AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
EXHIBIT 10.1
AMENDMENT
NO. 1 TO
THIS AMENDMENT NO. 1 TO AGREEMENT AND
PLAN OF MERGER (this “Amendment”) is made
and entered into as of the 1st day of
July, 2009, by and among NEOSTEM, INC., a Delaware
corporation (“NeoStem”), CBH ACQUISITION LLC, a
Delaware limited liability company and a wholly owned subsidiary of NeoStem
(“Subco”),
CHINA BIOPHARMACEUTICALS
HOLDINGS, INC., a Delaware corporation (“CBH”) and CHINA BIOPHARMACEUTICALS
CORP., a British Virgin Islands corporation (“CBC”). NeoStem,
Subco and CBH are sometimes collectively referred to as the “Parties,” each
individually a “Party.”
The
Parties entered into an Agreement and Plan of Merger (the “Original Agreement”)
on November 2, 2008, and hereby wish to amend certain provisions in that
Original Agreement. Terms not defined herein shall have the meanings
set forth in the Original Agreement.
1. Exchange
Securities. (a) The definition of “Exchanged Common
Shares” in Preliminary Statement E(1) of the Original Agreement is
amended to reduce it from 7,500,000 shares to 7,150,000 shares of NeoStem Common
Stock.
(b) The
definition of “Exchange Ratio” set
forth in Section 2.2.4 is amended to be equal to the quotient of 7,150,000
shares divided by the sum of (x) the number of shares of CBH stock outstanding
as of the Effective Time and (y) the number of shares of CBH common stock
issuable upon exercise of in-the-money warrants of CBH immediately prior to the
Effective Time, subject to adjustment as set forth in the Original
Agreement. CBH represents and warrants that the denominator of the
Exchange Ratio as of the date hereof is 37,132,313 shares (after conversion of
all CBH Series A Preferred shares to CBH Common Stock, which CBH represents was
effective in June 2009), such that as of the date hereof, the Exchange Ratio
would be 0.19255.
(c) Sections
2.12 and 2.3.1 are amended to change the references from 7,500,000 shares to
7,150,000 shares. Further, notwithstanding any omission in this
Amendment, all similar references to the purchase price of 7,500,000 shares
shall hereafter refer to 7,150,000 shares. NeoStem shall not be
required to issue 150,000 shares of NeoStem Common Stock in escrow.
2. RimAsia
Securities. (a) Preliminary Statement E(2) of the Original
Agreement is deleted and replaced with the following:
(b) 6,458,009
shares of NeoStem Common Stock (“RimAsia Exchanged Common
Shares”), and (b) 8,177,512 shares of NeoStem Series C Convertible
Preferred Stock (as defined herein), each with a liquidation preference of
$1.125 and convertible to shares of Neo Stem Common Stock at $.90 (“RimAsia Exchanged Preferred
Shares”) (collectively, the RimAsia Exchanged Common Shares and the
RimAsia Exchanged Preferred Shares are referred to as the “RimAsia Exchanged
Securities”), to be issued to RimAsia Capital Partners, L.P. (“RimAsia”);
All
references in the Original Agreement to the Class B Warrants or the Class B
Warrant Agreement are deleted, and Exhibit A (the Class B Warrant Agreement) is
deleted from the Original Agreement.
In addition, the parties acknowledge
that since November 2008 RimAsia has provided certain advances in connection
with the parties’ business initiatives, and will continue to incur costs
relating to the transaction, including costs for legal and accounting services
and the increased stock consideration set forth above relates in part to the
forgiveness of such advances as further specified in a separate agreement among
the parties.
3. CBH Common Stock Purchase
Warrants. (a) Preliminary Statement E(3) of the
Original Agreement is deleted and replaced with the following:
(b)
Subject to acceptance by the holders of CBH Common Stock Purchase Warrants to
purchase an aggregate of up to 8,370,298 shares of CBH Common Stock (collectively, the “CBH
Common Stock Purchase Warrants”), Class C warrants (the “Class C Warrants”) to
purchase up to 2,012,097 shares of NeoStem Common Stock at an exercise price
equal to $2.50 per share under the Class C Warrant Agreement, the form of which
is attached hereto as Exhibit B, to be
issued to such holders of CBH Common Stock Purchase Warrants.
4. EET
Shares. A new Preliminary Statement E(4) is added to the
Original Agreement as follows:
125,000 shares of NeoStem Common Stock
to be issued to EET or its designee (“EET Exchanged Common Shares”) for
assistance in effecting the Merger.
5. Escrow
Shares. Section 2.5 of the Original Agreement is
modified. NeoStem shall have no obligation to issue the 200,000
shares of NeoStem Common Stock into escrow as set forth therein, since the
payment is now highly unlikely, as the parties acknowledge that the Share
Exchange Agreement of NeoStem with respect to the Shandong Institute, dated as
of November 2, 2008, has been or is being terminated, and CBH and CBC consent to
such termination. The Escrow Agreement attached as Exhibit D to the
Original Agreement is also deleted. Notwithstanding the lack of an
escrow, NeoStem will still owe CBC a payment of 200,000 shares of its Common
Stock if it does purchase the Shandong Institute within six (6) months of
consummation of the Merger but shall have no other obligations to CBC whatsoever
in connection with acquisition activity.
6. Globus/Mao. Section
2.7 of the Original Agreement is amended to read in its entirety as
follows:
At the
Effective Time, NeoStem shall issue (a) to Xxxxxx X. Xxxxxx, a director of CBH
(“Globus”), in exchange for a complete release and full satisfaction of the
Globus Obligation (as defined in Section 6.2.21), 9,532 shares of NeoStem Common
Stock, and (b) to Xxxxx Xxxx Mao, the Chief Executive Officer of CBH (“Mao”) in
exchange for a complete release and full satisfaction of the Mao Obligation (as
defined in Section 6.2.21), 7,626 shares of NeoStem Common Stock.
7. Section
5.5.7(vii) is hereby amended to clarify that such issuances may be options or
shares of Common Stock, with applicable withholding paid by the Company, and
that such issuances may be made, in the discretion of the Compensation
Committee, to NeoStem officers, consultants and advisors upon the Closing of the
Merger, and such officers, significant employees and/or directors of Erye (“Erye
Personnel”) following receipt of all PRC approvals after the Closing of the
Merger, as the Compensation Committee shall determine in connection with the
closing of the transactions contemplated by this Agreement.
8. Real
Estate. As an additional covenant of CBH and an additional
condition to NeoStem’s obligation to close, at least 15 days prior to Closing,
in order to satisfy its obligations under a Memorandum of Understanding with
EET, CBH shall have caused Erye and EET to enter into binding agreements whereby
(a) Erye is bound to transfer the land and building for its principal
manufacturing facility to EET or its affiliate for a sum to be agreed upon by
the parties, with such transfer reported and accounted for in the financial
records of Erye and CBH prior to Closing, and (b) EET or its affiliate is bound
to lease such principal manufacturing facility back to Erye at a nominal fee for
a term through the construction and validation period of Erye’s new
manufacturing facility and until such date as Erye’s new facility is completed
and fully operational, such that Erye is assured that there is no interruption
of its operations by reason of such transfers and agreements. All
documents and accounting for such transactions shall be reasonably acceptable to
NeoStem, including release by Erye of all obligations due to it from NeoStem or
CBH under the Memorandum of Understanding or otherwise.
9. CBC
Spin-Off. Preliminary Statement C and Section 6.2.12 are
amended. CBC shall not be spun-off to the shareholders of CBH in a
liquidating distribution. Instead, as an additional covenant of CBH
and an additional condition to NeoStem’s obligation to close, (a) no later than
15 days prior to the effective date of the Form S-4, CBH shall have entered into
a binding agreement to transfer the stock of CBC to a third party in a private
transaction and (b) no later than 15 days prior to the Closing, CBH shall have
consummated the transfer of all of the CBC stock to such third party, all in a
manner such that, following the transfer, as contemplated by the Original
Agreement, the only material assets and liabilities of CBH at the time
of the merger shall be the Eyre Ownership, land rights and at least
$550,000 cash, and CBH shall have no liabilities except transaction related
expenses of $450,000 or less. All documents and accounting for such
CBC sale transaction shall be reasonably acceptable to NeoStem and shall include
a full release in favor of NeoStem and its affiliates from any and all claims or
liabilities due or asserted to be due to CBC, Keyuan or any of their
affiliates. CBH shall take appropriate action to liquidate or
extinguish any intercompany debt owed to CBH or Erye by CBC or Keyaun or any of
their affiliates. CBH and CBC represent and warrant that CBC has de
minimis value, if any, and that it has the corporate power and authority to
effect the CBC sale transaction on the terms set forth herein without any
further corporate action other than approval of its Board of Directors, so that
no shareholder approval is required. No CBC shares will be registered
as part of the Prospectus/Joint Proxy Statement. Where appropriate
following this Amendment, references to the Spin-Off in the Original Agreement
shall refer to the private sale of CBC.
10. Board of
Directors. Section 5.8(i) of the Original Agreement is
deleted. Xxxx Xxx will be added to the current Board of Directors of
NeoStem immediately after the Effective Time. Shi Mingsheng will be
added to the current Board of Directors of NeoStem immediately after receipt of
all PRC approvals following the Effective Time.
11. Capitalization; Equity Incentive
Compensation Plan. Section 4.19.1(ii) and Section
5.5.7(iv)(b) of the Original Agreement (relating to the amendment of NeoStem
option vesting schedules) are hereby deleted in their entirety, and Section
4.19.1(ii) is replaced with the following: “NeoStem may make the issuances of
securities described in Section 5.5.7(vii) hereof, including the issuance of
shares.” Further, it was agreed under Sections 4.19.1 and 5.5
of the Original Agreement, that the exercise price of certain outstanding
options and warrants of NeoStem will be reduced as provided for in Schedule
4.19. It is agreed that Schedule 4.19 in the Original Agreement is
deleted in its entirety and replaced as follows.
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(a)
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All warrants outstanding
immediately prior to the closing of the Merger (other than warrants issued
to the public or the underwriters in the Company’s August 2007 public
offering) shall be amended to provide that the Current Exercise Price
shall be amended effective on the Closing of the Merger to provide the
Adjusted Exercise as set forth
below:
|
NeoStem Warrant Repricing
Table
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Current
Exercise Price
|
Adjusted
Exercise Price
|
|
$ 4.00
|
$ 3.8182
|
|
$ 4.50
|
$ 4.1932
|
|
$ 4.61
|
$ 4.2726
|
|
$ 4.70
|
$ 4.3368
|
|
$ 4.90
|
$ 4.4768
|
|
$ 4.95
|
$ 4.5113
|
|
$ 5.00
|
$ 4.5455
|
|
$ 5.10
|
$ 4.6132
|
|
$ 5.30
|
$ 4.7459
|
|
$ 5.50
|
$ 4.8750
|
|
$ 5.80
|
$ 5.0618
|
|
$ 6.00
|
$ 5.1818
|
|
$ 6.10
|
$ 5.2405
|
|
$ 6.50
|
$ 5.4659
|
|
$ 6.70
|
$ 5.5732
|
|
$ 7.00
|
$ 5.7273
|
|
$ 8.00
|
$ 6.1818
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(b) The Compensation
Committee in its discretion may determine for any or all options outstanding
immediately before the closing of the Merger, to lower the exercise price to as
low as the $.80 originally provided in the Original Agreement; however, if the
Compensation Committee determines to lower the exercise price of such
outstanding options to a price that is greater than $.80, it may also, in its
sole discretion, grant to the respective holder of such outstanding options,
additional stock, options or other consideration (including cash) such that the
value overall of consideration granted to the optionee is generally equivalent,
in the judgment of NeoStem’s Compensation Committee, to the value
that would have been provided if the exercise prices of the options
had been reduced to $.80 and in each case the vesting schedule of the options
shall be maintained. The exercise price shall in no case be reduced
below fair market value on the closing of the Merger.
12. Outside
Date. Section 7.1.13 of the Original Agreement is hereby
amended to mean “October 31, 2009.
13. Employment
Agreements. Section 6.1.5 of the Original Agreement, with
respect to the need for new employment contracts for Xxxxx Xxxxx and Xxxxx Xxxx,
is deleted. Xxxxx Xxxxx will continue to serve as CEO pursuant to the
terms of her existing employment agreement as it may be amended from time to
time. Section 6.2.18 of the Original Agreement is hereby amended to
delete the consulting agreement for Xxxxx Xxx and to add the underlined
language:
Mao shall have executed and delivered
to NeoStem a NeoStem Confidentiality Agreement and shall release NeoStem
and CBH from any obligation with respect to any employment agreement or
arrangements which he had with CBH or any of its Subsidiaries. Any
other parties with employment agreements with CBH will execute amendments
whereby CBC will assume all liabilities of CBH under such
agreements. The employees will release NeoStem and CBH from all
liabilities due to them as employees, whether under such agreements or
otherwise, and CBH and CBC will certify to NeoStem that no other employment or
consulting agreements with CBH exist.
14. PRC
Approvals. Section 6.1.6 of the Original Agreement
contemplates that as a condition of Closing, certain approvals from PRC
regulatory authorities shall have been obtained prior to Closing, including
approvals with respect to the Merger, and the terms of the Amended and Restated
Erye Joint Venture Agreement, the Erye Articles of Incorporation and related
organizational documents. Section 6.2.23 of the Original Agreement
also contemplates certain assurances from PRC Governmental
Authorities. The parties now understand that under PRC law, they may
not be able to obtain certain approvals until after Closing. CBH
shall use reasonable commercial efforts to obtain such approvals prior to the
Closing, however, the Parties agree that if NeoStem, in its sole and unfettered
discretion, determines to waive such condition in whole or in part, and agree to
consummate the Merger prior to approval from any PRC Governmental Authority
including but not limited to approval of the matters listed above, the condition
shall remain as a condition subsequent to the Merger and all related
transactions, and the parties shall at Closing either permit NeoStem to defer
delivery of any NeoStem securities to holders of CBH securities through a
provison in the certificate of merger or otherwise, or enter into an escrow
agreement on terms satisfactory to NeoStem, such that in either event
consummation of the Merger or issuance of all consideration to be paid or issued
by NeoStem in connection with, related to, or contingent upon the consummation
of the Merger (except as contemplated by Sections 5.5.7(iv) and (vii)) may be
deferred or held back by NeoStem, or held in escrow, in each case
subject to an absolute right of NeoStem to receive back all such consideration
and rescind the Merger and all related transactions if any such PRC regulatory
approvals are not obtained within a reasonable period of time after Closing
(such time period to be fixed in the escrow agreement; but not in excess of 45
days). Xx. Xxx and Madame Jian shall be paid an aggregate of 203,338
shares of NeoStem Common Stock if all PRC approvals are timely
received.
15. Potential
Reverse Stock Split. It is acknowledged that share numbers and prices
shall be appropriately adjusted to reflect any reverse stock split the Company
may undertake at the time of the Merger.
16. Representations and
Warranties. The parties hereto reaffirm their respective
representations and warranties contained in the Original Agreement through the
date hereof. CBH and CBC also represent and warrant to NeoStem that
the financial statements of CBC delivered to NeoStem for the year ended December
31, 2008 and for the three month period ended March 31, 2009 comply in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with U.S. generally accepted accounting principles consistently
applied and SEC accounting standards, and present fairly in all material
respects, the consolidated financial position and results of operations of CBC
and its consolidated subsidiaries as of their respective dates, and for the
periods presented therein (subject, in the case of the unaudited interim
financial statements, to notes and normal year-end adjustments that were not
material in amount or effect). Each party represents and warrants to
the other, that with respect to the information about it contained in the draft
joint Form S-4 which they are participating in preparing, the information is
accurate in all material respects and does not omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. CBC acknowledges that neither it nor any of its
affiliates or associates has or will have any claims against NeoStem or CBH and
hereby releases NeoStem and CBH in full.
17. Opinions. As
an additional closing condition, NeoStem shall provide CBH with an opinion of
its counsel with respect to NeoStem's corporate authorization of the Merger, and
CBH shall provide NeoStem with an opinion of its counsel with respect to CBH's
corporate authorization of the Merger.
18. Acceptance. Except
as amended pursuant to the terms of this Amendment, the Original Agreement shall
continue in full force and effect. The Amendment shall be considered
as part of the Original Agreement. The Amendment shall be governed in
accordance with the laws of the State of Delaware, without regard to any
internal conflicts of law principles.
19. Language
Translation. Each party acknowledges that this Amendment has
been prepared in English. In the event of a conflict between
different translations of these terms, the English translation will
govern.
20. Counterparts. This
Amendment may be executed in counterparts, which together shall constitute one
and the same agreement. The parties may execute more than one copy of
the Amendment, each of which shall constitute an original. Execution
and delivery of this Amendment by pdf or facsimile transmission shall constitute
execution and delivery of this Amendment for all purposes, with the same force
and effect as execution and delivery of an original manually signed
copy.
[Balance
of Page is Intentionally Blank]
IN WITNESS WHEREOF, NeoStem,
Subco, CBH and CBC have signed this Amendment as of the date first written
above.
| NEOSTEM,
INC.
By:
/s/ Xxxxx Xxxxx
Name: Xxxxx
Xxxxx
Title: CEO
CBH
ACQUISITION LLC
By: /s/
Xxxxx Xxxxx
Name: Xxxxx
Xxxxx
Title: CEO
CHINA
BIOPHARMACEUTICALS
HOLDINGS,
INC.
By: /s/Xxxxx
Xxxx Mao
Name: Xxxxx
Xxxx Mao
Title: CEO
CHINA
BIOPHARMACEUTICALS
CORP.
By:
/s/ Xxxxxxx Xxxxxx
Name:
Xxxxxxx Xxxxxx
Title: Director
|
[Signature
Page to Amendment No. 1 to Agreement and Plan of Merger]
