Document:

Unassociated Document

    Atossa Genetics,
Inc.

    

    Proposal for:

    Prototype
Development

    Confidential

    PR-10-48

    June 30, 2010

    

    Steven C. Quay M.D.,
Ph.D.

    President

    Atossa Genetics, Inc

    4105 E. Madison St. Suite
320

    Seattle, WA 98112

    C: 206-419-4873

    F: 206-325-6087

    steven.c.quay@gmail.com

    

    [GRAPHIC]

    

    

    

    Jeff Martinez

    Director of Sales & Business
Development

    HLB, LLC

    355 N. Canal St

    Chicago, IL 60606

    312-454-1116, ext
326

    Jmartinez@hlb.com

     

     

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    Goal of
Prototype Development

    

    The goal of this proposal is to deliver
20 functional prototypes of the original trigger design and facilitate the
fabrication of 10,000 disposables of the original disposable design that has
already passed the FDA.  Since the disposable will not be changed in
the final design and because of the large quantity being requested a more
permanent tool must be developed.  Atossa is responsible for
developing this one-to-one relationship with the selected supplier. The
estimated cost for the disposables ($114,400) is not part of this
proposal.  The disposables kit quote does not include secondary
packaging and sterilization since this has not been identified as a requirement
to-date.

    

    Phase 1:
Prototype Development

    This phase outlines the steps needed to
have 20 trigger prototypes of the original design developed through the process
of urethane cast molding (and cast silicone for the diaphragm). Cost includes
all urethane molds and the cost for 20 piece parts. Assembly of trigger Units
will be done by HLB.

    

    Notes &
Assumptions:

    
      	
               
      

            	
              ·

            	
              Trigger Prototypes will be
      assembled and checked for proper fit. No performance testing will be done
      due to lack of performance targets (amount of suction required,
      etc.)

            

    

    
      	
               
      

            	
              ·

            	
              HLB will not modify the existing
      design (CAD Data). 2D documentation and part fabrication will be based on
      existing CAD. If modifications are required, it will be quoted
      separately

            

    

    
      	
               
      

            	
              ·

            	
              Disposables are not part of the
      quote

            

    

    
      	
               
      

            	
              ·

            	
              Atossa Genetics will have a direct
      relationship with the supplier that develops the tooling (PTI) for the
      disposables

            

    

    

    Deliverables:

    
      	
               
      

            	
              ·

            	
              20 Trigger Assemblies (hand
      assembled Urethane Cast
Parts)

            

    

    
      	
               
      

            	
              ·

            	
              2D Control drawings (Critical
      dimensions only)

            

    

    
      	
               
      

            	
              ·

            	
              Test
  plan

            

    

    
      	
               
      

            	
              ·

            	
              Test
  results

            

    

    

    Tasks:

    1.1 Create 2D control drawings of all
parts

    1.2 Develop SLA for urethane molding and
evaluate (receive client sign-off)

    1.3 Support development of the urethane
molds

    1.4 Develop urethane molds review FAI
data

    1.5 Assemble and test (fit and basic
function) of 1st prototype

    1.6 Create Test
Document

    1.7 Assemble remaining 19 Trigger
units

    1.8 Test each prototype for
suction

    1.9 Document suction test results and
insights from assembly

    1.8 Ship prototypes to
Atossa

    

    Projected completion
time: 4-6
weeks

    Professional Fees:
$44,800

    

    
      
         

      

      
        Page 2 of 7

        
          

          Atossa
Genetics, Inc – HLB – PR-10-48 (Rev B)

          HLB
Confidential

        

      

      
         

      

    

     

    PROVISIONS

    If
the above proposal is accepted, a
retainer in the amount of $10,000 is due prior to the start of any
work.  This retainer invoice is due
upon receipt. All invoices are due within thirty (30) days of issuance date.
(Please see Payments/Security Interest clause in our Terms and
Conditions.)

    

    This contract is valid for sixty days
from date of issue and will be re-quoted, if required, upon expiration. All
estimates in this proposal are a result of our best judgment at this point in
time. Based upon the developmental nature of this project, we reserve the right
to re-quote as the project progresses and our original assumptions are modified.
Additional work may be required to complete this project. We will alert you to
this possibility. We will progress up to the dollar limits stated in this
proposal and then stop until we review the status of the project and Amendments
or Change Orders are agreed upon and properly authorized in
writing.

    

    This proposal is subject to the Terms
and Conditions attached hereto. In the event of any conflict between the terms
of these Terms and Conditions and the proposal, the terms of the proposal shall
govern.

    

    A written authorization and purchase
order are required in order to commence work. Written authorization may be done
by letter or a signature on this document. Please fax a signed copy of this
proposal or letter and purchase order to us at (312)
454.9019

    

    
      	
              HLB, LLC

              Jeff Martinez

              Director of Sales & Business
      Development

               

              BY:
      /s/
      Jeff
      Martinez                                      
      

               

              DATE:
7-23-2010

               

               

            	
              Atossa Genetics,
      Inc.

              Steven C. Quay, M.D.,
      Ph.D.

              President

               

              BY:
      /s/
      Steven C. Quay, M.D., Ph.D.

               

              DATE: July 22,
      2010

            

    

    

    
      
         

      

      
        Page 3 of 7

        
          

          Atossa
Genetics, Inc – HLB – PR-10-48 (Rev B)

          HLB
Confidential

        

      

      
         

      

    

     

    Terms and Conditions

    

    1.
Services Upon the execution and delivery by
Client of the proposal attached hereto and made a part hereof (the “Proposal”),
HLB shall perform for Client the services (the “Services”) described in the
Proposal and in any Change Orders (as hereinafter defined). The Proposal, these
Terms and Conditions and any Change Orders are collectively referred to as the
“Agreement.”

    

    2.
Compensation [As compensation for the Services,
Client shall pay to HLB the amount set forth in the Proposal, as increased or
decreased pursuant to any fee adjustments set forth in any Change Orders (the
“Fees”). The obligations of HLB pursuant to this Agreement shall not apply in
the event that all Fees and Expenses due to HLB from Client are not timely
paid.]

    

    3.
Scheduling Client understands that the product
design services to be performed by HLB are

    unique, extremely complex and involve a
great degree of Client/HLB interaction and discussion. The schedule for
completion of the Services set forth in the Proposal is an estimate of the time
required to complete the Services. The time actually required to complete the
Services or any portion thereof will be subject to Client availability, timely
delivery of information by Client to HLB, unforeseen design issues, design
changes and modifications requested by Client pursuant to Change Orders and
other matters which generally effect product design services. HLB shall properly
staff all projects and will use its commercially reasonable efforts to meet all
agreed upon schedules.

    

    4.
Change
Orders In the event that Client requests any
modifications to the Services, HLB shall

    prepare and deliver to Client a written
summary describing such modifications and the changes in the Services necessary
to effectuate such modifications (a “Change Order”). The Change Order will also
set forth the additional Fees, if any, and an estimate of the revised schedule
for completion of the Services as a result of such modifications to the
Services. After receipt of a Client request, verbal or written, for
modifications to the Services, HLB may elect not to continue or complete the
Services until HLB receives a signed copy of the Change Order from Client and
the schedule for completion of the Services shall be extended by the number of
days elapsed between the receipt of the modification request from Client and
HLB’s receipt of the signed Change Order. The execution of the Change Order by
Client shall constitute authorization from Client to HLB to proceed with the
Services as modified by the Change Order and Client’s

    consent to the increase or decrease in
the Fees and revised schedule set forth in the Change Order.

    

    5.
Charges
for External Resources To provide the Services HLB may use
external resources to include travel companies; third party vendors with
specialized knowledge or expertise; manufacturers or distributors of materials,
parts and product/part modelers. Client shall pay charges for these external
resources. HLB will notify the Client if charges for these services/items change
due to a Change Order.  HLB shall have the right to require the Client
to pay directly to the vendor any of these charges.

    

    6.
Invoices
and Payments [Unless otherwise provided in the
Proposal, at the end of every month and the completion of a phase, HLB shall
issue an invoice to Client (an “Invoice”) for all work performed to date, plus
all Charges for External Resources in connection with the Services during the
period covered by such Invoice. Client shall pay to HLB the amount set forth in
each Invoice within thirty (30) days of receipt of such Invoice. Any amount
which is not paid when due shall bear interest at the rate of 1.5% per month or
portion thereof from the date such amount became due through the date on which
payment is received by HLB.  All payments shall be made to HLB at 345
North Canal Street, Chicago, Illinois 60606.]

     

    
      
         

      

      
        Page 4 of 7

        
          

          Atossa
Genetics, Inc – HLB – PR-10-48 (Rev B)

          HLB
Confidential

        

      

      
         

      

    

    
 

    7.
Inspections Client shall have the right, upon
reasonable prior notice to HLB and during HLB’s normal business hours, to
inspect and review HLB’s facilities and pertinent technical, project and
financial records with respect to the Services; provided, however, that Client
shall execute such confidentiality agreements as are required by HLB. All such
inspections and reviews shall be subject to HLB’s security and safety
requirements.

    

    8.
Termination Client or HLB may, by written 30 day
advance notice to each other (a “Termination Notice”), terminate the Services at
any time. No Termination Notice shall be effective until actual written receipt
thereof by the non-terminating party. HLB shall cease performance of the
Services as soon as is reasonably possible following the non-terminating party’s
receipt of a Termination Notice. Following termination of the Services, HLB
shall provide to Client an Invoice for all work performed through the
termination date plus all Expenses in connection with the termination of the
Services (collectively, the “Termination Payment”). HLB shall prepare a final
Invoice with respect to the Termination Payment as soon as is practicable
following its receipt or delivery of a Termination Notice. HLB will use
reasonable efforts to

    minimize continuing charges and expenses
associated with any termination of this Agreement and the Services; provided,
however, that HLB shall have the right to disassemble, organize and return all
materials and equipment in connection with the Services.

    

    9.
Technical
Data Client shall promptly furnish to HLB all
necessary technical and other data

    necessary to perform the Services.
Client represents that it has the right to use all such information and hereby
grants to HLB the right to use such information as contemplated by the Proposal.
All reports, designs, information, inventions and materials (“Project
Information”) developed for Client by HLB shall be the property of HLB until the
completion or termination of the Services and payment in full of all amounts due
to HLB, at which time, all Project Information shall be provided to and shall
become the property of Client. HLB shall have the right to retain for its
records copies of all such Project Information, data, drawings, specifications,
reports, estimates, summaries, and other information and materials. HLB
shall

    maintain as confidential all Project
Information for a period of five (5) years following completion of the Services
by HLB or termination of the Services by Client unless such Project Information:
(i) was available to the public prior to the HLB’s receipt thereof, (ii) becomes
available to the public following HLB’s receipt thereof through no fault of HLB,
(iii) was in the possession of HLB prior to the date hereof, or (iv) has been
developed by HLB as a result of activities carried out independently of the
Services and without access to technical information made in connection with the
Services.

    

    10.
Inventions/Patent
Rights At Client’s cost and expense, HLB will
perform all lawful and necessary acts, sign all patent, trademark and copyright
applications, oaths, assignments and other papers necessary to apply for, obtain
and assign to Client the Letters Patent trademarks and copyrights for any and
all such inventions and discoveries. Client shall conduct and pay for all
searches and other aspects of the patent, trademark or copyright application
processes and the assignment thereof to Client and costs and expenses incident
thereto (including attorneys’ fees and expenses).

    

    11.
Proprietary
Technology In the event that the Services require
use of proprietary technology (patents, confidential information or know-how)
which belongs to HLB, then HLB will negotiate, under reasonable terms, a license
to Client of the rights to such technology. Any use of HLB’s proprietary
technology which is anticipated by HLB prior to the commencement of the Services
shall be disclosed to Client prior to the commencement of the
Services.

     

    
      
         

      

      
        Page 5 of 7

        
          

          Atossa
Genetics, Inc – HLB – PR-10-48 (Rev B)

          HLB
Confidential

        

      

      
         

      

    

    
 

    12.
Disclaimers HLB makes no representations or
warranties (i) regarding the intellectual property rights of Client in any
invention, discovery, design or product produced pursuant to the Services
(collectively, the “Products”), (ii) regarding any actual or potential
infringement of the Products on any intellectual property or other rights of any
person or entity and (iii) regarding the prior development or current existence
of any invention, discovery, design or product similar to the Products. HLB
expressly disclaims all liability and responsibility regarding safety testing or
warnings necessary or desirable in connection with any of the Products. HLB
shall have no liability or responsibility to conduct any investigation or
inquiry with respect to the foregoing; provided, however, that HLB shall
disclose to Client all infringements upon the rights or patents of others and
all violations of federal, state or local laws of which HLB has actual
knowledge. HLB will make reasonable efforts to comply with any federal, state or
local laws with respect to

    the Products.

    

    13.
Limits
of Liability EXCEPT AS SET FORTH IN THIS AGREEMENT,
HLB HEREBY DISCLAIMS ALL WARRANTIES, WHETHER EXPRESS OR IMPLIED, WITH RESPECT TO
THE SERVICES AND/OR PRODUCTS, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND/OR TITLE AND,
EXCEPT AS SET FORTH IN THIS AGREEMENT, THE SERVICES AND/OR PRODUCTS ARE PROVIDED
“AS IS”. HLB will not be liable for any indirect, direct, special, or
consequential losses or damages, including, without limitation, loss of business
or lost profits, regardless of the form of action, whether in contract, tort or
otherwise, and regardless of whether the cause of action arises from the
Services and/or Products or any component

    thereof, or from performance by HLB
under this Agreement or any action or failure to act by HLB. In no event shall
HLB’s liability hereunder exceed the amount of Fees paid by Client to HLB
pursuant to this Agreement.

    

    14.
Deliveries All deliveries from HLB to Client shall
be F.O.B. shipping point and title and risk of loss with respect to such
deliveries shall pass to Client at the shipping point.

    

    15.
Personnel Each of HLB and Client agrees that
neither HLB nor Client, respectively, shall solicit or employ the employees of
Client or HLB, respectively, during the performance of the Services and for a
period of twelve (12) months following the completion of the
Services.

    

    16.
Waiver Any waiver by any party of its rights
under the Agreement shall be in writing and signed by the party waiving such
right. The failure of either party to enforce any of the provisions of this
Agreement or any rights in respect thereto, or to exercise any election herein
provided, shall not waive such provisions, rights or elections or subsequent
breaches thereof.

    

    17.
Force
Majeure HLB shall not be liable for delays in or
non-performance of the Services as a result of strikes, lockouts, fires, war
conditions, accidents, foreign or domestic governmental controls or other
actions, embargoes or other causes beyond such HLB’s
control.

    

    18.
Relationship
of Parties The relationship of the parties shall be
that of independent contractors and not as partners or joint venturers. Each
party is, and is intended to be, engaged in its own and entirely separate
business.

    

    19.
Assignment/Benefit This Agreement and the rights and
obligations in connection herewith and therewith to Client may only be assigned
with the prior written consent of HLB. Any assignment in contravention hereof
shall be null and void. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective representatives, successors and
assigns.

     

    
      
         

      

      
        Page 6 of 7

        
          

          Atossa
Genetics, Inc – HLB – PR-10-48 (Rev B)

          HLB
Confidential

        

      

      
         

      

    

     

    20.
Notices All notices and other communications
given hereunder shall be in writing and deemed to have been given when (i)
personally delivered, (ii) one (1) business day after delivery to a nationally
recognized overnight courier service for next business day delivery, (iii) upon
the written confirmation of receipt following the transmission of a facsimile or
(iv) three (3) days after being mailed by certified mail, postage prepaid, to
the addresses of HLB or Client as set forth in the Proposal or to such other
addresses as either party hereto may request by notice given as
aforesaid.

    

    21.
Governing
Law This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois. In the event of
any dispute, action or proceeding in connection with this Agreement, the
Services or any documents, instruments or transactions in connection therewith,
the non-prevailing party shall pay all costs and expenses (including reasonable
attorneys’ and paralegals’ fees and expenses) incurred by the prevailing party
in connection with such dispute, action or proceeding.

    

    22.
Jurisdiction
and Venue HLB AND CLIENT IRREVOCABLY AGREE THAT
ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM
OR RELATED TO THIS AGREEMENT, THE SERVICES OR ANY DOCUMENTS, INSTRUMENT OR
TRANSACTION IN CONNECTION HEREWITH OR THEREWITH SHALL BE HEARD OR LITIGATED
EXCLUSIVELY IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, COOK COUNTY,
STATE OF ILLINOIS. HLB AND CLIENT CONSENT AND SUBMIT TO THE JURISDICTION OF ANY
LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY, COUNTY AND STATE AND
IRREVOCABLY WAIVE ANY RIGHT TO TRANSFER OR CHANGE VENUE OF ANY SUCH ACTION OR
PROCEEDING OR OBJECT TO THE

    JURISDICTION OF ANY SUCH COURT OVER THE
PARTIES HERETO.

    

    23. Entire
Agreement/Conflict This Agreement constitutes the entire agreement and
understanding between the parties with respect to the Services and supersede all
previous negotiations, agreements and representations between the parties,
written or oral, all of which shall be deemed to be merged into this Agreement.
In the event of any conflict between the terms of these Terms and Conditions and
the Proposal, the terms of the Proposal shall govern.

     

     

    
      
         

      

      
        Page 7 of 7

        
          

          Atossa
Genetics, Inc – HLB – PR-10-48 (Rev B)

          HLB
ConfidentialExhibit
10.27

    

     

    STANDSTILL
AND OPTION AGREEMENT

     

    THIS STANDSTILL AND OPTION AGREEMENT
(this “Agreement”) is made
and entered into this 22nd day of
October, 2009 (the “Effective Date”), by
and between Baxter Healthcare Corporation, a Delaware Corporation with a place
of business at One Baxter Parkway, Deerfield, IL 60015 (“Baxter”) and
Medgenics, Inc., a Delaware, corporation with a place of business at Teradion
Business Park, P.O. Box 14, Misgav 20179 Israel (“Medgenics”). Baxter
and Medgenics are each sometimes referred to herein as a “Party” and,
collectively, as the “Parties”.

     

    WHEREAS, Baxter researches,
develops, manufactures and markets a variety of medical devices, pharmaceutical
and biotechnology products;

     

    WHEREAS, Medgenics has
developed a certain technology (including certain intellectual property related
thereto) using human dermis micro-organs to produce on a sustained basis a
desired therapeutic protein (the “Biopump
Technology”).

     

    WHEREAS, Medgenics has
determined that the Biopump Technology is capable of being applied to produce
human Factor VIII (hFVIII) protein (the proposed hFVIII Biopump shall be
referred to as the “hFVIII Biopump
Technology”);

     

    WHEREAS, the Parties have had
discussions related to the funding of further development efforts, related to
the hFVIII Biopump Technology, in accordance with the Development Plan (as
defined below) (the “Development”);

     

    WHEREAS, Baxter is willing
fund such Development subject to the terms and conditions set forth in this
Agreement;

     

    NOW, THEREFORE, in
consideration of the mutual covenants set forth herein and for such other good
and valuable consideration, the receipt and sufficiency of which the Parties
hereby acknowledge, the Parties agree as follows:

     

    1.           Financial
Considerations.

     

    
      	
               
      

            	
              a.

            	
              Within
      fifteen (15) days of the execution of this Agreement, Baxter shall pay to
      Medgenics an amount equal to One Million Two Hundred Thousand Dollars
      ($1,200,000). Of this amount, One Hundred Thousand Dollars ($100,000)
      shall be allocated to the obligations of Medgenics pursuant to Section 2 (the
      “Initial
      Standstill Payment”) and the remaining One Million One Hundred
      Thousand Dollars ($1,100,000) of this amount shall be considered Prepaid
      Development Funding (as such term is hereinafter
  defined).

            

    

    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

     

    
      	
               
      

            	
              b.

            	
              Upon
      the achievement by Medgenics of the Initial Milestone (as hereinafter
      defined) Medgenics shall provide written notice to Baxter (the “Initial Milestone
      Notice”).   Within fifteen (15) days of its receipt
      of the Initial Milestone Notice and Baxter's confirmation of the
      achievement of the Initial Milestone, Baxter shall pay to Medgenics an
      amount equal to One Million Four Hundred Thousand Dollars ($1,400,000)
      (the “Milestone
      Standstill Payment” and, together with the Initial Standstill
      Payment, the “Standstill
      Payment”).

            

    

     

    2.      
    Standstill.

     

    
      	
               
      

            	
              a.

            	
              In
      connection with its receipt of the Standstill Payment, Medgenics agrees
      that it shall not, nor shall Medgenics permit any of its affiliates (as
      such term is defined in the Securities Exchange Act of 1934, as amended)
      to, nor shall Medgenics agree, assist, encourage, provide information to
      others, or permit its affiliates to agree, assist, encourage or provide
      information to others, to, individually or collectively, directly or
      indirectly during the Standstill Period (as defined below) and during the
      Negotiation Period, if any, enter into any discussions or agreements
      (written or otherwise) relating to the sale, license or other transfer of
      the hFVIII Biopump Technology to any third party; provided, however, that
      this Agreement shall not in any way restrict any such activities and/or
      dealings by Medgenics related to the use of the Biopump Technology in
      relation to any application (including any protein application) other than
      human Factor VIII (hFVIII) protein.

            

    

     

    b.     For
purposes of this Agreement, the term “Standstill Period”
shall mean:

     

    
      	
               
      

            	
              1.

            	
              Unless
      Baxter has paid the Milestone Standstill Payment, the period of time
      commencing on the Effective Date and expiring on January 15, 2010;
      and

            

    

     

    
      	
               
      

            	
              2.

            	
              If
      Baxter has paid the Milestone Standstill Payment, the Standstill Period
      shall be extended from the date such payment is received until the date
      that is the one (1) year anniversary of the Effective Date; provided,
      however, that the parties may mutually agree to extend the Standstill
      Period for up to an additional 6 months in the event
      that the In Vitro Milestones and/or the Animal Milestone (each as defined
      below) have not been met prior to the one (1) year anniversary of the
      Effective Date.

            

    

    

    
      
        
           

        

        
          2

          
            

          

        

        
           

        

      

    

     

    3.  
         Development
Program.

     

    
      	
            	
              a.

            	
              Funding. In
      further consideration of Medgenics' obligations under this Agreement,
      Baxter shall provide funding for the development of the hFVIII Biopump
      Technology pursuant to the development plan (the “Development
      Plan”) attached hereto as Exhibit A, at a
      rate of Three Hundred Thousand Dollars ($300,000) per year per full time
      equivalent (FTE) assigned to the project, plus approved out-of-pocket
      expenses necessary in connection with the implementation of the
      Development Plan (together, the “Development
      Funding”), to be finalized and approved by the JSC (as defined
      below). The parties currently anticipate that seven (7) FTEs and
      approximately $500,000 in out-of-pocket expenses will be required in
      connection with the implementation of the Development Plan. Medgenics will
      devote the requisite time of its experienced staff in order to implement
      the Development Plan as approved by the JSC. Baxter shall pay the
      Development Funding amount to Medgenics in advance in quarterly
      installments with the first two installments being made concurrent with
      the payment of the Initial Standstill Payment. Subsequent installments
      shall be made within forty-five (45) days following the six (6) and nine
      (9) month anniversaries of the Effective Date (each such anniversary, a
      “Quarterly
      Date”). Development Funding shall continue on such quarterly basis
      during any extension of the Standstill Period contemplated by Section 2 above
      and during the Negotiation Period.

            

    

     

    
      	
            	
              b.

            	
              Reconciliation.
      In connection with the payment of Development Funding for all quarters
      after the initial two quarters commencing on the Effective Date (the
      “Prepaid
      Development Period”), Medgenics will provide to the JSC, on or
      before the applicable Quarterly Date, a good faith estimate of the FTEs
      and expenses required in connection with the Development Plan for the
      upcoming quarter. The JSC will review and approve such estimate, with such
      adjustments as it deems reasonable, and thereupon Baxter shall pay to
      Medgenics such Development Funding within the 45-day period set forth
      above. Within ten (10) days after (i) the end of the Prepaid Development
      Period and (ii) the end of each quarter following the Prepaid Development
      Period, Medgenics will provide a report to the JSC of the FTEs and
      expenses actually incurred in connection with the Development Plan during
      such period as compared to the estimate for such period previously
      approved by the JSC. If there is any material discrepancy between the
      actual FTEs and/or expenses and the estimated FTEs and/or expenses, such
      difference shall be paid to Medgenics (if the actual exceeds the
      estimated) or offset by Baxter against future payments of Development
      Funding (if the actual are less than the estimated). For purposes of the
      previous sentence, a “material discrepancy” shall mean an increase or
      decrease in the actual FTEs and/or expenses of more than 5% as compared to
      the estimated FTEs and/or expenses.

            

    

     

    
      	
            	
              c.

            	
              Additional Development
      Funding Agreements. Notwithstanding anything to the contrary
      contained herein, the parties agree that: (i) the amount of Development
      Funding for Prepaid Development Period shall be in total One Million One
      Hundred Thousand Dollars ($1,100,000), based on Eight Hundred Thousand
      Dollars ($800,000) for FTEs and Three Hundred Thousand Dollars ($300,000)
      of estimated out-of-pocket expenses, and (ii) the total number of FTEs for
      any quarter shall not exceed seven (7). All FTE's and approved expenses
      paid by Baxter hereunder shall be used exclusively for the development of
      the hFVIII Biopump Technology.

            

    

    

    
      
        
           

        

        
          3

          
            

          

        

        
           

        

      

    

     

    
      	
            	
              d.

            	
              Milestones. For
      purposes of this Agreement, the term “Initial
      Milestone” shall mean the receipt by Medgenics' adenovector
      production lab in Texas of the first plasmid containing an expression
      cassette including the hFVIII gene. If and when Medgenics achieves the
      target in vitro performance milestone as set forth in the Development Plan
      (the “In Vitro
      Milestone”), Medgenics shall deliver written notice to Baxter of
      such achievement. Within forty-five (45) days of the delivery of the
      notice regarding the achievement of the In Vitro Milestone, Baxter shall
      make a payment to Medgenics in the amount of Two Hundred Fifty Thousand
      Dollars ($250,000) (the “In Vitro Milestone
      Payment”). If and when Medgenics achieves the target animal
      performance milestone as set forth in the Development Plan (the “Animal
      Milestone”), Medgenics shall deliver written notice to Baxter of
      such achievement. Within forty-five (45) days of the delivery of the
      notice regarding the achievement of the Animal Milestone, Baxter shall
      make a payment to Medgenics in the amount of Two Hundred Fifty Thousand
      Dollars ($250,000) (the “Animal Milestone
      Payment”). The In-Vitro Milestone Payment and the Animal Milestone
      Payment shall be non-refundable and
  non-creditable.

            

    

     

    
      	
            	
              e.

            	
              Joint Steering
      Committee. The parties shall establish a Joint Steering Committee
      (the “JSC”) to monitor the progress of the Development and the
      implementation of the Development Plan. The JSC shall consist of six (6)
      members, three (3) of which shall be appointed by Baxter and three (3) of
      which shall be appointed by Medgenics. The JSC, following standard
      operating procedures, shall be responsible for the following matters: (i)
      any coordination and communication between Baxter and Medgenics, (ii) the
      interpretation of the Development Plan and resolution of any issues that
      arise with respect thereto, (iii) the determination of appropriate
      material transfer terms and provisions, including with respect to proposed
      provision by Baxter to Medgenics of plasmids with the agreed hFVIII genes,
      and by Medgenics to Baxter of biopumps BP-FVIII and other materials for
      testing by Baxter (iv) the determination of if and when the In Vitro
      Milestone and the Animal Milestone have been met, and (v) the
      clarification of regulatory, clinical and commercialization feasibility
      and plans.

            

    

     

    f.      Intellectual Property and
Data Ownership

     

    
      
        	
              	
                1.

              	
                All
      intellectual property (whether patented or not) and all data relating to
      the hFVIII Biopump Technology arising out of or resulting from the
      Development conducted during the term of this Agreement shall be jointly
      owned by the Parties (the “Jointly Owned Intellectual Property” that
      includes, but is not limited to, the “Jointly Owned Patent
      Applications” and “Jointly Owned
      Patents”).

              

      

    

     

    
      
        	
              	
                a.

              	
                For
      the avoidance of doubt, Medgenics shall be the sole owner, and Baxter
      shall have no ownership right or interest
in;

              

      

    

    

    
      
        
           

        

        
          4

          
            

          

        

        
           

        

      

    

     

    
      	
               
      

            	
              i.

            	
              all
      intellectually property (whether patented or not) and data related to the
      hFVIII Biopump Technology that exists prior to the Effective Date;
      and,

            

    

     

    
      	
               
      

            	
              ii.

            	
              all
      intellectual property (whether patented or not) and data relating
      generally to the Biopump Technology (whether such intellectual property
      exists prior to the implementation of the Development Plan or at any time
      after the Effective Date), such intellectual property and data shall not
      include the hFVIII Biopump Technology to the extent it is not encompassed
      within Section 3flai supra.

            

    

     

    
      	
            	
              2.

            	
              Medgenics
      shall be responsible for the control, preparation, prosecution and
      maintenance of the Jointly Owned Patent Applications and Jointly Owned
      Patents in such jurisdictions as Medgenics and Baxter shall deem
      appropriate, with the proviso that both Parties agree that all patent
      applications shall be filed in at least the following: the United States,
      the EPO (and at least the United Kingdom, France, Germany, Italy, Spain,
      the Netherlands, Switzerland, Belgium and Austria), Japan, Australia, New
      Zealand, Canada and China. Medgenics and Baxter shall share equally all
      costs and fees related to the preparation, filing, prosecution,
      maintenance and the like of all Jointly Owned Patent Applications and
      Jointly Owned Patents filed in accordance with the provisions of this
      Section 3f2.

            

    

     

    
      	
            	
              3.

            	
              In
      the event that Medgenics reasonably decides that it will not continue to
      prosecute a Jointly Owned Patent Application and/or maintain a Jointly
      Owned Patent in a given jurisdiction, then Medgenics shall provide written
      notice to Baxter, with such notice providing Medgenic's reasonable
      explanation, in which case Baxter, in its discretion, may elect to
      continue to prosecute such Jointly Owned Patent Application and/or
      maintain such Jointly Owned Patent in such jurisdiction at its own cost
      and expense. Baxter shall notify Medgenics in writing of Baxter's election
      to file and/or continue to prosecute such Jointly Owned Patent Application
      and/or maintain such Jointly Owned Patent in such jurisdiction, at
      Baxter's expense (the “Baxter Patent Notice”). In the event of a Baxter
      election pursuant to this Section, then such patent application and any
      Patents resulting there from shall be solely owned by Baxter for all
      purposes of this Agreement.

            

    

    

    
      
        
           

        

        
          5

          
            

          

        

        
           

        

      

    

     

    
      	
            	
              4.

            	
              Medgenics
      shall provide to Baxter a copy of any Jointly Owned Patent Application
      that is being prepared for filing with any patent office no later than
      seven (7) days prior to filing of said Jointly Owned Patent Application.
      Baxter shall have the right lo comment on any Jointly Owned Patent
      Application received from Medgenics. Baxter shall provide any such
      comments reasonably in advance of the filing date to permit Medgenics to
      complete the filing in a timely manner. Medgenics shall reasonably
      consider Baxter's comments in preparing said jointly owned patent
      application for filing.

            

    

     

    
      	
            	
              5.

            	
              Medgenics
      shall provide to Baxter a copy of all substantive paper(s) received from
      any patent office anywhere in the world related to the prosecution and
      maintenance of any Jointly Owned Patent Application. No later than
      fourteen (14) days prior to filing a substantive response related to any
      Jointly Owned Patent Application, Medgenics shall provide to Baxter a
      draft response, and afford Baxter an opportunity to provide any comments
      Baxter may have. Baxter shall provide any such comments reasonably in
      advance of the filing date to permit Medgenics to complete the filing in a
      timely manner. Medgenics shall reasonably consider Baxter's comments prior
      to finalizing and submitting the
response.

            

    

     

    
      	
            	
              6.

            	
              If
      no Option Notice has been received by Medgenics and/or this Agreement is
      terminated, Baxter shall immediately on demand, assign to Medgenics all of
      its right, title, and interest in and to the Jointly Owned Intellectual
      Property (whether patented or not), all data and/or any other rights or
      interest in, to, arising out of or resulting from the Development and
      provided that Baxter has met all of its payment obligations under this
      Agreement Medgenics shall be required to pay to Baxter a license fee equal
      to five percent (5%) of the net proceeds Medgenics receives upon future
      exploitation of the hFVIII Biopump Technology which accrues over time and
      the total paid to Baxter shall not exceed a maximum cumulative aggregate
      cap equal to ten (10) times the total funds paid by Baxter to Medgenics
      hereunder, such funds including, but not limited to all costs and expenses
      paid by Baxter for the preparation, filing, prosecution, maintenance of
      all Jointly Owned Patent Application and Jointly Owned
      Patents.

            

    

     

    
      	
            	
              7.

            	
              If
      an Option Notice has been received by Medgenics, but the parties fail to
      execute a definitive agreement for a Further Transaction prior to the
      expiration of the Negotiation Period, Baxter shall immediately on demand
      assign to Medgenics all of right, title, and interest in and to the
      Jointly Owned Intellectual Property (whether patented or not), all data
      and/or any other rights or interest in, to, arising out of or resulting
      from the Development and provided that Baxter has met all of its payment
      obligations under this Agreement Medgenics shall be required to pay to
      Baxter a license fee equal to ten percent (10%) of the net proceeds
      Medgenics receives upon future exploitation of the hFVIII Biopump
      Technology, which accrues over time and shall not exceed a maximum
      cumulative aggregate cap equal to ten (10) times the total funds paid by
      Baxter to Medgenics hereunder, such funds including, but not limited to,
      all costs and expenses paid by Baxter for the preparation, filing,
      prosecution, maintenance of all Jointly Owned Patent Application and
      Jointly Owned Patents.

            

    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              8.

            	
              The
      Parties agree, understand and have discussed during the negotiation of
      this Agreement that the disposition, filing, prosecution, maintenance and
      enforcement of Intellectual Property Rights set forth in a License
      Agreement that the Parties may enter following completion of this
      Agreement may not provide for the disposition, filing, prosecution,
      maintenance and enforcement of Intellectual Property Rights in a manner
      set forth in this Section 2d of the
Agreement.

            

    

     

    
      	
               
      

            	
              g.

            	
              Medgenics
      shall keep complete and accurate records of its activities conducted under
      this Agreement and the results thereof. Baxter shall have the right to
      audit such records upon written request by Baxter, but no more than once
      each calendar year. Medgenics shall permit Baxter to have access during
      normal business hours to records of Medgenics as may be reasonable
      necessary to verify the accuracy of the hours spent per employee assigned
      to the Development Plan by time tracking. Medgenics will provide time
      tracking spread sheets of hours or days spent for each quarter for each
      FTE, together with the report of actual FTEs and expenses provided under
      Section 3b above. Within thirty (30) days after completion of the
      Development Plan, Medgenics shall prepare and provide to Baxter a
      reasonable detailed written report describing the activities conducted
      under this Agreement, sufficient to enable Baxter to understand and
      monitor the diligence of Medgenics satisfying its obligations under the
      Development Plan and the results
thereof.

            

    

     

    4.            Option.

     

    
      
        	
                  

              	
                a.

              	
                Generally.
      Medgenics hereby grants to Baxter an exclusive option (the “Option”) to
      negotiate a definitive agreement regarding a transaction between the
      Parties related to the hFVIII Biopump Technology and to the Development
      (which transaction may include, among other things, a development or
      collaboration relating to or a sale, license or other transfer of the
      hFVIII Biopump Technology to Baxter) (a “Further
      Transaction”). Any Further Transaction shall take into fair account
      the relative contributions of the Parties then to
  date.

              

      

    

    

    
      
        
           

        

        
          7

          
            

          

        

        
           

        

      

    

     

    
      
        	
                 

              	
                b.

              	
                Exercise; Option
      Payment. The Option may be exercised at any time prior to the
      expiration of the Standstill Period (as the same may be extended) by the
      service by Baxter upon Medgenics of notice in writing of its desire to
      exercise the Option (the “Option
      Notice”). Within forty-five (45) days of the delivery of the Option
      Notice, Baxter shall make a payment to Medgenics in the amount of Two
      Million Five Hundred Thousand Dollars ($2,500,000) (the “Option
      Payment”). The Option Payment shall be non-refundable but shall be
      creditable against any up-front or signing payment due in connection with
      a Further Transaction, if entered into between the
  Parties.

              

      

    

     

    
      
        	
                 

              	
                c.

              	
                Negotiation
      Period. Promptly upon receipt of the Option Payment, the Parties
      shall commence good faith negotiations relating to such Further
      Transaction for a period (the “Negotiation
      Period”) of six (6) months (or such shorter period as shall end on
      the date that a definitive agreement relating to such a Further
      Transaction has been executed between the Parties). If, prior to
      expiration of the Negotiation Period, the Parties have made material
      progress toward the execution of a definitive agreement relating to such
      Further Transaction, and additional time is required to complete the
      negotiation and execution of definitive agreements relating thereto, the
      Negotiation Period shall be automatically extended for a period of three
      (3) months and the Parties shall be obligated to continue good faith
      negotiations for such additional period. If no Further Transaction has
      been executed upon the lapse of the Negotiation Period or an extension
      thereof, this Agreement shall terminate with no further rights under this
      Agreement to any of the Parties hereto except as set forth in the last
      sentence of Section 3f.

              

      

    

     

    
      	
              5.

            	
              Relationship
      of the Parties: Expenses. Nothing in this
      Agreement shall be construed to create a joint venture, partnership or
      agency relationship. Neither Party is authorized to represent, bind,
      obligate or agree on behalf of the other. Each Party shall bear its own
      costs and expenses related to any and all due diligence and negotiations
      activities including all such activities relating to any Further
      Transaction.

            

    

     

    
      	
              6.

            	
              Confidentiality. The Parties have entered into a
      Confidential Disclosure Agreement (“CDA”), dated March 16, 2009. Unless
      and until the Parties execute a definitive agreement relating to any
      Further Transaction, all confidential information exchanged by the Parties
      will be covered by the terms of the
CDA.

            

    

     

    
      	
              7.

            	
              Publicity. No information
      concerning the existence of this Agreement, information or terms contained
      in this Agreement or the negotiations between the Parties related to this
      Agreement and any Further Transaction (the “Covered
      Matters”) may be disclosed, directly or indirectly, by the Parties
      or any of their representatives publicly or otherwise to any other person
      or entity, other than their respective financial and legal advisors who
      agree to maintain the confidentiality thereof, without the prior
      reasonable agreement of the other Party, except that Medgenics shall be
      entitled to disclose such Covered Matters (a) to third parties for
      commercial purposes, and (b) to the extent that the relevant party shall
      be advised that any of the Covered Matters must be disclosed to any court,
      tribunal, governmental office or agency or regulatory or like body or, in
      compliance with any law, rule or regulation binding on the relevant party,
      publically announced provided that in relation to any announcement to be
      made by Medgenics in compliance with the London Stock Exchange's AIM Rule,
      Baxter's name shall not be stated without Baxter having given its prior
      agreement, and Medgenics shall (to the extent that it shall be lawful and
      practicable to do so) consult with Baxter regarding the nature, extent and
      form of any such disclosure/announcement and take due account of its
      views.

            

    

    

    
      
        
           

        

        
          8

          
            

          

        

        
           

        

      

    

     

    
      	
              8.

            	
              No
      Amendment: Termination. No amendment of this
      Agreement shall be effective unless it is in writing and signed by the
      authorized representatives of the Parties. Medgenics shall have the right
      to terminate this Agreement upon 10 days' written notice to Baxter in the
      event of any failure of Baxter to make the payments required
      hereunder.

            

    

     

    
      	
              9.

            	
              Nature
      of this Agreement. Other than with respect to the
      terms and conditions of any Further Transaction (the terms and conditions
      of which shall only become binding upon execution of a definitive
      agreement relating thereto by both Parties), this Agreement shall
      constitute a binding and enforceable agreement between the
      Parties.

            

    

     

    
      	
              10.

            	
              Governing
      Law. This
      Agreement shall be governed by the laws of the State of Illinois excluding
      its conflicts of law provisions.

            

    

     

    [Signature
Page Follows]

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    [Signature
Page to Standstill and Option Agreement]

     

    IN WITNESS WHEREOF, the
Parties have executed this Agreement as of the date first set forth
above.

    

    
      
        
          
            
              
                
                  
                    
                      
                        	
                                MEDGENICS,
      INC

                              
	 	 
	
                                By:

                              	/s/ Andrew L.
      Pearlman
	
                                Name:

                              	
                                Andrew
      L. Pearlman

                              
	
                                Title:

                              	
                                CEO

                              
	 
      	 
      
	
                                BAXTER
      HEALTHCARE CORPORATION

                              
	 
      	 
      
	
                                By:

                              	/s/
      Joy
      A. Amundson
	
                                Name:

                              	
                                Joy
      A. Amundson

                              
	
                                Title:

                              	
                                CVP/President
      Bioscience

                              

                      

                    

                  

                

              

            

          

        

      

    

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    Exhibit
A

    Development
Plan

     

    (See
attached.)

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    Exhibit
A

    Development
Plan

     

    Medgenics
Baxter Biopump Factor VIII Gantt - Brief Description of Work Plan 

     

    Rev 2
October 22, 2009

     

    Task Description (according
to Project Gantt below)

     

    1.     Signing
of Agreement (assumed October 22, 2009)

     

    
      	
              2.

            	
              Agree
      target specs in vitro, in SCID mice, The Joint Steering Committee will
      approve the target specifications for the key milestones of the project,
      specifically:

            

    

     

    
      	
               
      

            	
              o

            	
              In-Vitro
      Milestone: in-vitro secretion rates of Factor VIII per day from a typical
      Biopump

            

    

     

    
      	
               
      

            	
              o

            	
              In
      Vivo Animal Milestone: in-vivo animal demonstration in SCID mice, or other
      agreed test animal, post implantation of Factor VIII secreting human
      dermis Biopumps

            

    

     

    3.    Vector
Production

     

    a.    Expression
Cassette - 6 versions

    Express
cassette constructs will be produced by outsourced firm within an estimated 6
week timeframe. The current intention is to produce the following six
constructs. These will be investigated and alternatives may be proposed. Final decision on which constructs to pursue
will be taken in conjunction with the JSC.

    
      	 	
              i. 

            	
              CAG-wtFVIII
      - current promoter used in EPODURE

            

    

    
      	 	
              ii. 

            	
              CAG-optimizedFVIII

            

    

    
      	 	
              iii. 

            	
              CAG-MAR-wtFVIII
      or
      CAG-MAR-optimizedFVIII-WPRE

            

    

    
      	 	
              iv. 

            	
              CAG-MAR-optimizedFVIII

            

    

    
      	 	
              v. 

            	
              Fibronectin-MAR-optimizedFVIII

            

    

    
      	 	
              vi. 

            	
              EF1
      alpha-MAR-optimizedFVIII

            

    

     

    
      	
               
      

            	
              b.

            	
              Note:
      Baxter is to provide Medgenics with the plasmids carrying the agreed FVIII
      genes as
      coordinated with Medgenics

            

    

     

    c.    Production
of HDAd vector batches

     

    Production
of the final HDAd vector batches for each of these constructs will be performed
by Medgenics and its research affiliates. It is estimated that a given batch
will take up to six weeks to produce, and that some can proceed in parallel such
that with the cooperation of the research affiliates, first batches can be
received within two months, and all batches could potentially be available for
testing at Medgenics within three months of order.

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    4.     In-vitro
Testing, Optimization

     

    a.    Titration

    These
experiments using varying amounts of vector per biopump will aim to determine
the efficiency of the HDAd- Factor VIII viral vectors in producing and secreting
Factor VIII in a titer dependent manner.

     

    b.    Selection
of optimal vector/expression cassette

    Based on
the data of secretion levels and duration of expression from the titration
experiments, the best candidate vector will be selected.

     

    c.    Transduction
optimization

    Transduction
using the selected vector will be further optimized. Various transduction
protocols will be tested, including such elements as multiple viral hits or
varying transduction times.

     

    d.    Testing
level and duration of bpFVIII expression

    Parameters
that will be tested include long term secretion, secretion variability across
skin samples, biopumps viability, and optimization of media
type.

     

    
      	
               
      

            	
              e.

            	
              In-vitro
      milestone: meets FVIII/day/bp target spec 

              Determination
      of achievement of in-vitro
milestone.

            

    

     

    5.     Animal
testing

     

    a.    Training
visits

    These
visits will include training of Baxter personnel in the techniques of Biopump
implantation in a mouse animal model. It has been proposed that the first two
training visits will take place in Israel and that an additional training visit
will take place in Vienna.

     

    
      	
               
      

            	
              b.     
      

            	
              SCID
      mice preparations, testing of FVIII Delivery into mouse blood circulation
      from implanted
      hBPFVIII

            

    

    These
SCID mice experiments will aim to demonstrate that implantation of human dermis
BPFVIII in SCID mice results in hFVIII detected in the mouse blood serum. It is
anticipated that the initial SCID experiments will test subcutaneous
implantation of the Biopumps, and if not found acceptable, testing of
implantation in the omentum could also be performed.

     

    
      	
               
      

            	
              c.
      

            	
              In
      vivo milestone: meets delivery in SCID mice target spec 

              Determination
      of achievement of in-vitro
milestone.

            

    

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    
      	
               
      

            	
              d.

            	
              Investigation
      of feasibility of demonstration in a hemophilic animal

              Medgenics,
      with the assistance of Baxter, will investigate the possibility of testing
      hBPFVIII
      using a hemophilic mouse or other animal model, in view of the challenges
      posed
      by the human dermis biopump implant producing human
      FVIII.

            

    

     

    
      	
               
      

            	
              e.

            	
              If
      such testing in hemophilic animals is to be performed by Baxter, Medgenics
      will produce
      BPFVIII and ship to Baxter for this
  purpose.

            

    

     

    
      
        	
                6.

              	
                Preclinical
      Preparations (not currently included in Medgenics project activities scope
      of work but shown for informational
purposes)

              

      

    

     

    a.     Biochemical
analysis & immunohistochemistry

    Assistance
from Baxter in determining which analyses to be performed, and Medgenics and/or
Baxter to perform these analyses.

     

    b.     Factor
VIII potency study

    Types of
in-vitro or in-vivo assays will be discussed with Baxter. Current proposals
are:

     

    
      
        	 	
                i.

              	
                to test clotting time of the treated SCID mice
      from 3C, and compare against that of
      the same mice before treatment with
      BPFVIII

              

      

    

    
      
        	 	
                ii.

              	
                to inject SCID mice with FVIII collected from the
      in vitro supernatant of the BPFVIII
      incubation wells, and test clotting time against that of the same mice
      before
      treatment with
  BPFVIII

              

      

    

    
      
        	 	
                iii.

              	
                to inject hemophilic mice or other model
      animal with FVIII from in vitro wells and
      test clotting times.

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