UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): September 26, 2018

 

 

BioLargo, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware

 

000-19709

 

65-0159115

(State or other jurisdiction

of incorporation)

 

(Commission File Number)

 

(IRS Employer

Identification No.)

 

 

14921 Chestnut St., Westminster, California

 

92683

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (949) 643-9540

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company.          ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.                    ☐

 

 

 

 

1.01 Entry into a Material Definitive Agreement

 

On September 26, 2018, we (BioLargo, Inc., the “Company”) and our partially owned subsidiary, Clyra Medical Technologies, Inc. (“Clyra Medical”), agreed to a transaction whereby we acquired the assets of Scion Solutions, LLC (“Scion”), and in particular its stem cell based technology, the SkinDisc, and key team members to support the sale and distribution of Clyra Medical’s products based on our BioLargo technologies.

 

Scion is led by Spencer Brown, a medical device industry veteran with more than 35 years’ experience in sales, account management, and distribution in the medical device industry. The SkinDisc product was developed by Dr. Brock Liden, a renowned medical podiatrist and expert in wound care and diabetic limb salvage. The SkinDisc is a therapy product that uses a patient’s own bone marrow and plasma to generate a cell-rich biogel for use with chronic wounds. It has been tested in over 250 patient cases with no adverse effects, and has successfully aided in the salvage of limbs that otherwise would have been amputated.

 

The parties entered into a Stock Purchase Agreement and Plan of Reorganization (“Purchase Agreement”) whereby Scion and Clyra Medical agreed to contribute all of their assets to a new entity (initially named Clyra Acquisition Corp., to be later renamed Clyra Medical Technologies, Inc., and referred to herein as “Clyra Acquisition”) in exchange for stock of the new entity. In exchange for the contribution of its assets, Clyra Medical received from Clyra Acquisition the exact number of common and preferred shares it has outstanding (totaling 33,015 shares), and entered into a plan of reorganization whereby it will distribute the shares of the acquisition corporation to its shareholders such that its shareholders will hold the exact same number of common and preferred shares in the new entity as it did in Clyra Medical prior to the transaction.

 

The consideration provided to Scion is subject to an escrow agreement and earn out provisions and includes: (i) 21,000 shares of the Clyra Acquisition common stock; (ii) 10,000 shares of Clyra Acquisition common stock redeemable for BioLargo common shares (detailed below); and (iii) a promissory note in the principal amount of $1,250,000 to be paid through new capital investments and revenue, as detailed below. The Clyra Acquisition common stock will be held in escrow subject to the new entity raising $1,000,000 “base capital” to fund its business operations. If $1,000,000 in base capital is received within 120 days, one-half of the common stock would be released, and the second half would be subject to the following performance metrics, each vesting one-fifth of the remaining shares of common stock: (a) notification of FDA premarket clearance of certain orthopedics products, or recognition by Clyra Acquisition of $100,000 gross revenue; (b) the recognition by Clyra of $100,000 in aggregate gross revenue; (c) the granting of all or any part of the patent application for the Skin Disc product, or recognition by Clyra Acquisition of $500,000 in gross revenue; (d) recognition by Clyra Acquisition of $1,000,000 in aggregate gross revenue; and (e) recognition by Clyra Acquisition of $2,000,000 in gross revenue. If $1,000,000 base capital is not raised within 120 days, then either party may completely terminate the transaction upon which termination we would have no further rights in the SkinDisk nor any further obligations to Scion.

 

The promissory note issued by Clyra Acquisition to Scion accrues interest at the rate of 5%. Principal and interest due under the note are to be paid periodically once the company receives $1,000,000 in “base capital”, at a rate of 25% of investment proceeds received. If the note is not paid off within 18 months after the date of issuance, it is automatically extended for additional 12-month periods until the note is repaid in full. Payments after the initial 18-month maturity date are required to be made as investment proceeds are received, at a rate of 25% of such proceeds, and 5% of Clyra Acquisition’s gross revenues. BioLargo purchased the Scion intellectual property and 12,755 common shares from Clyra Acquisition. and in exchange issued 7,142,858 shares of its common stock, and in turn licensed back the technology to Clyra Acquisition. Scion may redeem these shares from Clyra Acquisition by exchanging its 10,000 common shares once (and only if) those 10,000 Clyra Acquisition shares are vested as discussed above.

 

We were initially introduced to the SkinDisc product and Scion Solutions through Dr. Liden and Tanya Rhodes’s consulting work with Clyra Medical (both Dr. Liden and Ms. Rhodes have ownership interest in Scion). Prior to the execution of the above-described agreements, BioLargo did not have any material relationship with Scion’s founder Spencer Brown.

 

 

 

 

The transactions contemplated by the Purchase Agreement were approved by BioLargo’s Board of Directors by written consent on September 26, 2018. In connection with the transaction, the Board of Directors obtained a fairness opinion from an independent appraiser, Berg Capital Markets, LLC. The fairness opinion states that the terms of the transaction is fair, from a financial point of view, to BioLargo, Clyra, and their shareholders.

 

The foregoing descriptions of the Purchase Agreement, Note and Escrow Agreement are qualified in their entirety by reference to the full text of such agreements, copies of which are attached hereto as Exhibits 10.1, 10.2 and 10.3, respectively. The representations, warranties and covenants contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements, and may be subject to limitations agreed upon by the contracting parties.

 

Item 3.02 Unregistered Sales of Equity Securities.

 

The Company issued 7,142,858 shares of its common stock, representing approximately 5% of the outstanding shares of common stock of the Company, as partial consideration for the transaction described above.

 

Item 5.07 Submission of Matters to a Vote of Security Holders

 

The Company held a Special Meeting of the Stockholders (the “Special Meeting”) on September 26, 2018. The following matters were each submitted to a vote of stockholders through the solicitation of proxies or otherwise:

 

 

1.

A proposal to approve a reverse stock split at a ratio between one-for-four (1:4) and one-for-forty (1:40) of our common stock, as determined by our board of directors, at any time before the earlier of September 26, 2019 and the next meeting of the Company, if and as determined by our board of directors.

 

 

2.

A proposal to approve a reduction of the number of shares of common stock authorized by our Amended and Restated Certificate of Incorporation, if and in an amount as determined by our board of directors.

 

 

3.

A proposal to approve for the adjournment of the Special Meeting to permit the Company to solicit additional proxies, if there are insufficient proxies at the Special Meeting to approve the foregoing proposals.

 

A quorum was present in person or by proxy. Each matter was approved. The voting results are as follows:

 

Proposal Number

Votes For

Votes

Against

Votes

Abstain

Broker Non-

Vote

Total votes

1

82,224,734

9,443,551

310,484

48,789

91,978,769

2

85,104,808

6,276,595

597,365

48,790

91,978,768

3

77,315,130

6,539,087

4,788,998

-

88,643,215

 

Item 9.01. Financial Statements and Exhibits.

 

(d)     Exhibits.

 

Exhibit No.

 

Description

10.1

 

Stock Purchase Agreement and Plan of Reorganziation dated September 26, 2018

10.2

 

Promissory note issued by Clyra dated September 26, 2018

10.3

 

Escrow Agreement dated September 26, 2018

99.1

 

Fairness opinion issued by Berg Capital Markets, LLC

99.2

 

Press release

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

                 

Date: October 2, 2018

 

 

 

BIOLARGO, INC.

         
 

 

 

 

 

 

By:

 

/s/ Dennis P. Calvert

 

 

 

 

 

 

 

 

Dennis P. Calvert

 

 

 

 

 

 

 

 

President and Chief Executive Officer

 

 

 

 

Exhibit 10.1

 

 

 

STOCK PURCHASE AGREEMENT AND PLAN OF REORGANIZATION

 

 

 

By and Among

 

Clyra Acquisition Corp. (the “Company”)

 

and

 

Clyra Medical Technologies, Inc. (“Clyra”)

 

and

 

Scion Solutions, LLC (“Scion”)

 

and

 

Shareholders of Clyra Medical Technologies, Inc.

(through its Shareholder Representative s )

 

 

 

Dated September 26 , 2018

 

i

 

 

TABLE OF CONTENTS

 

ARTICLE I   –

DEFINITIONS

1

     

ARTICLE II   –

THE STOCK PURCHASE AND LIQUIDATION

4

2.1

Stock Purchase

4

2.2

Escrow

8

2.3

Performance Metrics

9

2.4

Alternative Release Conditions

10

2.5

Liquidation of Clyra

10

2.6

Effect of the Liquidation

10

2.7

Company Board Seats

10

2.8

Employment and  Consulting Agreements

11

     

ARTICLE III   –

CLOSING MATTERS

11

3.1

Closing

11

3.2

Closing Deliveries

11

     

ARTICLE IV   –

COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE COMPANY

13

4.1

Organization, Conduct of Business, etc

13

4.2

Authorization; Validity of Agreement

13

4.3

Absence of Defaults

13

4.4

Capital Stock

14

4.5

Options, SARs, Warrants, etc.

14

4.6

Compliance with Laws

14

4.7

Full Disclosure

14

     

ARTICLE V  –

COVENANTS, REPRESENTATIONS AND WARRANTIES OF CLYRA

14

5.1

Organization, Conduct of Business, etc.

14

5.2

Authorization and Validity of Agreement

15

5.3

Absence of Defaults Under Agreements

15

5.4

Actions, Proceedings, and Investigations

15

     

ARTICLE VI –

COVENANTS, REPRESENTATIONS AND WARRANTIES OF SCION

15

6.1

Organization, Conduct of Business, etc.

15

6.2

Authorization and Validity of Agreement

16

6.3

Absence of Defaults Under Agreements

16

6.4

Actions, Proceedings, and Investigations

16

     

ARTICLE VII   –

INDEMNIFICATION

16

7.1

Survival of Representations and Warranties

16

7.3

Indemnification by Clyra

16

7.3

Indemnification by Scion

16

7.4

General Indemnification Provisions

16

 

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ARTICLE VIII   –

ADDITIONAL COVENANTS

17

8.1

Costs

17

8.2

Instruments of Transfer, etc.

18

8.3

Notices

18

8.4

Amendments

19

8.5

Entire Agreement

19

8.6

Assignment

19

8.7

Public Statements

19

8.8

Confidentiality

19

8.9

Governing Law; Jurisdiction

20

8.1

Waiver of Jury Trial

20

8.11

Counterparts

20

8.12

Headings

20

8.13

Facsimile Signatures

20

8.14

Representation by Counsel

20

8.15

Remedies

20

 

iii

 

 

STOCK PURCHASE  AGREEMENT AND PLAN OF REORGANIZATION

 

T his S tock P urchase A greement and P lan of R eorganization (the “ Agreement ”), dated as of the 26th day of September, 2018, is made and entered into by and among Clyra Acquisition Corp., a California corporation (the “ Company ”), Clyra Medical Technologies, Inc. a California corporation (“ Clyra ”), Scion Solutions, LLC, an Indiana limited liability company (“ Scion ”), and BioLargo, Inc., a Delaware corporation as the Clyra Shareholder Representative (“ Clyra Shareholder Representative ”).

 

R E C I T A L S :

 

 

W hereas , Clyra and Scion have each designed and developed certain products relating to orthopedic antimicrobial surgical wound treatments;

 

W hereas , Clyra and Scion have determined that it is in their mutual best interests to combine their respective assets and operations into a single company in order to permit them to accelerate the commercialization of their existing products and the creation of new products;

 

W hereas , the Company is a newly formed corporation that has been organized for the sole purpose of facilitating the combination of the current products, intellectual property and know-how of Clyra and Scion; and

 

W hereas , the parties hereto desire that all of the products, intellectual property and know-how of Clyra and Scion be contributed to the Company and that immediately thereafter Clyra shall liquidate and distribute its shares of the Company stock to its shareholders pursuant to this Agreement and the terms of a Plan and Agreement of Reorganization (the “ Plan of Reorganization ”) and Certificate of Dissolution (the “ Certificate of Dissolution ”), substantially in the form attached hereto as Exhibit A .

 

N ow, therefore , in consideration of the premises and of the mutual covenants and conditions set forth herein, the parties hereby covenant and agree as follows:

 

A G R E E M E N T :

 

ARTICLE I

DEFINITIONS

 

For purposes of this Agreement the following definitions shall apply:

 

1.1     “ Acquired Contracts ” is defined in Section 2.1(c)(3) .

 

1

 

 

1.2     “ Agreement ” means this Stock Purchase Agreement and Plan of Reorganization between the Company, Clyra, the Clyra Shareholder Representative, and Scion, together with any duly executed amendments or addendums to this Agreement.

 

1.3     “ Assumed Liabilities ” is defined in Section 2.1(e) .

 

1.4     “ Base Capital ” is defined in Section 2.2 .

 

1.5     “ Base Capital Deadline ” is defined in Section 2.2(a) .

 

1.6     “ BioLargo ” means BioLargo, Inc., a Delaware corporation whose stock is publicly held and is traded in the OTCQB tier of the OTC Markets Group under the trading symbol BLGO.

 

1.7     “ Change in Control ” means (a) the sale, transfer, exchange, or other transaction, pursuant to which any Person or Persons other than the parties or any shareholder or member of the parties become(s) the beneficial owner(s) of more than fifty percent (50.0%) of the total voting power of the then outstanding stock of the Company, (b) any sale, transfer, or exchange by the Company of all or substantially all of its assets, or (c) any merger, consolidation, or other reorganization of the Company with any entity, other than its affiliates, whereby the Company is not the surviving entity or the shareholders of the Company otherwise fail to retain substantially the same direct or indirect ownership in the Company or its affiliates immediately after any such merger, consolidation or reorganization.

 

1.8     “ Closing ” means the closing of the Stock Purchase contemplated under this Agreement.

 

1.9     “ Closing Date means the date Closing occurs.

 

1.10     “ Clyra Assets ” is defined in Sections 2.1(a) and 2.1(c) .

 

1.11     “ Clyra Common Shares ” is defined in Section 2.1(a) .

 

1.12     “ Clyra Preferred Shares ” is defined in Section 2.1(a) .

 

1.13     “ Code ” means the Internal Revenue Code of 1986, as amended.

 

1.14     “ Contracts ” means all oral or written contracts, agreements, arrangements, instruments and other documents to which a Person is a party or by which it or its assets is or are bound.

 

1.15     “ Effective Time ” is defined in Section 2.5 .

 

1.16      “ Encumbrances means levies claims, charges, assessments, mortgages, security interests, liens, pledges, conditional sales agreements, title retention contracts, leases, subleases, rights of first refusal, options to purchase, restrictions (including those on transferring, pledging and mortgaging), proxies, voting trusts, warrants, puts, calls, restrictions on transfer (other than restrictions imposed by Federal and state securities laws), pre-emptive or conversion rights, and contracts to create or suffer any of the foregoing.

 

2

 

 

1.17     “ Escrow Agent means John R. Browning, Esq., located at 3200 Park Center Drive, Suite 500, Costa Mesa, CA 92626.

 

1.18     “ Escrow Agreement ” means the Escrow Agreement substantially in the form attached as Exhibit B, pursuant to which the Scion Common Shares and the Scion Redeemable Shares will be held in escrow and released to Scion only upon the occurrence of certain events as set forth in this Agreement.

 

1.19     “ Excluded Assets ” is defined in Section 2.1(d) .

 

1.20     “ Excluded Contracts ” is defined in Section 2.1(d)(3) .

 

1.21     “ Indemnitee ” is defined in Section 7.4(a) .

 

1.22     “ Indemnitor ” is defined in Section 7.4(a) .

 

1.23     “ Intellectual Property ” means all of the following: (a) patents, patent applications, patent disclosures and all related continuation, continuation-in-part, divisional, reissue, re-examination, utility, model, certificate of invention and design patents, patent applications, registrations and applications for registrations, (b) trademarks, service marks, trade dress, logos, trade names, service names and corporate names and registrations and applications for registration thereof, (c) copyrights and registrations and applications for registration thereof, (d) mask works and registrations and applications for registration thereof, (e) trade secrets and confidential business information, whether patentable or non-patentable and whether or not reduced to practice, know-how, moral rights, manufacturing and product processes and techniques, research and development information, copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information, (f) other proprietary rights relating to any of the foregoing (including without limitation associated goodwill and remedies against infringements thereof and rights of protection of an interest therein under the laws of all jurisdictions) and (g) copies and tangible embodiments thereof. Intellectual Property includes, without limitation, the Intellectual Property identified on Schedule 2.1(c)(1) .

 

1.24     “ Liquidation ” is defined in Section 2.5 .

 

1.25     “ Losses ” is defined in Section 7.4(a) .

 

1.26     “ Ordinary Course of Business ” means the ordinary course of business, consistent with past practice of the Business, including with regard to nature, frequency and magnitude.

 

1.27     “ Organizational Documents ” means the articles or certificate of incorporation or organization, bylaws, constitution, memorandum of association, articles of association, limited liability company agreement, partnership agreement or other governing documents of an entity, in each case as amended and/or restated as of the date of this Agreement.

 

3

 

 

1.28     “ Permits ” means licenses, certificates, permits, and rulings of governmental authorities.

 

1.29     “ Person ” means an individual, partnership, corporation, limited liability company, association, stock company, trust, joint venture, unincorporated organization, any other business entity, or any governmental entity (or any department, agency or political subdivision thereof).

 

1.30     “ Plan of Reorganization ” means the Plan and Agreement of Reorganization between the Company, Clyra and the Shareholders, in substantially the form attached hereto as Exhibit A .

 

1.31     “ Promissory Note ” is defined in Section 2.1(b)(3) .

 

1.32     “ Retained Liabilities ” is defined in Section 2.1(e) .

 

1.33     “ Returns ” means all returns, reports, estimates, information returns and statements required to be filed with any taxing authority.

 

1.34     “ Scion Assets ” is defined in Sections 2.1(b) and 2.1(c) .

 

1.35     “ Scion Common Shares ” is defined in Section 2.1((b)(1).

 

1.36     “ Stock Purchase ” means the purchases by Clyra and Scion of shares of the Company’s Common Stock in accordance with the terms of this Agreement.

 

1.37     “ Scion Redeemable Shares ” is defined in Section 2.1(b)(2) .

 

1.38     “ Taxes ” means all federal, state, local, foreign and other taxes, levies, imposts, assessments, impositions or other similar government charges, including, without limitation, income, estimated income, business, occupation, franchise, real property, payroll, personal property, sales, transfer, stamp, use, employment, commercial rent or withholding, occupancy, premium, gross receipts, profits, windfall profits, deemed profits, license, lease, severance, capital, production, corporation, ad valorem, excise, duty or other taxes, including interest, penalties and additions thereto.

 

1.39     “ Third Party Claim ” is defined in Section 7.4(b) .

 

 

ARTICLE II

THE STOCK PURCHASE AND LIQUIDATION

 

2.1       Stock Purchase . In accordance with and pursuant to the terms and conditions of this Agreement, Clyra and Scion shall purchase shares of the Company’s Common Stock as follows:

 

(a)      Stock Purchase by Clyra . Upon the terms and subject to the conditions of this Agreement, at the Closing, Clyra shall contribute, transfer, assign and deliver to the Company, free and clear of any Encumbrances, all of Clyra’s right, title and interest in all of the property and assets of Clyra, excluding only the Excluded Assets, including, but not limited to, all of the assets listed in Section 2.1(c) below (collectively, the “ Clyra Assets ”) in exchange for twenty-three thousand one hundred eighty five (23,185) shares of the Company’s Common Stock (the “ Clyra Common Shares ”) and nine thousand eight hundred thirty (9,830) shares of the Company’s Series A Preferred Stock (the “ Clyra Preferred Shares ”).

 

4

 

 

(b)      Stock Purchase by Scion . Upon the terms and subject to the conditions of this Agreement, at the Closing, Scion shall contribute, transfer, assign and deliver to the Company, free and clear of any Encumbrances, all of Scion’s right, title and interest in all of the property and assets of Scion, excluding only the Excluded Assets, including, but not limited to, all of the assets listed in Section 2.1(c) below (collectively, the “ Scion Assets ”) in exchange for the following:

 

(1)     Twenty-one thousand (21,000) shares of the Company’s Common Stock (the “ Scion Common Shares ”). The Scion Common Shares will be held in escrow pursuant to an Escrow Agreement, as provided in Section 2.2 below. The Escrow Agreement will provide for the release of Scion Common Shares to Scion as follows (subject to the alternative release conditions in Section 2.4 below): (i) fifty percent (50%) of the Scion Common Shares shall be released upon the Company raising the Base Capital prior to the Base Capital Deadline (as such terms are defined below) and (ii) the remaining fifty percent (50%) shall be released upon achievement of the performance metrics set forth in Section 2.3 below. Scion will be entitled to vote the Scion Common Shares held in escrow.

 

(2)     An additional ten thousand (10,000) shares of the Company’s Common Stock which Scion may require the Company to redeem as provided in this Agreement (the “ Scion Redeemable Shares ”). Certificates representing the Scion Redeemable Shares include a legend indicating that the shares represented thereby are subject to redemption by the Company. The Scion Redeemable Shares will be held in escrow pursuant to an Escrow Agreement, as provided in Section 2.2 below. The Escrow Agreement will provide for the release to Scion of Scion Redeemable Shares as follows (subject to the alternative release conditions in Section 2.4 below): (i) five thousand (5,000) of the Scion Redeemable Shares shall be released to Scion upon the Company raising the Base Capital prior to the Base Capital Deadline and (ii) the remaining five thousand (5,000) shares of Scion Redeemable Shares shall be released to Scion in increments upon the Company’s achievement of the performance metrics set forth in Section 2.3 below. The redemption price to be paid to Scion by the Company upon redemption of Scion Redeemable Shares shall be payable in shares of BioLargo common stock held by the Company, at the rate of 714.2858 shares of BioLargo common stock for each one share of the Scion Redeemable Shares redeemed by Scion. Scion may require the Company to redeem any Scion Redeemable Shares that have been released from escrow, provided that Scion may not sell any BioLargo shares it receives in any such redemption for a period of twelve months from the Closing Date, and Scion further agrees that the maximum number of such BioLargo shares that Scion may sell in any given month thereafter shall be the lesser of 400,000 shares or ten percent (10%) of the prior three months average trading volume for BioLargo’s common stock. The parties agree that until the Scion Redeemable Shares are redeemed for shares of BioLargo common stock, such Scion Redeemable Shares will be voted pursuant to a Voting Agreement substantially in the form attached as Exhibit C .

 

5

 

 

(3)     An unsecured, nonnegotiable promissory note, subject to the escrow described in Section 2.2 , in the form attached hereto as Exhibit D (the “ Promissory Note ”). The Promissory Note shall be in the principal amount of One Million Two Hundred Fifty Thousand Dollars ($1,250,000), shall accrue interest at the rate of five percent (5.0%) per annum, and shall have an initial maturity date that is eighteen months after the Closing Date. Payments under the Promissory Note shall be made as follows:

 

(A).     During the first eighteen months following Closing the Company shall make periodic payments to Scion in amounts equal to twenty-five percent (25%) of all amounts that the Company receives from the sale of capital stock of the Company to third parties. Such periodic payments shall be made promptly, but in no event later than ten days, after the Company receives such amounts from any third parties; provided, however, that the first payment shall not be made until after the close of the escrow as described in Section 2.2 below. Such periodic payments shall be applied first to accrued but unpaid interest and then to outstanding principal.

 

(B).     In the event that the Promissory Note, including all accrued interest thereon, has not been paid in full by the end of the eighteen-month period described in subsection (A) above, the Promissory Note shall automatically be extended for an additional twelve-month period. At the close of such additional twelve-month period, the Company shall make a payment to Scion equal to the greater of (i) twenty-five percent (25%) of all amounts that the Company received during such twelve-month period from the sale of capital stock of the Company to third partiesand (ii) five percent (5%) of the Company’s gross revenue received during such twelve-month period. Such payment shall be applied first to accrued but unpaid interest and then to outstanding principal.

 

(C).     In the event that the Promissory Note, including all accrued interest thereon, has not been paid in full by the end of the additional twelve-month period described in subsection (B) above, the Promissory Note shall automatically be extended for additional twelve-month periods until it has been paid in full. The amount of the payment to be made as the end of each such additional twelve-month period shall be determined in accordance with subsection (B) above.

 

6

 

 

(4)     In the event that either (i) a sale or license of the Skin Disc product occurs prior to twelve months following the Closing or (ii) a letter of intent for such a sale or license is executed prior to twelve months following the Closing and the sale or license is concluded by definitive documentation later, an amount equal to ten percent (10%) of the gross proceeds from such sale or license shall be payable directly to Scion. For clarity, any payments under this Subsection (4) shall be in addition to any payments or other considerations pursuant to Subsections (1) , (2) , or (3) above.

 

(c)      Included Assets . The Clyra Assets and the Scion Assets to be contributed to the Company shall include, respectively, all of the following:

 

(1)     all of the contributing party’s Intellectual Property, including without limitation the Intellectual Property identified on Schedule 2. 1 (c)( 1 ) and all goodwill associated therewith;

 

(2)     all fixed assets and items of machinery, equipment, furniture, and all other tangible personal property of the contributing party, including without limitation those items set forth on Schedule 2. 1 (c)( 2 );

 

(3)     all rights existing under all of the contributing party’s Contracts, excluding those identified as Excluded Assets, but including without limitation those set forth on Schedule 2. 1 (c)( 3 ) (the “ Acquired Contracts ”);

 

(4)     all files, lists and records of customers (whether past or current), suppliers, distributors, and agents of the contributing party;

 

(5)     all claims, deposits, warranties, guarantees, refunds, causes of action, rights of recovery, rights of set-off and rights of recoupment of every kind and nature with respect to the contributing party’s assets;

 

(6)     all Permits, to the extent assignable, including without limitation those listed on Schedule 2. 1 (c)( 6 ) ;

 

(7)     all billed and unbilled accounts receivable and all correspondence with respect thereto, including without limitation, all trade accounts receivable, notes receivable from customers, and all other obligations from customers, including without limitation the items listed on Schedule 2. 1 (c)( 7 ) ;

 

(8)     all insurance and warranty proceeds received after the Closing Date with respect to damage, non-conformance of or loss to the contributing party’s assets;

 

(9)     all prepayments, vendor credits, prepaid expenses and similar assets; and

 

(10)     all goodwill and going concern value associated with the contributing party’s assets.

 

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(d)      Excluded Assets . Notwithstanding the foregoing provisions of this Section 2.1 , the Clyra Assets and the Scion Assets shall not include the following assets of either contributing party (collectively, the “ Excluded Assets ”):

 

(1)     rights under or pursuant to this Agreement and agreements entered into pursuant to this Agreement;

 

(2)     minute books, statutory books and company seals;

 

(3)     all rights existing under each Contract set forth on Schedule 2.1(d) ( 3 ) (the “ Excluded Contracts ”); and

 

(4)     all bank accounts of the contributing party.

 

(e)      Liabilities . On the Closing Date, the Company will assume and agree to discharge obligations of Clyra and Scion under the Acquired Contracts arising on or after the Closing Date, based on facts and circumstances that first arose after the Closing Date, and that are to be performed on or after, or in respect of periods following, the Closing Date (collectively, the “ Assumed Liabilities ”). All liabilities of each contributing party not specifically included in the Assumed Liabilities will remain the sole responsibility of the contributing party, as applicable, will be retained, paid, performed and discharged solely by such contributing party, and are expressly not being assumed by the Company as Assumed Liabilities (the “ Retained Liabilities ”). For the avoidance of doubt, the Retained Liabilities expressly include (i) all liabilities that are caused by the actions or inactions of any Contributing Party with respect to the Acquired Contracts prior to the Closing Date, other than requirements of the contract to be first performed after the Closing, (ii) all liabilities related to Taxes for periods prior to Closing, (iii) all liabilities related to Excluded Assets, and (iv) each contributing party’s expenses pursuant to Section 7.1 .

 

2.2      Escrow . The parties acknowledge and agree that the Company will need to raise capital in order to move forward with the business plan that the parties have developed, and that in the event the Company is unable to raise the necessary capital, the parties agree that they have the right, but not the obligation, to unwind the transactions described herein. To assure that the transaction can be unwound if necessary, the consideration to be paid to Scion, as described in Section 2.1(b) above, shall be held in escrow subject to the Company raising equity capital of at least One Million Dollars ($1,000,000) (the “ Base Capital ”).

 

(a)     If the Base Capital is raised prior to the expiration of 120 days after the Closing (the “ Base Capital Deadline ”), then the transactions shall proceed as described herein and the following shall occur:

 

(1)     Fifty percent (50%) (i.e., 10,500 shares) of the Scion Common Shares shall be released from escrow and delivered to Scion. The remaining fifty percent (50%) (i.e., 10,500 shares) of the Scion Common Shares shall continue to be held in escrow subject to the achievement of the performance metrics described in Section 2.3 below.

 

(2)     Fifty percent (50%) of the Scion Redeemable Shares shall be released from escrow and delivered to Scion. The remaining fifty percent (50%) of the Scion Redeemable Shares shall continue to be held in escrow subject to the achievement of the performance metrics described in Section 2.3 below.

 

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(3)     A payment under the Promissory Note equal to twenty-five percent (25%) of the amount received from third parties (including the Base Capital) prior to the Base Capital Deadline shall be paid to Scion.

 

(b)     Unless the parties mutually agree in writing to extend the Base Capital Deadline, if the Base Capital has not been raised by the Base Capital Deadline, then the transactions described herein shall be unwound and the following shall occur:

 

(1)     The Scion Common Shares will be cancelled and deemed to be unissued shares of the Company;

 

(2)     The Scion Redeemable Shares will be cancelled and deemed to be unissued shares of the Company;

 

(3)     The Promissory Note will be cancelled and of no further force and effect;

 

(4)     All of the Scion Assets will be returned to Scion, including but not limited to the rights to the Skin Disc patent application or the Skin Disc patent;

 

(5)     The Consulting Agreements will be terminated; provided, however, that any unpaid costs/fees associated with the services completed prior to the Base Capital Deadline (as extended, if applicable) will be paid in full; and

 

(6)     Any funds received by the Company from third party investors will be returned to such investors.

 

2.3      Performance Metrics . Subject to the alternative release conditions described in Section 2.4 below, the fifty percent (50%) of the Scion Common Shares and Scion Redeemable Shares that will remain in escrow after the Company has raised the Base Capital, will be released from escrow in five separate equal tranches, as follows:

 

(a)     One-fifth (1/5) upon the earlier of (i) notification of FDA premarket clearance of any of the Company’s “revision wash” or “primary joint wash” proposed surgical wound wash products or (ii) satisfaction of the condition in subsection (b) immediately below;

 

(b)     One-fifth (1/5) upon the recognition by the Company of One Hundred Thousand Dollars ($100,000) in aggregate gross revenue (which amount will be in addition to $100,000 of gross revenue that may have been recognized in satisfaction of subsection (a)(ii) immediately above);

 

(c)     One-fifth (1/5) upon the earlier of (i) the granting of all or any part of U.S. Patent Application Number 20170354754 (Liden, et al), regarding the Skin Disc product or (ii) recognition by the Company of Five Hundred Thousand Dollars ($500,000) in aggregate gross revenue (which may include any revenue used to satisfy the conditions set forth in subsections (a) and/or (b) above);

 

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(d)     One-fifth (1/5) upon recognition by the Company of One Million Dollars ($1,000,000) in aggregate gross revenue (which may include any revenue used to satisfy the conditions set forth in subsections (a), (b), and/or (c) above); and

 

(e)     One-fifth (1/5) upon recognition by the Company of Two Million Dollars ($2,000,000) in aggregate gross revenue (which may include any revenue used to satisfy the conditions set forth in subsections (a), (b), (c), and/or (d) above).

 

2.4      A lternative Release Conditions . Notwithstanding Section s 2.2 and 2.3 , all Scion Common Shares or Scion Redeemable Shares remaining in escrow shall be immediately released to Scion upon the earliest to occur of any of the following events:

 

(a)     The receipt by the Company of an aggregate Six Million Dollars ($6,000,000) cash and/or guaranteed value over time from a sale or license of the Skin Disc product; provided that in the event the cash and/or guaranteed value over time from a sale or license of the Skin Disc product is less than Six Million Dollars ($6,000,000), then one-half of the cash and/or guaranteed value so received shall apply to satisfy the gross revenue provisions in Section 2.3 above;

 

(b)     A sale or license of the Company’s “revision wash” and “primary joint wash” proposed surgical wound wash products; or

 

(c)     Any Change in Control of the Company.

 

2.5      Liquidation of Clyra . Immediately following the Closing of the Stock Purchase described in Section 2.1 above, Clyra shall be liquidated pursuant to the laws of the State of California, and subject to the terms and conditions of this Agreement and in accordance with the Plan of Reorganization (the “ Liquidation ”). The time immediately following the Closing of the Stock Purchase at which the Liquidation shall occur is referred to as the “ Effective Time .”

 

2.6      Effect of the Liquidation . At the Effective Time, Clyra shall be liquidated with the effect provided by the laws of the State of California, and the separate legal existence of Clyra shall cease, except as may otherwise be provided by the laws of the State of California. Pursuant to the Liquidation, Clyra shall distribute all of the Clyra Common Shares and Clyra Preferred Shares to its shareholders pro rata, according to their ownership interests in Clyra. The distribution of the Clyra Common Shares and Clyra Preferred Shares to its shareholders will not be deemed to be a Change in Control of the Company. Following the Liquidation, the Company will change its name to “Clyra Medical Technologies, Inc.” The Company and Clyra agree to cooperate with each other in effecting the Liquidation, including the execution and filing of such documents and/or consents as are necessary to permit the Company to use the name “Clyra Medical Technologies, Inc.” following the Liquidation.

 

2.7      Company Board Seats . The Company currently has three (3) directors. At such time as the Company has raised the Base Capital, the number of directors shall be increased to five (5), and Scion will thereafter be entitled to designate two (2) directors.

 

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2.8      Employment and Consulting Agreements . At the Closing, Scion will cause Spencer Brown, Dr. Brock Liden and Tanya Rhodes to each enter into a written employment or consulting agreement with the Company for the purpose of providing sales and product support services in connection with the Company’s efforts to commercialize its Intellectual Property and products.

 

 

ARTICLE III

CLOSING MATTERS

 

3.1      Closing . The closing of the Stock Purchase outlined in Section 2.1 of this Agreement (the “ Closing ”) will take place remotely via the exchange of documents and signatures, on the date of this Agreement (the date on which the Closing takes place is referred to herein as the “ Closing Date ”) and the Closing will be deemed effective as of 12:01 a.m. local time on the Closing Date.

 

3.2      Closing Deliveries . At the Closing, the parties shall cause the following to be delivered:

 

(a)     Clyra will deliver to Scion and the Company the following items:

 

(1)     an Officer’s Certificate executed on behalf of Clyra by one of its officers, providing a copy of resolutions of the board of directors and shareholders of Clyra approving the execution and delivery of this Agreement and the other agreements and documents to be delivered pursuant hereto and the consummation of the transactions described herein, and certifying that the resolutions are a true and correct copy;

 

(2)     an executed Bill of Sale, Assignment and Assumption, substantially in the form attached to this Agreement as Exhibit E transferring and assigning all of the Clyra Assets to the Company; and

 

(3)     an executed Intellectual Property Contribution and Assignment Agreement substantially in the form attached to this Agreement as Exhibit F transferring and assigning all of Clyra’s Intellectual Property to the Company.

 

(b)     Scion will deliver to Clyra and the Company:

 

(1)     a Manager’s Certificate executed on behalf of Scion by its Manager, certifying as to member and manager resolutions, with a copy of such resolutions attached as an exhibit thereto as well as certification that none of the foregoing have been modified, rescinded, or revoked, which resolutions authorize and approve the execution, delivery and performance of this Agreement;

 

(2)     an executed Bill of Sale, Assignment and Assumption, substantially in the form attached to this Agreement as Exhibit G transferring and assigning all of the Scion Assets to the Company; and

 

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(3)     an executed Intellectual Property Contribution and Assignment Agreement substantially in the form attached to this Agreement as Exhibit H transferring and assigning all of Scion’s Intellectual Property to the Company;

 

(4)     a counterpart of the Escrow Agreement substantially in the form attached to this Agreement as Exhibit B executed by an authorized officer of the Company; and

 

(5)     executed Consulting Agreements between the Company and each of Spencer Brown, Dr. Brock Liden, and Tanya Rhodes, substantially in the form attached to this Agreement as Exhibit I .

 

(c)     The Company will deliver to Scion:

 

(1)     a Secretary’s Certificate executed on behalf of the Company by its Secretary, certifying as to (i) complete and accurate copies of the Company’s Organizational Documents, which will be attached as an exhibit thereto, (ii) shareholder and board resolutions authorizing the execution, delivery and performance of this Agreement, attached as an exhibit thereto, and further certifying that none of the foregoing have been modified, rescinded, or revoked, and (iii) a list of the directors and officers authorized to sign agreements on behalf of the Company;

 

(2)     a counterpart of the Escrow Agreement substantially in the form attached to this Agreement as Exhibit B executed by an authorized officer of the Company;

 

(3)     a copy of share certificates representing all of the Scion Common Shares, and the Scion Redeemable Shares, the original of which certificates will be delivered to the Escrow Agent at Closing; and

 

(4)     a Promissory Note in the form attached to this Agreement as Exhibit D executed by an authorized officer of the Company.

 

(d)     The Company will deliver to Clyra:

 

(1)     a Secretary’s Certificate executed on behalf of the Company by its Secretary, certifying as to (i) complete and accurate copies of the Company’s Organizational Documents, which will be attached as an exhibit thereto, (ii) shareholder and board resolutions authorizing the execution, delivery and performance of this Agreement, attached as an exhibit thereto, and further certifying that none of the foregoing have been modified, rescinded, or revoked, and (iii) a list of the directors and officers authorized to sign agreements on behalf of the Company;

 

(2)     a counterpart of the Escrow Agreement substantially in the form attached to this Agreement as Exhibit B executed by an authorized officer of the Company;

 

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(3)     a copy of share certificates representing all of the Scion Common Shares, and the Scion Redeemable Shares, the original of which certificates will be delivered to the Escrow Agent at Closing;

 

(4)     an original share certificate representing all of the Clyra Common Shares and all of the Clyra Preferred Shares; and

 

(5)     an executed counterpart of the Promissory Note.

 

(e)     The Company will deliver to the Escrow Agent:

 

(1)     an executed copy of this Agreement;

 

(2)     an executed Escrow Agreement; and

 

(3)     original share certificates representing all of the Scion Common Shares, and the Scion Redeemable Shares.

 

 

ARTICLE IV

COVENANTS, REPRESENTATIONS AND WARRANTIES

OF THE COMPANY

 

The Company hereby covenants, represents and warrants to and agrees with Clyra and Scion, as of the date of this Agreement and as of the Closing Date as follows:

 

4.1      Organization, Conduct of Business, etc . The Company (i) is duly organized and validly existing under the laws of California, (ii) has all requisite power and authority (corporate and other) to own its properties and conduct its business as now being conducted, and (iii) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it therein or in which the transaction of its business makes such qualification necessary.

 

4.2      Authorization; Validity of Agreement . The Company has the corporate and other power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement has been duly and validly approved by the Board of Directors and shareholders of the Company. This Agreement has been duly executed and delivered on the Company’s behalf, and constitutes a valid and binding agreement of the Company, enforceable in accordance with its terms. The person signing below on behalf of the Company represents and warrants that he or she has been duly authorized by appropriate corporate action to execute this Agreement for and on behalf of the Company.

 

4.3      Absence of Defaults . The execution and delivery of this Agreement and the Plan of Reorganization does not, and the performance of the transactions contemplated in such documents will not, (a) violate the provisions of the Articles of Incorporation or Bylaws of the Company, or (b) violate the provisions of or place the Company in default under any agreement, easement, indenture, mortgage, lien, lease, contract, instrument, order, judgment, decree, ordinance, statute or regulation to which the Company is subject, to which any property of the Company is subject, or to which the Company is a party. Neither the Company nor any of its shareholders is required to give any notice to, make any filing with, or obtain any authorization, consent or approval from any governmental authority or other third party in order to consummate (or otherwise in connection with) the transactions contemplated by this Agreement. There are no rights of first refusal or other rights outstanding in favor of any Person that would be triggered by the execution of this Agreement or the consummation of the transactions contemplated hereby.

 

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4.4      Capital Stock . The Company has 150,000 shares of Common Stock currently authorized none of which are outstanding prior to the Closing Date, 9,830 shares of Series A Preferred Stock, none of which are outstanding prior to the Closing Date, and no shares of any other class or series of capital stock authorized or outstanding.

 

4.5      Options, SARs, Warrants, etc . There are no outstanding stock appreciation rights or options, warrants, calls, units or commitments of any kind relating to the issuance, sale, purchase or redemption of, or securities convertible into, capital stock or other securities of the Company. The capital stock of the Company is not, and at the Closing will not be, subject to any buy-sell or other shareholders agreement, voting trust agreement or other contract restricting or otherwise relating to the voting, dividend rights or disposition of such capital stock, other than this Agreement.

 

4.6      Compliance with Laws . The conduct by the Company of its business does not violate or infringe any domestic laws, statutes, ordinances, rules or regulations, the enforcement of which, individually or in the aggregate, would materially and adversely affect the business, operations, properties, assets or condition (financial or otherwise) of the Company; and the Company has complied in all material respects with every local, state or federal law or ordinance, and every regulation or order issued thereunder, now in effect and applicable to the Company.

 

4.7      Full Disclosure . No representations or warranties by the Company or its Shareholders in this Agreement, or in any document, exhibit, statement, certificate or schedule furnished to the Company pursuant hereto, including without limitation the Schedules attached hereto, contains or will contain any untrue statement of a material fact, or omits or will omit to state any material fact necessary to make the statements or facts contained therein not misleading.

 

 

ARTICLE V

COVENANTS, REPRESENTATIONS AND

WARRANTIES OF CLYRA

 

Clyra, through the Shareholder Representative, hereby covenants, represents and warrants to and agrees with the Company and Scion as of the date of this Agreement and as of the Closing Date as follows:

 

5.1      Organization, Conduct of Business, etc . Clyra (i) is duly organized and validly existing and in good standing under the laws of California, (ii) has all requisite power and authority (corporate and other) to own its properties and conduct its business as now being conducted, (iii) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it therein or in which the transaction of its business makes such qualification necessary, except when failure to so qualify would not have a material adverse effect on the Company, and (iv) is not transacting business, or operating any properties owned or leased, in violation of any provision of federal or state law or any rule or regulation promulgated thereunder, which violation would have a material adverse effect on the Company.

 

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5.2      Authorization and Validity of Agreement . Clyra has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement has been duly and validly approved by Clyra’s Board of Directors and shareholders, has been duly executed and delivered on Clyra’s behalf, and constitutes a valid and binding agreement of Clyra, enforceable in accordance with its terms.

 

5.3      Absence of Defaults Under Agreements . Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will conflict with or result in a breach of or constitute a default under any provision of Clyra’s Articles of Incorporation, Bylaws, or any agreement to which Clyra is a party or by which it is bound or to which any of its properties is subject, or result in the creation of any liens or encumbrances upon Clyra’s assets, and no consents or waivers thereunder are required to be obtained in connection with the transactions contemplated hereby, except for the approval of required regulatory authorities and of the shareholders of Clyra.

 

5.4      Actions, Proceedings, and Investigations . There are no actions, proceedings or investigations pending, or to the knowledge of the executive officers of Clyra, threatened or contemplated, against or relating to Clyra or any of its properties, which would materially and adversely affect the financial condition (present or prospective), business, properties or operations of Clyra, or the ability of Clyra to consummate the transactions contemplated hereby.

 

 

ARTICLE VI

COVENANTS, REPRESENTATIONS AND

WARRANTIES OF SCION

 

Scion hereby covenants, represents and warrants to and agrees with the Company and Clyra as of the date of this Agreement and as of the Closing Date as follows:

 

6.1      Organization, Conduct of Business, etc . Scion (i) is duly organized and validly existing and in good standing under the laws of Indiana, (ii) has all requisite power and authority (limited liability company and other) to own its properties and conduct its business as now being conducted, (iii) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it therein or in which the transaction of its business makes such qualification necessary, except when failure to so qualify would not have a material adverse effect on the Company, and (iv) is not transacting business, or operating any properties owned or leased, in violation of any provision of federal or state law or any rule or regulation promulgated thereunder, which violation would have a material adverse effect on the Company.

 

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6.2      Authorization and Validity of Agreement . Scion has the limited liability company power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement has been duly and validly approved by Scion’s manager and members, has been duly executed and delivered on Scion’s behalf, and constitutes a valid and binding agreement of Scion, enforceable in accordance with its terms.

 

6.3      Absence of Defaults Under Agreements . Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will conflict with or result in a breach of or constitute a default under any provision of Scion’s Operating Agreement, Articles of Organization, or any agreement to which Scion is a party or by which it is bound or to which any of its properties is subject, or result in the creation of any liens or encumbrances upon Scion’s assets, and no consents or waivers thereunder are required to be obtained in connection with the transactions contemplated hereby, except for the approval of required regulatory authorities and of the shareholders of Scion.

 

6.4      Actions, Proceedings, and Investigations . There are no actions, proceedings or investigations pending, or to the knowledge of the executive officers of Scion, threatened or contemplated, against or relating to Scion or any of its properties, which would materially and adversely affect the financial condition (present or prospective), business, properties or operations of Scion, or the ability of Scion to consummate the transactions contemplated hereby.

 

 

ARTICLE VII

INDEMNIFICATION

 

7.1      Survival of Representations and Warranties . The representations and warranties of the Company, Clyra and Scion Articles IV through VI shall survive in perpetuity.

 

7.2      Indemnification by Shareholders of Clyra . Except as otherwise limited by this Article VII, the shareholders of Clyra, through the Clyra Shareholder Representative, hereby agree to defend, indemnify and hold harmless Scion and its respective successors and assigns from and against any and all Losses arising out of or resulting from (a) any misrepresentation or breach of warranty by the Company or Clyra contained herein or in any document delivered pursuant hereto; or (b) any breach of any covenant or agreement contained in this Agreement or in any other document delivered pursuant hereto, to be performed by the Company or Clyra.

 

7.3      Indemnification by Scion . Scion hereby agrees to defend, indemnify and hold harmless the Company and Clyra and their respective successors and assigns from and against any and all Losses arising out of or resulting from (a) any misrepresentation or breach of warranty by Scion contained herein or in any document delivered pursuant hereto; or (b) any breach of any covenant or agreement contained in this Agreement or in any other document delivered pursuant hereto, to be performed by Scion.

 

7.4      General Indemnification Provisions .

 

(a)     For the purposes of this Section 7.4 , the term “ Indemnitee ” shall refer to the Person or Persons indemnified, or entitled, or claiming to be entitled, to be indemnified, pursuant to the provisions of this Article VII , as the case may be; and the term “ Indemnitor ” shall refer to the Person or Persons having the obligation to indemnify pursuant to this Article VII . The term “ Losses ” is not limited to matters asserted by third parties, but includes Losses incurred or sustained by an Indemnitee in the absence of third party claims, and payments by the Indemnitee shall not be a condition precedent to recovery.

 

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(b)     An Indemnitee shall give the Indemnitor notice of any matter which an Indemnitee has determined has given or could give rise to a right of indemnification under this Agreement as soon as practicable after the Indemnitee becomes aware of such matter, stating the amount of Losses, if known, and the method of computation thereof, all with reasonable particularity and containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed or arises. With respect to Losses arising from a claim of any third party that are subject to the indemnification provided for in this Article (“ Third Party Claim ”), the Indemnitee shall give the Indemnitor notice of such Third Party Claim as promptly as practicable (and in any event within fifteen (15) calendar days after the service of the citation or summons) and shall permit the Indemnitor, at its option, to participate in the defense of such Third Party Claim by counsel of its own choice and at its expense. The Indemnitor shall also be entitled, at its option, to assume and control the defense of such Third Party Claim at its cost, risk and expense and through counsel acceptable to Indemnitee acting reasonably if it gives notice, within fifteen (15) calendar days after receiving notice of such claim from the Indemnitee, of his or its intention to do so to the Indemnitee, unless the named parties to such action or proceeding include both the Indemnitor and the Indemnitee and the Indemnitee has been advised in writing by counsel that there may be one or more legal defenses available to such Indemnitee that are different from or additional to those available to the Indemnitor. In the event the Indemnitor exercises its right to undertake the defense against any such Third Party Claim as provided above, the Indemnitee shall cooperate with the Indemnitor in such defense and make available to the Indemnitor, at the Indemnitor’s expense, all witnesses, pertinent records, materials and information in its possession or under its control relating thereto as is reasonably required by the Indemnitor. Similarly, in the event the Indemnitee is, directly or indirectly, conducting the defense against any such Third Party Claim, the Indemnitor shall cooperate with the Indemnitee in such defense and make available to it all such witnesses, records, materials and information in its possession or under its control relating thereto as is reasonably required by the Indemnitee. No such Third Party Claim, except the settlement thereof which involves the payment of money only and for which the Indemnitee is fully indemnified by the Indemnitor, may be settled by the Indemnitor without the written consent of the Indemnitee, which consent will not be unreasonably withheld. If the Indemnitor fails to assume the defense of such Third Party Claim within fifteen (15) calendar days after receipt of the notice thereof, the Indemnitee against which such claim has been asserted will (upon delivering notice to such effect to the Indemnitor) have the right to undertake, at the Indemnitor’s cost and expense in accordance with this Article IX, the defense, compromise or settlement of such claim on behalf of and for the account and risk of the Indemnitor in accordance with this Article VII.

 

 

ARTICLE VIII

ADDITIONAL COVENANTS

 

8.1       Costs . Each party hereto shall pay their own costs and expenses incurred or to be incurred in connection with the execution and performance of this Agreement.

 

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8.2      Instruments of Transfer, etc . Each party hereto shall cooperate with the other parties in every way in carrying out the transactions contemplated herein, in delivering instruments to perfect the conveyances, assignments and transfers contemplated herein, and in delivering all documents and instruments reasonably deemed necessary or useful by counsel for any party hereto.

 

8.3      Notices . All notices, requests, demands or other communications that are required or may be given pursuant to the terms of this Agreement shall be in writing and shall be deemed to have been duly given: (a) on the date of delivery, if personally delivered by hand, (b) upon the third day after such notice is deposited in the United States mail, if mailed by registered or certified mail, postage prepaid, return receipt requested, (c) upon the date scheduled for delivery, if such notice is sent by a nationally recognized overnight express courier or (d) upon written confirmation of receipt by the recipient of such notice (including any automatic confirmation that is received), if transmitted by facsimile or electronic mail:

 

(a)       If to the Company :

 

  14921 Chestnut St.

  Westminster, CA 92683

 

  With a copy to :

 

  Browning Law Group, Inc.

  3200 Park Center Drive, Suite 500

  Costa Mesa, CA 92626

 

(b)       If to Clyra :

 

  14921 Chestnut St.

  Westminster, CA 92683

 

  With a copy to :

 

  Browning Law Group, Inc.

  3200 Park Center Drive, Suite 500

  Costa Mesa, CA 92626

 

 

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(a)       If to the Clyra Shareholder Representative :

 

  BioLargo, Inc.

  14921 Chestnut St.

  Westminster, CA 92683

 

  With a copy to :

 

  Browning Law Group, Inc.

  3200 Park Center Drive, Suite 500

  Costa Mesa, CA 92626

 

 

(b)       If to Scion :

 

  Scion Solutions, LLC

  15 EMS T30A Lane

  Leesburg, Indiana 46538

 

  With   a copy to :

 

  David B. Tingey

  Kirton McConkie

  36 So. State Street, Suite 1900

  Salt Lake City, Utah 84111

 

1.2      Amendments . This Agreement may be amended or modified only by an agreement in writing between the parties executed in the same manner as this Agreement.

 

1.3      Entire Agreement . This Agreement and all exhibits and schedules hereto and other documents incorporated or referred to herein, contain the entire agreement of the parties and there are no representations, inducements or other provisions other than those expressed in writing. No modification, waiver or discharge of any provision of or breach of this Agreement shall (i) be effective unless it is executed in writing by the party effecting such modification, waiver or discharge, or (ii) affect the right of the parties to thereafter enforce any other provision or to exercise any right or remedy in the event of a breach by a party hereto, whether or not similar.

 

1.4      Assignment . This Agreement may not be assigned by any party hereto except with the prior written consent of the other parties, which consent may be withheld in such other party’s sole discretion.

 

1.5      Public Statements . Subject to the requirements of law, no party shall issue any press release or other public statement concerning this Agreement or the transactions contemplated by this Agreement without the prior written consent of the other parties.

 

1.6      Confidentiality . Each party shall use all information that it obtains from the others pursuant to this Agreement solely for the effectuation of the transactions contemplated by this Agreement or for other purposes consistent with the intent of this Agreement and shall not use any of such information for any other purpose, including, without limitation, the competitive detriment of the other parties. Each party shall maintain as strictly confidential all information it learns from the others and shall upon expiration or termination of this Agreement, return promptly to the other parties all documentation (and copies thereof) provided by them or made available by third parties. Each party may disclose such information to its respective affiliates, counsel, accountants, tax advisors and consultants. This provision shall not prohibit the use or disclosure of confidential information in communications to the parties’ respective shareholders or members in connection with approval of the transactions contemplated herein, or pursuant to court order, or which has otherwise become publicly available.

 

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1.7      Governing Law; Jurisdiction . This Agreement and the legal relations among the parties will be governed by and construed in accordance with the internal substantive laws of the State of California (without regard to the Laws of conflict that might otherwise apply) as to all matters, including without limitation matters of validity, construction, effect, performance and remedies. Each of the parties irrevocably submits to the exclusive jurisdiction of the courts of the State of California and of the United States located in California, for the purposes of any such proceeding arising out of this Agreement or any transaction contemplated hereby. Each party further agrees that service of process, summons, notice or document by United States registered mail to such party’s respective address set forth in Section 8.3 above will be effective service of process for any action, suit or proceeding in California with respect to any matters to which it has submitted to jurisdiction in this Section 8.9 .

 

1.8        Waiver of Jury Trial . EACH PARTY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR ANY TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.

 

1.9        Counterparts . Any number of counterparts of this Agreement may be signed and delivered and each shall be considered an original and together they shall constitute one agreement.

 

1.10      Headings . The table of contents and the headings of the sections and subsections of this Agreement are inserted for convenience only and will not constitute a part hereof.

 

1.11      Facsimile Signatures . Any facsimile signature on any counterpart shall be deemed to be an original signature for all purposes and shall fully bind the party whose authorized officer’s or agent’s facsimile signature appears on the counterpart.

 

1.12      Representation by Counsel . Each party represents and agrees that it has been represented by counsel of its own choosing during the negotiation and execution of this Agreement and, therefore, waives the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or documents. Each party or the authorized officers of each party, as applicable, have carefully read and fully understand this Agreement in its entirety, have had this Agreement fully explained to them by such party’s respective counsel, and are fully aware of the contents and meaning, intent and legal effect of this Agreement.

 

1.13      Remedies . Except as expressly provided in this Agreement, any Person having any rights under any provision of this Agreement: (a) will be entitled to enforce such rights specifically (without posting a bond or other security; (b) to recover damages by reason of any breach of any provision of this Agreement; and (c) to exercise all other rights granted by law. Except as expressly provided in this Agreement, all such rights and remedies will be cumulative and non-exclusive, and may be exercised singularly or concurrently. The Parties acknowledge that any breach of this Agreement may cause substantial irreparable harm to the other party. Therefore, this Agreement may be enforced in equity by specific performance, temporary restraining order and/or injunction. The rights to such equitable remedies will be in addition to all other rights or remedies that a party may have under this Agreement or under applicable law.

 

[ Remainder of this page intentionally left blank]

 

20

 

 

IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the day and year first set forth above.

 

  CLYRA ACQUISITION CORP.  
     
     
  By: Steven V. Harrison  
  Its: President  
     
     
     
  CLYRA MEDICAL TECHNOLOGIES, INC :  
     
  /s/ Steven V. Harrison  
  By: Steven V. Harrison  
  Its: President  
     
     
     
 

SCION SOLUTIONS, LLC

 
     
  /s/ Spencer Brown  
  By: Spencer Brown  
  Its: Manager  
     
     
     
 

CLYRA SHAREHOLDER

REPRESENTATIVE:

 
     
  BioLargo, Inc.  
     
  /s/ Dennis P. Calvert  
  Name: Dennis P. Calvert, President  

 

 

 

 

 

 

 

[Signature Page]

 

 

 

 

EXHIBIT A

 

Plan and Agreement of Reorganization

Certificate of Dissolution

 

[Attached]

 

 

 

 

EXHIBIT B

 

Escrow Agreement

 

[Attached]

 

 

 

 

EXHIBIT C

 

Voting Agreement

 

[Attached]

 

 

 

 

EXHIBIT D

 

Promissory Note

 

[Attached]

 

 

 

 

EXHBIT E

 

Clyra Bill of Sale, Assignment and Assumption Agreement

 

[Attached]

 

 

 

 

EXHIBIT F

 

Clyra Intellectual Property Contribution and Assignment Agreement

 

[Attached]

 

 

 

 

EXHBIT G

 

Scion Bill of Sale, Assignment and Assumption Agreement

 

[Attached]

 

 

 

 

EXHIBIT H

 

Scion Intellectual Property Contribution and Assignment Agreement

 

[Attached]

 

 

 

 

EXHIBIT I

 

Consulting Agreement

 

[Attached]

 

 

 

 

Stock Purchase Agreement

Schedule 2.1(c)(1)

Intellectual Property

 

 

 

I. Scion

 

 

Patent application (No. 15/620,531) filed at the United States Patent and Trademark Office, published December 14, 2017 as number US 2017/0354754, titled Systems and Methods for Treating a Wound with Wound Packing, by Liden and Brown.

 

Registered trademark for SKINDISC, registered with the U.S. Patent and Trademark Office on August 8, 2018 (Serial No. 88069988)

 

 

 

 

 

 

II. Clyra

 

Antimicrobial technology for specialized wound care that features the most potent, advanced, and broadest-spectrum oxidation system known to exist for anti-bacterial, anti-fungal and anti-viral applications.

 

Formulations of antimicrobial hydrogel.

 

Formulations of liquid wound cleanser.

 

 

 

 

Stock Purchase Agreement

Schedule 2.1(c)(2)

Fixed Assets

 

 

 

 

I. Scion

 

None.

 

 

 

 

 

 

 

 

 

 

 

 

II. Clyra

 

None.

 

 

 

 

Stock Purchase Agreement

Schedule 2.1(c)(3)

Acquired Contracts

 

 

 

 

 

I. Scion

 

None.

 

 

 

 

 

 

 

 

 

 

 

 

 

II. Clyra

 

Steve Harrison employment contract

Tanya Rhodes employment contract

Josh Berg employment contract

 

 

 

 

Stock Purchase Agreement

Schedule 2.1(c)(6)

Permits

 

 

 

I. Scion

 

None.

 

 

 

 

 

 

 

 

 

 

 

 

II. Clyra

 

None.

 

 

 

 

Stock Purchase Agreement

Schedule 2.1(c)(7)

Billed & Unbilled Accounts Receivable

 

 

 

 

 

 

I. Scion

 

None.

 

 

 

 

 

 

 

 

 

 

 

 

II. Clyra

 

None.

 

 

 

 

Stock Purchase Agreement

Schedule 2.1(d)(3)

Excluded Contracts

 

 

I. Scion

 

Letter Agreement dated August 2, 2018 between Scion Solutions, LLC and Seer Stone Consulting, LLC (Jason Baty) relating to SkinDisc Intellectual Property

 

Amounts owed by Scion Solutions, LLC to Brothers Brown, Spencer Brown and/or BBA Medical as reimbursement for costs and expenses incurred by Scion Solutions, LLC relating to the SkinDisc Intellectual Property, as evidenced by various documents of diverse dates entitled “Initial Risk Principal.”

 

 

 

 

 

 

 

 

 

 

 

II. Clyra

 

None.

 

 

 

 

Exhibit 10.2

 

PROMISSORY NOTE

 

THE SECURITIES REPRESENTED BY THIS PROMISSORY NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THERE IS AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

 

 

Principal Amount :   $ 1, 2 5 0,000

Westminster , California

Instrument #:    

Issuance Date: September 2 6 , 2018

 

FOR VALUE RECEIVED, CLYRA ACQUISITION CORP., a corporation organized under the laws of the state of California (“ Issuer ”), promises to pay to the order of Scion Solutions , LLC (hereafter, together with any subsequent holder hereof, called “ Holder ”), at its address, or at such other place as Holder may direct, the “Amount” noted above (the “ Loan Amount ”), payable on [ 18 months after Closing Date] (the “ Maturity Date ”). This note is duly authorized issue of the Issuer, purchased by the initial Holder and accepted by the Issuer on the “Issuance Date” noted above (the “ Issuance Date ”) (referred to herein as the “ Note ”).

 

This Note is entered into in connection with a Stock Purchase Agreement and Plan of Reorganization of even date hereof (the “Stock Purchase Agreement”), pursuant to which Holder sold, transferred and assigned to Issuer all or substantially all of its assets in exchange for certain consideration including this Note.

 

Interest will accrue on the unpaid principal at the rate of five percent (5%) per annum. In the event that the Note, including all accrued interest, has not been paid in full by the Maturity Date and so long as an Event of Default (as defined in Section 5 below) has not occurred, the Maturity Date will automatically extend an additional twelve (12) months. In the event that the Note, including all accrued interest, has not been paid in full by the end of the additional twelve-month period and so long as an Event of Default (as defined in Section 5 below) has not occurred, the Maturity Date will automatically extend for additional twelve (12) month periods, consecutively, until the Note and accrued interest have been paid in full.

 

Payments of both principal and interest are to be made in immediately available funds in lawful money of the United States of America as set forth below.

 

     The Note is subject to the following additional provisions:

 

1.      Principal and Interest Payments . Accrual of interest shall commence as of the Issuance Date. During the eighteen-month period before the Maturity Date, Issuer will make periodic payments to Holder in amounts equal to twenty-five percent (25%) of all amounts that Issuer receives from the sale of capital stock of Issuer to third parties. Such periodic payments shall be made no later than ten (10) days after Issuer receives such amounts from any third parties; provided, however, that the first of such payments shall not be made until after the close of escrow for the funds dedicated to the acquisition of Holder by Issuer. Such periodic payments shall be applied first to accrued but unpaid interest and then to outstanding principal.

 

-1-

 

 

2.      Maturity Date Extensions . In the event that the Maturity Date is automatically extended for an additional twelve-month extension after the initial eighteen-month period, or there are subsequent twelve-month extensions of the Maturity Date, as prescribed above, Issuer shall make a payment to Holder at the close of any such additional twelve-month period equal to the greater of:

 

  a.

Twenty-five percent (25%) of all amounts that Issuer received during such twelve-month period from the sale of its capital stock to third parties; and

 

 

b.

Five percent (5%) of Issuer’s gross revenue received during such twelve-month period.

 

Such payments shall be applied first to accrued but unpaid interest and then to outstanding principal.

 

3.      Prepayment . Issuer may prepay any amount owed under this Note in whole or in part.

 

4.      Transfer . This Note has been issued subject to investment representations of the original Holder hereof and may be transferred or exchanged only in compliance with the Securities Act and applicable state securities laws. Prior to the due presentment for such transfer of this Note, the Issuer and any agent of the Issuer may treat the person in whose name this Note is duly registered on the records of the Issuer as the owner hereof for the purpose of receiving payment as herein provided and all other purposes, whether or not this Note is overdue, and neither the Issuer nor any such agent shall be affected by notice to the contrary. The transferee shall be bound, as the original Holder by the same representations and terms described herein.

 

5.      Events of Default . Each of the following occurrences is hereby defined as an “Event of Default”:

 

 

a.

Nonpayment . The Issuer shall fail to make any payment of principal, interest, or other amounts payable hereunder when and as due, and at least ten (10) days have elapsed since Holder has demanded such payment without cure by the Issuer; or

 

 

b.

Dissolutions, etc . The Issuer or any subsidiary shall fail to comply with any provision concerning its existence or any prohibition against dissolution, liquidation, merger, consolidation or sale of assets; or

 

 

c.

Noncompliance with this Agreement . The Issuer shall fail to comply in any material respect with any provision hereof, which failure does not otherwise constitute an Event of Default, and such failure shall continue for ten (10) days after the occurrence of such failure; or

 

 

d.

Bankruptcy . Any bankruptcy, insolvency, reorganization, arrangement, readjustment, liquidation, dissolution, or similar proceeding, domestic or foreign, is instituted by or against the Issuer or any of its subsidiaries, or the Issuer or any of its subsidiaries shall take any step toward, or to authorize, such a proceeding; or

 

-2-

 

 

 

e.

Insolvency . The Issuer shall make a general assignment for the benefit of its creditors, shall enter into any composition or similar agreement, or shall suspend the transaction of all or a substantial portion of its usual business.

 

6.      Holder’s Election upon Default . Upon the occurrence of any Event of Default (without the need for any party to give any notice or take any other action), this Note (and all interest through such date) shall be immediately due and payable. It is agreed that in the event of such action, such Holder shall be entitled to receive all reasonable fees, costs and expenses incurred, including without limitation such reasonable fees and expenses of attorneys. The parties acknowledge that a change in control of the Issuer shall not be deemed to be an Event of Default as set forth herein.

 

7.      Invalid or Unenforceable Provisions . In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.

 

IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed by an officer thereunto duly authorized.

 

  CLYRA ACQUISITION CORP .  
     
     
  By /s/ Steven V. Harrison  
  Name: Steven V. Harrison, President  

 

Original Holder: Scion Solutions, LLC

Issuance Date: September 26, 2018

Original Principal Amount: $1,250,000

 

 

-3-

 

Exhibit 10.3

 

ESCROW AGREEMENT

 

This Escrow Agreement (“Escrow Agreement”) is dated September 26, 2018, and is between Clyra Acquisition Corp., a California corporation whose principal office is located at 14921 Chestnut St., Westminster, CA 92683 (“Clyra”), Scion Solutions, LLC, an Indiana limited liability company whose principal office is located at 15 EMS T30A Lane, Leesburg, Indiana 46538 (“Scion”), and John R. Browning, Esq., an attorney licensed to practice law in the State of California whose principal office is located at 3200 Park Center Drive, Suite 500, Costa Mesa, CA 92626 (“Escrow Agent”).

 

A.      Pursuant to a Stock Purchase Agreement and Plan of Reorganization dated September 26, 2018 to which Clyra and Scion are parties (the “Stock Purchase Agreement”), Scion has agreed to transfer and assign substantially all of its assets to Clyra in exchange for a total of 31,000 shares of Clyra Common Stock, 21,000 of which are referred to as the “Scion Common Shares” and 10,000 of which are referred to as the “Scion Redeemable Shares” (the “Scion Common Shares,” and together with the Scion Common Shares, the “Shares”), subject to certain conditions set forth in the Stock Purchase Agreement. Certificates representing the Scion Redeemable Shares include a legend indicating that the shares represented thereby are subject to redemption by Clyra.

 

B.      The parties have agreed that the certificates representing the Shares are to be held in escrow pending the occurrence of certain conditions set forth in the Stock Purchase Agreement.

 

C.      Escrow Agent has agreed to hold the Shares, as an escrow agent only, until it is notified as set forth herein that the conditions established in the Stock Purchase Agreement for release of the Shares to Scion have been satisfied, at which time the Shares will be released and delivered to Scion; or until it is notified that the transactions contemplated in the Stock Purchase Agreement have been abandoned, at which time the Shares will be returned to Clyra for cancellation.

 

D.      Escrow Agent acknowledges that following the closing of the transaction contemplated in the Stock Purchase Agreement, Clyra will change its name to Clyra Medical Technologies, Inc.

 

NOW, THEREFORE, in consideration of the premises above recited, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledge, the parties hereto agree as follows:

 

1.       Purpose of Escrow . This Escrow is established for the purpose of facilitating the delivery to Scion of the Scion Common Shares and the Scion Redeemable Shares upon the occurrence of certain conditions set forth in the Stock Purchase Agreement, or the return to Clyra of the Scion Common Shares and the Scion Redeemable Shares in the event that the transactions contemplated in the Stock Purchase Agreement are abandoned.

 

 

 

 

2.       Acceptance of Appointment . Escrow Agent accepts the appointment as Escrow Agent, and agrees to hold the items described below in escrow and to deliver such items only in accordance with the provisions of this Escrow Agreement.

 

2.       Escrow Deposits . Clyra shall deliver the following items to Escrow Agent pursuant to the Stock Purchase Agreement:

 

 

(a)

A fully executed copy of the Stock Purchase Agreement;

 

 

(b)

A copy of this Escrow Agreement executed by Clyra, Clyra, and Scion;

 

 

(c)

Original share certificates representing the Scion Common Shares, issued to Scion in the following denominations:

 

 

i.

10,500 shares

 

 

ii.

10,500 shares

 

 

(d)

Original share certificates representing the Scion Redeemable Shares, which certificates include a legend indicating that the shares represented thereby are subject to redemption by Clyra, issued to Scion in the following denominations:

 

 

i.

5,000 shares

 

 

ii.

1,000 shares

 

 

iii.

1,000 shares

 

 

iv.

1,000 shares

 

 

v.

1,000 shares

 

 

vi.

1,000 shares

 

3.       Delivery of Shares . Within five (5) days after receipt by Escrow Agent of joint written instructions signed by authorized officers of both Clyra and Scion (the “Joint Written Instructions”), Escrow Agent shall release and deliver certificates representing the Shares to either Scion or to Clyra as specified in the Joint Written Instructions.

 

4.       Termination of Escrow . This Escrow shall terminate upon the earliest to occur of the following:

 

 

(a)

The date on which all of certificates representing the Shares have been delivered pursuant to Joint Written Instructions;

 

 

(b)

The date on which a written notice of termination signed by Clyra and Scion has been delivered to Escrow Agent; or

 

2

 

 

 

(c)

September 26, 2028 .

 

In the event this Escrow is terminated before all of the certificates representing the Shares have been delivered pursuant to Joint Written Instructions as provided in Section 3 above, Escrow Agent shall return to Clyra any certificates representing Shares that have not been delivered prior to such termination and Escrow Agent shall thereupon be relieved of its duties hereunder.

 

5.       Provisions Regarding Escrow Agent . It is understood and agreed that the duties of Escrow Agent are entirely ministerial, being limited to receiving certificates representing the Shares, and holding and releasing such certificates as directed in Joint Written Instructions in accordance with this Escrow Agreement. Escrow Agent acts hereunder as a depository only, and is not responsible or liable in any manner whatsoever for the sufficiency, correctness, genuineness, or validity of any instrument deposited with it, or with respect to the form or execution of the same, or the identity, authority, or rights of any person executing or depositing the same.

 

6.       Limitation of Liability . Escrow Agent shall not be liable for any error of judgment or for any act done or step taken or omitted by it in good faith, or for any mistake of fact or law, or for anything which it may do or refrain from doing in connection herewith, except its own gross negligence or willful misconduct. Escrow Agent may consult with legal counsel in the event of any dispute or question as to the consideration of the foregoing instructions or the Escrow Agent's duties hereunder, and Escrow Agent shall incur no liability and shall be fully protected in acting in accordance with the opinion and instructions of such counsel.

 

7.       Indemnification . Clyra and Scion shall jointly and severally indemnify and save Escrow Agent harmless from and against any and all liability, loss, cost, damages, claims, demands, suits, actions, expenses and disbursements of whatever kind and nature which may be incurred by, imposed upon, asserted against or demanded from Escrow Agent in connection with the performance of his duties hereunder other than those arising from the gross negligence or fraud of Escrow Agent.

 

8.       Resolution of Disputes . In the event of any disagreement between the parties resulting in adverse claims and/or demands being made in connection with any papers, money, or property involved herein or affected hereby, Escrow Agent shall be entitled, at its option, to refuse to comply with any such claim, or demand so long as such disagreement shall continue and, in so refusing, Escrow Agent shall not be or become liable to the undersigned or any of them for the failure or refusal to comply with such conflicting or adverse demands, Escrow Agent shall be entitled to continue to so refrain and refuse to so act until:

 

 

(a)

the rights of adverse claimants have been finally adjudicated in a court of proper jurisdiction; or

 

 

(b)

all differences shall have been adjusted by agreement and Escrow Agent shall have been notified thereof in writing signed by all of the persons interested.

 

3

 

 

9.       Third Party Beneficiary . The parties agree that this Escrow Agreement has been executed solely for the benefit of the parties named herein; and no other party including, without limitation, partners or creditors are intended to be benefited under the provisions hereof. No person shall be entitled to enforce any provision hereof as a third party beneficiary.

 

10.       Notices . All notices will be in writing and will be given by personal delivery with a signed acknowledgment of receipt; by United States mail, postage prepaid, with return receipt requested; by an established commercial courier service, charge prepaid, with written proof of delivery; or by electronic mail with a confirmation of receipt. Notices will be addressed to the person and address designated below (or such other person or address as the Parties may designate on ten days’ notice in accordance with this Section):

 

 

(a)

If to Clyra :

 

 

 

14921 Chestnut St.

Westminster, CA 92683

 

 

 

With a copy to :

 

Browning Law Group, Inc.

3200 Park Center Drive, Suite 500

Costa Mesa, CA 92626

 

 

(b)

If to Scion :

 

 

 

Scion Solutions, LLC

15 EMS T30A Lane

Leesburg, Indiana 46538

 

 

 

With a copy to :

 

 

 

David B. Tingey

Kirton McConkie

36 So. State Street, Suite 1900

Salt Lake City, Utah 84111

 

 

(c)

If to Escrow Agent:

 

 

 

John R. Browning, Esq.

3200 Park Center Drive, Suite 500

Costa Mesa, CA 92626

 

 

A notice will be deemed effective upon confirmed receipt, which includes (a) receipt confirming delivery from an established commercial courier service, (b) response to an email notice, or (c) a date-stamped return receipt from the U.S. Postal Service, or in the case of refusal to accept delivery the earliest of (x) the date of the attempted delivery or refusal to accept, (y) the delivery date of the return receipt, or (z) the date of receipt of notice of refusal or notice of non-delivery by the sending party.

 

4

 

 

11.      Counterparts . This Escrow Agreement may be signed in one or more counterparts, each of which shall be deemed an original and together shall constitute one and the same instrument. Executed copies of this Agreement transmitted by facsimile or e-mail shall be valid and binding.

 

12.      Severability . If any provision of this Escrow Agreement, or the application thereof to any person or circumstance, shall be invalid or unenforceable to any extent, the remainder of this Escrow Agreement, or the application of such term to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby. Each term of this Escrow Agreement shall be valid and enforceable to the fullest extent permitted by law.

 

13.      Amendment, Modification . The provisions of this Escrow Agreement may be amended, modified, changed or waived only by a written instrument signed by the party against whom enforcement of any waiver, amendment, change, modification or discharge is sought.

 

14.      Titles and Captions . All titles and captions in this Escrow Agreement are set forth herein for convenience only and shall not be deemed part of this Escrow Agreement, and they in no way define, limit, augment, extend or describe the scope, content or intent of any part of this Escrow Agreement.

 

15.      Further Action . The parties shall execute and deliver all documents, provide all information, and take or forbear from all such action as may be necessary or appropriate to achieve the purposes of this Escrow Agreement.

 

16.      Authorization . Each respective person executing this Escrow Agreement represents and warrants that said person is duly authorized to execute this Escrow Agreement on behalf of the party for whom such person purports to execute this Escrow Agreement.

 

17.      Applicable Law . This Escrow Agreement shall be construed in accordance with and shall be governed by the laws of the state in which the Escrow Agent maintains its principal place of business.

 

[ Signature page follows ]

 

5

 

 

IN WITNESS WHEREOF, the parties have executed this Escrow Agreement on the date first written above.

 

  CLYRA:  
  Clyra Acquisition Corp.  
  A California corporation  
     
  By:  /s/ Steven V. Harrison  
    Steven V. Harrison, President  
     
     
  SCION:  
  Scion Solutions, LLC  
  An Indiana limited liability company  
     
  By: /s/ Spencer Brown  
    Spencer Brown  
     
  ESCROW AGENT:  
  John R. Browning, Esq.  
     
    /s/ John R. Browning  
     
     
     

 

 

6

Exhibit 99.1

 

 

 

September 6, 2018

 

Board of Directors

Biolargo, Inc.

14921 Chestnut Street

Westminster, California 92683

(949) 643-9540

 

 

Dear Members of the BioLargo, Inc. Board of Directors:

 

Berg Capital Markets, LLC has been engaged by BioLargo, Inc. and its subsidiary, Clyra Medical Technologies, (collectively, “Buyer”), to offer a Fairness Opinion on the proposed acquisition of Scion Solutions, LLC (“Seller”). The Transaction contemplates that the Buyer will acquire assets and product designs of the Seller, including all personnel, in order to successfully develop and commercialize the pipeline of products owned by the combined entity. The engagement with Berg Capital Markets, LLC includes a review of the terms of the Transaction, implied valuation based on proposed terms, and an assessment of the fairness of those terms.

 

For the purpose of the Opinion set forth herein, we have reviewed, among other things:

 

 

(i) financial documents of BioLargo, Inc. (including historical income statement, balance sheet, cash flow statements) as represented on the Quarterly and Annual filings provided by the Company to the SEC;

 

(ii) a list of proposed Patents and their descriptions provided by the Buyer and Seller;

 

(iii) pro forma projections of the combined entity provided by the Buyer and Seller;

 

(iv) Berg Capital has performed such other analyses, reviewed such information and considered such other factors, as deemed appropriate.

 

In arriving at our opinion, we have assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available, or otherwise made available to us, by the Buyer and Seller. We have assumed that the Transaction will not differ in material respect from the documents reviewed by us, and that the Patent assets will be executed and maintained without modification or delay material to this opinion.

 

Our opinion is necessarily based on financial, economic, monetary, market and other circumstances as in effect on, and the information made available to us as of the date hereof, and we do not have an obligation or responsibility to update, revise or reaffirm this opinion based on circumstances, developments or events occurring after the date hereof. Our opinion does not constitute a recommendation to any stockholder of the Companies as to how such stockholders should vote or act with respect to the Transaction or any other matter.

 

 

 

 

In addition, we have relied, without independent verification, upon the assessment of management of the Companies as to the future technology and products of the Company and the risks associated with such technology and products. We are not expressing any opinion as to the solvency or viability of the Companies or the ability of the Companies to pay their obligations when they come due. We are not legal, regulatory, tax or accounting advisors, and we express no opinion as to any legal, regulatory, tax or accounting matters.

 

The Opinion expressed herein is provided for the information and assistance of the BioLargo, Inc. Board of Directors in assessing the terms of the Transaction. Of note, Berg Capital Markets, LLC may provide other services to the Company or their respective affiliates, for which we may receive compensation.

 

Relative to the terms of the Transaction, the following assumptions have been made:

 

 

Per share price of BioLargo, Inc. common equity will convert at the lower end of the proposed minimum-maximum range;

 

Should the per share price fall below the minimum-maximum range (within a reasonable threshold), the transaction will proceed as planned;

 

Additional equity capital will be raised after close of the Transaction from outside investors at a rate above $1 million, but will not meaningfully exceed $5 million;

 

For the sake of this opinion, we have not considered a potential equity line of credit post close of the equity financing.

 

Relative the Fairness Opinion and the Valuation of the combined entity, we have assumed execution on the following milestones:

 

 

Timely approval by the USPTO of key patents related to the combined Clyra-Scion intellectual property portfolio;

 

Ability to secure FDA Approval on timelines consistent with Company guidance;

 

Wound Irrigation Solution commercialization in 2019;

 

Oral Rinse commercialization in 2020;

 

Revision Ortho Wash commercialization in 2020;

 

Primary Ortho Wash commercialization in 2021;

 

SkinDisc TM commercialization in 2021;

 

Potential spin-out of the newly-formed combined entity into a publicly-traded enterprise listed on a domestic stock exchange.

 

Valuation

To arrive at our valuation threshold and conclusion of Fairness, we analyzed the core markets for Clyra products, including the Wound, Dental, Revision & Primary Joint, as well as the Regenerative Medicine markets. In addition, we have given consideration to additional potential markets where the Clyra technology may have applicability, including the General Surgery market. Within these core markets, we assumed approval and commercialization dates, applied reasonable assumptions on implied penetration and annualized growth rates for the products, overall cost of goods, general operational expenses, costs of capital, and then applied a discounted cash flow analysis to arrive at a net present value of the enterprise.

 

 

 

 

Along these lines, using the Discounted Cash Flow Model Valuation, we applied a Weighted Average Cost of Capital (WACC) of 25.75%, which assumes a Beta of 3.25, an Equity Risk Premium of 7%, and a 10 year Risk Free Treasury Yield of 3%, which is consistent with publicly-traded peers in terms of Industry and Market Capitalization. We assume growth in perpetuity of the enterprise at an estimated rate of 2.5%. Based on these inputs, including expected revenue growth and an operating margin profile and progression consistent with Industry peers, as well as reasonable capital expenditure assumptions, we arrive at a valuation of $34,700,000.

 

Using a Sum of the Parts Valuation approach, we apply price to sales multiples on 2020 projected revenue for each product line, using different multiples based on characteristics of the product line and end markets (including growth rates, average selling prices, gross margin profiles, total addressable markets, and long-term positioning within the competitive landscape). Based on projected 2020 revenue, we are using a two and a half times price to sales multiple for the Wound Irrigation Solution, Oral Rinse and Revision Ortho products. We apply a seven times price to sales multiple for the Primary Ortho products to account for the potential applicability of the product to the General Surgery market. We apply a ten times price to sales multiple to the SkinDisc™   product, reflecting a premium for the disruptive potential of the product and to account for the early stage revenue profile relative to the overall product cycle. Summing the individual components, and applying a 35% discount based time value and uncertain regulatory approval, we arrive at a combined value of $35,500,000.

 

Lastly, as a frame of reference, we also conducted an analysis of publicly-traded peers, with a particular emphasis of Market Capitalization, stage of development or commercialization, as well as other considerations (capital structure, ancillary business lines, margin profile, et cetera). Based on six different Micro Cap comparables, the average market capitalization for the peer group is $29,100,000 (*September 5, 2018 closing prices).

 

Using an equally-weighted blended average of these valuation approaches, we arrive at an estimated valuation of $33,100,000 for the combined entity.

 

Based on and subject to the foregoing, we are of the opinion on the date hereof that the terms of the Transaction for BioLargo, Inc., and it shareholders, and Clyra Medical Technologies, Inc., and its shareholders, is fair, from a financial point of view, to such entities and shareholders.

 

Very truly yours,

 

 

/s/ Josh Berg    
Josh Berg    
CEO & President    
Berg Capital Markets, LLC    

 

Disclaimer: This document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice. Review or use of the document and any discussions does not create an attorney‐client relationship with the author. To the extent that this document may contain suggested provisions, they will require modification to suit a particular transaction, jurisdiction or situation. Please consult with an attorney with the appropriate level of experience if you have any questions. Any tax information contained in the document or discussions is not intended to be used, and cannot be used, for tax advice or guidance, or for purposes of avoiding penalties imposed under the United States Internal Revenue Code. Any opinions expressed are those of the author. Berg Capital Markets, LLC does not take responsibility for the content in this document or discussions and does not make any representation or warranty as to their completeness or accuracy; and further, does not accept any liability (whether in contract, tort, negligence or otherwise) for any loss or damage (including, without limitation, loss of profit), which may arise directly or indirectly from use of or reliance on this document.

Exhibit 99.2

 

BioLargo acquire s breakthrough stem cell therap y technology to expand medical product portfolio

 

Westminster, CA – October 2, 2018 – BioLargo, Inc. (OTCQB:BLGO), developer of sustainable science and technologies and a full-service environmental engineering company, announced today that it had entered into definitive agreements to acquire a breakthrough stem cell therapy technology called “SkinDisc”. Developed by Scion Solutions, LLC, SkinDisc uses a patient’s own bone marrow and plasma to generate a cell-rich biogel which heals chronic wounds. The product has been tested in over 250 patient cases with no adverse side effects, and successfully aided in the salvage of limbs that otherwise would have been amputated.

 

The SkinDisc product will be sold through BioLargo subsidiary Clyra Medical Technologies, Inc. In addition to the SkinDisc product, Scion’s key team members will join Clyra to support Clyra’s commercial strategy, including Dr. Brock Liden, a renowned medical podiatrist and expert in wound care and diabetic limb salvage, and Spencer Brown, a medical device industry veteran with more than 35 years of experience working in medical sales, account management, and distribution in the medical device industry.

 

The acquisition is contingent upon Clyra raising initial minimum capital of $1 million. If Clyra is unable to raise the funds in 120 days, either party may unwind the transaction.

 

As consideration for the SkinDisc product and other intellectual property, Scion will receive approximately 20% of Clyra’s common stock (half of which would be released upon raising the $1 million initial minimum capital, and the second half released subject to performance metrics), 7,142,858 shares of BioLargo common stock (subject to the same escrow and earn out provisions), and a promissory note in the principal amount of $1,250,000 which would be paid through the capital raise conducted by Clyra.

 

Dennis P. Calvert, CEO of BioLargo commented, “Company management believes this transaction carries significant value for both BioLargo and Clyra for several reasons. First, our antimicrobial products and the SkinDisc are highly complementary as they will both serve the same advanced wound care market and can often be used together. Second, a fairness opinion report written by an independent evaluator suggested that there is good evidence, based on comparable company analysis, that the combined value of Clyra and Scion would be approximately $33 million following this transaction. Third, the two technical platforms - our antimicrobial products and the SkinDisc - present a long list of product design opportunities establishing a foundation upon which to build an internationally competitive wound care company. Finally, we are particularly excited to be working with the Scion team members that have successfully launched a number of products into the medical industry and believe they bring crucial expertise regarding how to position these products and support the selling process. We remind our shareholders that we cannot predict the timing of the approval of our current application before the FDA, but that we are highly encouraged with the interaction with the FDA staff and believe we are on the right track to be successful.”

 

Clyra Medical Technologies develops products for wound management that feature broad-spectrum antimicrobial efficacy with no known acquired resistance, sustained release, biofilm efficacy, and being gentle on skin and tissue. Its first product called the Clyra Wound Wash is currently in review by the FDA under a 510 (k) application. The company believes its first target commercial markets will be in the areas of general wound therapy, infection control for the orthopedic surgery market, and a dental rinse. The Clyra technology presents the potential for multiple additional product designs.

 

 

 

 

About BioLargo, Inc.

BioLargo, Inc. is an innovative technology developer and environmental engineering company driven by a mission to “make life better”  by delivering robust, sustainable solutions for a broad range of industries and applications, with a focus on clean water, clean air, and advanced wound care. We develop and commercialize disruptive technologies by providing the capital, support, and expertise to expedite them from “cradle” to “maturity” ( www.biolargo.com ). Our engineering division features experienced professional engineers dedicated to integrity, reliability, and environmental stewardship ( www.biolargoengineering.com ). Our industrial odor control division, Odor-No-More ( www.odornomore.com ) features CupriDyne Clean Industrial Odor Eliminator ( www.cupridyne.com ), which eliminates the odor-causing compounds and VOCs rather than masking them, and is now winning over leading companies in the solid waste handling and wastewater industries and other industries that contend with malodors and VOCs. Our subsidiary BioLargo Water ( www.biolargowater.ca ) develops the Advanced Oxidation System “AOS”, a disruptive industrial water treatment technology designed to eliminate waterborne pathogens and recalcitrant contaminants with better energy-efficiency and lower operational costs than incumbent technologies. Our subsidiary Clyra Medical ( www.clyramedical.com ) features effective and gentle solutions for chronic infected wounds to promote infection control and regenerative tissue therapy.

 

Contact Information Dennis Calvert President and CEO BioLargo, Inc. 949-643-9540 x2