AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF
MERGER
THIS AMENDMENT NO. 1 TO AGREEMENT
AND PLAN OF MERGER (this
“ Amendment ”) is made and entered into as of
the 1 st
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 Steven E. Globus, 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 Chris
Peng 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
