hoon Han, President and CEO of Histostem Co.,
Ltd., a Korean company ("Histostem") and together with Xx. Xxx and Histostem,
Xx. Xxx and SCTI are collectively referred to as the "Parties".
Definitions
Following abbreviations shall be used to define their exact meaning in this MOU:
a. "SCTI" shall mean the Stem Cell Therapy International, Inc., a
corporation organized under the laws of the State of Nevada, and
having its principal location at 0000 X. Xxxx Xxxxxx, 0xx Xxxxx,
Xxxxx, XX 00000, X.X.X. Xx. Xxxxxx Xxx is currently the Chairman and
CEO of SCII.
b. "SCII" shall mean the stock/ticker symbol of the above SCTI
company and shall be used as the same meaning with SCTI in this MOU
c. "Histostem" shall mean the Histostem Co., Ltd., a corporation
organized under the laws of the Republic of Korea, and having its
principal location 518-4 Seoul Life Foundation Bldg., Dunchon-Dong.
Kangdong-Gu, Seoul, Korea, Xx. Xxx-Hoon is currently the President and
CEO of Histostem.
d. "PUBCO" means a new Public Company name that will be selected by
Histostem at the close of the transaction that will represent the
combined companies of SCTI and Histostem and that will obtain a new
stock symbol.
WHEREAS, the Parties desire to enter into a definitive Reorganization and
Stock Purchase agreement whereby SCTI will acquire 100% of the outstanding stock
of Histostem from the Histostem Shareholders, in exchange for a controlling
interest in SCTI, and at the time of closing adopt a new public company (PUBCO)
name;
AND WHEREAS, the Parties wish to memorialize the terms and conditions of
such an agreement;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitive Agreement. A formal agreement (the "Definitive Agreement")
containing the terms and conditions memorialized herein will be prepared and
entered into within fifteen (15) days of the execution of this Agreement, unless
both parties agree to extend the date by written consent. If a Definitive
Agreement cannot be reached within 60 days both parties agreed to cease actions,
and terminate this MOU, without legal recourse.
1
2. Terms of the Agreement. The terms of the Definitive Agreement shall be
as follows. If any necessary terms are not covered in this MOU they will be
determined during the upcoming meeting for the Definitive Agreement based on the
schedule agreed by the parties:
The Share Transaction. SCTI will exchange a controlling interest in
SCTI for 100% of the outstanding stock of Histostem (the "Transaction").
Upon the closing of the transaction, Histostem will become a wholly owned
subsidiary of SCTI and shall continue to operate in Korea, and the
Histostem Shareholders will collectively own 60% of the newly combined
entity at the time of the completion of the merger and SCTI will own 40%.
While it shall be legally domiciled as a U.S. public company, the principal
place of operations of the combined entity shall remain Seoul, Korea and
SCTI will only maintain a branch office of such size and operations as is
set forth in the Definitive Agreement in the United States. The persons who
work in the U.S. office and manage the business affairs of that office
shall be selected by the U.S. Operations of the new entity..
Escrow. Within 15 business days after entering the Definitive
Agreement, the parties will execute all documents as are required to close
the transaction, issue all shares as are required, and deliver all shares
and documents into escrow with a mutually approved U.S. law firm to act as
escrow agent.
Legal Advisor or Counsel. Both parties may engage a U.S. securities
law firm to act as a legal advisor to each party as necessary and to be
counsel for this transaction; each party to pay its own legal expense
Financial Statements. On or before March 30, 2008, and prior to
closing, Histostem will provide to SCTI completed audited financial
statements of Histostem in accordance with US GAAP, sufficient to file
under Regulation S-X with the United States Securities and Exchange
Commission ("SEC").
e. Exchange Listing Status. SCTI warrants that SCTI is quoted for
trading on the over the counter bulletin board (OTC-BB) maintained by
NASDAQ. SCTI will warrant that PUBCO will be eligible to be listed on AMEX
or NASDAQ provided that PUBCO as the combined entity with Histostem meets
the share price, net tangible assets and other requirements for such
listing. Provided that PUBCO (as the combined entity with Histostem) meets
such listing requirements, the Parties intend to apply for listing on
either AMEX or NASDAQ prior to the first round of funding, which is after
the initial funding period.
f. Periodic Reports. SCTI will warrant that it is current with its
obligations to file periodic reports with the SEC. For a period of one year
after closing, Xx. Xxx will provide assistance to the new management of
PUBCO with regards to these SEC filing requirements. The combined entities
will engage a mutually agreed upon U.S. securities law firm to serve as
legal counsel to PUBCO.
g. Directors of PUBCO. At the time of closing, the Board of Directors of
2
PUBCO will have five members, four chosen by Histostem and one chosen
by the current management of SCTI. The director to serve as Chairman of the
Board will be chosen by Histostem. Management of PUBCO. At the time of
closing, PUBCO will have such officers and other employees as will be
chosen by Histostem; the officers and employees of the U.S. operations
shall be selected by SCTI. Name Change and Capital Increase. Immediately
prior to closing, the authorized capital of SCTI will be raised to
500,000,000 shares of common stock in maximum, and SCTI will be re-named to
a new name determined by Histostem in conjunction with consultations with
SCTI, prior to execution of the Definitive Agreement. It is understood that
under SEC regulations the name change cannot be effective or used by the
public company PUBCO until the transaction has closed and filed all
necessary paperwork with the SEC.
Fundraising.
i. Fundraising Goal. The fundraising efforts will be undertaken by the
new combined entity, and Investment Bankers on a best efforts basis, with
the objective of attempting to achieve a total fund raising goal of
$80,000,000. The parties acknowledge that the actual amount of funding in
each round may be affected by many factors outside of one or more of the
Parties' control, including the status of the audited financial statements
of the combined entity, the business plan accomplishments of the new
entity, and changes in market conditions.
ii. Best Efforts Basis. It is understood that the fundraising efforts
to be undertaken will be on a Best Efforts Basis, as that term is
understood by U.S. investment bankers and public companies raising capital
iii. Source of Capital. The capital required for operations by
Histostem shall be provided from newly issued stock of PUBCO. Any
additional capital raised after the first round, either through equity or
through any other security, regardless of how the capital is raised, shall
be disbursed 49% to the US operations of PUBCO and 51% to the Korean
operations of Histostem, respectively.
iv. Initial Round. The work for the initial round of the financing
goal shall commence immediately upon the signing of this MOU and shall be
paid as soon as the funds are available provided that at the time of paying
the funds the US GAAP prepared audited financial statements of Histostem
are completed and the Definitive Agreement is prepared and signed at the
time of funding. The initial round of the financing goal will be undertaken
by SCTI and a broker-dealer it selects on a best efforts basis for a total
of up to $3.0M. Of this amount, $2.0M will be used by Histostem for
immediate operating capital, and $1.0M will be used by SCTI, according to a
Use of Proceeds statement that shall be submitted to SCTI, and approved by
them, within fifteen (15) days after the effective date of this MOU.
3
v. First Round. The first round of financing shall occur as soon as
reasonably possible but no later than six (6) months following the initial
round financing and will be undertaken by SCTI on a best efforts basis for
a total of up to $25,000,000. Among the first round of financing,
$15,000,000 will be used by Histostem (the Korean subsidiary of PUBCO) and
the remaining $10,000,000 will be used by PUBCO for long term growth and
operations according to a Use of Proceeds Statement to be approved by the
Board of PUBCO
vi. Further Rounds. Other financing rounds will occur, beginning
within twelve (12) months following the second round, and will be
undertaken on a best efforts basis for a overall total of up to $80,000,000
including proceeds from the first two rounds. Proceeds from these further
rounds will be used by Histostem and SCTI (as the combined entity with
Histostem) for long term growth and operations according to a Use of
Proceeds statement to be approved by the Board of the PUBCO.
vii. Distribution of Equity After the completion of the reverse
merger, in consideration of 100% of the current Histostem shares, Histostem
will own 60% equity and SCTI will own 40% equity of the new public company
(PUBCO).
viii. Limitations on Liability for Best Efforts Financing. It is
understood that the ability to obtain financing is dependent on several
factors that are out of the control of Xx. Xxx and SCTI, including
Histostem successfully implementing its business plan and meeting its pro
forma financial milestones, and current market conditions. It is understood
that Xx. Xxx and SCTI shall incur no liability with respect to those events
or the resulting price per share.
k. Issuances for Services. In addition to the shares issued to the
Histostem Shareholders pursuant to the Definitive Agreement, at closing of
the reverse merger SCTI will issue 1,000,000 common shares each to
Primebell and Princeton Healthcare for services rendered to Histostem.
Furthermore, Xx. Xxxxxx and Xx. Xxxxxx Xxx will agree to provide ongoing
services to PUBCO for a period of five (5) years and they shall each be
paid for such services according to the terms to be set forth and mutually
agreed to in the Definitive Agreement. SCTI and not Histostem, shall be
obligated to pay for the merger services of Xx. Xxxxxx in making the
introduction, such payment to take place at or before the signing of the
Definitive Agreement.
l. Antidilution. For a period of twenty-four (24) months from the date
of the first round of financing, the Parties agree not to attempt or
implement any reverse splits or other efforts to dilute the shares of the
minority shareholders of SCII. For the purposes of this clause, shares are
diluted only where such efforts result in the reduction of the value of the
minority shareholders' stock. It is understood that shares are not diluted
due to stock issued in the course of the anticipated three rounds of
financing.
m. Professional Services.
4
i. Investor Relations Firm. The current management of SCTI will assist
the new management of PUBCO to retain an investor relations firm to create
awareness of SCII and Histostem on a worldwide basis.
ii. Investment Banker. Both Parties hereby agree to interview and
select the best offer of a U.S. based investment banker to raise funds for
PUBCO as set forth in this Agreement.
iii. Legal Services for Histostem. The Law firm of Xxxxxxx, Xxxxxx and
Green may be considered to serve as the Legal Advisor to Histostem during
the MOU and Definitive Agreement is process, upon necessary.
3. No Shop Clause . Upon execution of this MOU until the date of closing of
the Definitive Agreement, Histostem will keep the terms of this agreement
confidential, will not "shop" or otherwise seek more favorable terms from
another investment source, and will not to enter into any agreement with any
other party that would in any way prejudice the rights of SCTI. Both parties
agree to negotiate in Good Faith until the Definitive Agreement is completed and
executed.
4. Confidentiality. Except as required by applicable law, no information
regarding this MOU or any other agreement, or verbal or written communications
regarding these Parties and the transaction described herein, shall be released
to the public or anyone outside of the respective companies' Boards of Directors
or other professionals without the written consent of both Parties. The Parties
may by mutual agreement decide to issue a worldwide press release upon the
signing of this MOU. It is understood that upon execution of the Definitive
Agreement, SCTI will be required to publicly disclose the terms of the
Definitive Agreement on Form 8-K, and SCTI will issue a public press release at
that time.
5. Binding of Successors. This Agreement shall be binding on, and shall
inure to the benefit of, the parties and their respective heirs, legal
representatives, successors and assigns.
6. Severability. Each provision of this MOU shall be treated as a separate
and independent clause. If any court of law should rule that a clause is illegal
or otherwise unenforceable, such clause shall be deleted from this MOU, and this
MOU shall be deemed to consist of the remaining clauses with the unenforceable
clause(s) stricken. Moreover, if one or more of the provisions contained in this
Agreement should for any reason be held to be excessively broad as to scope,
activity, or subject so as to be unenforceable at law, such provision or
provisions shall be construed by the appropriate judicial body by limiting and
reducing it or them, so as to be enforceable to the maximum extent compatible
with the current applicable law.
7. Amendment of the MOU. This MOU may not be amended or modified except by
a writing executed by both parties.
8. Waiver. Any waiver by any Party of a breach of any provision of this MOU
shall not operate or be construed as a waiver of any subsequent breach of such
provision or
5
any other provision hereof.
9. Entire Agreement. This MOU represents the entire understanding of the
parties regarding the terms and conditions hereunder, and supersedes all prior
communications, agreements and understandings, whether oral or written, relating
to the subject matter hereof.
10. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given (i) on the date they are
delivered if delivered in person; (ii) on the date initially received if
delivered by facsimile transmission followed by registered or certified mail
confirmation; (iii) on the date delivered by an overnight courier service; or
(iv) on the third business day after it is mailed by registered or certified
mail, return receipt requested with postage and other fees prepaid, to the
addresses provided by each party to the other parties.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Confirmation of execution
by electronic transmission of a facsimile signature page shall be binding upon
any party so confirming.
IN WITNESS WHEREOF, the Parties have executed this Agreement effective as
of the date first above shown.
HISTOSTEM CO, LTD STEM CELL THERAPY INT'L, INC
\s\ Dr. Hoon Han \s\ Xxxxxx Xxx
---------------- --------------
By: Dr. Hoon Han By: Xxxxxx Xxx
Title: CEO/President Title: CEO/President
Dated: 2/22/06 Dated: 2/22/06
Witness: \s\Xxxxx Xxx, 2/22/8
--------------------
By: Xxxxx Xxx
Title: Advisor to Histostem
6
