Item
1.01. Entry into a Material Definitive Agreement
On
November 7, 2018, BioTime, Inc. (“
BioTime
”), Asterias Biotherapeutics, Inc. (“
Asterias
”)
and Patrick Merger Sub, Inc., a newly formed wholly owned subsidiary of BioTime (“
Merger Sub
”) entered into
an Agreement and Plan of Merger (the “
Merger Agreement
”), pursuant to which Merger Sub will merge with and
into Asterias (the “
Merger
”) with Asterias as the surviving entity.
Merger
Agreement
Pursuant
to the terms of the Merger Agreement, at the effective time of the Merger (the “
Effective Time
”), by virtue
of the Merger and without any action on the part of any Asterias stockholder, each share of common stock of Asterias, par value
$0.0001 per share (“
Asterias Common Stock
”), will be converted into the right to receive 0.71 voting common
shares of BioTime (the “
Exchange Ratio
”), no par value per share (“
BioTime Common Shares
”).
Outstanding options to purchase shares of Asterias Common Stock pursuant to Asterias’ Amended and Restated 2013 Equity Incentive
Plan will be cancelled and extinguished for no consideration and shall cease to exist after the Effective Time. Outstanding shares
of Asterias Common Stock underlying Asterias restricted stock units pursuant to Asterias’ Amended and Restated 2013 Equity
Incentive Plan shall vest in full immediately prior to the Effective Time and will be cancelled and converted into the right to
receive the Exchange Ratio in respect of each share of Asterias Common Stock underlying each Asterias restricted stock unit.
As
of November 7, 2018, BioTime owned approximately 40% of outstanding Asterias Common Stock. Previously, Asterias was a majority-owned
consolidated subsidiary of BioTime until May 2016 when BioTime deconsolidated Asterias financial statements and results of operations
from those of BioTime under applicable generally accepted accounting principles due to the decrease in BioTime’s percentage
ownership in Asterias from 57.1% to 48.7% following a sale of common stock by Asterias in a public offering.
The
Exchange Ratio was determined as a result of negotiations between a special committee of independent directors of the board of
directors of Asterias and a special committee of independent directors of the board of directors of BioTime, with the assistance
of separate financial and legal advisors to each special committee. The Merger Agreement, the Merger and the other transactions
contemplated in the Merger Agreement have been recommended by the Asterias special committee and the BioTime special committee
and unanimously approved by the respective disinterested members of the board of directors of Asterias and BioTime.
Pursuant
to the terms of a “go-shop” provision in the Merger Agreement, between the date of the Merger Agreement and December
3, 2018 (the “
Go-Shop Period
”), Asterias and its representatives may solicit, discuss and negotiate alternative
proposals from third parties for the acquisition of Asterias.
Following
the expiration of the Go-Shop Period, Asterias will become subject to customary “no shop” restrictions on its and
its representatives’ ability to solicit, discuss and negotiate alternative acquisition proposals from third parties (other
than certain third parties that submit qualifying proposals during the Go-Shop Period for a limited time period), subject to exceptions
for acquisition proposals that the Asterias board of directors and the Asterias special committee have determined constitutes
or is reasonably expected to constitute a Superior Proposal (as defined in the Merger Agreement).
Each
of Asterias and BioTime has made certain covenants in the Merger Agreement, including, among others: (a) to conduct their respective
businesses in the ordinary course consistent with past practice during the interim period between the execution of the Merger
Agreement and the consummation of the Merger; (b) not to engage in certain kinds of transactions during such period; (c) to convene
and hold meetings of the stockholders and shareholders, respectively, of each of Asterias and BioTime to approve the transaction;
and (d) that, subject to certain exceptions, the Boards of Directors of Asterias and BioTime will each recommend that their respective
stockholders and shareholders approve the transaction. Pursuant to the Merger Agreement, Don M. Bailey, the Chairman of the Board
of Asterias, will join the BioTime Board of Directors and Michael H. Mulroy, the President and Chief Executive Officer of Asterias,
will remain on the Board of Directors of BioTime. Mr. Mulroy has served on the Board of Directors of BioTime since October 2014.
Consummation
of the Merger is subject to certain conditions, including (a) the adoption of the Merger Agreement by the stockholders of Asterias
and the approval by the shareholders of BioTime of the issuance of BioTime Common Shares; (b) absence of any applicable restraining
order or injunction prohibiting the Merger; (c) the effectiveness of a registration statement on Form S-4; (d) the absence of
material adverse effect with respect to each of Asterias and BioTime; (e) the accuracy of the representations and warranties of
each party, subject to specified materiality thresholds; and (f) performance in all material respects by each party of its obligations
under the Merger Agreement. The Merger Agreement also contains customary termination provisions and provides that, upon termination
of the Merger Agreement, under specified circumstances, including termination by Asterias to enter into a Superior Proposal, Asterias
or BioTime, as applicable, would be required to pay the other party a termination fee of $2,000,000 if the merger is not consummated
or, under specified circumstances, expense reimbursement of up to $1,500,000, which will be credited against the
termination fee.
The
foregoing description of the Merger Agreement is only a summary, does not purport to be complete and is qualified in its entirety
by reference to the Merger Agreement, a copy of which is filed as Exhibit 2.1 to this Current Report on Form 8-K (this “
Current
Report
”) and incorporated herein by reference. The representations, warranties and covenants contained in the Merger
Agreement were made only for purposes of the Merger Agreement and as of specified dates, were solely for the benefit of the parties
to the Merger Agreement, and may be subject to limitations agreed upon by the contracting parties, including being qualified by
confidential disclosures exchanged between the parties in connection with the execution of the Merger Agreement. The representations
and warranties have been made for the purpose of allocating contractual risk between the parties to the Merger Agreement instead
of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties which
are different from “materiality” as defined under applicable securities laws. Investors should not rely on the representations,
warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of BioTime,
Asterias or Merger Sub. Moreover, information concerning the subject matter of the representations, warranties and covenants may
change after the Effective Time, which subsequent information may or may not be fully reflected in public disclosures.