Exhibit 10.1

 

 PANACEA LIFE SCIENCES, INC.

 

SERIES B PREFERRED SECURITIES PURCHASE AGREEMENT

 

 

 

DECEMBER 3, 2019

 

 

 

 

TABLE OF CONTENTS

Page

 

1. Purchase and Sale of Preferred Stock, Convertible Note and Warrant. 1   1.1
Sale and Issuance of Preferred Stock Convertible Note and Warrant. 1   1.2
Closing; Delivery. 1   1.3 Sale of Milestone Shares of Preferred Stock. 2   1.4
Use of Proceeds 2   1.5 Defined Terms Used in this Agreement 2         2.
Representations and Warranties of the Company 4   2.1 Organization, Good
Standing, Corporate Power and Qualification 5   2.2 Capitalization 5   2.3
Subsidiaries 6   2.4 Authorization 6   2.5 Valid Issuance of Series B Securities
7   2.6 Governmental Consents and Filings 7   2.7 Litigation 7   2.8 and
Compliance with Laws 7   2.9 Intellectual Property 8   2.10 Compliance with
Other Instruments 9   2.11 Agreements; Actions 9   2.12 Certain Transactions 10
  2.13 Rights of Registration and Voting Rights 10   2.14 Property 10   2.15
Financial Statements 10   2.16 Changes 11   2.17 Employee Matters 12   2.18 Tax
Returns and Payments 13   2.19 Insurance 13   2.20 Employee Agreements 13   2.21
Permits 14   2.22 Corporate Documents 14   2.23 83(b) Elections 14   2.24
Environmental and Safety Laws 14   2.25 Data Privacy 14   2.26 Preclinical
Development and Clinical Trials 15   2.27 FDA Approvals 15   2.28 Purchase
Entirely for Own Account 15   2.32 Accredited Investor 17         3.
Representations and Warranties of the Purchaser 17   3.1 Authorization 18   3.2
Valid Issuance of Purchase Common Stock 18   3.3 Governmental Consents and
Filings 18   3.4 Litigation 18   3.5 SEC Documents 18   3.6 Purchaser Financial
Statements 19   3.7 Tax Returns and Payments 19

 

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TABLE OF CONTENTS
(continued)

Page

 

  3.8 Purchase Entirely for Own Account 19   3.9 Disclosure of Information 19  
3.10 Restricted Securities 19   3.11 No Public Market 20   3.12 Legends 20  
3.13 Accredited Investor 20   3.14 No General Solicitation 20   3.15 Residence
20         4. Conditions to the Purchaser’s Obligations at Closing 21   4.1
Representations and Warranties 21   4.2 Performance 21   4.3 Compliance
Certificate 21   4.4 Qualifications 21   4.5 Board of Directors 21   4.6
Investors’ Rights Agreement 21   4.7 Right of First Refusal and Co-Sale
Agreement 21   4.8 Voting Agreement 21   4.9 Letter Agreement 21   4.10 Restated
Certificate 22   4.11 Secretary’s Certificate 22   4.12 Proceedings and
Documents 22   4.13 Preemptive Rights 22         5. Conditions of the Company’s
Obligations at Closing 22   5.1 Representations and Warranties 22   5.2
Performance 22   5.3 Qualifications 22   5.4 Investors’ Rights Agreement 22  
5.5 Right of First Refusal and Co-Sale Agreement 23   5.6 Voting Agreement 23  
5.7 Letter Agreement 23   5.8 Secretary’s Certificate 23   5.9 Compliance
Certificate 23         6. Miscellaneous 23   6.1 Survival of Warranties 23   6.2
Successors and Assigns 23   6.3 Governing Law 23   6.4 Counterparts 23   6.5
Titles and Subtitles 23   6.6 Notices 23   6.7 No Finder’s Fees 24   6.8 Fees
and Expenses 24   6.9 Attorneys’ Fees 24   6.10 Amendments and Waivers 24   6.11
Severability 24   6.12 Delays or Omissions 24

  

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TABLE OF CONTENTS
(continued)

 

Page

 

  6.13 Entire Agreement 25   6.14 Termination of Closing Obligations 25   6.15
Dispute Resolution 25

 

Exhibit A - FORM OF SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION    
Exhibit B - FORM OF NOTE     Exhibit C - FORM OF WARRANT     Exhibit D - COMPANY
DISCLOSURE SCHEDULE     Exhibit E - PURCHASER DISCLOSURE SCHEDULE     Exhibit F
- FORM OF INVESTORS’ RIGHTS AGREEMENT     Exhibit G - Form of Right of First
Refusal and Co-Sale Agreement     Exhibit H - FORM OF VOTING AGREEMENT    
Exhibit I - FORM OF LETTER AGREEMENT     Exhibit J - FORM OF SECURITY AGREEMENT

 

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SERIES B PREFERRED SECURITIES PURCHASE AGREEMENT

 

THIS SERIES B PREFERRED SECURITIES PURCHASE AGREEMENT (this “Agreement”), is
made as of December 3, 2019 by and among Panacea Life Sciences, Inc., a Colorado
corporation (the “Company”), and 22nd Century Group, Inc., a Nevada corporation
(the “Purchaser”).

 

The parties hereby agree as follows:

 

1.  Purchase and Sale of Preferred Stock, Convertible Note and Warrant.

 

1.1  Sale and Issuance of Preferred Stock Convertible Note and Warrant.

 

(a)  The Company shall adopt and file with the Secretary of State of the State
of Colorado on or before the Initial Closing (as defined below) the Second
Amended and Restated Articles of Incorporation in the form of Exhibit A attached
to this Agreement (the “Restated Certificate”).

 

(b)  Subject to the terms and conditions of this Agreement, the Purchaser agrees
to purchase at the Initial Closing and the Company agrees to sell and issue to
the Purchaser at the Initial Closing 3,733,334 shares (the “Initial Shares”) of
Series B Preferred Stock, $0.01 par value per share (the “Series B Preferred
Stock”), at a purchase price of $1.875 per share (the “Series B Original Issue
Price”). The shares of Series B Preferred Stock issued to the Purchaser pursuant
to this Agreement (including the Initial Shares, the Milestone Shares (as
defined below), the Warrant Shares (as defined below) and the Conversion Shares,
(as defined below) shall be referred to in this Agreement as the “Shares.”

 

(c)  Subject to the terms and conditions of this Agreement, the Purchaser agrees
to purchase at the Initial Closing and the Company agrees to sell and issue to
the Purchaser, a secured convertible promissory note in the form of Exhibit B
hereto (the “Note”) in the principal amount of $7,000,000, which Note is
convertible into 3,733,334 shares of Series B Preferred Stock, subject to
adjustment as provided in the Note (the “Conversion Shares”).

 

(d)  The Company shall issue to the Purchaser a warrant, in substantially the
form of Exhibit C, (a “Series B Warrant”), for the purchase of shares (the
“Warrant Shares”) of Series B Preferred Stock which shall be exercisable at a
price per share equal to $2.344, subject to adjustment as provided in the Series
B Warrant.

 

1.2  Closing; Delivery.

 

(a)  The initial purchase and sale of the Initial Shares, the Series B Warrant
and the Notes shall take place remotely via the exchange of documents and
signatures on the date hereof, or at such other time and place as the Company
and the Purchaser mutually agree upon, orally or in writing (which time and
place are designated as the “Initial Closing”).

 

 

 

 

(b)  At the Initial Closing, the Company shall deliver to the Purchaser a
certificate representing the Initial Shares, the Note and the Series B Warrant
against payment of the purchase price therefor as follows: (i) $12 million by
wire transfer to a bank account designated by the Company, and (ii) the issuance
by the Purchaser of a number of shares of Purchaser’s common stock, $0.00001 par
value per share (the “Purchaser Common Stock”) equal to the quotient of
$2,000,000 divided by the 30-day VWAP ending on the date of the Initial Closing;
provided that the 30-day VWAP shall not be less than $1.00.

 

1.3  Sale of Milestone Shares of Preferred Stock.

 

(a)  After the Initial Closing, the Company shall sell, and the Purchaser shall
purchase, on the same terms and conditions as those contained in this Agreement,
5,333,334 additional shares of Series B Preferred Stock (the “Milestone Shares”)
at the Series B Original Issue Price per share, upon the certification by the
Board (including the director appointed by the Purchaser) that the Company has
achieved at least an aggregate of $20,000,000 in gross revenues (calculated in
accordance with GAAP (as defined below)) for any twelve (12) consecutive month
period following the Initial Closing (the “Milestone Event”). The date of the
purchase and sale of the Milestone Shares are referred to in this Agreement as
the “Milestone Closing” which such closing shall occur upon, or a reasonable
time after, the Milestone Event.

 

(b)  At the Milestone Closing, the Company shall deliver to the Purchaser a
certificate representing the Milestone Shares against payment of the purchase
price therefor as follows: (i) $8,500,000 by wire transfer to a bank account
designated by the Company, and (ii) the issuance by the Purchaser of a number of
shares of Purchaser Common Stock equal to the quotient of $1,500,000 divided by
the 30-day VWAP ending on the date of the Milestone Closing; provided that the
30-day VWAP shall not be less than $1.00.

 

1.4  Use of Proceeds. In accordance with the directions of the Board of
Directors of the Company (the “Board”), as it shall be constituted in accordance
with the Voting Agreement, the Company will use the proceeds from the sale of
the Initial Shares, the Milestone Shares, the Note and the Conversion Shares for
(i) the repayment of up to $5,000,000 in aggregate principal amount of
indebtedness of the Company held by Quintel and (ii) product development,
limited research studies as mutually agreed between the parties, sales and
marketing investments, capital investments, working capital and other general
corporate purposes, but excluding distributions to stockholders, repurchases of
securities (except as in (ii) above) and acquisitions.

 

1.5  Defined Terms Used in this Agreement. In addition to the terms defined
above, the following terms used in this Agreement shall be construed to have the
meanings set forth or referenced below.

 

(a)  “30-day VWAP” means, as of any date, the volume weighted average price per
share of the Purchaser Common Stock on the Principal Trading Market (as reported
by Bloomberg L.P. (or its successor) or, if not available, by another
authoritative source mutually agreed by the Company and the Purchaser) from 9:30
a.m. (New York City time) on the Trading Day that is thirty (30) Trading Days
preceding such date to 4:00 p.m. (New York City time) on the last Trading Day
immediately preceding such date.

 

(b)  “Affiliate” means, with respect to any specified Person, any other Person
who, directly or indirectly, controls, is controlled by, or is under common
control with such Person, including, without limitation, any general partner,
managing member, officer, director or trustee of such Person, or any venture
capital fund or registered investment company now or hereafter existing that is
controlled by one or more general partners, managing members or investment
advisers of, or shares the same management company or investment adviser with,
such Person.

  

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(c)  “Closing” means either the Initial Closing or the Milestone Closing, as
applicable.

 

(d)  “Code” means the Internal Revenue Code of 1986, as amended.

 

(e)  “Company Intellectual Property” means all patents, patent applications,
registered and unregistered trademarks, trademark applications, registered and
unregistered service marks, service mark applications, tradenames, copyrights,
trade secrets, domain names, information and proprietary rights and processes,
similar or other intellectual property rights, subject matter of any of the
foregoing, tangible embodiments of any of the foregoing, licenses in, to and
under any of the foregoing, and any and all such cases that are owned or used by
the Company in the conduct of the Company’s business as now conducted and as
presently proposed to be conducted.

 

(f)   “Exchange Act” means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.

 

(g)  “Investors’ Rights Agreement” means the agreement among the Company and the
Purchaser and certain other stockholders of the Company dated as of the date of
the Initial Closing, in the form of Exhibit F attached to this Agreement.

 

(h)  “Key Employee” means (i) Leslie Buttorff, (ii) Jordan D. Buttorff, (iii)
Nick S. Buttorff, (iv) Nick J. Cavarra and (v) James Baumgartner.

 

(i)  “Knowledge” with respect to the Company, including the phrase “to the
Company’s knowledge” shall mean the actual and constructive knowledge of the Key
Employees, and “Knowledge” with respect to the Purchaser, including the phrase
“to the Purchaser’s knowledge” shall mean the actual and constructive knowledge
of the executive officers of the Purchaser.

 

(j)  “Letter Agreement” means the agreement, among the Company, the Key
Employees, Quintel and the Purchaser, in the form of Exhibit I attached to this
Agreement.

 

(k) “Material Adverse Effect” with respect to the Company, means a material
adverse effect on the business, assets (including intangible assets),
liabilities, financial condition, property, or results of operations of the
Company, and with respect to the Purchaser, means a material adverse effect on
the business, assets (including intangible assets), liabilities, financial
condition, property, or results of operations of the Purchaser.

 

(l)  “Person” means any individual, corporation, partnership, trust, limited
liability company, association or other entity.

 

(m)  “Preferred Stock” means the Company’s Series A Preferred Stock and Series B
Preferred Stock.

 

(n) “Principal Trading Market” means the trading market on which the Purchaser
Common Stock is primarily listed on and quoted for trading, and which, as of the
Issue Date is the NYSE American.

 

(o)  “Quintel” means Quintel-MC, Incorporated, a Colorado corporation.

 

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(p)  “Right of First Refusal and Co-Sale Agreement” means the agreement among
the Company, the Purchaser, and certain other stockholders of the Company, dated
as of the date of the Initial Closing, in the form of Exhibit G attached to this
Agreement.

 

(q)  “SEC” means the United States Securities and Exchange Commission.

 

(r)  “SEC Documents” means all forms, proxy statements, registration statements,
reports, schedules, and other documents filed, or required to be filed, by the
Purchaser with the SEC pursuant to the Securities Laws.

 

(s)  “Securities Act” means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

 

(t)  “Securities Laws” means the Securities Act and the Exchange Act and the
rules and regulations promulgated thereunder.

 

(u)  “Security Agreement” means the agreement among the Company and the
Purchaser, dated as of the date of the Initial Closing and securing the
obligations under the Notes in the form of Exhibit J attached to this Agreement.

 

(v)  “Series A Preferred Stock” means the Company’s Series A Preferred Stock,
$0.01 par value per share.

 

(w)  “Series B Securities” means the Initial Shares, Milestone Shares, Notes,
Conversion Shares, Series B Warrants and Warrant Shares.

 

(x)  “Shares” means the shares of Series B Preferred Stock issued at the Initial
Closing, any Milestone Shares issued at a Milestone Closing under Subsection
1.2(b), the Conversion Shares and the Warrant Shares.

 

(y)  “Trading Day” means a day on which the Principal Trading Market is open for
trading.

 

(z)  “Transaction Agreements” means this Agreement, the Note, the Series B
Warrant, the Security Agreement, the Investors’ Rights Agreement, the Right of
First Refusal and Co-Sale Agreement, Voting Agreement, the Letter Agreement and
any other agreements, instruments or documents entered into in connection with
this Agreement.

 

(aa)  “Voting Agreement” means the agreement among the Company, the Purchaser
and certain other stockholders of the Company, dated as of the date of the
Initial Closing, in the form of Exhibit H attached to this Agreement.

 

2.  Representations and Warranties of the Company. The Company hereby represents
and warrants to the Purchaser that, except as set forth on the Disclosure
Schedule attached as Exhibit D to this Agreement, which exceptions shall be
deemed to be part of the representations and warranties made hereunder, the
following representations are true and complete as of the date of the Initial
Closing, except as otherwise indicated. The Disclosure Schedule shall be
arranged in sections corresponding to the numbered and lettered sections and
subsections contained in this Section 2, and the disclosures in any section or
subsection of the Disclosure Schedule shall qualify other sections and
subsections in this Section 2 only to the extent it is readily apparent from a
reading of the disclosure that such disclosure is applicable to such other
sections and subsections.3

 

 

 

3 NTD: All reps and warranties subject to further diligence review.

 

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For purposes of these representations and warranties (other than those in
Subsections 2.2, 2.3, 2.4, 2.5, and 2.6), the term the “Company” shall include
any subsidiaries of the Company, unless otherwise noted herein.

 

2.1  Organization, Good Standing, Corporate Power and Qualification. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Colorado and has all requisite corporate power and
authority to carry on its business as now conducted and as presently proposed to
be conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a
Material Adverse Effect.

 

2.2  Capitalization.

 

(a)  The authorized capital of the Company consists, as of the adoption and
filing of the Restated Certificate with the Secretary of State of the State of
Colorado, of:

 

(i)  (i) 33,930,000 shares of common stock, $0.01 par value per share (the
“Common Stock”), 18,404,331 shares of which are issued and outstanding
immediately prior to the Initial Closing. All of the outstanding shares of
Common Stock have been duly authorized, are fully paid and nonassessable and
were issued in compliance with all applicable federal and state securities laws.

 

(ii)  14,674,000 shares of Preferred Stock, of which (A) 13,174,000 shares have
been designated Series B Preferred Stock, none of which are issued and
outstanding immediately prior to the Initial Closing and (B) 1,500,000 shares
have been designated Series A Preferred Stock, 1,500,000 of which are issued and
outstanding immediately prior to the Initial Closing. The rights, privileges and
preferences of the Preferred Stock are as stated in the Restated Certificate and
as provided by the Colorado Business Corporation Act.

 

(b)  The Company has reserved 3,235,000 shares of Common Stock for issuance to
officers, directors, employees and consultants of the Company pursuant to its
2017 Equity Incentive Plan duly adopted by the Board of Directors and approved
by the Company stockholders (the “Stock Plan”). Of such reserved shares of
Common Stock, 1,345,000 shares have been issued pursuant to restricted stock
purchase agreements, options to purchase 844,002 shares have been granted and
are currently outstanding, and 1,045,998 shares of Common Stock remain available
for issuance to officers, directors, employees and consultants pursuant to the
Stock Plan. The Company has furnished to the Purchaser complete and accurate
copies of the Stock Plan and forms of agreements used thereunder.

 

(c)  Except for (A) the conversion or exercise privileges of the Series B
Securities to be issued under this Agreement, (B) the rights provided in Section
4 of the Investors’ Rights Agreement, and (C) the securities and rights
described in Subsections 2.2(a)(ii) and 2.2(b) of this Agreement and Subsection
2.2(b) of the Disclosure Schedule, there are no outstanding options, warrants,
rights (including conversion or preemptive rights and rights of first refusal or
similar rights) or agreements, orally or in writing, to purchase or acquire from
the Company any shares of Common Stock or Preferred Stock, or any securities
convertible into or exchangeable for shares of Common Stock or Preferred Stock.
All outstanding shares of the Company’s Common Stock and all shares of the
Company’s Common Stock underlying outstanding options are subject to (i) a right
of first refusal in favor of the Company upon any proposed transfer (other than
transfers for estate planning purposes); and (ii) a lock-up or market standoff
agreement of not less than one hundred eighty (180) days following the Company’s
initial public offering pursuant to a registration statement filed with the
Securities and Exchange Commission under the Securities Act. No person or entity
(x) has been granted full ratchet, formula adjustment, or any other type of,
protection against dilution of their ownership interest in the Company, (y) has
been granted rights to receive the same or better rights in connection with any
ownership interest in the Company as any other person or entity may receive
either pursuant to this Agreement or at any time hereafter or (z) have been
granted rights of redemption by the Company. No full ratchet, formula
adjustment, or any other type of, protection against dilution of any ownership
interest in the Company has been triggered, nor will be triggered by the
transactions provided for in this Agreement.

 

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(d)  None of the Company’s restricted stock award agreements under the Stock
Plan contains a provision for acceleration of vesting (or lapse of a repurchase
right) or other changes in the vesting provisions or other terms of such
agreement or understanding upon the occurrence of any event or combination of
events, including without limitation in the case where the Company’s Stock Plan
is not assumed in an acquisition. The Company’s stock option agreements under
the Stock Plan contain “double-trigger” vesting acceleration upon the occurrence
of both (i) a change of control of the Company and (ii) a termination of
employment without cause within 12 months of a change of control. The Company
has never adjusted or amended the exercise price of any stock options previously
awarded, whether through amendment, cancellation, replacement grant, repricing,
or any other means. Except as set forth in the Restated Certificate, the Company
has no obligation (contingent or otherwise) to purchase or redeem any of its
capital stock.

 

(e)  409A. The Company believes in good faith that any “nonqualified deferred
compensation plan” (as such term is defined under Section 409A(d)(1) of the Code
and the guidance thereunder) under which the Company makes, is obligated to make
or promises to make, payments (each, a “409A Plan”) complies in all material
respects, in both form and operation, with the requirements of Section 409A of
the Code and the guidance thereunder. To the knowledge of the Company, no
payment to be made under any 409A Plan is, or will be, subject to the penalties
of Section 409A(a)(1) of the Code.

 

(f)  The Company has obtained valid waivers of any rights by other parties to
purchase any of the Series B Securities covered by this Agreement.

 

2.3  Subsidiaries. The Company does not currently own or control, directly or
indirectly, any interest in any other corporation, partnership, trust, joint
venture, limited liability company, association, or other business entity. The
Company is not a participant in any joint venture, partnership or similar
arrangement.

 

2.4  Authorization. All corporate action required to be taken by the Board and
stockholders in order to authorize the Company to enter into the Transaction
Agreements, and to issue the Series B Securities at the Initial Closing and the
Milestone Closing and the Preferred Stock or Common Stock issuable upon
conversion or exercise of the Series B Securities, has been taken or will be
taken prior to the Initial Closing. All action on the part of the officers of
the Company necessary for the execution and delivery of the Transaction
Agreements, the performance of all obligations of the Company under the
Transaction Agreements to be performed as of the Initial Closing and/or the
Milestone Closing, and the issuance and delivery of the Series B Securities has
been taken or will be taken prior to the Initial Closing. The Transaction
Agreements, when executed and delivered by the Company, shall constitute valid
and legally binding obligations of the Company, enforceable against the Company
in accordance with their respective terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or
other laws of general application relating to or affecting the enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies, or (iii) to the extent the indemnification provisions contained in the
Investors’ Rights Agreement may be limited by applicable federal or state
securities laws.

 

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2.5  Valid Issuance of Series B Securities. (i) The Initial Shares and the
Milestone Shares, when issued, sold and delivered in accordance with the terms
and for the consideration set forth in this Agreement, (ii) the Warrant Shares,
when issued upon exercise of the Series B Warrant in accordance with its terms,
(iii) the Conversion Shares, when issued upon conversion of the Note in
accordance with its terms, and (iv) the Common Stock, when issued upon
conversion of the Initial Shares, the Milestone Shares, the Warrant Shares and
the Conversion Shares in accordance with the Restated Certificate, will be
validly issued, fully paid and nonassessable and free of restrictions on
transfer other than restrictions on transfer under the Transaction Agreements,
applicable state and federal securities laws and liens or encumbrances created
by or imposed by the Purchaser. Assuming the accuracy of the representations of
the Purchaser in Section 3 of this Agreement and subject to the filings
described in the Voting Agreement, the Series B Securities will be issued in
compliance with all applicable federal and state securities laws. The Preferred
Stock or Common Stock issuable upon conversion or exercise of the Note, Warrant,
Initial Shares, Conversion Shares and Milestone Shares has been duly reserved
for issuance, and upon issuance in accordance with the terms of the Restated
Certificate, will be validly issued, fully paid and nonassessable and free of
restrictions on transfer other than restrictions on transfer under the
Transaction Agreements, applicable federal and state securities laws and liens
or encumbrances created by or imposed by the Purchaser. Based in part upon the
representations of the Purchaser in Section 3 of this Agreement and in the
Voting Agreement, the Common Stock issuable upon the conversion or exercise of
the Series B Securities will be issued in compliance with all applicable federal
and state securities laws. No “bad actor” disqualifying event described in Rule
506(d)(1)(i)-(viii) of the Securities Act is applicable to the Company or, to
the Company’s knowledge, any person affiliated with the Company.

 

2.6  Governmental Consents and Filings. Assuming the accuracy of the
representations made by the Purchaser in Section 3 of this Agreement, no
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state or local
governmental authority is required on the part of the Company in connection with
the consummation of the transactions contemplated by this Agreement, except for
(i) the filing of the Restated Certificate, which will have been filed as of the
Initial Closing, and (ii) filings pursuant to Regulation D of the Securities
Act, and applicable state securities laws, which have been made or will be made
in a timely manner.

 

2.7  Litigation and Compliance with Laws. To the Company’s knowledge and to the
Knowledge of the Key Employees, neither the Company nor any of its Affiliates is
or in the past three (3) years has been in material violation of, or has been
charged with any violation of, any applicable law (excluding traffic violations
and other minor offenses). There is no claim, action, suit, proceeding,
arbitration, complaint, charge or investigation pending or, to the Company’s
knowledge, currently threatened (i) against the Company or any officer, director
or Key Employee of the Company; (ii) that questions the validity of the
Transaction Agreements or the right of the Company to enter into them, or to
consummate the transactions contemplated by the Transaction Agreements; or (iii)
that would reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect, nor does the Company have any knowledge of
any basis for the foregoing. Neither the Company nor, to the Company’s
knowledge, any of its officers, directors or Key Employees is a party or is
named as subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality (in the case of
officers, directors or Key Employees, such as would affect the Company). There
is no action, suit, proceeding or investigation by the Company pending or which
the Company intends to initiate. The foregoing includes, without limitation,
actions, suits, proceedings or investigations pending or threatened (or any
basis therefor known to the Company) involving the prior employment of any of
the Company’s employees, their services provided in connection with the
Company’s business, any information or techniques allegedly proprietary to any
of their former employers or their obligations under any agreements with prior
employers.

 

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2.9  Intellectual Property. The Company owns or possesses or, to the Company’s
knowledge, believes it can acquire on commercially reasonable terms sufficient
legal rights to all Company Intellectual Property without any conflict with, or
infringement of, the rights of others, including prior employees or consultants
with which any of them may be affiliated now or may have been affiliated in the
past. To the Company’s knowledge with respect to third-party patents,
trademarks, service marks and tradenames only, no product or service marketed or
sold (or proposed to be marketed or sold) by the Company violates or will
violate any license or infringes or will infringe any intellectual property
rights of any other party. Other than with respect to commercially available
software products under standard, non-negotiated, non-exclusive end-user object
code license agreements that are not incorporated into, or used in, the
Company’s products or services, there are no outstanding options, licenses,
agreements, claims, encumbrances or shared ownership interests of any kind
relating to the Company Intellectual Property, nor is the Company bound by or a
party to any options, licenses or agreements of any kind with respect to the
patents, trademarks, service marks, trade names, domain names, copyrights, trade
secrets, licenses, information, proprietary rights and processes of any other
Person. The Company has not received any communications alleging that the
Company has violated, or by conducting its business, would violate any of the
patents, trademarks, service marks, tradenames, domain names, copyrights, trade
secrets, mask works or other proprietary rights or processes of any other
Person, and the Company is not aware of any potential basis for such an
allegation or of any reason to believe that such an allegation may be
forthcoming. The Company has obtained and possesses valid licenses to use all of
the software programs present on the computers and other software-enabled
electronic devices that it owns or leases or that it has otherwise provided to
its employees for their use in connection with the Company’s business. To the
Company’s knowledge, it will not be necessary to use any inventions of any of
its employees or consultants (or Persons it currently intends to hire) made
prior to, or outside the scope of, their employment by or consulting
relationship with the Company, including prior employees or consultants with
which any of them may be affiliated now or may have been affiliated in the past.
Each current employee and consultant has assigned to the Company all
intellectual property rights he or she owns that are related to the Company’s
business as now conducted and as presently proposed to be conducted and all
intellectual property rights that he, she or it solely or jointly conceived,
reduced to practice, developed or made during the period of his, her or its
employment or consulting relationship with the Company that (a) relate, at the
time of conception, reduction to practice, development, or making of such
intellectual property right, to the Company’s business as then conducted or as
then proposed to be conducted, (b) were developed on any amount of the Company’s
time or with the use of any of the Company’s equipment, supplies, facilities or
information or (c) resulted from the performance of services for the Company.
Subsection 9 of the Disclosure Schedule lists all patents, patent applications,
registered trademarks, trademark applications, service marks, service mark
applications, tradenames, registered copyrights, and licenses to and under any
of the foregoing, in each case owned by the Company. For purposes of this
Subsection 2.9, the Company shall be deemed to have knowledge of a patent right
if the Company has actual knowledge of the patent right or would be found to be
on notice of such patent right as determined by reference to United States
patent laws. To the extent the Company uses any “open source” or “copyleft”
software in its products or services or is a party to “open” or “public source”
or similar licenses with respect to all or any part of its products or services
(each, an “Open Source License”), the Company is in compliance with the terms of
any such licenses, any such software and Open Source Licenses are listed on the
Disclosure Schedule, and the Company is not required (and, even if it
distributed its software, would not be required) under any such Open Source
License to (a) make or permit any disclosure or to make available any source
code for its (or any of its licensors’) proprietary software or (b) distribute
or make available any of the Company’s proprietary software or intellectual
property (or to permit any such distribution or availability). No government
funding, facilities of a university, college, other educational institution or
research center, or funding from third parties was used in the development of
any Company Intellectual Property. No Person who was involved in, or who
contributed to, the creation or development of any Company Intellectual
Property, has performed services for the government, university, college, or
other educational institution or research center in a manner that would affect
Company’s rights in the Company Intellectual Property.

 

 8 

 

 

2.10  Compliance with Other Instruments. The Company is not in violation or
default of any provisions of its Restated Certificate or Bylaws. The Company is
not in material violation or default (i) of any instrument, judgment, order,
writ or decree, (ii) under any note, indenture or mortgage, or (iii) under any
lease, agreement, privacy policy, contract or purchase order to which it is a
party or by which it is bound, or (iv) to its knowledge, of any provision of
federal or state statute, rule or regulation applicable to the Company
(including, without limitation, those related to food services, privacy,
personally identifiable information or export control). The execution, delivery
and performance of the Transaction Agreements and the consummation of the
transactions contemplated by the Transaction Agreements will not result in any
such violation or be in conflict with or constitute, with or without the passage
of time and giving of notice, either (X) a default under any such provision,
instrument, judgment, order, writ, decree, contract or agreement; or (Y) an
event which results in the creation of any lien, charge or encumbrance upon any
assets of the Company or the suspension, revocation, forfeiture, or nonrenewal
of any material permit or license applicable to the Company.

 

2.11  Agreements; Actions.

 

(a)  Except for the Transaction Agreements, there are no agreements,
understandings, instruments, contracts or proposed transactions to which the
Company is a party or by which it is bound that involve (i) obligations
(contingent or otherwise) of, or payments to, the Company in excess of $25,000,
(ii) the license or transfer of or other agreements regarding any patent,
copyright, trademark, trade secret or other proprietary right to or from the
Company, (iii) the grant of rights to manufacture, produce, assemble, license,
market, or sell its products or services to any other Person that limits the
Company’s exclusive right to develop, manufacture, assemble, distribute, market
or sell its products, or (iv) indemnification by the Company with respect to
infringements of proprietary rights. Collectively, all of the foregoing are
“Material Contracts.” All Material Contracts are valid, binding and enforceable
against the Company and, to the Company’s knowledge, against the other parties
thereto in accordance with their respective terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, or other laws of general application relating to or affecting the
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies. The Company is not in default under any Material Contract.

 

(b)  The Company has not (i) declared or paid any dividends, or authorized or
made any distribution upon or with respect to any class or series of its capital
stock, (ii) incurred any indebtedness for money borrowed or incurred any other
liabilities individually in excess of $100,000 or in excess of $200,000 in the
aggregate, (iii) made any loans or advances to any Person, other than ordinary
advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of
any of its assets or rights, other than the sale of its inventory in the
ordinary course of business. For the purposes of (a) and (b) of this
Subsection 2.11, all indebtedness, liabilities, agreements, understandings,
instruments, contracts and proposed transactions involving the same Person
(including Persons the Company has reason to believe are affiliated with each
other) shall be aggregated for the purpose of meeting the individual minimum
dollar amounts of such subsection.

 

(c)  The Company is not a guarantor or indemnitor of any indebtedness of any
other Person.

 

2.12  Certain Transactions.

 

(a)  Other than (i) standard employee benefits generally made available to all
employees, (ii) standard director and officer indemnification agreements
approved by the Board of Directors, and (iii) the purchase of shares of the
Company’s capital stock and the issuance of options to purchase shares of the
Company’s Common Stock, in each instance, approved in the written minutes of the
Board of Directors (previously provided to the Purchaser or their counsel),
there are no agreements, understandings or proposed transactions between the
Company and any of its officers, directors, consultants or Key Employees, or any
Affiliate thereof.

 

 9 

 

 

(b)  The Company is not indebted, directly or indirectly, to any of its
directors, officers or employees or to their respective spouses or children or
to any Affiliate of any of the foregoing, other than in connection with expenses
or advances of expenses incurred in the ordinary course of business or employee
relocation expenses and for other customary employee benefits made generally
available to all employees. None of the Company’s directors, officers or
employees, or any members of their immediate families, or any Affiliate of the
foregoing are, directly or indirectly, indebted to the Company or, to the
Company’s knowledge, have any (i) material commercial, industrial, banking,
consulting, legal, accounting, charitable or familial relationship with any of
the Company’s customers, suppliers, service providers, joint venture partners,
licensees and competitors, (ii) direct or indirect ownership interest in any
firm or corporation with which the Company is affiliated or with which the
Company has a business relationship, or any firm or corporation which competes
with the Company except that directors, officers, employees or stockholders of
the Company may own stock in (but not exceeding two percent (2%) of the
outstanding capital stock of) publicly traded companies that may compete with
the Company; or (iii) financial interest in any contract with the Company, other
than pursuant to employment agreements and awards under the Stock Plan.

 

2.13  Rights of Registration and Voting Rights. Except as provided in the
Investors’ Rights Agreement, the Company is not under any obligation to register
under the Securities Act any of its currently outstanding securities or any
securities issuable upon exercise or conversion of its currently outstanding
securities. To the Company’s knowledge, except as contemplated in the Voting
Agreement, no stockholder of the Company has entered into any agreements with
respect to the voting of capital shares of the Company.

 

2.14  Property. The property and assets that the Company owns are free and clear
of all mortgages, deeds of trust, liens, loans and encumbrances, except for
statutory liens for the payment of current taxes that are not yet delinquent and
encumbrances and liens that arise in the ordinary course of business and do not
materially impair the Company’s ownership or use of such property or assets.
With respect to the property and assets it leases, the Company is in compliance
with such leases and holds a valid leasehold interest free of any liens, claims
or encumbrances other than those of the lessors of such property or assets. The
Company does not own any real property.

 

2.15  Financial Statements. . The Company has delivered to the Purchaser its
unaudited financial statements (including balance sheet and income statement) as
of December 31, 2018 and for the fiscal year ended December 31, 2018 and its
unaudited financial statements (including balance sheet and income statement) as
of October 31, 2019 and for the interim period ended October 31, 2019
(collectively, the “Financial Statements”). The Financial Statements have been
prepared in accordance with generally accepted accounting principles (“GAAP”)
applied on a consistent basis throughout the periods indicated, except that the
unaudited Financial Statements may not contain all footnotes required by GAAP.
The Financial Statements fairly present in all material respects the financial
condition and operating results of the Company as of the dates, and for the
periods, indicated therein, subject in the case of the unaudited Financial
Statements to normal year-end audit adjustments. Except as set forth in the
Financial Statements, the Company has no material liabilities or obligations,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to September 30, 2019; (ii) obligations under
contracts and commitments incurred in the ordinary course of business; and (iii)
liabilities and obligations of a type or nature not required under GAAP to be
reflected in the Financial Statements, which, in all such cases, individually
and in the aggregate would not have a Material Adverse Effect. The Company
maintains and will continue to maintain a standard system of accounting
established and administered in accordance with GAAP.

 

 10 

 

 

2.16  Changes. Since October 31, 2019 there has not been:

 

(a)  any change in the assets, liabilities, financial condition or operating
results of the Company from that reflected in the Financial Statements, except
changes in the ordinary course of business that have not caused, in the
aggregate, a Material Adverse Effect;

 

(b)  any damage, destruction or loss, whether or not covered by insurance, that
would have a Material Adverse Effect;

 

(c)  any waiver or compromise by the Company of a valuable right or of a
material debt owed to it;

 

(d)  any satisfaction or discharge of any lien, claim, or encumbrance or payment
of any obligation by the Company, except in the ordinary course of business and
the satisfaction or discharge of which would not have a Material Adverse Effect;

 

(e)  any material change to a material contract or agreement by which the
Company or any of its assets is bound or subject;

 

(f)  any material change in any compensation arrangement or agreement with any
employee, officer, director or stockholder;

 

(g)  any resignation or termination of employment of any officer or Key Employee
of the Company;

 

(h)  any mortgage, pledge, transfer of a security interest in, or lien, created
by the Company, with respect to any of its material properties or assets, except
liens for taxes not yet due or payable and liens that arise in the ordinary
course of business and do not materially impair the Company’s ownership or use
of such property or assets;

 

(i)  any loans or guarantees made by the Company to or for the benefit of its
employees, officers or directors, or any members of their immediate families,
other than travel advances and other advances made in the ordinary course of its
business;

 

(j)  any declaration, setting aside or payment or other distribution in respect
of any of the Company’s capital stock, or any direct or indirect redemption,
purchase, or other acquisition of any of such stock by the Company;

 

(k)  any sale, assignment or transfer of any Company Intellectual Property that
could reasonably be expected to result in a Material Adverse Effect;

 

(l)  receipt of notice that there has been a loss of, or material order
cancellation by, any major customer of the Company;

 

 11 

 

 

(m)  to the Company’s knowledge, any other event or condition of any character,
other than events affecting the economy or the Company’s industry generally,
that could reasonably be expected to result in a Material Adverse Effect; or

 

(n)  any arrangement or commitment by the Company to do any of the things
described in this Subsection 2.16.

 

2.17  Employee Matters.

 

(a)  As of the date hereof, the Company employs 20 full-time employees and 4
part-time employees and engages 13 consultants or independent contractors.
Section 2.17(a) of the Disclosure Schedule sets forth a detailed description of
all compensation, including salary, bonus, severance obligations and deferred
compensation paid or payable for each officer, employee, consultant and
independent contractor of the Company who received compensation in excess of
$75,000 for the fiscal year ended December 31, 2018 or is anticipated to receive
compensation in excess of $75,000 for the fiscal year ending December 31, 2019.

 

(b)  To the Company’s knowledge, none of its employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would materially interfere with such employee’s
ability to promote the interest of the Company or that would conflict with the
Company’s business as presently conducted or as presently proposed to be
conducted. Neither the execution or delivery of the Transaction Agreements, nor
the carrying on of the Company’s business by the employees of the Company, nor
the conduct of the Company’s business as now conducted and as presently proposed
to be conducted, will, to the Company’s knowledge, conflict with or result in a
breach of the terms, conditions, or provisions of, or constitute a default
under, any contract, covenant or instrument under which any such employee is now
obligated.

 

(c)  The Company is not delinquent in payments to any of its employees,
consultants, or independent contractors for any wages, salaries, commissions,
bonuses, or other direct compensation for any service performed for it to the
date hereof or amounts required to be reimbursed to such employees, consultants
or independent contractors. The Company has complied in all material respects
with all applicable state and federal equal employment opportunity laws and with
other laws related to employment, including those related to wages, hours,
worker classification and collective bargaining. The Company has withheld and
paid to the appropriate governmental entity or is holding for payment not yet
due to such governmental entity all amounts required to be withheld from
employees of the Company and is not liable for any arrears of wages, taxes,
penalties or other sums for failure to comply with any of the foregoing.

 

(d)  To the Company’s knowledge, no Key Employee intends to terminate employment
with the Company or is otherwise likely to become unavailable to continue as a
Key Employee. The Company does not have a present intention to terminate the
employment of any of the foregoing. The employment of each employee of the
Company is terminable at the will of the Company. Except as set forth in
Subsection 2.16(d) of the Disclosure Schedule or as required by law, upon
termination of the employment of any such employees, no severance or other
payments will become due. Except as set forth in Subsection 2.16(d) of the
Disclosure Schedule, the Company has no policy, practice, plan or program of
paying severance pay or any form of severance compensation in connection with
the termination of employment services.

 

 12 

 

 

(e)  The Company has not made any representations regarding equity incentives to
any officer, employee, director or consultant that are inconsistent with the
share amounts and terms set forth in the minutes of meetings of the Board.

 

(f)  Subsection 2.17(f) of the Disclosure Schedule sets forth each employee
benefit plan maintained, established or sponsored by the Company, or which the
Company participates in or contributes to, which is subject to the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”). The Company has
made all required contributions and has no liability to any such employee
benefit plan, other than liability for health plan continuation coverage
described in Part 6 of Title I(B) of ERISA, and has complied in all material
respects with all applicable laws for any such employee benefit plan.

 

(g)  To the Company’s Knowledge, none of the Key Employees or directors of the
Company has been (a) convicted in a criminal proceeding or named as a subject of
a pending criminal proceeding (excluding traffic violations and other minor
offenses); (b) subject to any order, judgment or decree (not subsequently
reversed, suspended, or vacated) of any court of competent jurisdiction
permanently or temporarily enjoining him or her from engaging, or otherwise
imposing limits or conditions on his or her engagement in any securities,
investment advisory, banking, insurance, or other type of business or acting as
an officer or director of a public company; or (c) found by a court of competent
jurisdiction in a civil action or by the Securities and Exchange Commission or
the Commodity Futures Trading Commission to have violated any federal or state
securities, commodities, or unfair trade practices Law, which such judgment or
finding has not been subsequently reversed, suspended, or vacated.

 

2.18  Tax Returns and Payments. There are no federal, state, county, local or
foreign taxes due and payable by the Company which have not been timely paid.
There are no accrued and unpaid federal, state, country, local or foreign taxes
of the Company which are due, whether or not assessed or disputed. There have
been no examinations or audits of any tax returns or reports by any applicable
federal, state, local or foreign governmental agency. The Company has duly and
timely filed all federal, state, county, local and foreign tax returns required
to have been filed by it and there are in effect no waivers of applicable
statutes of limitations with respect to taxes for any year.

 

2.19  Insurance. The Company has in full force and effect insurance policies
concerning such casualties as would be reasonable and customary for companies
like the Company. with extended coverage, sufficient in amount (subject to
reasonable deductions) to allow it to replace any of its properties that might
be damaged or destroyed.

 

2.20  Employee Agreements. Each current and former employee, consultant and
officer of the Company has executed an agreement with the Company regarding
confidentiality and proprietary information in the form or forms delivered to
the counsel for the Purchaser (the “Confidential Information Agreements”). No
current employee, consultant or officer has excluded works or inventions or
other subject matter from his or her assignment of inventions pursuant to such
person’s Confidential Information Agreement. Each current employee has executed
a non-competition and non-solicitation agreement substantially in the form or
forms delivered to the counsel for the Purchaser. The Company is not aware that
any of its employees, consultants or officers is in violation of any agreement
covered by this Subsection 2.20, and the Company will use its commercially
reasonable efforts to prevent any such violation.

 

2.21  Permits. The Company has all franchises, permits, licenses and any similar
authority necessary for the conduct of its business, the lack of which could
reasonably be expected to have a Material Adverse Effect. The Company is not in
default in any material respect under any of such franchises, permits, licenses
or other similar authority.

 

 13 

 

 

2.22  Corporate Documents. The Restated Certificate and Bylaws of the Company
are in the form provided to the Purchaser. The copy of the minute books of the
Company provided to the Purchaser contains minutes of all meetings of directors
and stockholders and all actions by written consent without a meeting by the
directors and stockholders since the date of incorporation and accurately
reflects in all material respects all actions by the directors (and any
committee of directors) and stockholders with respect to all transactions
referred to in such minutes.

 

2.23  83(b) Elections. To the Company’s knowledge, all elections and notices
under Section 83(b) of the Code have been or will be timely filed by all
individuals who have acquired unvested shares of the Company’s Common Stock.

 

2.24  Environmental and Safety Laws. To its knowledge (a) the Company is and has
been in compliance with all Environmental Laws; (b) there has been no release or
to the Company’s knowledge threatened release of any pollutant, contaminant or
toxic or hazardous material, substance or waste or petroleum or any fraction
thereof (each a “Hazardous Substance”), on, upon, into or from any site
currently or heretofore owned, leased or otherwise used by the Company;
(c) there have been no Hazardous Substances generated by the Company that have
been disposed of or come to rest at any site that has been included in any
published U.S. federal, state or local “superfund” site list or any other
similar list of hazardous or toxic waste sites published by any governmental
authority in the United States; and (d) there are no underground storage tanks
located on, no polychlorinated biphenyls (“PCBs”) or PCB-containing equipment
used or stored on, and no hazardous waste as defined by the Resource
Conservation and Recovery Act, as amended, stored on, any site owned or operated
by the Company, except for the storage of hazardous waste in compliance with
Environmental Laws. The Company has made available to the Purchaser true and
complete copies of all material environmental records, reports, notifications,
certificates of need, permits, pending permit applications, correspondence,
engineering studies and environmental studies or assessments.

 

For purposes of this Subsection 2.24, “Environmental Laws” means any law,
regulation, or other applicable requirement relating to (a) releases or
threatened release of Hazardous Substance; (b) pollution or protection of
employee health or safety, public health or the environment; or (c) the
manufacture, handling, transport, use, treatment, storage, or disposal of
Hazardous Substances.

 

2.25  Data Privacy. In connection with its collection, storage, transfer
(including, without limitation, any transfer across national borders) and/or use
of any personally identifiable information from any individuals, including,
without limitation, any customers, prospective customers, employees and/or other
third parties (collectively “Personal Information”), the Company is and has been
in compliance with the Company’s privacy policies and the requirements of any
contract or codes of conduct to which the Company is a party and, to the
Company’s knowledge, all applicable laws in all relevant jurisdictions. The
Company has commercially reasonable physical, technical, organizational and
administrative security measures and policies in place to protect its
confidential information and all Personal Information collected by it or on its
behalf from and against unauthorized access, use and/or disclosure. To the
extent the Company maintains or transmits protected health information, as
defined under 45 C.F.R. § 160.103, the Company is in compliance with the
applicable requirements of the Health Insurance Portability and Accountability
Act of 1996, as amended by the Health Information Technology for Economic and
Clinical Health Act, including all rules and regulations promulgated thereunder.
The Company is and has been in compliance in all material respects with all laws
relating to data loss, theft and breach of security notification obligations.

 

 14 

 

 

2.26  Preclinical Development and Clinical Trials. The studies, tests,
preclinical development and clinical trials, if any, conducted by or on behalf
of the Company are being conducted in all material respects in accordance with
experimental protocols, procedures and controls pursuant to accepted
professional and scientific standards for products or product candidates
comparable to those being developed by the Company and all applicable laws and
regulations, including the Federal Food, Drug, and Cosmetic Act and 21 C.F.R.
parts 50, 54, 56, 58, 312, and 812. The descriptions of, protocols for, and data
and other results of, the studies, tests, development and trials conducted by or
on behalf of the Company that have been furnished or made available to the
Purchaser are accurate and complete. The Company is not aware of any studies,
tests, development or trials the results of which reasonably call into question
the results of the studies, tests, development and trials conducted by or on
behalf of the Company, and the Company has not received any notices or
correspondence from the FDA or any other Governmental Entity or any
Institutional Review Board or comparable authority requiring the termination,
suspension or material modification of any studies, tests, preclinical
development or clinical trials conducted by or on behalf of the Company.

 

2.27  FDA Approvals. The Company possesses all permits, licenses, registrations,
certificates, authorizations, orders and approvals from the appropriate federal,
state or foreign regulatory authorities necessary to conduct its business as now
conducted, including all such permits, licenses, registrations, certificates,
authorizations, orders and approvals required by the U.S. Food and Drug
Administration (“FDA”) or any other federal, state or foreign agencies or bodies
engaged in the regulation of drugs, pharmaceuticals, medical devices or
biohazardous materials. The Company has not received any notice of proceedings
relating to the suspension, modification, revocation or cancellation of any such
permit, license, registration, certificate, authorization, order or approval.
Neither the Company nor, to the Company's knowledge, any officer, employee or
agent of the Company has been convicted of any crime or engaged in any conduct
that has previously caused or would reasonably be expected to result in (A)
disqualification or debarment by the FDA under 21 U.S.C. Sections 335(a) or (b),
or any similar law, rule or regulation of any other Governmental Entities, (B)
debarment, suspension, or exclusion under any Federal Healthcare Programs or by
the General Services Administration, or (C) exclusion under 42 U.S.C. Section
1320a-7 or any similar law, rule or regulation of any Governmental Entities.
Neither the Company nor any of its officers, employees, or to the Knowledge of
the Company, any of its contractors or agents is the subject of any pending or
threatened investigation by FDA pursuant to its “Fraud, Untrue Statements of
Material Facts, Bribery, and Illegal Gratuities” policy as stated at 56 Fed.
Reg. 46191 (September 10, 1991) (the “FDA Application Integrity Policy”) and any
amendments thereto, or by any other similar Governmental Entity pursuant to any
similar policy. Neither the Company nor any of its officers, employees,
contractors, and agents has committed any act, made any statement or failed to
make any statement that would reasonably be expected to provide a basis for FDA
to invoke the FDA Application Integrity Policy or for any similar governmental
entity to invoke a similar policy. Neither the Company nor any of its officers,
employees, or to the Company’s Knowledge, any of its contractors or agents has
made any materially false statements on, or material omissions from, any
notifications, applications, approvals, reports and other submissions to FDA or
any similar governmental entity.

 

2.28  Purchase Entirely for Own Account. This Agreement is made with the Company
in reliance upon the Company’s representation to the Purchaser, which by the
Company’s execution of this Agreement, the Company hereby confirms, that the
Purchaser Common Stock to be acquired by the Company will be acquired for
investment for the Company’s own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that the
Company has no present intention of selling, granting any participation in, or
otherwise distributing the same (other than to an Affiliate of the Company). By
executing this Agreement, the Company further represents that the Company does
not presently have any contract, undertaking, agreement or arrangement with any
Person to sell, transfer or grant participations to such Person or to any third
Person, with respect to any of the Purchaser Common Stock, other than to an
Affiliate of the Company.

 

 15 

 

 

2.29  Disclosure of Information. The Company has had an opportunity to discuss
the Purchaser’s business, management, financial affairs and the terms and
conditions of the offering of the Purchaser Common Stock with the Purchaser’s
management. The foregoing, however, does not limit or modify the representations
and warranties of the Purchaser in Section 3 of this Agreement or the right of
the Company to rely thereon.

 

2.30  Restricted Securities. The Company understands that the Purchaser Common
Stock has not been, and will not be, registered under the Securities Act, by
reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Company’s representations as
expressed herein. The Company understands that the Purchaser Common Stock is
“restricted securities” under applicable U.S. federal and state securities laws
and that, pursuant to these laws, the Company must hold the Purchaser Common
Stock indefinitely unless they are registered with the Securities and Exchange
Commission and qualified by state authorities, or an exemption from such
registration and qualification requirements is available. The Company
acknowledges that the Purchaser has no obligation to register or qualify the
Purchaser Common Stock for resale; provided that, to the extent the Purchaser
Common Stock is eligible for resale pursuant to Rule 144 under the Securities
Act (“Rule 144”), the Purchaser shall use commercially reasonable efforts to
facilitate the Company’s or any Company Affiliate’s resale of the Purchase
Common Stock pursuant to Rule 144, including by instructing the Purchaser’s
transfer agent to take any steps necessary to facilitate such resale. The
Company further acknowledges that if an exemption from registration or
qualification is available, it may be conditioned on various requirements
including, but not limited to, the time and manner of sale, the holding period
for the Purchaser Common Stock, and on requirements relating to the Purchaser
which are outside of the Company’s control, and which the Purchaser is under no
obligation and may not be able to satisfy.

 

2.31  Legends. The Company understands that the Purchaser Common Stock may be
notated with one or all of the following legends:

 

“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

 

(a)  Any legend set forth in, or required by, the other Transaction Agreements.

 

(b)  Any legend required by the securities laws of any state to the extent such
laws are applicable to the Purchaser Common Stock represented by the
certificate, instrument, or book entry so legended.

 

2.32  Accredited Investor. The Company is an accredited investor as defined in
Rule 501(a) of Regulation D promulgated under the Securities Act.

 

2.33  No General Solicitation. Neither the Company, nor any of its officers,
directors, employees, agents, stockholders or partners has either directly or
indirectly, including, through a broker or finder (a) engaged in any general
solicitation, or (b) published any advertisement in connection with the offer
and sale of the Purchaser Common Stock.

 

 16 

 

 

2.34  Residence. The office of the Company in which its principal place of
business is identified in the address or addresses of the Company set forth on
signature page hereto.

 

2.35 Obligations of Management. Except as set forth on Section 2.35 of the
Disclosure Schedule, each officer of the Company and Key Employee is currently
devoting all of his or her business time to the conduct of the business of the
Company, and is not devoting any business time to the conduct of any other
business. The Company does not have any Knowledge that any officer of the
Company or Key Employee is planning to work less than full time at the Company
in the future. No officer or Key Employee is currently working for or, to the
Company’s Knowledge, plans to work for a competitive enterprise, whether or not
such officer or Key Employee is or will be compensated by such enterprise.

 

2.36 Foreign Corrupt Practices Act. Neither the Company nor any of the Company’s
directors, officers, employees or agents have, directly or indirectly, made,
offered, promised or authorized any payment or gift of any money or anything of
value to or for the benefit of any “foreign official” (as such term is defined
in the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”)),
foreign political party or official thereof or candidate for foreign political
office for the purpose of (i) influencing any official act or decision of such
official, party or candidate, (ii) inducing such official, party or candidate to
use his, her or its influence to affect any act or decision of a foreign
governmental authority, or (iii) securing any improper advantage, in the case of
(i), (ii) and (iii) above in order to assist the Company or any of its
affiliates in obtaining or retaining business for or with, or directing business
to, any person. Neither the Company nor any of its directors, officers,
employees or agents have made or authorized any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment of funds or received or retained any
funds in violation of any law, rule or regulation. The Company further
represents that it has maintained, and has caused each of its subsidiaries and
affiliates to maintain, systems of internal controls (including, but not limited
to, accounting systems, purchasing systems and billing systems) to ensure
compliance with the FCPA or any other applicable anti-bribery or anti-corruption
law. Neither the Company, or, to the Company’s Knowledge, any of its officers,
directors or employees are the subject of any allegation, voluntary disclosure,
investigation, prosecution or other enforcement action related to the FCPA or
any other anti-corruption law.

 

2.37 Disclosure. The Company has made available to the Purchaser all the
information reasonably available to the Company that the Purchaser has requested
for deciding whether to acquire the Series B Securities. No representation or
warranty of the Company contained in this Agreement, as qualified by the Company
Disclosure Schedule, and no certificate furnished or to be furnished to
Purchaser at the Closing contains or will contain, as applicable, any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading in light
of the circumstances under which they were made. It is understood that this
representation is qualified by the fact that the Company has not delivered to
the Purchaser, and has not been requested to deliver, a private placement or
similar memorandum or any written disclosure of the types of information
customarily furnished to purchasers of securities.

 

3.  Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Company that, except (i) as set forth on the
Disclosure Schedule attached as Exhibit E to this Agreement, and (ii) as set
forth in the SEC Documents, which in each case exceptions shall be deemed to be
part of the representations and warranties made hereunder, the following
representations are true and complete as of the date of the Initial Closing,
except as otherwise indicated. The Disclosure Schedule shall be arranged in
sections corresponding to the numbered and lettered sections and subsections
contained in this Section 3 and the disclosures in any section or subsection of
the Disclosure Schedule shall qualify other sections and subsections in this
Section 3 only to the extent it is readily apparent from a reading of the
disclosure that such disclosure is applicable to such other sections and
subsections.

 

 17 

 

 

3.1  Authorization. The Purchaser has full power and authority to enter into the
Transaction Agreements. The Transaction Agreements to which the Purchaser is a
party, when executed and delivered by the Purchaser, will constitute valid and
legally binding obligations of the Purchaser, enforceable in accordance with
their terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and any other laws of general
application affecting enforcement of creditors’ rights generally, and as limited
by laws relating to the availability of specific performance, injunctive relief
or other equitable remedies, or (b) to the extent the indemnification provisions
contained in the Investors’ Rights Agreement may be limited by applicable
federal or state securities laws.

 

3.2  Valid Issuance of Purchase Common Stock. The Purchaser Common Stock, when
issued, sold and delivered in accordance with the terms and for the
consideration set forth in the Transaction Agreements, will be validly issued,
fully paid and nonassessable and free of restrictions on transfer other than
restrictions on transfer under the Transaction Agreements and applicable state
and federal securities laws. Assuming the accuracy of the representations of the
Company in Section 2 of this Agreement, the Purchaser Common Stock will be
issued in compliance with all applicable federal and state securities laws.

 

3.3  Governmental Consents and Filings. Except as set forth in Subsection 3.3 of
the Disclosure Schedule, assuming the accuracy of the representations made by
the Company in Section 2 of this Agreement, no consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority is required on
the part of the Purchaser in connection with the consummation of the
transactions contemplated by this Agreement, except for the filings pursuant to
Regulation D of the Securities Act, and applicable state securities laws, which
have been made or will be made in a timely manner.

 

3.4  Litigation. There is no claim, action, suit, proceeding, arbitration,
complaint, charge or investigation pending or currently threatened (i) against
the Purchaser or any officer or director of the Purchaser; (ii) that questions
the validity of the Transaction Agreements or the right of the Company to enter
into them, or to consummate the transactions contemplated by the Transaction
Agreements; or (iii) that would reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect, nor is the
Purchaser aware of any basis for the foregoing. Neither the Purchaser nor, to
the Purchaser’s knowledge, any of its officers or directors is a party or is
named as subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality (in the case of
officers or directors, such as would affect the Purchaser). There is no action,
suit, proceeding or investigation by the Purchaser pending or which the
Purchaser intends to initiate. The foregoing includes, without limitation,
actions, suits, proceedings or investigations pending or threatened (or any
basis therefor known to the Purchaser) involving the prior employment of any of
the Purchaser’s employees, their services provided in connection with the
Purchaser’s business, any information or techniques allegedly proprietary to any
of their former employers or their obligations under any agreements with prior
employers.

 

3.5  SEC Documents. The Purchaser has filed all required SEC Documents required
to be filed by it with the SEC since January 1, 2018. As of their respective
dates, the SEC Documents (a) were prepared in accordance and complied in all
material respects with the requirements of the Securities Laws applicable to
such SEC Documents, and (b) did not at the time they were filed (or if amended
or superseded by a filing prior to the date of this Agreement then on the date
of such filing) contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of the Purchaser’s subsidiaries is required to file
any forms, reports or other documents with the SEC.

 

3.6  Purchaser Financial Statements. The financial statements of the Purchaser
included in the SEC Documents (the “Purchaser Financial Statements”) comply as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. The Purchaser
Financial Statements have been prepared in accordance with generally accepted
accounting principles (“GAAP”) applied on a consistent basis throughout the
periods indicated, except that the unaudited Financial Statements may not
contain all footnotes required by GAAP. The Financial Statements fairly present
in all material respects the financial condition and operating results of the
Purchaser as of the dates, and for the periods, indicated therein, subject in
the case of the unaudited Purchaser Financial Statements to normal year-end
audit adjustments.

 

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3.7  Tax Returns and Payments. There are no federal, state, county, local or
foreign taxes due and payable by the Purchaser which have not been timely paid.
There are no accrued and unpaid federal, state, country, local or foreign taxes
of the Purchaser which are due, whether or not assessed or disputed. There have
been no examinations or audits of any tax returns or reports by any applicable
federal, state, local or foreign governmental agency. The Purchaser has duly and
timely filed all federal, state, county, local and foreign tax returns required
to have been filed by it and there are in effect no waivers of applicable
statutes of limitations with respect to taxes for any year.

 

3.8  Purchase Entirely for Own Account. This Agreement is made with the
Purchaser in reliance upon the Purchaser’s representation to the Company, which
by the Purchaser’s execution of this Agreement, the Purchaser hereby confirms,
that the Series B Securities to be acquired by the Purchaser will be acquired
for investment for the Purchaser’s own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and that the
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, the Purchaser
further represents that the Purchaser does not presently have any contract,
undertaking, agreement or arrangement with any Person to sell, transfer or grant
participations to such Person or to any third Person, with respect to any of the
Series B Securities. The Purchaser has not been formed for the specific purpose
of acquiring the Series B Securities.

 

3.9  Disclosure of Information. The Purchaser has had an opportunity to discuss
the Company’s business, management, financial affairs and the terms and
conditions of the offering of the Series B Securities with the Company’s
management and has had an opportunity to review the Company’s facilities. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 2 of this Agreement or the right of the Purchaser to
rely thereon.

 

3.10  Restricted Securities. The Purchaser understands that the Series B
Securities have not been, and will not be, registered under the Securities Act,
by reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Purchaser’s representations as
expressed herein. The Purchaser understands that the Series B Securities are
“restricted securities” under applicable U.S. federal and state securities laws
and that, pursuant to these laws, the Purchaser must hold the Series B
Securities indefinitely unless they are registered with the Securities and
Exchange Commission and qualified by state authorities, or an exemption from
such registration and qualification requirements is available. The Purchaser
acknowledges that the Company has no obligation to register or qualify the
Series B Securities, or the Common Stock into which it may be converted, for
resale except as set forth in the Investors’ Rights Agreement. The Purchaser
further acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Series B
Securities, and on requirements relating to the Company which are outside of the
Purchaser’s control, and which the Company is under no obligation and may not be
able to satisfy.

 

3.11  No Public Market. The Purchaser understands that no public market now
exists for the Series B Securities, and that the Company has made no assurances
that a public market will ever exist for the Series B Securities.

 

 19 

 

 

3.12  Legends. The Purchaser understands that the Series B Securities and any
securities issued in respect of or exchange for the Series B Securities, may be
notated with one or all of the following legends:

 

“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

 

(a)  Any legend set forth in, or required by, the other Transaction Agreements.

 

(b)  Any legend required by the securities laws of any state to the extent such
laws are applicable to the Series B Securities represented by the certificate,
instrument, or book entry so legended.

 

3.13  Accredited Investor. The Purchaser is an accredited investor as defined in
Rule 501(a) of Regulation D promulgated under the Securities Act.

 

3.14  No General Solicitation. Neither the Purchaser, nor any of its officers,
directors, employees, agents, stockholders or partners has either directly or
indirectly, including, through a broker or finder (a) engaged in any general
solicitation, or (b) published any advertisement in connection with the offer
and sale of the Series B Securities.

 

3.15  Residence. The office of the Purchaser in which its principal place of
business is identified in the address or addresses of the Purchaser set forth on
signature page hereto.

 

3.16 Disclosure. The Purchaser has made available to the Company all the
information reasonably available to the Purchaser that the Company has requested
for deciding whether to enter into the Transaction Agreements. No representation
or warranty of the Purchaser contained in this Agreement, as qualified by the
Purchaser Disclosure Schedule, and no certificate furnished or to be furnished
to the Company at the Closing contains or will contain, as applicable, any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein not misleading in
light of the circumstances under which they were made. It is understood that
this representation is qualified by the fact that the Purchaser has not
delivered to the Company, and has not been requested to deliver, a private
placement or similar memorandum or any written disclosure of the types of
information customarily furnished to purchasers of securities.

 

4.  Conditions to the Purchaser’s Obligations at Closing. The obligations of the
Purchaser to purchase Series B Securities at the Initial Closing or any
Milestone Closing are subject to the fulfillment, on or before such Closing, of
each of the following conditions, unless otherwise waived:

 

4.1  Representations and Warranties. The representations and warranties of the
Company contained in Section 2 shall be true and correct in all respects as of
such Closing; provided that the Company shall have the opportunity to amend,
supplement and update the Company Disclosure Schedule as of the Milestone
Closing with respect to any fact, occurrence, event, effect, change,
circumstance or development occurring between the Initial Closing and the
Milestone Closing, and such amendment, supplement or update will be deemed to
have amended the Company Disclosure Schedule and to have modified the Company’s
representations and warranties contained herein as of the Milestone Closing.

 

 20 

 

 

4.2  Performance. The Company shall have performed and complied with all
covenants, agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by the Company on or before
such Closing.

 

4.3  Compliance Certificate. The CEO of the Company shall deliver to the
Purchaser at such Closing a certificate certifying that the conditions specified
in Subsections  4.1 and 4.2 have been fulfilled.

 

4.4  Qualifications. All authorizations, approvals or permits, if any, of any
governmental authority or regulatory body of the United States or of any state
that are required in connection with the lawful issuance and sale of the Series
B Securities pursuant to this Agreement shall be obtained and effective as of
such Closing.

 

4.5  Board of Directors. As of the Initial Closing, the authorized size of the
Board shall be three (3), and the Board shall be comprised of Leslie Buttorff,
Adam Desmond and Clifford B. Fleet.

 

4.6  Investors’ Rights Agreement. The Company and the Purchaser (other than the
Purchaser relying upon this condition to excuse the Purchaser’s performance
hereunder) shall have executed and delivered the Investors’ Rights Agreement.

 

4.7  Right of First Refusal and Co-Sale Agreement. The Company, the Purchaser
(other than the Purchaser relying upon this condition to excuse the Purchaser’s
performance hereunder), and the other stockholders of the Company named as
parties thereto shall have executed and delivered the Right of First Refusal and
Co-Sale Agreement.

 

4.8  Voting Agreement. The Company, the Purchaser (other than the Purchaser
relying upon this condition to excuse the Purchaser’s performance hereunder),
and the other stockholders of the Company named as parties thereto shall have
executed and delivered the Voting Agreement.

 

4.9  Letter Agreement. The Company, Quintel, the Key Employees and the Purchaser
(other than the Purchaser relying upon this condition to excuse the Purchaser’s
performance hereunder) shall have executed and delivered the Letter Agreement.

 

4.10  Restated Certificate. The Company shall have filed the Restated
Certificate with the Secretary of State of Colorado on or prior to the Closing,
which shall continue to be in full force and effect as of the Closing.

 

4.11  Secretary’s Certificate. The Secretary of the Company shall have delivered
to the Purchaser at the Closing a certificate certifying (i) the Bylaws of the
Company, (ii) resolutions of the Board approving the Transaction Agreements and
the transactions contemplated under the Transaction Agreements, and (iii)
resolutions of the stockholders of the Company approving the Restated
Certificate and the other matters contemplated by the Transaction Agreements.

 

4.12  Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Purchaser, and the Purchaser (or its counsel) shall have received all such
counterpart original and certified or other copies of such documents as
reasonably requested. Such documents may include good standing certificates.

 

 21 

 

 

4.13  Preemptive Rights. The Company shall have fully satisfied (including with
respect to rights of timely notification) or obtained enforceable waivers in
respect of any preemptive or similar rights directly or indirectly affecting any
of its securities.

 

4.15 D&O Insurance. Following the Initial Closing, the Company will obtain and
maintain a Directors’ and Officers’ (D&O) Insurance Policy on commercially
reasonable terms, as determined by the Company’s Board of Directors, on
directors and officers of the Company in the aggregate amount of $5,000,000
payable to the Company.

 

5.  Conditions of the Company’s Obligations at Closing. The obligations of the
Company to sell Series B Securities to the Purchaser at the Initial Closing or
any Milestone Closing are subject to the fulfillment, on or before the Closing,
of each of the following conditions, unless otherwise waived:

 

5.1  Representations and Warranties. The representations and warranties of the
Purchaser contained in Section 3 shall be true and correct in all respects as of
such Closing; provided that the Purchaser shall have the opportunity to amend,
supplement and update the Purchaser Disclosure Schedule as of the Milestone
Closing with respect to any fact, occurrence, event, effect, change,
circumstance or development occurring between the Initial Closing and the
Purchaser Closing, and such amendment, supplement or update will be deemed to
have amended the Purchaser Disclosure Schedule and to have modified the
Purchaser’s representations and warranties contained herein as of the Milestone
Closing.

 

5.2  Performance. The Purchaser shall have performed and complied with all
covenants, agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by them on or before such
Closing.

 

5.3  Qualifications. All authorizations, approvals or permits, if any, of any
governmental authority or regulatory body of the United States or of any state
that are required in connection with the lawful issuance and sale of the Series
B Securities pursuant to this Agreement shall be obtained and effective as of
the Closing.

 

5.4  Investors’ Rights Agreement. The Purchaser shall have executed and
delivered the Investors’ Rights Agreement.

 

5.5  Right of First Refusal and Co-Sale Agreement. The Purchaser and the other
stockholders of the Company named as parties thereto shall have executed and
delivered the Right of First Refusal and Co-Sale Agreement.

 

5.6  Voting Agreement. The Purchaser and the other stockholders of the Company
named as parties thereto shall have executed and delivered the Voting Agreement.

 

5.7  Letter Agreement. The Purchaser shall have executed and delivered the
Letter Agreement.

 

5.8 Secretary’s Certificate. The Secretary of the Purchaser shall have delivered
to the Company at the Closing a certificate certifying (i) the Bylaws of the
Purchaser and (ii) resolutions of the Board of the Purchaser approving the
Transaction Agreements and the transactions contemplated under the Transaction
Agreements.

 

 22 

 

 

5.9 Compliance Certificate. The CEO of the Purchaser shall deliver to the
Company at such Closing a certificate certifying that the conditions specified
in Subsections  5.1 and 5.2 have been fulfilled.

  

6.  Miscellaneous.

 

6.1  Survival of Warranties. Unless otherwise set forth in this Agreement, the
representations and warranties of the Company and the Purchaser contained in or
made pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the Closing.

 

6.2  Successors and Assigns. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.

 

6.3  Governing Law. This Agreement shall be governed by the internal law of the
State of Delaware without regard to conflict of law principles that would result
in the application of any law other than the law of the State of Delaware.

 

6.4  Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Counterparts may be
delivered via facsimile, electronic mail (including pdf or any electronic
signature complying with the U.S. federal ESIGN Act of 2000, e.g.,
www.docusign.com) or other transmission method and any counterpart so delivered
shall be deemed to have been duly and validly delivered and be valid and
effective for all purposes.

 

6.5  Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.

 

6.6  Notices. All notices and other communications given or made pursuant to
this Agreement shall be in writing and shall be deemed effectively given upon
the earlier of actual receipt, or (a) personal delivery to the party to be
notified, (b) when sent, if sent by electronic mail or facsimile during normal
business hours of the recipient, and if not sent during normal business hours,
then on the recipient’s next business day, (c) five (5) days after having been
sent by registered or certified mail, return receipt requested, postage prepaid,
or (d) one (1) business day after deposit with a nationally recognized overnight
courier, freight prepaid, specifying next business day delivery, with written
verification of receipt. All communications shall be sent to the respective
parties at their address as set forth on the signature page, or to such e-mail
address, facsimile number or address as subsequently modified by written notice
given in accordance with this Subsection 6.6. If notice is given to the Company,
it shall be sent to 16194 W 45th Drive, Golden, CO 80403, Attention: Chief
Executive Officer, a copy (which shall not constitute notice) shall also be sent
to Holland & Hart LLP, 1800 Broadway, Suite 300, Boulder, CO 80302, Attention:
Amos Barclay, Email: AWBarclay@hollandhart.com; and if notice is given to the
Purchaser, it shall be sent to 8560 Main Street, Suite 4, Williamsville, New
York 14221, Attention: Chief Executive Officer a copy (which shall not
constitute notice) shall also be given to Troutman Sanders LLP, 1001 Haxall
Point 15th Floor Richmond, VA 23219, Attention: Coby Beck, Email:
coby.beck@troutman.com.

 

 23 

 

 

6.7  No Finder’s Fees. Other than the Company’s fees payable to Golden Eagle
Partners for its services in connection with the transactions contemplated
hereby, each party represents that it neither is nor will be obligated for any
finder’s fee or commission in connection with this transaction. The Purchaser
agrees to indemnify and to hold harmless the Company from any liability for any
commission or compensation in the nature of a finder’s or broker’s fee arising
out of this transaction (and the costs and expenses of defending against such
liability or asserted liability) for which the Purchaser or any of its officers,
employees or representatives is responsible. The Company agrees to indemnify and
hold harmless the Purchaser from any liability for any commission or
compensation in the nature of a finder’s or broker’s fee arising out of this
transaction (and the costs and expenses of defending against such liability or
asserted liability) for which the Company or any of its officers, employees or
representatives is responsible.

 

6.8  Fees and Expenses. Each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement and the other Transaction Agreements.

 

6.9  Attorneys’ Fees. If any action at law or in equity (including, arbitration)
is necessary to enforce or interpret the terms of any of the Transaction
Agreements, the prevailing party shall be entitled to reasonable attorneys’
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.

 

6.10  Amendments and Waivers. Except as set forth in Subsection 1.3(a) of this
Agreement, any term of this Agreement may be amended, terminated or waived only
with the written consent of the Company and (i) the holders of at least 50% of
the then-outstanding Shares. Any amendment or waiver effected in accordance with
this Subsection 6.10 shall be binding upon the Purchaser and each transferee of
the Shares (or the Common Stock issuable upon conversion thereof), each future
holder of all such securities, and the Company.

 

6.11  Severability. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provision.

 

6.12  Delays or Omissions. No delay or omission to exercise any right, power or
remedy accruing to any party under this Agreement, upon any breach or default of
any other party under this Agreement, shall impair any such right, power or
remedy of such non-breaching or non-defaulting party nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any party of any breach or
default under this Agreement, or any waiver on the part of any party of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.

 

6.13  Entire Agreement. This Agreement (including the Exhibits hereto), the
Restated Certificate and the other Transaction Agreements constitute the full
and entire understanding and agreement between the parties with respect to the
subject matter hereof, and any other written or oral agreement relating to the
subject matter hereof existing between the parties are expressly canceled.

 

6.14  Termination of Closing Obligations. The Purchaser shall have the right to
terminate its obligations to complete the Initial Closing and any Milestone
Closing, as the case may be, if prior to the occurrence thereof, any of the
following occurs:

 

 24 

 

 

(a)  the Company consummates a Deemed Liquidation Event (as defined in the
Restated Certificate);

 

(b)  the closing of an initial public offering of the Company, in which case the
Purchaser may terminate their obligations hereunder immediately prior to, or
contingent upon, such closing; or

 

(c)  the Company (i) applies for or consents to the appointment of a receiver,
trustee, custodian or liquidator of itself or substantially all of its property,
(ii) becomes subject to the appointment of a receiver, trustee, custodian or
liquidator of itself or substantially all of its property, (iii) makes an
assignment for the benefit of creditors, (iv) institutes any proceedings under
the United States Bankruptcy Code or any other federal or state bankruptcy,
reorganization, receivership, insolvency or other similar law affecting the
rights of creditors generally, or files a petition or answer seeking
reorganization or an arrangement with creditors to take advantage of any
insolvency law, or files an answer admitting the material allegations of a
bankruptcy, reorganization or insolvency petition filed against it, or (v)
becomes subject to any involuntary proceedings under the United States
Bankruptcy Code or any other federal or state bankruptcy, reorganization,
receivership, insolvency or other similar law affecting the rights of creditors
generally, when proceeding is not dismissed within thirty (30) days of filing,
or have an order for relief entered against it in any proceedings under the
United States Bankruptcy Code.

 

6.15  Dispute Resolution. The parties (a) hereby irrevocably and unconditionally
submit to the jurisdiction of the federal courts of the United States of America
for the district of Delaware or the courts of the state of Delaware for the
purpose of any suit, action or other proceeding arising out of or based upon
this Agreement, (b) agree not to commence any suit, action or other proceeding
arising out of or based upon this Agreement except in the federal courts of the
United States of America for the district of Delaware or the courts of the state
of Delaware, and (c) hereby waive, and agree not to assert, by way of motion, as
a defense, or otherwise, in any such suit, action or proceeding, any claim that
it is not subject personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from attachment or execution, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that this Agreement or the subject
matter hereof may not be enforced in or by such court.

 

Waiver of Jury Trial: EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE OTHER
TRANSACTION AGREEMENTS, THE SERIES B SECURITIES OR THE SUBJECT MATTER HEREOF OR
THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND
ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE
PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH
PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED
THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.

 

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 25 

 

 

IN WITNESS WHEREOF, the parties have executed this Series B Preferred Securities
Purchase Agreement as of the date first written above.

 

  COMPANY:           PANACEA LIFE SCIENCES, INC.           By: /s/ Leslie
Buttorff   Name: Leslie Buttorff   Title: CEO               Address: 16194 West
45th Drive,     Golden, CO 80403         Attn: Leslie Buttorff   Telephone:
303-434-0215   Facsimile:     Email: leslie.buttorff@panacealife.com

  

  PURCHASER:       22ND CENTURY GROUP, INC.             By: /s/ Clifford B.
Fleet   Name: Clifford B. Fleet   Title: President and CEO              
Address: 8560 Main Street, Suite 4,     Williamsville, New York 14221        
Attn: Chief Executive Officer   Telephone: 716-270-1523   Facsimile:
716-877-3064   Email: cfleet@xxiicentury.com

 

 

 

 

EXHIBITS

 

Exhibit A - FORM OF SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION    
Exhibit B - FORM OF NOTE     Exhibit C - FORM OF WARRANT     Exhibit D - COMPANY
DISCLOSURE SCHEDULE     Exhibit E - PURCHASER DISCLOSURE SCHEDULE     Exhibit F
- FORM OF INVESTORS’ RIGHTS AGREEMENT     Exhibit G - Form of Right of First
Refusal and Co-Sale Agreement     Exhibit H - FORM OF VOTING AGREEMENT    
Exhibit I - FORM OF LETTER AGREEMENT     Exhibit J - FORM OF SECURITY AGREEMENT