Term Sheet Agreement
This
Term
Sheet Agreement is entered into by and among Cytomedix, Inc. and Fitch, Even,
Tabin & Xxxxxxxx (“Xxxxx, Even”) and Xxxxxx X. Xxxxxxx & Associates
(“RCA”) effective as of this 2nd
day of
August, 2007. Fitch, Even and RCA are referred to collectively as “Counsel.” The
terms set forth herein are the binding, final agreed-upon terms to be
incorporated into one or more definitive agreements (“Definitive Agreements")
that the parties shall use their good faith efforts to enter into.
| 1. |
“Retainer
Agreement” means the Amended and Restated Retainer Agreement by and among
Cytomedix and Fitch, Even and RCA effective as of July 29, 2003.
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| 2. |
Cytomedix
shall pay Fitch, Even and RCA the
sum of ninety thousand U.S. dollars ($90,000) representing an agreed
upon
liquidation of Counsel’s
contingent fee shares of all royalty revenue, as
of June 30, 2007, which would be due to Counsel pursuant to the terms
of
the Retainer
Agreement. Subject to receiving such
payment,
Fitch, Even and RCA waive and release any and all claims or interests
under the Retainer Agreement, including without limitation any interest
in
all
amounts
due and payable to Cytomedix after June 30, 2007, and any and all
interest
in past and future revenue generated from licensing
agreements or sales
of Cytomedix’s products. RCA does not waive but shall retain its interest
in royalties received from Medtronic pursuant to the separate retainer
agreement between and among Cytomedix, RCA and Fish & Xxxxxxxxxx.
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| 3. |
Pursuant
to a Shareholder’s Agreement negotiated and executed as part of the
Definitive Agreements, Cytomedix shall issue to Fitch, Even and RCA
a
total of One Million Three Hundred Thousand (1,300,000) shares of
Cytomedix common stock (the
“Shares”).
The Shares shall be prorated between the firms according to their
respective Lodestar Percentage as calculated according to Exhibit
C of the
Retainer Agreement.
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| 4. |
Pursuant
to the Shareholder’s Agreement and a form of warrant to be negotiated and
executed as part of the Definitive Agreements, Cytomedix shall issue
to
Fitch, Even and RCA a total of Nine Hundred Seventy Five Thousand
warrants
to purchase shares of Cytomedix common stock (“the Warrants”). The
Warrants will have a seven and one half (7.5) year term. The strike
price
on the Warrants will
be
as
follows: 325,000 at
$1.25
(Group A); 325,000 at $1.50
(Group B); and 325,000 at $1.75 (Group C). Cytomedix shall have a
right to
call the Warrants according to the following schedule once the underlying
stock trades at or above the designated call price for ten (10)
consecutive trading days: Group A Warrants - $4/share; Group B Warrants
-
$5/share; Group C Warrants - $6/share. If Cytomedix exercises its
right to
call, it shall provide at least forty-five (45) days notice for one-half
of the Warrants subject to the call and at least ninety (90) days
notice
for the remainder of the Warrants subject to the call. In no event,
however, shall the call right apply to Warrants whose underlying
shares
are not yet publicly tradable due to the restrictions contained herein.
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| 5. |
Upon
the execution of the Definitive Agreements, Fitch, Even and RCA shall
submit to Cytomedix lists containing the identity
of, and the amounts of Shares and Warrants to be issued to, their
respective distributees. Cytomedix shall use this information to
prepare
and submit the necessary applications seeking approval to issue the
Shares
and Warrants from the American Stock Exchange and any other
approval
that may be necessary. Cytomedix shall issue the Shares and Warrants
within ten (10) business days after receiving all necessary
authorizations, including that from the American Stock Exchange,
and after
it has received lists from the firms containing the identity of,
and
amounts to be issued to, each of their respective distributes.
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| 6. |
As
part of the Definitive Agreements, the parties will negotiate and
execute
a Registration Rights Agreement, pursuant to which Cytomedix will
agree to
file with the SEC, at its own expense, a registration statement covering
resale of the Shares and the additional shares underlying the Warrants
within 60 days after the Effective Date of the Definitive Agreements,
provided that Fitch, Even and RCA furnish to Cytomedix such information
as
Cytomedix shall require to register the Shares and the additional
shares
underlying the Warrants. Cytomedix will agree to use commercially
reasonable efforts to have the registration statement declared effective
as soon as possible. Shares may be sold under the registration statement
only by the methods described in the registration statement (which
will be
standard and customary for non-underwritten resales).
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| 7. |
The
Shareholder’s Agreement will contain the following restrictions on the
public resale of the Shares and the shares underlying the Warrants:
(a)
during the period from the Effective Date of the Definitive Agreements
until the registration statement is declared effective, no Shares
may be
publicly sold; (b) 25% of the Shares may be sold on or after the
date on
which the registration statement is declared effective; (c) an additional
25% may be sold in or after the first fiscal quarter following the
end of
the fiscal quarter in which the registration statement is declared
effective; (d) an additional 25% may be sold in or after the second
fiscal
quarter following the end of the fiscal quarter in which the registration
statement is declared effective; (e) an additional 25% may be sold
in or
after the third fiscal quarter following the end of the fiscal quarter
in
which the registration statement is declared effective. Nothing herein
shall prevent Fitch, Even or RCA from distributing the Shares and
Warrants
among partners or other lawyers of the respective firms. However,
any such
distributee shall take such Shares or Warrants subject to the restrictions
contained herein and in the Definitive
Agreements.
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| 8. |
As
part of the Definitive Agreements, Cytomedix and Fitch, Even and
RCA will
negotiate in good faith regarding the terms of an
amended Retainer Agreement
covering any further patent litigation and/or licensing legal
representation required by Cytomedix going forward (the “Second
Retainer Agreement”). The Second Retainer Agreement shall provide for the
following, as material terms
thereof:
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(a) With
regard to each particular matter, Cytomedix
shall have the opportunity,
but not
the obligation,
to
engage Counsel on either a “Standard Basis” or
on a
“Contingent Basis,” as explained more fully below. Cytomedix will pay Counsel’s
normal hourly fees, plus all expenses, in connection with Standard Basis
engagements. Cytomedix will pay Counsel at the same contingent fee percentages
set forth in the Retainer Agreement, plus all expenses, in connection with
Contingent Basis engagements. Further specifics regarding the recoveries to
which Counsel’s contingent fee interest shall apply are provided below.
Cytomedix shall select the desired basis of representation for a given matter
in
writing prior to the commencement of the representation for that matter.
(b) If
Cytomedix so desires, Counsel
shall represent Cytomedix in any matters
involving disputes
with Existing Licensees regarding the Xxxxxxxx ‘938 patent and/or the license
and/or settlement agreements in place
currently
with
such Existing Licensees. The “Existing Licensees” are: Harvest Technologies,
PPAI, SafeBlood Technologies, Cobe Cardiovascular (Sorin Group), Biomet,
and
CellMedix. Counsel shall represent Cytomedix in any such disputes on a
Contingent Basis. Counsel’s fees for any such matter handled on a Contingent
Basis shall be limited to: (1) the full amount of any attorneys fees awarded
to
Cytomedix in connection with such dispute; and (2) a contingent fee
interest
in any
settlements, damages, royalties or other amounts recovered by Cytomedix above
and beyond that which was otherwise due Cytomedix under the applicable license
agreement.
(c) If
Cytomedix so desires, Fitch,
Even shall represent Cytomedix in any
matters
involving
patent
prosecution and maintenance necessary to maintain the Xxxxxxxx ‘938 and Xxxxxx
‘112 patents in full force and effect both nationally and internationally. Such
representation shall be on a Standard Basis.
(d) If
Cytomedix so desires, Counsel
shall represent Cytomedix in
the
matters involving
the
investigation and notification of additional potential licensees under the
Xxxxxxxx ‘938 and/or Xxxxxx ‘112 patents, and in the negotiation of license
agreements with such potential licensees, in matters which do not involve the
commencement of litigation by Cytomedix or the third-party potential licensee.
Counsel shall represent Cytomedix in any such licensing matters on
either
a Standard Basis or a Contingent Basis, at Cytomedix’s election. With
regard to those licensing matters in which Cytomedix elects Counsel’s
representations, Cytomedix
agrees to keep Counsel reasonably informed of and involved in such licensing
matters.
(e) If
Cytomedix so desires, Counsel
shall represent Cytomedix in litigation matters
necessary
to enforce the Xxxxxxxx ‘938 and/or
Xxxxxx ‘112 patents
against
third-party infringers of the patent, whether the infringement claim is
initiated by way of an affirmative claim or by counterclaim to a third-party
declaratory judgment action. Counsel shall also represent Cytomedix in the
defense of any declaratory judgment action or counterclaims concerning the
Xxxxxxxx ‘938 and/or
Xxxxxx ‘112 patents
brought
against Cytomedix by a third-party. Counsel shall represent Cytomedix in any
such litigation on either a Standard Basis or a Contingent Basis, at Cytomedix’s
election; provided, however, that Counsel need not accept more than two such
matters on a Contingent Basis
during
the term of the Second Retainer Agreement.
If
Cytomedix requests Counsel to handle more than two such matters on a Contingent
Basis, and Counsel declines to do so, then Cytomedix shall have the right to
either engage Counsel on a Standard Basis for the declined matters or to retain
separate counsel for that matter on a basis acceptable to Cytomedix. Counsel
shall have no contingent fee interest in any such declined matter for which
Counsel
does not represent Cytomedix.
(f) With
respect to all Contingent Basis engagements under Paragraphs 8(b)
-8(e),
the
recoveries to which Counsel’s contingent fee interest applies shall include
settlements, damages, royalties or other consideration of any kind (less
deductions as allowed under the Retainer Agreement) received by Cytomedix,
including amounts received by Cytomedix for the purchase of Cytomedix products
or services by a third-party that becomes a purchaser or distributor of
Cytomedix as part of resolution of any such matter. However, with respect
to any
such sales of Cytomedix products or services, the contingent fee shall be
calculated based on the Net Profit
received
by Cytomedix. The “Net Profit”
shall
equal the amount received by Cytomedix from the third-party after the deduction
of freight, taxes, commissions paid to agents or employees, non-reimbursed
training related expenses, company-provided equipment, and the actual cost
of
the product or service being sold. Further,
the
contingent fee interest to
which
Counsel shall be entitled with regard to any matter undertaken on a Contingent
Basis shall be limited to ten times the aggregate amount of “Allowed Xxxxxxxx”
with respect to all Contingent Basis engagements under Paragraphs 8(b) - 8(e)..
Time billed by Counsel shall be deemed “Allowed Xxxxxxxx” if Cytomedix does not
notify Counsel of its dispute within sixty (60) days following receipt of a
consolidated monthly statement from Counsel.
Counsel
shall submit consolidated invoices to Client within sixty (60) days of the
end
of each calendar month, otherwise, Time billed on such invoices will not be
deemed “Allowed Xxxxxxxx”.
All
other
provisions of the Retainer Agreement not inconsistent with the above specific
terms shall be included in the Second Retainer Agreement.
| 9. |
No
party shall disclose any of the specific financial terms in this
Term
Sheet Agreement without the express written consent of the other
parties,
unless required for legitimate business purpose or pursuant to a
binding
legal requirement of disclosure.
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| 10. |
Fitch,
Even and RCA will indemnify and hold Cytomedix harmless from any
claims or
liability arising out of the information provided to Cytomedix by
Fitch,
Even and RCA.
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| 11. |
The
parties shall negotiate in good faith and endeavor to prepare and
execute
the Definitive Agreements as soon as practicable following the execution
of the Term Sheet Agreement. The
effective date
of the
Definitive Agreements shall be the date
this Term Sheet Agreement
is
signed by all parties hereto.
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Agreed
and accepted:
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Cytomedix,
Inc.
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Fitch,
Even, Tabin & Xxxxxxxx
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/s/
Xxxxxxx Xxxxx
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/s/
Xxxx X. Xxxx
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Name:
Xxxxxxx Xxxxx
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Name:
Xxxx X. Xxxx
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Title:
Chairman & CEO
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Title:
Managing Partner
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Cytomedix
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Date:
August 2, 2007
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Date:
August 2, 2007
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Xxxxxx
X. Xxxxxxx & Associates
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/s/
Xxxxxx Xxxxxxx
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Name:
Xxxxxx X. Xxxxxxx
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Title:
Principal
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Xxxxxx
X. Xxxxxxx & Associates
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Date:
August 2, 2007
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