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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of Report (Date of earliest event reported): November 20, 2023
22nd Century Group, Inc.
(Exact
Name of Registrant as Specified in Charter)
Nevada |
001-36338 |
98-0468420 |
(State or Other Jurisdiction of
Incorporation) |
(Commission File Number) |
(I.R.S. Employer
Identification No.) |
500 Seneca Street, Suite 508, Buffalo, New York
(Address of Principal Executive Office) |
14204
(Zip Code) |
Registrant’s
telephone number, including area code: (716) 270-1523
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities
Registered pursuant to Section 12(b) of the Act:
Title of Each Class |
Trading
Symbol |
Name
of Exchange on Which Registered |
Common
Stock, $0.00001 par value per share |
XXII |
Nasdaq Capital Market |
Indicate by check mark whether the registrant is an emerging
growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities
Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ¨
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 1.01. |
Entry into a Material Definitive Agreement. |
On November 20, 2023, 22nd Century Group, Inc.
(the “Company”) entered into an Equity Purchase Agreement (the “Purchase Agreement”) with Specialty
Acquisition Corporation, a Nevada corporation (the “Buyer”) pursuant to which the Company agreed to sell substantially
all of its GVB hemp/cannabis business (the “Purchased Interests”) for a purchase price of $2,250,000 (the “Purchase
Price”). There exists a material relationship between the Company and Buyer in that three of the Company’s employees will
be investors in, and be executive officers of, Buyer. As a result of this relationship, the Purchase Agreement is conditioned upon the
receipt of a fairness opinion to the effect that, the Purchase Price and other consideration is fair, from a financial point of view,
to the Company and its shareholders.
The Purchase Price consists of (i) a cash payment
of $1,000,000 to the Company at closing and (ii) a 12% secured promissory note issued by Buyer in an aggregate principal amount of $1,250,000,
subject to increase based on the amount of certain liabilities related to the GVB business (the “Closing Note”). The
Closing Note is payable in six equal monthly installments commencing on the fourth calendar month following the closing.
Pursuant to the terms of the Purchase Agreement,
the Company and Buyer will equally share in the liabilities related to the GVB assets that are not purchased, subject to certain conditions.
The Company is entitled to retain any insurance proceeds received in connection with the fire at the Grass Valley manufacturing facility,
up to $2,000,000 of which will be used to offset Buyer’s portion of such shared liabilities.
Additionally, the Company will fund the expenses
of the Purchased Interests up to $1,250,000 (the “Expense Cap”) from now through closing. If the Company and Buyer
agree to exceed the Expense Cap, Buyer will reimburse the Company for such excess expenses.
The Company expects to close the transaction in
early December 2023, subject to customary closing conditions including, approval by the Company’s Board of Directors, receipt of
a fairness opinion, Buyer obtaining $3 million of financing and receipt of third-party consents, including the consent of our senior lender.
The Company is currently in discussions with the senior lender to obtain such consent. No assurances can be given that the Buyer will
obtain the required financing or that the Company’s senior lender will consent to the transaction. Pursuant to the terms of the
Purchase Agreement, all of the Purchased Interests are expected to be transferred to the Buyer at closing on an “as is where is”
basis and both parties agreed to a general release of all claims either party may have except with respect to the Purchase Agreement or
the Closing Note.
The Purchase Agreement may be terminated at any
time prior to closing by (i) the mutual written consent of the Company and Buyer, (ii) the Company or Buyer if there has been a breach,
inaccuracy in or failure to perform any representation, warranty covenant or agreement made by the other party, (iii) the Company or Buyer
if certain conditions (other than financing) are not satisfied by December 7, 2023, (iv) the Company if Buyer fails to, or it becomes
apparent that it will not, obtain financing by December 7, 2023, and (v) Buyer if Buyer fails to, or it becomes apparent that it will
not, obtain financing by December 30, 2023.
The foregoing description of the Purchase Agreement
is qualified in its entirety by reference to the full text of the Purchase Agreement, which is filed as Exhibit 10.1 hereto.
Cautionary Note Regarding Forward-Looking Statements
Except for historical information, all of the
statements, expectations, and assumptions contained in this Form 8-K are forward-looking statements. Forward-looking statements typically
contain terms such as “anticipate,” “believe,” “consider,” “continue,” “could,”
“estimate,” “expect,” “explore,” “foresee,” “goal,” “guidance,”
“intend,” “likely,” “may,” “plan,” “potential,” “predict,” “preliminary,”
“probable,” “project,” “promising,” “seek,” “should,” “will,”
“would,” and similar expressions. Forward-looking statements include, but are not limited to, statements regarding (i) our
expectations regarding the conditions of the Purchase Agreement, (ii) our expectations on the timing and completion of the sale of our
hemp/cannabis business, including the GVB assets, and (iii) our expectations regarding our business interruption insurance claim. Actual
results might differ materially from those explicit or implicit in forward-looking statements. These forward-looking statements reflect
our current views about future events and involve assumptions which may be affected by risks and uncertainties in our business, as well
as other external factors, which could cause future results to materially differ from those expressed or implied in any forward-looking
statement. These risks include, but are not limited to: (1) the risk that the conditions of the Purchase Agreement are not met, (2) the
risk that the Purchase Agreement is terminated and (3) the other risks and uncertainties applicable to the Company and included in the
Company’s Annual Report on Form 10-K filed on March 9, 2023 and Quarterly Report on Form 10-Q filed May 9, 2023, August 14, 2023
and November 6, 2023. All information provided in this Form 8-K is as of the date hereof, and the Company assumes no obligation to and
does not intend to update these forward-looking statements, except as required by law.
Item 7.01. |
Regulation FD Disclosure. |
On November 27, 2023, the Company issued a press release regarding
the Purchase Agreement, a copy of which is attached hereto as Exhibit 99.1.
Item 9.01. |
Financial Statements and Exhibits. |
(d) Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| 22ND CENTURY GROUP, INC. |
| |
Date: November 27, 2023 | /s/ Peter Ferola |
| Peter Ferola |
| Chief Legal Officer |
Exhibit 10.1
[Execution Version]
Equity Purchase Agreement
by and among
22nd Century Group, Inc.,
ESI Holdings, LLC
and
Specialty Acquisition Corporation
dated as of
November 20, 2023
Equity
Purchase Agreement
This Equity Purchase Agreement
(this “Agreement”), dated as of November 20, 2023, is entered into by and between 22nd Century Group, Inc.,
a Nevada corporation (“22nd Century”), ESI Holdings, LLC, a Nevada limited liability company (“ESI,”
and together with 22nd Century, the “Seller”), and Specialty Acquisition Corporation, a Nevada corporation (the “Buyer”).
WHEREAS, Seller wishes to
sell to Buyer, and Buyer wishes to purchase from Seller, 100% of the issued and outstanding equity interests of (i) 22nd Century
Group Europe B.V., an Amsterdam private limited liability company (“Group Europe”) (ii) GV Farm Services, LLC,
an Oregon limited liability company (“Farm Services”), (iii) Evergreen State Holdings, LLC, an Oregon limited
liability company (“Evergreen”), (iv) Oregon Custom Supply, LLC, an Oregon limited liability company (“Custom
Supply”), (v) Central Oregon Processing, LLC, an Oregon limited liability company (“Central Processing”),
(vi) GVBiopharma UK Ltd., an England and Wales private limited company (“GVBiopharma”), (vii) RX Pharmatech
Ltd., an England and Wales private limited company (“Pharmatech”), and (viii) Prineville Solutions, LLC, an Oregon
limited liability company d/b/a “Prineville Refrigeration,” (“Prineville” and together with, Group Europe,
Farm Services, Evergreen, Custom Supply, Central Processing, GVBiopharma and Pharmatech, the “GVB Companies”), (the
“Purchased Interests”), subject to the terms and conditions set forth herein (the “Transaction”);
and
WHEREAS, Buyer previously
deposited Five Hundred Thousand Dollars ($500,000) in escrow (the “Deposit”) with Citibank, N.A. (the “Escrow
Agent”) to be held pursuant to the terms of that certain Escrow Agreement dated as of November 15, 2023 by and between
Buyer, Seller, and the Escrow Agent (the “Escrow Agreement”).
NOW, THEREFORE, in consideration
of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Purchase and Sale
Section 1.01
Purchase and Sale. On the terms and subject to the conditions set forth herein, at the Closing (as defined herein), Seller shall
sell to Buyer, and Buyer shall purchase from Seller, all of Seller’s right, title, and interest in and to the Purchased Interests,
free and clear of any mortgage, pledge, lien, charge, security interest, claim or other encumbrance (“Encumbrance”).
Section 1.02
Purchase Price. The aggregate purchase price for
the Purchased Interests shall be Two Million Two Hundred Fifty Thousand Dollars ($2,250,000), plus the amounts of certain accounts payable
and pre-closing expenses, as contemplated in this Agreement, as may be adjusted by Section 1.03 (the “Purchase Price”).
The Purchase Price shall be paid by Buyer to Seller as follows:
(a)
Buyer shall cause the Escrow Agent to release the Deposit to Seller at Closing by wire transfer of immediately available funds
in accordance with the wire transfer instructions delivered by Seller to Buyer prior to the Closing.
(b)
Buyer shall deliver to Seller Five Hundred Thousand Dollars ($500,000) in cash (the “Closing Date Cash Payment”)
at Closing by wire transfer of immediately available funds in accordance with the wire transfer instructions delivered by Seller to Buyer
prior to the Closing.
(c)
Buyer shall deliver to Seller a secured promissory note, substantially in the form attached hereto as Exhibit A, in
the aggregate principal amount of (i) One Million Two Hundred Fifty Thousand Dollars ($1,250,000), plus (ii) 50%
of the accounts payable of ESI, PTB Investment Holdings, LLC and Bridgeway Distribution, LLC existing at Closing, if any (the “Closing
AP Liabilities”) (together, the “Closing Note”), the payment of which will be guaranteed by the GVB Companies
and secured by the Purchased Interests as set forth in the Closing Note. For the avoidance of doubt, the term “Closing AP Liabilities”
shall include any liabilities that existed at Closing but the amount of which was not fully known by the Company at Closing, provided,
that the amounts become known by the Company no later than thirty (30) days following Closing.
Section 1.03
Post-Closing Adjustment.
(a)
[**]
(b)
[**]
(c)
“Buyer’s Settlement Share” [**].
(d)
Upon the later of (i) [**],
and (ii) Seller’s receipt of the Insurance Proceeds, the parties shall determine the “Post-Closing Adjustment”,
which shall be an amount equal to (i) Buyer’s Settlement Share, less, (ii) the lesser of (x) the Insurance
Proceeds received
by Seller, and (y) Two Million Dollars ($2,000,000).
(e)
If the Post-Closing Adjustment is a negative number, Seller shall pay to Buyer an amount equal to the absolute value of the Post-Closing
Adjustment, up to a maximum amount equal to the Closing
AP Liabilities (the “Post-Closing Adjustment Offset”); provided, that Seller and Buyer agree that any amount owing by Seller
to Buyer pursuant to the foregoing provision shall first be set-off against and otherwise reduce the amounts owing by Buyer to Seller
under the Closing Note; provided, further, that if the amount of the Post-Closing Adjustment Offset is greater than the outstanding amount
of the Closing Note at the time such Post-Closing Adjustment is calculated, then Seller shall pay to Buyer the amount by which the Post-Closing
Adjustment Offset exceeds the outstanding amount of the Closing Note. If the Post-Closing Adjustment is a positive number, Buyer
shall pay to Seller an amount equal to the Post-Closing Adjustment. Any payments of the Post-Closing Adjustment shall be made in three
equal monthly installments commencing on the first business day of the month following the month in which the Post-Closing Adjustment
is finally determined.
(f)
Any payments made pursuant to this Section 1.03 shall be treated as an adjustment to the Purchase Price by the parties for
tax purposes to the maximum extent permitted by applicable law.
Section 1.04
Pre-Closing Expenses. Seller shall fund the costs and expenses of the GVB Companies incurred from November 7, 2023 through the
Closing (which, together with the expenses of ESI, PTB Investment Holdings, LLC and Bridgeway Distribution, LLC during such period (the
“Expense Period”), the “Pre-Closing Expenses”) up to One Million Two Hundred Fifty Thousand Dollars ($1,250,000)
(the “Expense Cap”). Seller shall have no obligation to fund any Pre-Closing Expenses above the Expense Cap. If the parties
agree, in writing, to exceed the Expense Cap during the Expense Period, Buyer shall pay to Seller the amount by which the Pre-Closing
Expenses exceed the Expense Cap within five (5) business days following Closing. Any payments made pursuant to this Section 1.04
shall be treated as an adjustment to the Purchase Price by the parties for tax purposes to the maximum extent permitted by applicable
law.
Section 1.05
Closing. The closing of the transactions contemplated
by this Agreement (the “Closing”) shall take place remotely (through the electronic exchange of documents and consideration
required to be delivered at the Closing), on a date to be specified by the parties hereto, which shall be no later than the second business
day after satisfaction (or waiver) of the conditions set forth in Article IV (not including conditions which are to be satisfied by actions
taken at the Closing, but subject to the satisfaction of such conditions), unless another time, date or place is agreed to in writing
by Buyer and Seller. The date on which the Closing actually occurs is referred to as the “Closing Date.” Notwithstanding
the foregoing, the parties hereto intend that the Closing shall be deemed to be effective, and the transactions contemplated by this Agreement
shall be deemed to occur simultaneously, at 12:01 a.m. (Eastern Time), on the Closing Date.
Section 1.06
Closing Deliverables.
(a)
Seller’s Deliveries. At the Closing, Seller
shall deliver or cause to be delivered to Buyer the following:
(i)
A properly completed and executed IRS Form W-9 from each Seller; and
(ii)
Such other documents, instruments or certificates as shall be reasonably requested by Buyer and its counsel.
(b)
Buyer's Deliveries. At the Closing, Buyer shall
deliver or cause to be delivered to Seller the following:
(i)
The Deposit, by wire transfer of immediately available funds to such bank account or other accounts as have been designated in
writing by Seller;
(ii)
The Closing Date Cash Payment by wire transfer of immediately available funds to such bank account or other accounts as have been
designated in writing by Seller;
(iii)
The Closing Note duly executed by Buyer, together with any security documents required thereunder; and
(iv)
Such other documents, instruments or certificates as shall be reasonably requested by Seller and its counsel.
Section 1.07
Withholding Tax. Notwithstanding anything herein to the contrary, Buyer and its agents and affiliates shall be entitled
to deduct and withhold from the Purchase Price and any other payments otherwise payable pursuant to this Agreement all amounts that Buyer
or such agent or affiliate is required to deduct and withhold under any provision of tax law; provided that Buyer shall use commercially
reasonable efforts to give Seller at least two (2) business days advance written notice prior to withholding any such amounts together
with an explanation of the legal basis for such withholding and shall reasonably cooperate with Seller to eliminate or minimize the amount
of any such withholding to the extent permitted under applicable law. All such withheld amounts shall be treated as delivered to Seller
hereunder to the extent properly remitted to the appropriate taxing authority.
Section 1.08
Allocation of Purchase Price. The Purchase Price and any and all other payments hereunder shall be allocated among the equity
of each of Group Europe, GVBiopharma and Pharmatech and the assets of each of the other GVB Companies for all purposes (including tax
and financial accounting) as shown on the allocation schedule to be agreed in good faith between the parties following the date hereof
(the “Allocation Schedule”); provided, that in the event Buyer makes a 338(g) election as contemplated under
Section 6.08 hereunder, the Purchase Price and any and all other payments hereunder shall be allocated amongst the assets of Group
Europe, GVBiopharma and Pharmatech and each of the other GVB Companies for all purposes (including tax and financial accounting) as shown
on the Allocation Schedule. The Allocation Schedule has been prepared in accordance with Section 1060 of the Internal Revenue Code of
1986, as amended (the “Code”). Buyer and the Sellers shall file all Tax Returns including, without limitation, Internal
Revenue Service Form 8594 (including any amendments thereto and any claims for refund in respect thereof) in a manner consistent with
the Allocation Schedule. Neither Buyer nor the Sellers shall take any position (whether in audits, returns or otherwise) that is inconsistent
with such allocation unless required to do pursuant to a “determination” within the meaning of Section 1313(a) of the
Code.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants
to Buyer that the statements contained in this Article II are true and correct as of the date hereof. For purposes of this Article II,
“Seller’s knowledge,” “knowledge of Seller,” and any similar phrases shall mean the actual knowledge of
any officer of Seller.
Section 2.01
Organization and Authority of Seller; Enforceability. 22nd Century is a corporation duly organized, validly existing, and in good
standing under the laws of the state of Nevada. ESI is a limited liability company duly organized, validly existing, and in good standing
under the laws of the state of Nevada. Each of 22nd Century and ESI has full corporate and company power and authority to enter into this
Agreement and the documents to be delivered hereunder, to carry out its respective obligations hereunder, and to consummate the transactions
contemplated hereby. The execution, delivery, and performance by each of 22nd Century and ESI of this Agreement and the documents to be
delivered hereunder and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate
action on the part of such party. This Agreement and the documents to be delivered hereunder have been duly executed and delivered by
each of 22nd Century and ESI, and (assuming due authorization, execution, and delivery by Buyer) this Agreement and the documents to be
delivered hereunder constitute legal, valid, and binding obligations of each of 22nd Century and ESI, enforceable against 22nd Century
and ESI in accordance with their respective terms, except as may be limited by any bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, or other similar laws affecting the enforcement of creditors’ rights generally or by general principles of
equity.
Section 2.02
Good Standing. The GVB Companies are in good standing under the laws of their respective state of incorporation.
Section 2.03
No Conflicts; Consents. The execution, delivery and performance by each of 22nd Century and ESI of this Agreement and the documents
to be delivered hereunder, and the consummation of the transactions contemplated hereby, do not and will not: (a) violate or conflict
with any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to 22nd Century or ESI; (b) conflict with,
or result in (with or without notice or lapse of time or both) any violation of, or default under, or give rise to a right of termination,
acceleration or modification of any obligation or loss of any benefit under, any contract or other instrument to which 22nd Century or
ESI is a party, or (c) result in the creation or imposition of any Encumbrance on the Purchased Interests. No consent, approval,
waiver or authorization is required to be obtained by 22nd Century or ESI from any person or entity in connection with the execution,
delivery and performance by 22nd Century and ESI of this Agreement and the consummation of the transactions contemplated hereby, other
than those that will be obtained at or prior to Closing or any disclosures required under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”).
Section 2.04
Ownership of Purchased Interests. Either 22nd Century or ESI, as applicable, is the sole legal, beneficial, record, and equitable
owner of the Purchased Interests, free and clear of all Encumbrances whatsoever. The Purchased Interests constitute 100% of the total
issued and outstanding membership interests or equity interest, as the case may be, in each of the GVB Companies. Upon consummation of
the transactions contemplated by this Agreement, Buyer shall own all of the Purchased Interests, free and clear of all Encumbrances (other
than Encumbrances created by Buyer). Other than the organizational documents of the GVB Companies (true and correct copies of which have
been provided to Buyer), there are no voting trusts, proxies or other agreements or understandings in effect with respect to the voting
or transfer of any of the Purchased Interests.
Section 2.05
Legal Proceedings. Except as set forth on Schedule A, there is no claim, action, suit, proceeding or governmental investigation
(“Action”) of any nature pending or, to Seller’s knowledge, threatened against or by 22nd Century or ESI (a) relating
to or affecting the Purchased Interests, or (b) that challenges or seeks to prevent, enjoin, or otherwise delay the transactions
contemplated by this Agreement, except any Action(s) that would not, individually or in the aggregate, have a material adverse effect
on 22nd Century’s or ESI’s ability to consummate the transactions contemplated hereby on a timely basis. To Seller’s
knowledge, no event has occurred or circumstances exist that may give rise or serve as a basis for any such Action.
Section 2.06
No Other Representations or Warranties. Except
for the representations and warranties contained in this Article II, none of Seller, any affiliate of Seller nor any other person makes
any representations or warranties, and Seller hereby disclaims any other representations or warranties, whether made by Seller or an affiliate
of Seller, or any of its respective representatives, with respect to the execution and delivery of this Agreement or any document delivered
to Buyer pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants
to Seller that the statements contained in this Article III are true and correct as of the date hereof. For purposes of this Article III,
“Buyer’s knowledge,” “knowledge of Buyer,” and any similar phrases shall mean the actual knowledge of any
officer of Buyer.
Section 3.01
Organization and Authority of Buyer; Enforceability. Buyer is a corporation duly organized, validly existing, and in good standing under
the laws of the state of Nevada. Buyer has full corporate power and authority to enter into this Agreement and the documents to be delivered
hereunder, to carry out its respective obligations hereunder, and to consummate the transactions contemplated hereby. The execution, delivery,
and performance by Buyer of this Agreement and the documents to be delivered hereunder and the consummation of the transactions contemplated
hereby have been duly authorized by all requisite corporate action on the part of Buyer. This Agreement and the documents to be delivered
hereunder have been duly executed and delivered by Buyer, and (assuming due authorization, execution, and delivery by Seller) this Agreement
and the documents to be delivered hereunder constitute legal, valid, and binding obligations of Buyer, enforceable against Seller in accordance
with their respective terms.
Section 3.02
No Conflicts; Consents. The execution, delivery,
and performance by Buyer of this Agreement and the documents to be delivered hereunder, and the consummation of the transactions contemplated
hereby, do not and will not: (a) violate or conflict with any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Buyer; or (b) conflict with, or result in (with or without notice or lapse of time or both) any violation of, or default
under, or give rise to a right of termination, acceleration or modification of any obligation or loss of any benefit under, any contract
or other instrument to which Buyer is a party. No consent, approval, waiver or authorization is required to be obtained by Buyer from
any person or entity in connection with the execution, delivery, and performance by Buyer of this Agreement and the consummation of the
transactions contemplated hereby.
Section 3.03
Investment Purpose. Buyer is acquiring the Purchased Interests solely for its own account for investment purposes and not
with a view to, or for offer or sale in connection with, any distribution thereof. Buyer acknowledges that the Purchased Interests are
not registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws, and
that the Purchased Interests may not be transferred or sold except pursuant to the registration provisions of the Securities Act or pursuant
to an applicable exemption therefrom and subject to state securities laws and regulations, as applicable.
Section 3.04
Legal Proceedings. There is no Action pending or, to Buyer’s knowledge, threatened against, or by, Buyer or any affiliate
of Buyer that challenges or seeks to prevent, enjoin, or otherwise delay the transactions contemplated by this Agreement, except
any Actions that would not, individually or in the aggregate, have a material adverse effect on Buyer’s ability to consummate the
transactions contemplated hereby on a timely basis. To Buyer’s knowledge, no event has occurred or circumstances exist that may
give rise or serve as a basis for any such Action.
Section 3.05
Adequate Information;
No Reliance. Buyer acknowledges and agrees that (i) it has been furnished with all materials it considers relevant to making an investment
decision to enter into this Agreement and has had the opportunity to review Seller’s filings and submissions with the Securities
and Exchange Commission, including, without limitation, all information filed or furnished to the Exchange Act, (ii) Buyer, together
with its professional advisers, is a sophisticated and experienced investor and is capable of evaluating, to its satisfaction, the accounting,
tax, financial, legal, and other risks associated with the sale of the Purchased Interests, and Buyer has had the opportunity to consult
with its accounting, tax, financial, and legal advisors to be able to evaluate the risks involved in the sale of the Purchased Interests,
and (iii) it is not relying, and has not relied, upon any statement, advice (whether accounting, tax, financial, legal or other),
representation or warranty made by Seller or any of its affiliates or representatives, except for the representations and warranties made
by Seller in this Agreement.
Section 3.06
Non-Public
Information. Buyer acknowledges that (a) Seller now possesses and may hereafter possess certain non-public information concerning
Seller and their affiliates and/or the GVB Companies that may or may not be independently known to Buyer (the “Non-Public Information”)
which may constitute material information with respect to the foregoing, and (b) Seller is relying on this representation and would
not enter into a transaction to sell the Purchased Interests to Buyer absent this representation. Buyer agrees to purchase the Purchased
Interests from Seller notwithstanding that the Non-Public Information exists and Seller has not disclosed any Non-Public Information to
Buyer. Buyer acknowledges that it is a sophisticated buyer and with respect to the purchase, sale, and valuation of securities such as
the Purchased Interests and that Seller has no obligations to Buyer to disclose such Non-Public Information and no fiduciary obligations
to Buyer.
ARTICLE IV
Closing Conditions
Section 4.01
Conditions to Obligations of Buyer. The obligations of Buyer to consummate the Transaction are subject to the satisfaction
at or prior to Closing of the following conditions, any or all of which may be waived, in whole or in part, to the extent permitted by
applicable law, by Buyer:
(a)
No Order. No governmental entity, including any federal or state court of competent jurisdiction, shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order, judgment, decree, injunction or other order which (i) is
final and non-appealable, (ii) is in effect, and (iii) has the effect of making illegal or otherwise prohibiting the performance
by Buyer and Seller of their respective obligations under this Agreement.
(b)
Representations and Warranties. The representations and warranties of Seller contained in this Agreement shall be true and
correct as of the date of this Agreement and at and as of the Effective Time with the same force and effect as if made at and as of the
Effective Time (other than those representations and warranties that address matters only as of a particular date or only with respect
to a specific period of time, which need only be true and correct as of such date or with respect to such period), except where the failure
of such representations and warranties to be true and correct (without giving effect to any “materiality” or “material
adverse effect” qualifiers set forth therein) would not reasonably be expected to have, either individually or in the aggregate,
a material adverse effect on the ability of Seller to consummate the transactions contemplated hereby.
(c)
Agreements and Covenants. Seller shall have performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it at or prior to the Closing.
(d)
Closing Deliverables. Seller shall have delivered or caused to be delivered the documentation required to be delivered by
Seller pursuant to Section 1.06.
(e)
Fairness Opinion. Seller shall have provided to Buyer a copy of an opinion from an investment bank to the effect that, as
of the Closing Date, the consideration to be paid to Seller pursuant to the terms of this Agreement is fair, from a financial point of
view, to Seller.
(f)
Release of Debt Obligations. Seller shall have received any required release or consent, as applicable with respect to any
outstanding indebtedness, including the 7% Original Issue Discount Secured Debentures of Seller and any security or guarantee documents
related thereto.
(g)
Financing. Buyer shall have received at least $3,000,000 from the initial closing of an equity financing of its preferred
stock, on terms acceptable to Buyer (the “Financing”).
Section 4.02
Conditions to Obligations of Seller. The obligations of Seller to consummate the Transaction are subject to the satisfaction
at or prior to the Closing of the following conditions, any or all of which may be waived, in whole or in part, to the extent permitted
by applicable law, by Seller:
(a)
No Order. No governmental entity, including any federal or state court of competent jurisdiction, shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order, judgment, decree, injunction or other order which (i) is
final and non-appealable, (ii) is in effect, and (iii) has the effect of making illegal or otherwise prohibiting the performance
by Buyer and Seller of their respective obligations under this Agreement.
(b)
Representations and Warranties. The representations and warranties of Buyer contained in this Agreement shall be true and
correct as of the date of this Agreement and at and as of the Effective Time with the same force and effect as if made at and as of the
Effective Time (other than those representations and warranties that address matters only as of a particular date or only with respect
to a specific period of time, which need only be true and correct as of such date or with respect to such period), except where the failure
of such representations and warranties to be true and correct (without giving effect to any “materiality” or “material
adverse effect” qualifiers set forth therein) would not reasonably be expected to have, either individually or in the aggregate,
a material adverse effect on the ability of Buyer to consummate the transactions contemplated hereby.
(c)
Agreements and Covenants. Buyer shall have performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it at or prior to the Closing.
(d)
Closing Deliverables. Buyer shall have delivered or caused to be delivered the documentation required to be delivered by
Seller pursuant to Section 1.06.
(e)
Fairness Opinion. The board of directors of 22nd Century shall have received an opinion from an investment bank to the effect
that, as of the Closing Date, the consideration to be paid to Seller pursuant to the terms of this Agreement is fair, from a financial
point of view, to Seller.
(f)
Release of Debt Obligations. Seller shall have received any required release or consent, as applicable with respect to any
outstanding indebtedness, including the 7% Original Issue Discount Secured Debentures of Seller and any security or guarantee documents
related thereto.
Section 4.03
Waiver of Closing Conditions. Upon the occurrence of the Closing, any condition set forth in this Article IV that was not
satisfied as of the Closing shall be deemed to have been waived as of and from the Closing.
ARTICLE V
COVENANTS AND OTHER AGREEMENTS
Section 5.01
Conduct of Business Prior to the Closing.
From the date hereof until the Closing, except as otherwise provided in this Agreement or consented to in writing by Buyer (which
consent shall not be unreasonably withheld or delayed), Seller shall, and shall cause the GVB Companies to, (x) conduct the business
of the GVB Companies in the ordinary course of business consistent with past practice; (y) use reasonable best efforts to maintain
and preserve intact the current organization, business and franchise of the GVB Companies and to preserve the rights, franchises, goodwill
and relationships of its employees, customers, lenders, suppliers, regulators and others having business relationships with the GVB Companies;
and (z) not make, change or revoke any material tax election, change any annual accounting period, adopt or change any accounting method,
amended any tax return, enter into any closing agreement, settled any tax claim or assessment relating to any of the GVB Companies, surrender
any right to claim a refund of taxes, or consent to any extension or waiver of the limitation period applicable to any tax claim or assessment
relating to any of the GVB Companies.
Section 5.02
Insurance Proceeds. The parties acknowledge and agree that Seller and/or its subsidiaries or affiliates (excluding, for this purpose,
the GVB Companies and all of their subsidiaries) shall be the sole party entitled to any and all insurance proceeds (the “Insurance
Proceeds”) related to any claims in connection with the fire at the manufacturing facility located at 212 NE North Street, Grass
Valley, Oregon 97029, Sherman County (including, without limitation, for property damage and business interruption) and, for all income
and other tax purposes and financial statement reporting purposes, the GVB Companies shall be treated as having distributed and otherwise
assigned any and all rights of the GVB Companies to the Insurance Proceeds to Seller prior to the Closing. To the extent Buyer, or the
GVB Companies or any of their subsidiaries receive any such Insurance Proceeds after the Closing, such Insurance Proceeds shall be deemed
to have been received by Buyer or the GVB Companies or any of their subsidiaries solely as an agent for Seller and Buyer, or the GVB Companies
or any of their subsidiaries shall cause the Insurance Proceeds to be paid to Seller within two (2) days of receipt thereof. With respect
to the costs associated with the Insurance Proceeds, Seller shall bear the costs of the continued legal action associated with receipt
of such Insurance Proceeds. Seller shall reimburse Buyer for any third-party costs or actual net tax liabilities Buyer incurs as a result
of the receipt of the Insurance Proceeds. The parties agree and acknowledge that Seller shall be entitled exclusively to control, defend
and settle any claims in connection with the fire at the manufacturing facility.
Section 5.03
Pre-Closing Transfers. The parties agree that, prior to the Closing, the assets, liabilities and contracts (i) listed
on Schedule B attached hereto will be transferred from Seller to one or more of the GVB Companies, and (ii) the assets,
liabilities and contracts listed on Schedule C attached hereto will be transferred from the GVB Companies to Seller.
Section 5.04
Litigation. Each
of Buyer and Seller will cooperate fully, as and to the extent reasonably requested by the other party, in connection with the legal proceedings
listed on Schedule A.
Section 5.05
Location of Assets; Liabilities. If at any time
or from time to time after the Closing, (a) Seller and/or its subsidiaries receive or otherwise possess any asset that should belong
to the GVB Companies (including any contract), or any liability that should be allocated to the GVB Companies, on or prior to the Closing
Date exclusively related to the business of hemp-based cannabinoid extraction, refinement, contract manufacturing, and product development
(collectively, the “Business”) or (b) the GVB Companies receive or otherwise possess any asset that should belong
to Seller and/or any of its subsidiaries or affiliates, or any liability that should be allocated to Seller, on or prior to the Closing
Date not exclusively related to the Business, Seller shall, and shall cause its affiliates to, with respect to subsection (a), or Buyer
shall, and shall cause its affiliates to, with respect to subsection (b), as promptly as practicable: (i) transfer all right, title,
and interest in such asset to Buyer, the GVB Companies, their respective subsidiaries or as Buyer may direct, or to Seller or as Seller
may direct, as applicable, in each case for no additional consideration, and (ii) hold its right, title, and interest in and to such
asset in trust for the applicable transferee until such time as such transfer is completed.
Section 5.06
Employee Matters: For purposes of this Section 5.06, “Transferred Employees” means, (a) all employees of ESI who
accept offers of employment with Buyer or its affiliates, including the GVB Companies after Closing, and commence such employment immediately
after the Closing with Buyer or its affiliates and (b) employees who are absent due to vacation, family leave, short-term disability,
long-term disability, or other authorized leave of absence on the Closing Date but who accept such offer of employment and indicate an
intention to commence such employment with Buyer or its affiliates as of such employee’s return from vacation, family leave, short-term
disability, long-term disability or other authorized leave. Buyer or its affiliates, including the GVB Companies, shall extend offers
of employment to all Transferred Employees prior to and effective on the Closing Date. Such offers shall be made on the same terms and
conditions as the Transferred Employees current employment. Seller shall provide Buyer with access to their personnel records and personnel
files and such other information with respect to the Transferred Employees as Buyer may reasonably request, to the extent compliant with
applicable laws. Subject to Buyer’s right to terminate any Transferred Employees following the Closing, Buyer shall provide, or
shall cause one of its affiliates to provide, for a period of one (1) year from and after the Closing Date, each Transferred Employee
with compensation and benefits (excluding, for this purpose, equity-based compensation, long-term incentive awards, retention bonuses,
change in control-related payments, defined benefit pensions and retiree welfare benefits) that are no less favorable to those provided
to such Transferred Employee immediately prior to the Closing. Notwithstanding the foregoing or anything else in this Agreement, if Buyer
or one of its affiliates fails to make offers of employment to, or makes offers of employment that constitute an employment loss to, any
number of Transferred Employees that, if terminated by Seller upon the Closing, would trigger any obligations or liabilities under the
WARN Act, then Buyer shall be solely liable for any such obligations or liabilities. Without limiting the generality of the foregoing,
in the event that a Transferred Employee does not accept the offer of employment from Buyer or one of its affiliates, Buyer shall be required
to reimburse Seller for the total severance costs for such Transferred Employees. No provision in this Section 5.06 or otherwise
in this Agreement, whether express or implied, shall (i) create any third-party beneficiary or other rights in any employee or former
employee of Seller or any of its subsidiaries or affiliates (including any beneficiary or dependent thereof), or any other Person; or
(ii) create any rights to continued employment with Seller, Buyer or any of their respective subsidiaries or affiliates or in any
way limit the ability of Seller, Buyer or any of their respective subsidiaries or affiliates to terminate the employment of any individual
at any time and for any reason.
Section 5.07
Financing. Buyer shall use reasonable best efforts to take, or cause to be taken, all actions and do, or cause to be done,
as promptly as possible, all things necessary, proper or advisable, in each case, to the extent within the control of Buyer, to arrange,
obtain and consummate the Financing.
Section 5.08
Intercompany Balances. Seller and Buyer acknowledge and agree that any intercompany balances between Seller and any of its
affiliates on the one hand, and the GVB Companies on the other hand, shall be forgiven immediately at the Closing other than amounts related
to the Pre-Closing Expenses.
Section 5.09
Intercompany Services. Any and all services being provided by Seller and any of its affiliates to the GVB Companies prior
to the Closing shall have been terminated at the Closing.
ARTICLE VI
Financial and tax matters
Section 6.01
Pre-Closing Tax Returns Filed. Following the Closing, Seller will, at its own cost, prepare and timely file, or cause to
be prepared and timely filed, any income tax return with respect to any taxable period ending on or before the Closing Date (“Pre-Closing
Tax Period”) and Buyer shall cooperate with the filing of such income tax returns. Such income tax returns will be prepared
in a manner consistent with past practice, except to the extent otherwise required under applicable law. Seller will provide all such
income tax returns that are income tax returns to Buyer for review at least fifteen (15) days prior to the due date for such income tax
returns (including any applicable extensions), and Seller will reasonably and in good faith consider any comments made by Buyer before
the due date for such income tax returns with respect to such income tax returns that are consistent with the standard set forth in the
preceding sentence. Seller shall bear all costs, fees and expenses of preparing and filing such tax returns.
Section 6.02
Straddle Period Tax Returns Filed. Following the Closing, Buyer will, at its own cost, prepare and timely file, or cause
to be prepared and timely filed, any tax return of the GVB Companies with respect to any taxable period beginning before the Closing Date
and ending after the Closing Date (the “Straddle Period”). Such tax returns will be prepared in a manner consistent
with past practice, except to the extent otherwise required under applicable law. Buyer will provide all such tax returns that are income
tax returns to Seller for review at least fifteen (15) days prior to the due date for such tax returns (including any applicable extensions),
and Buyer will reasonably and in good faith consider any comments made by Seller before the due date for such tax returns with respect
to such tax returns that are consistent with the standard set forth in the preceding sentence. In connection with the filing of any such
tax return for a Straddle Period, the Seller shall pay or cause to be paid to Buyer Seller’s pro rata share of all taxes of the
GVB Companies shown on any Straddle Period tax return to the extent allocable to the portion of the Straddle Period through the end of
the Closing Date as determined in accordance with Section 6.03.
Section 6.03
Straddle Periods. For purposes of this Agreement, in the case of any Straddle Period, the amount of any taxes not based
upon or measured by income or gain, proceeds, receipts or expenses (e.g., payroll taxes or sales taxes) allocated to the portion of the
Straddle Period through the end of the Closing Date will be deemed to be the amount of such tax for the entire taxable period multiplied
by a fraction, the numerator of which is the number of days in the Straddle Period ending on the Closing Date and the denominator of which
is the number of days in such Straddle Period. The amount of taxes based upon or measured by income or gain, proceeds, receipts or expenses
for a Straddle Period that relate to the portion of the Straddle Period ending on the Closing Date will be determined based on an interim
closing of the books as of the close of business on the Closing Date; provided, however, that any item determined on an annual or periodic
basis (such as deductions for depreciation or real estate taxes) shall be apportioned on a daily basis in accordance with the preceding
fraction.
Section 6.04
Cooperation. Each of Buyer and Seller will cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of tax returns and any tax contest with respect to Pre-Closing Tax Periods. The parties acknowledge that,
following Closing, Buyer and Seller will have certain SEC reporting obligations that will involve and include the preclosing operations
and financial statements of 22nd Century and its subsidiaries. In connection with such SEC reporting obligations, Buyer and Seller shall
reasonably cooperate, and use their commercially reasonable efforts to cause their auditors to reasonably cooperate, in connection with
the preparation and filing of such obligations.
'
Section 6.05
Post-Closing Actions. Following the Closing Date, Buyer will not amend or cause to be amended any tax return, make or change
any tax election, agree to the extension or waiver of the statute of limitations period or take any other action that has the effect of
extending the period of assessment or collection, initiate discussions or examinations with any governmental entity, or make any voluntary
disclosures, or take any other similar action with respect to taxes or omit to take any action with respect to taxes, in each case with
respect to taxes of the GVB Companies that relates to a Pre-Closing Tax Period, and in each case except as required by applicable law
(as mutually agreed by Buyer and Seller, acting reasonably) or otherwise with the consent of Seller, which consent will not be unreasonably
withheld, delayed, or conditioned.
Section 6.06
Transfer Taxes. All taxes and fees (including any penalties and interest) incurred in connection with the Transaction shall
be borne and paid by the party to which it accrues under applicable law.
Section 6.07
Refunds. Seller shall be entitled to any refunds of any (i) Taxes paid by the GVB Companies for all Pre-Closing Tax Periods,
and (ii) with respect to any Straddle Period, Taxes paid by the Company attributable to the portion of such Straddle Period that ends
on and includes the Closing Date (including, in each case, any interest in respect thereof). Notwithstanding, Buyer shall not be obligated
to take any particular action or refrain from taking any particular action, in either case to obtain or maximize the amount of any such
refunds. Buyer shall use commercially reasonable efforts to cause the amount of any such refunds of taxes (including interest) to which
Seller is entitled, but which are received by any of the GVB Companies after the Closing Date, to be paid to Seller as soon as practicable
following such receipt or crediting to Seller by wire transfer of immediately available funds to the account designated by Seller.
Section 6.08
Section 338(g) Election. Notwithstanding anything to the contrary in this Agreement, Buyer shall in its sole discretion
be permitted to make, or cause its affiliates (including on or after the Closing Date, each of Group Europe, GVBiopharma, and Pharmatech)
to make, an election under Section 338(g) of the Code (or any similar provision under state or local tax law) with respect to the
purchase by Buyer of 100% of the equity of each such entity. Seller and each of Group Europe, GVBiopharma, and Pharmatech shall not take
any action inconsistent with such election and shall cooperate with Buyer to (i) complete all tax forms required in connection with
such election; and (ii) complete and deliver any notice required under Treasury Regulation Section 1.338-2(e)(4).
Section 6.09
Tax Sharing Arrangements. Any and all tax allocation, indemnity or sharing agreements binding any of the GVB Companies shall
be terminated as of the day before the Closing Date and, from and after the Closing Date, none of the GVB Companies shall be obligated
to make any payment to any person pursuant to any such agreement.
ARTICLE VII
General Release
Section 7.01
Mutual Release. In consideration of the covenants, agreements, and undertakings of each party under this Agreement and the
other agreements contemplated hereby, at the Closing, each party, on behalf of itself and its present and former, direct and indirect,
agents, representatives, successors and assigns (each, a “Releasing Party”) hereby releases, waives, and forever discharges
the other parties and their present and former, direct and indirect, parents, subsidiaries, officers, directors, managers, members, employees,
agents, representatives, successors and assigns (each, a “Released Party” and collectively, the “Released
Parties”) from and with respect to any and all actions, causes of action, suits, losses, liabilities, rights, debts, dues, sums
of money, accounts, reckonings, obligations, costs, expenses, liens, bonds, bills, specialties, covenants, contracts, controversies, agreements,
promises, variances, trespasses, damages, judgments, extents, executions, claims, and demands, of every kind and nature whatsoever, whether
now known or unknown, foreseen or unforeseen, matured or unmatured, suspected or unsuspected, in law, admiralty, or equity (collectively,
“Claims”) that any such Releasing Party now has, ever had or may in the future have against the Released Parties by
reason of any matter, cause or thing that has happened, developed or occurred, and any Claims that have arisen, before the Closing, including,
without limitation, any actual or alleged act, omission, transaction, practice, conduct, occurrence, or other matter, and each party shall
not seek to recover any amounts in connection therewith or thereunder from any Released Party. For the avoidance of doubt, this release
shall not release, waive, or forever discharge the parties from and with respect to any and all Claims arising from this Agreement, the
Notes or the Transaction.
ARTICLE VIII
TERMINATION
Section 8.01
Termination. This Agreement may be terminated at any time prior to the Closing:
(a)
by the mutual written consent of Seller and Buyer;
(b)
by Seller or Buyer if such party is not in material breach of this Agreement and there has been a material breach, inaccuracy in
or failure to perform any representation, warranty, covenant or agreement made by the other party;
(c)
by Seller or Buyer if any of the conditions to Closing shall not have been, or if it becomes apparent that any of such conditions
will not be, other than with respect to Section 4.01 (g), fulfilled by December 7, 2023;
(d)
by Seller if the condition of Section 4.01(g) shall not have been, or if it becomes apparent that it will not be, fulfilled by
December 7, 2023;
(e)
by Buyer if the condition of Section 4.01(g) shall not have been, or if it becomes apparent that it will not be, fulfilled by December
30, 2023.
Section 8.02
Effect of Termination. In the event of the termination of this Agreement, this Agreement shall forthwith become void and
there shall be no liability on the part of any party hereto except that nothing herein shall relieve any party hereto from liability for
any willful breach of any provision hereof. Promptly upon the termination of this Agreement for any reason, Buyer and Seller shall cause
the Escrow Agent to release the Deposit to Buyer by wire transfer of immediately available funds.
ARTICLE IX
Miscellaneous
Section 9.01
AS IS SALE. EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE II, IT IS UNDERSTOOD AND AGREED THAT SELLER IS NOT MAKING, NOR HAS, AT ANY TIME,
MADE, ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY PORTION OF THE PURCHASED INTERESTS,
OR THE BUSINESS OR PROPERTY OF THE GVB COMPANIES. BUYER ACKNOWLEDGES AND AGREES THAT UPON THE CLOSING, 22ND CENTURY AND ESI SHALL SELL
AND CONVEY TO BUYER, AND BUYER SHALL ACCEPT, THE PURCHASED INTERESTS “AS IS, WHERE IS, WITH ALL FAULT,” EXCEPT TO THE EXTENT
EXPRESSLY PROVIDED OTHERWISE IN ARTICLE II.
Section 9.02
Expenses. All costs and expenses, including, without
limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred;
provided, that, at Closing, Buyer shall pay the transaction expenses incurred by Seller, so long as the same have been consented
to by Buyer, such consent not to be unreasonably withheld, conditioned or delayed.
Section 9.03
Further Assurances. Following the Closing, each of the parties hereto shall, and shall cause their respective affiliates to, execute
and deliver such additional documents, instruments, conveyances, and assurances and take such further actions as may be reasonably required
to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement.
Section 9.04
Notices. All notices, requests, consents, claims, demands, waivers, and other communications hereunder shall be in writing and
shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the
addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by e-mail (with confirmation
of transmission) if sent during normal business hours of the recipient, and on the next business day if sent after normal business hours
of the recipient or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage
prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 9.04):
If to Buyer: |
Specialty
Acquisition Corporation
[**]
Attention: [**]
with a copy, which shall not constitute notice, to:
[**]
Attn: [**]
Email: [**]
|
If to Seller: |
22nd Century Group, Inc.
500 Seneca Street, Suite 508
Buffalo, NY 14204
Attention: [**]
with a copy, which shall not constitute notice, to:
[**]
Attn: [**]
Email: [**]
|
Section 9.05
Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.
Section 9.06
Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such
term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable,
the parties hereto shall negotiate in good faith to modify the Agreement so as to effect the original intent of the parties as closely
as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated
to the greatest extent possible.
Section 9.07
Entire Agreement. This Agreement and the documents to be delivered hereunder constitute the sole and entire agreement of the parties
to this Agreement with respect to the subject matter contained herein, and supersede all prior and contemporaneous understandings and
agreements, both written and oral, with respect to such subject matter.
Section 9.08
Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Neither party may assign its rights or obligations hereunder without the prior written consent of the
other party, which consent shall not be unreasonably withheld or delayed. No assignment shall relieve the assigning party of any of its
obligations hereunder.
Section 9.09
No Third-Party Beneficiaries. This Agreement is for the sole benefit of the parties hereto and their respective successors and
permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other person or entity any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
Section 9.10
Amendment and Modification. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each
party hereto.
Section 9.11
Waiver. No waiver by any party of any of the provisions
hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate
or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a
similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any
right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise
of any other right, remedy, power or privilege.
Section 9.12
Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Nevada without
giving effect to any choice or conflict of law provision or rule (whether of the State of Nevada or any other jurisdiction).
Section 9.13
Submission to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions
contemplated hereby may be instituted in the federal courts of the United States of America or the courts of the State of Nevada and each
party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding.
Section 9.14
Waiver of Jury Trial. Each party acknowledges and agrees that any controversy which may arise under this Agreement is likely to
involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have
to a trial by jury in respect of any legal action arising out of or relating to this Agreement or the transactions contemplated hereby.
Section 9.15
Specific Performance. The parties agree that irreparable damage would occur if any provision of this Agreement were not performed
in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to
any other remedy to which they are entitled at law or in equity. Each party hereto (a) agrees that it shall not oppose the granting
of such specific performance or relief and (b) hereby irrevocably waives any requirements for the security or posting of any bond
in connection with such relief.
Section 9.16
Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together
shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic
transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
[Signature
Page Follows]
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
Buyer:
|
Specialty acquisitioN corporation |
|
|
a Nevada corporation |
|
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|
|
|
|
By: |
/s/ William Spiegel |
|
|
Name: |
William Spiegel |
|
|
Title: |
Chief Operating Officer |
|
Seller:
|
22nd Century Group, Inc. |
|
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a Nevada corporation |
|
|
|
|
|
|
By: |
/s/ Hugh Kinsman |
|
|
Name: |
Hugh Kinsman |
|
|
Title: |
Chief Financial Officer |
|
|
ESI HOLDINGS, LLC |
|
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a Nevada limited liability company |
|
|
|
|
|
|
By: |
/s/ Hugh Kinsman |
|
|
Name: |
Hugh Kinsman |
|
|
Title: |
Chief Financial Officer |
|
[Signature Page to Equity Purchase Agreement]
Exhibit 99.1
22nd Century Group Enters into Agreement to
Sell Hemp/Cannabis Franchise
-Sale Expected to Result in Immediate and Significant
Reduction in Operating Costs and Cash Requirements-
BUFFALO,
N.Y., November 27, 2023 (Globe Newswire) — 22nd Century Group, Inc. (Nasdaq: XXII)
(the “Company” or “22nd Century”), a leading biotechnology company focused on utilizing advanced plant technologies
to improve health and wellness, today announced it has reached an agreement to sell substantially all of its GVB Biopharma (“GVB”)
hemp/cannabis operations to Specialty Acquisition Corporation, a Nevada corporation (the “Buyer”), an entity affiliated
with current GVB employees. The transaction is subject to certain approvals and Buyer obtaining financing.
Terms of the transaction include a cash payment
to the Company of $1 million at closing of the sale (the “Closing”) and a 12% secured promissory note for $1.25 million issued
by the Buyer and payable through six equal monthly installments of principal and accrued interest commencing the fourth calendar month
after the Closing. The parties will equally share liabilities related to any GVB entities not part of the transaction, subject to certain
conditions. The Company plans to use the proceeds from the sale to further deleverage its balance sheet.
22nd Century is also entitled to retain any insurance
proceeds received in connection with the fire at the Company’s Grass Valley manufacturing facility, a portion of which will be used
to offset Buyer’s portion of the shared liabilities. At present, damages being sought are approximately $9 million, subject to upward
revision the longer the disputed claim with the insurer remains unresolved, although the amount received will not be finalized until resolution
of the matter.
The sale is expected to close in early December
2023, subject to customary closing conditions including approval by 22nd Century’s Board of Directors, receipt of a fairness opinion,
Buyer obtaining $3 million of financing and receipt of third-party consents, including the consent of the Company’s senior lender.
The Company is currently in discussions with the senior lender to obtain such consent. No assurances can be given that the Buyer will
obtain the required financing or that the Company’s senior lender will provide the consent to the transaction.
“The sale of our hemp/cannabis franchise
will immediately and materially further reduce the cash and operating demands within our business,” stated John Miller, interim
Chief Executive Officer of 22nd Century. “The buyer will assume responsibility for payroll, lease, and other operational expenses,
along with future funding requirements for the hemp/cannabis business. We expect this transaction will substantially lower 22nd Century’s
operating expenses beyond the previously announced $15 million in cost savings initiatives on an annual basis. Additionally, we will retain
rights to the insurance proceeds, subject to certain offsets, effectively recouping cash that was invested into the continuity of the
hemp/cannabis business.”
“We
remain committed to determining the best path forward to create value for our shareholders. Including, evaluating strategic alternatives
with respect to our tobacco assets, notably our VLNÒ reduced
nicotine content products, as approved by the FDA for harm reduction as a modified risk tobacco product (MRTP),” said Miller.
About 22nd Century Group, Inc.
22nd Century Group, Inc. (Nasdaq: XXII)
is a leading agricultural biotechnology company focused on tobacco harm reduction, reduced nicotine tobacco and improving health and
wellness through plant science. With dozens of patents allowing it to control nicotine biosynthesis in the tobacco plant, the Company
has developed proprietary reduced nicotine content (RNC) tobacco plants and cigarettes, which have become the cornerstone of the FDA’s
Comprehensive Plan to address the widespread death and disease caused by smoking. The Company received the first and
only FDA Modified Risk Tobacco Product (MRTP) authorization for a combustible cigarette in December 2021. 22nd Century uses modern plant
breeding technologies, including genetic engineering, gene-editing, and molecular breeding to deliver solutions for the life science
and consumer products industries by creating new, proprietary plants with optimized alkaloid and flavonoid profiles as well as improved
yields and valuable agronomic traits.
Learn more at xxiicentury.com,
on Twitter, on LinkedIn, and on YouTube.
Learn
more about VLN® at tryvln.com.
###
Cautionary Note Regarding Forward-Looking Statements
Except for historical information, all of the
statements, expectations, and assumptions contained in this press release are forward-looking statements, including but not limited to
our full year business outlook. Forward-looking statements typically contain terms such as “anticipate,” “believe,”
“consider,” “continue,” “could,” “estimate,” “expect,” “explore,”
“foresee,” “goal,” “guidance,” “intend,” “likely,” “may,” “plan,”
“potential,” “predict,” “preliminary,” “probable,” “project,” “promising,”
“seek,” “should,” “will,” “would,” and similar expressions. Forward-looking statements
include, but are not limited to, statements regarding (i) the sale of our hemp/cannabis business, including the GVB assets, (ii) our expectations
regarding our future operating expenses and cash flow, (iii) our expectations on the timing and completion of the sale of our hemp/cannabis
business, and (iv) our expectations for our business interruption insurance claim. Actual results might differ materially from those explicit
or implicit in forward-looking statements. Important factors that could cause actual results to differ materially are set forth in “Risk
Factors” in the Company’s Annual Report on Form 10-K filed on March 9, 2023 and Quarterly Reports on Form 10-Q filed May 9,
2023, August 14, 2023 and November 6, 2023. All information provided in this press release is as of the date hereof, and the Company assumes
no obligation to and does not intend to update these forward-looking statements, except as required by law.
Investor Relations & Media Contact
Matt Kreps
Investor Relations
22nd Century Group
mkreps@xxiicentury.com
214-597-8200
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