Letter of Intent dated 20th Day of January 2009
Exhibit
10.21
Between : Vegiesafe LLC a
Limited Liability Company registered in New York whose address is 000 Xxxxx
Xxxxxx 0xx Xxxxx Xxx Xxxx, XX 00000-0000 XXX ("Vegiesafe") and Between Pimi Agro CleanTech
Ltd. a company registered in Israel whose address is POB 107 Kibutz Alonim,
Israel ("Pimi").
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Whereas
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Pimi developed
Stabilized Hydrogen Peroxide (STHP) ("The Product") and a
storage protocol ("the
Storage Protocol") used in the treatment of fruits and vegetables
in storage and has filed for patent registrations for such applications
and formulations;
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And
Whereas
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Pimi has registered
patents and patents application for the Product and the Storage Protocol
(hereinafter the Product and Storage Protocol are
collectively referred to as the "Technology") in various
countries among them the USA. The
patents, patent applications and all enhancements, improvements,
derivatives and additions thereto, whether now in existence or created in
the future are hereinafter referred to as the Patents. Set forth in Exhibit A attached
hereto is a list of the registered Patents and
applications.
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And
Whereas
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Pimi has introduced the
Technology for use in storage of
potatoes.
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And
Whereas
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Pimi is active currently
in Europe and Israel and desires to expand and start activity in the US, Canada and
Mexico.
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And
Whereas
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Vegiesafe and its
affiliated companies are marketing, brand and product development
companies which do business with mass-market retailers and supermarket
stores in the US
such as Wal-Mart
("WM"), Target and others.
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And
Whereas
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Vegiesafe has
represented to Pimi that its affiliated
companies have relationships with WM and other mass-market
retailers and major supermarket chains in North America ("Retailers") and will
seek to build a business for CIPC free potatoes and
potato products using the Technology for the
Retailers.
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And
Whereas
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The
parties have agreed to cooperate in the development and expansion of Pimi activities in the
US.
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1
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Now
it has been Declared and Agreed between the
Parties:
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1.
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Preamble
and Appendices
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1.1
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The
Preamble and appendices to this LOI is one and integral
part of it.
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1.2
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The
headings of the section are for convenient only and would not serve for
interpretation to this LOI.
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2.
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Incorporation
a US Subsidiary by Pimi
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2.1
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Pimi intends to
incorporate a fully owned subsidiary in the US ("NEWCO" or "NC") which might be the
main vehicle for Pimi activities in the
US.
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2.2
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Pimi will grant to NC licenses for the use
of the under the Patents. The licenses for the US will be an
exclusive license and the licenses for Canada and Mexico will be
non-exclusive.
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3.
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The
Joint Venture between the Parties
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3.1
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On
or before January 15, 2009 NC or Pimi and Vegiesafe will enter
into a joint venture agreement ("JV Agreement")
incorporating the terms and conditions set forth in this LOI ("The Joint Venture"). The
Joint Venture will be in the form of an American LLC or partnership as the
parties will agree. The LLC or the partnership will be incorporated when
the Joint Venture will commercially justify it. In the event a JV
Agreement is not entered into by February 15, 2009, the terms of this LOI
and the terms stated herein to be set forth or provided in the JV
Agreement shall constitute the parties JV
Agreement.
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3.2
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In
the event any Retailer, any fast-food chain or any major packaged, frozen
or snack food marketers or any major or national vegetable (or fruit)
growers and major or national distributors (all collectively referred to
herein as "Distributor"), in the US (such Distributors, being subject to
the mutual approval of Vegiesafe and Pimi,
which approval shall not be unreasonably withheld) expresses an interest
in launching CIPC
free potatoes or CIPC free potato
products at any Retailer or by any Distributor by requesting its
supplier/s to use the Technology for potatoes or
potato products, in order to produce or to supply CIPC
free potatoes or CIPC
free potato products for its consumption, such request
hereinafter referred to as a "Trigger Event". The Parties will continue to
operate the Joint Venture under the terms hereof and the JV Agreement, so
long as such Trigger Event occurs prior to December 31,
2009.
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4.
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Scope
of the Joint Venture
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4.1
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The
Joint Venture will market, sell and distribute the Technology throughout
of the USA on an
exclusive basis,
and throughout Canada and Mexico on a
non-exclusive basis. The Technology will be distributed under the
Trademark/s or such other name/s as shall be mutually agreed upon by the
Parties as well as under Earthbound LLC’s (“EB”), an affiliated company of
Vegiesafe umbrella brand known as
"Galapagos".
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4.2
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The
Joint Venture will have exclusivity for marketing, sales and distribution
of the Technology for treatment and storage of potatoes in the USA subject to Section
4.3 below. Treatment and storage of other fruits and vegetables will be
added to the Joint Venture in the future based upon the milestone and
vision set forth in Exhibit B.
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Notwithstanding
the above, the Parties agree that opportunities may come along with respect to
other fruits and vegetables. The Parties mutually agree that when
these opportunities come along, the Parties will decide together whether or not
to include such additional categories within the scope of this
Agreement.
The Joint
Venture will also market, sell and distribute the Technology for treatment and
storage of potatoes in Canada and Mexico, but not on an exclusive
basis.
2
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4.3
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The
exclusivity of the Joint Venture will be subject to fulfillment of certain
milestones of annual sales set forth in the Exhibit
C.
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In
case such milestones are not achieved, either party will have the right,
but not the obligation to terminate the Joint Venture's
exclusivity.
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4.4
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The
Joint Venture will relate initially to process potatoes such as,
French-Fries, Chips and fresh table potatoes. Once the Joint Venture has
achieved the milestones set forth in Exhibit B, the Joint
Venture's rights will be extended to other fruits and vegetables by mutual
agreement, taking into account resources, funds availability, and vision
for such expansion. Vegiesafe acknowledge that Pimi is in
R&D stages for other usages of the Technology such as soil treatment
and disinfection, and grain treatment and other potential solutions and
usages which are not part of the
LOI/Agreement.
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5.
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Parties
share in the Joint Venture and its
Management
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5.1
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The
parties' share in the Joint Venture will be: NC 70%, Vegiesafe 30% of all net
revenues. "Net revenues": will include all sums received for
the Technology regardless of whether such sums are paid in the form of a
royalty or payment for the sale of the Products or use of the Storage
Protocol less any cost and expenses relating to achieving the
revenues.
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5.2
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The
Joint Venture will have a board of directors. Pimi will be entitled to
have two directors and Vegiesafe will be
entitled to have one director. Notwithstanding the above, all
decisions regarding expenditures of Company funds relating only to the
first investment of the $250,000 will require unanimous approval of the
Board. Notwithstanding the above, expenses relating to the EPA approval of
up to $100,000 as set forth in Exhibit E, efficacy
tests/demonstration room/s of up to $50,000, and travel expenses to the US
of Pimi staff or to Israel by Vegiesafe or the staff
of its affiliated companies for working session of up to $50,000 will be
considered as approved in advance, and will not require additional
approval of the Board of the JV.
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5.3
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At
such time as the activities of the Joint Venture warrant and upon mutual
agreement of the Parties, the Joint Venture will employ a CEO and/or such other
employees as may be necessary for the successful operation of the Joint
Venture, including without limitation an agronomist who will be in touch
with the customers in the USA.
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5.4
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The
Parties will have a meeting every quarter to review the business of
the Joint Venture. Such meeting may be in person or by
conference call.
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6.
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Pimi/NC
Responsibilities.
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6.1
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NC and Pimi responsibilities
and missions under the Joint Venture are as
follows:
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6.1.1
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Pimi/NC will give sub
license to the Joint Venture for the use of the Technology, and all other
intellectual property and know-how including any research and
development relating to the formula and any new product developed
("IP") for the
term of the Joint Venture.
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6.1.2
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Training
of core personnel and technical support required for the activity in the
US, until the
Joint Venture will engage sufficient personnel who will take upon itself
the technical support for the installation and the treatment and
Storage Protocol.
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6.1.3
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Receiving
of all approvals and consents required for the activity of the Joint
Venture in the USA.
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6.1.4
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Installation
of the initial trials and demonstration
rooms.
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6.1.5
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Pimi, its owners,
officers, and managers agree (i) they will not, directly or indirectly,
initiate contact with any Retailer or Distributor for the purpose of
proposing or soliciting a license, sales, or other agreement for any
Products or the Technology that are exclusive to the Joint Venture
hereunder, and (ii) if contacted by any such Retailer or Distributor,
Pimi will refer
such Retailer or Distributor to Joint Venture. In the event of
a violation of this paragraph by Pimi, the Parties agree
that the measure of Vegiesafe's damages will
be based on its share of net revenue set forth in Paragraph
5.1.
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7.
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Vegiesafe
Responsibilities:
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7.1
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Vegiesafe
responsibilities and missions under the Joint Venture are as
follows:
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7.1.1
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Marketing
and sales activities of the Joint
Venture.
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7.1.2
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Seeking
to have a Retailer and/or major Distributor in the US, which will be
mutually agreed upon by the parties, to start treatment of a line of CIPC free potatoes or
CIPC free potato
products, by recommending its producer/s and/or supplier/s to manufacture
and supply such CIPC free potatoes
or CIPC free
potato products; and following up with a line of products for extending
shelf life of fruits and vegetables with CropDefender, Pimi
products and other products treated by or that include the
Technology. Such next step will be discussed and mutually
agreed upon by the parties once the milestones set forth In Exhibit B have
been achieved.
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3
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7.1.3
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Assisting
with the allocation of required personnel for the Joint
Venture.
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8.
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Services
and Goods provided by the Parties to the Joint
Venture
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8.1
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All
services provided to the Joint Venture by any party will be charged to the
Joint Venture at cost basis.
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8.2
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Pimi
will sell the Products to the Joint Venture on cost basis including but
not limited to any external work done and
transportation.
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9.
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Financing
the Joint Venture
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9.1
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Vegiesafe will invest in
the Joint Venture an aggregated amount of $250,000 which will be used for
expenses reflected in a budget prepared for the Joint Venture and approved
by Vegiesafe and
Pimi. The
budget shall include such items as EPA approval, flights,
accommodations, legal/accounting and first Potato treatments tests, etc.
The above sum will be provided on an as required basis according to a
working quarterly budget prepared by NewCo or Pimi and as shall be
determined by the board of directors of the Joint Venture in accordance
with section 5.2 above. Vegiesafe will deposit
$40,000 with Pimi on or before January 26, 2009 which will be an advanced
of the above amount out of which the sum of $12,400 which Pimi has already
expended will be reimbursed to Pimi. Once this amount has been
used Vegiesafe will deposit additional amount of $40,000 and so forth.
Decision as to costs and expenses relating to the expending the above
investment will be taken by mutual
consent.
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9.2
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The
Joint Venture will open a bank account when practical. Signature rights in
the Joint Venture bank account will be as decided by the Joint Venture
Board of Directors.
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9.3
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Any
additional investment in excess of the $250,000 set forth in section 9.1
above shall be contributed by the parties to the Joint Venture upon the
mutual consent of the parties taking into account the Joint Venture's
business and needs and will be paid to the Joint Venture as
follows: 70% to be paid by Pimi and 30% to be paid by
Vegiesafe.
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9.4
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Breach
by Vegiesafe of its obligation to invest under section 9.1 above, will be
considered a fundamental breach of this LOI and/or the JV Agreement and
will enable Pimi or NC to terminate the JV Agreement or this LOI by an
advance written notice to Vegiesafe of its default under which it will
provide Vegiesafe with a period of 15 days from the date of receipt of
Pimi or NC’s notice to cure its default of payment of any of the
installments payable under section 9.1. In case of termination in the
above circumstance Vegiesafe will not be entitled to receive any
compensation or the consideration under section 11.4 herein
under.
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9.5
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A
breach by Vegiesafe of its obligations to invest in the Joint Venture
under section 9.1 above shall not affect EB’s rights with respect to EB’s
investment in Pimi under Section
10.
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10.
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Vegiesafe
investment in Pimi
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10.1
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EB,
an affiliate of Vegiesafe will invest directly in Pimi Agro CleanTech Ltd
$300,000 at a valuation of $8M pre-money ("EB Investment") for
226,642 Ordinary Shares of 0.01 NIS each representing 3.61% of the issued
capital of Pimi at the time of investment. The investment will be paid to
Pimi in tranches as follows: first tranche of $60K will be paid
on the 15th
of March 2009. The balance of $240,000 will be paid in four
installments as follows: $60,000 on the 15th
June, 2009, $90,000 on 15th
of September, 2009 and $90,000 on the 15th
of January 2010. EB will receive the allocated shares pro rata
to the EB Investment against each payment of the EB Investment. Attached
to this LOI as Exhibit
D is the Term Sheet for EB investment in
Pimi.
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10.2
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In
the event Pimi
raises funds from a VC, or from an institutional investor ("The Outside
Investment"), or will issue shares in an IPO, for a valuation which is
higher than $8Million then EB will have the option
to pay the balance of the EB Investment prior to the funding of the
Outside Investment. If EB, in its sole
discretion elects not to pay the balance of the EB Investment at such
time, it will then lose its right to pay the balance of the EB Investment
and will not receive the balance of the shares, and will be left only with
those shares that have been already allocated under paragraph 10.1
above.
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10.3
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In
case that prior to the first payment of the Investment by EB, there will
be a conversion of the shares of Pimi to shares in a US company, as a part
of the plan to register the shares of the US company on the NASDAQ OTC/BB,
then instead of shares in Pimi, EB will receive shares in the US company
at the same rate of conversion which applies to all other holders of the
Ordinary Shares 0.01 NIS each of
Pimi.
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10.4
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Breach
by EB of its obligation to invest in Pimi under section 10.1 above, will
be considered a fundamental breach of this LOI and/or the JV Agreement by
Vegiesafe and will enable Pimi or NC to terminate the JV Agreement or this
LOI by an advance written notice to Vegiesafe of its default and providing
Vegiesafe with a period of 15 days from the date of receipt of Pimi or
NC’s notice to cure its default of payment of any of the installments
payable under section 10.1. In case of termination in the above
circumstance Vegiesafe will not be entitled to receive any compensation or
the consideration under section 11.4 herein
under.
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11.
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Termination
of the LOI or the Joint Venture
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11.1
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Either
Party shall have the right to terminate this LOI and/or the Joint
Venture and the JV Agreement if the Trigger Event, as that term is defined
in Section 3.1, does not occur by December 31, 2009. Notice of the
exercise of the right to terminate this LOI and/or the Joint
Venture and the JV Agreement shall be sent to the other party as provided
in Section 17 within 60 days after December 31, 2009. In the
event of a termination as provided in this Section 11.1, Vegiesafe acknowledges
that its investment made in the Joint Venture will not be returned, except
for its investment which was used for acquiring the EPA approval for
registration of the Technology in the US including without
limitation the expenses set forth in Exhibit E including expenses added to
the EPA registration budget after the date hereof and such additional
direct expenses associated with EPA registration if actually
incurred.
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11.2
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Pimi
and/or NC shall have the right but not the obligation to terminate the
exclusivity of the Joint Venture, if the milestones set forth in Exhibit C
(“Milestones”) are not achieved. If, however, good faith negotiations with
Retailers or Distributors, that are, in both parties good faith
determination, reasonably expected to achieve the Milestones are ongoing
at the time of any Milestone deadline, the parties will discuss the
potential of such negotiations and give consideration to such negotiations
prior to terminating the exclusivity of the Joint Venture for failure to
achieve a Milestone.
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11.3
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Upon
termination of the Joint Venture the Technology and EPA approval and any
other license or consent, will remain the sole property of Pimi and/or
NC.
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11.4
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Upon
termination of the Joint Venture NC or Pimi, if NC has not
been formed will continue to pay Vegiesafe its share of
revenue from the sales as agreed under the JV Agreement as long as Vegiesafe continues to
provide services required under any agreement to which it is a
party.
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11.5
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Upon
termination of the Joint Venture, all rights in and to EB's Galapagos brand and
such customized trademark, other than the actual Licensed Xxxx used in
conjunction with the Products, will belong exclusively to EB. Pimi and/or NC shall own
all right, title and interest in and to the underlying Technology, IP, and
to the underlying artwork in the brand collateral produced by the
Joint Venture, including but not limited to, any Product specifications,
copyrights, names, seals, logos and artwork developed in connection
therewith, Pimi agrees it will not use, either during or after the term of
this LOI or the JV
Agreement, any intellectual property, including but not limited to artwork
and designs, created by Vegiesafe using or connected to the Technology or
Licensed Xxxx for any purpose outside the scope of this LOI or the Joint Venture
without the prior written consent of Vegiesafe upon such terms as are
agreeable to Vegiesafe .
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12.
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Confidentiality
and non Compete
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12.1
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The
parties will keep their relationship confidential unless mutually
pre-agreed in writing or required under any court order and or law or
regulations of the USA or Israel.
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12.2
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Any
information disclosed by one Party to the other under this LOI or in connection
with the Joint Venture will be kept confidential and will be used only for
the mutual benefit of the Parties in furtherance of the purpose of the
Joint Venture.
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12.3
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Vegiesafe will not be
involved in any other solution for fruit and vegetables that directly
competes with the Technology for five (5) years after termination of this
LOI or the Joint
Venture.
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12.4
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During
the term of this LOI and the JV
Agreement, neither party shall engage in any independent business
enterprise in the US without the other in connection with any business
enterprise that sells, promotes or markets products that are competitive
with the Technology. Notwithstanding anything to the contrary set forth
above, nothing contained herein shall preclude Vegiesafe from entering
into a business relationship with Vego LLC which is extending shelf
life for processed fruit and vegetables. Vegiesafe shall be
permitted to enter into any business relationship with Vego LLC even if
the subject matter of such business competes with the Technology or other
Pimi Products
subject to Vego LLC not using the
Technology.
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12.5
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The
Parties agrees not to solicit the other Party's employees to work directly
or indirectly for them or hire any former employees of the other Party for
a period of three (3) years after the former employee's employment
terminated.
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12.6
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The
provisions of this Section 12 shall survive the termination of this LOI.
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13.
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Sale of Brand or
Pimi.
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The Joint
Venture Agreement will provide the in case of sale of the JV or the JV
operations relating to fruit and vegetables by NC or Pimi, PIMI’s share will be 70% and
Vegiesafe’s share will
be 30% of the consideration of such sale, provided the Trigger Event has
occurred. The above entitlement is only in case that Vegiesafe has not received
consideration for its part in the JV directly which is intended to represent 30%
of the total consideration for such sale.
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14.
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Goodwill.
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14.1
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The
Parties acknowledge that any intellectual property, including but not
limited to artwork and designs, created by Vegiesafe using or connected
to the Technology or Licensed Xxxx is created for the mutual benefit and
profit of the Joint Venture. Vegiesafe retains the
perpetual right to use, solely as an historical example of its
advertising, any advertising and promotional materials produced by or for
Pimi or the Joint Venture hereunder which incorporate the Licensed Xxxx,
provided that such use will be exclusively for award consideration and
non-commercial internal and portfolio
purposes.
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14.2
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Pimi
acknowledges that the Galapagos brand is solely the property of
EB. Pimi shall not, at any time, regardless of the duration of
this LOI, dispute
or contest, directly or indirectly, EB's ownership of the Galapagos
brand. Pimi recognizes the value of the goodwill associated
with the Galapagos brand and agrees that all rights in the Galapagos Brand
and goodwill associated with it, including all goodwill generated by use
of the Galapagos brand in connection with the sale of the Technology
belong to EB. Pimi acknowledges that any intellectual property
created by EB using the Galapagos brand is created for the exclusive
benefit and profit of EB. Pimi agrees it will not use, either
during or after the term of this LOI or the JV Agreement,
for any purpose, any intellectual property, including but not limited to
artwork and designs, created by Vegiesafe using or connected to the
Galapagos brand.
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15.
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Arbitration
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Parties
agree that any controversy or claim arising out of or relating to this LOI, the Joint Venture or the
JV Agreement or any breach or alleged breach of the provisions of this
LOI or the JV Agreement,
shall be settled by arbitration submitted to the American Arbitration
Association, to be conducted, in New York City, New York, and judgment upon the
award rendered may be entered in any court having jurisdiction
thereof. The arbitration shall be conducted in accordance with the
then current commercial rules of the American Arbitration
Association.
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In
the event of the actual or threatened breach of this LOI or the JV Agreement,
the non-breaching Party shall be entitled to a preliminary restraining
order or injunction restraining the breaching Party from violating its
provisions. Nothing contained in this LOI or the JV Agreement
shall be construed to prohibit the non-breaching Party from pursuing any
other available remedies for such breach or threatened breach, including
the recovery of damages. Any recourse by a Party to a court for
interim or provisional relief shall not be deemed incompatible with the
agreement to arbitrate or a waiver of the right to
arbitrate.
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16.
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Reports
and transparency
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NC,
Vegiesafe and Pimi will report to each other on any meeting, and/or connection
and/or relations with Retailer or Distributor as well as potential Retailer or
Distributor, as well as any technical data or trials made in the US or Canada or
Mexico, and any other territory.
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17.
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Joint
Venture/Joint Venture Agreement
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17.1
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The
parties will instruct their lawyers to work on a JV Agreement which will
incorporate and reflect the terms and conditions of this
LOI.
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17.2
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The
parties will use their best commercial efforts to complete and sign the JV
Agreement by no later than February 15, 2009. If the JV Agreement is not
signed by January 15, 2009 this LOI shall be the JV
Agreement.
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18.
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Notices
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All
notices and other communications pursuant to this LOI shall be sent by telefax
with confirmation or by overnight courier service to the other Party at the
address stated above. Each Party's address may be changed by notice
to the other party in accordance with this Paragraph.
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Any
and all notices sent to Vegiesafe shall also require that a copy be sent
to Xxxxxxxx & Soniker P.C., 000 Xxxx Xxxxxx Xxxxx, 00xx Xxxxx Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000 fax 000-000-0000. Any and all notices
sent to Pimi shall also require that a copy be sent to Advocate Xxxxx
Xxxxxxx, Sadot & Co Law offices of 00 Xxxx Xxxxxx Xx. Xxxxx-Xxx,
Xxxxxx fax
000-0-0000000. In the
event of delivery by overnight courier, the date of delivery is deemed to
be the next business day (two business days for international delivery)
after deposit to the overnight courier. In the event of
delivery by confirmed telefax, the date of delivery is deemed to be the
date of transmission if transmission occurs before 4:00 PM at the location
of receipt of the notice, otherwise the next business
day.
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19.
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Execution/Counterparts.
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This LOI
(or any subsequent amendment or addendum thereto) may be executed in
counterparts by the Parties with each such counterpart then being considered one
and the same and all of which shall constitute one and the same
agreement. A signed e-mail or telefaxed copy of this LOI (or any subsequent
amendment or addendum thereto) shall have the same force and effect as an
original signed copy of this LOI.
6
In
witness whereof the Parties have signed this LOI on the 20th of
January 2009.
/s/
JD
/s/ Xxxxx
Xxxxxxx
Vegiesafe
LLC.
Pimi Agro Cleantech
Xxxx
Deweck
Xxxxx
Xxxxxxx ADV
1/22/09
Alon
Carmel, Chairman
EB's
consent
We the
undersigned Earthbound LLC agree to terms of this LOI and to be bound by the
terms of section 10 above. We also agree to grant the JV and/or Pimi and/or the
NC the right to use our brand name "Galapagos" pursuant to the terms of this LOI
and for the purposes of the JV, as long as the JV or the partnership under it
will be in force, free of any charge and without any consideration to
us.
Earthbound
LLC
By :
___________________________________
Signature:
_______________________________
Date:
__________________________________
Exhibit A
________________________________
Patents
and Patent Applications
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COUNTRY
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Patent Register
No.
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Application
No.
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Status
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U.S.A
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6,797,302; 6,946,155;
7,147,872
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Granted
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Canada
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2,338,718
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Pending
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7
Exhibit
B
Milestones
for other fruits and vegetables to be added
The Joint
Venture has achieved sale target of 300,000 tons potatoes using the
Technology.
Vision:
Vegetables:
Cabbage, Onions, Mushrooms, Sweet Potatoes, carrots, Broccoli
cauliflower.
Fruits:
Citrus, Apples , Pear, Peach.
Priority
will be decided according to market information and demand as well as product
development.
8
Exhibit
C
Milestones
to maintain exclusivity:
|
1.
|
Trigger
Event until December 31, 2009.
|
|
2.
|
Entering
a CIPC free branding program with 2 Retailers or Distributors before crop
season started Sep 2010.
|
|
3.
|
Treatment
of 150,000 tons of potatoes in season which starts on Sep.
2011.
|
|
4.
|
Treatment
done to 350,000 tons of potatoes in season starts on Sep.
2012.
|
9
Exihibit
D
Term Sheet and POA
10
