ASSET PURCHASE AGREEMENT

 

 

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT is made as of the 1st day of October, 2006 between CorCell, Inc., a Delaware corporation (the “ Seller ”) and Cord Blood America, Inc., a Florida corporation (the “ Buyer ”).

BACKGROUND

A.

The Seller is engaged in the business of retrieving and storing cord blood samples for individuals. The Buyer desires to purchase and the Seller desires to sell, the assets used in the retrieval of cord blood samples only (the “ Acquired Business ”). The Seller shall retain all Existing Samples and associated client Contracts.

B.

The Seller desires to sell to the Buyer, and the Buyer desires to purchase from the Seller, the Acquired Assets of Seller on the terms and conditions hereinafter set forth.

C.

Capitalized terms used and not otherwise defined herein shall have the meanings set forth in Section 15 hereof.

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which is acknowledged, the parties hereto agree as follows:

AGREEMENT

1.

SALE AND PURCHASE OF ASSETS.  

(a)

Sale and Purchase of Assets .  The Seller shall sell, assign, transfer, convey and deliver to the Purchaser, at the Closing, good and valid title to the Acquired Assets, free and clear of any Encumbrances, on the terms and subject to the conditions set forth in this Agreement.  For purposes of this Agreement, “ Acquired Assets ” means:

(i)

rights to use the sterile and closed connection processing techniques or standards, as currently employed at Bergen Community Blood Services on behalf of Seller pursuant to a license agreement, in the form to be agreed upon by the parties hereto, that provides for a one-time only royalty fee paid to Vita 34 AG, a German corporation (“Vita 34”) and an affiliate of Seller, equal to the amount of 0.5% of the collection revenues only, excluding storage revenues, from each new customer agreement entered into by Buyer after the Closing Date (the “ License Agreement ”);

(ii)

An amount in cash equal to the amount of the Customer Deposits from Payment Plan account (estimated to be approximately $80,000 as August 31, 2006) as of the Closing Date representing revenues received as prepayments for processing and storage, but where such services have not yet been performed;

 

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(iii)

the Seller’s website, including without limitation, its domain name (www.corcell.com) and all software codes, licenses and documentation relating in any manner to the website;

(iv)

copies of all Records;

(v)

all trademarks, trade names, software, know-how, intellectual property rights and proprietary assets owned or used by Seller; and

(vi)

the Acquired Assets set forth on Schedule 1(a) hereto.

(b)

Excluded Assets .  Notwithstanding anything herein to the contrary, all the assets of the Seller not specifically included in the Acquired Assets (the “ Excluded Assets ”) shall not be sold or transferred hereunder, shall be excluded from the definition of Acquired Assets and shall remain the property of the Seller.  The Excluded Assets shall include, but are not limited to, the following::

(i)

All cash and accounts receivable of Seller at Closing;

(ii)

All revenues to be collected from clients for services rendered on or before the Closing Date as reflected in the Accrued Revenue Under Payment Plan account (estimated to be approximately $121,000 as of August 31, 2006) as of the Closing Date, which amounts shall be paid to Seller as collected by Buyer.

(iii)

The Existing Samples and the related Contracts of the Seller with each of the clients with respect to the Existing Samples ;

(iv)

The Real Property Lease; and

(v)

The minute books, stock books and accounting records of Seller.

(c)

The sale of the Assets as herein contemplated shall be effected by such bills of sale, endorsements, assignments, drafts, checks, deeds and other instruments of transfer, conveyance and assignment as shall be necessary or appropriate to transfer, convey and assign the Acquired Assets to Buyer on the Closing Date as contemplated by this Agreement and as shall be reasonably requested by Buyer.

(d)

Seller shall, at any time and from time to time after the Closing Date, execute and deliver such further instruments of transfer and conveyance and do all such further acts as may be reasonably requested by Buyer to transfer, convey, assign and deliver to Buyer, or to aid and assist Buyer in collecting and reducing to possession, any and all of the Acquired Assets, or to vest in Buyer good, valid and marketable title to the Acquired Assets.

(e)

Subject to any confidentiality obligations or applicable privileges (including, without limitation, the attorney-client privilege), for a period of three (3) years after the Closing

 

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Date, at reasonable times and upon reasonable notice, Seller and its authorized representatives shall have, and Buyer shall afford Seller and its Representatives Records conveyed to Buyer hereunder for tax purposes or in connection with claims related to Excluded Assets and Excluded Liabilities only, and Buyer and its Representatives shall have, and Seller shall afford Buyer and its Representatives, access to any minute books, stock books and similar corporate records and accounting records retained by Seller pursuant to Section 1(b) of this Agreement.

(f)

Effective upon the Closing Date, Seller hereby irrevocably constitutes and appoints Buyer, its successors and assigns, the true and lawful attorney of Seller with full power of substitution, in the name of Buyer, or in the name of Seller, on behalf of and for the benefit of Buyer, to collect all items being transferred, conveyed and assigned to Buyer as part of the Acquired Assets, to institute and prosecute, in the name of Seller, or otherwise, all proceedings which Buyer may deem proper in order to collect, assert or enforce any claim, right or title of any kind in or to the Acquired Assets, and to do all such other acts in relation thereto as Buyer may deem advisable.  Seller agrees that the foregoing powers are coupled with an interest and shall be irrevocable by Seller directly or indirectly by the dissolution or liquidation of Seller or in any manner or for any reason.  

(g)

Sales Taxes .  The Seller shall bear and pay one hundred percent (100%) of any sales taxes, use taxes, transfer taxes, documentary charges, recording fees or similar taxes, charges, fees or expenses that may become payable in connection with the sale and transfer of the Acquired Assets to the Buyer.  The parties hereto shall cooperate with each other and use commercially reasonable efforts to minimize any of the aforementioned Taxes, charges, fees or expenses including but not limited to the transfer of all software by remote electronic transmission.

2.

ASSUMPTION OF LIABILITIES

(a)

Subject to the performance by the parties hereto of their respective obligations hereunder, on the Closing Date, simultaneously with the sale, conveyance and assignment of the Acquired Assets by Seller to Buyer, Buyer shall assume and shall pay or cause to be paid or otherwise discharged when due, subject to the limitations contained herein, any obligations or liabilities associated with or related to the Acquired Assets and the liabilities and obligations listed on Schedule 2 only (collectively, the “ Assumed Obligations ”).

(b)

Buyer shall not assume any liabilities or obligations of Seller whatsoever (the “ Excluded Liabilities ”) other than the Assumed Obligations, including, without limitation, any liability arising directly or indirectly out of the PharmaStem Litigation, any other litigation against the Seller or the Real Property Lease.

3.

PURCHASE PRICE.

(a)

In consideration of the transfer, conveyance and assignment of the Acquired Assets, and the assumption of the Assumed Obligations, Buyer shall pay a purchase price (the “ Purchase Price ”) in cash  to Seller at Closing equal to One Dollar ($1.00.

 

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(b)

The Purchase Price together with the Assumed Obligations, shall be allocated among the Assets as set forth on Schedule 3(b).  Each of Seller and Buyer shall file Forms 8594 with the Internal Revenue Service consistent with such allocation.

4.

CLOSING; CLOSING DATE.

(a)

The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall be effective as of October1, 2006 and shall take place on October 10, 2006, unless extended by mutual agreement of the parties hereto (the “ Closing Date ”) at 10:00 a.m. local time at the offices of Dilworth Paxson LLP, 3200 Mellon Bank Center, 1735 Market Street, Philadelphia, Pennsylvania 19103, or such other time and place that are mutually acceptable to the Seller and the Buyer.

(b)

At the Closing:

(i)

the Seller shall execute and deliver a Bill of Sale, in the form of Exhibit A attached hereto (the “ Bill of Sale ”);  

(ii)

the Buyer shall pay the Purchase Price to the Seller;

(iii)

the Buyer and Seller shall execute and deliver a general Assignment and Assumption Agreement in the form of Exhibit B attached hereto (the “ Assignment and Assumption Agreement ”);

(iv) the Buyer and Seller shall execute and deliver a Trademark Assignment Agreement in the form of Exhibit C attached hereto (the “ Trademark Assignment Agreement ”); and

(v) the Buyer and Seller shall execute and deliver an Existing Samples Purchase Agreement in the form of Exhibit D attached hereto (the “ Existing Samples Purchase Agreement ”)

(c)

Post-Closing Transfers .  Following the Closing, the parties shall cooperate with each other to identify any assets that were not designated as part of the Acquired Assets at the Closing but which are necessary to conduct the Acquired Business as currently being conducted by the Seller, but excluding the Real Property Lease (the “ Nontransferred Assets ”).  To the extent any Nontransferred Assets are identified and the Seller is legally and contractually permitted to transfer such assets, the Seller shall, at no cost to the Buyer, promptly take all actions to transfer such Nontransferred Assets to the Buyer.  In the event the Seller is required to obtain the consent or approval of any Person prior to the transfer of any Nontransferred Asset, then the Seller shall, at its own expense, use its commercially reasonable efforts to promptly obtain such approval or consent, and upon obtaining such approval or consent, shall promptly transfer such Nontransferred Asset to the Buyer.  In the event the Seller is unable to obtain such approval or consent, then the Seller and the Buyer shall discuss in good faith an appropriate resolution for the transfer of the economic benefit of such Nontransferred Asset to the Buyer.  

 

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(d)

Post-Closing Funds .  If, following the Closing, (i) the Seller receives any payment or proceeds with respect to any Acquired Asset sold hereunder, the Seller shall promptly remit the proceeds or payments to the Buyer, and (ii) the Buyer receives any payment or proceeds with respect to any Excluded Assets, the Buyer shall promptly remit the proceeds or payments to the Seller.

(e)

Other Post-Closing Adjustments .  On each of the first 6 monthly anniversary dates after the Closing Date, the parties shall exchange any information required for them to pay to each other the amounts of any assets or expenses the respective amounts of which were not ascertainable as of the Closing Date, and which are properly attributable to the other party.

5.

REPRESENTATIONS AND WARRANTIES OF THE SELLER.

The Seller represents and warrants to the Buyer as follows, except as set forth in the disclosure schedules delivered by the Seller to the Buyer concurrently with the execution of this Agreement (“ Schedules ”) (it being agreed that disclosure in the Schedules with respect to any particular section of the Agreement shall be deemed disclosure with respect to another section of the Agreement only to the extent the applicability of such disclosure to the subject matter of such other section is reasonably clear or apparent from a reading of such disclosure in the Schedules in conjunction with such other section of the Agreement):

(a)

Organization of Seller .  The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.  The Seller has all requisite corporate power and authority to own, operate and lease its properties and to carry on its business as now being conducted.  The Seller is duly qualified or licensed and in good standing to do business in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified or licensed and in good standing, individually or in the aggregate, would not have a Material Adverse Effect on the Seller.

(b)

Intentionally Omitted .

(c)

Authority and Enforceability of Agreements .  The Seller has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly authorized and executed by the Seller and constitutes the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or hereinafter in effect, relating to creditors' rights generally and to general principles of equity.

(d)

Consents .  Except as set forth in Schedule 5(d), neither the execution and delivery of this Agreement by the Seller nor the consummation by the Seller of the transactions contemplated by this Agreement will require any Consent of, any Governmental Body or other Person.

 

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(e)

Non-Contravention .  The execution and delivery of this Agreement by the Seller and the consummation by the Seller of the transactions contemplated hereby will not (i) violate any provision of any statute, law, regulation, rule, injunction, judgment, order, decree, ruling or other restriction of any Governmental Body to which the Seller is subject, (ii) contravene or result in a violation of any corporate charter document or by-law of the Seller, (iii) conflict with or result in any violation or breach of any of the terms, conditions or provisions of, or constitute a default under any Contract, or result in the creation of any Encumbrance upon, or (iv) give any Person the right to (a) declare a default or exercise any remedy under any Contract, (b) accelerate the maturity or performance of any Contract, or (c) cancel, terminate or materially modify any Contract.  

(f)

Corporate Documents .  True and correct copies of the Certificate of Incorporation and Bylaws of the Seller, as currently in effect, have been furnished to the Buyer.

(g)

Corporate Identification .  Within the past five years, the Seller has not done any business under, or been known by, any name other than its current names.

(h)

Intellectual Property .  The Seller owns or is licensed to use all trademarks, trade names, assumed names, service marks, logos, patents, copyrights (including those relating to operating and applications computer software and data bases), trade secrets, technology, know-how and information and data processes which are material to the Acquired Business as heretofore conducted by the Seller (collectively, the “ Proprietary Rights ”) free and clear of all Encumbrances.  Schedule 5(h) sets forth a list of all material Proprietary Rights and indicates which are owned and which are licensed by the Seller.  To the knowledge of the Seller, no Proprietary Rights used by the Seller in connection with the Acquired Business conflict with or infringe upon any proprietary rights of any other Person, except as set forth on Schedule 5(h).  To the knowledge of the Seller, the Proprietary Rights are valid and enforceable and no Person is infringing on or violating the Proprietary Rights owned or used by the Seller nor are there any challenges or disputes or unresolved issues with respect to any Proprietary Rights owned by the Seller, except as set forth on Schedule 5(h).

(i)

Investments .  The Seller has no subsidiaries and owns no stock or other equity interest in any other Person. The Seller is not a partner in any partnership or joint venture with any other Person.

(j)

Financial Information .  The Seller has previously furnished to the Buyer audited balance sheets of the Seller as of December 31, 2003, December 31, 2004 and December 31, 2005, and audited income statements, statements of retained earnings and statements of cash flow of the Seller for the fiscal years ending on such dates (herein collectively referred to as the “ Financial Statements ”), and the unaudited balance sheet of the Seller as of June 30, 2006 and the unaudited income statement of the Seller for the period then ended on such date (the “ Interim Statements ”).  The Financial Statements and the Interim Statements were prepared from the books and records of the Seller, which books and records accurately reflect in all material respects the accounts and transactions recorded therein. The Financial Statements were

 

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prepared in accordance with generally accepted accounting principles applied consistently throughout the periods covered and fairly present the financial condition and results of operations of the Seller as of the dates and for the periods indicated.

(k)

Undisclosed Liabilities .  The Seller has no liabilities of a type required by generally accepted accounting principles to be reflected on a balance sheet (including the footnotes thereto), except (i) as reflected in the December 31, 2005 Financial Statements or the Interim Statements, (ii) as incurred in the Ordinary Course of Business since June 30, 2006 through the Closing Date, as set forth in Schedule 5(k).

(l)

Absence of Changes or Events .  Since June 30, 2006, except as set forth in Schedule 5(l) hereto or as specifically permitted or contemplated by this Agreement:

(i)

there has not been any change in, and no event has occurred that could reasonably be expected to have a Material Adverse Effect on the Acquired Business or that adversely affects the Acquired Assets or Assumed Obligations in any material respect;

(ii)

there has not been any loss, damage or destruction to, or any interruption in the use of, any of the Acquired Assets or Assumed Obligations in any material respect;

(iii)

the Seller has not sold or otherwise transferred, or leased, or licensed, any material portion of the assets used in the Acquired Business to any other Person; except for non-exclusive, non-transferable licenses to software granted in the Ordinary Course of Business and except for sales of inventory in the Ordinary Course of Business;

(iv)

no material Contract related to, or necessary to the conduct of, the Acquired Business or Assumed Obligations has been amended or terminated;

(v)

the Seller has not caused any of the Acquired Assets or Assumed Obligations to become subject to any Encumbrances;

(vi)

except as contemplated by the Transaction Documents, the Seller has not entered into any transaction or taken any other action, in each case related to the Acquired Business outside the Ordinary Course of Business; and

(vii)

the Seller has not agreed (in writing or otherwise) to take any of the actions referred to in clauses “(i)” through “(vi)” above.

(m)

Litigation and Claims .  There is no Proceeding pending or, to the Knowledge of the Seller, threatened against the Seller or any of its properties or rights, nor any judgment, order, injunction or decree before any court or other Governmental Body, that might result in any Material Adverse Effect on the Acquired Business, the Acquired Assets or the Assumed Obligations or which questions the validity of this Agreement or the transactions contemplated hereby, except as set forth in Schedule 5(m) hereto. There is no Order to which the Seller, or any of the Acquired Assets or Assumed Obligations, is subject; and none of the Affiliates of the

 

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Seller is subject to any Order that relates to the Acquired Business, Acquired Assets or Assumed Obligations.

(n)

Performance Of Services .  There is no Proceeding pending or, to the Knowledge of the Seller, being threatened against the Seller relating to any services performed by the Seller in connection with the Acquired Business, and, to the Knowledge of the Seller, there is no reasonable basis for the assertion of any such claim, except as set forth on Schedule 5(n) hereto.

(o)

Tax Matters .

(i)

For purposes of this Agreement, the term “ Taxes ” means all federal, state, local, foreign, and other net income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, stamp severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, or assessments, together with any interest and any penalties, additions to tax, or additional amounts with respect thereto, and the term “ Tax ” means any one of the foregoing Taxes. The term “ Tax Returns ” means all returns, declarations, reports, statements, and other documents required to be filed in respect of Taxes and the term “ Tax Return ” means any one of the foregoing returns.  The term “ Code ” means the Internal Revenue Code of 1986, as amended.  All citations to the Code or the regulations promulgated thereunder shall include any amendments or any substitute or successor provisions thereto.

(ii)

The Seller has filed all Tax Returns that it was required to file, except Tax Returns for the Seller’s fiscal years ended December 31, 2004 and 2005..  All such Tax Returns were correct and complete in all material respects.  All Taxes of the Seller shown on any Tax Return have been paid or are reflected on the December 31, 2005 Financial Statements or the Interim Statements in accordance with generally accepted accounting principles. There are no liens for Taxes (other than for Taxes not yet due or payable) upon any of the assets of the Seller.  The Seller is not currently the beneficiary of any extension of time within which to file any Tax Return which has continuing effect.

(iii)

There is no material dispute or claim concerning any Tax liability of any of the Seller and no such dispute or claim has been raised by any taxing authority.

(iv)

Except for Tax Returns not yet filed, the Seller has delivered or made available to the Buyer correct and complete copies of all income Tax Returns, examination reports, and statements of deficiencies assessed against, or agreed to by any of the Seller since December 31, 2002.  The Seller has not waived any statute of limitations in respect of Taxes which has continuing effect or agreed to any extension of time with respect to a Tax assessment or deficiency which has continuing effect.

(v)

The Seller is not a party to any tax allocation or sharing agreement.

(p)

Assets; Title and Related Matters .  

 

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(i)

None of the Acquired Assets is subject to any Encumbrances (including tax-related Encumbrances).  At the Closing Date, the Seller will transfer to the Buyer good and marketable title to all Acquired Assets, free and clear of any Encumbrances.

(ii)

As of the Closing Date, no Affiliate of the Seller will own, control or have custody of any Acquired Asset.

(iii)

Except as contemplated by the Transaction Documents, neither the Seller nor any of its Affiliates has any agreement, absolute or contingent, written or oral, with any other Person to effect any Acquisition Transaction or to sell or otherwise transfer any of the Acquired Assets, except for non-exclusive, non-transferable licenses to software granted in the Ordinary Course of Business.

(q)

Contracts .  Schedule 5(q) hereto lists all Contracts relating to the Acquired Business (collectively, “ Acquired Business Contracts ”) to which the Seller is a party or by which the Seller and the Acquired Assets are bound, other than any Acquired Business Contract (i) that was entered into by the Seller in the Ordinary Course of Business, and (ii) as to which the total payments due to or from the Seller over the term thereof (or upon early termination by the Seller) do not exceed $5,000.  The Seller has delivered to the Buyer accurate and complete copies of all Acquired Business Contracts listed on Schedule 5(q) hereto in connection with Buyer’s diligence.  With respect to each Acquired Business Contract listed on Schedule 5(q) hereto, except as indicated on such Schedule:

(i)

such Acquired Business Contract is valid and in full force and effect; the Seller is not in material default under such Acquired Business Contract and, to the knowledge of the Seller, no other party to such Acquired Business Contract is in material default thereunder, and there is no condition or basis known to the Seller for any claim of a material default by any party thereto or event which with notice, lapse of time or both would constitute a material default;

(ii)

no consent of any other Person is needed in order that such Acquired Business Contract continue in full force and effect following the consummation of the transactions contemplated by this Agreement;

(iii)

neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will result in any breach or acceleration of, or constitute a default under, any such Acquired Business Contract; and

(iv)

no such Acquired Business Contract contains a covenant not to compete, an exclusivity provision in favor of any other party to the Seller’s Contract, or a change of control provision.

(r)

Insurance .  A list of all insurance policies or binders maintained by the Seller is set forth in Schedule 5(r) hereto.  Such policies and binders are valid and enforceable and in full force and effect, and except as set forth in Schedule 5(r) the Seller is not in default with respect

 

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to any material provision contained in any such policy or binder and has not failed to give any notice or present any claim under any such policy or binder in due and timely fashion. There are no outstanding unpaid claims under any such policy or binder. The Seller has not received a notice of cancellation or non-renewal of any such policy or binder.

(s)

Labor Matters .  The Seller has not engaged in any unfair labor practice of any nature with respect to the Acquired Business.  There has not been any slowdown, work stoppage, labor dispute or union organizing activity, or any similar activity or dispute, affecting the Acquired Business.  To the Knowledge of the Seller, no officer, employee or consultant of the Seller is obligated under any Contract or subject to any Order or Legal Requirement that would interfere with the Acquired Business as currently conducted.  To Seller’s Knowledge, neither the execution nor delivery of this Agreement, nor the carrying on of the Seller’s business as presently conducted nor any activity of such officers, employees or consultants in connection with the carrying on of the Seller’s business as presently conducted, will conflict with or result in a breach of the terms, conditions or provisions of, constitute a default under, or trigger a condition precedent to any rights under any Contract or other agreement under which any of such officers, employees or consultants is now bound.

(t)

Borrowing and Lending .  Except for loans from its parent corporation, the Seller has not, as either lender or borrower, entered into any Contract relating to lines of credit, loans or other extensions of credit or agreements therefor of any kind.  A copy of each of such Contract has been furnished to the Buyer.

(u)

Environmental and Health and Safety Matters .  Neither the Seller nor, to knowledge of the Seller, any prior owner or tenant of the real property underlying (i) the Real Property Lease or (ii) any real property lease for prior premises occupied or used by the Seller has made, caused or contributed to any release of any Hazardous Material into the environment nor are any Hazardous Materials in, on, over or under the real property underlying the Real Property Lease.  The Acquired Business conducted by the Seller does not involve the generation, transportation, treatment, storage or disposal of Hazardous Materials. The Seller has never received any notice or other communication (in writing or otherwise) from any Governmental Body or other Person regarding any actual, alleged, possible or potential liability arising from or relating to the presence, generation, manufacture, production, transportation, importation, use, treatment, refinement, processing, handling, storage, discharge, release, emission or disposal of any Hazardous Material.  No Person has ever commenced or threatened to commence any contribution action or other Proceeding against the Seller in connection with any such actual, alleged, possible or potential liability; and no event has occurred, and no condition or circumstance exists, that may directly or indirectly give rise to, or result in the Seller becoming subject to, any such liability.  The Seller is not in violation of any applicable statute, law or regulation relating to the environment or occupational health and safety, and to its Knowledge, no material expenditures are or will be required in order to comply with any such existing statute, law or regulation.  

 

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(v)

Real Property .  The lease of the Seller’s office located at 1717 Arch Street, Suite 1410, Philadelphia, Pennsylvania 19103 a complete and accurate copy of which have been provided to the Buyer (the “ Real Property Lease ”), is the only lease or sublease for real property to which the Seller is a party or which cover premises used in the Acquired Business.  The Real Property Lease is valid, binding and in full force and effect, all rent and other sums and charges payable by the Seller thereunder are current and no notice of a default or termination under any Real Property Lease has been given or received by the Seller, and, to the knowledge of the Seller, no event has occurred which would, with the giving of notice or the passage of time or both or otherwise, constitute a material default.  Except for the Real Property Lease, the Seller has no real property rights or interests, whether owned or leased, or any liability for any prior real estate leases.

(w)

Compliance with Laws .  The Seller is in full compliance with each Legal Requirement that is applicable to it or to the conduct of its business or the ownership or use of any of its assets, except to the extent any such noncompliance could not reasonably be expected to have a Material Adverse Effect on the Acquired Business.  No event has occurred, and no condition or circumstance exists, that could (with or without notice or lapse of time) constitute or result directly or indirectly in a violation by the Seller of, or a failure on the part of the Seller to comply with, any Legal Requirement, except to the extent any such noncompliance could not reasonably be expected to have a Material Adverse Effect on the Acquired Business.  The Seller has not received any written notice or other written communication, or any other written information, or to the Knowledge of the Seller, any oral notice, communication or other information, at any time, from any Governmental Body or any other Person regarding (i) any actual, alleged, possible or potential violation of, or failure to comply with, any Legal Requirement, or (ii) any actual, alleged, possible or potential obligation on the part of the Seller to undertake, or to bear all or any portion of the cost of, any cleanup or any remedial, corrective or response action of any nature.  To the Knowledge of the Seller, no Governmental Body has proposed or is considering any Legal Requirement that, if adopted or otherwise put into effect, (i) may have a Material Adverse Effect on the Acquired Business, or (ii) may have the effect of preventing, delaying, making illegal or otherwise interfering with the consummation of the transactions contemplated by this Agreement.

(x)

Brokers .  No broker, finder, agent or similar intermediary has acted for or on behalf of the Seller in connection with this Agreement or the transactions contemplated hereby, and no broker, finder, agent or similar intermediary is entitled to any broker’s, finder’s or similar fee or other commission in connection therewith based on any agreement, arrangement or understanding with the Seller or any action taken by the Seller.

(y)

Governmental Authority .  Schedule 5(y) hereto identifies: each Governmental Authorization that is held by the Seller and is related to the conduct of the Acquired Business.  The Seller has delivered to the Buyer accurate and complete copies of all of the Governmental Authorizations identified in Schedule 5(y), including all renewals thereof and all amendments thereto.  Each Governmental Authorization identified or required to be identified in Schedule 5(y) hereto is valid and in full force and effect.  The Seller is and has at all times been in full

 

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compliance with all of the terms and requirements of each Governmental Authorization identified or required to be identified in Schedule 5(y) hereto, except to the extent any such noncompliance could not reasonably be expected to have a Material Adverse Effect on the Seller.  To the Knowledge of the Seller, no event has occurred, and no condition or circumstance exists, that might (with or without notice or lapse of time) (A) constitute or result directly or indirectly in a violation of or a failure to comply with any term or requirement of any Governmental Authorization identified or required to be identified in Schedule 5(y) hereto, or (B) result directly or indirectly in the revocation, withdrawal, suspension, cancellation, termination or modification in any material respect of any Governmental Authorization identified or required to be identified in Schedule 5(y) hereto.  The Seller has not received any written notice or other written communication (from any Governmental Body or any other Person regarding (A) any actual, alleged, possible or potential violation of or failure to comply with any term or requirement of any Governmental Authorization primarily related to the Acquired Business, or (B) any actual, proposed, possible or potential revocation, withdrawal, suspension, cancellation, termination or modification in any material respect of any Governmental Authorization primarily related to the Acquired Business.  The Governmental Authorizations identified in Schedule 5(y) hereto constitute all of the Governmental Authorizations necessary (i) to enable the Seller to conduct the Acquired Business in the manner in which such business is currently being conducted, and (ii) to permit the Seller to own and use the assets related to the Acquired Business in the manner in which they are currently owned or used.

(z)

Affiliate Transactions .  No Affiliate of the Seller:  (a) has any direct or indirect interest of any nature in any of the Acquired Assets; (b) is competing with the Acquired Business; (c) has any claim or right against the Acquired Assets.  To the Knowledge of the Seller, no event has occurred, and no condition or circumstance exists, that could (with or without notice or lapse of time) give rise to or serve as a basis for any claim or right in favor of any Affiliate of the Seller against the Acquired Assets.

(aa)

Sufficiency of Assets .  The Acquired Assets constitute all the assets, properties, rights and goodwill necessary to carry on the Acquired Business as currently conducted by the Seller, except that the Seller’s contract for processing any samples retrieved is not being transferred to Buyer, and no licenses issued by any governmental authority are being transferred to Buyer.

(bb)

Bulk Transfer Laws .  Seller has satisfied all obligations pursuant to any bulk transfer law or similar legal requirement in connection with any of the Transactions.

(cc)

Access to Information; Evaluation of Transaction .  The Seller and its Representatives have had full and complete access to all records and information relating to the Buyer; have had the opportunity to ask all questions of and receive all answers from the Buyer and its officers and directors that the Seller and its Representatives have deemed necessary and material for an evaluation of the merits and risks of its sale of the Acquired Assets; and have had an opportunity to obtain additional information to the extent deemed necessary or advisable by

 

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the Seller and its Representatives in order to verify the accuracy of the information obtained.  The Seller has sufficient knowledge, experience and sophistication in financial and business matters, and is capable of evaluating the merits and risks of its sale of the Acquired Assets and of making an informed investment decision with respect thereto.

DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES.  EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 5, THE SELLER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF THE SELLER OR THE BUSINESS, INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.

6.

REPRESENTATIONS AND WARRANTIES OF THE BUYER.

Buyer hereby represents and warrants to the Seller as follows:

(a)

Organization .  The Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida. The Buyer has all requisite corporate power and authority to own, operate and lease its properties and to carry on its business as now being conducted.  The Buyer is duly qualified or licensed and in good standing to do business in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified or licensed and in good standing, individually or in the aggregate, would not have a Material Adverse Effect on the Buyer.

(b)

Authority and Enforceability of Agreements .  The Buyer has all requisite corporate power and authority to execute and deliver the Transaction Documents and to consummate the transactions contemplated thereby. The Transaction Documents have been duly authorized by all necessary corporate action of the Buyer.  The Transaction Documents have been duly executed and delivered by the Buyer and constitute the valid and binding obligation of the Buyer enforceable against the Buyer in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws, nor or hereinafter in effect,  relating to creditors' rights generally and to general principles of equity.

(c)

Consents .  Neither the execution and delivery of the Transaction Documents by the Buyer nor the consummation by the Buyer of the transactions contemplated thereby will require the Consent of any Governmental Body or other Person.

(d)

No Conflicts .  The execution, delivery and performance of the Transaction Documents by the Buyer and the consummation by the Buyer of the transactions contemplated hereby will not (i) result in a violation of the Articles of Incorporation, any certificate of designations of any outstanding series of preferred stock of the Buyer or the By-laws or (ii) conflict with or constitute a default (or an event which with notice or lapse of time or both would

 

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become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Buyer or any of its subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of The National Association of Securities Dealers Inc.'s OTC Bulletin Board on which the common stock of Buyer is quoted) applicable to the Buyer or any of its subsidiaries or by which any property or asset of the Buyer or any of its subsidiaries is bound or affected.  Neither the Buyer nor its subsidiaries is in violation of any term of or in default under its Articles of Incorporation or By-laws or their organizational charter or by-laws, respectively, or any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Buyer or its subsidiaries.  The business of the Buyer and its subsidiaries is not being conducted, and shall not be conducted in violation of any material law, ordinance, or regulation of any governmental entity.  Except as specifically contemplated by this Agreement and as required under the Securities Act and any applicable state securities laws, the Buyer is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under or contemplated by this Agreement or the Registration Rights Agreement in accordance with the terms hereof or thereof.  All consents, authorizations, orders, filings and registrations which the Buyer is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof.  The Buyer and its subsidiaries are unaware of any facts or circumstance, which might give rise to any of the foregoing.

(e)

Absence of Litigation .  There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending against or affecting the Buyer or any of the Buyer's subsidiaries, wherein an unfavorable decision, ruling or finding would (i) have a material adverse effect on the transactions contemplated hereby (ii) adversely affect the validity or enforceability of, or the authority or ability of the Buyer to perform its obligations under, this Agreement or any of the documents contemplated herein, or (iii) have a material adverse effect on the business, operations, properties, financial condition or results of operations of the Buyer and its subsidiaries taken as a whole.  

(f)

Brokers .  No broker, finder, agent or similar intermediary has acted for or on behalf of the Buyer in connection with this Agreement or the transactions contemplated hereby, and no broker, finder, agent or similar intermediary is entitled to any broker’s, finder’s or similar fee or other commission in connection therewith based on any agreement, arrangement or understanding with the Buyer or any action taken by the Buyer.

(g)

Access to Information; Evaluation of Transaction .  The Buyer and its Representatives have had full and complete access to all records and information relating to the Seller and the Acquired Business; have had the opportunity to ask all questions of and receive all answers from the Seller and its officers and directors concerning the Seller and the Acquired Business that the Buyer and its Representatives have dee