EXHIBIT 10.2
COGENCO INTERNATIONAL, INC.
4085 South Dexter Street
Englewood, Colorado 80113
Telephone: 303-758-1357; Fax: 303-759-3553
e-mail: cogenco@comcast.net
November 5, 2004
Bruce G. Miller, CEO &
President
DMI BioSciences,
Inc.
3601 South Clarkson St.,
Suite 420
Englewood, CO.
80113-3948
Re: Proposed Transactions: (1)
Co-Development Agreement and (2) Merger
("Amended LOI")
Dear Bruce:
The purpose of this amended
letter of intent ("Amended LOI") is to set forth the
principal terms pursuant to
which Congenco International, Inc. ("Cogenco")
proposes to enter inter
certain transactions with DMI BioSciences, Inc; ("DMI").
This Amended LOI specifically
supercedes the letter of intent signed by the
parties and dated August 20,
2004. This Amended LOI merely constitutes a
statement of the mutual
intentions of the parties and does not contain all
matters upon which agreement
must be reached for the proposed transaction to be
consummated and, therefore,
does not constitute a binding commitment with
respect to the proposed
transactions themselves.
The parties wish to avoid any
misunderstandings and disputes that might
otherwise occur in the event
that definitive agreements are not fully negotiated
and fully executed. The
parties intend to work toward reaching definitive
agreements as set forth
herein, but in the event definitive agreements are not
executed and delivered by the
parties, then any party may abandon these
negotiations and be relieved
of all liabilities and obligations with respect
thereto, except with respect
to any definitive Agreement already concluded by
the parties as contemplated
herein (such as the CODA). This Amended LOI also
does not create a duty on the
part of any party to negotiate in good faith
toward a binding contract,
and may not be relied upon by any party as the basis
for a contract by estoppel or
otherwise, but rather evidences a non-binding
expression of good faith
intention to endeavor, without obligation, to negotiate
the terms of the proposed
transactions.
The parties acknowledge and
agree that the subject matter of the negotiations
involve numerous interrelated
business and technical factors, and that, except
as set forth in this Amended
LOI, neither party shall be bound to the other for
any performance, payment,
license, right, or reliance with respect to the
subject matter, unless and
until all material terms have been set forth in the
definitive agreement(s)
described herein or a subsequent definitive agreements
(the "Agreements"). All
proposals, letters, agreements, points of proposed or
actual agreements, "term
sheets," memos and charts used or exchanged in the
negotiations either shall be
reflected in this Amended LOI or a subsequent
Agreement(s) or shall be
deemed rejected, rescinded and void upon the end of
negotiations. Nothing
contained in this Amended LOI shall be deemed to limit
the
scope of the negotiations or
the content of any subsequent CODA OR Merger or
related agreement.
Notwithstanding the foregoing, upon acceptance hereof as
described below, the
provisions of paragraphs 6 and 7 of this Amended LOI
shall
be legally binding and
enforceable in accordance with their terms.
1. Proposed Structure of the
Transactions. Cogenco and DMI intend to enter into
a multi-phase series of
transactions as set forth below:
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DMI BioSciences,
Inc.
November 5, 2004
(a) Phase I: On or about
November 21, 2004, Cogenco shall enter into a
definitive co-development
agreement with DMI to fund certain specific ongoing
development activities of DMI
relating to the treatment of Asthma in humans
("Co-Development Agreement"
or "CODA"). Cogenco and DMI shall enter into such
CODA after reaching mutual
agreement on the terms and conditions of such
co-development, including
among others, the following terms:
(i) Cogenco
payments to DMI:
(1) A non-refundable
stand still fee of $100,000 due no later than
November 10, 2004;
(2) A non-refundable
fee due upon execution of the Co-Development
Agreement of $500,000 for prior research costs, but no later
than
November 21, 2004;
(3) A non-refundable
access payment of $2,500,000.00 to DMI ("Access
Fee Payment") due upon execution of the Co-Development
Agreement
but no later than November 21 2004;
(4) Payment for
screening and basic and preclinical research and
other development work for DKPs - actual cost of work
plus
reasonable overhead, payable in advance on terms to be
agreed
before the work commences;
(5) Payments for phase
1, phase 2, phase 3 clinical trials of Product
candidates and phase 4 post-marketing studies of Products
-
actual cost of work plus reasonable overhead, payable in
advance
on terms to be agreed before the work commences;
(6) A non-refundable
milestone payment of $1,000,000 upon
commencement of phase 1 or equivalent in the first Major
Market
Country;
(7) A non-refundable
milestone payment of $2,500,000 upon
commencement of phase 2 or equivalent in the first Major
market
Country;
(8) A non-refundable
milestone payment of $5,000,000 upon filing of
an NDA or equivalent in the first Major Market Country;
and
(9) A non-refundable
milestone payment of $10,000,000 upon regulatory
approval or equivalent in the first Major Market
country.
(ii) Sharing of
Revenues: Cogenco and DMI will share equally Profits on
Sales made by either one of
them of Products and will share equally all payments
received from third-party
licensees and sublicensees, including licensing fees,
sublicensing fees, milestone
payments and royalties.
The parties intend that such
CODA will be structured in order to minimize any
tax consequences arising from
the proposed Phase II Merger described below.
(b) Phase II: After the
closing and initial funding of the CODA and within 210
days after the execution of
the initial LOI, but no later than March 31, 2005,
Cogenco shall make an equity
investment of between $25-50 million [or such other
maximum amount mutually
agreeable to the parties] into DMI, which the parties
currently intend will be
structured as a tax free section 368 (A) "reverse
triangular merger"
("Merger"). In accordance therewith, it is anticipated
that
the following shall
occur:
(i) Cogenco will form a wholly-owned
subsidiary ("NewSub"), mutually
agreeable by the parties'] via a private placement or other
means,
2
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DMI BioSciences,
Inc.
November 5, 2004
(iii) NewSub
will subsequently be merged into DMI, with between
$25-50
million in new cash [or such other mutually agreed upon amount]
free
and clear of any debts or liens at the Merger closing,
and
(iv) The
shareholders of DMI shall receive in consideration for
the
surrender of their stock of DMI, and the Cogenco shareholders shall
be
left with, shares of common stock of Cogenco equivalent to
the
percentages set forth below of the issued and outstanding shares
of
the post-Merger Cogenco [excluding any effect from a post-Merger
2004
Equity Incentive Plan];
(1)
If Cogenco/NewSub has
$25 million cash free and clear of any
debts or liens at the closing of the Merger, then
Cogenco
shareholders/affiliates shall own approximately 37.9% of
the
post-Merger issued and outstanding shares, and DMI
shareholders/affiliates shall own approximately 62.1% of
post-Merger Cogenco issued and outstanding shares;
(2) If Cogenco/NewSub
has $40 million cash free and clear of any
debts or liens at the closing of the Merger, then
Cogenco
shareholders/affiliates shall own approximately 48.5% of
the
post-Merger issued and outstanding shares, and DMI
shareholders/affiliates shall own approximately 51.5% of
post-Merger Cogenco issued and outstanding shares;
(3) If Cogenco/NewSub
has $50 million cash free and clear of any
debts or liens at the closing of the Merger, then
Cogenco
shareholders/affiliates shall own approximately 53.8% of
the
post-Merger issued and outstanding shares, and DMI
shareholders/affiliates shall own approximately 46.5% of
post-Merger Cogenco issued and outstanding shares.
The Merger is intended to
occur as soon as practicable following the execution
of the CODA between Cogenco
and DMI. Cogenco and DMI further intend that the
post-Merger Cogenco shall use
any remaining cash in pre-merger Cogenco/NewSub
for its ongoing
bio-pharmaceutical developme
