Document:

ex_398319.htm

 

 

Exhibit 10.1

 

AVINGER, INC.

 

CHANGE OF CONTROL AND SEVERANCE AGREEMENT

 

This Change of Control and Severance Agreement (the “Agreement”) is entered into as of May 16, 2022 (the “Effective Date”) by and between Avinger, Inc. (the “Company”), and Nabeel Subainati (“Executive”).

 

1.            Severance.

 

(a)        Termination for other than Cause, Death or Disability or Good Reason in the Event of a Change of Control. If upon or within eighteen (18) months following a Change of Control (i) the Company (or any parent or subsidiary or successor of the Company) terminates Executive’s employment with the Company other than for Cause, death or disability, or (ii) the Executive resigns from such employment for Good Reason, then, subject to Section 2, Executive will be entitled to: (A) receive continuing payments of severance pay at a rate equal to Executive’s base salary and target bonus, as then in effect, for six (6) months from the date of such termination, which will be paid in accordance with the Company’s regular payroll procedures; (B) if Executive timely elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) for Executive and Executive’s dependents, within the time period prescribed pursuant to COBRA, the Company will reimburse Executive for the COBRA premiums for such coverage for Executive and his covered dependents for six (6) months from the date of Executive’s termination of employment or such earlier date if Executive no longer constitutes a “Qualified Beneficiary” (as such term is defined in Section 4980B(g) of the Code); (C) accelerated vesting as to 100% of Executive’s outstanding unvested stock options and/or restricted stock; and (D) the extension of the post-termination exercise period for any options held by Executive for a period of one (1) year.

 

(b)        Termination for Cause, Death or Disability; Resignation without Good Reason. If Executive’s employment with the Company (or any parent or subsidiary or successor of the Company) terminates voluntarily by Executive (except upon resignation for Good Reason upon or within eighteen (18) months following a Change of Control), for Cause by the Company or due to Executive’s death or disability, then (i) all vesting will terminate immediately with respect to Executive’s outstanding equity awards, (ii) all payments of compensation by the Company to Executive hereunder will terminate immediately (except as to amounts already earned), and (iii) Executive will only be eligible for severance benefits in accordance with the Company’s established policies, if any, as then in effect.

 

(c)        Option/Stock Acceleration in the Event of a Change of Control. Upon a Change of Control of the Company, Executive will be entitled to accelerated vesting as to 50% of Executive’s outstanding unvested stock options and/or restricted stock, provided that any remaining shares shall continue to vest per the schedules previously implemented by the Company.

 

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(d)        Exclusive Remedy. In the event of a termination of Executive’s employment with the Company (or any parent or subsidiary or successor of the Company), the provisions of this Section 1 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or the Company may otherwise be entitled, whether at law, tort or contract, in equity, or under this Agreement. Executive will be entitled to no severance or other benefits upon termination of employment with respect to acceleration of award vesting or severance pay other than those benefits expressly set forth in this Section 1.

 

2.            Conditions to Receipt of Severance; No Duty to Mitigate.

 

(a)        Separation Agreement and Release of Claims. The receipt of any severance pursuant to Section 1(a) will be subject to Executive signing and not revoking a standard separation agreement and release of claims with the Company (the “Release”) and provided that such Release becomes effective and irrevocable no later than sixty (60) days following the termination date (such deadline, the “Release Deadline”). If the Release does not become effective and irrevocable by the Release Deadline, Executive will forfeit any rights to severance or benefits under this Agreement. In no event will severance payments or benefits be paid or provided until the Release becomes effective and irrevocable.

 

(b)        Nonsolicitation. The receipt of any severance benefits pursuant to Section 1(a) will be subject to Executive not violating the provisions of Section 4. In the event Executive breaches the provisions of Section 4, all continuing payments and benefits to which Executive may otherwise be entitled pursuant to Section 1(a) will immediately cease.

 

(c)        Section 409A.

 

(i)    Notwithstanding anything to the contrary in this Agreement, no severance pay or benefits to be paid or provided to Executive, if any, pursuant to this Agreement that, when considered together with any other severance payments or separation benefits, are considered deferred compensation under Code Section 409A, and the final regulations and any guidance promulgated thereunder (“Section 409A”) (together, the “Deferred Payments”) will be paid or otherwise provided until Executive has a “separation from service” within the meaning of Section 409A. Similarly, no severance payable to Executive, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9) will be payable until Executive has a “separation from service” within the meaning of Section 409A.

 

(ii)    Any severance payments or benefits under this Agreement that would be considered Deferred Payments will be paid on, or, in the case of installments, will not commence until, the sixtieth (60th) day following Executive’s separation from service, or, if later, such time as required by Section 2(c)(iii). Any installment payments that would have been made to Executive during the sixty (60) day period immediately following Executive’s separation from service but for the preceding sentence will be paid to Executive on the sixtieth (60th) day following Executive’s separation from service and the remaining payments shall be made as provided in this Agreement.

 

(iii)    Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning of Section 409A at the time of Executive’s termination (other than due to death), then the Deferred Payments that are payable within the first six (6) months following Executive’s separation from service, will become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of Executive’s separation from service. All subsequent Deferred Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following Executive’s separation from service, but prior to the six (6) month anniversary of the separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executive’s death and all other Deferred Payments will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.

 

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(iv)    Any amount paid under this Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred Payments for purposes of clause (i) above.

 

(v)    Any amount paid under this Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed the Section 409A Limit (as defined below) will not constitute Deferred Payments for purposes of clause (i) above.

 

(vi)    The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Executive under Section 409A.

 

(d)        No Duty to Mitigate. Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any earnings that Executive may receive from any other source reduce any such payment.

 

3.            Definitions.

 

(a)        Cause. For purposes of this Agreement, “Cause” is defined as (i) an act of dishonesty made by Executive in connection with Executive’s responsibilities as an employee, (ii) Executive’s conviction of, or plea of nolo contendere to, a felony or any crime involving fraud, embezzlement or any other act of moral turpitude, causing material harm to the standing and reputation of the Company, in each case as determined in good faith by the board of directors of the Company (the “Board”); (iii) Executive’s gross misconduct, (iv) Executive’s unauthorized use or disclosure of any proprietary information or trade secrets of the Company or any other party to whom Executive owes an obligation of nondisclosure as a result of Executive’s relationship with the Company; (v) Executive’s willful breach of any obligations under any written agreement or covenant with the Company; (vi) Executive’s continued failure to perform his employment duties after Executive has received a written demand of performance from the Company which specifically sets forth the factual basis for the Company’s belief that Executive has not substantially performed his duties and has failed to cure such non-performance to the Company’s satisfaction within 10 business days after receiving such notice provided that such nonperformance has resulted or is likely to result in substantial and material damage to the Company or its subsidiaries; or (vii) Executive’s repeated unexplained or unjustified absence from the Company.

 

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(b)        Change of Control. For purposes of this Agreement, “Change of Control” of the Company is defined as:

 

(i)    any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than 50% of the total voting power represented by the Company’s then outstanding voting securities; or

 

(ii)    the date of the consummation of a merger or consolidation of the Company with any other corporation that has been approved by the stockholders of the Company, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation;

 

(iii)    the date of the consummation of the sale or disposition by the Company of all or substantially all the Company’s assets; or

 

(iv)    the date that a majority of members of the Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purposes of this clause (iv), if any person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same person will not be considered a Change of Control.

 

Notwithstanding the foregoing provisions of this definition, a transaction will not be deemed a Change of Control unless the transaction qualifies as a “change in control event” within the meaning of Section 409A.

 

Further, notwithstanding the foregoing provisions of this definition, the following shall not constitute a Change of Control:

 

(x) any bona fide equity financing for capital raising purposes;

 

(y) any merger or acquisition done exclusively to effect a change of domicile of the Company; and

 

(z) any transfer of assets by the Company to a new company for tax planning purposes.

 

(c)        Code. For purposes of this Agreement, “Code” means the Internal Revenue Code of 1986, as amended.

 

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(d)        Good Reason. For the purposes of this Agreement, “Good Reason” means Executive’s resignation within ninety (90) days following the expiration of any Company cure period (discussed below) following the occurrence of one or more of the following, without Executive’s express written consent: (i) a material reduction of Executive’s duties, position or responsibilities, or the removal of Executive from such position and responsibilities, either of which results in a material diminution of Executive’s authority, duties or responsibilities, unless Executive is provided with a comparable position (i.e., a position of equal or greater organizational level, duties, authority, compensation and status); provided, however, that a reduction in duties, position or responsibilities solely by virtue of the Company being acquired and made part of a larger entity (as, for example, when the Chief Executive Officer of the Company remains as such following a Change of Control but is not made the Chief Executive Officer of the acquiring corporation) will not constitute “Good Reason”; (ii) a material reduction in Executive’s base salary (in other words, a reduction of more than ten percent (10%) of Executive’s base salary in any one year); (iii) a material change in the geographic location of Executive’s primary work facility or location; provided, that a relocation of less than fifty (50) miles from Executive’s then present location will not be considered a material change in geographic location; or (iv) a material breach of this Agreement by the Company. Executive will not resign for Good Reason without first providing the Company with written notice of the acts or omissions constituting the grounds for “Good Reason” within ninety (90) days of the initial existence of the grounds for “Good Reason” and a reasonable cure period of not less than thirty (30) days following the date of such notice.

 

(e)        Section 409A Limit. For purposes of this Agreement, “Section 409A Limit” will mean the lesser of two (2) times: (i) Executive’s annualized compensation based upon the annual rate of pay paid to Executive during the Executive’s taxable year preceding the Executive’s taxable year of his or her termination of employment as determined under Treasury Regulation Section 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Internal Revenue Code for the year in which Executive’s employment is terminated.

 

4.            Non-Solicitation. Until the date one (1) year after the termination of Executive’s employment with the Company for any reason, Executive agrees not, either directly or indirectly, to solicit, induce, attempt to solicit, recruit, or encourage any employee of the Company (or any parent or subsidiary of the Company) to leave his or her employment either for Executive or for any other entity or person. Executive represents that he (i) is familiar with the foregoing covenant not to solicit, and (ii) is fully aware of his obligations hereunder, including, without limitation, the reasonableness of the length of time, scope and geographic coverage of these covenants. This Section 4 supersedes all prior or contemporaneous agreements whether written or oral as to the subject matter herein.

 

5.            Assignment. This Agreement will be binding upon and inure to the benefit of (a) the heirs, executors and legal representatives of Executive upon Executive’s death and (b) any successor of the Company. Any such successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, “successor” means any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company. None of the rights of Executive to receive any form of compensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution. Any other attempted assignment, transfer, conveyance or other disposition of Executive’s right to compensation or other benefits will be null and void.

 

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6.            Notices. All notices, requests, demands and other communications called for hereunder will be in writing and will be deemed given (i) on the date of delivery if delivered personally, (ii) one (1) day after being sent by a well established commercial overnight service, or (iii) four (4) days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at the following addresses, or at such other addresses as the parties may later designate in writing:

 

If to the Company:

 

Avinger, Inc.

Attn: Chief Financial Officer at the time

 

400 Chesapeake Drive

Redwood City, CA 94063

 

If to Executive:

 

at the last residential address known by the Company.

 

7.            Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement will continue in full force and effect without said provision.

 

8.            Arbitration.

 

(a)        Arbitration. In consideration of Executive’s employment with the Company, its promise to arbitrate all employment-related disputes, and Executive’s receipt of the compensation, pay raises and other benefits paid to Executive by the Company, at present and in the future, Executive agrees that any and all controversies, claims, or disputes with anyone (including the Company and any employee, officer, director, shareholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from Executive’s employment with the Company or termination thereof, including any breach of this Agreement, will be subject to binding arbitration under the Arbitration Rules set forth in California Code of Civil Procedure Section 1280 through 1294.2, including Section 1281.8 (the “Act”), and pursuant to California law. The Federal Arbitration Act shall also apply with full force and effect, notwithstanding the application of procedural rules set forth under the Act.

 

(b)        Dispute Resolution. Disputes that Executive agrees to arbitrate, and thereby agrees to waive any right to a trial by jury, include any statutory claims under local, state, or federal law, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the Sarbanes Oxley Act, the Worker Adjustment and Retraining Notification Act, the California Fair Employment and Housing Act, the Family and Medical Leave Act, the California Family Rights Act, the California Labor Code, claims of harassment, discrimination, and wrongful termination, and any statutory or common law claims. Executive further understands that this Agreement to arbitrate also applies to any disputes that the Company may have with Executive.

 

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(c)        Procedure. Executive agrees that any arbitration will be administered by the Judicial Arbitration & Mediation Services, Inc. (“JAMS”), pursuant to its Employment Arbitration Rules & Procedures (the “JAMS Rules”). The arbitrator shall have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication, motions to dismiss and demurrers, and motions for class certification, prior to any arbitration hearing. The arbitrator shall have the power to award any remedies available under applicable law, and the arbitrator shall award attorneys’ fees and costs to the prevailing party, except as prohibited by law. The Company will pay for any administrative or hearing fees charged by the administrator or JAMS, and all arbitrator’s fees, except that Executive shall pay any filing fees associated with any arbitration that Executive initiates, but only so much of the filing fee as Executive would have instead paid had Executive filed a complaint in a court of law. Executive agrees that the arbitrator shall administer and conduct any arbitration in accordance with California law, including the California Code of Civil Procedure and the California Evidence Code, and that the arbitrator shall apply substantive and procedural California law to any dispute or claim, without reference to the rules of conflict of law. To the extent that the JAMS Rules conflict with California law, California law shall take precedence. The decision of the arbitrator shall be in writing. Any arbitration under this Agreement shall be conducted in Santa Clara County, California.

 

(d)        Remedy. Except as provided by the Act, arbitration shall be the sole, exclusive, and final remedy for any dispute between Executive and the Company. Accordingly, except as provided by the Act and this Agreement, neither Executive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator will not order or require the Company to adopt a policy not otherwise required by law which the Company has not adopted.

 

(e)        Administrative Relief. Executive is not prohibited from pursuing an administrative claim with a local, state, or federal administrative body or government agency that is authorized to enforce or administer laws related to employment, including, but not limited to, the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission, the National Labor Relations Board, or the Workers’ Compensation Board. However, Executive may not pursue court action regarding any such claim, except as permitted by law.

 

(f)        Voluntary Nature of Agreement. Executive acknowledges and agrees that Executive is executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else. Executive further acknowledges and agrees that Executive has carefully read this Agreement and that Executive has asked any questions needed for Executive to understand the terms, consequences and binding effect of this Agreement and fully understands it, including that EXECUTIVE IS WAIVING EXECUTIVE’S RIGHT TO A JURY TRIAL. Finally, Executive agrees that Executive has been provided an opportunity to seek the advice of an attorney of Executive’s choice before signing this Agreement.

 

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9.            Integration. This Agreement represents the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior or contemporaneous agreements whether written or oral. With respect to stock options granted on or after the date of this Agreement, the acceleration of vesting provisions provided herein will apply to such stock options except to the extent otherwise explicitly provided in the applicable stock option agreement. This Agreement may be modified only by agreement of the parties by a written instrument executed by the parties that is designated as an amendment to this Agreement.

 

10.          Waiver of Breach. The waiver of a breach of any term or provision of this Agreement, which must be in writing, will not operate as or be construed to be a waiver of any other previous or subsequent breach of this Agreement. Notwithstanding anything to the contrary in this Agreement, the failure of the Company to obtain the assumption of this Agreement by a successor and/or acquirer shall be a material breach of this Agreement.

 

11.          Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

 

12.          Tax Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable taxes.

 

13.          Governing Law. This Agreement will be governed by the laws of the State of California (with the exception of its conflict of laws provisions).

 

14.          Acknowledgment. Executive acknowledges that he has had the opportunity to discuss this matter with and obtain advice from his private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.

 

15.          Counterparts. This Agreement may be executed in counterparts, and each counterpart will have the same force and effect as an original and will constitute an effective, binding agreement on the part of each of the undersigned.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by their duly authorized officers, as of the day and year first above written.

 

COMPANY:

 

AVINGER, INC.

 

	By:	/s/ Jeffrey M. Soinski 	 	Date:	May 5, 2022
	Title:	President and Chief Executive Officer	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	EXECUTIVE:	 	 	 
	 	 	 	 	 
	/s/ Nabeel Subainati	 	Date:	May 13, 2022
	Nabeel Subainati	 	 	 

               

[SIGNATURE PAGE TO AVINGER, INC. CHANGE OF CONTROL AND SEVERANCE AGREEMENT]

 

-9-Common Stock Purchase Warrant

THIS WARRANT AND ANY SHARES ISSUED BY EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE. NO OFFER, SALE OR OTHER TRANSFER OF THIS WARRANT OR SUCH SHARES ISSUED BY EXERCISE OF THIS WARRANT MAY BE MADE UNLESS REGISTERED UNDER SUCH LAWS OR EXEMPT FROM REGISTRATION.

THIS WARRANT AND THE SHARES ISSUED PURSUANT TO THE EXERCISE OF THIS WARRANT ARE SUBJECT TO THE TERMS OF THAT CERTAIN TRADING AGREEMENT BETWEEN THE HOLDER, AND THE COMPANY, DATED AS OF APRIL 1, 2022. A COPY OF THE TRADING AGREEMENT MAY BE INSPECTED AT THE PRINCIPAL OFFICE OF THE COMPANY.

COMMON STOCK PURCHASE WARRANT

This Common Stock Purchase Warrant (this Warrant) issued on April  1, 2022 (the Issue Date) by Rapid Therapeutic Science Laboratories, Inc., a Nevada corporation (the Company), entitles Jeffrey J. Kimbell & Associates, Inc., a District of Columbia corporation (the Holder), to purchase up to 360,000 shares (the Shares) of the common stock of the Company, par value $0.001 per share (the Common Stock), as determined in accordance with Article 2, at a price for each Share of $10.00, as such price may be adjusted in accordance with Article 2 (the Warrant Price), on any date on or before April 1, 2032 (the Expiration Date). This Warrant has been issued for services provided by the Holder to the Company and other good and valuable consideration that the Company and the Holder agree is sufficient consideration for their mutual agreements, obligations, representations and warranties stated in this Warrant.

1.Exercise. 

(a)Method of Exercise. This Warrant may be exercised in whole or in part, at any time and from time to time on or before the Expiration Date to purchase fully paid and non-assessable Shares of Common Stock. The Holder exercises this Warrant by delivering this Warrant together with a completed and executed Notice of Exercise in substantially the form attached as Exhibit A to the Company in accordance with Section 5(f) that states the date on which the Notice of Exercise is delivered (the Exercise Date) and the number of shares to which the Notice of Exercise relates (the Exercise Shares). Unless the Holder is exercising this Warrant using the cashless exercise method described in Section 1(b), the Holder will also deliver to the Company concurrently with the Notice of Exercise a check, wire transfer to an account designated by the Company, or other form of payment reasonably acceptable to the Company in an amount equal to the Warrant Price on Exercise Date multiplied by the number of Exercise Shares. 

(b)Cashless Exercise. The Holder may elect to exercise this Warrant without delivering a cash payment by receiving a number of Shares less than the number of Exercise Shares determined in accordance with the following equation. 

X=((A−B)xC)÷A, with the variables used as stated below:

Xis the number of Shares issued to the Holder as a result of the cashless exercise of this Warrant; 

Ais the Fair Market Value (as defined below) on the Exercise Date; 

Bis the Warrant Price on the Exercise Date; and 

Cis the number of Exercise Shares. 

If X is a negative number or zero, no Shares will be issued on a cashless exercise pursuant to this Section 1(b). If no Shares will be issued on a cashless exercise or the Holder does not agree with the Fair Market Value determined pursuant to Section 1(c), the Holder may in its sole discretion elect to rescind the cashless exercise and instead exercise this Warrant by delivering a cash payment in accordance with Section 1(a).

(c)Fair Market Value. Fair Market Value as of a designated date (the Determination Date) is calculated as stated below. 

(i)If the Common Stock is listed or quoted on one or more stock exchanges or other securities trading systems with regularly reported sale prices, the Fair Market Value is the closing or last daily sale price of the Common Stock reported on the trading day immediately before the Exercise Date. 

(ii)If the Determination Date is the date of a liquidation, dissolution or winding up of the Company in accordance with the governing documents of the Company, the Fair Market Value will be the amount paid or payable per share to holders of the Common Stock in accordance with the governing documents of the Company. 

(d)Delivery of Certificate and New Warrant. As soon as reasonably practicable after the Holder exercises this Warrant, the Company will deliver to the Holder (i) certificates representing the Shares issued to the Holder and (ii) if this Warrant has not been fully exercised and has not expired, a new Warrant in identical form as this Warrant that entitles the Holder to purchase all Shares for which the Holder has not previously delivered a Notice of Exercise. 

(e)Replacement of Warrant. The Company will execute and deliver a replacement of this Warrant to the Holder after receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (i) in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory to the Company; or (ii) in the case of mutilation, on surrender of this Warrant as so mutilated. 

(f)Sale, Merger, or Consolidation of the Company. As used in this Warrant, Acquisition means any sale or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, or merger of the Company where the holders of the Company’s securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction. On the closing date of an Acquisition, (i) the acquiring or successor entity will assume the obligations of this Warrant, and the right to purchase each Share remaining in the unexercised portion of the Warrant will be exercisable to purchase the securities, cash, and property paid for each Share outstanding on such closing date with respect to each Share then issuable under this  

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Warrant; and (ii) if the Warrant Price then in effect is higher than $7.75, the Warrant Price will be reduced to $7.75.

(g)Automatic Exercise. On the Expiration Date, if the Fair Market Value of the Common Stock is greater than the Warrant Price on such date, this Warrant will automatically be deemed to be exercised on a cashless basis pursuant to Section 1(b) as to all Shares for which it shall not previously have been exercised, and the Company will promptly deliver a certificate representing the Shares (or such other securities) issued upon such exercise to Holder. 

2.Shares. 

(a)Number of Shares. The aggregate number of Shares for which this Warrant may be exercised will be determined based on the completion of the conditions stated below (each a Condition), up to a maximum aggregate number of 360,000 Shares. The Warrant may only be exercised if at least one Condition is completed for the stated number of Shares related to that Condition. The completion of each additional Condition will increase the total Shares for which this Warrant may be exercised by the stated number of Shares related to that additional Condition. Unless stated otherwise, each Condition is independent of the other Conditions and no individual Condition is required as a prerequisite for the completion of any other Condition. If a Condition is completed at any time, the Shares for which this Warrant may be exercised will be increased by the stated number of Shares regardless of any future event related to such Condition. If none of the Conditions are completed before the Expiration Date, this Warrant will not be exercisable for any Shares. 

(i)If the Company completes a merger, acquisition, or divestiture with a firm or investor introduced to the Company by Jeffrey J. Kimbell & Associates, Inc. (the Contractor) resulting in a material change in the capitalization or assets of the Company, the number of Shares for which this Warrant may be exercised will be increased by 160,000 Shares. 

(ii)If the Company  enters into a definitive agreement with the University of Mississippi (Ole Miss) for a collaborative effort for medical research of cannabis resulting in an Investigative New Drug (IND) study being approved by the U.S. Food and Drug Administration (FDA) and the U.S. Drug Enforcement Administration (DEA) and the right to commence a commercial IND at or near the conclusion of a research IND, the number of Shares for which this Warrant may be exercised will be increased by 40,000 Shares. 

(iii)If the Company completes a commercial IND study stemming from any agreement with Ole Miss wherein a medical cannabis inhaler product is approved by the FDA leading to the ability to market such product to the public as a prescription or over the counter (OTC) product, the number of Shares for which this Warrant may be exercised will be increased by 40,000 Shares. 

(iv)If the Company completes a commercial IND study wherein an OTC or prescription cannabis inhaler product containing only hemp derivatives is approved by the FDA leading to the ability to market such product to the public, the number of Shares for which this Warrant may be exercised will be increased by 40,000 Shares. 

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(v)If the Company applies for and is granted a Medicaid number for any products discussed in Sections 2(a)(iii) or 2(a)(iv), the number of Shares for which this Warrant may be exercised will be increased by 40,000 Shares. 

(vi)If the Company applies for and is granted a Medicare number for any products discussed in Sections 2(a)(iii) or 2(a)(iv), the number of Shares for which this Warrant may be exercised will be increased by 40,000 Shares. 

(vii)As used in this Section 2(a), the successful completion of any matter related to a Condition means that such matter is completed to the extent that it can be commercially monetized at the conclusion of any study, approval, fulfillment of a contract, or other matter, as reasonably determined by the Company. 

(viii)In the event that the Independent Contractor Agreement between the Contractor and the Company is terminated before to the final completion of any Condition, the subsequent completion of the Condition will increase the number of Shares for which this Warrant may be exercised if the Contractor participated to a material degree in the completion of such Condition. 

(b)Adjustment for Stock Dividends, Splits and Offerings. 

(i)If the Company, at any time while this Warrant is outstanding: (i) pays a dividend on the Shares payable in Common Stock, (ii) subdivides the outstanding Shares into a greater number of Shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues by reclassification of shares of Common Stock any shares of capital stock of the Company, then in each such case (1) the Warrant Price will be adjusted by multiplying the Warrant Price then in effect by a fraction, the numerator of which equals the number of outstanding shares of Common Stock outstanding immediately prior to such event, and the denominator of which equals the number of shares of Common Stock outstanding immediately after such event, and (2) the number of Shares issuable hereunder will be concurrently adjusted by multiplying such number by the reciprocal of such fraction. Such adjustments will take effect on the effective date of such dividend, subdivision, combination or reclassification, as the case may be. The provisions of this Section 2(a) will similarly apply to any successive reclassifications, exchanges, combinations, substitutions, recapitalizations and reorganizations. 

(ii)If the Company makes an offering or sells shares of Common Stock or securities exercisable for or convertible into Common Stock (1) at an offering or sale price below the then current Warrant Price (after giving effect to any exercise or conversion, if applicable); and (2) in connection with securities of the Company being listed or during the period securities of the Company are listed on the Nasdaq Stock Market or the New York Stock Exchange, then the Warrant Price will be reduced to the lowest price at which shares of Common Stock were sold (after giving effect to any exercise or conversion, if applicable). 

(c)No Impairment. The Company will not, by amendment of its Certificate of Incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or  

4

sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company.

(d)Fractional Shares. No fractional Shares will be issuable upon exercise of the Warrant and the number of Shares to be issued will be rounded down to the nearest whole Share.  If a fractional share interest arises upon any exercise of the Warrant, the Company will eliminate such fractional share interest by paying Holder the amount computed by multiplying the fractional interest by the Fair Market Value of a full Share. 

3.Representations, Warranties and Other Agreements. 

(a)The Company. The Company represents and warrants to the Holder, and agrees to the obligations stated below. 

(i)The Company is a corporation validly existing and in good standing under the laws of the State of Nevada and has all requisite corporate power and authority to carry on its business as now conducted.   

(ii)This Warrant constitutes the Company’s valid and legally binding obligation, enforceable in accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization, or similar laws relating to or affecting the enforcement of creditors’ rights and (ii) laws relating to the availability of specific performance, injunctive relief or other equitable remedies. All corporate action has been taken on the part of the Company, its officers, directors, and stockholders necessary for the authorization, execution and delivery of this Warrant and the issuance of the Shares upon exercise of this Warrant. 

(iii)The Holder will not have any rights as a shareholder of the Company until the exercise of this Warrant. The Shares for which this Warrant is exercisable will be free from preemptive rights and any other rights that would prevent the exercise of this Warrant in full by the Holder. 

(iv)The Shares which may be issued upon the exercise of this Warrant will be duly reserved from the Company’s authorized and unissued capital stock. The Company will take all steps necessary to ensure that all Shares issued on the exercise of this Warrant will be duly authorized, validly issued, fully paid and nonassessable, free of any liens and encumbrances, and issued to the Holder without violation of any applicable law or governmental regulation or any requirements of any stock exchanges or other securities trading systems upon which the Shares may be listed, other restrictions on transfer provided for in the Trading Agreement or under applicable federal and state securities laws. 

(b)The Holder. The Holder represents and warrants to the Company as stated below. 

(i)This Warrant and any Shares acquired upon exercise of this Warrant by the Holder are being acquired (i) for investment purposes exclusively for the account of the Holder, (ii) not as a nominee or agent for any other party, and (iii) not with a view to a public resale or distribution in violation of applicable securities laws. The Holder was not formed for the specific purpose of acquiring this Warrant or the Shares. 

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(ii)The Holder has received or has had access to the information it considers necessary or appropriate to make an informed investment decision with respect to this Warrant and the Shares. 

(iii)The Holder (i) understands that this Warrant and the Shares involves substantial risk, (ii) has experience as an investor in securities of companies in the development stage, (iii) acknowledges that it can bear the economic risk of an investment in this Warrant and the Shares, and (iv) has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its investment in this Warrant and the Shares. 

(iv)The Holder is an accredited investor as defined in Rule 501 promulgated under the U.S. Securities Act of 1933 (the Securities Act). 

(v)The Holder understands that this Warrant and the Shares issuable on its exercise have not been registered under the Securities Act or the securities laws of any state in reliance on exemptions from registration. These exemptions rely on the representations and warranties regarding the investment intent, disclosure of information, and qualifications of the Holder In this Section 3. 

4.Miscellaneous. 

(a)Term. This Warrant is exercisable in whole or in part at any time and from time to time on or before the Expiration Date.   

(b)Restrictive Legends. This Warrant and any certificate representing the Shares will include a restrictive legend in substantially the following form: 

THIS WARRANT AND ANY SHARES ISSUED BY EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE. NO OFFER, SALE OR OTHER TRANSFER OF THIS WARRANT OR SUCH SHARES ISSUED BY EXERCISE OF THIS WARRANT MAY BE MADE UNLESS REGISTERED UNDER SUCH LAWS OR EXEMPT FROM REGISTRATION.

(c)Transfer. After providing the Company with written notice, the Holder may transfer or assign all or part of this Warrant or the Shares issued on exercise of this Warrant to any transferee. In connection with any such transfer, the Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of such transferee and the Holder will surrender this Warrant to the Company for reissuance to any transferee and the Holder, if applicable. However, this Warrant and the Shares issued on exercise of this Warrant may not be transferred or assigned without compliance with applicable federal and state securities laws by the transferor and the transferee. In connection with any proposed transfer of this Warrant or the Shares issued on exercise of this Warrant to any person other than an affiliate of the Holder, the Holder will deliver to the Company a written opinion of legal counsel reasonably acceptable to the Company that states that that such transfer complies with applicable federal and state securities laws. In addition, this Warrant and the Shares issued pursuant to this Warrant are subject to that  

6

certain Trading Agreement between the Company and the Holder dated as of the same date as this Warrant that imposes restrictions on any sale or other transfer of this Warrant or such Shares as stated in such Trading Agreement.

(d)Notices. All notices and other communications between the Company and the Holder will be in writing and will be deemed delivered (i) on the date of personal delivery, (ii) on the date actually delivered to the address of the recipient by courier service or U.S. mail, and (iii) on the date when actually received and read by the recipient when delivered by email. Notices will be addressed as stated below until the receiving party notifies the other party of a new address in accordance with this Section 5(d). 

If to the Holder:

Jeffrey J. Kimbell & Associates, Inc.

2100 Park Ave. #680287

Park City, UT 84068

Attn: Jeffrey J. Kimbell, President

Email: JKimbell@kimbell-associates.com

 

If to the Company:

Rapid Therapeutic Science Laboratories, Inc.

5580 Peterson Ln.

Suite 120

Dallas, TX 75240

Attn: Donal R, Schmidt, Jr.

Email: don@rtslco.com

 

(e)Amendment. This Warrant may only be amended or waived by a written agreement executed by the Holder and the Company. 

(f)Governing Law. This Warrant will be governed by and construed in accordance with the laws of the State of Nevada, without giving effect to laws regarding conflicts of laws. 

(g)Execution. This Warrant may be executed in counterparts with the same effect as if all parties had executed the same document. All counterparts will be construed together and will constitute a single agreement. This Warrant may be executed by delivery of an image of the executed document or by an electronic signature application provided by a third party, which signatures will be effective execution and delivery. 

  

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Intending to create a legally binding agreement, the undersigned have executed this Warrant as of the Issuance Date.

The Company

Rapid Therapeutic Science Laboratories, Inc.

By:/s/ Donal R. Schmidt, Jr. 

Name:Donal R. Schmidt, Jr. 

Title:Chief Executive Officer 

The Holder

Jeffery J. Kimbell & Associates, Inc.

By:/s/ Jeffery J. Kimbell 

Name:Jeffery J. Kimbell 

Title:President 

 

 

 

 

 

 

  

Signature Page

Common Stock Purchase Warrant

EXHIBIT A

NOTICE OF EXERCISE FORM

The undersigned Holder, pursuant to the provisions of the attached Common Stock Purchase Warrant (the Warrant), hereby elects to exercise the Warrant to purchase (check applicable box). Defined terms used in this Notice of Exercise have the same meaning as used in the Warrant.

	Exercise Date: 

	______________________________

	Number of Exercise Shares:

	______________________________

	Warrant Price: 

	$_________________

	Fair Market Value: 

	$_________________

The Holder elects to pay the total Warrant Price for the Exercise Shares as stated below.

 ̈By delivery of $______________________ in cash. 

 ̈By delivery of ______________________ Shares in accordance with a cashless exercise a described in Section 1(b). 

The undersigned requests that the certificates representing the Shares issued pursuant to this Notice of Exercise be titled to the Holder and delivered to the following address.

_____________________________________________

_____________________________________________

_____________________________________________

_____________________________________________

The Holder

_____________________________________________

By:_____________________________________________ 

Name:_____________________________________________ 

Title:_____________________________________________

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