Proxy Statement Pursuant to Section 14(a) of
The Securities Exchange Act of 1934
(Amendment No. )
☐ Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of
its filing.
At the Meeting, you will be asked to consider
and vote upon a proposal to approve the Sale. As part of the Sale, we also are selling the name of the Company and
we will need to change our name. Accordingly, we also are asking you to vote to amend our Amended and Restated Articles
of Incorporation to change our name to “CBA, Inc.” contingent upon the closing of the Sale. In addition, we are
asking you to vote to amend our Amended and Restated Articles of Incorporation to adopt a provision to protect the Company’s
net operating losses for tax purposes (the “
Protective Amendment
”).
The Company plans to distribute, in an initial
distribution (with potential subsequent installment distributions thereafter), cash from the Sale and the Company’s other
cash, subject to a contingency reserve for remaining costs and liabilities, following the closing of the Sale. The amount
and timing of the distributions to Shareholders will be determined by the Board in its discretion, subject to the provisions of
the Asset Purchase Agreement. On the bases described in the Proxy Statement, the Board anticipates that the amount of
the initial distribution to Shareholders will be between approximately $0.0025 and $0.0035 per share of Common Stock.
The Sale pursuant to the Asset Purchase
Agreement is the result of a broad review of strategic alternatives by the Board. The Board retained CREO | Montminy
& Co., LLC (“
CM&Co.
”) to, among other things, provide an opinion (the “
Fairness Opinion
”)
regarding the fairness to the Company, from a financial point of view, of the consideration to be paid to the Company pursuant
to the Sale. CM&Co. has provided the Board with its opinion that as of February 6, 2018 the consideration to be
received by the Company pursuant to the Sale is fair to the Company from a financial point of view.
The Proxy Statement sets forth
information about the background and details of the Sale, the background and details of the Protective Amendment and the
Meeting. The Proxy Statement additionally requests Shareholder approval of, and contains information with respect
to the grant of authority of the Board to adjourn the Meeting, even if a quorum is present, if necessary or appropriate in
the sole discretion of the Board, including to solicit additional proxies in the event that there are insufficient
shares present in person or by proxy voting in favor of the Sale, the change of the Company’s name and the Protective
Amendment.
The Board unanimously recommends that the Shareholders vote in favor of this
additional proposal.
On behalf of the Board, I hope that you
will attend the Meeting and vote in favor of the proposals.
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
INTRODUCTION
This Proxy Statement (this “
Proxy
Statement
”) is furnished in connection with the solicitation of proxies from the holders of shares of the issued
and outstanding common stock (“
Common Stock
”) of Cord Blood America, Inc. (the “
Company
”)
to be voted at a Special Meeting of Shareholders to be held on May 14, 2018, at 11:00 a.m. Eastern Time, at 150 E Palmetto Park
Rd #800 (8th floor), Boca Raton, FL 33432 (the “
Meeting
”).
The enclosed proxy is solicited by the Board
of Directors of the Company (the “
Board
”). These proxy materials have been prepared for the
Board by the Company’s management. This Proxy Statement and the proxy card are first being mailed to the holders
of Common Stock entitled to vote at the Meeting (“
Shareholders
”) on or about April 16, 2018.
The mailing address of the Company’s
principal executive office is 1857 Helm Drive, Las Vegas, NV 89119.
Capitalized terms used but not defined in
this Proxy Statement have the meanings set forth in the “
Glossary of Terms
” section beginning on page 10
below.
The terms “we,” ”our,”
“us” or “Cord Blood” refer to the Company and its subsidiaries.
SUMMARY TERM SHEET
The following is a summary of certain
information contained elsewhere in this Proxy Statement or in its annexes. This information is not, and is not intended
to be, complete. This is a summary only and is qualified in its entirety by the more detailed information appearing
elsewhere in this Proxy Statement and the annexes hereto.
Shareholders are urged to review carefully the entirety
of this Proxy Statement and all annexes hereto.
Certain capitalized terms used in this Proxy Statement have the
meanings set forth in the “
Glossary of Terms
” section beginning on page 10 below.
Meeting
The Meeting will be held on May 14, 2018 at
11:00 a.m. Eastern Time at 150 E Palmetto Park Rd #800 (8th floor), Boca Raton, FL 33432 for the purposes of approving:
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The sale of substantially all of the assets of the Company and its subsidiaries pursuant to, and the other transactions contemplated by, the Asset Purchase Agreement (the “
Asset Purchase Agreement
”) attached as Annex A to this Proxy Statement (the “
Sale
” and such proposal being the “
Sale Proposal
”);
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An amendment to the Company’s Amended and Restated Articles of Incorporation to change its corporate name to “CBA, Inc.”, contingent on and effective upon the consummation of the Sale (the “
Name Change
” and such proposal being the “
Name Change Proposal
”);
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An amendment to the Company’s Amended and Restated Articles of Incorporation to adopt a provision to protect the Company’s net operating losses for tax purposes (the “
Protective Amendment
”, and such proposal being the “
Protective Amendment Proposal
”);
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The grant of authority to the Board to adjourn the Meeting, even if a quorum is
present, in the sole discretion of the Board, including to solicit additional proxies in the event that there are
insufficient shares present in person or by proxy voting in favor of the Sale, the Name Change and/or the Protective
Amendment (the “
Adjournment Proposal
”); and
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Any other business that may properly come before the Meeting and any adjournment or postponement thereof.
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The Record Date and Quorum
The record date for determining the Shareholders
entitled to receive notice of and to vote at the Meeting is the close of business on April 9, 2018 (the “
Record Date
”).
A Shareholder is entitled to receive notice
of, and to vote at, the Meeting if such Shareholder owned shares of Common Stock at the close of business on the Record Date. A
Shareholder of record will have one vote for each share of Common Stock held at the close of business on the Record Date. At
the close of business on the Record Date, there were 1,272,066,146 shares of Common Stock outstanding and entitled to vote at the
Meeting.
A quorum is necessary to hold the Meeting
and conduct business. The presence, either in person or represented by proxy, of Shareholders who can direct the vote
of at least a majority of the outstanding shares of Common Stock as of the Record Date is considered a quorum. A Shareholder
is counted present at the meeting if (a) the Shareholder is present and votes in person at the meeting or (b) the Shareholder has
properly submitted a proxy.
Shares of Common Stock that are not voted
by the broker who is the record holder of the shares because the broker is not instructed to vote and does not have discretionary
authority to vote (i.e., broker non-votes) and shares that are not voted in other circumstances in which proxy authority is defective
or has been withheld, will be counted for purposes of establishing a quorum.
If a quorum is not present, the Meeting
will be adjourned until a quorum is obtained.
In addition, even if a quorum is present,
the Board may hold a vote on the Adjournment Proposal, if in its sole discretion, it determines that it is necessary or appropriate
for any reason to adjourn the Meeting to a later date. See “
Proposal No. 4 – Adjournment
.”
The Parties
The Seller Parties under the Asset Purchase
Agreement include the Company and its following wholly-owned subsidiaries: Cord Partners, Inc., CorCell Companies, Inc., CorCell,
Ltd., CBA Properties, Inc., and Career Channel, Inc. (formerly Rainmakers International). The Company, along with its subsidiaries,
facilitates umbilical cord blood and cord tissue stem cell processing and storage for expectant parents and their children. The
Company’s principal executive office is located at 1857 Helm Drive, Las Vegas, NV 89119, and its website is: http://www.cordblood-america.com.
Buyer in the Sale is California Cryobank
Stem Cell Services LLC, a California limited liability company. In this Proxy Statement, we refer to California Cryobank Stem Cell
Services LLC as “Buyer”. Founded in 1997, Buyer has more than 20 years of experience and is one of the fastest growing
cord blood and cord tissue companies in the United States. Buyer has nearly 100,000 units in storage for families that want a biologic
resource that can be used to protect their families with future stem cell treatments. Buyer is a subsidiary of the California Cryobank
LLC, a California limited liability company, which is the world leader in frozen donor gamete services (donor sperm and egg services),
as well as fertility preservation. California Cryobank and its affiliates are portfolio companies of two healthcare-focused private
investment firms, Longitude Capital and NovaQuest Capital Management. Buyer’s corporate address is 11915 La Grange Avenue,
Los Angeles, CA 90025, and its website is: http://CaliforniaCryobank.com.
Prior to entering into the Asset Purchase
Agreement, none of the Seller Parties had done business of a material nature with or entered into any other material transactions
with Buyer or any of its affiliates within the preceding two years.
The Sale
Asset Purchase Agreement
Following is a summary of the principal
terms of the Asset Purchase Agreement:
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Pursuant to the Asset Purchase Agreement, the Seller Parties will sell to the Buyer substantially all of the operating assets of the Seller Parties.
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The total consideration for the purchase and sale of the assets of the Seller Parties is $15.5 million in cash, plus the assumption of certain specified liabilities. At Closing, $3,000,000 of the Purchase Price will be held back in an escrow account to cover potential indemnification claims during the two years following closing. The remaining $12.5 million of the Purchase Price will be paid to the Company. The Purchase Price and the Escrow Payment are more specifically described in the Asset Purchase Agreement and elsewhere in this Proxy Statement. See “
Proposal No. 1 – Sale – Summary of Proxy Statement – Purchase Price
.”
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The Asset Purchase Agreement contains a number of representations and warranties of the Seller Parties to the Buyer relating to, among other things: organization of the Seller Parties; authority of the Seller Parties; conflicts and consents; capitalization of the Seller Parties; title to the purchased assets; condition and sufficiency of assets; real property; material contracts; licenses; intellectual property; management of the Company; legal proceedings and Governmental Orders; compliance with laws and permits; periodic reporting with the Commission and financial statements; the absence of undisclosed liabilities; the absence of certain changes and certain events; taxes; employee benefit matters; insurance; product warranties; brokers; environmental matters; privacy and data security; employment matters; lack of restrictions on business activities; transactions with affiliates; solvency; non-applicability of the Health Insurance Portability and Accountability act of 1996, as amended (“HIPAA”); compliance with anti-corruption laws; and certain assets in the custody of a third party.
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The Asset Purchase Agreement contains a number of representations and warranties of the Buyer to the Seller Parties relating to, among other things: organization of the Buyer; authority of the Buyer; conflicts and consents; brokers; licenses; and the Buyer’s credit facility and financing of the Sale.
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The conditions precedent to the obligations of the Buyer to complete the Sale (each of which may be waived by Buyer at or before Closing), include the following:
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the representations and warranties of the Seller Parties in the Asset Purchase Agreement must be true and correct in all material respects on and as of the date of signing the Asset Purchase Agreement and on the Closing Date (subject to certain exceptions);
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the Seller Parties’ performance of their respective agreements, covenants and conditions set forth in the Asset Purchase Agreement, as applicable, through the Closing Date;
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the Seller Parties receiving all approvals, consents, and waivers that are necessary to consummate the Sale, such that the Buyer shall have received all such requisite consents and approvals to assume, acquire and have the benefit of at least 97% of the contracts assumed by it pursuant to the Sale;
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the absence of a Governmental Order making the Sale illegal, or otherwise restraining or prohibiting the consummation of the Sale;
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the absence of a Material Adverse Effect;
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the delivery of the signatures, certificates, instruments, and other deliverables by the Seller Parties and the Company that are contemplated by the Asset Purchase Agreement;
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the Company shall have received approval from the Shareholders of the Asset Purchase Agreement and the Sale; and
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the Company shall have received the consent of the lessor of its headquarters facility to the deemed assignment of the applicable lease as a result of the Sale and related transactions.
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The conditions precedent to the obligations of the Company to complete the Sale (each of which may be waived by the Company at or before Closing), include the following:
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the representations and warranties of the Buyer in the Asset Purchase Agreement must be true and correct in all material respects on and as of the date of signing the Asset Purchase Agreement and on the Closing Date (subject to certain exceptions);
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the Buyer’s performance of its agreements, covenants and conditions set forth in the Asset Purchase Agreement, as applicable, through the Closing Date;
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the Company shall have received approval from the Shareholders of the Asset Purchase Agreement and the Sale; and
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the delivery of the signatures, certificates, instruments, and other deliverables by the Buyer that are contemplated by the Asset Purchase Agreement;
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The Asset Purchase Agreement contains numerous covenants of the Seller Parties and the Buyer during the period up to and including the Closing Date. The covenants that are specific to the Seller Parties generally relate to, among other things: the conduct of the Seller Parties’ business operations before the Closing; providing the Buyer with access to, and deliveries of, certain information; holding a meeting of the Shareholders and soliciting proxies to the Shareholders to obtain the approval of the Sale by the Shareholders; notifications to Buyer of certain events; the Seller Parties’ agreement not to compete for three years; changing of the name of the Seller Parties at or prior to Closing; keeping certain information concerning the Seller Parties’ business and other matters confidential; the remittance to Buyer of funds received by the Seller Parties from customers with respect to the provision of services by Buyer post-Closing; non-solicitation of customers, vendors or Seller Parties’ or Buyer’s employees by the Company following Closing; and delivery of monthly unaudited financial statements of the Company to Buyer. In addition, the Company may not dissolve or liquidate for at least two years following Closing. The Asset Purchase Agreement contains additional covenants of the Seller Parties and Buyer relating to, among other things: making notices to, and obtaining consents, authorizations, orders, and approvals from, Governmental Authorities in connection with the Sale; using commercial reasonable efforts to take such actions as are necessary to expeditiously satisfy the closing conditions of the parties; making public announcements of the Asset Purchase Agreement and the Sale; payment of Taxes and fees incurred in connection with the Asset Purchase Agreement and the other Transaction Documents; access to retained books and records; and the execution and delivery of certain documents and the taking of certain actions to effect the Sale. The Company must also reasonably cooperate with Buyer in connection with obtaining the financing required to consummate the Sale, and Buyer must use its commercially reasonable efforts to obtain such financing.
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Until the closing of the Sale, the Seller Parties are prohibited from engaging in solicitation activities and may not engage in similar activities set forth in the Asset Purchase Agreement (the “
No-Shop
”). During the No-Shop, the Seller Parties may, under certain circumstances, provide information to and participate in discussions or negotiations with third parties with respect to certain unsolicited alternative transaction proposals that are Superior Proposals. The Company must give the Buyer the opportunity to revise its proposal so that any other alternative transaction proposals no longer are Superior Proposals. See “
Proposal No. 1 – Sale – Summary of Asset Purchase Agreement – No-Shop
” below.
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The Asset Purchase Agreement may be terminated at any time before the Closing upon the mutual consent of Buyer and the Company. In addition, the Asset Purchase Agreement may be terminated by Buyer upon the occurrence of certain events, including, without limitation, the following:
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there has been an uncured breach, inaccuracy in, or failure to perform any representation, warranty, covenant or agreement made by the Company pursuant to the Asset Purchase Agreement that would give rise to the failure of any of the Buyer’s closing conditions;
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the Closing shall not have occurred on or before August 6, 2018 (the “
End Date
”), provided that such failure to close is not due to Buyer’s breach or violation of any of its representations, warranties or covenants and resulted in the failure of the Closing to occur by the End Date;
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an effect, event or change which, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect on the Company;
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Buyer is unable to complete the financing of the Sale on the terms and conditions previously agreed to; or
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there shall be any law that makes consummation of the Sale illegal or otherwise prohibited or there shall be any Governmental Order restraining or enjoining the Sale, and such Governmental Order shall have become final and non-appealable.
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The Company may terminate the Asset Purchase Agreement upon the occurrence of certain events, including, without limitation, the following:
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there has been an uncured breach, inaccuracy in, or failure to perform any representation, warranty, covenant or agreement made by Buyer pursuant to the Asset Purchase Agreement that would give rise to the failure of any of the Company’s closing conditions;
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the Closing shall not have occurred on or before the End Date, provided that such failure to close is not due to the Company’s breach or violation of any of its representations, warranties or covenants and resulted in the failure of the Closing to occur by the End Date;
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if at any time prior to receipt of the Company shareholder approval of the Sale, the board of directors of the Company determines to enter into a written alternative agreement with respect to a Superior Proposal, but only if the Company has complied in all respects with its obligations with respect to such Superior Proposal and is otherwise permitted to terminate the Asset Purchase Agreement and accept such Superior Proposal;
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automatically if, at least 10 business days prior to the End Date, the Company does not obtain the approval of its shareholders of the Asset Purchase Agreement and the Sale; or
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there shall be any law that makes consummation of the Sale illegal or otherwise prohibited or there shall be any Governmental Order restraining or enjoining the Sale, and such Governmental Order shall have become final and non-appealable.
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If Buyer terminates the Asset Purchase Agreement because:
(i)
there
has been an uncured breach, inaccuracy in, or failure to perform any representation, warranty, covenant or agreement made by the
Company pursuant to the Asset Purchase Agreement that would give rise to the failure of any of the Buyer’s closing conditions,
then the Company pays Buyer a termination fee of $800,000,
(ii)
a
Material Adverse Effect on the Company has occurred, then the Company pays Buyer a termination fee equal to all fees and expenses
reasonably incurred by the Buyer in connection with the Sale, in an amount not to exceed $400,000, or
(iii)
Buyer
has failed to obtain financing to consummate the Sale but all other Company closing conditions have been met, then Buyer pays
the Company a termination fee equal to all fees and expenses reasonably incurred by the Company in connection with the Sale, in
an amount not to exceed $400,000.
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If the Company terminates the Asset Purchase Agreement because:
(i)
the
Company’s board of directors determines to enter into a Superior Proposal, then the Company pays Buyer $1,600,000, or
(ii)
other
than being unable to complete the Sale financing, there has been an uncured breach, inaccuracy in, or failure to perform any representation,
warranty, covenant or agreement made by Buyer pursuant to the Asset Purchase Agreement that would give rise to the failure of
any of the Company’s closing conditions, then Buyer pays the Company a termination fee of $800,000.
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If the Asset Purchase Agreement terminates automatically because the Company’s shareholders do not approve the Asset Purchase Agreement and the Sale, then the Company pay a termination fee equal to all fees and expenses reasonably incurred by the Buyer in connection with the Sale, in an amount not to exceed $400,000.
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The representations and warranties of the Company and the right of the Buyer to indemnification under the Asset Purchase Agreement generally survive the Closing Date for 24 months.
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The Company will deposit $3,000,000 (the “
Escrow Payment
”) of the purchase price into an escrow account at Closing to secure its indemnification obligations to the Buyer with respect to breaches of the Company’s representations and warranties, breaches of covenants, losses related to excluded assets or excluded liabilities and certain other matters set forth in the Asset Purchase Agreement.
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The Buyer will indemnify the Company with respect to breaches of Buyer’s representations and warranties and any liabilities assumed by Buyer pursuant to the Sale.
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Other than in the case of (i) fraud or willful breach or (ii) any inaccuracy of any of certain specified representations and warranties (the “
Fundamental Representations and Warranties
”), an indemnifying party shall not be liable to an indemnified party for indemnification unless and until the aggregate amount of the indemnification obligations exceeds $100,000 (the “
Basket
”), in which event the indemnifying party shall then be required to pay or be liable for all losses in excess of $100,000. Other than in the case of (x) fraud or willful breach or (y) any inaccuracy of any Fundamental Representations and Warranties, the Company shall not be obligated to indemnify the Buyer for breaches of representations and warranties in an aggregate amount in excess of $2,000,000. Other than in the case of fraud or willful breach, the Company shall not be obligated to indemnify the Buyer, with respect to the Fundamental Representations and Warranties, or with respect to certain specified indemnification categories, inclusive, in an aggregate amount in excess of the Escrow Payment. Other than in the case of fraud or willful breach, the Buyer shall not be obligated to indemnify the Company indemnified parties in an aggregate amount in excess of the Escrow Payment.
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Voting Agreement
The Red Oak Fund, LP, The Red Oak Long Fund,
LP and Pinnacle Opportunities Fund, LP (collectively, the “
Fund Shareholders
”), which own 164,073,684,
76,226,316 and 140,752,632 shares of the Company’s common stock, respectively, or approximately 30.0% of the Company’s
issued and outstanding common stock in the aggregate, and each of which are affiliates of Red Oak Partners, LLC, entered into a
voting agreement (the “
Voting Agreement
”) with Buyer and the Company on February 6, 2018, pursuant to
which the Fund Shareholders have agreed, among other things, to vote their shares (the “
Covered Shares
”)
in favor of the Sale and grant to Buyer an irrevocable proxy with respect to their respective Covered Shares. See “
Proposal
No. 1 – Sale – Summary of Asset Purchase Agreement – Voting Agreement
” below.
Board Approval; Fairness Opinion
The Board engaged CM&Co., an independent
investment banking firm, to evaluate the Sale and to provide its opinion as to the fairness to the Company, from a financial point
of view, of the consideration to be paid to the Company pursuant to the Asset Purchase Agreement. CM&Co. delivered
an opinion to the Board, dated February 6, 2018, that, subject to the limitations set forth in its opinion, the payment of $15,500,000
in cash, which is subject to the Escrow, and the assumption of certain liabilities by the Buyer, is fair, from a financial point
of view, to the Company.
The Board, taking into account the fairness
opinion received from CM&Co., unanimously approved and authorized the Asset Purchase Agreement and the Sale.
See “
Proposal No. 1 – Sale
”
below.
Name Change
If the Shareholders approve the Sale, the
Company is proposing to change its name to “CBA, Inc.”, subject to approval by the Shareholders of an amendment to
the Company’s Amended and Restated Articles of Incorporation to effect the name change. See “
Proposal
No. 2 – Name Change
” below.
Dissenters’ Rights of Appraisal
Appraisal rights under Florida law are available
to Shareholders with respect to the Sale if they fully comply with all applicable statutory requirements. All future references
in this Proxy Statement to “our shareholders” or “the Company’s shareholders” or the like, when referring
to dissenters’ appraisal rights, shall be a reference to Shareholders who are entitled to vote on the Sale, namely our Common
Stock Shareholders. Failure to follow the steps and procedures required by Sections 607.1301 through 607.1333 of the FBCA for perfecting
appraisal rights may result in the loss, termination or waiver of such rights. In view of the complexity of these provisions of
Florida law, any Shareholder who is considering exercising appraisal rights should consult his or her legal advisor.
ANY SHAREHOLDER
WHO WISHES TO EXERCISE APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE HIS OR HER RIGHT TO DO SO SHOULD REVIEW
APPENDIX C
CAREFULLY
AND SHOULD CONSULT HIS OR HER LEGAL ADVISOR, SINCE FAILURE TO TIMELY COMPLY WITH THE PROCEDURES SET FORTH THEREIN WILL RESULT IN
THE LOSS OF SUCH RIGHTS.
Shareholder Distributions
If the Sale is approved, the timing of any
distributions to Shareholders upon consummation of the Sale depends upon, among other factors, the timing of the Company performing
all of its obligations and requirements after the closing of the Sale and payment of any applicable liabilities and obligations. See
“
Risk Factors
” below.
If the Shareholders approve the Sale, subject
to the Escrow, the satisfaction of the liabilities of the Company and certain assumptions, the Company intends, although there
can be no assurance, to provide for an initial distribution of between $3.2 million and $4.5 million in the aggregate, or approximately
$0.0025 to $0.0035 per share of Common Stock. No distribution will be made if there is no Closing, and the amount of any future
distribution will be determined by the Board. To the extent the Closing occurs and the initial distribution is made, the Company
intends to pay one or more future distributions but such distribution(s) and amount(s) will depend on the Company’s available
cash, after reflecting any reserve for future contingent liabilities, operating costs and any other uses of cash.
The Company currently anticipates that the initial
distribution to the Shareholders will occur within 90 days after the closing of the Sale, assuming the Shareholders approve the
Sale, and that the Sale is consummated.
Interests of Certain Persons in Matters to be Acted Upon
Other than as set forth herein, the Company
is not aware of any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, of any director,
executive officer or any associate or affiliate of any of the foregoing in any matter, to be acted upon at the Meeting.
Three of the Company’s directors,
David Sandberg, Adrian Pertierra and Anthony Snow (who is also the Company’s Interim President), are employed by Red Oak
Partners, LLC, a Florida-based, Commission-registered investment company, which is the general partner of the Fund Shareholders
and has shared voting power and shared dispositive power over their shares of the Company. Each of the Fund Shareholders has entered
into the Voting Agreement with Buyer agreeing, among other things, to vote its shares in favor of the Sale. See “
Proposal
No. 1 – Sale – Summary of Asset Purchase Agreement – Voting Agreement
” below.
Solicitation of Proxies
We will solicit proxies and will bear the
entire cost of our solicitation, including the preparation, assembly, printing and mailing of this Proxy Statement and any additional
materials furnished to our shareholders. We have retained InvestorCom, Inc. (“
InvestorCom
”)
to assist us in the solicitation of proxies, as described in “
General-Cost of Solicitation
” below. The
initial solicitation of proxies by mail may be supplemented by telephone, fax, e-mail, internet and personal solicitation by our
directors, officers or other regular employees. No additional compensation for soliciting proxies will be paid to our directors,
officers or other regular employees for their proxy solicitation efforts. Fees paid to InvestorCom are described in “
General-Cost
of Solicitation
” below.
No Regulatory Approval
No federal or state regulatory requirements
must be complied with or approval must be obtained in connection with the Sale.
No Going Private Transaction
The Sale will not have the effect of a “going
private transaction” as defined in Rule 13e-3 of the Securities Exchange Act of 1934, which we refer to as the “Exchange
Act.” Following the consummation of the Sale, the Company will continue to have more than 300 record holders and will not
be eligible to terminate its reporting obligations under the Exchange Act. As a result, the Company will continue to be subject
to the periodic reporting requirements of the Exchange Act.
Risk Factors
For a description of certain risk factors
in respect of the business of the Company and its subsidiaries, see the risk factors set forth in the Company’s Annual Report
on Form 10-K for the fiscal year ended December 31, 2016. For a description of certain risk factors in respect of the
Sale, see “
Risk Factors
” below.
If You Have Any Questions
If you have any questions, or need assistance
in voting your shares, please contact the firm assisting us in the solicitation of proxies:
InvestorCom, Inc.
Stockholders Call Toll Free: 877-972-0090
Banks and Brokers Call Collect: 203-972-9300
GLOSSARY OF TERMS
All capitalized terms used in this Proxy
Statement but not otherwise defined in the Proxy Statement have the following meanings:
“
Affiliates
” has
the meaning set forth in the Asset Purchase Agreement.
“
Buyer
” means
Cryobank Stem Cell Services, LLC, a California limited liability company.
“
Code
” means the
Internal Revenue Code of 1986, as amended.
“
Closing
” has
the meaning set forth in the Asset Purchase Agreement.
“
Closing Date
”
has the meaning set forth in the Asset Purchase Agreement.
“
Commission
” has
the meaning set forth in the Asset Purchase Agreement.
“
CM&Co.
” means
CREO | Montminy & Co., LLC, the independent investment bank which provided the fairness opinion.
“
FBCA
” means the
Florida Business Corporation Act.
“
Governmental Authority
”
has the meaning set forth in the Asset Purchase Agreement.
“
Governmental Order
”
means any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of
any Governmental Authority.
“
IRS
” means the
U.S. Internal Revenue Service.
“
Material Adverse Effect
”
has the meaning set forth in the Asset Purchase Agreement.
“
Purchase Price
”
has the meaning set forth in the Asset Purchase Agreement.
“
Securities Act
”
means the Securities Act of 1933, as amended.
“
Seller Parties
”
means, collectively, the Company and its wholly-owned subsidiaries.
“
Superior Proposal
”
has the meaning set forth in the Asset Purchase Agreement.
“
Taxes
” has the
meaning set forth in the Asset Purchase Agreement.
“
Transaction Documents
”
has the meaning set forth in the Asset Purchase Agreement.
FORWARD-LOOKING STATEMENTS
This Proxy Statement, including the “
Summary
Term Sheet
” above, contains forward-looking statements (“
forward-looking statements
”) within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act regarding the Sale, the approval of matters
to be presented to the Shareholders at the Meeting, the timing of the Meeting, the liabilities of the Company, the net proceeds
anticipated to be available for distribution to the Shareholders, and the distribution of funds to Shareholders, all of which are
based on information currently available to the Company’s management as well as management’s assumptions and beliefs.
For this purpose, any statements contained
in this Proxy Statement that are not statements of historical fact may be deemed to be forward-looking statements. When
used in this Proxy Statement and in documents incorporated by reference herein, forward-looking statements include, without limitation,
statements regarding our expectations, beliefs, or intentions that are signified by terminology such as “subject to,”
“believes,” “anticipates,” “plans,” “expects,” “intends,” “estimates,”
“may,” “will,” “should,” “can,” the negatives thereof, variations thereon and similar
expressions. Such forward-looking statements reflect the Company’s current views with respect to future events,
based on what the Company believes are reasonable assumptions; however, such statements are subject to certain risks and uncertainties.
Risks include, but are not limited to:
|
·
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The Sale, even if approved by the Shareholders, may not be completed;
|
|
·
|
The timing and amount of distributions to Shareholders cannot be predicted with certainty;
|
|
·
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Any estimate of the amount available for distribution to Shareholders could be reduced if the Company’s expectations regarding operating expenses, employee retention, costs of satisfying or discharging liabilities costs are inaccurate;
|
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·
|
Any estimate of the amount available for distribution to Shareholders is based on a number of assumptions, including with respect to administrative and professional expenses incurred in connection with the Sale, some or all of which may be inaccurate;
|
|
·
|
Any delay in the closing of the Sale will decrease the funds available for distribution, because the Company will continue to be subject to ongoing operating expenses;
|
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·
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The Company may face lawsuits or other claims and it may take time and Company resources to defend or settle any such lawsuits or claims;
|
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·
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Shareholders could approve the Sale but not our Name Change, which may result in our inability to close the Sale;
|
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·
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The occurrence of certain events, changes or other circumstance could give rise to the termination of the Asset Purchase Agreement, which would result in the Sale not being consummated;
|
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·
|
The Company may receive a Superior Proposal, the Asset Purchase Agreement may be terminated in connection with the Company’s pursuit of such alternative transaction, and that alternative transaction may not be consummated;
|
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·
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The Sale process may disrupt current plans and operations and we may face difficulties in employee retention;
|
|
·
|
The Company may not receive any competing transaction proposals or Superior Proposals because of the termination fee payable to the Buyer;
|
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·
|
Our directors and executive officers may have interests that are different from, or in addition to, those of Shareholders generally;
|
|
·
|
We will continue to incur the expenses of complying with public company reporting requirements; and
|
|
·
|
The other risks set forth in the discussion of risk factors herein (see “
Risk Factors
” below).
|
Shareholders are urged to consider these
risks, uncertainties and factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance
on such forward-looking statements. Should one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may differ materially from those in the forward-looking statements. The
Company disclaims any intention or obligation to update or review any forward-looking statements or information, whether as a result
of new information, future events or otherwise. The Company undertakes no obligation to comment on analyses, expectations
or statements made by third-parties in respect of the Company or the Sale.
CAUTIONARY STATEMENT
Unless otherwise stated, the information contained
in this Proxy Statement, including the “
Summary Term Sheet
” above, is given as of April 16, 2018. No
person has been authorized to give information or to make any representations in connection with matters to be considered at the
Meeting other than those contained in this Proxy Statement and, if given or made, any such information or representations should
not be relied upon in making a decision as to how to vote on the matters to be considered at the Meeting or be considered to have
been authorized by the Company, or its directors or officers.
Shareholders should not construe the
contents of this Proxy Statement as legal, tax or financial advice and should consult with their own professional advisors as to
the relevant legal, tax, financial or other matters in connection with the Meeting, the Sale and the other matters set forth in
this Proxy Statement.
QUESTIONS AND ANSWERS ABOUT THE MEETING
The following are some questions that you,
as a Shareholder, may have regarding the proposals contained in this Proxy Statement and brief answers to those questions. It
constitutes on a summary of certain information in this Proxy Statement and we urge you to read carefully this entire Proxy Statement
(including supplemental materials, if any), and the Annexes hereto, and the documents referred to or incorporated by reference
in this Proxy Statement, because the information in this section does not provide all of the information that may be important
to a Shareholder with respect to the matters set forth in this Proxy Statement.
MEETING
What am I being asked to vote on?
At the Meeting, Shareholders will be asked
to vote on the matters set forth in the Notice of Special Meeting of Shareholders that preceded this Proxy Statement. The
matters scheduled to be voted on are as follows:
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2.
|
the Name Change Proposal;
|
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3.
|
the Protective Amendment Proposal;
|
|
4.
|
the Adjournment Proposal; and
|
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5.
|
any other business that may properly come before the meeting and any adjournment or postponement thereof (the Board currently knows of no other business to be presented for consideration at the Meeting).
|
If any matters other than those referred
to in the accompanying Notice of Meeting and this Proxy Statement should properly come before and be considered at the Meeting,
it is intended that proxies in the form the Company provides to its Shareholders will be voted thereon in accordance with the judgment
of the person voting such proxies.
The Board is asking you to vote on these proposed
items of business. This Proxy Statement, including its Annexes, and the enclosed form of proxy are first being sent
to Shareholders on or about April 16, 2018.
How does the Board recommend that I vote?
The Board recommends a vote “
FOR
”
proposals 1-4 set forth above.
Why is Shareholder approval being sought for the Sale Proposal,
the Name Change Proposal and the Protective Amendment Proposal?
Under the FBCA, approval by the holders
of a majority of the outstanding voting power of the shares entitled to vote on the matter (i.e., shares of Common Stock) is required
for certain fundamental corporate transactions, including the sale of all or substantially all of the assets of a corporation,
the change of a corporation’s name and the amendment of the articles of incorporation to impose transfer restrictions on
a corporation’s shares.
Are the approvals of the Sale Proposal, the Name Change Proposal
and the Protective Amendment Proposal interdependent, or can only one of them be approved?
The approval of the Sale, the
Name Change and the Protective Amendment are independent matters. A vote “
FOR
”
or “
AGAINST
” one proposal does not count as a
vote
“FOR”
or “
AGAINST
” the other proposal. However, the Name
Change is conditioned on, and will not be implemented, unless and until the Sale is consummated. The Sale is not
conditioned on the Shareholders approving the Name Change or the Protective Amendment. The Protective Amendment is not
conditioned on the Shareholders approving the Name Change or the Sale.
The Board believes that the Sale, the
Name Change and the Protective Amendment are integral parts of an overall plan for the Company and that
approval of each matter collectively represent the best alternative for the Company and its Shareholders as of this time.
Additionally, if the Shareholders approve
the Sale, but not the Name Change, the Company may be unable to close the Sale, because we are required pursuant to the Asset Purchase
Agreement to transfer our rights to the “Cord Blood” name to the Buyer.
Who is entitled to vote at the Meeting?
The Board has set April 9, 2018 as the Record
Date for the Meeting. If you were a Shareholder of record at the close of business on April 9, 2018, you are entitled
to vote at the Meeting. You have one vote for each share of Common Stock you held on the Record Date.
As of the Record Date, 1,272,066,146 shares
of Common Stock were issued and outstanding. The Company does not have any other class of capital stock outstanding.
How many shares must be present to hold the Meeting?
A quorum is necessary to hold the Meeting
and conduct business. The presence, either in person or represented by proxy, of Shareholders who can direct the vote
of at least a majority of the outstanding shares of Common Stock as of the Record Date is considered a quorum. A Shareholder
will be counted present at the Meeting if:
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·
|
the Shareholder is present and votes in person at the Meeting; or
|
|
·
|
the Shareholder has submitted a proxy properly.
|
Shares of Common Stock that are not voted
by the broker who is the record holder of the shares because the broker is not instructed to vote and does not have discretionary
authority to vote (i.e., broker non-votes), and shares that are not voted in other circumstances in which proxy authority is defective
or has been withheld, will be counted for purposes of establishing a quorum.
If a quorum is not present, the Meeting
will be adjourned until a quorum is obtained.
In addition, even if a quorum is present,
the Board may hold a vote on the Adjournment Proposal, if in its sole discretion, it determines that it is necessary or appropriate
for any reason to adjourn the Meeting to a later date. See “
Proposal No. 4 – Adjournment
.”
What is the difference between a Shareholder of record and
a “street name” holder?
If your shares are registered directly in
your name, you are considered the Shareholder of record with respect to those shares.
If any of your shares of Common Stock are
held in a stock brokerage account or by a bank or other nominee, you are still considered the beneficial owner of those shares,
but those shares are held in “street name.”
How do I vote my shares of Common Stock?
If you are a Shareholder of record, you
can vote your shares without having to attend the Meeting by providing a proxy. This can be done by mailing your signed
proxy card to us before the Meeting. You may also vote in person at the Meeting.
If you hold your shares in street name,
you must vote your shares following the procedures indicated to you by your broker or nominee on the voting instruction card.
What if multiple Shareholders have the same address?
If you and other residents at your mailing address
own shares of Common Stock in street name, your broker or bank may have sent you a notice that your household will receive only
one Proxy Statement. This practice is known as “householding,” and is designed to reduce our printing and
postage costs. However, if any Shareholder residing at such an address wishes to receive a separate Proxy Statement,
such Shareholder may submit a request to our Corporate Secretary or by calling InvestorCom toll free at (877) 972-0090.
What does it mean if I receive more than one proxy card?
If you receive more than one proxy card,
this means that you hold shares of Common Stock registered in more than one account. To ensure that all of your shares
of Common Stock are voted, sign and return each proxy card you receive. If you wish to consolidate your accounts, please contact
our stock transfer agent, Issuer Direct Corporation, at 500 Perimeter Park Drive, Suite D, Morrisville, NC 27560, or by phone at
(919) 481-4000.
In addition to a proxy card, you may also
receive a “voting instructions” card which looks very similar to a proxy card. Voting instructions are prepared
by brokers, banks or other nominees for Shareholders who hold shares of Common Stock in street name.
Can I vote my shares of Common Stock in person at the Meeting?
Yes. If you are a Shareholder
of record, you may vote your shares of Common Stock at the Meeting by completing a ballot at the Meeting. However, even
if you currently plan to attend the Meeting, we recommend that you submit your proxy ahead of time so that your vote will be counted
if, for whatever reason, you later decide not to attend, or cannot attend, the Meeting.
If you hold any shares of Common Stock in
street name, you may vote those shares in person at the Meeting only if you obtain a signed proxy from your broker, bank or other
nominee giving you the right to vote such shares at the Meeting.
What vote is required to approve the Sale Proposal, the Name
Change Proposal, the Protective Amendment Proposal, the Adjournment Proposal and any other proposals that
will be made at the Meeting?
The presence, in person or by proxy, of at least
a majority of the outstanding shares of Common Stock entitled to vote at the Meeting is necessary to establish a quorum for the
transaction of business. Shares represented by proxies that contain one or more abstentions or broker non-votes will
be counted as present for purposes of determining the presence or absence of a quorum for the Meeting. Only Shareholders of record
at the close of business on April 9, 2018, the Record Date, are entitled to notice of, and to vote at, the Meeting and at any adjournments
or postponements of the meeting. As of April 9, 2018, there were 1,272,066,146 shares of our Common Stock outstanding. Each
share of Common Stock is entitled to one vote per share on all matters presented to our Shareholders for approval. The
Company has no other class of voting securities outstanding.
Each of the Sale Proposal, the Name
Change Proposal and the Protective Amendment Proposal require the affirmative vote of the holders
of a majority of all outstanding shares of Common Stock entitled to vote. The Adjournment Proposal will be
approved if it receives an affirmative vote of a majority of shares present or represented and entitled to vote at the
Meeting.
Broker non-votes occur when nominees,
such as brokers and banks, holding shares on behalf of “street name” owners do not receive voting instructions
from those owners regarding a matter and do not have discretionary authority to vote on the matter, but who submit a
proxy. With respect to matters such as the Sale Proposal, the Name Change Proposal and the Protective Amendment
Proposal, nominees cannot vote unless they receive instructions from the “street name”
owner. The failure to receive such instructions as to such a matter results in a broker non-vote. With respect to the
Adjournment Proposal, broker non-votes and abstentions will be counted to determine a quorum, but will not be counted as
votes for or against any proposal and therefore have the practical effect of reducing the number of affirmative votes
required to achieve a majority by reducing the total number of shares from which the majority is calculated.
With respect to the Sale Proposal,
the Name Change Proposal and the Protective Amendment Proposal, only shares affirmatively voted “FOR” the
proposals will be counted as favorable votes. Shares of our Common Stock held by persons attending the Meeting but not
voting, broker non-votes and shares of our Common Stock for which we received proxies but with respect to which holders of
those shares have abstained from voting, will have the same effect as votes “AGAINST” the Sale Proposal, the Name
Change Proposal and the Protective Amendment Proposal for purposes of determining whether or not
the requisite vote was received.
If you hold your shares of our Common
Stock through a broker and wish to vote on the proposals described in this proxy statement that are
“non-routine,” you must instruct your broker how to vote your shares. IF YOU FAIL TO INSTRUCT YOUR BROKER HOW TO
VOTE WITH RESPECT TO THE SALE PROPOSAL, THE NAME CHANGE PROPOSAL AND THE PROTECTIVE AMENDMENT PROPOSAL, THE RESULTING BROKER NON-VOTE ON SUCH PROPOSALS WILL HAVE THE EFFECT OF A VOTE “AGAINST” SUCH
PROPOSALS.
What are broker non-votes?
If any of your shares of Common Stock are
held by a broker, the broker may require your instructions in order to vote those shares. If you give the broker instructions,
your shares that are held by the broker will be voted on a proposal as you direct. If you do not give instructions,
your shares of Common Stock that are held by the broker will be considered to be “broker non-votes” and will not be
voted on any proposal on which your broker does not have discretionary authority to vote.
How are votes counted?
Shareholders may also vote “
FOR
,”
“
AGAINST
” or “
ABSTAIN
” on the proposals at the Meeting.
If you vote “
ABSTAIN
”
or “
WITHHOLD
,” your shares of Common Stock will be counted as present at the Meeting for the purposes of determining
a quorum.
If you “
ABSTAIN
” from
voting on the proposals, your abstention has the same effect as a vote against those proposals.
If you hold any shares of Common Stock in
street name and do not provide voting instructions to your broker with respect to those shares, but the broker submits a proxy
for the Meeting, those shares will be counted as present at the Meeting for the purpose of determining a quorum but will not be
voted on any proposal on which your broker does not have discretionary authority to vote. Such a broker non-vote will
have the effects described above.
What if I do not specify on my proxy card how I want my shares
of Common Stock voted?
If you do not specify on your returned proxy
card how you want to vote your shares of Common Stock, the persons named as proxies on the card will vote the shares as recommended
by our Board:
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·
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“
FOR
” the Sale Proposal;
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·
|
“
FOR
” the Name Change Proposal;
|
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·
|
“
FOR
” the Protective Amendment Proposal; and
|
|
·
|
“
FOR
” the Adjournment Proposal.
|
Can I change my vote?
Yes. You may change your vote
and revoke your proxy at any time before it is voted at the meeting in any of the following ways:
|
·
|
by delivering a written notice of revocation to the Company’s Corporate Secretary;
|
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·
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by submitting another properly signed proxy card at a later date to our Corporate Secretary; or
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·
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by attending and voting in person at the Meeting.
|
Attendance at the Meeting will not, by itself, revoke a proxy.
Who pays the cost of proxy preparation and solicitation?
The Company pays for the cost of proxy preparation
and solicitation, including the charges and expenses of brokerage firms or other nominees for forwarding proxy materials to beneficial
owners.
The proxies are being solicited by mail. In
addition, proxies may be solicited personally by some of our directors, officers and regular employees. These individuals
will receive no additional compensation beyond their regular salaries for these services.
SALE PROPOSAL
Why did the Corporation enter into the Asset Purchase Agreement?
Entering into the Asset Purchase Agreement
is the result of an extensive review by the Board of various strategic alternatives available to the Company. The Board
determined that the proposed Sale would maximize value for the Shareholders and eliminate future business risk. See
“
Proposal No. 1 – Sale
” below.
What does the Board recommend regarding the Sale Proposal?
The Board has determined that the terms
and provisions of the Asset Purchase Agreement and related transaction documents, in its opinion, are fair to, advisable and in
the best interests of, the Company and its Shareholders. This determination was made by a unanimous vote of all of the
members of the Board. The Board recommends that each Shareholder vote “
FOR
” the authorization of
the Sale Proposal.
Do I have appraisal rights in connection with the Sale?
Yes, appraisal rights under Florida law
are available to Shareholders who are entitled to vote on the Sale if they fully comply with all applicable statutory requirements.
All future references in this Proxy Statement to “our shareholders” or “the Company’s shareholders”
or the like, when referring to dissenters’ appraisal rights, shall be a reference to Shareholders who are entitled to vote
on the Sale, namely our Common Stock Shareholders. Failure to follow the steps and procedures required by Sections 607.1301 through
607.1333 of the FBCA for perfecting appraisal rights may result in the loss, termination or waiver of such rights. In view of the
complexity of these provisions of Florida law, any Shareholder who is considering exercising appraisal rights should consult his
or her legal advisor.
What will happen if the Sale is approved by Shareholders?
If the holders of at least a majority of all
of the outstanding shares of Common Stock approve the Sale, and the conditions to closing the Sale as set forth in the Asset Purchase
Agreement are satisfied or waived, the Company and its subsidiaries will sell substantially all of their assets to the Buyer for
cash. As soon as practicable after the closing of the Sale, the Company plans to distribute, in one or more installments,
cash from the Sale and the Company’s other cash, subject to a reserve for remaining costs and liabilities, which the Company
anticipates to be in the amount of between approximately $3.2 million and $4.5 million. The amount and timing of the
payment(s) will be determined by the Board in its discretion.
If the Shareholders approve the Sale, subject
to the Escrow, the satisfaction of the liabilities of the Company and certain assumptions, the Company intends, although there
can be no assurance, to provide for an initial distribution of between $3.2 million and $4.5 million in the aggregate, or approximately
$0.0025 to $0.0035 per share of Common Stock. No distribution will be made if there is no Closing, and the amount of any future
distribution will be determined by the Board. To the extent the Closing occurs and the initial distribution is made, the Company
intends to pay one or more future distributions but such distribution(s) and amount(s) will depend on the Company’s available
cash, after reflecting any reserve for future contingent liabilities, operating costs and any other uses of cash.
Although the Company’s management
believes that the estimates of the liabilities and net proceeds available for distribution to the Shareholders are reasonable based
on information currently available to the Company, the actual amounts of such liabilities and resulting net proceeds available
for distribution to the Shareholders may differ materially from such estimates, thereby affecting the amount available to be distributed
to Shareholders. The Board currently is not aware of any material items that could give rise to unforeseen tax liabilities
or other liabilities or costs not factored into the above estimated liabilities and obligations which would materially reduce the
amount of cash available for distribution to Shareholders, but there is no assurance this will remain the case.
The timing of any distributions to Shareholders
upon consummation of the Sale depends upon, among other factors, the timing of Company’s subsidiaries completing all of their
obligations and requirements and subsequently providing a liquidating distribution to the Company consisting of the balance of
cash available to those subsidiaries after the closing of the Sale and payment of all liabilities and obligations. See
“
Risk Factors
” below.
What will happen if the Sale is not approved by the Shareholders?
Pursuant to the terms of the Asset Purchase
Agreement, if the Company fails to obtain the approval of Shareholders of the Sale, the Sale will not occur. If the
Asset Purchase Agreement terminates automatically because the Shareholders do not approve the Asset Purchase Agreement and the
Sale, then the Company shall reimburse Buyer for up to $400,000 of its fees and expenses reasonably incurred in connection with
the contemplated Sale.
What is the Aggregate Purchase Price?
The Purchase Price to be paid in connection
with the Sale is $15,500,000 in cash plus the assumption of certain specified liabilities, provided that $3,000,000 of the purchase
price into an escrow account at Closing to secure the Company’s indemnification obligations to the Buyer with respect to
breaches of the Company’s representations and warranties, breaches of covenants, losses related to excluded assets or excluded
liabilities and certain other matters set forth in the Asset Purchase Agreement. Any claims for indemnification made
by the Buyer and paid from the Escrow Amount will reduce the amount of the aggregate Purchase Price actually received by the Company.
The Escrow Payment and the indemnification terms are more specifically described in the Asset Purchase Agreement and elsewhere
in this Proxy Statement. See “
Proposal No. 1 – Sale – Summary of Proxy Statement – Purchase
Price
.”
How was the Purchase Price determined?
The Purchase Price was negotiated by the
Board with the Buyer in connection with a sale process initially facilitated by Boxwood Partners, LLC (“
Boxwood
”),
which advised the Company in its review of strategic alternatives. Boxwood conducted a bid process on behalf of the
Company and its subsidiaries in an attempt to secure the highest price for the Company’s and its subsidiaries’ assets. The
Buyer was the high bidder in the bid process. The Buyer’s bid was contingent on financing and was an all-cash
bid.
What are the material terms of the Asset Purchase Agreement?
See the section of this Proxy Statement
entitled “
Proposal No. 1 – Sale
” below.
Are there any risks to the Sale?
Yes. Please read carefully the
section of this Proxy Statement below entitled “
Risk Factors
.”
What are the tax consequences of the Sale to the Shareholders?
The proposed Sale will be a transaction
taxable to the Company for United States federal income tax purposes. In general, the Company will recognize taxable gain in an
amount equal to the difference, if any, between (i) the total amount realized by the Company on the Sale and (ii) the Company’s
aggregate adjusted tax basis in the assets sold. The total amount realized by the Company on the Sale will equal the cash the Company
receives in exchange for the assets sold, plus the amount of related liabilities assumed by the Buyer or cancelled in the transaction.
The Company expects that a portion of the taxable gain recognized on the Sale will be offset by current year losses from operations
and available net operating loss carry forwards, as currently reflected on our consolidated U.S. federal income tax returns. However,
the Company believes that a significant portion of its net operating loss carryforwards will never be fully utilized and will expire
unused.
Shareholders will not be subject to U.S.
federal income tax on the Sale. However, as discussed below, Shareholders will be subject to U.S. federal income tax upon the receipt
of any distribution of Sale proceeds made by the Company to the Shareholders.
See the section entitled “
Certain
U.S. Federal Income Tax Considerations – Certain U.S. Federal Tax Consequences
.”
When is the closing of the Sale expected to occur?
If the Sale is approved by the Shareholders
and all conditions to completing the Sale, as set forth in the Asset Purchase Agreement, are satisfied or waived, the Sale is expected
to occur as soon as practicable after the Meeting. The Board expects the Sale to close on or before the fifth business
day following the satisfaction of all of the closing conditions set forth in the Asset Purchase Agreement.
NAME CHANGE
What is the proposed amendment to the Amended and Restated
Articles of Incorporation?
The proposed amendment is to change our
corporate name to “CBA, Inc.” upon closing of the Sale.
What vote is required to effect the Company’s name
change?
The affirmative vote of the holders of a
majority of all of the outstanding shares of Common Stock entitled to vote at the Meeting is necessary to approve the amendment
to our Amended and Restated Articles of Incorporation to effect the Company’s name change.
Why is the name change necessary?
Under the Asset Purchase Agreement, we have
agreed to sell to Buyer all rights to our name “Cord Blood”, as well as our trade names and trademarks and the trade
names and trade marks of our wholly-owned subsidiaries. Accordingly, in order to close the asset sale, we must change
our corporate name to a name other than “Cord Blood”.
When will the Company’s name change be effective
?
If the Sale is approved and the closing
occurs, the name change will be effective at closing or promptly after closing of the Sale. The Company’s name
change will be effected by filing an amendment to the Company’s Amended and Restated Articles of Incorporation with the Florida
Secretary of State. If the Sale is not approved by the Shareholders or does not close, the name change will not be effective
(even if approved by the Shareholders) and we will not change our name.
PROTECTIVE AMENDMENT
What is the proposed amendment to the Amended and Restated
Articles of Incorporation?
The proposed amendment is to adopt a provision
in our Amended and Restated Articles of Incorporation to protect the significant potential tax benefits presented by net operating
losses (“
NOLs
”) of the Company pursuant to the Protective Amendment, which is designed to prevent certain
transfers of our securities that could result in an ownership change that could eliminate the tax benefits of our NOLs.
What vote is required to effect the Company’s Protective
Amendment?
The affirmative vote of the holders of a
majority of all of the outstanding shares of Common Stock entitled to vote at the Meeting is necessary to approve the amendment
to our Amended and Restated Articles of Incorporation to effect the Protective Amendment.
What is the benefit of the Protective Amendment?
Under federal tax laws, we generally can
use the NOLs (to the extent not subject to limitations under Section 382 of the Code) and certain related tax credits to reduce
ordinary income tax on our future taxable income for up to 20 years for all NOLs accrued prior to January 1, 2018 (the “
Old
NOLs
”), at which point the Old NOLs “expire” for such purposes. NOLs arising after December 31, 2017
(“
New NOLs
”) do not expire. Until they expire, we can “carry forward” and offset up to 100%
of ordinary income with respect to available Old NOLs, and we can offset up to 80% of ordinary income with respect to available
New NOLs. Our NOLs may also be used for state tax purposes in certain circumstances. While we cannot estimate the exact amount
of NOLs that we will be able use to reduce future income tax liability because we cannot predict the amount and timing of our future
taxable income, we believe the NOLs are a very valuable asset.
When will the Protective Amendment be effective
?
If the Protective Amendment is approved,
it will become effective following the Meeting, upon the filing of an amendment to our Amended and Restated Articles of Incorporation
with the Florida Secretary of State.
ADJOURNMENT PROPOSAL
Why am I being asked to vote on the Adjournment Proposal?
The Commission requires that companies give
its shareholders the ability to specifically vote on any adjournment proposal.
What is the vote required to approve the Adjournment Proposal?
This proposal becomes effective if it receives
the affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy and entitled
to vote on that proposal at the Meeting.
RISK FACTORS
For a discussion of certain risks relating
to an investment in our Common Stock, please refer to the risk factors under the caption “Risk Factors” in the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed with the Commission. Shareholders also
should carefully consider the risk factors described below with respect to the Sale and the other information contained in this
Proxy Statement and the annexes hereto.
The Sale, even if approved by the Shareholders, may not
be completed.
The completion of the Sale is subject to
a number of conditions to closing, some of which are outside the control of the Company and its subsidiaries, including receipt
of Shareholder approval of the Sale and the Sale closing by August 6, 2018, obtaining any applicable third-party consents to the
assignment of applicable contracts, the Asset Purchase Agreement remaining in force and the Buyer having obtained third-party financing
and having performed its other obligations under the Asset Purchase Agreement. There can be no certainty, nor can the
Company provide any assurance to Shareholders, that, if even if the Shareholders approve the Sale, these conditions will be satisfied
or, if satisfied, when they will be satisfied.
The distributions to Shareholders as a result of the Sale
are subject to a number of risks.
Any distributions made by the Company to
its Shareholders as a result of the Sale, including the timing and amount of such distributions, are subject to a number of risks,
including (without limitation) the following:
|
·
|
the timing and amount of distributions to Shareholders cannot be predicted with certainty;
|
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·
|
any estimate of the amount available for distribution to Shareholders could be reduced if the Company’s expectations regarding operating expenses, employee retention, costs of satisfying or discharging liabilities are inaccurate;
|
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·
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any estimate of the amount available for distribution to Shareholders is based on a number of assumptions, including with respect to administrative and professional expenses incurred by the Company in the interim, some or all of which may be inaccurate;
|
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·
|
any delay in the closing of the Sale will decrease the funds available for distribution, because the Company will continue to be subject to ongoing operating expenses;
|
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·
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the Company may face lawsuits or other claims and it may take time to defend or settle any such lawsuits or claims, and any estimates of liability that may arise from such lawsuits or claims may be inaccurate;
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·
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Shareholders could vote against the Sale, thereby making the Sale impossible and adding great uncertainty as to the ability to make any distribution to Shareholders;
|
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·
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the occurrence of certain events, changes or other circumstance could give rise to the termination of the Asset Purchase Agreement, which would result in the Sale not being consummated;
|
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·
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the Company may receive a Superior Proposal, the Asset Purchase Agreement may be terminated in connection with the Company’s pursuit of such alternative transaction, and that alternative transaction may not be consummated; or
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·
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the Sale process may disrupt current plans and operations and we may face difficulties in employee retention.
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If claims for indemnification are made by the Buyer and
paid from the Escrow Amount, it will reduce the amount of the aggregate Purchase Price actually received by the Company and the
potential distributions to be made to Shareholders.
The Purchase Price to be paid in connection
with the Sale is $15,500,000 in cash plus the assumption of certain specified liabilities, provided that $3,000,000 of the purchase
price into an escrow account at Closing to secure the Company’s indemnification obligations to the Buyer with respect to
breaches of the Company’s representations and warranties, breaches of covenants, losses related to excluded assets or excluded
liabilities and certain other matters set forth in the Asset Purchase Agreement. Any claims for indemnification made
by the Buyer and paid from the Escrow Amount will reduce the amount of the aggregate Purchase Price actually received by the Company
and the amount of cash ultimately available for distributions to Shareholders. There can be no assurance that the Escrow Amount
will not be used to satisfy indemnification claims. The mechanics of indemnification and the escrow in relation thereto
are more specifically described in the Asset Purchase Agreement.
The Company may not receive any competing transaction
proposals or Superior Proposals, including as a result of the termination fee payable to the Buyer.
The Asset Purchase Agreement requires the
Company to pay to the Buyer a termination fee if certain events specified in the Asset Purchase Agreement occur, including the
Company pursuing a Superior Proposal. The amount of this termination fee may have the effect of causing other potential
third-party buyers to not submit a proposal to buy either the Company and its subsidiaries or their assets at a higher price or
to enter into a more favorable alternative transaction.
Our directors and executive officers may have interests
that are different from, or in addition to, those of Shareholders generally.
You should be aware of interests of, and
the benefits available to, our directors and executive officers when considering the recommendation of our Board of the Sale. Our
directors and executive officers may have interests in the Sale that may be in addition to, or different from, their interests
as Shareholders. Three of the Company’s directors, David Sandberg, Adrian Pertierra and Anthony Snow (who is also the Company’s
Interim President), are employed by Red Oak Partners, LLC, a Florida-based, Commission-registered investment company, which is
the general partner of the Fund Shareholders and has shared voting power and shared dispositive power over their shares of the
Company. Each of the Fund Shareholders has entered into the Voting Agreement with Buyer agreeing, among other things, to vote its
shares in favor of the Sale. See “
Interests of Certain Persons in Matters to be Acted Upon
” below.
If we fail to complete the Sale, our business may be materially
harmed.
We cannot assure you that the Sale will
be completed. As a result of our announcement of the Sale, third parties may be unwilling to enter into material agreements with
respect to our business. New or existing customers may prefer to enter into agreements with our competitors who have not expressed
an intention to sell their business because customers may perceive that such relationships are likely to be more stable. If we
fail to complete the proposed Sale, the failure to maintain existing business relationships or enter into new ones may materially
and adversely affect our business, results of operations and financial condition.
We will incur significant expenses in connection with
the Sale and could be required to make significant payments if the Asset Purchase Agreement is terminated under certain conditions.
If we are unable to close the Sale due to
our uncured breach of our representations, warranties, covenants or obligations under the Asset Purchase Agreement , we may owe
contractual damages to the Buyer that would likely exhaust our cash reserves. In addition, we expect to pay legal fees,
accounting fees and proxy costs whether the Sale closes or not. Any significant expenses or payment obligations incurred by us
in connection with the Sale could adversely affect our financial condition and cash position.
We will continue to incur the expenses of complying with
public company reporting requirements.
We have an obligation to continue to comply
with the applicable reporting requirements of the Exchange Act even though compliance with such reporting requirements is economically
burdensome. Until the Company is able to deregister its shares and suspend its periodic reporting obligations under
the Exchange Act, the Company will remain a reporting issuer and will incur attendant costs relating to filing such reports with
the Commission.
SHAREHOLDER PROPOSALS FOR 2018 ANNUAL
MEETING
For a Shareholder proposal to be considered
for inclusion in the Company’s proxy statement for the 2018 annual meeting, the Corporate Secretary must have received the
written proposal at the Company’s principal executive offices no later than the deadline stated below. Such proposals must
comply with Commission regulations under Rule 14a-8 of the Exchange Act regarding the inclusion of shareholder proposals in company-sponsored
proxy materials. Proposals should have been addressed to:
Cord Blood America, Inc.
Attention: Corporate Secretary
1857 Helm Drive
Las Vegas, NV 89119
Facsimile: (702) 914-7251
Under Rule 14a-8, to be timely, a Shareholder’s
notice must have been received at the Company’s principal executive offices not less than 120 calendar days before the date
of the Company’s proxy statement release to Shareholders in connection with the previous year’s annual meeting. However,
if the Company did not hold an annual meeting in the previous year or if the date of this year’s annual meeting has been
changed by more than 30 days from the date of the previous year’s annual meeting, then the deadline is a reasonable time
before the Company begins to print and send its proxy materials. Therefore, Shareholder proposals intended to be presented at the
2018 annual meeting should have been received by the Company at its principal executive office by January 30, 2018 in order to
be eligible for inclusion in the Company’s 2018 proxy statement and proxy relating to that meeting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file annual, quarterly and current reports,
proxy statements and other information with the Commission. These documents are available without charge on our website
at https://www.cordblood-america.com/investors/ or by writing to: Corporate Secretary, Cord Blood America, Inc., 1857 Helm Drive,
Las Vegas, NV 89119. These documents also are available on the website maintained by the Commission at www.sec.gov. The
reference to such website addresses does not constitute incorporation by reference of the information contained on, or linked to,
such websites and none of such information is part of this Proxy Statement.
In addition, we incorporate by reference
in this Proxy Statement any future filings that we may make with the Commission under Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this Proxy Statement and before the date of the Meeting. Such documents are considered
to be a part of this Proxy Statement, effective as of the date such documents are filed. In the event of conflicting
information in these documents, the information in the latest filed document should be considered correct.
If you have questions about the Meeting,
the Sale, the Name Change or any other matter after reading this Proxy Statement, or if you would like additional copies of this
Proxy Statement or the proxy card, you should contact our Corporate Secretary by writing to 1857 Helm Drive, Las Vegas, NV 89119.
You should rely only on the information
contained in this Proxy Statement. We have not authorized anyone to provide you with information that is different from
or that adds to what is contained in this Proxy Statement. Therefore, if anyone does give you information of this sort,
you should not rely on it. If you are in a jurisdiction where the solicitation of proxies is unlawful, or if you are
a person to whom it is unlawful to direct these types of activities, then the offer presented in this document does not extend
to you. The information contained in this document speaks only as of the date indicated on the cover of this document,
unless the information specifically indicates that another date applies. The mailing of this Proxy Statement to the
Shareholders does not create any implication to the contrary.
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By order of the Board of Directors,
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Anthony Snow
Corporate Secretary
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April 16
, 2018
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Annex A
ASSET
PURCHASE AGREEMENT
This Asset Purchase
Agreement (the “
Agreement
”) is entered into as of February 6, 2018, by and between California Cryobank Stem
Cell Services, LLC, a California limited liability company (the “
Buyer
”), and Cord Blood America, Inc., a Florida
corporation (the “
Seller
”). The Buyer and the Seller are collectively referred to herein as the “
Parties
”
and individually as a “
Party
.”
R E C I T A L S
This Agreement contemplates
a transaction in which the Buyer will purchase the Acquired Assets and assume the Storage solely with respect to the Acquired Assets
(as set forth in the Assumed Contracts) in consideration of the Purchase Price (as such terms are defined herein).
The board of directors
of the Seller and each of the Seller’s subsidiaries have approved the transactions contemplated by this Agreement.
The board of directors
of the Seller has resolved to recommend the authorization of the transactions contemplated by this Agreement by shareholders of
record of the Seller.
Concurrently with the
execution of this Agreement, and as a condition and inducement to the Buyer’s willingness to enter into this Agreement, Red
Oak Partners, LLC, a Florida limited liability company, and the officers and directors of the Seller, and their respective Affiliates
(as such term is defined herein) (collectively, the “
Supporters
”), have entered into a voting and support agreement
pursuant to which the Supporters agreed in their respective capacities as shareholders of the Seller, to vote in favor of and otherwise
support the transactions contemplated by this agreement.
NOW
THEREFORE
, in consideration of the premises and the mutual promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the Parties agree as follows.
“
Acquired
Assets
” means all assets, properties, interests and other rights of the Selling Parties other than the Excluded Assets,
including: (a) the cord blood, cord tissue and isocell units set forth in
Schedule 1.1
, which are the subject of Assumed
Contracts (
provided
, that, notwithstanding anything else in this Agreement to the contrary, the cord blood, cord tissue
and isocell units set forth in
Schedule 1.1
and otherwise in the custody of any Selling Party are the assets and property
of the contractual counterparties listed on
Schedule 1.1
and are not the assets nor property of any Selling Party
nor the Buyer following the consummation of this transaction); (b) the Assumed Contracts and all rights in, under and related
thereto; (c) all prepaid expenses, deposits, rebates, credits, advances, other prepayments and related rights paid, obtained by,
or related to the Selling Parties; (d) all Intellectual Property of the Selling Parties and all rights thereunder or in respect
thereof, including all Seller Intellectual Property, any third-party Intellectual Property licensed by the Selling Parties and
all rights to the names of the Selling Parties; (e) all training materials, presentation materials and sales or promotional
materials of the Selling Parties; (f) the Tangible Assets; (g) all books, files, papers, ledgers, correspondence, databases,
information systems, programs, materials, documents and records of the Selling Parties, including all records and documents relating
to the Acquired Assets, the Assumed Liabilities, and the Selling Parties’ accounts receivable and unbilled accounts receivable
and work-in process (including the purchasing, sales and return materials authorization records, testing records for all the Selling
Parties’ products, customer, vendor and pricing lists, accounting, financial and business records, billing records, product
documentation, inventory records, product specifications, research and development records, patent disclosures, patent files histories,
manuals, marketing requirement documents, end user documentation, packaging materials, brochures, user manuals, graphics and artwork),
on whatever medium; (h) all permits of the Selling Parties; (i) the goodwill of the Selling Parties; (j) all assets,
properties, interests and other rights necessary to operate the Business as now conducted or presently proposed to be conducted
including but not limited to those items set forth on
Schedule 2.1
; (k) all claims, causes of action, rights
to tender claims or other rights against any Person related to the Acquired Assets; and (l) all of the Selling Parties’
other tangible and intangible assets.
“
Affiliate
”
of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such Person. The term “control” (including the terms “controlled by” and
“under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction
of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
“
Agreement
”
shall have the meaning set forth in the Preamble.
“
Allocation
Schedule
” shall have the meaning set forth in
Section 2.5(c)
.
“
Applicable
Anti-Corruption Laws
” shall have the meaning set forth in
Section 3.27(a)
.
“
Assumed Contracts
”
means the pre-donor qualifications healthcare questionnaire, informed consent forms, storage contracts and other agreements pertaining
to each cord blood, cord tissue and isocell unit set forth in
Schedule 1.1
, entered into by a Selling Party and each
in the form attached hereto as
Exhibit E
, which shall not include any such documents with the counterparties listed on
Schedule 2.2
.
“
Assumed Liabilities
”
shall have the meaning set forth in
Section 2.3
.
“
Balance Sheet
”
means the consolidated unaudited balance sheets of the Seller at the Balance Sheet Date.
“
Balance Sheet
Date
” means September 30, 2017.
“
Basis
”
means any past or present fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could reasonably form the basis for any specified consequence.
“
Basket
”
shall have the meaning set forth in
Section 8.5(a)
.
“
Benefit Plan
”
means each (a) employment or consulting agreement with a Selling Party employee or other service provider of a Selling Party that
is in effect as of the date hereof or under which the Seller, any other Selling Party or any ERISA Affiliate has any outstanding
Liability or obligations, and (b) Employee Benefit Plan (whether or not such plan is subject to ERISA) or other employee benefit,
bonus, deferred compensation, incentive, equity, or equity-based compensation, stock option, securities purchase, stock appreciation,
retirement or supplemental retirement, pension, employment, consulting, fringe benefit, severance pay, lay-off or reduction in
force, change in control, sick pay, vacation pay, salary continuation, retainer, leave of absence, educational assistance, service
award, employee discount, and other similar fringe or employee benefit plan, program, arrangement, policy or practice, in each
case (i) covering any Selling Party employee or other service provider of a Selling Party (or any dependent or beneficiary
thereof), (ii) to which the Seller, any other Selling Party or any of its ERISA Affiliates is a party, (iii) with respect
to which the Seller or any of its ERISA Affiliates has or could have any obligation or Liability or (iv) which is maintained,
contributed to, sponsored by or required to be contributed to by the Seller, any other Selling Party or any of its ERISA Affiliates.
“
Bill of Sale
and Assignment and Assumption Agreement
” shall have the meaning set forth in
Section 2.8(a)
.
“
Business
”
means the cryogenic storage of stem cells, cord blood and cord tissue and other related services currently conducted by the Selling
Parties.
“
Buyer
”
shall have the meaning set forth in the Preamble.
“
Buyer Indemnified
Parties
” shall have the meaning set forth in
Section 8.2
.
“
Closing
”
shall have the meaning set forth in
Section 2.7
.
“
Closing Date
”
shall have the meaning set forth in
Section 2.7
.
“
Closing Payment
”
shall have the meaning set forth in
Section 2.5(a)
.
“
COBRA
”
shall have the meaning set forth in
Section 5.22
.
“
Code
”
means the Internal Revenue Code of 1986, as amended.
“
Commission
”
means the United States Securities and Exchange Commission.
“
Competing
Proposal
” means any offer or proposal (whether or not in writing) from any Person relating to any (a) merger, consolidation,
share exchange, business combination or other similar transaction, or series of transactions, involving the Seller or any other
Selling Party that, if consummated, would result in a third party acquiring twenty percent (20%) or more of the outstanding voting
power of the Seller, such Selling Party, or the surviving entity of such transaction immediately following such transaction, or
series of transactions, (b) sale, lease, license, disposition or other transfer of ownership by the Seller or any other Selling
Party (including by way of merger, consolidation, share exchange, business combination, joint venture, sale of shares of capital
stock of the Seller or otherwise), through a transaction, or series of transactions, of any of the Acquired Assets, (c) issuance
of shares of capital stock, or other equity interest in, of the Seller, or any other Selling Party, representing twenty percent
(20%) or more of the voting power of the Seller or such Selling Party, (d) tender offer or exchange offer that, if consummated,
would result in any Person beneficially owning more than twenty percent (20%) of the shares of capital stock of the Seller, or
any other Selling Party, then outstanding or (e) any other transaction or series of transactions that would otherwise be inconsistent
with transactions contemplated by this Agreement.
“
Competitive
Services
” shall have the meaning set forth in
Section 5.3
.
“
Confidential
Information
” shall have the meaning set forth in
Section 5.4
.
“
Content
”
shall have the meaning set forth in
Section 3.9(k)
.
“
Credit Agreement
”
means the Credit Agreement, dated as of August 19, 2014, as amended by the Second Amendment and as otherwise amended, modified,
renewed, extended or amended, restated, or replaced from time to time, among Cryobank Holdings, LLC, a Delaware limited liability
company, California Cryobank LLC, a California limited liability company, certain other loan parties party thereto from time to
time, the financial institutions party thereto as lenders and Golub Capital LLC, as administrative agent for the lenders.
“
Customer
”
shall have the meaning set forth in
Section 5.11(a)
.
“
Domain Names
”
shall have the meaning set forth in
Section 3.9(k)
.
“
Employee
Benefit Plan
” shall have the meaning specified in Section 3(3) of ERISA and shall include both “employee pension
benefit plans” within the meaning of Section 3(2)(A) of ERISA (including any simplified employee pension plans subject
to Section 408(k) of the Code) and “employee welfare benefit plans” within the meaning of Section 3(1) of
ERISA.
“
End Date
”
shall have the meaning set forth in
Section 7.1
.
“
Environmental
Laws
” means all federal, state, or local Laws pertaining to environmental matters, including those arising under the
Resource Conservation and Recovery Act, CERCLA, the Superfund Amendments and Reauthorization Act of 1986, the Federal Clean Water
Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any other Law relating to health, safety or the environment.
“
ERISA
”
means the Employee Retirement Income Security Act of 1974, as amended.
“
ERISA Affiliate
”
means each Person which is or was required to be treated as a single employer with the Seller under Section 414 of the Code
or Section 4001(b)(1) of ERISA.
“
Escrow Agent
”
means US Bank National Association.
“
Escrow Agreement
”
shall have the meaning set forth in
Section 2.8(a)
.
“
Escrow Payment
”
shall have the meaning set forth in
Section 2.5(b)
.
“
Exchange
Act
” shall have the meaning set forth in
Section 3.12(a)
.
“
Excluded
Assets
” shall have the meaning set forth in
Section 2.2
.
“
Excluded
Documents
” means (a) the corporate organizational documents, minute books, qualifications to conduct business as a foreign
corporation, arrangements with registered agents relating to foreign qualifications, taxpayer and other identification numbers,
general ledgers, Tax Returns and other Tax-related documents, seals, minute books, stock transfer books or similar documents of
any Selling Party, (b) any data and information, including personnel files, relating to any Seller Employee or Seller Consultant
or (c) any data and information the transfer of which hereunder is prohibited by applicable Law.
“
Excluded
Liability
” means any Liability of the Seller Parties not specifically assumed by the Buyer pursuant to
Section
2.3
, including (a) any Liability arising in connection with any Excluded Asset; (b) any Liability resulting from violations
of any applicable Laws by the Selling Parties or infringement of third-party rights or interests; (c) all Seller Employee Liabilities;
(d) any proceeding against the Selling Parties or the Acquired Assets arising out of or relating to any occurrence or event
happening prior to the Closing Date; (e) any Liability that arises out of or relates to any breach of, or failure to perform or
comply with, any covenant or obligation by the Selling Parties; (f) any Liabilities under the Assumed Contracts for any period
prior to Closing Date; (g) all Special Liabilities; (h) any Liabilities listed on
Schedule 2.4
; and (i) any Liability
of the Selling Parties arising prior to the Closing Date.
“
Excluded
Subsidiaries
” means Vida Plus 2007, S.L. and China Stem Cells, Ltd.
“
Exploit
”
means develop, design, test, modify, make, use, sell, have made, used and sold, import, reproduce, market, distribute, commercialize,
support, maintain, correct and create derivative works of.
“
Facility
”
shall have the meaning set forth in
Section 3.6(a)
.
“
FDA
”
shall have the meaning set forth in
Section 3.8
.
“
Financing
Source
” means the financial institutions identified as lenders under the Credit Agreement, together with Golub Capital,
LLC, as administrative agent for the lenders.
“
Financing
Source Related Parties
” means the Financing Source and its Affiliates, partners, trustees, and equityholders, and the
directors, officers, employees, advisors, representatives, attorneys-in-fact and agents of the foregoing, including their respective
successors and assigns, which shall not include the Buyer or its Affiliates.
“
FIRPTA Certificate
”
shall have the meaning set forth in
Section 2.8(a)
.
“
Fundamental
Representations and Warranties
” means such representations and warranties set forth in
Section 3.1
(Organization
of Seller),
Section 3.2
(Authorization of Transaction),
Section 3.3
(Noncontravention),
Section 3.5
(Title to Assets),
Section 3.15
(Taxes) and
Section 3.19
(Brokers’ Fees).
“
GAAP
”
means United States generally accepted accounting principles, consistently applied.
“
Government
Official
” has the meaning set forth in
Section 3.27(b)
.
“
Governmental
Authority
” means any federal, state, local municipal and foreign, international, or multinational government, administration
or quasi-governmental and related agencies, boards, commissions and all other regulatory bodies, including any securities exchange.
“
In-Bound
License Agreement
” shall have the meaning set forth in
Section 3.9(d)
.
“
Indemnified
Party
” shall have the meaning set forth in
Section 8.1
.
“
Indemnifying
Party
” shall have the meaning set forth in
Section 8.1
.
“
Insurance
Policies
” shall have the meaning set forth in
Section 3.17
.
“
Intellectual
Property
” means, with respect to the Selling Parties, all patents, patent rights, patent applications, registered trademarks
and service marks, trademark rights, trademark applications, service mark rights, service mark applications, trade names, fictitious
names, domain names, email addresses, websites, registered copyrights, copyright rights (including computer programming code) and
all intellectual, industrial and proprietary rights and trade secrets, technology and know-how in which any Selling Party has an
ownership or licensed interest or which any Selling Party uses in the Business, in each case together with any amendments, modifications
and supplements thereto.
“
Internal
Systems
” means the software and documentation and the computer, communications and network systems (both desktop and
enterprise-wide), servers, hardware, equipment, materials and apparatus used by the Selling Parties in their business or operations
or to develop, manufacture, fabricate, assemble, provide, distribute, support, maintain or test the products manufactured, distributed,
licensed or sold by the Selling Parties, whether located on the premises of the Selling Parties or hosted at a third-party site.
“
IP Assignment
and Assumption Agreement
” shall have the meaning set forth in
Section 2.8(a)
.
“
IRS
”
shall have the meaning set forth in
Section 2.5(c)
.
“
Knowledge
”
means, with respect to the Seller, the actual knowledge of the Selling Parties (including their respective officers and directors)
and such knowledge as such management (including their respective officers and directors) could reasonably be expected to have
been obtained through reasonable investigation, and with respect to the Buyer, actual knowledge of the Buyer (including its officers
and directors) and such knowledge as such management (including its officers and directors) could reasonably be expected to have
been obtained through reasonable investigation.
“
Laws
”
means all laws, rules, regulations, codes, injunctions, judgments, orders, decrees, rulings, interpretations, constitution, ordinance,
common law, treaty or other legal requirement.
“
Lease
”
means a lease, dated as of June 16, 2009, by and between the Lessor and the Seller, as Lessee, as amended and extended.
“
Leased Premises
”
means the approximately 16,523 rentable square feet on the second floor of a building known as 1857 Helm Drive, Las Vegas, Nevada
89119.
“
Lessor
”
means Spencer Airport Center, LLC.
“
Liability
”
means any claims, debts, liabilities, obligations or commitments of any nature (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, whether incurred or consequential
and whether due or to become due), including any liability for Taxes.
“
Lien
”
means any mortgage, pledge, lien, security interest, charge, claim, equitable interest, encumbrance, restriction on transfer, conditional
sale or other title retention device or arrangement, defect of title, third party right (including co-ownership right), charge
or encumbrance of any nature whatsoever.
“
Losses
”
means all Liabilities, obligations, judgments, Liens, injunctions, charges, orders, decrees, rulings, damages, dues, assessments,
Taxes, losses, fines, penalties, expenses, fees, costs, amounts paid in settlement (including reasonable attorneys’ and expert
witness fees and disbursements in connection with investigating, defending or settling any action or action threatened in writing),
arising out of any claim, damages, complaint, demand, cause of action, audit, investigation, hearing, action, suit or other proceeding
asserted or initiated or otherwise existing in respect of any matter.
“
Material
Adverse Effect
” means with respect to a particular Person (or with respect to the Business, if no particular Person is
specified), any change, effect or circumstance that, individually or in the aggregate, is or is reasonably likely to be materially
adverse to the business, assets (including intangible assets), financial condition or results of operations of such Person taken
as a whole;
provided
, that the foregoing shall not include any fact, event, circumstance, change, condition, occurrence
or effect occurring after the date hereof following or resulting from (a) any outbreak of war or act of sabotage or terrorism
or natural or man-made disasters, (b) changes in Laws or applicable accounting rules or enforcement or interpretation thereof,
in each case proposed, adopted or enacted after the date of this Agreement, (c) changes or conditions that generally affect the
industry and market in which the Selling Parties operate, (d) any failure, in and of itself, of the Selling Parties to meet
any internal or published projections, estimates, budgets, plans or forecasts of revenues, earnings or other financial performance
measures (it being understood that the underlying facts giving rise or contributing to such failure or change may be taken into
account in determining whether there has been a Material Adverse Effect if such facts are not otherwise excluded under this definition),
(e) any action taken by the Selling Parties at the express written request of Buyer or expressly required by this Agreement, or
(f) any litigation brought by current or former shareholders of the Seller alleging breach of fiduciary duty or inadequate disclosure
in connection with this Agreement or any of the transactions contemplated hereby or otherwise challenging any of the transactions
contemplated hereby;
provided, further
, that, in the case of clause (a), (b) or (c), only to the extent such fact, event,
circumstance, change, condition, occurrence or effect has a disproportionate effect on such Person, relative to other participants
in the industry in which the Selling Parties operate.
“
Material
Contracts
” shall have the meaning set forth in
Section 3.7
.
“
Non-Transferable
Asset
” shall have the meaning set forth in
Section 5.8(b)
.
“
Notice of
Superior Proposal
” shall have the meaning set forth in
Section 5.20(d)
.
“
Out-Bound
License Agreement
” shall have the meaning set forth in
Section 3.9(e)
.
“
Party
”
shall have the meaning set forth in the Preamble.
“
Patent Rights
”
means: (a) all patents and patent applications (including provisional patent applications); (b) all utility models, design
registrations and certificates of invention and applications for utility models, design registrations and certificates of invention;
and (c) all other governmental grants and applications for governmental grants for the protection of inventions or industrial
designs (including all continuations, continuations-in-part, divisionals, renewals, extensions, reissues and reexaminations and
applications or requests therefor).
“
Person
”
means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust,
a joint venture, an unincorporated organization, or a Governmental Authority (or any department, agency, or political subdivision
thereof).
“
Personal
Data
” means any piece of information that allows the identification of a natural person, including a natural
person’s name, street address, telephone number, e-mail address, photograph, social security number, driver’s license
number or other government issued identification number, passport number, financial account number, or credit or debit card number.
“
Privacy Agreements
”
shall have the meaning set forth in
Section 3.21
.
“
Processing
Agreement
” shall have the meaning set forth in
Section 5.28
.
“
Public Software
”
means any software that is distributed as, or derived from, free software, “copyleft” software, open source software,
or similar licensing or distribution models, including software licensed or distributed under any of the following licenses or
distribution models, or licenses or distribution models similar to any of the following: (a) the GNU General Public License
(GPL) or Lesser/Library GPL (LGPL); (b) the Artistic License; (c) the Mozilla Public License; (d) the Netscape Public
License; (e) the Sun Community Source License (SCSL); (f) the Sun Industry Standards Source License (SISSL); (g) the
BSD License; (h) the Apache Software License; or (i) any other license described by the Open Source Initiative as set
forth at www.opensource.org.
“
Purchase
Price
” shall have the meaning set forth in
Section 2.5
.
“
Related Party
”
means the Seller, manager, member, any trustee or other Affiliate of the Seller, any officer, director, employee, shareholder or
Affiliate of the Seller, or any spouse, child or parent of any of the foregoing individuals.
“
Related Party
Arrangement
” shall have the meaning set forth in
Section 3.24
.
“
Restricted
Party
” shall have the meaning set forth in
Section 5.3
.
“
Restricted
Period
” shall have the meaning set forth in
Section 5.3
.
“
Sarbanes-Oxley
Act
” shall have the meaning set forth in
Section 3.12(a)
.
“
Second Amendment
”
means Amendment No. 2 to Credit Agreement, dated on or about the date hereof, among California Cryobank LLC, a California limited
liability company, the financial institutions party thereto as lenders and Golub Capital LLC, as administrative agent for the lenders.
“
Securities
Act
” shall have the meaning set forth in
Section 3.12(a)
.
“
Seller
”
shall have the meaning set forth in the Preamble.
“
Seller Commission
Documents
” shall have the meaning set forth in
Section 3.12(a)
.
“
Seller Consultants
”
shall have the meaning set forth in
Section 3.22(a)
.
“
Seller Employees
”
shall have the meaning set forth in
Section 3.22(a)
.
“
Seller Employee
Liabilities
” means any and all Liabilities incurred in connection with (a) any Benefit Plan or any other employment or
benefit plan, program, agreement or arrangement maintained, sponsored or contributed or required to be contributed to by a Selling
Party or any of its Affiliates or with respect to which a Selling Party or any of its Affiliates has any Liability or (b) the
employment or service by, or termination from employment or service by, a Selling Party or any of its Affiliates of any Person,
including any and all Liabilities pertaining to any salary or wages, vacation pay, bonuses or any other type of compensation or
benefits.
“
Seller Financial
Statements
” shall have the meaning set forth in
Section 3.12(a)
.
“
Seller Indemnified
Parties
” shall have the meaning set forth in
Section 8.3(a)
.
“
Seller Licensed
Intellectual Property
” means all Intellectual Property that are licensed to any of the Selling Parties by any third party.
“
Seller Owned
Intellectual Property
” means all Intellectual Property owned or purported to be owned by any of the Selling Parties,
in whole or in part.
“
Seller Registered
Intellectual Property
” means United States and foreign Patent Rights, registered Trademarks, registered copyrights and
designs, mask work registrations and applications for each of the foregoing that are registered or filed in the name of any of
the Selling Parties, alone or jointly with others.”
“
Seller Representatives
”
shall have the meaning set forth in
Section 5.20(a)
.
“
Seller Shareholder
Meeting
” shall have the meaning set forth in
Section 5.19(d)
.
“
Seller Shareholder
Approval
” shall have the meaning set forth in
Section 5.19(a)
.
“
Selling Parties
”
means the Seller and each of the Seller’s subsidiaries, which shall not include the Excluded Subsidiaries.
“
Set-off Claim
”
shall have the meaning set forth in
Section 8.4
.
“
Set-off Claim
Dispute Notice
” shall have the meaning set forth in
Section 8.4
.
“
Special Liabilities
”
means, to the extent any such Liabilities are not otherwise paid in full prior to the Closing, any Liability for: (a) severance,
change in control bonus or other payment, paid time off, vacation pay, or other compensation provided or payable to Seller Employees
or Seller Consultants, including, in each case, any employee withholding Taxes and any employer payroll Taxes thereon, and any
amounts payable to any Seller Employee or any Seller Consultant pursuant to any bonus arrangement as a result of any such Person’s
service to the Selling Parties through the Closing, and (b) any transaction fees and expenses of the Company related to the
transactions contemplated hereby and incurred (whether or not invoiced) by the Selling Parties prior to Closing, including, without
limitation, financial advisory fees, legal fees and expenses, broker and finder fees and expenses of accountants.
“
Storage
”
means the obligation to (a) maintain and store cord blood, cord tissue and isocell units, (b) maintain all associated records relating
to such cord blood, cord tissue and isocell units and (c) make said cord blood, cord tissue and isocell units available upon request
to the owner, all as set forth in the Assumed Contracts.
“
Superior
Proposal
” means an unsolicited bona fide written Competing Proposal that the board of directors of the Seller reasonably
concludes in good faith, after consultation with its financial advisors and outside legal counsel, taking into account all legal,
financial, regulatory, and other aspects of the proposal and the person or entity making the proposal (including any break-up fees,
expense-reimbursement provisions, and conditions to consummation), (a) is more favorable, from a financial point of view,
to the Seller’s shareholders than the transactions contemplated by this Agreement, and (b) is reasonably likely to be
consummated on a timely basis on the terms proposed (taking into account financing, among other things).
“
Superior
Proposal Termination Fee
” shall have the meaning set forth in
Section 7.2(a)
.
“
Supporters
”
shall have the meaning set forth in the Recitals.
“
Survival
Date
” shall have the meaning set forth in
Section 8.1
.
“
Tangible
Assets
” means all of the Selling Parties’ tangible assets listed on
Schedule 2.1
.
“
Tax
”
or “
Taxes
” means (a) any federal, state, local, or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, withholding, social security (or similar), personal property, sales, use, transfer, registration,
or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not, and (b) any
Liability for the payment of any amounts of the type described in clause (a) by reason of contract, assumption, transferee Liability,
operation of Law or as a result of being a member of an affiliated, consolidated, combined, unitary or aggregate group for any
taxable period.
“
Tax Consideration
”
shall have the meaning set forth in
Section 2.5(c)
.
“
Tax Return
”
means any report, return, statement, claim for refund, election, declaration, information return or other document with respect
to any Tax filed or required to be filed with any taxing authority, or maintained or required to be maintained, in connection with
the determination, assessment or collection of any Tax or the administration of any Tax Laws, including any schedule or attachment
thereto, and including any amendment thereof.
“
Trademarks
”
means any trademarks (whether or not registered), service marks, trade dress, trade names, logos, domain names, URLs, corporate
names, doing business as designations (DBAs), and fictitious names, together with all of the goodwill of the business symbolized
thereby.
“
Transaction
Documents
” means this Agreement, all transfer documents relating to the Acquired Assets, and any other agreements and
documents contemplated hereby or thereby, including all assignments, the Bill of Sale and Assignment and Assumption Agreement,
the IP Assignment and Assumption Agreement, the Escrow Agreement and the FIRPTA Certificate.
“
Transaction
Litigation
” shall have the meaning set forth in
Section 5.21
.
“
Transition
Services Agreement
” means a transition services agreement in substantially the form attached hereto as
Exhibit F
.
“
URL
”
shall have the meaning set forth in
Section 3.9(k)
.
“
Xytex
”
shall have the meaning set forth in
Section 3.28(a)
.
“
Xytex Agreements
”
shall have the meaning set forth in
Section 3.28(c)
.
“
Xytex Assets
”
shall have the meaning set forth in
Section 3.28(a)
.
“
Xytex Assumed
Contracts
” shall have the meaning set forth in
Section 3.28(b)
.
“
Xytex Facility
”
shall have the meaning set forth in
Section 3.28(a)
.
|
2.
|
ACQUISITION OF ASSETS BY BUYER.
|
2.1
Purchase and Sale of Assets
. The Seller agrees to, and will cause the other Selling Parties to, sell, assign, convey,
transfer, and deliver to the Buyer, and the Buyer agrees to purchase from the Selling Parties, at the Closing the Acquired Assets,
subject to and upon the terms and conditions contained herein, free and clear of any Lien of any kind whatsoever.
2.2
Excluded Assets
. There shall be excluded from the items to be sold, assigned, transferred, conveyed and delivered
to the Buyer hereunder, and to the extent in existence on the Closing Date, there shall be retained by the Selling Parties the
following assets (collectively, the “
Excluded Assets
”) of the Selling Parties:
(a)
any cash;
(b)
any bank accounts;
(c)
any notes, accounts or intercompany receivable;
(d)
the Excluded Documents;
(e)
all contracts that are not Assumed Contracts, including all contracts with the counterparties
listed on
Schedule 2.2
;
(f)
any office equipment, office furnishings, office computers, office telephones, office furniture
and office supplies;
(g)
all real property or any interest in real property owned or leased by any Selling Party, including
the Lease;
(h)
the Internal Systems;
(i)
any Benefits Plans, together with any right title or interest in any assets thereof or relating
thereto;
(j)
any insurance policies;
(k)
custody of any cord blood, cord tissue or isocell units stored on behalf of the counterparties
listed on
Schedule 2.2
;
(l)
any documents resulting from or entered into in connection with any Selling Party’s
business relationship for the storage of cord blood, cord tissue or isocell units with any counterparty listed on
Schedule 2.2
;
(m)
any Tax assets (including the right to refunds or credits); and
(n)
any equity or similar interest held by any Selling Parties, including any equity in Cord Partners,
Inc., CorCell Companies, Inc., CorCell Ltd., CBA Properties, Inc., Career Channel, Inc., Vida Plus 2007, S.L. or China Stem Cells,
Ltd.
2.3
Assumption of Liabilities
. The Buyer shall, after the Closing Date, assume and timely pay, perform or otherwise discharge
the Liabilities of the Selling Parties expressly set forth in the Assumed Contracts which relate to the period from and after the
Closing Date (the “
Assumed Liabilities
”).
2.4
Excluded Liabilities
. Any Liabilities not specifically assumed pursuant to
Section 2.3
, including those
Liabilities set forth on
Schedule 2.4
, shall not be part of the Assumed Liabilities and shall not be, whether as a
transferee or successor, by contract, operation of Law or otherwise, transferred to or assumed by the Buyer. The Seller agrees
to, and shall cause the other Selling Parties to discharge all Excluded Liabilities and the Buyer shall not assume or be responsible
for any of the Excluded Liabilities.
2.5
Purchase Price
. In consideration of the sale of the Acquired Assets to the Buyer and the assumption of the Assumed
Liabilities, and subject to the satisfaction of the terms, conditions and covenants of this Agreement, the Buyer agrees to pay
to the Seller up to Fifteen Million Five Hundred Thousand Dollars ($15,500,000.00) (the “
Purchase Price
”) as
follows:
(a)
Twelve Million Five Hundred Thousand Dollars (12,500,000.00) in immediately available funds
(the “
Closing Payment
”) shall be paid to the Seller at the Closing;
(b)
Three Million Dollars ($3,000,000.00) (the “
Escrow Payment
”)
shall be paid to the Escrow Agent in immediately available funds at the Closing to be held by the Escrow Agent and released in
accordance with the terms of the Escrow Agreement; and
(c)
As soon as practicable following the Closing, the Buyer shall prepare and deliver to the Seller
an allocation schedule (the “
Allocation Schedule
”) setting forth the Buyer’s allocation to the Acquired
Assets of the total consideration deemed paid by the Buyer pursuant to this Agreement for U.S. federal income tax purposes (the
“
Tax Consideration
”), including the Closing Payment, the Assumed Liabilities, and all other relevant items that
are properly includible in determining the amount paid by the Buyer for the Acquired Assets for U.S. federal income tax purposes.
The Buyer will permit the Seller to review and comment on such Allocation Schedule and shall consider in good faith such changes
as are reasonably requested by the Seller;
provided
, that such comments are delivered to the Buyer in writing within fifteen
(15) days of the Seller’s receipt of the Allocation Schedule. If the Tax Consideration changes at any time after the Allocation
Schedule is prepared by the Buyer and provided to the Seller, the Buyer shall prepare and provide to the Seller for review and
comment a revised Allocation Schedule that reflects the change. The Buyer shall consider in good faith such changes as are reasonably
requested by the Seller;
provided
, that such comments are delivered to the Buyer in writing within fifteen (15) days of
the Seller’s receipt of the revised Allocation Schedule. The Parties shall, and shall cause their respective Affiliates to,
file all Tax Returns (including, but not limited to, IRS Form 8594) in a manner consistent with (and the Parties and their respective
Affiliates shall not otherwise take any Tax position, whether in audits, Tax Returns or otherwise, inconsistent with) the Allocation
Schedule, unless required by the Internal Revenue Service (“
IRS
”) or other applicable taxing authority.
2.6
Withholding of Tax
. The Buyer shall be entitled to deduct and withhold from the consideration otherwise payable pursuant
to this Agreement such amounts as the Buyer (or any Affiliate thereof) shall determine in good faith that they are required to
deduct and withhold with respect to the making of such payment under the Code or any provision of any other Tax Laws. To the extent
that amounts are so withheld by the Buyer, such withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the payee with respect to which such amount was withheld.
2.7
Closing Time and Location
. Subject to any earlier termination of this Agreement, the closing of the transactions
contemplated hereby (the “
Closing
”) shall occur on later of March 31, 2018, or the fifth (5th) business
day following the satisfaction or waiver of all the conditions and obligations of the Parties to consummate the transactions (other
than the conditions with respect to the actions the respective Parties will take as of the Closing itself) or such date as the
Parties may mutually agree (the “
Closing Date
”). The Closing will be effected by the exchange of signature pages
by fax or email and the delivery of original documents and instruments by reputable overnight courier, or at such other location
or date as the Parties may mutually agree upon in writing.
2.8
Deliveries at the Closing
.
(a)
At or before the Closing, the Seller will, or will cause the applicable Selling Party to,
deliver to the Buyer:
(i)
a certificate, duly executed by the Seller, certifying that, as of the Closing, all conditions
set forth in
Section 6.1
have been satisfied;
(ii)
a bill of sale and assignment and assumption agreement, duly executed by the Seller, in substantially
the form attached hereto as
Exhibit A
(the “
Bill of Sale and Assignment and Assumption Agreement
”);
(iii)
an IP assignment and assumption agreement, duly executed by the Seller, in substantially the
form attached hereto as
Exhibit B
(the “
IP Assignment and Assumption Agreement
”);
(iv)
an escrow agreement, duly executed by the Seller and the Escrow Agent, in substantially the
form attached hereto as
Exhibit C
(the “
Escrow Agreement
”);
(v)
a statement pursuant to Treasury Regulation Section 1.1445-2(b), duly executed by the Seller,
in substantially the form attached hereto as
Exhibit D
that providing that the Seller is not a “foreign person”
for purposes of Section 1445 of the Code (the “
FIRPTA Certificate
”);
(vi)
the Transition Services Agreement, duly executed by the Seller, in substantially the form
attached hereto as
Exhibit F
;
(vii)
copies of all Assumed Contracts and associated records, charts and information;
(viii)
any and all consents that may be required for the assignment or transfer of the Assumed Contracts
or Acquired Assets;
(ix)
a certificate, duly executed by the secretary of the Seller, setting forth the certified articles
of incorporation, by-laws (or equivalent organizational documents) (each as in effect immediately prior to the Closing) of each
Selling Party and resolutions of each Selling Party’s board of directors and shareholders (or similar authorization of the
applicable holder of equity) authorizing the execution, delivery and performance of this Agreement and the other documents contemplated
hereby and the consummation of the transactions contemplated hereby and thereby, and certifying that (A) such articles of
incorporation, by-laws (or equivalent organizational documents) and resolutions have not been amended or rescinded and are in full
force and effect, and (B) each Selling Party’s authorizing officer executing this Agreement and other documents delivered
pursuant to this Agreement is an incumbent officer and the specimen signature on the certificate is his or her genuine signature;
(x)
evidence, to the reasonable satisfaction of the Buyer, that any Lien on the Acquired Assets
has been released and discharged;
(xi)
a good standing certificate for each Selling Party from the jurisdiction of incorporation
of such Selling Party and from each state in which such Selling Party is qualified to do business, each dated as of a date reasonably
close to the Closing; and
(xii)
such other items or documents which may be required or appropriate in the reasonable determination
of the Buyer in connection with the consummation of the transactions contemplated hereby.
(b)
At or before the Closing, the Buyer will deliver to the Seller:
(i)
the Closing Payment, in immediately available funds;
(ii)
the Bill of Sale and Assignment and Assumption Agreement, duly executed by the Buyer;
(iii)
the IP Assignment and Assumption Agreement, duly executed by the Buyer;
(iv)
the Escrow Agreement, duly executed by the Buyer;
(v)
the Transition Services Agreement, duly executed by the Buyer;
(vi)
a certificate, duly executed by the secretary of the Buyer, setting forth the certified articles
of organization, operating agreement (as in effect immediately prior to the Closing) and resolutions of its managers authorizing
the execution, delivery and performance of this Agreement and the other documents contemplated hereby and the consummation of the
transactions contemplated hereby and thereby, and certifying that (A) such articles of organization, operating agreement and
resolutions have not been amended or rescinded and are in full force and effect, and (B) its authorizing officer executing
this Agreement and other documents delivered pursuant to this Agreement is an incumbent officer and the specimen signature on the
certificate is his or her genuine signature; and
(vii)
a good standing certificate for the Buyer from the State of California, dated as of a date
reasonably close to the Closing.
|
3.
|
REPRESENTATIONS AND WARRANTIES OF THE SELLER.
|
In order to induce
the Buyer to purchase the Acquired Assets, the Seller represents, warrants and agrees that the following are true and correct as
of the date hereof and will remain true and correct as of the Closing Date:
3.1
Organization of the Seller
. The Seller is a corporation duly organized, validly existing and in good standing under
the laws of the State of Florida, and is qualified to do business in all states and jurisdictions as it may be required in order
to conduct its Business as it is currently being conducted, except where such failure to be qualified would not have a Material
Adverse Effect. Each other Selling Party is an organization duly organized, validly existing and in good standing under the laws
of the jurisdiction of its formation, and is qualified to do business in all states and jurisdictions as it may be required in
order to conduct its Business as it is currently being conducted, except where such failure to be qualified would not have a Material
Adverse Effect. Each Selling Party has all necessary power and authority to (a) own its assets and conduct its Business as
it is currently being conducted and (b) transfer the Acquired Assets and to assign the Assumed Contracts free and clear of
all Liens. Except as set forth on
Schedule 3.1
, the Seller does not own, directly or indirectly, any outstanding voting
securities or shares, debentures or other securities of or other interests of any nature whatsoever in, nor does it control, any
other corporation, partnership, joint venture or other entity, except for its consolidated subsidiaries. The Seller has provided
to the Buyer a complete and correct copy of the articles of organization, by-laws or equivalent organizational documents, each
as amended to date, of each Selling Party. These articles of organization or equivalent organizational documents are in full force
and effect. No Selling Party is in violation of the provisions of its articles of organization or equivalent organizational documents.
3.2
Authorization of Transaction
. Each Selling Party has the corporate power and authority to enter into, to perform
the obligations of such Selling Party under, and to consummate the transactions and other acts contemplated by this Agreement.
The execution, delivery and performance of the Transaction Documents by each of the Selling Parties have been duly and validly
authorized by all necessary company and other actions or proceedings. This Agreement has been duly executed and delivered by each
Selling Party and the respective Transaction Documents to which such Selling Party is or will be a party constitute or will, when
executed and delivered, constitute legal, valid and binding obligations of such Selling Party, enforceable in accordance with their
terms, except to the extent that (a) enforcement may be limited by or subject to any bankruptcy, insolvency, reorganization,
moratorium, or similar law as is now or hereinafter in effect relating to creditors’ rights generally, and (b) the remedy
of specific performance and injunctive and other forms of equitable relief are subject to certain equitable defenses and to the
discretion of the court or other authority or person before which any proceeding therefore may be brought.
3.3
Noncontravention
. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (a) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any government, Governmental Authority, or court to which any Selling Party or any of its property
is subject or any provision of the articles, by-laws or other organizational documents of such Selling Party, (b) conflict
with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, permit, instrument, or other
arrangement to which any Selling Party is a party or by which it is bound or to which any of its assets is subject (or result in
the imposition of any Lien upon any of its assets) including but not limited to the Material Contracts, except where the breach
or default would not be expected to have individually or in the aggregate a Material Adverse Effect on the Selling Parties or (c) violate
or conflict with any provision of the articles, by-laws or organizational documents of any Selling Party. Except for compliance
with the applicable rules and regulations of the Commission, no Selling Party needs to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or Governmental Authority in order for the Parties to consummate
the transactions contemplated hereby. Each Selling Party, upon notice to the respective contractual counterparties, has the right
to assign and transfer all Assumed Contracts to the Buyer. In addition, the assignment, transfer and disclosure of the cord blood,
cord tissue and isocell units with respect to any such Assumed Contracts will comply with all privacy or other rights of any party
and comply with all laws, statutes, rules and regulatory provision of all Governmental Authority.
3.4
Capitalization
.
(a)
Schedule 3.4
sets forth the record and beneficial owners of the issued and outstanding
stock of each Selling Party held by its respective executive officers, directors and shareholders holding more than 5% of the outstanding
stock of such Selling Party. The foregoing notwithstanding, this disclosure shall be limited to record holders to the extent shares
are held in depository accounts, such as CEDE & Co.
(b)
All of the issued and outstanding stock or equivalent ownership interests of each Selling
Party have been duly authorized and validly issued, and, as applicable, are fully paid and non-assessable. No restrictions on transfer,
repurchase option, right of redemption, preemptive rights, proxies, ownership agreements, rights of first refusal or other agreements
or rights exist with respect to the stock or equivalent ownership interests of any Selling Party, and no such rights arise by virtue
of or in connection with the transactions contemplated hereby; and to the extent permitted by Law, each Selling Party has waived
(or hereby irrevocably waives) any and all such rights.
(c)
Except as set forth in
Schedule 3.4
, there is no:
(i)
outstanding,
or right to acquire any, subscription, option, call, warrant or right (whether or not currently exercisable) to acquire or sell
or issue, relating to, any stock, economic interests, profits interests or other equity or ownership interest in any Selling Party;
(ii)
outstanding, or right to acquire any security, instrument
or obligation that is or may become convertible into or exchangeable for any stock, profits interests or other securities of any
Selling Party;
(iii)
contract under which any Selling Party
is or may become obligated to sell, transfer, encumber or otherwise issue any stock, profits interests or any other securities;
or
(iv)
condition or circumstance that may give rise to or
provide a Basis for the assertion of a claim by any Person to the effect that such Person is entitled to acquire or receive any
stock, profits interests or other securities of any Selling Party. As of the Closing, no such economic interests, profits interests,
stock appreciation, stock option, restricted stock, phantom stock, profit participation or other similar rights with respect to
any Selling Party shall be outstanding.
3.5
Title to Assets
. Except as set forth on
Schedule 3.5
, the Selling Parties, collectively, have good, valid
and marketable title to, and the power to sell, all of the Acquired Assets, free and clear of all Liens and claims of third parties.
To the Knowledge of the Selling Parties, the Acquired Assets are sufficient to operate the Business as it is currently being conducted
and constitute all of the properties, rights, interests and other tangible and intangible assets reasonably necessary to enable
the Buyer to own and use the Acquired Assets in the manner in which the Acquired Assets are currently owned and used.
3.6
Real Property
.
(a)
The Selling Parties do not own any real property.
Schedule 3.6(a)
sets forth an
accurate and complete list of all real property leased by the Selling Parties (each, a “
Facility
” and collectively,
the “
Facilities
”). True, complete and correct copies of all leases of real property listed on
Schedule 3.6(a)
have been provided or made available to the Buyer. Except as otherwise disclosed on
Schedule 3.6(a)
, no Selling Party
has entered into any written or oral sublease, license, option or other right granting to any Person the right to use or occupy
any portion of any Facility. Each lease set forth on
Schedule 3.6(a)
is in full force and effect and constitutes a
valid and binding agreement of a Selling Party in accordance with its terms and there is no existing material breach or material
default by such Selling Party under any such lease.
(b)
Schedule 3.6(b)
sets forth an accurate list of all owned and leased personal property
included on the Balance Sheet and all other personal property owned or leased by the Selling Parties (i) as of the Balance
Sheet Date, or (ii) acquired since the Balance Sheet Date, in each case valued in excess of Five Thousand Dollars ($5,000),
including an indication as to which assets are currently owned, or were formerly owned, by the Selling Parties or Affiliates of
the Selling Parties. True, complete and correct copies of all leases of personal property and equipment listed on
Schedule 3.6(b)
have been provided or made available to the Buyer. All of the personal property and equipment listed on
Schedule 3.6(b)
is in good working order and condition, ordinary wear and tear excepted.
Schedule 3.6(b)
sets forth a list of all cryogenic
tanks owned by the Selling Parties and lists the condition of such tanks and the expected useful life of each tank. All personal
property and equipment used by the Selling Parties is either owned by a Selling Party or leased under an agreement listed on
Schedule 3.6(b)
.
All leases set forth on
Schedule 3.6(b)
are in full force and effect and constitute valid and binding agreements of
the Selling Parties and to the Knowledge of the Seller, the other party or parties thereto in accordance with their respective
terms.
(c)
Each Selling Party has good and marketable title to or, in the case of leased property, have
valid leasehold interests in, all tangible personal property (including all fixtures, leasehold improvements, equipment (including
computer hardware and communications equipment), whether or not such equipment constitutes a fixture under applicable Law, machinery,
assets, tools and tooling, parts, office, operating and other supplies and furniture) material to its business as presently conducted,
all of which are free and clear of any and all Liens. There are no facts or conditions affecting the any Selling Party’s
assets that could, individually or in the aggregate, reasonably be expected to interfere in any material respect with the use,
occupancy or operation thereof as currently used, occupied or operated by such Selling Party, or their adequacy for such use.
(d)
Each Selling Party has good and marketable title to or leasehold interest in, is the exclusive
legal and equitable owner or leaseholder of, and has the unrestricted power and right to sell, assign and deliver the Acquired
Assets. Except as provided in
Schedule 3.5
, the Acquired Assets are free and clear of all Liens of any kind or nature.
Upon Closing, the Buyer will acquire exclusive, good and marketable title or license to or a valid leasehold interest in (as the
case may be) the Acquired Assets, free and clear of all Liens.
(e)
The shareholders of the Seller do not own, lease, license or use any tangible personal property
(including any fixtures, leasehold improvements, equipment (including computer hardware and communications equipment), whether
or not such equipment constitutes a fixture under applicable Law, machinery, assets, tools and tooling, parts, office, operating
and other supplies and furniture) material to the Business. No Selling Party uses, leases, licenses or receives any assets of,
or services from, any shareholder or owe any obligation or has any Liability with respect thereto.
3.7
Material Contracts
.
Schedule 3.7
contains a current list and brief description of all material contracts
of the Selling Parties related to the Business (the “
Material Contracts
”). The Selling Parties have delivered
to the Buyer full and complete copies of the Material Contracts;
provided
, that the Selling Parties are not assigning, and
the Buyer is not assuming, any Material Contract except the Assumed Contracts. There exists no material breach of, default under,
or any event or circumstance that, with the giving of notice, passage of time or both could result in the acceleration of, create
in any party the right to accelerate, terminate, modify, or cancel, or require any notice under, any Material Contract set forth
on
Schedule 3.7
. The form of contract entered into between any Selling Party and its customers is set forth on
Exhibit E
.
No Selling Party has made modifications to such form with any customer except as set forth in
Schedule 3.7
, or such
other
de minimis
modifications made in the ordinary course of business. The information set forth on
Schedule 3.7
is true and accurate in all respects. The Material Contracts are all of the contracts that are necessary to operate the Business.
Each Assumed Contract is legal, valid, binding and enforceable, in accordance with its terms (except to the extent such enforceability
is limited by general equitable principles or by applicable bankruptcy, insolvency, moratorium or similar Laws which affect creditors
generally), and is in full force and effect. Each Selling Party has performed all material obligations required to be performed
by it to date under each such Assumed Contract. No Person is currently renegotiating, or has the contractual right to renegotiate,
any amount paid or payable to any Selling Party under any Material Contract or to the Knowledge of the Selling Parties any other
term or provision of any contract (other than
de minimis
modifications made in the ordinary course of business).
3.8
Licenses
. Each Selling Party is currently and properly licensed, registered, certified and qualified under any applicable
statute, rule, regulation or requirement of any Governmental Authority having jurisdiction over such matters to provide long-term
Storage of the Acquired Assets and to perform the obligations to be imposed upon it by the Assumed Contracts, except where the
failure to maintain the licenses, certifications or qualifications would not be material to the Business. A copy of each such Selling
Party’s U.S. Food and Drug Administration (the “
FDA
”) registration and licenses are attached as
Schedule 3.8
.
3.9
Intellectual Property
.
(a)
Schedule 3.9(a)
sets forth a complete and accurate list of all United States and
foreign Seller Registered Intellectual Property and material unregistered trademarks, trade names and fictitious names, and, with
respect to Seller Registered Intellectual Property, in each case enumerating specifically the applicable filing or registration
number, title, jurisdiction in which filing was made or from which registration issued, date of filing or issuance, names of all
current applicant(s) and registered owner(s), the current status of the application and the next steps required to be taken in
connection with such application and the deadlines therefore, as applicable. The Selling Parties have delivered to the Buyer correct
and complete copies of all registration and applications for Seller Registered Intellectual Property, as amended to date. All necessary
registration, maintenance and renewal fees in connection with each item of Seller Registered Intellectual Property have been paid
and all necessary documents and certificates in connection with such Seller Registered Intellectual Property have been filed with
the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be,
for the purposes of maintaining such Seller Registered Intellectual Property. There are no actions that must be taken by any Selling
Party within one hundred eighty (180) days following the Closing Date, including the payment of any registration, maintenance
or renewal fees or the filing of any responses to office actions, documents, applications or certificates for the purposes of obtaining,
maintaining, perfecting, preserving or renewing any Seller Registered Intellectual Property.
(b)
The Selling Parties, collectively, are the sole and exclusive owners of all material Seller
Intellectual Property (except the Seller Licensed Intellectual Property), free and clear of any Liens. No Selling Party has permitted
its rights in the Seller Owned Intellectual Property to lapse or enter the public domain. The Seller Intellectual Property constitute
all Intellectual Property necessary (i) to Exploit the products manufactured, distributed, licensed or sold by any Selling
Party in the manner so done currently by such Selling Party, (ii) to Exploit any software as they are currently used by any
Selling Party, and (iii) otherwise to conduct the Business. Other than the Seller Intellectual Property, no Intellectual Property
has been developed or created by or on behalf of any Selling Party or the Business as now conducted.
(c)
No Selling Party is a party to any claim, suit, action or proceeding, nor is any claim, suit,
action or proceeding, to the Knowledge of the Seller, threatened, against any Selling Party that involves a claim of infringement,
unauthorized use or violation of any Seller Intellectual Property, or challenging the ownership, right to use, sell, distribute,
license or sublicense, validity or enforceability of any Seller Intellectual Property. To the Knowledge of the Selling Parties,
the operation of the Business as now conducted does not currently infringe or misappropriate any Intellectual Property of any Person
or constitute unfair competition or trade practices under the Laws of any jurisdiction, and no Selling Party has received written
notice from any Person claiming that such operation infringes or misappropriates any Intellectual Property of any Person or constitutes
unfair competition or trade practices under the Laws of any jurisdiction (nor does any Selling Party have Knowledge of any Basis
therefor). To the Knowledge of the Seller, no third party is infringing upon or misappropriating, or has infringed upon or misappropriated,
any Seller Owned Intellectual Property or any Seller Licensed Intellectual Property that is exclusively licensed to any Selling
Party.
(d)
Schedule 3.9(d)
identifies: (i) each item of Seller Licensed Intellectual
Property and the license or agreement pursuant to which any Selling Party Exploits it; (ii) each agreement, contract, assignment
or other instrument pursuant to which any Selling Party has obtained any joint or sole ownership interest in or to each item of
Seller Owned Intellectual Property; and (iii) all such licenses, sublicenses and other agreements that require any Selling
Party to license, assign or otherwise grant rights to additions, modifications or improvements to Seller Licensed Intellectual
Property made by or for such Selling Party to any third party (each, an “
In-Bound License Agreement
”). Each
Selling Party has delivered or made available to the Buyer copies of all licenses, sublicenses and other agreements identified
above. Each Selling Party is in compliance with all material terms and conditions of all such licenses, sublicenses, and other
agreements. No Selling Party is a party to any oral license, sublicense or other contract or understanding that, if reduced to
written form, would be required to be listed in
Schedule 3.9(d)
under the terms of
Section 3.9(d)
. No third
party inventions, methods, services, materials, processes or software are included in or required to Exploit any product manufactured,
distributed, licensed or sold by any Selling Party or Internal Systems, except as specifically set forth on
Schedule 3.9(d)
.
(e)
Schedule 3.9(e)
identifies each license, sublicense, covenant or other agreement
pursuant to which any Selling Party has assigned, transferred, licensed, distributed or otherwise granted any right or access to
any person, or covenanted not to assert any right, with respect to any past, existing or future Seller Intellectual Property (each,
an “
Out-Bound License Agreement
”). Each Selling Party has delivered or made available to the Buyer accurate
and complete copies of all licenses, sublicenses, covenants and other agreements identified above, and each Selling Party is in
compliance with all material terms and conditions of such licenses, sublicenses, covenants and other agreements. Except as described
on
Schedule 3.9(e)
, No Selling Party has agreed to indemnify any person against any infringement, violation or misappropriation
of any Intellectual Property with respect to any product manufactured, distributed, licensed or sold by such Selling Party or any
third party Intellectual Property.
(f)
Each Selling Party has taken commercially reasonable necessary security measures to protect
and enforce their trade secrets and otherwise safeguard and maintain the confidential and proprietary nature of all confidential
information used by each in the conduct of the Business and have taken reasonable actions, consistent with industry standards,
to protect against unauthorized use of, access to, or “hacking” into the Internal Systems utilized by such Selling
Party in the operation of the Business and owned or controlled by or for such Selling Party. Each Selling Party has materially
complied with all applicable contractual and legal requirements pertaining to information privacy and security. No complaint relating
to an improper use or disclosure of, or a breach in the security of, any such information has been made or, to the Knowledge of
the Seller, threatened against any Selling Party. To the Knowledge of the Selling Parties, there has been no: (i) unauthorized
disclosure of any third party proprietary or confidential information in the possession, custody or control of any Selling Party
or (ii) breach of any Selling Party’s security procedures wherein confidential information has been disclosed to a third
person.
(g)
All current officers, employees, consultants, independent contractors and other service providers
of each Selling Party have executed and delivered to such Selling Party valid and binding agreements (copies of which have been
provided to the Buyer) (i) requiring each such employee, consultant, independent contractor or other service provider to protect
and preserve the confidentiality of the information and (ii) expressly assigning to such Selling Party all Intellectual Property
arising from the services performed for such Selling Party by such persons.
(h)
To the Knowledge of the Seller, there are no facts, circumstances, information, or Intellectual
Property that could reasonably be expected (i) to render invalid or unenforceable any of the Intellectual Property included
in the Seller Intellectual Property or (ii) to affect adversely, limit, restrict, impair or impede the ability of any Selling
Party (or, after the consummation of the transactions contemplated hereby, the ability of the Buyer) to use and practice the Seller
Intellectual Property.
(i)
To the Knowledge of Seller, no federal, state, local or other government facilities or funding,
or university or college facilities or funding, was used in the development of any Seller Intellectual Property owned by any Selling
Party or claimed by any Selling Party to be owned by such Selling Party.
(j)
Except for Intellectual Property in the public domain (such that they may be used by any Person
without payment, condition or limitation), the Seller Owned Intellectual Property as included in the Acquired Assets and the Seller
Licensed Intellectual Property as included in the Acquired Assets constitute all of the Intellectual Property required by or used
in (or proposed by any Selling Party be used in) the conduct of the Business.
(k)
Set forth on
Schedule 3.9(k)
are all Internet domain names and universal resource
locators (“
URLs
”) with respect to which any Selling Party is the registrant (“
Domain Names
”),
specifying the applicable entity. The Selling Parties, collectively, are the sole registrants of all Domain Names, and, except
as specified in
Schedule 3.9(k)
, all registrations of Domain Names are in good standing. No Selling Party uses to promote
the Business, or use as its own domain name or URL, any domain names or URLs other than the Domain Names. To the Knowledge of the
Seller, no action has been taken or is pending to challenge the any Selling Party’s rights to, suspend, cancel or disable
any Domain Name, registration therefor or the right of such Selling Party to use a Domain Name. The Selling Parties, collectively,
are the owners of, or has sufficient rights to display or make available, all content, data, and other information displayed or
made available, as applicable, on the website associated with each of the Domain Names (collectively, the “
Content
”),
and no consent, license or approval from any third party is required in connection with the sale or transfer of the registrations
of the Domain Names and the continued use of the Content by the Buyer as the Domain Names and Content are currently used.
(l)
Schedule 3.9(l)
lists all Public Software that is used in the development of or
incorporated in, linked to, interfaced with, embedded in, or included with the software of the Selling Parties or otherwise used
in providing Services;
provided
, that such list does not include Public Software hosted by unaffiliated third parties (such
as internet service providers) that is used by such third parties to provide services generally to their users. Each Selling Party
is in material compliance with all open source license agreements under which such Public Software is licensed to such Selling
Party. No Selling Party licenses or distributes any Public Software.
(m)
Neither the execution, delivery and performance of this Agreement nor the consummation of
the transactions contemplated hereby, nor any contract to which any Selling Party is a party or by which it is bound, will cause
or require (or purports to cause or require) the Buyer or any of its Affiliates to (i) grant to any Person any license, covenant
not to sue, release, immunity or other right with respect to or under any Intellectual Property, or (ii) be obligated to pay
any royalties or other amounts, or offer any discounts, to any other Person.
(n)
The software and tools used by the Selling Parties are free of any defects, bugs and errors
that materially interfere or reasonably could materially interfere with the any Selling Party’s use of the software or tools,
and do not contain any disabling codes or instructions, spyware, Trojan horses, worms, viruses or other software routines that
enable or cause unauthorized access to, or disruption, impairment, disablement, or destruction of, software, tools, data or other
materials. The Internal Systems, as such Internal Systems are included in the Acquired Assets, are reasonably sufficient for the
existing needs of the Selling Parties. The Selling Parties, collectively, own or have valid rights to the Internal Systems to operate
the Internal Systems as reasonably required for the Business. In the twelve (12)-month period prior to the date hereof, there has
been no failure, breakdown or continued substandard performance of any Internal Systems that has caused a material disruption or
interruption in or to the operation of the Business. Each Selling Party has taken commercially reasonable steps to provide for
the remote site back-up of data and information critical to the conduct of the Business (including such data and information that
are stored on magnetic or optical media in the ordinary course of business) in a commercially reasonable attempt to avoid material
disruption or interruption in or to the conduct of the Business. Each Selling Party has in place commercially reasonable disaster
recovery and business continuity plans, procedures and facilities. Each Selling Party has taken all reasonable steps, consistent
with industry standards, to preserve any documents or information that might reasonably be expected to be produced in any proceeding
involving such Selling Party or consistent with applicable Law.
3.10
Management
. The current Chairman of the Board of the Seller is David Sandberg, the interim President and Secretary
of the Seller is Anthony Snow and Timothy McGrath is a director of the Seller. The persons authorized to execute documents (including
this Agreement) on behalf the Seller are David Sandberg, in his role as Chairman of the Board of the Seller, Anthony Snow in his
role as President and Secretary of the Seller and Timothy McGrath in his role as a director of the Seller.
3.11
Legal and Other Compliance
. Except as set forth on
Schedule 3.11
, there are no judicial or administrative
actions, claims, suits, proceedings or investigations pending or threatened in writing against any Selling Party, the Buyer or
the Acquired Assets or that question the validity of this Agreement or of any action taken or to be taken pursuant to or in connection
with the provisions of this Agreement nor, to the Knowledge of the Seller, is there any Basis for any such action, claim, suit,
proceeding or investigation. There are no judgments, orders, decrees, citations, fines or penalties heretofore assessed against
any Selling Party or its employees affecting the Acquired Assets or the transactions contemplated hereby under any federal, state
or local law. Since January 1, 2014, each Selling Party has not settled or compromised any suit, claim, action, arbitration, proceeding
or investigation (whether filed or threatened). There are no claims, suits or proceedings by any Selling Party pending, or which
such Selling Party has commenced preparations to initiate, against any other Person. Each Selling Party has all material licenses,
permits, approvals and qualifications from any Governmental Authority necessary to carry on the Business and operations of such
Selling Party, and all such items are in full force and effect. Each Selling Party has complied, in all material respects, with
all of its governmental permits, licenses, registrations, certificates of occupancy, approvals and other authorizations. Each Selling
Party is in compliance in all material respects with all applicable Laws.
3.12
Financial Statements
.
(a)
Since January 1, 2015, the Seller has filed with or otherwise furnished to (as applicable)
the Commission all registration statements, prospectuses, forms, reports, definitive proxy statements, schedules and documents
required to be filed or furnished by it under the Securities Act of 1933 (the “
Securities Act
”) or the
Securities Exchange Act of 1934 (the “
Exchange Act
”), as the case may be, together with all certifications
required pursuant to the Sarbanes-Oxley Act of 2002, as amended (the “
Sarbanes-Oxley Act
”) (such documents and
any other documents filed by the Seller with the Commission, as have been supplemented, modified or amended since the time of filing,
collectively, the “
Seller Commission Documents
”). As of their respective filing dates or, if supplemented,
modified or amended since the time of filing and prior to the date hereof, as of the date of the most recent such supplement, modification
or amendment, the Seller Commission Documents did not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under
which they were made, not misleading and complied in all material respects with the applicable requirements of the Exchange Act
or the Securities Act, as the case may be, and the Sarbanes-Oxley Act, each as in effect on the date each such document was filed.
The audited consolidated financial statements and unaudited consolidated interim financial statements of the Seller included in
the Seller Commission Documents (collectively, the “
Seller Financial Statements
”) (i) complied as of their
respective dates of filing in all material respects with the then applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto, (ii) have been prepared in accordance with GAAP (as in effect in the United
States on the date of such Seller Financial Statements) applied on a consistent basis during the periods involved (except as may
be indicated in the notes thereto or, in the case of interim financial statements, for normal and recurring year-end adjustments
and as may be permitted by the Commission on Form 10-Q, Form 8-K or any successor or like form under the Exchange Act) and (iii) fairly
present the consolidated financial position and the consolidated results of operations, cash flows and changes in common stock
equity of the Seller and its consolidated subsidiaries as of the dates and for the periods referred to therein (except, in the
case of interim financial statements, for normal and recurring year-end adjustments and as may be permitted by the Commission on
Form 10-Q, Form 8-K or any successor or like form under the Exchange Act).
(b)
Schedule 3.12(b)(i)
provides an accurate and complete breakdown and aging of all
accounts receivable and any other receivables of the Seller as of the Balance Sheet Date. Except as set forth on
Schedule 3.12(b)(ii)
,
(i) all existing accounts receivable of the Seller (including those accounts receivable reflected on the Balance Sheet that
have not yet been collected and those accounts receivable that have arisen since the Balance Sheet Date and have not yet been collected)
represent, in all material respects, valid obligations of the customers of the Seller arising from bona fide transactions entered
into in the ordinary course of business and (ii) all such receivables and any other receivables are current and are collectible
in full according to their respective terms, without any counterclaim or set off, when due subject to ordinary writeoffs and amounts
reserved in the Seller Financial Statements. Except as disclosed on
Schedule 3.12(b)(iii)
, no Person has any Lien on
such receivables or any part thereof, and no agreement for deduction, discounts or other deferred price shall have been made with
respect to any such receivables.
(c)
Since the fiscal year ended December 31, 2016, there have not been any adverse changes in
the business relationship of any Selling Party with any of its customers that, individually or in the aggregate, are material to
the Business. Except as disclosed in
Schedule 3.12(c)
, no more than three percent (3%) of the total customers of the
Selling Parties have threatened in writing to terminate their relationship with any Selling Party, and no Selling Party has any
Knowledge of any written or oral communication, fact, event or action that exists or has occurred that would indicate that more
than three percent (3%) of the total customers of the Selling Parties would do so, whether as a result of the transactions contemplated
hereby or otherwise.
3.13
Liabilities
.
(a)
There are no Liabilities of the Seller other than: (i) Liabilities reserved against or
reflected on the Balance Sheet and not previously paid or discharged; (ii) accounts payable incurred after the Balance
Sheet Date arising in the ordinary course of business and consistent with past practice (none of which in either case results from,
arises out of, relates to, is in the nature of or was caused by any breach of contract, breach of warranty, tort, infringement
or violation of Law); (iii) Liabilities that, in the aggregate, and together with (ii), do not total more than Twenty Thousand
Dollars ($20,000); (iv) future performance obligations expressly set forth under any contracts listed on
Schedule 3.7
;
or (v) as disclosed in
Schedule 3.13
. No Selling Party is a guarantor or otherwise liable for any Liabilities
of any other Person other than endorsements for collection in the ordinary course of business.
(b)
Schedule 3.13
provides an accurate and complete breakdown and aging as of the
Balance Sheet Date of all accounts payable of each Selling Party and all debt of each Selling Party. No Selling Party is a party
to, or has any commitment to become a party to, (i) any contract associated with off-balance sheet financing, including any
arrangement for the sale of receivables, (ii) any hedging, derivatives or similar contract or arrangement or (iii) any
contract pursuant to which such Selling Party is obligated to make any capital contribution or other investment in or loan to any
Person.
(c)
Following the transactions contemplated by this Agreement, the Buyer will not be liable for
any Liability of any kind whatsoever arising from or related to any Excluded Assets.
3.14
Adverse Changes
. Except as specifically set forth on
Schedule 3.14
since the Balance Sheet Date, (a) each
Selling Party has operated the Business in the ordinary course and consistent with past practices and (b) no Selling Party
has: (i) suffered a Material Adverse Effect or any effect, event or change that individually or in the aggregate could reasonably
be expected to have a Material Adverse Effect; or (ii) become subject to any Liabilities, except Liabilities incurred in the
ordinary course of business of the Seller (and, in any case, not greater in the aggregate than One Hundred Thousand Dollars ($100,000)).
3.15
Taxes
.
(a)
Except as set forth on
Schedule 3.15
, the Seller has filed (or has had filed on its
behalf) on a timely basis (after giving effect to any valid extensions of time to file) all Tax Returns it is required to have
filed, and all such Tax Returns are correct and complete in all material respects. The Seller has not requested or been granted
any extension of time within which to file any Tax Return, which Tax Return has not since been filed.
(b)
Except as set forth on
Schedule 3.15
, all Taxes required to have been paid by the Seller
(whether or not shown on any Tax Return) have been paid on a timely basis. There are no Liens for Taxes on any of the assets of
the Seller that arose in connection with any failure (or alleged failure) to timely pay any Tax.
(c)
The Seller has withheld and paid over all Taxes required to have been withheld and paid over
and materially complied with all information reporting and backup withholding requirements in connection with amounts paid or owing
to any third party. All Persons that have provided services to the Seller and that have been classified by the Seller as independent
contractors for purposes of Laws applicable to Taxes and employee benefits were properly so classified.
(d)
The Seller has complied with all sales Tax resale certificate exemption requirements.
(e)
There are no pending or, to the Knowledge of the Seller, threatened examinations, audits or
other proceedings for the assessment or collection of Taxes that could result in a Tax Lien against the Acquired Assets.
(f)
There are no jurisdictions outside the United States in which the Seller is required to file
a Tax Return, or are otherwise subject to Tax by virtue of having a permanent establishment or other place of business outside
the United States, or, to the Knowledge of the Seller, otherwise. No claim has ever been made in writing (or otherwise to the Knowledge
of the Seller) by a Governmental Authority in a jurisdiction where the Seller does not currently file a particular type of Tax
Return or pay a particular type of Tax that the Seller is or may be required to file such Tax Return or pay such Tax (including
obligations to withhold amounts with respect to Tax) in that jurisdiction. The Seller has not conducted activities in any jurisdiction
that will require it to pay Taxes or file Tax Returns in such jurisdiction of a type that it had not filed or paid in the most
recently ended taxable period for which a Tax or a Tax Return of such type would be due and which is listed on
Schedule 3.15
,
except for the jurisdictions where the failure to register or cure would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect.
(g)
Schedule 3.15
identifies all Tax Returns that the Seller has filed for which the
applicable statute of limitations remains open and the taxable period covered by each such Tax Return, and identifies those Tax
Returns or taxable periods that have been audited or are currently the subject of an audit by a Governmental Authority. The Seller
has delivered to the Buyer complete and accurate copies of all documents requested in writing by the Buyer relating to Taxes of,
or Tax Returns filed by or on behalf of, the Seller.
(h)
No property owned by the Seller is (i) property required to be treated as being owned
by another Person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in
effect immediately prior to the enactment of the Tax Reform Act of 1986, (ii) ”tax-exempt use property” within
the meaning of Section 168(h)(1) of the Code, and (iii) ”tax-exempt bond financed property” within the meaning
of Section 168(g) of the Code.
(i)
The Seller is not a party to any agreement under which it is treated as a lessor or lessee
of “limited use property” within the meaning of Rev. Proc. 2001-28.
(j)
There is no taxable income relating to the Acquired Assets that will be required under applicable
Law to be reported by the Buyer or any of its Affiliates for any period after the Closing Date which taxable income was realized
(or reflects economic income arising) prior to the Closing Date.
(k)
The Seller is not a successor to any Person by reason of any acquisition of a substantial
part of the assets of another Person, whether by contract or by operation of Law, and whether pursuant to a merger, consolidation
or similar transaction.
(l)
Neither the execution of this Agreement nor the consummation of the transactions contemplated
by this Agreement (whether alone or in connection with any other event(s)) would result in the payment of any amount or provision
of any benefit to any current or former Seller Employee or other service provider that would, individually or in combination with
any other such payment or benefit, be considered an “excess parachute payment” (within the meaning of Section 280G
of the Code) (without regard to Subsection (b)(4) thereof) or not be deductible by reason of Section 280G (as determined without
regard to Section 280G(b)(4)). There is no written or unwritten agreement, plan, arrangement or other contract, including
any Benefit Plan, by which the Seller or any ERISA Affiliate is bound to compensate, indemnify, gross-up or otherwise make whole,
any current or former Seller Employee, other service provider of the Seller, or dependent or beneficiary thereof for additional
or excise taxes paid or payable pursuant to Sections 409A, 457A or 4999 of the Code or any costs or Liabilities relating thereto.
3.16
Employee Benefit Plans
.
(a)
A true, correct and complete list of each Benefit Plan is set forth on
Schedule 3.16
.
Neither the Seller nor any of its ERISA Affiliates has any express or implied commitment (i) to create, incur Liability with
respect to, or cause to exist any new Employee Benefit Plan, program or arrangement that would be considered a Benefit Plan or
(ii) to modify, change or terminate any Benefit Plan, other than with respect to a modification, change or termination required
by applicable Laws.
(b)
There has been delivered or made available to the Buyer, with respect to each Benefit Plan,
the following, to the extent applicable (or, to the extent no such copy exists, a description of): (i) a true and complete
copy of each Benefit Plan as in effect on the date hereof (or, in the case of an oral Benefit Plan, a written summary of such plan),
including all amendments not incorporated into the documentation for each such plan, (ii) the most recent summary plan description
together with the summary or summaries of material modifications thereto, if any, and (iii) the most recently received IRS
determination or opinion letter, if applicable.
(c)
Each Benefit Plan (and each related trust, insurance contract or fund) has been maintained,
operated and administered in all material respects in accordance with its governing instruments and all applicable Laws, including,
but not limited to, ERISA and the Code. All payments and contributions by the Seller or its ERISA Affiliates required by any Benefit
Plan or by applicable Law (including all employee and employer contributions, insurance premiums, or intercompany charges) have
been timely made or accrued in accordance with GAAP or applicable international accounting standards. There are no actions, audits
or claims (other than routine claims for benefits) pending or, to the Knowledge of the Seller, threatened, anticipated or expected
to be asserted with respect to any Benefit Plan or any related trust or other funding medium thereunder and there are no facts
to the Knowledge of the Seller or circumstances which would reasonably be expected to give rise to any such meritorious actions,
audits or claims. There have been no “prohibited transactions” (as described in section 406 of ERISA or section 4975
of the Code) with respect to any Benefit Plan and neither the Seller nor any of its ERISA Affiliates has engaged in any prohibited
transaction. Each Benefit Plan is maintained only in the United States and is subject only to the Laws of the United States or
a political subdivision thereof.
(d)
Each Benefit Plan that is intended to be qualified under Section 401(a) of the Code or
Section 401(k) of the Code, and any related trust established in connection with such Benefit Plan that is intended to be
exempt under 501(a) of the Code, has received a timely favorable determination, advisory and/or opinion letter from the IRS, covering
all of the provisions applicable to the Benefit Plan for which determination, advisory and/or opinion letters are currently available,
that the Benefit Plan is so qualified and the related trust is so tax exempt. No action has been taken or fact or event has occurred
since the date of such determination, advisory and/or opinion letter or letters from the IRS that would reasonably be expected
to adversely affect the qualified status of any such Benefit Plan or the exempt status of any such trust.
(e)
No Benefit Plan provides for, or has provided for since January 1, 2015, or promises post-retirement
or retiree medical, disability, life or other welfare benefits to any Person, including to any Seller Employee, other service provider
of the Seller or any dependent or beneficiary thereof, except as required by Section 4980B of the Code, Part 6 of Title I
of ERISA or similar applicable Law. Except as set forth in
Schedule 3.16(e)
, neither the execution of this Agreement nor
the consummation of the transactions contemplated hereby (either together with or upon the occurrence of any additional or subsequent
events) will or may reasonably be expected to (i) result in any payment or benefit (including change-in-control benefits, severance
or termination pay) becoming due to any current or former Seller Employee or other service provider of the Seller (or their dependents
or beneficiaries), or (ii) result in any acceleration of the time of payment, vesting or funding (including the segregation of
assets to fund) or increase the amount of compensation, benefits or other payments due to any current or former Seller Employee
or other service provider of the Seller (or their dependents or beneficiaries).
(f)
Each Benefit Plan or other Contract, plan, program, agreement, or arrangement that is a “nonqualified
deferred compensation plan” within the meaning of Section 409A(d)(1) of the Code has been operated in compliance with Section 409A
of the Code and applicable guidance thereunder. No nonqualified deferred compensation plan that was originally exempt from application
of Section 409A of the Code has been “materially modified” at any time. No compensation will, or could reasonably
be expected to, be includable in the gross income of any Seller Employee as a result of the operation of Section 409A of the
Code with respect to any arrangements or agreements in effect as of the Closing Date.
(g)
No Benefit Plan is, and neither the Seller nor any ERISA Affiliate currently maintains, contributes
to or participates in, has maintained, contributed to or participated in since January 1, 2015, has any obligation to maintain,
contribute to or participate in, or has or could have any Liability or other obligation (whether accrued, absolute, contingent
or otherwise) under, any (i) ”multiemployer plan” (within the meaning of Section 3(37) of ERISA), (ii) “multiple
employer plan” (within the meaning of Section 413(c) of the Code), (iii) “multiple employer welfare arrangement”
(within the meaning of Section 3(40) of ERISA), (iv) plan that is subject to the provisions of Title IV of ERISA or Section 412
of the Code, or (v) a “funded welfare plan” within the meaning of Section 419 of the Code. No Benefit Plan
is maintained through a human resources and benefits outsourcing entity, professional employer organization, or other similar vendor
or provider.
3.17
Insurance
. All policies or binders of fire, liability, product liability, workers’ compensation, vehicular
and other insurance and bond and surety arrangements (the “
Insurance Policies
”) held by or on behalf of
any Selling Party which names any Selling Party as the policy holder or named insured are listed and described on
Schedule 3.17
.
All premiums on all Insurance Policies have been paid to date, and each Selling Party has complied with all conditions of the Insurance
Policies applicable to it and the Insurance Policies are currently in effect. No insurer under any such insurance policy has canceled
or generally disclaimed Liability under any such policy or indicated any intent to do so or not to renew any such policy. Except
as set forth on
Schedule 3.17
, no written demand for payment or litigation currently is pending under any such policy, and
all prior claims under such insurance policies have been filed in a timely fashion and all written demands or litigation have been
resolved without Liability or further obligation to any Selling Party.
3.18
Products and Warranties
. Except as set forth on
Schedule 3.18
, all products sold, licensed, leased or delivered
by any Selling Party to customers and all services provided by or through any Selling Party to customers on or prior to the Closing
conform in all material respects to applicable written contractual commitments, express written warranties, written service level
commitments, written product specifications and written product documentation and to any representations made to customers.
3.19
Brokers’ Fees
. Except as set forth on
Schedule 3.19
, no Selling Party has any Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated hereby for which the
Buyer could become liable or obligated.
3.20
Environmental Compliance
. At all times prior to the Closing, (a) each Selling Party has been in compliance in
all material respects with Environmental Laws; (b) each Selling Party has obtained and maintained all permits required under
Environmental Laws, if any, and no Selling Party has received written notice of any action to revoke or modify any of such permits;
(c) there are no actions relating or pursuant to Environmental Laws that are pending, or, to the Knowledge of the Seller,
threatened in writing against any Selling Party, or concerning any real property ever owned or leased for operation of any Selling
Party; (d) no Selling Party has received written notice of or entered into or assumed by contract or operation of Law or otherwise
any Liability, order, settlement, judgment, injunction or decree pursuant to Environmental Law with respect to the ownership or
operation of such Selling Party; (e) no real property ever owned or leased for operation of any Selling Party is or has been
used as a hazardous waste treatment, storage or disposal facility required to obtain a permit under the federal Resource Conservation
and Recovery Act, 42 U.S.C. § 9601 et seq., or any analogous state or local Laws; and (f) no Selling Party has caused or allowed
a release of hazardous substances and no facts, circumstances or conditions exist with respect to such Selling Party, any real
property ever owned or leased for operation of such Selling Party, or any other property to or at which such Selling Party transported
or arranged for the disposal or treatment of hazardous substances that would reasonably be expected to result in any Selling Party
or the Buyer incurring Losses pursuant to Environmental Law.
3.21
Privacy and Data Security
. Each Selling Party is, and at all times has been, in material compliance with (a) all
applicable laws and industry standards regarding the protection, storage, use, disclosure, and transfer of Personal Data; and (b) all
contracts (or portions thereof) between such Selling Party and its vendors, marketing affiliates, and other customers and business
partners that are applicable to the use and disclosure of Personal Data (such contracts hereinafter referred to as “
Privacy
Agreements
”). Each Selling Party has used commercially reasonable efforts to confirm that all third parties that have
provided Personal Data to such Selling Party have collected, processed, used, stored, secured, and/or disclosed such Personal Data
in compliance with all applicable law, industry standards, self-regulatory guidelines, privacy policies, and security requirements.
Neither the execution, delivery or performance of this Agreement, nor the consummation of any of the transactions contemplated
in this Agreement will result in any material violation of any Privacy Agreements, or any applicable law, industry guidelines,
or standards pertaining to privacy or Personal Data. Each Selling Party has reasonable safeguards in place to protect Personal
Data in such Selling Party’s possession or control from unauthorized access by third persons, including such Selling Party’s
employees and contractors. To the Knowledge of the Seller, no Person has made any illegal or unauthorized use of Personal Data
that was collected by or on behalf of any Selling Party and is or was in the possession or control of any Selling Party that would
be material to the Business. No Selling Party has received any written claim, complaint, inquiry, or notice from any third party
or any Governmental Authority or self-regulatory authority or entity related to such Selling Party’s collection, processing,
use, storage, security, and/or disclosure of Personal Data that (x) such Selling Party is in violation of any applicable law, guideline,
industry standard, privacy policy, or (y) otherwise constitutes an unfair, deceptive, or misleading trade practice.
3.22
Employee Matters
.
(a)
Schedule 3.22
contains a complete and correct list of all employees of each Selling
Party (the “
Seller Employees
”) and their respective titles as of the date hereof.
Schedule 3.22
contains a complete and correct list of all consultants of each Selling Party (the “
Seller Consultants
”),
their respective roles and duties as of the date hereof. Except as set forth on
Schedule 3.22
, (i) the terms of
employment or engagement of all directors, managers, officers, Seller Employees, agents, consultants and professional advisers
of each Selling Party are such that their employment or engagement may be terminated at will with notice given at any time and
for any reason or no reason at all and without Liability for payment of compensation or damages, (ii) each Selling Party has
paid in full to all Seller Employees all wages, salaries, commissions, bonuses and other compensation due to such employees and
there are no severance payments that are or could become payable by such Selling Party to any such Person under the terms of any
oral or written agreement or commitment or any Law, custom, trade or practice, (iii) each Selling Party is in compliance with
any and all agreements, contracts or commitments, oral or written, between such Selling Party and any such Person and all such
agreements, contracts or commitments are identified on
Schedule 3.22
, (iv) as of the date hereof, no Person listed
on
Schedule 3.22
has given notice to any Selling Party of his or her intention to terminate his or her employment or
services to such Selling Party and (v) there are no agreements between any Seller Employee and any other Person that would
restrict, in any manner, such Person’s ability to perform services for any Selling Party or the Buyer or the right of any
of them to compete with any Person or the right of either of them to sell to or purchase from any other Person. All Persons listed
on
Schedule 3.22
or
Schedule 3.22
are, to the Knowledge of Seller, lawfully entitled to work or otherwise
provide services for the Selling Parties without any visa, permit, export license or consent being required.
(b)
No Selling Party is bound, nor has it been bound since January 1, 2015, by or subject to (and
none of its assets or properties are bound by or subject to) any arrangement with any labor union or other collective bargaining
representative. No employee of any Selling Party is represented, nor has been represented since January 1, 2015, by any labor union
or covered by any collective bargaining agreement while employed by such Selling Party and no informal or formal efforts or campaign
to establish such representation is in progress or has been attempted within the three (3) years prior to the date of this Agreement.
With respect to each Selling Party, there is no pending or, to the Knowledge of the Seller, threatened (i) strike, slowdown,
picketing, work stoppage or employee grievance process, (ii) material charge, grievance proceeding or other material claim
against or affecting such Selling Party relating to the alleged violation of any Law pertaining to labor relations or employment
matters, including any charge or complaint filed by an employee or union with the National Labor Relations Board, the Equal Employment
Opportunity Commission or any comparable Governmental Authority, (iii) employee or union organizational activity or other
labor or employment dispute against or affecting such Selling Party, or (iv) application for certification of a collective
bargaining agent.
(c)
Except as set forth on
Schedule 3.22
, each Selling Party is and has been in material
compliance with all applicable Laws regarding employment and employment practices, terms and conditions of employment, and wages
and hours, including any such Laws regarding employment documentation, equal employment opportunities, fair employment practices,
plant closings and mass layoffs, sexual harassment, discrimination based on sex, race, disability, health status, pregnancy, religion,
national origin, age or other tortious conduct, workers’ compensation, family and medical leave, the Immigration Reform and
Control Act, and occupational safety and health requirements, and no Selling Party has engaged in any unfair labor practice, except
where the failure to be so compliance would not reasonably be expected to result in a Material Adverse Effect on the Seller. No
Selling Party is, nor has it within the past two (2) years ever been, liable for the payment of any compensation, damages, Taxes,
fines, penalties or other amounts, however designated, for failure to comply with any of the foregoing or has resolved such claims
for payment of any sum regardless of any finding of liability. Each Selling Party is and has been in compliance with their obligations
under the Worker Adjustment and Retraining Notification Act and similar applicable Laws, and all other notification and bargaining
obligations arising under any applicable agreement, statute, or otherwise. To the Knowledge of Seller, all Persons classified by
each Selling Party as non-employees, including but not limited to independent contractors, consultants, or otherwise, do satisfy
and have satisfied the requirements of Law to be so classified, and each Selling Party has fully and accurately reported their
compensation on IRS Forms 1099 when required to do so. No Selling Party has any direct or indirect Liability, whether absolute
or contingent, with respect to any misclassification of any Person as an independent contractor rather than as an employee, or
with respect to any employee leased from another employer. No individual who has performed services for or on behalf of any Selling
Party within two (2) years and who has been treated by such Selling Party as a non-employee, whether as an independent contractor,
consultant or otherwise, is classifiable as a “leased employee” within the meaning of Section 414(n)(2) of the
Code with respect to such Selling Party.
(d)
No third party has claimed, or to the Knowledge of the Seller has reason to claim that any
Person employed by or affiliated with any Selling Party (i) has violated or may be violating any of the terms or conditions
of his or her employment, non-competition, non-solicitation or non-disclosure agreement with such third party, (ii) has or
may have disclosed or utilized any trade secret or proprietary information or documentation of such third party, or (iii) has
interfered or may be interfering in the employment relationship between such third party and any of its present or former employees.
To the Knowledge of Seller, no Person employed by or affiliated with any Selling Party has employed or has proposed to employ any
trade secret or any information or documentation proprietary to any former employer or violated any confidential relationship that
such Person may have had with any third party, in connection with the development, sale, licensing, or other providing of any Service
or proposed Service.
3.23
Restrictions on Business Activities
. Except as set forth on
Schedule 3.23
, there is no agreement or understanding
(non-competition or otherwise, written or oral), commitment, judgment, injunction, order or decree to which any Selling Party is
a party or otherwise binding upon any Selling Party that (a) prohibits or impairs a material business practice of such Selling
Party, (b) imposes a “most favored nation” requirement or similar provision on such Selling Party or (c) materially
limits the freedom of such Selling Party to engage in any line of business or to compete with any Person. Without limiting the
generality of the foregoing, except as set forth on
Schedule 3.23
, no Selling Party has (x) agreed to provide
or make any rebate, penalty, change in pricing or other payment or other accommodation to any Person in the event that such Selling
Party changes the terms applicable such Selling Party’s services or (y) entered into any contract under which such Selling
Party is restricted from selling, licensing, manufacturing, delivering or otherwise distributing or commercializing any of its
Seller Intellectual Property or from providing services to customers or potential customers or any class of customers, in any geographic
area, during any period of time, or in any segment of the market.
3.24
Related Party Transactions
. No Selling Party currently has extended or maintained credit, arranged for the extension
of credit, or renewed an extension of credit, in the form of a personal loan to or for any employee, director or officer (or equivalent
thereof) of such Selling Party or any of their respective Affiliates. No member, manager, officer or director of any Selling Party,
nor any of their respective Affiliates, currently has received, nor is entitled to receive, any material compensation from any
Person that has engaged in or is engaging in any material transaction with such Selling Party. Except as set forth on
Schedule 3.24
,
no Selling Party is a party to any contract or other commitment or transaction with any Related Party, nor do any Related Parties
have any legal or beneficial interest in the assets or property owned or used by such Selling Party, in any contracts to which
such Selling Party is a party, or in any other Person with which such Selling Party is or has been party to a contract. Except
as set forth on
Schedule 3.24
, there are no outstanding claims, accounts payable or receivable, intercompany loans,
indebtedness, or other Liabilities, between any Selling Party, on the one hand, and any Related Parties, on the other hand, and
all such Liabilities have been repaid in full. Any such arrangement with a Related Party is referred to herein as a “
Related Party
Arrangement
”. The terms and conditions of any such Related Party Arrangement are no less favorable to any Selling Party
than could have been obtained from an unrelated third party, and such Related Party Arrangement was negotiated and entered into
on an arms-length, commercially reasonable basis.
3.25
Solvency
. The Seller is not entering into this Agreement with the intent to hinder, delay or defraud any Person to
which any Selling Party is, or may become, indebted. The Purchase Price and the Assumed Liabilities are not less than the reasonably
equivalent value of the Acquired Assets. Each of any Selling Party’s assets, at a fair valuation, exceed their respective
liabilities, and after the Closing and after giving effect to this Agreement and the other transactions contemplated hereby, no
Selling Party will be insolvent (either because its financial condition is such that the sum of its debts is greater than the fair
value of its assets or because the present fair salable value of its assets will be less than the amount required to pay its probable
liability on debts as they become absolute and matured).
3.26
HIPAA
. No Selling Party is and, to the Knowledge of Seller, has never been a “covered entity” as defined
in the Health Insurance Portability and Accountability Act of 1996, as amended, including by The Health Information Technology
for Economic and Clinical Health (HITECH) Act, enacted as part of the American Recovery and Reinvestment Act of 2009, or the regulations
promulgated pursuant thereto (collectively, “
HIPAA
”). Notwithstanding each Selling Party’s status as a
“covered entity” or “business associate” (as both are defined in HIPAA), each Selling Party is aware of,
acknowledges and complies with HIPAA. Each Selling Party is and at all times has been, in compliance with HIPAA and with all HIPAA
“business associate” type covenants in any contract or amendment thereto. To the extent that any Selling Party is a
“business associate” under HIPAA, each has a valid and binding Business Associate Agreement that has been in force
at all times under which such entity has had access to any information covered by HIPAA. No Selling Party has received any written
complaint, nor, to the Knowledge of the Seller, has any complaint been made to any Person, from any Person regarding the improper
use or disclosure of such Person’s protected health information by such Selling Party, any of the or any of the foregoing’s
Representatives.
3.27
Compliance With Anti-Corruption Laws
.
(a)
No Selling Party, nor any representatives of any Selling Party has, directly or indirectly,
taken any action that as of the Closing would cause them to be in violation of: (i) the principles set out in the Organization
for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business
Transactions; (ii) the Foreign Corrupt Practices Act of 1977, as amended, or any rules or regulations thereunder; (iii) the
UK Bribery Act 2010; and (iv) any other applicable anti-corruption and/or anti-bribery laws, statutes, rules, regulations,
ordinances, judgments, orders, decrees, injunctions, and writs of any Governmental Authority of any jurisdiction applicable to
such Selling Party (whether by virtue of jurisdiction or organization or conduct of business) (collectively, the “
Applicable
Anti-Corruption Laws
”).
(b)
No Selling Party, nor any representatives of any Selling Party or any other Person acting
on behalf of any Selling Party has, directly or indirectly, offered, paid, promised to pay, or authorized a payment, of any money
or other thing of value (including any fee, gift, sample, travel expense or entertainment) or any commission payment, or any payment
related to political activity, to any of the following persons for the purpose of influencing any act or decision of such person
in his or her official capacity, inducing such person to do or omit to do any act in violation of the lawful duty of such official,
securing any improper advantage, or inducing such person to use his or her influence with a foreign government or instrumentality
thereof to affect or to influence any act or decision of such government or instrumentality, in order to assist such Selling Party
in obtaining or retaining business for or with, or directing the business to, any Person: (i) any person who is an agent,
representative, official, officer, director, or employee of any non-U.S. government or any department, agency, or instrumentality
thereof (including officers, directors, and employees of state-owned, operated or controlled entities) or of a public international
organization; (ii) any person acting in an official capacity for or on behalf of any such government, department, agency,
instrumentality, or public international organization; (iii) any political party or official thereof; (iv) any candidate
for political or political party office (such recipients in paragraphs (i), (ii), (iii) and (iv) of this subsection collectively,
“
Government Officials
”); or (v) any other individual or entity while knowing or having reason to believe
that all or any portion of such money or thing of value would be offered, given, or promised, directly or indirectly, to any Government
Official.
(c)
Except as disclosed in the Seller’s filings with the Commission, the Seller has devised
and maintained a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions
are executed and access to assets is permitted only in accordance with the Seller’s applicable policies and procedures and
management’s general or specific authorization, and (ii) transactions have been recorded as necessary to permit preparation
of periodic financial statements and to maintain accountability for assets, and the Seller has otherwise established reasonable
and adequate internal controls and procedures intended to ensure compliance with Applicable Anti-Corruption Laws.
(d)
The books, records and accounts of the Seller have at all times, accurately and fairly reflected,
in reasonable detail, the transactions and dispositions of its funds and assets. To the Knowledge of Seller, there have never been
any false or fictitious entries made in the books, records or accounts of the Seller relating to any illegal payment or secret
or unrecorded fund, and the Seller has not established or maintained a secret or unrecorded fund.
(e)
Neither the Seller, nor any representatives of the Seller or any other Person acting on behalf
of the Seller, has made any payments or transfers of value with the intent, or that have the purpose or effect, of engaging in
commercial bribery, or acceptance of or acquiescence in kickbacks or other unlawful or improper means of obtaining business.
(f)
The Seller has not entered into any transaction with any of its Affiliates that has provided
to the Seller revenues, earnings or assets that would not have been available to it in an arm’s length transaction with an
unaffiliated Person.
(g)
For purposes of this Section only, the term “
representatives
” shall also
mean, with respect to any Person, such Person’s resellers, distributors, consultants and intermediaries.
3.28
Xytex Assets
.
(a)
On or prior to the date hereof and on the Closing Date, the Seller has delivered to the Buyer
(i) a true, complete and accurate list of all Acquired Assets then located at the Xytex Cryo International, Ltd. (“
Xytex
”)
facility (the “
Xytex Assets
”) at 1100 Emmett Street, August, Georgia 30904 (the “
Xytex Facility
”)
and (ii) a list identifying the specific form of Assumed Contract applicable to each Xytex Asset (each, a “
Xytex Assumed
Contract
”).
(b)
There exists no breach of, default under, or any event or circumstance that, with the giving
of notice, passage of time or both could result in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any Xytex Assumed Contract. No party to any Xytex Assumed Contract has given notice
to any Selling Party of his or her intention to terminate such Xytex Assumed Contract, excluding, for the avoidance of doubt, the
Xytex Agreements (defined below). All Xytex Assumed Contracts are on the form or forms set forth on
Exhibit G
hereto
or on a form or forms reasonably acceptable to the Buyer.
(c)
The Seller has delivered to the Buyer true, complete and accurate copies of all agreements
of any Selling Party with Xytex (the “
Xytex Agreements
”), and all Xytex Agreements are in full force and effect
until the date of this Agreement. Xytex and each Selling Party are in full compliance with all of their respective covenants and
obligations under the Xytex Agreements and applicable Laws related to the storage and processing of the Xytex Assets. At the Closing,
the Buyer shall have the right pursuant to the Xytex Agreements and Xytex Assumed Contracts to remove, ship and transfer the Xytex
Assets to its offices in Los Angeles, California or a location of its choosing without restriction and without any financial obligation
to Xytex, any Selling Party (other than pursuant to
Section 5.26
hereof) or any party to a Xytex Assumed Contract.
3.29
Disclosure
. The representations and warranties set forth in the Transaction Documents, including schedules and exhibits
thereto, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
and information contained therein not misleading. There is no material fact relating to any Selling Party, the Acquired Assets
or the Assumed Liabilities which may adversely affect them or the Buyer which has not been disclosed to the Buyer in writing.
3.30
No Further Representations
. Notwithstanding anything contained herein to the contrary, except in the case of fraud,
no Selling Party nor any of its Affiliates or representatives has made or is making any representation warranty whatsoever, express
or implied, written or oral, including any implied representation or warranty as to the condition, merchantability, usage, suitability
or fitness for any particular purpose with respect to such Selling Party, except for the representations and warranties contained
in this Agreement.
|
4.
|
REPRESENTATIONS AND WARRANTIES OF THE BUYER.
|
The Buyer represents
and warrants to the Seller the following:
4.1
Organization of the Buyer
. The Buyer is a limited liability company duly organized, validly existing, and in good
standing under the laws of the State of California, and is qualified to do business in all states and jurisdictions as it may be
required in order to conduct the Business and its business as it is currently being conducted, except where such failure would
not have a Material Adverse Effect.
4.2
Authority for Agreement
. The Buyer has the company power and authority to execute and deliver this Agreement and
to perform its obligations hereunder. The execution, delivery and performance of the Transaction Documents by the Buyer have been
duly and validly authorized by all necessary company and other actions or proceedings. This Agreement has been duly executed and
delivered by the Buyer and the respective Transaction Documents to which the Buyer is or will be a party constitute or will, when
executed and delivered, constitute legal, valid and binding obligations of the Buyer, enforceable in accordance with their terms,
except to the extent that (a) enforcement may be limited by or subject to any bankruptcy, insolvency, reorganization, moratorium,
or similar law as is now or hereinafter in effect relating to creditors’ rights generally, and (b) the remedy of specific
performance and injunctive and other forms of equitable relief are subject to certain equitable defenses and to the discretion
of the court or other authority or person before which any proceeding therefore may be brought.
4.3
No Breach of Statute or Contract; Required Consents
. Neither the execution and delivery of this Agreement by the
Buyer, nor compliance with the terms and provisions of this Agreement by the Buyer will: (a) conflict with or result in a material
breach of any of the material terms, conditions or provisions of the Buyer’s organizational documents or any judgment, order,
decree, or ruling of any Governmental Authority, or of any injunction to which it is subject; or (b) require the affirmative consent
or approval of any material third party.
4.4
Brokers’ Fees
. The Buyer has no Liability to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated hereby for which the Seller could become liable or obligated.
4.5
Licenses
. The Buyer is currently and properly licensed, registered, certified and qualified under any applicable
statute, rule, regulation or requirement of any Governmental Authority having jurisdiction over such matters to provide long term
Storage of the Acquired Assets and to perform the obligations imposed upon it by the Acquired Contracts, except where such failure
would not have a Material Adverse Effect.
4.6
Second Amendment
. The Buyer has delivered to the Seller true, accurate and complete copies of the Second Amendment
and the Credit Agreement. As of the date hereof, each of the Second Amendment and the Credit Agreement is in full force and effect
and are legal, valid and binding obligations of the Buyer (as applicable) and, to the Knowledge of the Buyer, the other parties
thereto, and the Credit Agreement has not otherwise been amended, supplemented, waived or modified except pursuant to that certain
Amendment No. 1 to Credit Agreement, dated as of December 1, 2016 (which was executed in connection with an unrelated acquisition),
and no such amendment, supplement, waiver or modification is contemplated that will reduce or withdraw the commitment under the
Credit Agreement, and the respective commitments contained in the Credit Agreement have not been withdrawn or rescinded. Assuming
the financing is funded in accordance with the Second Amendment and the satisfaction of the conditions to the obligation of the
Buyer to consummate the transactions contemplated hereby or the waiver of such conditions, the net proceeds of the financing contemplated
by the Second Amendment (together with other cash available to the Buyer) will be sufficient for the Buyer to pay (a) the
Purchase Price, and (b) any other amounts required to be paid by the Buyer in connection with the consummation of the transactions
contemplated by this Agreement and all related fees and expenses associated therewith. As of the date hereof, the Buyer has no
reason to believe that it will be unable to satisfy, on a timely basis, any condition contained in the Second Amendment required
to be satisfied by it for the financing thereunder to be funded on or before the Closing Date or that the amounts committed pursuant
to the Second Amendment will not be available as of the Closing if the conditions of closing to be satisfied by it contained in
the Second Amendment are satisfied.
4.7
No Further Representations
. Notwithstanding anything contained herein to the contrary, except in the case of fraud,
neither the Buyer nor any of its Affiliates or representatives has made or is making any representation warranty whatsoever, express
or implied, written or oral, including any implied representation or warranty as to the condition, merchantability, usage, suitability
or fitness for any particular purpose with respect to the Buyer, except for the representations and warranties contained in this
Agreement.
The Parties agree as
follows:
5.1
General
. Each of the Parties will use its commercially reasonable best efforts to take all action and to do all things
necessary, proper, or advisable in order to consummate and make effective the transactions contemplated hereby (including satisfaction,
but not waiver, of the closing conditions set forth in
Article 6
below).
5.2
Commercially Reasonable Efforts
. Each Party agrees to use commercially reasonable efforts promptly to take, or cause
to be taken, all actions and do or cause to be done all things necessary, proper or advisable under applicable Laws and regulations
to (a) obtain all consents, approvals or actions of, make all filings with and give all notices to Governmental Authorities
or any other public or private third parties required to consummate the Closing and the other matters contemplated hereby, (b) provide
such other information and communications to such Governmental Authorities or other public or private Persons as the other Party
or such Governmental Authorities or other public or private Persons may reasonably request in connection therewith, and (c) consummate
and make effective the transactions contemplated by this Agreement, including the satisfaction of all material conditions hereto.
5.3
Agreement Not to Compete
. The Seller agrees that, in consideration of the purchase by the Buyer hereunder, the Seller
shall not, and the Seller shall cause each other Selling Party to not, in any manner, directly or indirectly, for a period of three
(3) years from Closing Date (the “
Restricted Period
”), directly or indirectly, including through entities controlled
by such Selling Party or otherwise, engage in or participate in or assist others to engage in any activity competitive with any
aspect of the Business (“
Competitive Services
”). A Selling Party shall be deemed to be engaged in the Business
or performing Competitive Services if a Selling Party shall engage in such Business or perform such services directly or indirectly,
whether for their own account or for that of another person, firm or corporation, or whether as shareholder, principal, partner,
member, employee, agent, investor, proprietor, director, officer, employee or consultant, or in any other capacity. The foregoing
restrictions shall not apply to ownership by a Selling Party of less than 2% of the equity securities of any publicly-traded company.
5.4
Confidential Information
. From and after the Closing, the Seller will not, and shall cause its respective shareholders,
officer and directors and any Person controlling, controlled by or under common control with the Seller to not, for any reason,
directly or indirectly, for itself or any other Person, use or disclose any trade secrets, confidential information, know-how,
proprietary information or other intellectual property of any Selling Party that was used in the Business (collectively, “
Confidential Information
”);
provided
, that the Seller and its respective officers or directors and any Person controlling, controlled by or under common
control with such Selling Party may disclose Confidential Information solely to the extent required under applicable Law. Confidential
Information does not include information if such information was in the public domain at the time of disclosure or it has become
publicly known through no act of any Selling Party.
5.5
Future Assurances
. At the request of the Seller or the Buyer and without further consideration, except as stated
below, the other Party will timely execute and deliver such other instruments of sale, transfer, conveyance, assignment and confirmation
and take such action as the requesting Party may reasonably determine is necessary to consummate the Closing and transfer, convey
and assign to the Buyer, and to confirm the Buyer’s title to or interest in the Acquired Assets and the Assumed Liabilities,
to put the Buyer in actual possession and operating control thereof, and to assist the Buyer in exercising all rights with respect
thereto. Following the Closing, (a) the Buyer shall promptly deliver to the Seller any mail or other communications received
by the Buyer relating to the Excluded Assets or the Excluded Liabilities, (b) the Seller shall promptly forward to the Buyer
any mail or other communications received by the Seller relating to the Acquired Assets or the Assumed Liabilities.
5.6
Remittance of Accounts Receivable
. The Seller shall, and shall cause each Selling Party to, remit any amounts received,
either by check or other form or payment, by the Seller or any other Selling Party from customers with respect to the provision
of services by the Buyer post-Closing as promptly as practical, but no less than monthly. The Buyer agrees to use reasonable efforts
to notify customers of a change in the accounts to which they direct payment, and the Seller shall provide, and shall cause each
Selling Party to provide, all assistance as the Buyer may reasonably request to assist in that notification and transfer. Any post-Closing
receivable with respect to the Acquired Assets made by check payable to the Seller or any other Selling Party and endorsed by the
Seller or any other Selling Party to the Buyer shall be endorsed without recourse to the Seller or the applicable Selling Party.
5.7
Bulk Transfer Law Provisions
. Each Party hereto hereby waives compliance with the provisions of any applicable bulk
transfer Law;
provided
, that the Seller agrees (a) to pay and discharge when due or to contest or litigate all claims
of creditors that are asserted against the Buyer or the Acquired Assets by reason of noncompliance with any such Law, (b) to
indemnify, defend and hold harmless the Buyer from and against any and all such claims, including claims for Taxes that may be
imposed in the event the Seller dose not obtain a clearance certificate required by any state Commissioner of Revenue or similar
agency, in the manner provided in
Article 8
and (c) to take promptly all necessary action to remove any Lien on
the Acquired Assets by reason of such noncompliance.
5.8
Acquired Assets
.
(a)
In the event that, at any time or from time to time following the Closing, any Party identifies
any asset that is included within the definition of Acquired Assets but such asset was not transferred as of Closing, then the
Seller shall, or shall cause the applicable Selling Party to, promptly transfer, or cause to be transferred, such asset to the
Buyer for no additional consideration. Prior to any such transfer, the Seller shall, or shall cause the applicable Selling Party
to, hold such asset in trust for the Buyer.
(b)
Notwithstanding the foregoing, if any Acquired Asset is not assignable or transferable (each,
a “
Non-Transferable Asset
”) without consent of a third party thereto, and if any such consent is not obtained
on or prior to the Closing Date, this Agreement and the related instruments of transfer shall not constitute an assignment or transfer
of such Non-Transferable Asset, and the Buyer or its designee(s) shall not assume the Seller’s rights or obligations under
such Non-Transferable Asset (and such Non-Transferable Asset shall not be included in the Acquired Assets);
provided
, that
Seller shall, or shall cause the applicable Selling Party to, use reasonable best efforts to obtain any such consent as soon as
reasonably practicable after the Closing Date and thereafter shall transfer and assign to the Buyer such Non-Transferable Assets
for no additional consideration. Following any such assignment or transfer, such Non-Transferable Assets shall be deemed Acquired
Assets for purposes of this Agreement.
(c)
After the Closing, the Seller shall, or shall cause the applicable Selling Party to, use commercially
reasonable efforts to provide the Buyer or its designee(s) with all of the rights and benefits of any Non-Transferable Assets after
the Closing as if the appropriate consent had been obtained, including by granting subleases, sublicenses or other rights and establishing
arrangements whereby the Buyer shall have the benefits of and shall undertake the obligation to perform under the Assumed Contracts
(including enforcement for the benefit of the Buyer of any and all rights of the Seller against any other party arising out of
any breach or cancellation of any such Non-Transferable Assets by such other party and, if requested by the Buyer, acting as an
agent on behalf of the Buyer or as the Buyer shall otherwise reasonably require). The Seller shall advise the Buyer in writing
at least ten (10) business days prior to the Closing with respect to any Assumed Contract which the Seller knows or has substantial
reason to believe will or may not be assignable or transferable to the Buyer hereunder at the Closing.
5.9
Name of the Seller
. On or prior to the Closing, the Seller shall, and shall cause each other Selling Party to, take
all actions necessary to (a) amend such Selling Party’s articles of organization, other organizational documents and
any licenses and permits to change the name of such Selling Party to remove any reference to “Cord Blood America”,
“Cord Partners” or “CorCell” or a word or phrase confusingly similar thereto (or any variations, translations
or combinations thereof or similar names) and (b) remove or obliterate the names “Cord Blood America”, “Cord
Partners” and “CorCell” or a word or phrase confusingly similar thereto (or any variations, translations or combinations
thereof or similar names) from all signs, purchase orders and acknowledgements, invoices, sales orders, labels, letterheads, shipping
documents, advertising, stationary, business cards, checks, customer agreements and other items and materials of the Seller and
otherwise, to the extent not conveyed to the Buyer and, immediately after the Closing Date, none of the Selling Parties shall use
a name or internet uniform resource locator which includes the words “Cord Blood America” or “Cord Partners”
or the word “CorCell,” or a word or phrase confusingly similar thereto (or any variations, translations or combinations
thereof or similar names).
5.10
Public Disclosure
. Except as may be required by the applicable rules and regulations of the Commission, the Buyer,
on the one hand, and any Selling Party, on the other hand, shall consult with each other before issuing any press release or otherwise
making any public statement or making any other public (or non-confidential) disclosure regarding the terms of this Agreement and
the transactions contemplated herein, and, except as may be required by applicable Law, neither shall issue any such press release
or make any such statement or disclosure without the prior approval of the other (which approval shall not be unreasonably withheld).
5.11
Non-Solicit
.
(a)
During the Restricted Period, the Seller (the “
Restricted Party
”), shall
not, and shall cause its and their Affiliates not to, directly or indirectly, (i) solicit any Person who was a customer of
the Business as of the Closing Date (a “
Customer
”), or cause or participate in any actions which could result
in the solicitation of any Customer to end its relationship with the Buyer or to terminate or violate the terms of any contract
such Person has with the Buyer, or (ii) solicit any lessor, lessee, vendor, supplier, customer, distributor or other Person
to end its relationship with the Buyer or to terminate or violate the terms of any contract such Person has with the Buyer.
(b)
During the Restricted Period, the Restricted Party shall not, and shall cause its Affiliates
not to, directly or indirectly, solicit for employment or employ any person who is or was an employee or consultant (excluding
professional advisors) of the Selling Parties as the Closing Date, or request, induce or advise any employee or consultant of the
Buyer to leave the employ of, or otherwise stop providing services to, the Buyer, without the prior written consent of the Buyer;
provided
, that a general offer of employment to the public shall not be deemed prohibited hereunder as long as not specifically
directed at any employees or consultants of the Buyer.
(c)
The nature and scope of the foregoing protection and the protections provided in
Section 5.11
have been carefully considered by the Parties. The Parties agree and acknowledge that the duration, scope and geographic areas
applicable to the provisions in this
Section 5.11
and
Section 5.3
are fair, reasonable and necessary and
that adequate compensation has been received by the Restricted Party for such obligations. If, however, for any reason any court
determines that any such restrictions are not reasonable or that consideration is inadequate, such restrictions shall be interpreted,
modified or rewritten to include as much of the duration, scope and geographic area identified in this
Section 5.11
and
Section 5.3
as will render such restrictions valid and enforceable. The Restricted Party acknowledges that it stands
to gain significant benefits by virtue of the consummation of the transactions contemplated by this Agreement.
(d)
In the event of a breach or threatened breach of this
Section 5.11
or
Section 5.3
,
the Buyer shall be entitled, without the posting of a bond, to an injunction restraining, and an accounting of profits and benefits
arising out of, such breach. Nothing herein contained shall be construed as prohibiting any Party from pursuing any other remedy
available to it for such breach or threatened breach.
5.12
Monthly Financial Statements
. During the period commencing on the date hereof and ending on the Closing Date, the
Seller will deliver to the Buyer as promptly as practicable (and in any event within fifteen (15) days) after the end of each calendar
month unaudited financial statements of the Seller that conform to the requirements of the Seller Financial Statements.
5.13
Access to Properties and Records
.
(a)
Subject to compliance with applicable Law, during the period commencing on the date hereof
and ending on the Closing Date, the Seller shall, and shall cause their representatives to, afford to the Buyer and its representatives
(including any Financing Sources), reasonable access, during normal business hours, to all of the assets, properties, books, records
(including Tax records), contracts, documents, employees, representatives and customers of the Seller. The Seller shall furnish
or cause to be furnished to the Buyer such reasonable financial and operating data and other information about the Seller, its
businesses as presently conducted, as conducted in the past and as presently proposed to be conducted in the future, and properties
and assets that the Buyer and its representatives may request;
provided
, that the foregoing shall not require the Seller
to provide any such access or disclose any information to the extent the provision of such access or such disclosure would contravene
applicable Law. Subject to compliance with applicable Law, during the period commencing on the date hereof and ending on the Closing
Date, the Seller shall confer from time to time as requested by the Buyer with one or more representatives of the Buyer to discuss
any changes or developments in the operational matters of the Seller and the general status of the ongoing operations of the Seller.
(b)
After the Closing Date, the Seller shall, and shall cause each other Selling Party to, provide
the Buyer and its representatives with access, subject to applicable Law, at reasonable times, on reasonable notice and during
ordinary business hours, at the Seller’s or other Selling Party’s place of business, to such information related to
the Seller or other Selling Party or the Acquired Assets in the Seller’s or other Selling Party’s possession or control
as is reasonably necessary for financial reporting, human resources, contract administration, audit, regulatory compliance and
accounting matters, the preparation and filing of any tax returns, reports or forms, or the defense of any Tax claim or assessment,
and the Buyer and its representatives shall be permitted to make extracts from, or take copies of, any books, records or other
documentation related to the Seller or the Acquired Assets as may be reasonably necessary for any such purposes.
5.14
Interim Covenants of the Seller
. During the period commencing on the date hereof and ending on the Closing Date,
the Seller shall, and shall cause each Selling Party to:
(a)
conduct the Business only in the ordinary course of business consistent with past practice
of the Seller and in compliance with all Laws, including maintaining all licenses required for the operation of the Business and
complying with all applicable healthcare and regulatory requirements applicable to the Business;
(b)
maintain its existence in good standing under Law and, except as required under this Agreement,
preserve intact its present business organizations, lines of business, rights to retain its employees and its relationships with
employees, customers, suppliers, distributors, contractors, licensors, licensees, lessors and other third parties having business
dealings with the Seller or other Selling Party, in each case, consistent with the Seller’s or the other Selling Party’s
past practice, to the end that its goodwill and ongoing businesses shall be unimpaired at the Closing;
(c)
(i) pay in full when due, all outstanding accounts payable (including outstanding invoices
for services provided by third parties to the Seller or other Selling Party) as determined in accordance with GAAP and pay all
other indebtedness when due, (ii) pay all of its Taxes when due, subject to good faith disputes over such Taxes through appropriate
proceedings, (iii) timely file all Tax Returns required to be filed in a manner consistent with past practice except as otherwise
required by Law and pay the expenses of preparation for such Tax Returns, (iv) pay or perform its other obligations when due,
(v) use reasonable best efforts to collect accounts receivable when due and not extend credit outside of the ordinary course
of business consistent with past practice, (vi) sell products and services consistent with past practice as to license, service
and maintenance terms, and incentive programs, (vii) recognize revenue consistent with past practice and policies and in accordance
with GAAP requirements, (viii) except as required under this Agreement or otherwise requested by the Buyer, use its best efforts
to keep available the services of its present officers, employees and consultants, (ix) maintain its assets and properties in the
same operating condition and repair, reasonable wear and tear excepted, and (x) prosecute and maintain all registrations and applications
to register the Seller Intellectual Property, including paying any related fees when due;
(d)
assure that each of its contracts (other than contracts with the Buyer) entered into after
the date hereof will not require the procurement of any consent, waiver or novation or provide for any change in the obligations
of any party in connection with, or terminate as a result of the consummation of the transactions contemplated by the Agreement,
and shall give reasonable advance notice to the Buyer prior to allowing any Material Contract or right thereunder to lapse or terminate
by its terms;
(e)
operate, maintain and repair its Leased Premises in substantially the same condition as the
same exist on the date hereof (reasonable wear and tear excepted) and in accordance with the terms of the Lease;
(f)
perform in all respects its respective obligations under each Material Contract;
(g)
maintain insurance coverage in amounts adequate to cover the reasonably anticipated risks
of the Business (and, in any event, no lower than as in effect as of the date of this Agreement); and
(h)
pay any accrued bonuses and other employee compensation payable after the date hereof and
before the Closing in the ordinary course of business consistent with past practice, except as set forth on
Schedule 5.14
.
5.15
Restrictions on Conduct of Business
. Without limiting the generality or effect of the provisions of
Section 5.14
,
during the period commencing on the date hereof and ending on the Closing Date, the Seller shall not, and shall cause each other
Selling Party to not, authorize or permit the Seller or other Selling Party, as applicable, to, directly or indirectly, do, propose
to any third party to do (other than proposals to the Buyer for the purpose of seeking consent), cause or permit any of the following
(except to the extent expressly provided otherwise in this Agreement or as requested by the Seller and reasonably consented to
in writing by the Buyer):
(a)
adopt or propose any change to its articles of incorporation or other organizational documents;
(b)
merge or consolidate with any other Person or acquire a material amount of equity or assets
of any other Person or effect any business combination, recapitalization or similar transaction;
(c)
sell, lease, license, transfer or dispose of or make any contract for the sale, lease, license,
transfer or disposition of, or make subject to a security interest or any other Lien, any of its properties or assets;
(d)
[INTENTIONALLY OMITTED]
(e)
[INTENTIONALLY OMITTED];
(f)
enter into a new line of business;
(g)
incur any bank indebtedness or borrowings, whether or not in the ordinary course of its business,
or issue any commercial paper;
(h)
enter into any leases of real property;
(i)
enter into any leases of equipment and machinery except in the ordinary course of business;
(j)
enter into any contract which would be required to be listed on
Schedule 1.1
,
Schedule 2.1
,
Schedule 2.2
or
Schedule 3.7
had it been entered into prior to the date hereof
or in which any Related Party has any beneficial interest, other than (i) a contract with the Buyer or (ii) a Xytex Assumed
Contract on the form or forms set forth on
Exhibit G
hereto or on a form or forms reasonably acceptable to the Buyer
entered into on or prior to the date of this Agreement;
(k)
amend or prematurely terminate, waive any material right or remedy under, or breach any obligation
with respect to, any Material Contract;
(l)
write off as uncollectible, or establish any extraordinary reserve with respect to, any account
receivable or other receivable;
(m)
authorize for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants, convertible or exchangeable securities, commitments, subscriptions,
rights to purchase or otherwise) any membership interest or other ownership interest in the Seller or other Selling Party, as applicable;
(n)
[INTENTIONALLY OMITTED];
(o)
create, incur or assume any Liability, except in the ordinary course of business or any Liability
relating to the closing of the transactions contemplated by this Agreement; or postpone or defer the creation, incurrence or assumption
of any Liability that would otherwise be created, incurred or assumed in the ordinary course of business absent the execution of
this Agreement;
(p)
[INTENTIONALLY OMITTED];
(q)
change any of its methods of accounting or accounting practices in any material respect, other
than any such changes as may be required under GAAP or other generally accepted accounting principles applicable to the Seller;
(r)
[INTENTIONALLY OMITTED];
(s)
[INTENTIONALLY OMITTED];
(t)
[INTENTIONALLY OMITTED];
(u)
make, authorize, or make any commitment with respect to, any single capital expenditure that
is, individually, in excess of Five Thousand Dollars ($5,000) or is, together with other capital expenditures that the Seller or
any other Selling Party, as applicable, has made, authorized or made a commitment with respect to, following the date of this Agreement,
in excess of Fifteen Thousand Dollars ($15,000);
(v)
make any material change that could reasonably be expected to adversely affect the Business;
(w)
make, change or revoke any material Tax election or allow any material Tax election previously
made to expire, file any amended Tax Return, adopt or change any Tax accounting method or Tax accounting period, enter into, cancel
or modify any agreement with a taxing authority, settle any Tax claim or assessment, or consent to any extension or waiver of the
limitation period applicable to any Tax claim or assessment relating to the any Selling Party or the Acquired Assets;
(x)
(i) enter into, amend, waive or terminate any contract pursuant to which any other party
is granted, or that otherwise constrains or subjects any Selling Party or the Buyer any non-competition, “most-favored nation,”
exclusive marketing or other exclusive rights of any type or scope or that otherwise restricts any Selling Party or, upon consummation
of the transactions contemplated by this Agreement, the Buyer or any of its Affiliates from engaging or competing in any line of
business, in any location or in any other manner; (ii) enter into or amend any contract with respect to joint ventures, partnerships
or material strategic alliances; or (iii) other than in the ordinary course of business consistent with past practice, enter
into or amend any contract with respect to future services requirements;
(y)
take any action, fail to take any action or enter into any agreement or understanding that
causes any Selling Party to be in breach or violation of any of the representations or warranties made in this Agreement or commit
a breach of or amend or terminate any Material Contract or any permit, license or other right; or
(z)
agree or commit, whether orally or in writing, to do any of the foregoing.
5.16
Notification of Certain Matters
. The Seller shall, and shall cause each other Selling Party to, give prompt notice
to the Buyer of (a) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which, to the Knowledge
of the Seller, causes any representation or warranty of any Selling Party contained herein to be untrue or inaccurate in any material
respect at or prior to the Closing; (b) any change, occurrence or event not in the ordinary course of business consistent
with past practice; (c) any notice or other communication from any Governmental Authority in connection with the transactions
contemplated by this Agreement or otherwise related to the Business; (d) any notice from any Person alleging that the consent
of such Person is or may be required in connection with the transactions contemplated by this Agreement; (e) any legal proceeding
commenced or, to the Knowledge of the Seller, threatened against, relating to or involving or otherwise affecting the Business
or that relates to the consummation of the transactions contemplated by this Agreement; (f) any breach of any covenant in
this Agreement; or (g) any change, occurrence or event which, individually or in the aggregate with any other changes, occurrences
and events, would reasonably be expected to be adverse to the Seller in any material respect or cause any of the conditions to
closing set forth in
Article 6
not to be satisfied. The delivery of any notice pursuant to this
Section 5.16
shall not be deemed to (x) modify the representations or warranties hereunder of the Seller, (y) modify the conditions
set forth in
Article 6
, or (z) limit or otherwise affect the remedies available hereunder to the Buyer.
5.17
Tax Matters
.
(a)
Notwithstanding any provision herein to the contrary, all personal property, real property,
ad valorem or other similar Taxes (excluding, for the avoidance of doubt, income Taxes and transfer Taxes) levied with respect
to the Acquired Assets for a taxable period that includes (but does not end on) the Closing Date shall be apportioned between the
Seller, on the one hand, and the Buyer, on the other hand, based on the relative number of days included in such period through
and including the Closing Date and the number of days included in such period after the Closing Date, respectively. To the extent
that any portion of such a pro-rated Tax is paid or required by Law to be paid by one Party hereto but required by the foregoing
to be borne by another Party hereto, such other Party shall promptly pay or reimburse the Tax-paying Party for the proper portion
of the Tax required to be so borne upon notice from the Tax-paying Party of the amount of such Tax required to be paid or reimbursed.
Each Party shall timely and duly cause to be filed all Tax Returns and other documentation with respect to all Taxes subject to
this
Section 5.17
that are required by Law to be filed by such Party, and shall pay to the relevant taxing authority
all such Taxes that are required to be paid by such Party (subject to such reimbursement as provided for herein).
(b)
Notwithstanding any provision herein to the contrary, all transfer Taxes incurred in connection
with the transactions contemplated by this Agreement shall be borne by the Seller. Such transfer Taxes shall be paid by the Seller
when due and the Seller shall, at their own expense, file all necessary tax returns and other documentation with respect to all
such transfer Taxes. If required by applicable Law, the Buyer shall, and shall cause its Affiliates to, join in the execution of
any such tax returns and other documentation.
5.18
Continued Existence of the Seller
. The Seller shall not dissolve or liquidate until the later of (a) the date on
which the Seller can be dissolved in accordance with Florida law, consistent with the Seller’s board of directors’
fiduciary duties and the Seller’s obligations under this Agreement and on which there are no pending or unresolved claims
for indemnification under this Agreement or (b) the two (2) year anniversary of the Closing. Buyer acknowledges that Seller intends
to wind-up the affairs of the Selling Parties and dissolve the Selling Parties promptly following the two (2) year anniversary
of the Closing, subject to the foregoing subparagraph (a).
5.19
Preparation of Proxy Statement; Seller Shareholder Meeting
.
(a)
The Seller shall exercise all commercially reasonable efforts necessary in accordance with
this Agreement, the internal laws of the State of Florida, its articles of incorporation and its by-laws to secure the approval
of this Agreement by the shareholders of the Seller (“
Seller Shareholder Approval
”). The Seller’s obligation
to secure the Seller Shareholder Approval in accordance with this
Section 5.19(a)
shall not be limited to or otherwise
affected by the commencement, disclosure, announcement or submission to the Seller of any Competing Proposal, including a Superior
Proposal, or in the event that the Seller board of directors withholds, withdraws, amends or modifies its recommendation to the
Seller shareholders in favor of the Seller Shareholder Approval. The Seller shall exercise commercially reasonable efforts to obtain
the Seller Shareholder Approval.
(b)
(i) The Seller board of directors shall unanimously recommend that the Seller’s shareholders
vote in favor of the approval and adoption of this Agreement; (ii) any information statement or other disclosure document
distributed to the Seller’s shareholders in connection with this transaction shall include a statement to the effect that
the Seller board of directors has unanimously recommended that the Seller’s shareholders vote in favor of the approval of
the adoption of this Agreement; and (iii) neither the Seller board of directors nor any committee thereof shall withhold,
withdraw, amend or modify, or propose or resolve to withhold, withdraw, amend or modify in a manner adverse to the Buyer, the unanimous
recommendation of the Seller board of directors that the Seller shareholders vote in favor of the approval of and adoption of this
Agreement. Notwithstanding the foregoing, prior to obtaining the Seller Shareholder Approval, the Seller board of directors may
withhold, withdraw, amend or modify its recommendation to the Seller shareholders if (A) it receives an unsolicited written
Superior Proposal and (B) it reasonably concludes in good faith (following the receipt of advice from outside counsel) that
modification or withdrawal of its recommendation is required in order to comply with its fiduciary obligations to the Seller shareholders
under the internal laws of the State of Florida.
(c)
As promptly as reasonably practicable following the date of this Agreement, but no later than
fifteen (15) business days after the date hereof, the Seller shall prepare and cause to be filed with the Commission a proxy statement
on Schedule 14A (any such proxy statement, in preliminary or definitive form, a “
Proxy Statement
”) in preliminary
form. The Buyer and the Seller shall cooperate and consult with each other in connection with the preparation of the Proxy Statement.
Without limiting the generality of the foregoing, the Buyer shall reasonably cooperate with the Seller to furnish all information
concerning the Buyer to the Seller, as required under applicable Laws, for the Proxy Statement or in response to any Commission
comment or request, and provide such other assistance as may be reasonably requested in connection with the preparation, filing
and distribution of the Proxy Statement. the Seller shall not file the Proxy Statement, or any amendment or supplement thereto,
without providing the Buyer a reasonable opportunity to review and comment thereon (which comments shall be reasonably considered
by the Seller). The Seller shall promptly notify the Buyer upon the receipt of any comments from the Commission or any request
from the Commission for amendments or supplements to the Proxy Statement, and shall, as promptly as practicable after receipt thereof,
provide the Buyer with copies of all correspondence between it and its representatives, on one hand, and the Commission, on the
other hand, and all written comments with respect to the Proxy Statement or received from the Commission and advise the Buyer of
any oral comments with respect to the Proxy Statement received from the Commission. The Seller shall use its reasonable best efforts
to resolve as promptly as practicable any comments from the Commission with respect to the Proxy Statement and cause the Proxy
Statement in definitive form to be cleared by the Commission.
(d)
No later than two (2) business days after the date the Commission confirms it has no further
comments to the Proxy Statement, the Seller shall, in accordance with its articles of organization and by-laws, establish a record
date for, duly call and give notice of the convening of a special meeting of shareholders of the Seller to vote on approving this
Agreement and the transactions contemplated hereby (together with any postponements or adjournments thereof, collectively, the
“
Seller Shareholder Meeting
”). The Seller shall use its reasonable best efforts to cause the Proxy Statement
to be mailed to the shareholders of the Seller entitled to vote at the Seller Shareholder Meeting and shall hold the Seller Shareholder
Meeting as soon as practicable after the Proxy Statement has been cleared by the Commission, except as provided in
Section 7.1(g)
.
The Seller shall use reasonable best efforts to (i) soliciting from the shareholder of Seller proxies in favor of the adoption
of this Agreement and the transactions contemplated hereby, and (ii) take all other actions reasonably necessary or advisable to
secure the vote or consent of the shareholders of the Seller required by the applicable Laws to obtain such approval.
5.20
Competing Proposal
.
(a)
From and after the date of this Agreement until the Closing or termination of this Agreement
pursuant to
Article 7
, the Seller will not, nor will it authorize or permit any of its officers, directors, Affiliates,
shareholders or employees or any investment banker, attorney or other advisor or representative retained by it (all of the foregoing
collectively being the “
Seller Representatives
”) to, directly or indirectly, (i) solicit, initiate,
seek, entertain, encourage, facilitate, support or induce the making, submission or announcement of any inquiry, expression of
interest, proposal or offer that constitutes, or would reasonably be expected to lead to, a Competing Proposal, (ii) enter
into, participate in, maintain or continue any communications (except solely to provide written notice as to the existence of these
provisions) or negotiations regarding, or deliver or make available to any Person any non-public information with respect to, or
take any other action regarding, any inquiry, expression of interest, proposal or offer that constitutes, or would reasonably be
expected to lead to, an Competing Proposal, (iii) agree to, accept, approve, endorse or recommend (or publicly propose or
announce any intention or desire to agree to, accept, approve, endorse or recommend) any Competing Proposal, (iv) enter into
any letter of intent or any other contract contemplating or otherwise relating to any Competing Proposal, or (v) submit any
Competing Proposal to the vote of any security holders of the Seller;
provided
, that nothing contained herein to the contrary
shall interfere with or otherwise prohibit the Selling Parties from complying with their obligations under applicable Law with
respect to unsolicited tender or exchange offers for the securities of the Seller. The Seller will immediately cease and cause
to be terminated any and all existing activities, discussions or negotiations with any Persons conducted prior to or on the date
of this Agreement with respect to any Competing Proposal. If any Seller Representative, whether in his or her capacity as such
or in any other capacity, takes any action that the Seller is obligated pursuant to this
Section 5.20
to cause such
Seller Representative not to take, then the Seller shall be deemed for all purposes of this Agreement to have breached this
Section 5.20
.
(b)
The Seller shall immediately notify the Buyer orally and in writing after receipt by the Seller
(or, to the Knowledge of the Seller, by any of the Seller Representatives), of (i) any Competing Proposal, (ii) any inquiry,
expression of interest, proposal or offer that constitutes, or would reasonably be expected to lead to, a Competing Proposal, (iii) any
other notice that any Person is considering making an Competing Proposal, or (iv) any request for nonpublic information relating
to the Seller or for access to any of the properties, books or records of the Seller by any Person or Persons other than the Buyer.
Such notice shall describe (1) the material terms and conditions of such Competing Proposal, inquiry, expression of interest,
proposal, offer, notice or request, and (2) the identity of the Person making any such Competing Proposal, inquiry, expression
of interest, proposal, offer, notice or request. The Seller shall keep the Buyer fully informed of the status and details of, and
any modification to, any such inquiry, expression of interest, proposal or offer and any correspondence or communications related
thereto and shall provide to the Buyer a true, correct and complete copy of such inquiry, expression of interest, proposal or offer
and any amendments, correspondence and communications related thereto, if it is in writing, or a reasonable written summary thereof,
if it is not in writing. The Seller shall provide the Buyer with 48 hours prior notice of any meeting of its board of directors
at which the board of directors is reasonably expected to discuss any Competing Proposal.
(c)
If at any time following the date of this Agreement and prior to the receipt of Seller Shareholder
Approval (i) the Seller has received an unsolicited bona fide written Competing Proposal, (ii) the board of directors of the Seller
determines in good faith, after consultation with its outside financial and legal advisors, that such Competing Proposal constitutes,
or would reasonably be expect to lead to, a Superior Proposal and (iii) the board of directors of the Seller determines in good
faith, after consultation with its outside legal advisors, that failure to take such action would breach the directors’ fiduciary
duties under applicable Laws, then the Seller may (x) furnish non-public information to such third party that has made the bona
fide written Competing Proposal and (y) engage in discussions or negotiations with such third party with respect to such bona fide
Competing Proposal;
provided
, that (A) the Seller shall have not violated any of the restriction contained in
Section 5.20(a)
above, (B) prior to so furnishing such information the Seller receives from the third party an executed confidentiality agreement,
which agreement shall not include any provision calling for any exclusive right to negotiate with such Person or having the purported
effect of restricting the Seller from satisfying its obligations under this Agreement, and (C) any non-public information concerning
the Seller or made available to the Buyer, be provided or made available to the Buyer at substantially the same time that such
non-public information is provided to made available to such third party. Prior to taking of any actions referred to in this
Section 5.20(c)
,
the Seller shall notify the Buyer orally and in writing that it proposes to furnish non-public information and/or enter into discussions
or negotiations as provided in this Section, together with a copy of the Competing Proposal submitted by such third party.
(d)
The board of directors of the Seller shall not be entitled to accept a Superior Proposal as
provided in
Section 5.20(c)
unless (i) the Seller has not breached this Section or
Section 5.19
as
it relates to such Superior Proposal, (ii) the Seller has provided written notice (a “
Notice of Superior Proposal
”)
to the Buyer that the Seller intends to take such action, which notice includes a copy of the Superior Proposal that is the Basis
of such action (including the identity of the third party making the Superior Proposal and any equity or debt financing materials
related thereto, if any), (iii) during the five (5) business day period following the Buyer’s receipt of the Notice of Superior
Proposal, the Seller shall, and shall cause its representatives to, negotiate with the Buyer in good faith (to the extent the Buyer
desires to negotiate) to make such adjustments in the terms and conditions of this Agreement so that such Superior Proposal ceases
to constitute a Superior Proposal, and (iv) following the end of the five (5) business day period, the board of directors of the
Seller shall have determined in good faith, after consultation with its outside financial and legal advisors, taking into account
any changes to this Agreement proposed by the Buyer in response to the Notice of Superior Proposal or otherwise, that the Superior
Proposal giving rise to the Notice of Superior Proposal continues to constitute a Superior Proposal. Any amendment to the financial
terms or other material amendment of such Superior Proposal shall require a new Notice of Superior Proposal and the Seller shall
be required to comply again with the requirements of this
Section 5.20
.
5.21
Transaction Litigation
. The Seller shall control, and the Seller shall give the Buyer the opportunity to participate
in the defense of, any litigation brought by shareholders of the Seller or any other Person against the Seller and/or members of
the board of directors of the Seller relating to the transactions contemplated by this Agreement (collectively, the “
Transaction Litigation
”);
provided
, that the Seller shall not compromise, settle, come to an arrangement regarding or agree to compromise, settle
or come to an arrangement regarding any Transaction Litigation, or consent to the same, without the prior written consent of the
Buyer (not to be unreasonably withheld or delayed). In connection with an Transaction Litigation and the Seller’s performance
of its obligations under this
Section 5.21
, the Parties shall enter into a customary common interest or joint defense
agreement or implement such techniques as are reasonably required to preserve any attorney-client privilege or applicable legal
privilege;
provided
, that the Seller shall not be required to provide information if doing so, in the opinion of the Seller’s
legal counsel, would cause the loss of any attorney-client privilege or other applicable legal privilege;
provided, further
,
that if any information is withheld pursuant to the foregoing proviso, the Seller shall inform the Buyer as to the general nature
of what is being withheld, and the Parties shall use commercially reasonably efforts to enable the Seller to provide such information
without causing the loss of any attorney-client or applicable legal privilege.
5.22
COBRA
. The Seller acknowledges and agrees that the “Selling Group” (as such term is defined in Section
54.4980B-9, Q&A-3 of the Treasury Regulations) shall be solely liable, and that the Buyer shall have no obligation or Liability,
for providing continuation coverage under and complying with the Consolidated Omnibus Budget Reconciliation Act of 1985 (“
COBRA
”)
with respect to any individual who prior to the Closing was covered under any Benefit Plan that constitutes a group health plan
contributed to or maintained by the Selling Group and who will be a “M&A Qualified Beneficiary” (as such phrase
is defined in Section 54.4980B- 9, Q&A-4 of the Treasury Regulations) in connection with the transactions contemplated by this
Agreement. The Seller agrees to cause the Selling Group to provide continuing health benefit coverage as required under COBRA to
all employees of the Seller who are M&A Qualified Beneficiaries with respect to the transactions contemplated in this Agreement
as a result of such individual’s employment with the Seller.
5.23
Financing
. Subject to the terms and conditions of this Agreement, the Buyer shall use its commercially reasonable
efforts, and cause its controlled Affiliates to use commercially reasonable efforts, to take, or cause to be taken, all actions
necessary or reasonably advisable to obtain the financing contemplated by the Second Amendment on or prior to the Closing Date,
including satisfying, or causing to be satisfied (or obtaining the waiver of), on a timely basis all conditions to the closing
of and funding under the Second Amendment applicable to the Buyer that are within its control. In the event any portion of the
financing becomes unavailable on the terms and conditions contemplated in the Second Amendment, (a) the Buyer shall promptly
notify the Seller and (b) the Buyer shall use its commercially reasonable efforts to obtain alternative financing from alternative
sources in an amount sufficient to consummate the transactions contemplated hereby.
5.24
Cooperation With Financing
. Upon the request of the Buyer, the Seller shall use, and shall cause each Selling Party
to use, its reasonable efforts to provide, to the Buyer, at the Buyer’s sole cost and expense, such reasonable cooperation
as is customary and reasonably requested by the Buyer in connection with the arrangement, syndication and consummation of the financing
of the transactions contemplated by this Agreement, including: (a) to the extent requested by the Buyer and required under
the Second Amendment, (i) obtain documents reasonably requested by the Buyer or the Financing Source relating to the repayment
of the existing indebtedness of any Selling Party and the release of related liens and related guarantees, including customary
payoff letters and (ii) provide all documentation and other information required by bank regulatory authorities under applicable
“know-your-customer” and anti-money laundering Laws, including the USA PATRIOT Act, relating to the Business, in each
case, as reasonably requested by the Buyer; (b) assist in the preparation of definitive financing documents, including collateral
documents and customary closing certificates as may be required by the Financing Source, or other customary documents as may be
reasonably requested by the Buyer, and cooperate to facilitate the pledging of, granting of security interests in and obtaining
perfection of any liens on, collateral in connection with the financing of the transactions contemplated by this Agreement, but
in no event shall any of the foregoing be effective until as of or after the Closing; (c) cooperate with the Buyer, and take
all corporate actions or other similar actions reasonably necessary to permit the consummation of the financing of the transactions
contemplated by this Agreement, including customary resolutions, consents or approvals; (d) to assist the Buyer in obtaining
legal opinions from local outside counsel as reasonably requested by the Buyer for financings similar to the financing of the transactions
contemplated by this Agreement; and (e) (i) permit the prospective lenders involved in the financing of the transactions
contemplated by this Agreement to evaluate the current assets of the Business for the purpose of establishing collateral arrangements
or (ii) permit representatives of the prospective lenders to conduct commercial field examinations, inventory and intellectual
property appraisals and make audits and appraisals delivered for the purposes of any credit facility available to the Buyer for
purposes of the financing of the transactions contemplated by this Agreement. In no event shall any Selling Party be required to
bear any cost or expense, pay any commitment or other fee, enter into any definitive agreement, incur any other Liability, make
any other payment or agree to provide any indemnity in connection with the financing of the transactions contemplated by this Agreement
or any of the foregoing prior to the Closing, nor shall any Selling Party be required to execute any agreements, certificates or
documents prior to the consummation of the Closing unless such agreements, certificates or documents shall only be effective upon
the consummation of the Closing. In addition, nothing in this
Section 5.24
shall require any action that would require
the Selling Parties or any of their Affiliates to waive or amend any terms of this Agreement or agree to pay any commitment or
other fees or reimburse any expenses, or incur any liability or give any indemnities or otherwise commit to take any similar action,
unreasonably interfere with the ongoing business or operations of the Selling Parties, result in any officer or director of the
Selling Parties incurring any personal liability with respect to any matters relating to the financing, require Selling Parties
to enter into any financing or purchase agreement for the financing, conflict with or violate any Selling Party’s organizational
documents or any applicable Laws or result in, prior to the Closing, the contravention of, or that would reasonably be expected
to result in, prior to the Closing, a violation or breach of, or default under, any contract to which any Selling Party is a party.
The Buyer shall promptly, upon request by any Selling Party, reimburse such Selling Party for all reasonable out-of-pocket costs
and expenses incurred by any Selling Party or any of their respective representatives in connection with the financing of the transactions
contemplated by this Agreement, including the cooperation of the Selling Parties or any of their respective Representatives contemplated
by this
Section 5.24
and the compliance by the Selling Parties or any of their respective representatives with its
obligations under this
Section 5.24
, and shall indemnify and hold harmless each Selling Party and their respective
representatives from and against any and all losses, damages, claims, costs or expenses suffered or incurred by any of them in
connection with the arrangement of the financing of the transactions contemplated by this Agreement and any information used in
connection therewith, including compliance by any selling Party or any of their respective representatives with its obligations
under this
Section 5.24
.
5.25
Payment of Liabilities
. Following the date hereof, the Seller shall, and shall have caused each other Selling Party
to, pay or discharge in full all Liabilities of each Selling Party in accordance with their terms and consistent with past practice,
other than any Liability subject to a bona fide dispute as determined in the reasonable judgment of the Seller, which Liability
shall be paid or discharged in full in accordance with its terms upon resolution of such dispute.
5.26
Payment of Cryogenic Move Expenses
. The Buyer shall pay the costs of and bear the risks associated with the physical
removal of the Acquired Assets located at the Xytex Facility and the Leased Premises, together with the costs and risks associated
with the shipping and transfer of such Acquired Assets to the Buyer’s offices at Los Angeles, California, or another location
chosen by the Buyer. In addition, the Seller shall, and shall have caused each other Selling Party to, at the request of the Buyer,
take such actions as are consistent with the terms of the Transition Services Agreement such that the Acquired Assets may be removed
from the Xytex Facility and Leased Premises and shipped and transferred to the Buyer’s offices at Los Angeles, California,
or another location chosen by the Buyer during the term of the Transition Services Agreement, at the Buyer’s sole cost and
expense as set forth above.
5.27
Notice to Counterparties
.
(a)
Promptly following the date of this Agreement, the Seller shall, and shall have caused each
other Selling Party to, together with the Buyer, send joint notices, on a form reasonably acceptable to the Seller and the Buyer
(a “
Transfer Notice
”), to any counterparty of an Assumed Contract, notifying such counterparty of the Seller’s
and the Buyer’s intent to relocate such counterparty’s cord blood, cord tissue or isocell units to the Buyer’s
offices at Los Angeles, California or another location chosen by the Buyer on or after the Closing Date. In addition, the Seller
shall, and shall have caused each other Selling Party to, at the Closing, pay any outstanding fees or any other amounts owed and
payable to Xytex.
(b)
Within three (3) business days of the Closing, Seller shall, and shall have caused each other
Selling Party to, together with the Buyer, send joint written notice in the form agreed to by Seller and Buyer as of the date hereof
to such Assumed Contract counterparties previously identified by Seller to Buyer.
5.28
Processing of Cord Blood, Cord Tissue and IsoCell Units by the Buyer
. Following the date of this Agreement, and until
the Closing, the Seller and the Buyer agree that the Seller shall, and shall have caused each other Selling Party to, send any
cord blood, cord tissue or isocell units of its customers collected on or after the date of this Agreement, to the Buyer at its
facilities for processing on substantially the same terms and conditions, including price, set forth in the Xytex Agreements pursuant
to a Stem Cell Processing Agreement in the form set forth in the attached
Exhibit H
(“
Processing Agreement
”).
The Buyer agrees to accept custody of such cord blood, cord tissue or isocell units on behalf of any Selling Party’s customers
and to store such units on behalf of the applicable Selling Party pursuant to the terms of such Processing Agreement.
5.29
Storage of Certain Excluded Assets
. After the Closing, until the earlier of (a) the two (2)-year anniversary
of the Closing Date or (b) the date on which the applicable counterparty listed on
Schedule 2.2
either (i) terminates
his or her agreement or agreements with the applicable Selling Party for the storage of cord blood, cord tissue or isocell units
or (ii) enters into a new agreement with the Buyer for the storage of cord blood, cord tissue or isocell units previously
stored by a Selling Party, the Buyer shall store on behalf of the Selling Parties, without charge, the cord blood, cord tissue
or isocell units of the counterparties listed on
Schedule 2.2
. After the expiration of the term of the Transition Services
Agreement, Buyer shall also provide medical director, quality control and quality assurance services and functions in the ordinary
course of business with respect to the storage of cord blood, cord tissue or isocell units with any counterparty listed on
Schedule
2.2
at no charge to the Selling Parties, and the Selling Parties shall not be required to retain their own medical director
or quality and regulatory affairs manager;
provided
, that the Selling Parties shall be required to retain their own medical
director or quality and regulatory affairs manager as may be required outside the ordinary course of business or with respect to
any litigation affecting the counterparties listed on
Schedule 2.2
. For the avoidance of doubt, prior to the Survival
Date, the Buyer shall not assume any documents or obligations resulting from or entered into in connection with any Selling Party’s
business relationship for the storage of cord blood, cord tissue or isocell units with any counterparty listed on
Schedule 2.2
.
Prior to the Survival Date, the Seller shall, and shall cause each Selling Party to, use its commercially reasonable efforts to
cause all counterparties listed on
Schedule 2.2
to enter into new agreements with the Buyer in terms acceptable to
the Buyer for the storage of cord blood, cord tissue or isocell units previously stored by a Selling Party. On the Survival Date,
Seller shall transfer to Buyer all right, title and interest, and Buyer shall assume all obligations, with respect to any contracts
with the customers listed on
Schedule 2.2
for no additional consideration. Buyer will execute such documents that may be
required in the reasonable determination of the Seller to effectuate such transfer.
5.30
Update to Schedule 1.1
. At the Closing, the Seller shall, and shall cause each other Selling Party to, deliver
to the Buyer a current
Schedule 1.1
reflecting the addition of any Xytex Assumed Contract entered into after the date
of this Agreement and any Assumed Contract pertaining to the storage of cord blood, cord tissue and isocell units stored processed
and stored as the Buyer’s facilities on behalf of a Selling Party.
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6.
|
CONDITIONS TO OBLIGATION TO CLOSE.
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6.1
Conditions to Obligation of the Buyer
. The obligation of the Buyer to consummate the transactions contemplated hereby
is subject to satisfaction of the following conditions:
(a)
Representations and Warranties
. Each of the representations and warranties set forth
in
Article 3
above shall be true and correct in all material respects (except that the Fundamental Representations
and Warranties and representations and warranties which are qualified as to “materiality” or “Material Adverse
Effect” shall be true and correct in all respects) as of the date hereof and as of the Closing Date as though then made and
as though the Closing Date were substituted for the date of this Agreement throughout such representations and warranties (except
to the extent any such representation or warranty speaks as of the date of this Agreement or any other specific date, in which
case such representation or warranty shall have been true and correct as of such date).
(b)
Performance by the Seller
. The Seller shall, and shall have caused each other Selling
Party to, have performed and complied with all of its covenants, agreements and obligations hereunder through the Closing.
(c)
Consents
. The Seller shall, and shall have caused each other Selling Party to, have
obtained all authorizations, consents, waivers, approvals, licenses and other action required in connection with the execution,
delivery and performance of this Agreement by each Selling Party and the consummation by each Selling Party of the transactions
contemplated by this Agreement in order for (i) during the term of the Transition Services Agreement, the Seller, or the applicable
other Selling Party, and (ii) after the expiration of the term of the Transition Services Agreement, the Buyer, in each case,
to operate the Business in the same manner as operated by the Selling Parties immediately prior to the Closing Date, consistent
with past practice, which shall include the authorizations, consents, waivers, approvals, licenses and other actions listed on
Schedule 6.1(c)
. Without limiting the generality of the foregoing, the Buyer shall have received all such requisite
consents and approvals to assume, acquire and have the benefit of at least ninety-seven percent (97%) of the Assumed Contracts.
(d)
No Prohibition; Pending Actions
. (i) No Law or final, non-appealable order that prohibits
the Buyer from consummating all or any of the transactions contemplated hereby shall be in effect as of the Closing; and (ii) there
shall not be pending or threatened in writing any action or proceeding by any Person or Governmental Authority challenging, or
seeking damages in connection with, the transactions contemplated herein or seeking to materially restrain, prohibit or limit the
exercise of full rights of ownership or operation by the Buyer of all or any material portion of the Seller.
(e)
No Material Adverse Effect
. Since the date hereof, there shall have been no Material
Adverse Effect on the Seller, the Business or the Acquired Assets.
(f)
Delivery of Closing Documents
. The Seller shall have delivered to the Buyer each of
the items listed in
Section 2.8(a)
at or before the Closing.
(g)
Shareholder Consent
. The Seller shall have received the Seller Shareholder Approval
of this Agreement and the transactions contemplated hereby at the Seller Shareholder Meeting.
(h)
Delivery of Lessor Consent
. The Seller shall have received from Lessor and delivered
to the Buyer, a consent approving the deemed assignment of the Lease as a result of the transactions contemplated herein in form
and substance reasonably acceptable to the Buyer.
The Buyer may waive any condition specified
in this
Section 6.1
if it executes a writing so stating at or prior to the Closing and such waiver shall not be considered
a waiver of any other provision in this Agreement unless the writing specifically so states.
6.2
Conditions to Obligations of the Seller
. The obligation of the Seller to consummate the transactions to be performed
by it in connection with the Closing is subject to satisfaction of the following conditions:
(a)
Representations and Warranties
. Each of the representations and warranties set forth
in
Article 4
above shall be true and correct in all material respects as of the date hereof and as of the Closing Date
as though then made and as though the Closing Date were substituted for the date of this Agreement throughout such representations
and warranties (except to the extent any such representation or warranty speaks as of the date of this Agreement or any other specific
date, in which case such representation or warranty shall have been true and correct as of such date).
(b)
Performance by the Buyer
. The Buyer shall have performed and complied in all material
respects with all of its covenants hereunder through the Closing.
(c)
Shareholder Consent
. The Seller shall have received the Seller Shareholder Approval
of this Agreement and the transactions contemplated hereby at the Seller Shareholder Meeting.
(d)
Delivery of Closing Documents
. The Buyer shall have delivered to the Seller each of
the items listed in
Section 2.8(b)
at or before the Closing.
The Seller may waive any condition specified
in this
Section 6.2
if it executes a writing so stating at or prior to the Closing and such waiver shall not be considered
a waiver of any other provision in this Agreement unless the writing specifically so states.
7.1
Termination
. Without limiting the rights of the Parties under
Section 9.12
hereof, this Agreement may,
by notice given to the other Parties on or prior to the Closing Date, in the manner hereinafter provided, be terminated and abandoned
at any time prior to the Closing Date:
(a)
by the Seller if (i) there has been a breach of any representation, warranty or covenant
or agreement of the Buyer contained in this Agreement that would, individually or in the aggregate, result in the failure of a
condition set forth in
Section 6.2
on any date prior to the Closing Date (it being understood that, for purposes of
this
Section 7.1(a)
, such date prior to the Closing Date shall be substituted for the Closing Date in determining whether
the conditions contained in
Section 6.2
have been satisfied) and (ii) such breach has not been cured within twenty (20)
days after the Buyer’s receipt of written notice thereof from the Seller stating the Seller’s intention to terminate
this Agreement pursuant to this
Section 7.1(a)
, it being understood that the Seller may not terminate this Agreement
pursuant to this
Section 7.1(a)
if such breach by the Buyer has been so cured prior to the end of such notice period)
or is incapable of being cured prior to the end of such notice period;
(b)
by the Buyer if (i) there has been a breach of any representation, warranty or covenant
or agreement of the Seller contained in this Agreement that would, individually or in the aggregate, result in the failure of a
condition set forth in
Section 6.1
on any date prior to the Closing Date (it being understood that, for purposes of
this
Section 7.1(b)
, such date prior to the Closing Date shall be substituted for the Closing Date in determining whether
the conditions contained in
Section 6.1
have been satisfied) and (ii) such breach has not been cured within twenty (20)
days after the Seller’s receipt of written notice thereof from the Buyer stating the Buyer’s intention to terminate
this Agreement pursuant to this
Section 7.1(b)
, it being understood that the Buyer may not terminate this Agreement
pursuant to this
Section 7.1(b)
if such breach by the Seller has been so cured prior to the end of such notice period)
or is incapable of being cured prior to the end of such notice period;
(c)
by mutual written agreement of the Seller and the Buyer;
(d)
by either the Seller or the Buyer if the Closing shall not have occurred on or before the
date that is six (6) months after the date hereof (the “
End Date
”);
provided
, that the Party seeking
to terminate this Agreement shall not seek termination because of its (and in the case of the Seller’s) breach or violation
of any representation, warranty or covenant contained herein having caused or resulted in the failure of the Closing to occur by
the End Date;
(e)
by the Buyer if there shall have occurred since the date hereof an effect, event or change
which, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect on the Seller;
(f)
by the Seller, on the one hand, or by the Buyer, on the other hand, if there shall be a final
nonappealable order of a federal or state court in effect prohibiting the consummation of the transactions contemplated by this
Agreement; or if there shall be any action taken, or any statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the transactions contemplated by this Agreement by any Governmental Authority which would make the consummation of
the transactions illegal;
provided
, that the Party seeking to terminate this Agreement pursuant to this clause shall not
have initiated such proceeding or taken any action in support of such proceeding;
(g)
by the Seller, at any time prior to receipt of the Seller Shareholder Approval, if the board
of directors of the Seller determines to enter into a written alternative agreement with respect to a Superior Proposal, but only
if the Seller shall have complied in all respects with its obligations under
Section 5.19
and
Section 5.20
with respect to such Superior Proposal and is otherwise permitted to terminate this Agreement and accept such Superior Proposal
pursuant to
Section 5.20
;
provided
, that any purported termination of this Agreement pursuant to this
Section 7.1(g)
shall be null and void if the Seller does not, prior to or concurrently with the termination of this Agreement, pay the Seller
the Superior Proposal Termination Fee (as defined below);
(h)
automatically if, at least ten (10) business days prior to the End Date, the Seller does not
obtain the Seller Shareholder Approval; or
(i)
by the Buyer, if at any time at or prior to the Closing, the Buyer is unable to complete the
financing of the transactions as contemplated by this Agreement and on the terms and conditions provided for in the Second Amendment.
7.2
Termination Fees; Effect of Termination
.
(a)
If this Agreement is terminated by the Seller pursuant to
Section 7.1(g)
, the
Seller shall pay a termination fee to the Buyer, in immediately available funds, equal to an amount of One Million Six Hundred
Thousand Dollars ($1,600,000) (the “
Superior Proposal Termination Fee
”).
(b)
If this Agreement is terminated by the Seller pursuant to
Section 7.1(a)
(other
than due to the Buyer being unable to complete the financing of the transactions as contemplated by this Agreement, including its
good faith compliance with its obligations pursuant to
Section 5.24
, and on the terms and conditions provided for in the
Second Amendment), and all the conditions set forth in
Section 6.1
have been met, the Buyer shall pay to the Seller,
in immediately available funds, liquidated damages of Eight Hundred Thousand Dollars ($800,000).
(c)
If this Agreement is terminated by the Buyer pursuant to
Section 7.1(b)
, the Seller
shall pay to the Buyer, in immediately available funds, liquidated damages of Eight Hundred Thousand Dollars ($800,000).
(d)
If this Agreement is terminated by the Buyer pursuant to
Section 7.1(e)
, the Seller
shall pay to the Buyer, in immediately available funds, all fees and expenses reasonably incurred by the Buyer in connection with
the transactions contemplated by this Agreement, in an amount not to exceed Four Hundred Thousand Dollars ($400,000).
(e)
If this Agreement is terminated by the Buyer pursuant to
Section 7.1(i)
and all
the conditions set forth in
Section 6.1
have been satisfied, the Buyer shall pay to the Seller, in immediately available
funds, all fees and expenses reasonably incurred by the Seller in connection with the transactions contemplated by this Agreement,
in an amount not to exceed Four Hundred Thousand Dollars ($400,000).
(f)
If this Agreement is terminated automatically pursuant to
Section 7.1(h)
, the
Seller shall reimburse and pay to the Buyer, in immediately available funds, all fees and expenses reasonably incurred by the Buyer
in connection with the transactions contemplated by this Agreement, in an amount not to exceed Four Hundred Thousand Dollars ($400,000).
(g)
In the event of the termination of this Agreement pursuant to
Section 7.1
, this
Agreement shall be null and void and the transactions contemplated hereby and the Closing shall be abandoned, except that (i) the
provisions of
Section 5.4
(Confidential Information),
Section 5.10
(Public Disclosure), this
Article 7
,
Article 8
and
Article 9
shall remain in full force and effect and survive any termination of this Agreement;
and (ii) nothing in this
Section 7.2(g)
shall be deemed to release any Party for any breach of this Agreement
prior to its termination or preclude the remedy of specific performance for any other Party to enforce the breaching Party’s
obligations under this Agreement;
provided
, that upon payment of the applicable fee set forth in this
Section 7.2
,
no Party, including any its officers, directors, shareholders, employees, Affiliates, financing sources or Financing Source Related
Parties, shall have any further Liability with respect to this Agreement or the transactions contemplated hereby to any other Party
or Person (whether at law, in equity, in contract, in tort or otherwise), and none of the Parties nor any other Person shall have
any claim or recourse against any other Party or Financing Source Related Party with respect to any representation, warranty, covenant
or agreement of the Parties, as applicable, that gave rise to such right of termination pursuant to
Section 7.1
and
right to receive a termination fee pursuant to this
Section 7.2
. Receipt of any termination fee pursuant to this
Section 7.2
shall constitute the sole and exclusive remedy of the Party entitled to receive such termination fee, and in no event shall any
Party be entitled to an injunction to prevent or remedy any breach of this Agreement, to enforce specifically the terms and provisions
of this Agreement, or to seek or recover damages in excess of such termination fee.
(h)
The Parties acknowledge that the agreements contained in this
Section 7.2
are
an integral part of the transactions contemplated hereby, and that without these agreements, the Parties would not enter into this
Agreement; accordingly, if either Party fails to timely pay any amount due pursuant to this
Section 7.2
, and, in order
to obtain the payment, the non-breaching Party commences a suit which results in a judgment against the breaching Party for the
payment set forth in this
Section 7.2
, the breaching Party shall pay the non-breaching Party the reasonable and documented
costs and expenses (including reasonable and documented attorneys’ fees) incurred by such Party in connection with such suit,
together with interest on such amount at the prime rate of Citibank, N.A. in effect on the date such payment was required to be
made through the date such payment was actually received.
8.1
Survival
. The representations and warranties of the Seller, and other rights of the Buyer Indemnified Parties (defined
below) to claim indemnification pursuant to this
Article 8
, contained herein or in any document or other instrument
required to be delivered hereunder shall survive the Closing and continue in full force and effect until the twenty-four (24) month
anniversary of the Closing Date (the “
Survival Date
”). The termination of any such representation or warranty
of the Seller, or other right of the Buyer Indemnified Parties (defined below) to claim indemnification pursuant to this
Article 8
,
however, shall not affect any claim for breaches of representations or warranties or indemnification pursuant to this
Article 8
if written notice thereof is submitted to the breaching party or parties prior to the Survival Date. The party making a claim under
this
Article 8
is referred to as the “
Indemnified Party
”, and the party against whom such claims
are asserted under this
Article 8
is referred to as the “
Indemnifying Party
.”
8.2
Indemnity by the Seller
. Subject to the limitations set forth in
Section 8.5
, the Seller shall protect,
defend, indemnify and hold harmless the Buyer and its directors, officers and Affiliates (collectively, the “
Buyer Indemnified
Parties
”) with respect to all Losses related to or arising from any of the following:
(a)
the inaccuracy of any representation or warranty made by the Seller herein, or resulting from
any misrepresentation, breach or non-performance of any agreement or covenant of the Seller contained herein or in any agreement
or instrument required to be entered into in connection herewith or from any misrepresentation in any schedule, document, certificate
or other instrument required to be furnished by the Seller hereunder;
(b)
any Excluded Asset or Excluded Liability;
(c)
any claims of third parties which relate to the acts or omissions of any Selling Party, its
members, officers, employees or agents prior to the Closing, including any action or proceeding by shareholders of the Seller relating
to the transactions contemplated by this Agreement;
(d)
any Liabilities for Taxes (i) of any Selling Party for any taxable period, including any state
or local Taxes that may be assessed upon any Selling Party following the Closing Date, (ii) in connection with or arising
out of the ownership of the Acquired Assets, the Assumed Liabilities, or the operation of the Business, in each case, on or prior
to the Closing Date, (iii) resulting from the transactions contemplated by this Agreement, including any transfer Taxes described
in
Section 5.17(b)
, (iv) relating to the Excluded Assets or Excluded Liabilities for any taxable period or (v) imposed
on the Buyer or any of its Affiliates by reason of any Selling Party failing to discharge its primary Liability for Taxes or by
reason of transferee or successor liability arising in respect of a transaction, event or status occurring or existing on or prior
to the Closing Date, all notwithstanding the Disclosure made in
Schedule 3.15
;
(e)
accuracy of client records with respect to attrition rate, bad debt and annual renewal dates
of Assumed Contracts which have not been prepaid;
(f)
any Liability set forth on
Schedule 8.2(f);
(g)
any Liability in connection with or arising out of an Excluded Subsidiary;
(h)
any Liability in connection with or arising out of the Lease;
(i)
any Liability set forth on
Schedule 2.4
; and
(j)
any Liability arising as a direct result of the failure to comply by any Selling Party with
customary industry standards in the, collection, processing, testing, documenting, or storing of cord blood, cord tissue or isocell
units, including without limitations the units set forth on
Schedule 3.18
.
8.3
Indemnity by the Buyer
. Subject to the limitations set forth in
Section 8.5
, the Buyer shall protect,
defend, indemnify and hold harmless the Seller and its members, managers, directors, officers and Affiliates (collectively, the
“
Seller Indemnified Parties
”) pursuant to the terms of this Agreement in respect of all Losses from any of the
following:
(a)
the inaccuracy of any representation or warranty made by the Buyer herein, or resulting from
any misrepresentation, breach or non-performance of any agreement or covenant of the Buyer contained herein or in any agreement
or instrument required to be entered into in connection herewith or from any misrepresentation in any schedule, document, certificate
or other instrument required to be furnished by the Buyer hereunder; and
(b)
any Assumed Liability.
8.4
Right of Setoff
. Notwithstanding any other provisions of this Agreement, the Buyer shall have the right to setoff
any obligations of the Seller to the Buyer pursuant to the Indemnity provisions of this Agreement against the portion of the Purchase
Price otherwise payable to the Seller under
Section 2.5(b)
and
Section 2.5(c)
; provided that nothing contained
herein limits Buyer’s obligations under the penultimate sentence of Section 5.29. Prior to exercising any right of set-off,
the Buyer shall furnish written notice to the Seller describing in detail the amount of and the Basis for the indemnity and the
set-off (the “
Set-off Claim
”). If the Seller has any dispute with the Set-off Claim, it shall deliver to the
Buyer written notice within ten (10) business days of receipt of the Set-off Claim a description in reasonable detail of the nature
of the dispute (the “
Set-off Claim Dispute Notice
”). Within ten (10) business days of the receipt of the Set-off
Claim Dispute Notice, the Seller and the Buyer shall meet at a mutually agreeable time and place and attempt in good faith to resolve
the Set-off Claim.
8.5
Certain Limitations
.
(a)
Other than in the case of (i) fraud or willful breach or (ii) any inaccuracy of
any of the Fundamental Representations and Warranties, the Indemnifying Party shall not be liable to the Indemnified Party for
indemnification under
Section 8.2(a)
or
Section 8.3(a)
, unless and until the aggregate amount of the indemnification
obligations exceeds One Hundred Thousand Dollars ($100,000) (the “
Basket
”), in which event the Indemnifying
Party shall then be required to pay or be liable for all Losses in excess of $100,000. Any adjustments to the Purchase Price made
pursuant to
Section 2.5(b)
or
Section 2.5(c)
shall not be subject to or count towards the Basket.
(b)
Other than in the case of (i) fraud or willful breach or (ii) any inaccuracy of any Fundamental
Representations and Warranties, the Seller shall not be obligated to indemnify the Buyer Indemnified Parties under
Section 8.2(a)
in an aggregate amount in excess of two-thirds of the Escrow Payment.
(c)
Other than in the case of fraud or willful breach, the Seller shall not be obligated to indemnify
the Buyer Indemnified Parties under
Section 8.2(a)
, solely with respect to the Fundamental Representations and Warranties,
or under
Section 8.2(b)–(g)
, inclusive, in an aggregate amount in excess of the Escrow Payment.
(d)
Other than in the case of fraud or willful breach, the Buyer shall not be obligated to indemnify
the Seller Indemnified Parties or the Seller be obligated to indemnify the Seller Indemnified Parties in an aggregate amount in
excess of the Escrow Payment.
(e)
Payments with respect to any Loss shall be limited to the amount of any Loss that remains
after deducting therefrom any insurance proceeds and any indemnity, contribution or other similar payment actually received by
the Indemnified Party in respect of any such claim. The Indemnified Party shall use its commercially reasonable efforts to recover
under insurance policies or indemnity, contribution or other similar agreements for any Losses.
(f)
For the sole purpose of determining the amount of any damages with respect to any breach of
any representation, warranty or covenant by the Seller for purposes of indemnification under this
Article 8
(and not
for determining whether or not any breaches of representations, warranties or covenants have occurred), any qualification or limitation
of a representation, warranty or covenant by reference to materiality of matters stated therein or as to matters having or not
having “Material Adverse Effect,” “materiality” or words of similar effect, shall be disregarded.
8.6
Indemnification Procedures
.
(a)
Third Party Claims
. If any Indemnified Party receives notice of the assertion or commencement
of any action, suit, claim or other legal proceeding made or brought by any Person who is not a party to this Agreement or an Affiliate
of a party to this Agreement or a representative of the foregoing (a “
Third Party Claim
”) against such Indemnified
Party with respect to which the Indemnifying Party is obligated to provide indemnification under this Agreement, the Indemnified
Party shall give the Indemnifying Party prompt written notice thereof. The failure to make timely delivery of a claim notice shall
not relieve the Indemnifying Party from any Liability under this
Article 8
with respect to such matter, except to the
extent the Indemnifying Party is actually materially prejudiced by failure to give such claim notice. Such notice by the Indemnified
Party shall describe the Third Party Claim in reasonable detail, shall include copies of all material written evidence thereof
and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified
Party. The Buyer shall have the sole right to direct and conduct the defense of any Third Party Claim;
provided
, that the
Buyer shall provide the applicable Selling Party the opportunity to participate, at such Selling Party’s expense, but not
direct or conduct, any defense of such claim, except that the Buyer may withhold from such Selling Party such communications with
its legal counsel to the extent that legal counsel to the Buyer advises that providing such communication would result in the loss
of any attorney-client privilege or right under the work-product doctrine of the Buyer in respect of such claim, after giving due
consideration to any “community of interest” or similar privilege. Such Selling Party’s participation will be
subject to the Buyer’s right to control such defense and the provisions of this
Section 8.6(a)
. The Buyer will
have the right, in its sole discretion, to settle any Third Party Claim, but if the settlement is without the written consent of
the applicable Selling Party, the settlement will not be determinative, in and of itself, of the existence or amount of Losses
relating to such matter or whether any Indemnified Party is entitled to indemnification for such Losses pursuant to the terms of
this Agreement. If the applicable Selling Party consents to any such settlement of a Third-Party Claim, which consent shall be
deemed to have been given unless such Selling Party shall have failed to respond indicating that such Selling Party does not consent
to such settlement, within ten (10) business days after a written request for such consent by the Buyer, no such Selling Party
or any other Person who has a beneficial interest in the Escrow Payment will have any power or authority to object to the amount
or validity of any claim by or on behalf of any Indemnified Person for indemnification with respect to such settlement.
(b)
Direct Claims
. Any claim by an Indemnified Party on account of a Loss which does not
result from a Third Party Claim (a “
Direct Claim
,” and together with Third Party Claims, “
Claims
”)
shall be asserted by the Indemnified Party giving the Indemnifying Party prompt written notice thereof. The failure to make timely
delivery of a claim notice shall not relieve the Indemnifying Party from any Liability under this
Article 8
with respect
to such matter, except to the extent the Indemnifying Party is actually materially prejudiced by failure to give such claim notice.
Such notice by the Indemnified Party shall describe the Direct Claim in reasonable detail, shall include copies of all material
written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be
sustained by the Indemnified Party.
(c)
Payment
. The Indemnifying Party shall pay all amounts payable pursuant to this
Article 8
,
(i) if the Indemnifying Party is the Seller, by the release of funds from the Escrow Payment being held pursuant to the Escrow
Agreement and (ii) the Indemnifying Party is the Buyer, then by wire transfer of immediately available funds, and in either
case of subsection (i) or (ii) above, promptly following receipt from an Indemnified Party of the claim notice, for a Loss that
is the subject of indemnification hereunder, unless the Indemnifying Party in good faith disputes the Loss, in which event it shall
so notify the Indemnified Party within ten (10) days of receipt of the claim notice. In any event, the Indemnifying Party shall
pay to the Indemnified Party, by wire transfer of immediately available funds, the amount of any Loss for which it is liable hereunder
no later than thirty (30) days following any final determination of such Loss and the Indemnifying Party’s Liability therefor.
A “
final determination
” shall exist when (i) the parties to the dispute have reached an agreement in writing,
(ii) a court of competent jurisdiction shall have entered a final and non-appealable order or judgment, or (iii) an arbitration
or like panel shall have rendered a final non-appealable determination with respect to disputes the parties have agreed to submit
thereto. If a Claim is to be paid from the funds held pursuant to the Escrow Agreement, the Buyer and the Seller shall promptly
deliver joint written instructions to the Escrow Agent (in the form set forth in the Escrow Agreement) directing the Escrow Agent
to release to the applicable Buyer an amount equal to the amount of the Claim.
8.7
Exclusive Remedies
. The Parties acknowledge and agree that, except in the case of fraud or willful breach, their
sole and exclusive remedy with respect to any and all claims for any breach of any representation, warranty, covenant, agreement
or obligation set forth herein or otherwise relating to the subject matter of this Agreement, shall be pursuant to the indemnification
provisions set forth in this
Article 8
. In furtherance of the foregoing, each Party hereby waives, to the fullest extent
permitted by Law, any and all rights, claims and causes of action for any breach of any representation, warranty, covenant, agreement
or obligation set forth herein or otherwise relating to the subject matter of this Agreement it may have against the other Parties
hereto and their Affiliates and each of their respective representatives arising under or based upon any Law, except pursuant to
the indemnification provisions set forth in this
Article 8
.
9.1
No Third Party Beneficiaries
. This Agreement shall not confer any rights or remedies upon any Person other than the
Parties and their respective successors and permitted assigns and, with respect to the Financing Source, the provisions of
Section 7.2(g)
,
Section 9.1
,
Section 9.3
,
Section 9.6
,
Section 9.7
and
Section 9.12
(and the related defined terms contained in the foregoing provisions), each of which shall expressly inure to the benefit of the
Financing Source and which the Financing Source shall be entitled to rely on and enforce the provisions of as they relate to the
Financing Source.
9.2
Entire Agreement
. This Agreement (including the documents referred to herein) constitutes the entire agreement between
the Parties and supersedes any prior understandings, agreements, or representations by or between the Parties, written or oral,
to the extent they related in any way to the subject matter hereof.
9.3
Succession and Assignment
. This Agreement shall be binding upon and inure to the benefit of the Parties named herein
and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests,
or obligations hereunder without the prior written approval of the other Party;
provided
, that the Buyer may (a) assign
any or all of its rights and interests hereunder to one or more of its qualified subsidiaries or its parent or associated companies,
(b) designate one or more of its qualified subsidiaries to perform its obligations hereunder or (c) may, from and after the
Closing, assign in whole or in part, this Agreement or any or all of its rights and obligations hereunder to one or more of its
Affiliates or for collateral security purposes to any lender or Financing Sources; provided, further, that no such assignment shall
relieve such party of any of its obligations under this Agreement.
9.4
Counterparts
. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original
but all of which together will constitute one and the same instrument.
9.5
Notices
. All notices, requests, demands, claims, and other communications pursuant to the Transaction Documents will
be in writing. Any notice, request, demand, claim, or other communication pursuant to the Transaction Documents shall be deemed
duly given (a) upon confirmation of facsimile, (b) one (1) business day following the date sent when sent by overnight
delivery and (c) five (5) business days following the date mailed when mailed by registered or certified mail return receipt requested
and postage prepaid at the following address:
If to the Seller
:
Cord Blood America, Inc.
Attn: David Sandberg
1857 Helm Drive
Las Vegas, NV 89119
Tel: (702) 914-7250
Fax: (702) 914-7251
With a simultaneous copy (which shall not
constitute notice) to
:
Olshan Frome Wolosky LLP
1325 Avenue of the Americas
New York, NY 10019
Attn: Kenneth A. Schlesinger, Esq.
Tel: (212) 451-2200
Fax: (212) 451-2222
If to the Buyer
:
California Cryobank Stem Cell Services, LLC
Attn: Richard D. Jennings
11915 La Grange Avenue
Los Angeles, CA 90025
Fax: (888) 317-4709
Tel: (310) 496-5693
With a simultaneous copy (which shall not
constitute notice) to
:
Morrison & Foerster LLP
12531 High Bluff Drive
Suite 100
San Diego, CA 92130-2040
Attn: Jay de Groot
Fax: (858) 523-2821
Tel: (858) 720-5180
Any Party may send any notice, request,
demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means
(including personal delivery, expedited courier, messenger service, telecopy, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received
by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Party notice in the manner herein set forth.
9.6
Governing Law; Forum
.
(a)
This Agreement shall be governed by and construed in accordance with the domestic laws of
the State of California without giving effect to any choice or conflict of law provision or rule (whether of the State of California
or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California.
Each Party hereby irrevocably submits to the exclusive jurisdiction of the Federal District Court of the State of California located
in Los Angeles, California and appellate courts thereof over any dispute arising out of or relating to this Agreement or any of
the transactions contemplated hereby and each Party hereby irrevocably agrees that all claims in respect of such dispute or any
suit, action or proceeding related thereto may be heard and determined in such courts, subject to the requirements contained in
this Section that the parties submit disputes to binding arbitration. Each Party hereby irrevocably waives, to the fullest extent
permitted by applicable law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought
in such court or any defense of inconvenient forum for the maintenance of such dispute.
(b)
The Parties further agree that jurisdiction and venue in any suit, action or proceeding brought
by any party against any Financing Source Related Party relating to or arising out of this Agreement, the financing contemplated
by the Second Amendment, or the transactions contemplated hereby or thereby or for recognition or enforcement of any judgment relating
thereto shall properly and exclusively lie in any Federal or state court located in New York County, City of New York, New York.
By execution and delivery of this Agreement, each Party irrevocably submits to the jurisdiction of such courts for itself and in
respect of its property with respect to such suit, action or proceeding. The Parties irrevocably agree that venue would be proper
in such court, and hereby waive any objection that any such court is an improper or inconvenient forum for the resolution of such
suit, action or proceeding.
9.7
Amendments and Waivers
. No amendment of any provision of this Agreement shall be valid unless the same shall be in
writing and signed by the Buyer and the Seller. No waiver by any Party of any default, misrepresentation, or breach of warranty
or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation,
or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.
No amendment to or waiver of any provision of this Agreement to which any Financing Source Related Party is a third-party beneficiary
will be effective against any Financing Source Related Party without the prior written consent of the Financing Source.
9.8
Severability
. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability
of the offending term or provision in any other situation or in any other jurisdiction.
9.9
Expenses
. Each of the Buyer and the Seller will bear its own costs and expenses (including legal and accounting fees
and expenses) incurred in connection with the Transaction Documents and the transactions contemplated hereby.
9.10
Construction
. When a reference is made herein to Articles, Sections, Subsections, Exhibits or Schedules, such reference
shall be to an Article, Section or Subsection of, or an Exhibit or Schedule to this Agreement unless otherwise indicated. The headings
contained herein are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
The use of “or” is not intended to be exclusive unless expressly indicated otherwise;
provided
, that the use
of “or” preceded by the word “either” is intended to be exclusive. The words “include,” “includes”
and “including” when used herein shall be deemed in each case to be followed by the words “without limitation.”
The phrases “provided to,” “delivered to,” “made available to” and phrases of similar import
when used herein, unless the context otherwise requires, shall mean that a true, correct and complete paper or electronic copy
of the information or material referred to has been provided to the party to whom such information or material is to be provided
or delivered. Unless the context of this Agreement otherwise requires: (a) words of any gender include each other gender,
(b) words using the singular or plural form also include the plural or singular form, respectively, and (c) the terms
“hereof,” “herein,” “hereunder” and derivative or similar words refer to this entire Agreement.
The symbol “$” refers to United States Dollars. The word “extent” in the phrase “to the extent”
means the degree to which a subject or other thing extends and such phrase shall not mean simply “if.” References to
a Person are also to its permitted successors and assigns. All references to “days” shall be to calendar days in California
unless otherwise indicated as a “business day.” The terms “U.S.” and “United States” shall
refer to the United States of America. References to the Seller shall mean the Seller and its subsidiaries except as otherwise
indicated herein.
9.11
Incorporation of Schedules
. The Schedules identified in this Agreement are incorporated herein by reference and made
a part hereof.
9.12
Specific Performance
.
(a)
Each of the Parties acknowledges and agrees that the other Party would be damaged irreparably
in the event any of the provisions of the Transaction Documents are not performed in accordance with their specific terms or otherwise
are breached. Accordingly, each of the Parties agrees that the other Party shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of the Transaction Documents and to enforce specifically the Transaction Documents and the terms
and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over
the Parties and the matter in addition to any other remedy to which it may be entitled, at law or in equity.
(b)
Notwithstanding the right of the Selling Parties to obtain an injunction or injunctions, or
other appropriate form of specific performance or equitable relief described in
Section 9.12(a)
above, no such right
may be enforced to cause the Closing to be consummated or the financing to be funded in order to finance the Closing (whether under
this Agreement or the Second Amendment), unless:
(i)
all conditions in
Section 6.1
have been satisfied at the time when the Closing
would have occurred;
(ii)
the Buyer is required to complete the Closing pursuant to
Section 6.1
;
(iii)
the financing has been funded or the lenders party to the Credit Agreement have confirmed
in a written notice delivered to the Buyer that all conditions to the funding of the financing have been satisfied and the financing
will be funded at the Closing; and
(iv)
the Selling Parties have irrevocably confirmed in a written notice delivered to the Buyer
that if specific performance under this
Section 9.12(b)
is granted and the financing is funded, then the Closing will
occur.
(c)
To the extent any Party brings any action to enforce specifically the performance of the terms
and provisions of this Agreement when expressly available to such Party pursuant to this
Section 9.12
, each Party hereby
agrees not to raise any objections to the availability of the equitable remedy of specific performance to prevent or restrain breaches
or threatened breaches of this Agreement by such Party, and to specifically enforce the terms and provisions of this Agreement
to prevent breaches or threatened breaches of, or to enforce compliance with, the covenants and obligations of such Party under
this Agreement. Any Party hereto seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement shall not be required to provide any bond or other security in connection with any such
order or injunction.
(d)
Notwithstanding anything to the contrary in this Agreement, none of the Seller and its equityholders,
partners, members, Affiliates, directors, officers, employees, controlling persons, and agents shall have any rights or claims
against any Financing Source Related Party in connection with this Agreement, the financing contemplated by the Second Amendment,
or the transactions contemplated hereby or thereby, whether at law or equity, in contract, in tort or otherwise. In addition, in
no event shall any Financing Source Related Party have any liability or obligation to the Seller or any of its equityholders, partners,
members, Affiliates, directors, officers, employees, controlling persons, or agents relating to or arising out of this Agreement,
the financing contemplated by the Second Amendment, or the transactions contemplated hereby or thereby.
9.13
Separate Legal Counsel
. Each of the parties acknowledges that it has been represented by separate legal counsel in
connection with this Agreement and the Transactions contemplated hereby. Each of the parties has read and understands this Agreement
and has signed and delivered this Agreement with the intent to be legally bound
REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS
IN WITNESS WHEREOF, the
Parties hereto have executed this Agreement on the date first above written.
BUYER:
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CALIFORNIA CRYOBANK STEM CELL SERVICES, LLC
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By:
/s/ Richard D. Jennings
Name: Richard D. Jennings
Title: President
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SELLER:
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CORD BLOOD AMERICA, INC.
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By:
/s/ David Sandberg
Name:
David Sandberg
Title: Chairman of the Board
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By:
/s/ Anthony Snow
Name:
Anthony Snow
Title: President
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Annex B
FAIRNESSS OPINION
CREO | Montminy & Co.
February 6, 2018
Cord Blood America, Inc.
c/o Board of Directors
1857 Helm Drive
Las Vegas, NV 89119
Ladies and Gentlemen:
By letter dated September 28, 2017, CREO
| Montminy & Co., LLC has been retained as an independent financial advisor to render a fairness opinion (the “Opinion”)
to the Board of Directors of Cord Blood America, Inc. (“CBAI” or the “Company”) on the possible sale of
the Company to California Cryobank Stem Cell Services, LLC (“CCSCS”). We understand that CBAI will potentially enter
into that certain draft Asset Purchase Agreement (the “APA”), dated February 6, 2018, with CCSCS, pursuant to which,
subject to the terms and conditions of the APA, CCSCS will acquire in a transaction (the “Transaction”) all of CBAI’s
rights, title and interest in and to all assets located at or held or used in connection with the business, except for certain
excluded assets. Pursuant to the APA, we understand that at the closing of the Transaction CBAI will be purchased for total consideration
of $15,500,000, consisting of (a) $12,500,000 at closing plus (b) $3,000,000 held in escrow as an indemnity holdback for a period
of 24 months (collectively, the “Purchase Price”).
You have asked us whether, in our Opinion,
the Transaction is fair to CBAI shareholders, collectively, from a financial point of view. In reaching our Opinion set forth herein,
we have, among other things:
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i.
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Reviewed term sheets dated August 10, 2017 and September 20, 2017, as well as the draft APA’s and Disclosure Schedules,
including the latest version dated February 6, 2018, which, for purposes of this Opinion we have assumed, with your permission
to be identical in all material respects to the document to be executed;
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ii.
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Discussed with the senior management of CBAI the financial consequences of the Transaction;
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iii.
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Reviewed certain financial and other information about the Company that was publicly available;
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iv.
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Reviewed information furnished to us by the Company’s management, including certain internal financial analyses, budgets,
reports and other information;
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v.
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Held discussions with various members of senior management of the Company concerning historical and current operations, financial
conditions and prospects including recent financial performance;
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vi.
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Reviewed the recent share trading price history of the Company;
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vii.
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Reviewed the valuation of the Company implied by the Purchase Price;
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viii.
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Reviewed the financial terms of selected acquisition transactions involving companies in lines of business that we deemed comparable
in certain respects to the business of the Company;
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ix.
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Compared the financial performance and other key metrics of certain other comparable publicly traded companies and their securities;
and
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x.
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Performed such other analyses and considered such other factors as we have deemed appropriate.
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We did not apply the Discounted Cash Flow
Methodology since financial projections for CBAI were not provided, other than a fiscal 2017 estimate. We note that projecting
future results of any company is inherently subject to uncertainty. In addition, in rendering this Opinion, we have assumed that
the Company’s fiscal 2017 estimate has been reasonably prepared by management and reflect management’s best currently
available estimates and good faith judgment of the future competitive, operating and regulatory environment and related financial
performance of the Company. We express no Opinion as to the estimate or the assumptions on which they are based.
In our review and analysis and in rendering
this Opinion, we have assumed and relied upon, but have not assumed any responsibility to independently investigate or verify,
the accuracy, completeness and fair presentation of all financial and other information that was provided to us by the Company
or that was publicly available to us (including, without limitation, the information described above), or that was otherwise reviewed
by us. This Opinion is expressly conditioned upon such information (whether written or oral) being complete, accurate and fair
in all respects material to our analysis. We have further relied upon the assurance of management of the Company that they are
unaware of any facts that would make the information provided to us incomplete or misleading in any respect.
In rendering this Opinion we have also assumed
that: (i) in all respects material to our analysis that the representations and warranties of each party contained in the APA are
true and correct, that each party will perform all of the covenants and agreements required to be performed by it under the APA
and that all conditions to the consummation of the Transaction will be satisfied without waiver thereof which would affect the
amount or timing of receipt of the Purchase Price; (ii) there is not now, and there will not as a result of the consummation of
the transactions contemplated by the APA be, any default, or event of default, under any indenture, credit agreement or other material
agreement or instrument to which the Company or any of its subsidiaries or affiliates is a party; and (iii) all material assets
and liabilities (contingent or otherwise, known or unknown) of the Company were as set forth in the consolidated financial statements
provided to us by the Company as of the respective dates of such financial statements.
In our review, we did not obtain or receive
any independent evaluation or appraisal of the assets or liabilities of, nor did we conduct a comprehensive physical inspection
of any of the books and records or the assets of the Company, nor have we been furnished with any such evaluations or appraisals
or reports of such physical inspections, nor do we assume any responsibility to obtain any such evaluations, appraisals or inspections.
Our Opinion is based on economic, monetary, market and other conditions existing and which can be evaluated as of the date hereof.
We have made no independent investigation of any legal or accounting matters affecting the Company, and we have assumed the correctness
in all respects material to our analysis of all legal and accounting advice given to the Company and its Board of Directors, including,
without limitation, advice as to the legal, accounting and tax consequences of the terms of, and transactions contemplated by,
the APA to the Company and its stockholders. In addition, in preparing this Opinion, we have not taken into account any tax consequences
of the Transaction to either the Company or to any holder of Common Stock.
In arriving at our Opinion, we did not attribute
any particular weight to any analysis or factor considered by us, but instead made qualitative judgments as to the significance
and relevance of each analysis and factor. Each method of analysis has inherent strengths and weaknesses, and the nature of the
available information may further affect the analytic value of particular methods. Accordingly, our analyses must be considered
as a whole. Considering any portion of such analyses or the factors considered, without considering all analyses and factors, could
create a misleading or incomplete view of the process underlying the conclusions expressed herein.
It is understood that we have prepared this
report solely for the Board of Directors in connection with its review of the Transaction, and we will receive a fee from CBAI
for such services upon delivery of this Opinion irrespective of our conclusions. In rendering our Opinion, we have not been engaged
to act as an agent of or fiduciary to CBAI, CCSCS, or any other third party. We were not authorized to and did not solicit any
expressions of interest from any other parties with respect to the sale of all or any part of the Company or any other alternative
transaction. We did not participate in negotiations with respect to the terms of the Transaction. We were not requested to and
did not provide advice concerning the structure, the specific amount of the consideration, or any other aspects of the Transaction,
or to provide services other than the delivery of this Opinion. Our Opinion does not address the relative merits of the Transaction
contemplated by the APA as compared to any alternative transactions that might be available to the Company, nor does it address
the underlying business decision by the Company to engage in the Transaction or the terms of the APA or the documents referred
to therein. Our Opinion does not constitute a recommendation as to how any holder of shares of Common Stock should vote or act
on any matter relevant to the APA (including without limitation, whether or not to tender Common Stock in connection with the Offer).
We have assumed that in conducting the process leading up to the Transaction, the Board of Directors of CBAI has complied with
its fiduciary duties and that the decision of the Board of Directors to enter negotiations and execute the APA with CCSCS was based
on the exercise of appropriate business judgment.
We expressly disclaim any undertaking or
obligation to advise any person of any change in any fact or matter affecting our Opinion of which we become aware after the date
hereof. It is understood that this letter is for the information of the Board of Directors of the Company and may not be disclosed
publicly (except under certain conditions which are enumerated in our engagement letter) in any manner without our prior written
approval. In furnishing this Opinion, we do not admit that we are experts within the meaning of the term “experts”
as used in the Securities Act of 1933, as amended, or the rules and regulations promulgated thereunder.
Based upon and subject to the foregoing,
we are of the Opinion as investment bankers that, as of the date hereof, the Purchase Price to be received by the holders of shares
of Common Stock pursuant to the APA is fair, from a financial point of view, to such holders.
Respectfully submitted,
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CREO | MONTMINY & Co., LLC
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By:
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/s/ Joel Montminy
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Joel Montminy
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President & CEO
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Date: February 6, 2018
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Annex C
FLORIDA BUSINESS CORPORATION ACT –
APPRAISAL RIGHTS STATUTE
Florida Statutes
Title XXXVI. BUSINESS ORGANIZATIONS
Chapter 607. CORPORATIONS (§§ 607.0101 to 607.193)
Part I. GENERAL PROVISIONS (§§ 607.0101 to 607.193)
Section 607.1301. Appraisal rights; definitions
The following definitions apply to ss. 607.1302
- 607.1333:
(1) “Affiliate” means a person that
directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with another person
or is a senior executive thereof. For purposes of s. 607.1302 (2)(d), a person is deemed to be an affiliate of its senior executives.
(2) “Beneficial shareholder” means a
person who is the beneficial owner of shares held in a voting trust or by a nominee on the beneficial owner’s behalf.
(3) “Corporation” means the issuer of
the shares held by a shareholder demanding appraisal and, for matters covered in ss. 607.1322 - 607.1333, includes the surviving
entity in a merger.
(4) “Fair value” means the value of
the corporation’s shares determined:
(a) Immediately before the effectuation of the corporate
action to which the shareholder objects.
(b) Using customary and current valuation concepts
and techniques generally employed for similar businesses in the context of the transaction requiring appraisal, excluding any appreciation
or depreciation in anticipation of the corporate action unless exclusion would be inequitable to the corporation and its remaining
shareholders.
(c) For a corporation with 10 or fewer shareholders,
without discounting for lack of marketability or minority status.
(5) “Interest” means interest from the
effective date of the corporate action until the date of payment, at the rate of interest on judgments in this state on the effective
date of the corporate action.
(6) “Preferred shares” means a class
or series of shares the holders of which have preference over any other class or series with respect to distributions.
(7) “Record shareholder” means the person
in whose name shares are registered in the records of the corporation or the beneficial owner of shares to the extent of the rights
granted by a nominee certificate on file with the corporation.
(8) “Senior executive” means the chief
executive officer, chief operating officer, chief financial officer, or anyone in charge of a principal business unit or function.
(9) “Shareholder” means both a record
shareholder and a beneficial shareholder.
Section 607.1302. Right of shareholders to appraisal
(1) A shareholder of a domestic corporation is entitled
to appraisal rights, and to obtain payment of the fair value of that shareholder’s shares, in the event of any of the following
corporate actions:
(a) Consummation of a conversion of such corporation
pursuant to s. 607.1112 if shareholder approval is required for the conversion and the shareholder is entitled to vote on the conversion
under ss. 607.1103 and 607.1112(6), or the consummation of a merger to which such corporation is a party if shareholder approval
is required for the merger under s. 607.1103 and the shareholder is entitled to vote on the merger or if such corporation is a
subsidiary and the merger is governed by s. 607.1104;
(b) Consummation of a share exchange to which the
corporation is a party as the corporation whose shares will be acquired if the shareholder is entitled to vote on the exchange,
except that appraisal rights are not available to any shareholder of the corporation with respect to any class or series of shares
of the corporation that is not exchanged;
(c) Consummation of a disposition of assets pursuant
to s. 607.1202 if the shareholder is entitled to vote on the disposition, including a sale in dissolution but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all or substantially all of the net proceeds of the sale
will be distributed to the shareholders within 1 year after the date of sale;
(d) An amendment of the articles of incorporation
with respect to the class or series of shares which reduces the number of shares of a class or series owned by the shareholder
to a fraction of a share if the corporation has the obligation or right to repurchase the fractional share so created;
(e) Any other amendment to the articles of incorporation,
merger, share exchange, or disposition of assets to the extent provided by the articles of incorporation, bylaws, or a resolution
of the board of directors, except that no bylaw or board resolution providing for appraisal rights may be amended or otherwise
altered except by shareholder approval;
(f) With regard to a class of shares prescribed in
the articles of incorporation prior to October 1, 2003, including any shares within that class subsequently authorized by amendment,
any amendment of the articles of incorporation if the shareholder is entitled to vote on the amendment and if such amendment would
adversely affect such shareholder by:
1. Altering or abolishing any preemptive rights attached
to any of his or her shares;
2. Altering or abolishing the voting rights pertaining
to any of his or her shares, except as such rights may be affected by the voting rights of new shares then being authorized of
any existing or new class or series of shares;
3. Effecting an exchange, cancellation, or reclassification
of any of his or her shares, when such exchange, cancellation, or reclassification would alter or abolish the shareholder’s
voting rights or alter his or her percentage of equity in the corporation, or effecting a reduction or cancellation of accrued
dividends or other arrearages in respect to such shares;
4. Reducing the stated redemption price of any of
the shareholder’s redeemable shares, altering or abolishing any provision relating to any sinking fund for the redemption
or purchase of any of his or her shares, or making any of his or her shares subject to redemption when they are not otherwise redeemable;
5. Making noncumulative, in whole or in part, dividends
of any of the shareholder’s preferred shares which had theretofore been cumulative;
6. Reducing the stated dividend preference of any
of the shareholder’s preferred shares; or
7. Reducing any stated preferential amount payable
on any of the shareholder’s preferred shares upon voluntary or involuntary liquidation;
(g) An amendment of the articles of incorporation
of a social purpose corporation to which s. 607.504 or s. 607.505 applies;
(h) An amendment of the articles of incorporation
of a benefit corporation to which s. 607.604 or s. 607.605 applies;
(i) A merger, conversion, or share exchange of a social
purpose corporation to which s. 607.504 applies; or
(j) A merger, conversion, or share exchange of a benefit
corporation to which s. 607.604 applies.
(2) Notwithstanding subsection (1), the availability
of appraisal rights under paragraphs (1)(a), (b), (c), and (d) shall be limited in accordance with the following provisions:
(a) Appraisal rights shall not be available for the
holders of shares of any class or series of shares which is:
1. Listed on the New York Stock Exchange or the American
Stock Exchange or designated as a national market system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc.; or
2. Not so listed or designated, but has at least
2,000 shareholders and the outstanding shares of such class or series have a market value of at least $10 million, exclusive of
the value of such shares held by its subsidiaries, senior executives, directors, and beneficial shareholders owning more than 10
percent of such shares.
(b) The applicability of paragraph (a) shall be determined
as of:
1. The record date fixed to determine the shareholders
entitled to receive notice of, and to vote at, the meeting of shareholders to act upon the corporate action requiring appraisal
rights; or
2. If there will be no meeting of shareholders, the
close of business on the day on which the board of directors adopts the resolution recommending such corporate action.
(c) Paragraph (a) shall not be applicable and appraisal
rights shall be available pursuant to subsection (1) for the holders of any class or series of shares who are required by the terms
of the corporate action requiring appraisal rights to accept for such shares anything other than cash or shares of any class or
any series of shares of any corporation, or any other proprietary interest of any other entity, that satisfies the standards set
forth in paragraph (a) at the time the corporate action becomes effective.
(d) Paragraph (a) shall not be applicable and appraisal
rights shall be available pursuant to subsection (1) for the holders of any class or series of shares if:
1. Any of the shares or assets of the corporation
are being acquired or converted, whether by merger, share exchange, or otherwise, pursuant to the corporate action by a person,
or by an affiliate of a person, who:
a. Is, or at any time in the 1-year period immediately
preceding approval by the board of directors of the corporate action requiring appraisal rights was, the beneficial owner of 20
percent or more of the voting power of the corporation, excluding any shares acquired pursuant to an offer for all shares having
voting power if such offer was made within 1 year prior to the corporate action requiring appraisal rights for consideration of
the same kind and of a value equal to or less than that paid in connection with the corporate action; or
b. Directly or indirectly has, or at any time in the
1-year period immediately preceding approval by the board of directors of the corporation of the corporate action requiring appraisal
rights had, the power, contractually or otherwise, to cause the appointment or election of 25 percent or more of the directors
to the board of directors of the corporation; or
2. Any of the shares or assets of the corporation
are being acquired or converted, whether by merger, share exchange, or otherwise, pursuant to such corporate action by a person,
or by an affiliate of a person, who is, or at any time in the 1-year period immediately preceding approval by the board of directors
of the corporate action requiring appraisal rights was, a senior executive or director of the corporation or a senior executive
of any affiliate thereof, and that senior executive or director will receive, as a result of the corporate action, a financial
benefit not generally available to other shareholders as such, other than:
a. Employment, consulting, retirement, or similar benefits
established separately and not as part of or in contemplation of the corporate action;
b. Employment, consulting, retirement, or similar benefits
established in contemplation of, or as part of, the corporate action that are not more favorable than those existing before the
corporate action or, if more favorable, that have been approved on behalf of the corporation in the same manner as is provided
in s. 607.0832; or
c. In the case of a director of the corporation who
will, in the corporate action, become a director of the acquiring entity in the corporate action or one of its affiliates, rights
and benefits as a director that are provided on the same basis as those afforded by the acquiring entity generally to other directors
of such entity or such affiliate.
(e) For the purposes of paragraph (d) only, the term
“beneficial owner” means any person who, directly or indirectly, through any contract, arrangement, or understanding,
other than a revocable proxy, has or shares the power to vote, or to direct the voting of, shares, provided that a member of a
national securities exchange shall not be deemed to be a beneficial owner of securities held directly or indirectly by it on behalf
of another person solely because such member is the recordholder of such securities if the member is precluded by the rules of
such exchange from voting without instruction on contested matters or matters that may affect substantially the rights or privileges
of the holders of the securities to be voted. When two or more persons agree to act together for the purpose of voting their shares
of the corporation, each member of the group formed thereby shall be deemed to have acquired beneficial ownership, as of the date
of such agreement, of all voting shares of the corporation beneficially owned by any member of the group.
(3) Notwithstanding any other provision of this
section, the articles of incorporation as originally filed or any amendment thereto may limit or eliminate appraisal rights for
any class or series of preferred shares, but any such limitation or elimination contained in an amendment to the articles of incorporation
that limits or eliminates appraisal rights for any of such shares that are outstanding immediately prior to the effective date
of such amendment or that the corporation is or may be required to issue or sell thereafter pursuant to any conversion, exchange,
or other right existing immediately before the effective date of such amendment shall not apply to any corporate action that becomes
effective within 1 year of that date if such action would otherwise afford appraisal rights.
(4) A shareholder entitled to appraisal rights under
this chapter may not challenge a completed corporate action for which appraisal rights are available unless such corporate action:
(a) Was not effectuated in accordance with the applicable
provisions of this section or the corporation’s articles of incorporation, bylaws, or board of directors’ resolution
authorizing the corporate action; or
(b) Was procured as a result of fraud or material
misrepresentation.
Section 607.1303. Assertion of rights by nominees and beneficial
owners
(1) A record shareholder may assert appraisal rights
as to fewer than all the shares registered in the record shareholder’s name but owned by a beneficial shareholder only if
the record shareholder objects with respect to all shares of the class or series owned by the beneficial shareholder and notifies
the corporation in writing of the name and address of each beneficial shareholder on whose behalf appraisal rights are being asserted.
The rights of a record shareholder who asserts appraisal rights for only part of the shares held of record in the record shareholder’s
name under this subsection shall be determined as if the shares as to which the record shareholder objects and the record shareholder’s
other shares were registered in the names of different record shareholders.
(2) A beneficial shareholder may assert appraisal
rights as to shares of any class or series held on behalf of the shareholder only if such shareholder:
(a) Submits to the corporation the record shareholder’s
written consent to the assertion of such rights no later than the date referred to in s. 607.1322 (2)(b)2.
(b) Does so with respect to all shares of the class
or series that are beneficially owned by the beneficial shareholder.
Section 607.1320. Notice of appraisal rights
(1) If proposed corporate action described in s.
607.1302 (1) is to be submitted to a vote at a shareholders’ meeting, the meeting notice must state that the corporation
has concluded that shareholders are, are not, or may be entitled to assert appraisal rights under this chapter. If the corporation
concludes that appraisal rights are or may be available, a copy of ss. 607.1301 - 607.1333 must accompany the meeting notice sent
to those record shareholders entitled to exercise appraisal rights.
(2) In a merger pursuant to s. 607.1104, the parent
corporation must notify in writing all record shareholders of the subsidiary who are entitled to assert appraisal rights that the
corporate action became effective. Such notice must be sent within 10 days after the corporate action became effective and include
the materials described in s. 607.1322.
(3) If the proposed corporate action described in
s. 607.1302 (1) is to be approved other than by a shareholders’ meeting, the notice referred to in subsection (1) must be
sent to all shareholders at the time that consents are first solicited pursuant to s. 607.0704, whether or not consents are solicited
from all shareholders, and include the materials described in s. 607.1322.
Section 607.1321. Notice of intent to demand payment
(1) If proposed corporate action requiring appraisal
rights under s. 607.1302 is submitted to a vote at a shareholders’ meeting, or is submitted to a shareholder pursuant to
a consent vote under s. 607.0704, a shareholder who wishes to assert appraisal rights with respect to any class or series of shares:
(a) Must deliver to the corporation before the vote
is taken, or within 20 days after receiving the notice pursuant to s. 607.1320 (3) if action is to be taken without a shareholder
meeting, written notice of the shareholder’s intent to demand payment if the proposed action is effectuated.
(b) Must not vote, or cause or permit to be voted,
any shares of such class or series in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements
of subsection (1) is not entitled to payment under this chapter.
Section 607.1322. Appraisal notice and form
(1) If proposed corporate action requiring appraisal
rights under s. 607.1302 (1) becomes effective, the corporation must deliver a written appraisal notice and form required by paragraph
(2)(a) to all shareholders who satisfied the requirements of s. 607.1321. In the case of a merger under s. 607.1104, the parent
must deliver a written appraisal notice and form to all record shareholders who may be entitled to assert appraisal rights.
(2) The appraisal notice must be sent no earlier
than the date the corporate action became effective and no later than 10 days after such date and must:
(a) Supply a form that specifies the date that the
corporate action became effective and that provides for the shareholder to state:
1. The shareholder’s name and address.
2. The number, classes, and series of shares as to
which the shareholder asserts appraisal rights.
3. That the shareholder did not vote for the transaction.
4. Whether the shareholder accepts the corporation’s
offer as stated in subparagraph (b)4.
5. If the offer is not accepted, the shareholder’s
estimated fair value of the shares and a demand for payment of the shareholder’s estimated value plus interest.
(b) State:
1. Where the form must be sent and where certificates
for certificated shares must be deposited and the date by which those certificates must be deposited, which date may not be earlier
than the date for receiving the required form under subparagraph 2.
2. A date by which the corporation must receive the
form, which date may not be fewer than 40 nor more than 60 days after the date the subsection (1) appraisal notice and form are
sent, and state that the shareholder shall have waived the right to demand appraisal with respect to the shares unless the form
is received by the corporation by such specified date.
3. The corporation’s estimate of the fair value
of the shares.
4. An offer to each shareholder who is entitled to
appraisal rights to pay the corporation’s estimate of fair value set forth in subparagraph 3.
5. That, if requested in writing, the corporation
will provide to the shareholder so requesting, within 10 days after the date specified in subparagraph 2., the number of shareholders
who return the forms by the specified date and the total number of shares owned by them.
6. The date by which the notice to withdraw under
s. 607.1323 must be received, which date must be within 20 days after the date specified in subparagraph 2.
(c) Be accompanied by:
1. Financial statements of the corporation that issued
the shares to be appraised, consisting of a balance sheet as of the end of the fiscal year ending not more than 15 months prior
to the date of the corporation’s appraisal notice, an income statement for that year, a cash flow statement for that year,
and the latest available interim financial statements, if any.
2. A copy of ss. 607.1301 - 607.1333.
Section 607.1323. Perfection of rights; right to withdraw
(1) A shareholder who wishes to exercise appraisal
rights must execute and return the form received pursuant to s. 607.1322 (1) and, in the case of certificated shares, deposit the
shareholder’s certificates in accordance with the terms of the notice by the date referred to in the notice pursuant to s.
607.1322 (2)(b)2. Once a shareholder deposits that shareholder’s certificates or, in the case of uncertificated shares, returns
the executed forms, that shareholder loses all rights as a shareholder, unless the shareholder withdraws pursuant to subsection
(2).
(2) A shareholder who has complied with subsection
(1) may nevertheless decline to exercise appraisal rights and withdraw from the appraisal process by so notifying the corporation
in writing by the date set forth in the appraisal notice pursuant to s. 607.1322 (2)(b)6. A shareholder who fails to so withdraw
from the appraisal process may not thereafter withdraw without the corporation’s written consent.
(3) A shareholder who does not execute and return
the form and, in the case of certificated shares, deposit that shareholder’s share certificates if required, each by the
date set forth in the notice described in subsection (2), shall not be entitled to payment under this chapter.
Section 607.1324. Shareholder’s acceptance of corporation’s
offer
(1) If the shareholder states on the form provided
in s. 607.1322 (1) that the shareholder accepts the offer of the corporation to pay the corporation’s estimated fair value
for the shares, the corporation shall make such payment to the shareholder within 90 days after the corporation’s receipt
of the form from the shareholder.
(2) Upon payment of the agreed value, the shareholder
shall cease to have any interest in the shares.
Section 607.1326. Procedure if shareholder is dissatisfied
with offer
(1) A shareholder who is dissatisfied with the corporation’s
offer as set forth pursuant to s. 607.1322 (2)(b)4. must notify the corporation on the form provided pursuant to s. 607.1322 (1)
of that shareholder’s estimate of the fair value of the shares and demand payment of that estimate plus interest.
(2) A shareholder who fails to notify the corporation
in writing of that shareholder’s demand to be paid the shareholder’s stated estimate of the fair value plus interest
under subsection (1) within the timeframe set forth in s. 607.1322 (2)(b)2. waives the right to demand payment under this section
and shall be entitled only to the payment offered by the corporation pursuant to s. 607.1322 (2)(b)4.
Section 607.1330. Court action
(1) If a shareholder makes demand for payment under
s. 607.1326 which remains unsettled, the corporation shall commence a proceeding within 60 days after receiving the payment demand
and petition the court to determine the fair value of the shares and accrued interest. If the corporation does not commence the
proceeding within the 60-day period, any shareholder who has made a demand pursuant to s. 607.1326 may commence the proceeding
in the name of the corporation.
(2) The proceeding shall be commenced in the appropriate
court of the county in which the corporation’s principal office, or, if none, its registered office, in this state is located.
If the corporation is a foreign corporation without a registered office in this state, the proceeding shall be commenced in the
county in this state in which the principal office or registered office of the domestic corporation merged with the foreign corporation
was located at the time of the transaction.
(3) All shareholders, whether or not residents of
this state, whose demands remain unsettled shall be made parties to the proceeding as in an action against their shares. The corporation
shall serve a copy of the initial pleading in such proceeding upon each shareholder party who is a resident of this state in the
manner provided by law for the service of a summons and complaint and upon each nonresident shareholder party by registered or
certified mail or by publication as provided by law.
(4) The jurisdiction of the court in which the proceeding
is commenced under subsection (2) is plenary and exclusive. If it so elects, the court may appoint one or more persons as appraisers
to receive evidence and recommend a decision on the question of fair value. The appraisers shall have the powers described in the
order appointing them or in any amendment to the order. The shareholders demanding appraisal rights are entitled to the same discovery
rights as parties in other civil proceedings. There shall be no right to a jury trial.
(5) Each shareholder made a party to the proceeding
is entitled to judgment for the amount of the fair value of such shareholder’s shares, plus interest, as found by the court.
(6) The corporation shall pay each such shareholder
the amount found to be due within 10 days after final determination of the proceedings. Upon payment of the judgment, the shareholder
shall cease to have any interest in the shares.
Section 607.1331. Court costs and counsel fees
(1) The court in an appraisal proceeding shall determine
all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court. The court
shall assess the costs against the corporation, except that the court may assess costs against all or some of the shareholders
demanding appraisal, in amounts the court finds equitable, to the extent the court finds such shareholders acted arbitrarily, vexatiously,
or not in good faith with respect to the rights provided by this chapter.
(2) The court in an appraisal proceeding may also
assess the fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any or
all shareholders demanding appraisal if the court finds the corporation did not substantially comply with ss. 607.1320 and 607.1322;
or
(b) Against either the corporation or a shareholder
demanding appraisal, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed
acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this chapter.
(3) If the court in an appraisal proceeding finds
that the services of counsel for any shareholder were of substantial benefit to other shareholders similarly situated, and that
the fees for those services should not be assessed against the corporation, the court may award to such counsel reasonable fees
to be paid out of the amounts awarded the shareholders who were benefited.
(4) To the extent the corporation fails to make
a required payment pursuant to s. 607.1324, the shareholder may sue directly for the amount owed and, to the extent successful,
shall be entitled to recover from the corporation all costs and expenses of the suit, including counsel fees.
Section 607.1332. Disposition of acquired shares
Shares acquired by a corporation pursuant to payment
of the agreed value thereof or pursuant to payment of the judgment entered therefor, as provided in this chapter, may be held and
disposed of by such corporation as authorized but unissued shares of the corporation, except that, in the case of a merger or share
exchange, they may be held and disposed of as the plan of merger or share exchange otherwise provides. The shares of the surviving
corporation into which the shares of such shareholders demanding appraisal rights would have been converted had they assented to
the merger shall have the status of authorized but unissued shares of the surviving corporation.
Section 607.1333. Limitation on corporate payment
(1) No payment shall be made to a shareholder seeking
appraisal rights if, at the time of payment, the corporation is unable to meet the distribution standards of s. 607.06401. In such
event, the shareholder shall, at the shareholder’s option:
(a) Withdraw his or her notice of intent to assert
appraisal rights, which shall in such event be deemed withdrawn with the consent of the corporation; or
(b) Retain his or her status as a claimant against
the corporation and, if it is liquidated, be subordinated to the rights of creditors of the corporation, but have rights superior
to the shareholders not asserting appraisal rights, and if it is not liquidated, retain his or her right to be paid for the shares,
which right the corporation shall be obliged to satisfy when the restrictions of this section do not apply.
(2) The shareholder shall exercise the option under
paragraph (1)(a) or paragraph (b) by written notice filed with the corporation within 30 days after the corporation has given written
notice that the payment for shares cannot be made because of the restrictions of this section. If the shareholder fails to exercise
the option, the shareholder shall be deemed to have withdrawn his or her notice of intent to assert appraisal rights.
Annex D
PROPOSED FORM OF ARTICLES OF AMENDMENT
TO AMENDED AND RESTATED ARTICLES OF INCORPORATION
TO IMPLEMENT THE PROTECTIVE AMENDMENT
ARTICLES OF AMENDMENT
TO THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
CORD BLOOD AMERICA, INC.
Cord Blood America, Inc.
, a corporation
organized and existing under and by virtue of the Florida Business Corporation Act (the “
Corporation
”),
adopts the following articles of amendment to its Amended and Restated Articles of Incorporation. These Articles of Amendment to
the Amended and Restated Articles of Incorporation add an
Article VII
to the Amended and Restated Articles of
Incorporation to read in its entirety as follows:
ARTICLE VII:
Section 1.
Definitions
.
As used in this
Article VII
,
the following capitalized terms have the following meanings when used herein with initial capital letters (and any references to
any portions of Treas. Reg. § 1.382-2T shall include any successor provisions):
|
(a)
|
“4.99-percent Transaction”
means any Transfer described in clause (a) or (b) of Section 2 of this Article VII.
|
|
(b)
|
“4.99-percent Shareholder”
means a Person or group of Persons that is a “5-percent shareholder” of the Corporation pursuant to Treas. Reg. § 1.382-2T(g), as applied by replacing “5-percent” with “4.99-percent” and “five percent” with “4.99 percent,” where applicable.
|
|
(c)
|
“Agent
” has the meaning set forth in Section 5 of this Article VII
.
|
|
(d)
|
“Board of Directors”
means the board of directors of the Corporation.
|
|
(e)
|
“Code”
means the United States Internal Revenue Code of 1986, as amended from time to time.
|
|
(f)
|
“Corporation Security”
or
“Corporation Securities”
means (i) any Stock, (ii) shares of preferred stock issued by the Corporation (other than preferred stock described in § 1504(a)(4) of the Code), and (iii) warrants, rights, or options (including options within the meaning of Treas. Reg. § 1.382-2T(h)(4)(v) or Treas. Reg. § 1.382-4(d)(9)) to purchase securities of the Corporation.
|
|
(g)
|
“Effective Date”
means the date of filing of these Articles of Amendment to the Amended and Restated Articles of Incorporation of the Corporation with the Secretary of State of the State of Florida.
|
|
(h)
|
“Excess Securities”
has the meaning set forth in Section 4 of this Article VII.
|
|
(i)
|
“Expiration Date”
means the earliest of (i) the close of business on the date that is the third anniversary of the Effective Date, (ii) the repeal of Section 382 of the Code or any successor statute if the Board of Directors determines that this Article VII is no longer necessary or desirable for the preservation of Tax Benefits, (iii) the close of business on the first day of a taxable year of the Corporation as to which the Board of Directors determines that no Tax Benefits may be carried forward or (iv) such date as the Board of Directors shall fix in accordance with Section 12 of this Article VII.
|
|
(j)
|
“Percentage Stock Ownership”
means the percentage Stock Ownership interest of any Person or group (as the context may require) for purposes of Section 382 of the Code as determined in accordance with Treas. Reg. § 1.382-2T(g), (h), (j) and (k) and Treas. Reg. § 1.382-4, or any successor provisions and other pertinent Internal Revenue Service guidance.
|
|
(k)
|
“Person”
means any individual, partnership, joint venture, limited liability company, firm, corporation, unincorporated association or organization, trust or other entity or any group of such “Persons” having a formal or informal understanding among themselves to make a “coordinated acquisition” of shares within the meaning of Treas. Reg. § 1.382-3(a)(1) or who are otherwise treated as an “entity” within the meaning of Treas. Reg. § 1.382-3(a)(1), and shall include any successor (by merger or otherwise) of any such entity or group.
|
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(l)
|
“Prohibited Distributions”
means any and all dividends or other distributions paid by the Corporation with respect to any Excess Securities received by a Purported Transferee.
|
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(m)
|
“Prohibited Transfer”
means any Transfer or purported Transfer of Corporation Securities to the extent that such Transfer is prohibited and/or void under this Article VII.
|
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(n)
|
“Public Group”
has the meaning set forth in Treas. Reg. § 1.382-2T (f) (13).
|
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(o)
|
“Purported Transferee”
has the meaning set forth in Section 4 of this Article VII.
|
|
(p)
|
“Remedial Holder”
has the meaning set forth in Section 7 of this Article VII.
|
|
(q)
|
“Stock”
means any interest that would be treated as “stock” of the Corporation pursuant to Treas. Reg. § 1.382-2T (f) (18).
|
|
(r)
|
“Stock Ownership”
means any direct or indirect ownership of Stock, including any ownership by virtue of application of constructive ownership rules, with such direct, indirect and constructive ownership determined under the provisions of Section 382 of the Code and the Treasury Regulations thereunder, including, for the avoidance of doubt, any ownership whereby a Person owns Stock pursuant to a “coordinated acquisition” treated as a single “entity” as defined in Treas. Reg. § 1.382-3(a)(1), or such Stock is otherwise aggregated with Stock owned by such Person pursuant to the provisions of Section 382 of the Code and the Treasury Regulations thereunder.
|
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(s)
|
“Tax Benefits”
means the net operating loss carry forwards, capital loss carry forwards, general business credit carry forwards, alternative minimum tax credit carry forwards and foreign tax credit carry forwards, as well as any loss or deduction attributable to a “net unrealized built-in loss” of the Corporation or any direct or indirect subsidiary thereof, within the meaning of Section 382 of the Code.
|
|
(t)
|
“Transfer”
means, any direct or indirect sale, transfer, assignment, conveyance, pledge or other disposition, event or occurrence or other action taken by a Person, other than the Corporation, that alters the Percentage Stock Ownership of any Person or group. A Transfer also shall include the creation or grant of an option (including an option within the meaning of Treas. Reg. § 1.382-4(d)). For the avoidance of doubt, a Transfer shall not include the creation or grant of an option by the Corporation, nor shall a Transfer include the issuance of Stock by the Corporation.
|
|
(u)
|
“Transferee”
means any Person to whom Corporation Securities are Transferred.
|
|
(v)
|
“Treasury Regulations”
or
“Treas. Reg.”
means the regulations, including temporary regulations or any successor regulations, promulgated under the Code, as amended from time to time.
|
Section 2
.
Transfer
and Ownership Restrictions
. In order to preserve the Tax Benefits, from and after the Effective Date of this
Article
VII
any attempted Transfer of Corporation Securities prior to the Expiration Date and any attempted Transfer of Corporation
Securities pursuant to an agreement entered into prior to the Expiration Date shall be prohibited and void
ab initio
to
the extent that, as a result of such Transfer (or any series of Transfers of which such Transfer is a part), either (a) any
Person or Persons would become a 4.99-percent Shareholder or (b) the Percentage Stock Ownership in the Corporation of any
4.99-percent Shareholder would be increased. The prior sentence is not intended to prevent Corporation Securities from being DTC-eligible
and shall not preclude the settlement of any transaction in Corporation Securities entered into through the facilities of a national
securities exchange;
provided
,
however
, that the Corporation Securities and parties involved in such transaction
shall remain subject to the provisions of this
Article VII
in respect of such transaction.
Section 3.
Exceptions
.
|
(a)
|
Notwithstanding anything to the contrary herein, Transfers to a Public Group (including a new Public Group created under Treas. Reg. § 1.382-2T (j) (3) (i)) shall be permitted.
|
|
(b)
|
The restrictions set forth in Section 2 of this Article VII shall not apply to an attempted Transfer that is a 4.99-percent Transaction if the transferor or the Transferee obtains the written approval of the Board of Directors or a duly authorized committee thereof. As a condition to granting its approval pursuant to this Section 3 of this Article VII, the Board of Directors may, in its discretion, require (at the expense of the transferor and/or Transferee) an opinion of counsel selected by the Board of Directors that the Transfer shall not result in a limitation on the use of the Tax Benefits as a result of the application of Section 382 of the Code;
provided
that the Board of Directors may grant such approval notwithstanding the effect of such approval on the Tax Benefits if it determines that the approval is in the best interests of the Corporation. The Board of Directors may grant its approval in whole or in part with respect to such Transfer and may impose any conditions that it deems reasonable and appropriate in connection with such approval, including, without limitation, restrictions on the ability of any Transferee to Transfer Stock acquired through a Transfer. Approvals of the Board of Directors hereunder may be given prospectively or retroactively. The Board of Directors, to the fullest extent permitted by law, may exercise the authority granted by this Article VII through duly authorized officers or agents of the Corporation. Nothing in this Section 3 of this Article VII shall be construed to limit or restrict the Board of Directors in the exercise of its fiduciary duties under applicable law.
|
Section 4.
Excess Securities
.
|
(a)
|
No employee or agent of the Corporation shall record any Prohibited Transfer, and the purported transferee of such a Prohibited Transfer (the “
Purported Transferee
”) shall not be recognized as a stockholder of the Corporation for any purpose whatsoever in respect of the Corporation Securities which are the subject of the Prohibited Transfer (the “
Excess Securities
”). The Purported Transferee shall not be entitled, with respect to such Excess Securities, to any rights of stockholders of the Corporation, including, without limitation, the right to vote such Excess Securities and to receive dividends or distributions, whether liquidating or otherwise, in respect thereof, if any, and the Excess Securities shall be deemed to remain with the transferor unless and until the Excess Securities are transferred to the Agent pursuant to Section 5 of this Article VII or until an approval is obtained under Section 3 of this Article VII. After the Excess Securities have been acquired in a Transfer that is not a Prohibited Transfer, the Corporation Securities shall cease to be Excess Securities. For this purpose, any Transfer of Excess Securities not in accordance with the provisions of this Section 4 or Section 5of this Article VII shall also be a Prohibited Transfer.
|
|
(b)
|
The Corporation may require as a condition to the registration of the Transfer of any Corporation Securities or the payment of any distribution on any Corporation Securities that the proposed Transferee or payee furnish to the Corporation all information reasonably requested by the Company with respect to its direct or indirect ownership interests in such Corporation Securities. The Company may make such arrangements or issue such instructions to its stock transfer agent as may be determined by the Board of Directors to be necessary or advisable to implement this Article VII, including, without limitation, authorizing such transfer agent to require an affidavit from a Purported Transferee regarding such Person’s actual and constructive ownership of Stock and other evidence that a Transfer will not be prohibited by this Article VII as a condition to registering any transfer.
|
Section 5.
Transfer to
Agent
. If the Board of Directors determines that a Transfer of Corporation Securities constitutes a Prohibited Transfer,
then, upon written demand by the Corporation sent within thirty days of the date on which the Board of Directors determines that
the attempted Transfer would result in Excess Securities, the Purported Transferee shall transfer or cause to be transferred any
certificate or other evidence of ownership of the Excess Securities within the Purported Transferee’s possession or control,
together with any Prohibited Distributions, to an agent designated by the Board of Directors (the “
Agent
”).
The Agent shall thereupon sell to a buyer or buyers, which may include the Corporation, the Excess Securities transferred to it
in one or more arm’s-length transactions (on the public securities market on which such Excess Securities are traded, if
possible, or otherwise privately);
provided
,
however
, that any such sale must not constitute a Prohibited
Transfer and
provided
,
further
, that the Agent shall effect such sale or sales in an orderly fashion and
shall not be required to effect any such sale within any specific time frame if, in the Agent’s discretion, such sale or
sales would disrupt the market for the Corporation Securities or otherwise would adversely affect the value of the Corporation
Securities. If the Purported Transferee has resold the Excess Securities before receiving the Corporation’s demand to surrender
Excess Securities to the Agent, the Purported Transferee shall be deemed to have sold the Excess Securities for the Agent, and
shall be required to transfer to the Agent any Prohibited Distributions and proceeds of such sale, except to the extent that the
Corporation grants written permission to the Purported Transferee to retain a portion of such sale proceeds not exceeding the amount
that the Purported Transferee would have received from the Agent pursuant to
Section 6
of this
Article
VII
if the Agent rather than the Purported Transferee had resold the Excess Securities.
Section 6.
Application
of Proceeds and Prohibited Distributions
. The Agent shall apply any proceeds of a sale by it of Excess Securities and,
if the Purported Transferee has previously resold the Excess Securities, any amounts received by it from a Purported Transferee,
together, in either case, with any Prohibited Distributions, as follows: (i) first, such amounts shall be paid to the Agent
to the extent necessary to cover its costs and expenses incurred in connection with its duties hereunder; (ii) second, any
remaining amounts shall be paid to the Purported Transferee, up to the amount paid by the Purported Transferee for the Excess Securities
(or the fair market value at the time of the Transfer, in the event the purported Transfer of the Excess Securities was, in whole
or in part, a gift, inheritance or similar Transfer) which amount (or fair market value) shall be determined at the discretion
of the Board of Directors; and (iii) third, any remaining amounts shall be paid to one or more organizations selected by the
Board of Directors which is described under Section 501(c)(3) of the Code (or any comparable successor provision) and contributions
to which are eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2552 of the Code. The Purported Transferee of
Excess Securities shall have no claim, cause of action or any other recourse whatsoever against any transferor of Excess Securities.
The Purported Transferee’s sole right with respect to such shares shall be limited to the amount payable to the Purported
Transferee pursuant to this
Section 6
of this
Article VII
. In no event shall the proceeds of
any sale of Excess Securities pursuant to this
Section 6
of this
Article VII
inure to the benefit
of the Corporation or the Agent, except to the extent used to cover costs and expenses incurred by Agent in performing its duties
hereunder.
Section 7.
Modification
of Remedies for Certain Indirect Transfers
. In the event of any Transfer which does not involve a transfer of Corporation
Securities within the meaning of Florida law but which would cause a 4.99-percent Shareholder to violate a restriction on Transfers
provided for in this
Article VII
, the application of
Sections 5
and
6
of this
Article
VII
shall be modified as described in this
Section 7
of this
Article VII
. In such case,
no such 4.99-percent Shareholder shall be required to dispose of any interest that is not a Corporation Security, but such 4.99-percent
Shareholder and/or any Person whose ownership of Corporation Securities is attributed to such 4.99-percent Shareholder (such 4.99-percent
Shareholder or other Person, a “
Remedial Holder
”) shall be deemed to have disposed of and shall be required
to dispose of sufficient Corporation Securities (which Corporation Securities shall be disposed of in the inverse order in which
they were acquired) to cause such 4.99-percent Shareholder, following such disposition, not to be in violation of this
Article
VII
. Such disposition shall be deemed to occur simultaneously with the Transfer giving rise to the application of this provision,
and such number of Corporation Securities that are deemed to be disposed of shall be considered Excess Securities and shall be
disposed of through the Agent as provided in
Sections 5
and
6
of this
Article VII
,
except that the maximum aggregate amount payable to a Remedial Holder in connection with such sale shall be the fair market value
of such Excess Securities at the time of the purported Transfer. A Remedial Holder shall not be entitled, with respect to such
Excess Securities, to any rights of stockholders of the Corporation, including, without limitation, the right to vote such Excess
Securities and to receive dividends or distributions, whether liquidating or otherwise, in respect thereof, if any, following the
time of the purported Transfer. All expenses incurred by the Agent in disposing of such Excess Stock shall be paid out of any amounts
due such 4.99-percent Shareholder or such other Person. The purpose of this
Section 7
of this
Article
VII
is to extend the restrictions in
Sections 2
and
5
of this
Article VII
to
situations in which there is a 4.99-percent Transaction without a direct Transfer of Corporation Securities, and this
Section 7
of
this
Article VII
, along with the other provisions of this
Article VII
, shall be interpreted to produce
the same results, with differences as the context requires, as a direct Transfer of Corporation Securities.
Section 8.
Legal Proceedings;
Prompt Enforcement
. If the Purported Transferee fails to surrender the Excess Securities or the proceeds of a sale thereof
to the Agent within thirty days from the date on which the Corporation makes a written demand pursuant to
Section 5
of
this
Article VII
(whether or not made within the time specified in
Section 5
of this
Article
VII
), then the Corporation may take such actions as it deems appropriate to enforce the provisions hereof, including the institution
of legal proceedings to compel the surrender. Nothing in this
Section 8
of this
Article VII
shall
(i) be deemed inconsistent with any Transfer of the Excess Securities provided in this
Article VII
being
void
ab initio
, (ii) preclude the Corporation in its discretion from immediately bringing legal proceedings without
a prior demand or (iii) cause any failure of the Corporation to act within the time periods set forth in
Section 5
of
this
Article VII
to constitute a waiver or loss of any right of the Corporation under this
Article VII
.
The Board of Directors may authorize such additional actions as it deems advisable to give effect to the provisions of this
Article
VII
.
Section 9.
Liability
.
To the fullest extent permitted by law, any shareholder subject to the provisions of this
Article VII
who knowingly
violates the provisions of this
Article VII
and any Persons controlling, controlled by or under common control
with such shareholder shall be jointly and severally liable to the Corporation for, and shall indemnify and hold the Corporation
harmless against, any and all damages suffered as a result of such violation, including but not limited to damages resulting from
a reduction in, or elimination of, the Corporation’s ability to utilize its Tax Benefits, and attorneys’ and auditors’
fees incurred in connection with such violation.
Section 10.
Obligation
to Provide Information
. As a condition to the registration of the Transfer of any Stock, any Person who is a beneficial,
legal or record holder of Stock, and any proposed Transferee and any Person controlling, controlled by or under common control
with the proposed Transferee, shall provide such information as the Corporation may request from time to time in order to determine
compliance with this
Article VII
or the status of the Tax Benefits of the Corporation.
Section 11.
Legends
.
The Board of Directors may require that any certificates issued by the Corporation evidencing ownership of shares of Stock that
are subject to the restrictions on transfer and ownership contained in this
Article VII
bear the following legend:
“THE AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF THE CORPORATION CONTAINS RESTRICTIONS PROHIBITING THE TRANSFER (AS DEFINED IN THE AMEDNED AND RESTATED ARTICLES OF INCORPORATION)
OF STOCK OF THE CORPORATION (INCLUDING THE CREATION OR GRANT OF CERTAIN OPTIONS, RIGHTS AND WARRANTS) WITHOUT THE PRIOR AUTHORIZATION
OF THE BOARD OF DIRECTORS OF THE CORPORATION (THE “BOARD OF DIRECTORS”) IF SUCH TRANSFER AFFECTS THE PERCENTAGE OF
STOCK OF THE CORPORATION (WITHIN THE MEANING OF SECTION 382 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”)
AND THE TREASURY REGULATIONS PROMULGATED THEREUNDER) THAT IS TREATED AS OWNED BY A 4.99-PERCENT SHAREHOLDER (AS DEFINED IN THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION). IF THE TRANSFER RESTRICTIONS ARE VIOLATED, THEN THE TRANSFER WILL BE VOID AB INITIO
AND THE PURPORTED TRANSFEREE OF THE STOCK WILL BE REQUIRED TO TRANSFER EXCESS SECURITIES (AS DEFINED IN THE AMENDED AND RESTATED
ARTTICLES OF INCORPORATION) TO THE CORPORATION’S AGENT. IN THE EVENT OF A TRANSFER WHICH DOES NOT INVOLVE SECURITIES OF THE
CORPORATION WITHIN THE MEANING OF THE FLORIDA BUSINESS CORPORATION ACT (“SECURITIES”) BUT WHICH WOULD VIOLATE THE TRANSFER
RESTRICTIONS, THE PURPORTED TRANSFEREE (OR THE RECORD OWNER) OF THE SECURITIES THAT VIOLATE THE TRANSFER RESTRICTIONS WILL BE REQUIRED
TO TRANSFER SUFFICIENT SECURITIES PURSUANT TO THE TERMS PROVIDED FOR IN THE AMENDED AND RESTATED ARTICLES OF INCORPORATION TO CAUSE
THE 4.99-PERCENT SHAREHOLDER TO NO LONGER BE IN VIOLATION OF THE TRANSFER RESTRICTIONS. THE CORPORATION WILL FURNISH WITHOUT CHARGE
TO THE HOLDER OF RECORD OF THIS CERTIFICATE A COPY OF THE AMENDED AND RESTATED ARTICLES OF INCORPORATION CONTAINING THE ABOVE-REFERENCED
TRANSFER RESTRICTIONS UPON WRITTEN REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS.”
The Board of Directors may also require
that any certificates issued by the Corporation evidencing ownership of shares of Stock that are subject to conditions imposed
by the Board of Directors under
Section 3
of this
Article VII
also bear a conspicuous legend
referencing the applicable restrictions.
Section 12.
Authority of
Board of Directors
.
|
(a)
|
The Board of Directors shall have the power to determine all matters necessary for assessing compliance with this Article VII, including, without limitation, (1) the identification of 4.99-percent Shareholders, (2) whether a Transfer is a 4.99-percent Transaction or a Prohibited Transfer, (3) the Percentage Stock Ownership in the Corporation of any 4.99-percent Shareholder, (4) whether an instrument constitutes a Corporation Security, (5) the amount (or fair market value) due to a Purported Transferee pursuant to Section 6 of this Article VII, and (6) any other matters which the Board of Directors determines to be relevant; and the good faith determination of the Board of Directors on such matters shall be conclusive and binding for all the purposes of this Article VII. In addition, the Board of Directors may, to the extent permitted by law, from time to time establish, modify, amend or rescind by-laws, regulations and procedures of the Corporation not inconsistent with the provisions of this Article VII for purposes of determining whether any Transfer of Corporation Securities would jeopardize or endanger the Corporation’s ability to preserve and use the Tax Benefits and for the orderly application, administration and implementation of this Article VII.
|
|
(b)
|
Nothing contained in this Article VII shall limit the authority of the Board of Directors to take such other action to the extent permitted by law as it deems necessary or advisable to protect the Corporation and its shareholders in preserving the Tax Benefits. Without limiting the generality of the foregoing, in the event of a change in law making one or more of the following actions necessary or desirable, the Board of Directors may, by adopting a written resolution, (1) accelerate the Expiration Date, (2) modify the ownership interest percentage in the Corporation or the Persons or groups covered by this Article VII, (3) modify the definitions of any terms set forth in this Article VII or (4) modify the terms of this Article VII as appropriate, in each case, in order to prevent an ownership change for purposes of Section 382 of the Code as a result of any changes in applicable Treasury Regulations or otherwise;
provided
,
however
, that the Board of Directors shall not cause there to be such acceleration or modification unless it determines, by adopting a written resolution, that such action is reasonably necessary or advisable to preserve the Tax Benefits or that the continuation of these restrictions is no longer reasonably necessary for the preservation of the Tax Benefits. Shareholders of the Corporation shall be notified of such determination through a filing with the Securities and Exchange Commission or such other method of notice as the Secretary of the Corporation shall deem appropriate.
|
|
(c)
|
In the case of an ambiguity in the application of any of the provisions of this Article VII, including any definition used herein, the Board of Directors shall have the power to determine the application of such provisions with respect to any situation based on its reasonable belief, understanding or knowledge of the circumstances. In the event this Article VII requires an action by the Board of Directors but fails to provide specific guidance with respect to such action, the Board of Directors shall have the power to determine the action to be taken so long as such action is not contrary to the provisions of this Article VII. All such actions, calculations, interpretations and determinations which are done or made by the Board of Directors in good faith shall be conclusive and binding on the Corporation, the Agent, and all other parties for all other purposes of this Article VII. The Board of Directors may delegate all or any portion of its duties and powers under this Article VII to a committee of the Board of Directors as it deems necessary or advisable and, to the fullest extent permitted by law, may exercise the authority granted by this Article VII through duly authorized officers or agents of the Corporation. Nothing in this Article VII shall be construed to limit or restrict the Board of Directors in its exercise of its fiduciary duties under applicable law.
|
Section 13.
Reliance
.
To the fullest extent permitted by law, the Corporation and the members of the Board of Directors shall be fully protected in relying
in good faith upon the information, opinions, reports or statements of the chief executive officer, the chief financial officer,
the chief accounting officer or the corporate controller of the Corporation and the Corporation’s legal counsel, independent
auditors, transfer agent, investment bankers or other employees and agents in making the determinations and findings contemplated
by this
Article VII
. The members of the Board of Directors shall not be responsible for any good faith errors made
in connection therewith. For purposes of determining the existence and identity of, and the amount of any Corporation Securities
owned by, any stockholder, the Corporation is entitled to rely on the existence and absence of filings of Schedule 13D or 13G under
the Securities and Exchange Act of 1934, as amended (or similar filings), as of any date, subject to its actual knowledge of the
ownership of Corporation Securities.
Section 14.
Benefits of
this Article VII
. Nothing in this
Article VII
shall be construed to give to any Person other than the
Corporation or the Agent any legal or equitable right, remedy or claim under this
Article VII
. This
Article
VII
shall be for the sole and exclusive benefit of the Corporation and the Agent.
Section 15.
Severability
.
The purpose of this
Article VII
is to facilitate the Corporation’s ability to maintain or preserve its Tax Benefits.
If any provision of this
Article VII
or the application of any such provision to any Person or under any circumstance
shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality
or unenforceability shall not affect any other provision of this
Article VII
.
Section 16.
Waiver
.
With regard to any power, remedy or right provided herein or otherwise available to the Corporation or the Agent under this
Article
VII
, (i) no waiver will be effective unless expressly contained in a writing signed by the waiving party and (ii) no
alteration, modification or impairment will be implied by reason of any previous waiver, extension of time, delay or omission in
exercise or other indulgence.
Resolutions
were duly adopted by the Board of Directors of the Corporation on March 8, 2018 setting forth these proposed Articles of Amendment
to the Amended and Restated Articles of Incorporation of the Corporation and declaring said Articles of Amendment to be advisable
and recommended for approval by the shareholders of the Corporation.
Pursuant to
resolution of its Board of Directors, a special meeting of the shareholders of the Corporation was duly called and held on May
14, 2018, upon notice in accordance with Section 607.0702 of the Florida Business Corporation Act, at which meeting the necessary
number of shares as required by applicable law was voted in favor of these Articles of Amendment.
S
aid Articles of Amendment were
duly adopted in accordance with the provisions of Section 607.1006 of the Florida Business Corporation Act.
IN WITNESS WHEREOF
, the Corporation,
by and through the undersigned duly authorized person, has executed these Articles of Amendment of the Amended and Restated Articles
of Incorporation on this day of ,
2018 and affirms that the statements made herein are true under the penalties of perjury.
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CORD BLOOD AMERICA, INC.
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By:
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Name:
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Title:
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SPECIAL MEETING OF STOCKHOLDERS OF
CORD BLOOD AMERICA, INC.
Monday, May 14, 2018
11:00 a.m. Eastern Time
150 E Palmetto Park Rd #800 (8th floor), Boca
Raton, FL 33432
PROXY