8-K
22nd Century Group, Inc. (XXII)
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
Dateof Report (Date of earliest event reported): November 4, 2025
22ndCentury Group, Inc.
(Exact Name of Registrant as Specified in Charter)
| Nevada | 001-36338 | 98-0468420 |
|---|---|---|
| (State or Other Jurisdiction<br><br> <br>of Incorporation) | (Commission<br><br> <br>File<br> Number) | (I.R.S.<br> Employer<br><br> <br>Identification<br> No.) |
| 321 Farmington Road, Mocksville, North Carolina | 27028 | |
| --- | --- | |
| (Address<br> of Principal Executive Office) | (Zip<br> Code) |
Registrant’s telephone number, including area code: (336) 940-3769
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<br> communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting<br> material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement<br> communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement<br> 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 each exchange on which registered |
|---|---|---|
| Common<br> Stock, $0.00001 par value | XXII | NASDAQ<br> 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 4, 2025, 22nd Century Group, Inc. (the “Company”) entered into a Sales Agreement (the “Sales Agreement”) with Needham & Company, LLC (the “Sales Agent”) under which the Company may issue and sell in a registered offering shares of our common stock having an aggregate offering price of up to $25,000,000 from time to time through or to the Sales Agent (the “ATM Offering”). The Company currently intends to use any net proceeds from this ATM Offering for general corporate purposes, including expansion and acceleration of the Company’s VLN® reduced nicotine content tobacco cigarettes including through partner brands, research and development expenses, procurement and development of additional intellectual property rights and working capital.
Subject to the terms and conditions of the Sales Agreement, each time that the Company wishes to issue and sell shares of common stock, it will notify the Sales Agent and the Sales Agent will use its commercially reasonable efforts, consistent with its sales and trading practices, to solicit offers to purchase the common stock shares under the terms and subject to the conditions set forth in the Sales Agreement.
The Company will pay the Sales Agent 3.00% of the gross proceeds of the sales price per share of common stock sold through the Sales Agent under the Sales Agreement. In addition, the Company will reimburse the Sales Agent for certain fees and disbursements to its legal counsel incurred in connection with entering into the transactions contemplated by the Sales Agreement in an amount not to exceed $100,000 for the establishment of the ATM Offering and $10,000 for each periodic update of the ATM Offering.
Sales of the Company’s common stock through or to the Sales Agent, if any, will be made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. The Company is not obligated to make any sales of its common stock under the Sales Agreement and may at any time suspend offers under the Sales Agreement. The Sales Agreement will terminate upon the earlier of (i) the sale of all of the Company’s common stock subject to the Sales Agreement, or (ii) termination of the Sales Agreement as permitted therein.
This description of the Sales Agreement does not purport to be complete and is qualified in its entirety by reference to the Sales Agreement, which is attached hereto as Exhibit 10.1 and incorporated by reference herein.
The issuance and sale of common stock, if any, by the Company under the Sales Agreement will be offered and sold pursuant to the Company’s Registration Statement on Form S-3 (Registration No. 333-270473) filed with the Securities and Exchange Commission (the “SEC”) on March 10, 2023 and declared effective on March 31, 2023, the base prospectus included therein and the related prospectus supplement, dated November 4, 2025, to be filed with the SEC. This Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of an offer to buy any shares of common stock nor shall there be any sale of shares of common stock in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or other jurisdiction.
A copy of the opinion of Foley & Lardner LLP relating to the legality of the issuance and sale of securities is attached hereto as Exhibit 5.1.
| Item 2.02 | Disclosure of Results of Operations and Financial Condition |
|---|
On November 4, 2025, the Company issued an earnings release for the quarter ended September 30, 2025. A copy of the earnings release is furnished as Exhibit 99.1 to this report.
The information in this item shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of Section 18, nor shall it be deemed incorporated by reference in any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent, if any, expressly set forth by specific reference in such filing.
| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers |
|---|
On November 3, 2025, the Company entered into executive employment agreements with certain executives, including its named executive officers (the “Employment Agreements”). The Employment Agreements have the initial durations indicated in the table below (the “Initial Term”), with automatic one-year renewal periods unless either party provides advance written notice of an intent not to renew.
The Employment Agreements specify the titles and provide for base salaries at the current levels indicated in the table below. They also provide that the executive officers will be eligible to participate in annual cash incentive and long-term cash and equity incentive plans and programs, as well as other employee benefit plans, that are generally provided to the Company’s senior executives from time to time.
The Employment Agreements also provide that, upon an involuntary termination of the executive officer’s employment by the Company without Cause (as defined in the Employment Agreements), or upon a resignation for Good Reason (as defined in the Employment Agreements) upon or within 24 months following a Change of Control (as defined in the Company’s 2021 Omnibus Incentive Plan or any successor incentive plan) (the “Change of Control Employment Period”), the executive officer will receive the severance payment indicated in the table below, as well as subsidized COBRA benefits for the continuation period indicated in the table below.
| Executive Officer | Initial Term | Title | Current<br> Base Salary | Severance Payment on Qualifying Termination During Change of Control Employment Period | COBRA Continuation Period |
|---|---|---|---|---|---|
| Lawrence<br> Firestone | 42<br> months | Chief<br> Executive Officer | 425,000 | 2.5x<br> sum of base salary plus greater of target bonus or prior year’s actual bonus | 18<br> months |
| Daniel<br> Otto | 39<br> months | Chief<br> Financial Officer | 315,000 | 1.5x<br> sum of base salary plus greater of target bonus or prior year’s actual bonus | 12<br> months |
| Jonathan<br> Staffeldt | 36<br> months | General<br> Counsel | 315,000 | ||
| Scott<br> Marion | 39<br> months | Vice<br> President Manufacturing Operations | 275,000 | ||
| Robert<br> Manfredonia | 36<br> months | Executive<br> Vice President Sales and Marketing | 275,000 |
All values are in US Dollars.
“Cause” is defined generally in the Employment Agreements to include (a) a willful act or omission that is a material breach of any material obligation under the Employment Agreement or material written policy or procedure and failure to cure, (b) continued willful failure or refusal to substantially perform duties reasonably required, (c) an act of moral turpitude, dishonesty or fraud by, or criminal conviction (excluding non-felony convictions relating solely to vehicle and traffic offenses), (d) material misappropriation of Company property or (e) other willful misconduct that is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company. “Good Reason” is defined generally in the Employment Agreements to include (1) a breach by the Company or successor in the Change of Control of the Employment Agreement, (2) a reduction in base salary, percentage of base salary available as incentive compensation or bonus opportunity or benefits, in each case relative to those most favorable to the in effect at any time during the 180-day period prior to the Change of Control or, to the extent more favorable to the executive officer, those in effect at any time after the Change of Control, (3) the removal of the executive officer from, or failure to reelect or reappoint the executive to, any of the positions held with the Company on the date of the Change of Control or any other positions with the Company to which the executive officer has been elected, appointed or assigned, (4) a material adverse change, without the executive officer’s written consent, in the executive officer’s working conditions or status with the Company relative to the most favorable working conditions or status in effect during the 180-day period prior to the Change of Control or, to the extent more favorable to the executive officer, those in effect at any time after the Change of Control, (5) the relocation by more than 50 miles from the principal place of employment on the date 180 days prior to the Change of Control, (6) a requirement to travel 20% in excess of the average number of days per month the executive officer was required to travel during the 180-day period prior to the Change of Control, or (7) a failure to obtain an agreement from a successor in a Change of Control expressly to assume and agree to perform from and after the date of such assignment all of the terms, conditions and provisions imposed by the Employment Agreement.
Upon a qualifying termination, the executive officers will also receive accrued but unpaid benefits. Equity awards will be treated as provided in the applicable equity incentive plan and award agreements. The Employment Agreements also require the executive officers to comply with certain restrictive covenants.
The foregoing description of the Employment Agreements is only a summary and is qualified in its entirety by the form of Executive Employment Agreement that is filed herewith as Exhibit 10.2 and incorporated herein by reference.
Item9.01(d): Financial Statements and Exhibits.
| Exhibit<br> 5.1 | Opinion of Foley & Lardner LLP |
|---|---|
| Exhibit<br> 10.1 | Sales<br> Agreement, dated November 4, 2025, by and between 22nd Century Group, Inc. and Needham & Company, LLC |
| Exhibit<br> 10.2 | Form of Executive Employment Agreement |
| Exhibit<br> 23.1 | Consent of of Foley & Lardner LLP (included in Exhibit 5.1) |
| Exhibit<br> 99.1 | Earnings release dated November 4, 2025 |
| Exhibit<br> 104 | Cover<br> Page Interactive Data File - The cover page XBRL tags are embedded within the inline XBRL document |
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. | |
|---|---|
| /s/ Lawrence Firestone | |
| Date:<br> November 4, 2025 | Lawrence<br> Firestone |
| Chief<br> Executive Officer |
Exhibit5.1
| ATTORNEYS AT LAW<br><br> <br><br><br> <br>One<br> INDEPENDENT DRIVE<br><br> <br>JACKSONVILLE,<br> FLORIDA 32202<br><br> <br>904.359.2000<br> TEL<br><br> <br>904.359.8700<br> FAX<br><br> <br>www.foley.com<br><br> <br><br><br> <br>CLIENT/MATTER<br> NUMBER<br><br> <br>045952-0305 |
|---|
November 4, 2025
22nd Century Group, Inc.
321 Farmington Road
Mocksville, North Carolina
Ladies and Gentlemen:
We have acted as counsel to 22nd Century Group, Inc., a Nevada corporation (the “Company”), in connection with the Company’s issuance and sale, through or to Needham & Company, LLC (the “Sales Agent”), of up to $25,000,000 of shares of the Company’s common stock, par value $0.00001 per share (the “Shares”), from time to time and at various prices in an “at-the-market” offering pursuant to (i) that certain Sales Agreement, dated November 4, 2025 (the “Sales Agreement”), by and between the Company and the Sales Agent, and (ii) the Company’s Registration Statement on Form S-3 (File No. 333-270473), filed with the Securities and Exchange Commission (the “Commission”) on March 10, 2023 and declared effective on March 31, 2023 (the “Registration Statement”), the base prospectus filed as part of the Registration Statement (the “Base Prospectus”), and the final prospectus supplement dated November 4, 2025 (together with the Base Prospectus, the “Prospectus”).
In connection with our representation, we have examined: (i) the Sales Agreement, (ii) the Registration Statement and the Prospectus, (iii) the Amended and Restated Certificate of Incorporation of the Company, as amended, (iv) the Amended and Restated Bylaws of the Company, as amended and (v) the proceedings and actions taken by the Board of Directors of the Company to authorize and approve the transactions contemplated by the Sales Agreement and the execution and delivery of the Sales Agreement. We have also considered such matters of law and of fact, including the examination of originals or copies, certified or otherwise identified to our satisfaction, of such records and documents of the Company, certificates of officers, directors and representatives of the Company, certificates of public officials, and such other documents as we have deemed appropriate as a basis for the opinions set forth below. In our examination of the above-referenced documents, we have assumed all electronic and manual signatures on all documents reviewed by us (including, without limitation, signatures delivered via electronic signature systems such as DocuSign, SecureDocs, or comparable electronic signature methods or systems) are genuine signatures of the purported signatories, the authenticity of all documents, certificates, and instruments submitted to us as originals and the conformity with the originals of all documents submitted to us as copies.
The opinions expressed herein are limited in all respects to the federal laws of the United States of America and the applicable provisions of Title 7 of the Nevada Revised Statutes, and no opinion is expressed with respect to the laws of any other jurisdiction or any effect which such laws may have on the opinions expressed herein. This opinion is limited to the matters stated herein, and no opinion is implied or may be inferred beyond the matters expressly stated herein.
| AUSTIN<br><br> <br>Boston<br><br> <br>CHICAGO<br><br> <br>dallas<br><br> <br>DENVER | DETROIT<br><br> <br>houston<br><br> <br>JACKSONVILLE<br><br> <br>LOS<br> ANGELES<br><br> <br>MADISON | MEXICO<br> CITY<br><br> <br>MIAMI<br><br> <br>MILWAUKEE<br><br> <br>NEW<br> YORK<br><br> <br>ORLANDO | SACRAMENTO<br><br> <br>SAN<br> DIEGO<br><br> <br>SAN<br> FRANCISCO<br><br> <br>SILICON<br> VALLEY<br><br> <br>TALLAHASSEE | TAMPA<br><br> <br>WASHINGTON,<br> D.C.<br><br> <br>BRUSSELS<br><br> <br>TOKYO |
|---|
Based upon, subject to and limited by the foregoing, we are of the opinion that, upon the issuance of the Shares pursuant to the terms of the Sales Agreement and the receipt by the Company of the consideration for the Shares pursuant to the terms of the Sales Agreement, the Shares will be validly issued, fully paid, and nonassessable.
This opinion is issued as of the date hereof, and we assume no obligation to supplement this opinion if any applicable law changes after the date hereof or if we become aware of any fact that might change the opinion expressed herein after the date hereof. This opinion is limited to the matters set forth herein, and no other opinion should be inferred beyond the matters expressly stated.
We consent to the filing of this opinion in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended (the “Securities Act”), as Exhibit 5.1 to the Registration Statement and to the references to our firm therein. In giving our consent, we do not admit that we are “experts” within the meaning of Section 11 of the Securities Act or within the category of persons whose consent is required by Section 7 of the Securities Act.
| Very<br> truly yours, |
|---|
| /s/<br> Foley & Lardner LLP |
Exhibit10.1
22ndCentury Group, Inc.
Sharesof Common Stock
SALESAGREEMENT
November 4, 2025
Needham & Company, LLC
250 Park Avenue
New York, New York 10177
Ladies and Gentlemen:
22^nd^ Century Group, Inc., a Nevada corporation (the “Company”), confirms as follows its agreements with Needham & Company, LLC (the “Sales Agent”).
1. Issuance and Sale of Shares.
(a) On the basis of the representations, warranties and agreements of the Company herein contained and subject to all the terms and conditions of this Sales Agreement (the “Agreement”), the Company agrees that, from time to time during the term of this Agreement, it may issue and sell through the Sales Agent up to an aggregate of $25.0 million of shares of common stock (the “Placement Shares”) of the Company, par value $0.00001 par value per share (the “Common Stock”); provided, however, that in no event shall the Company issue or sell through the Sales Agent such number or dollar amount of Placement Shares that would (i) exceed the number or dollar amount of shares of Common Stock registered on the effective Registration Statement (as defined below) pursuant to which the offering is being made, (ii) exceed the number of authorized but unissued shares of Common Stock (less shares of Common Stock issuable upon exercise, conversion or exchange of any outstanding securities of the Company or otherwise reserved from the Company’s authorized capital stock), (iii) exceed the number or dollar amount of shares of Common Stock permitted to be sold by the Company under Form S-3 (including General Instruction I.B.6. thereof, if applicable) or (iv) exceed the number or dollar amount of shares of Common Stock for which the Company has filed a Prospectus Supplement (as defined below) (the lesser of clauses (i), (ii), (iii) and (iv), the “Maximum Amount”). Notwithstanding anything to the contrary contained herein, the parties hereto agree that compliance with the limitations set forth in this Section 1 on the number or dollar amount of Placement Shares that may be issued and sold under this Agreement shall be the sole responsibility of the Company and the Sales Agent shall have no obligation in connection with such compliance. The issuance and sale of Placement Shares through the Sales Agent will be effected pursuant to the Registration Statement filed by the Company with the Securities and Exchange Commission (the “Commission”) on March 10, 2023 and declared effective by the Commission on March 31, 2023, although nothing in this Agreement shall be construed as requiring the Company to issue shares of Common Stock.
(b) The Company has filed, in accordance with the provisions of the Securities Act of 1933 (the “Act”), and the rules and regulations of the Commission thereunder (collectively referred to as the “Rules and Regulations”), with the Commission a registration statement on Form S-3 (File No. 333-270473), including a base prospectus and together with such amendments thereto as may have been required to the date of this Agreement, relating to the Common Stock to be issued from time to time by the Company, and which incorporates by reference documents that the Company has filed or will file in accordance with the provisions of the Securities Exchange Act of 1934 (the “Exchange Act”), and the rules and regulations of the Commission thereunder (collectively, the “Exchange Act Rules and Regulations”). The Company has prepared a prospectus supplement to the base prospectus included as part of the registration statement, which prospectus supplement relates to the Placement Shares to be issued from time to time by the Company pursuant to this Agreement (the “Prospectus Supplement”). The Company will furnish to the Sales Agent, for use by the Sales Agent, electronic copies of the base prospectus included as part of such registration statement, as supplemented by the Prospectus Supplement. The Company may file one or more additional registration statements from time to time that will contain a base prospectus and a related prospectus supplement, if applicable (which shall be a Prospectus Supplement), with respect to the Placement Shares. Except where the context otherwise requires, any such registration statement, including the amendments thereto, the exhibits and any schedules thereto, the documents otherwise deemed to be part thereof, included or incorporated by reference therein, and including any information contained in a Prospectus (as defined below) subsequently filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations (“Rule 424(b)”) or deemed to be a part of such registration statement pursuant to the Rules and Regulations (including Rule 430B thereof), and any registration statement relating to the offering contemplated by this Agreement and filed pursuant to Rule 462(b) of the Rules and Regulations (“Rule 462(b)”) is herein called the “Registration Statement.” The base prospectus or base prospectuses, including all documents incorporated by reference therein, included in the Registration Statement, as it may be supplemented, if applicable, by the Prospectus Supplement, in the form in which such prospectus or prospectuses and/or Prospectus Supplement have most recently been filed by the Company with the Commission pursuant to Rule 424(b), together with any then-issued Issuer Free Writing Prospectuses (as defined below), is herein called the “Prospectus.”
(c) Any reference herein to the Registration Statement, any base prospectus, any Prospectus Supplement, the Prospectus or any Issuer Free Writing Prospectus shall be deemed to refer to and include the documents, if any, that are or are deemed to be incorporated by reference therein or from which information is so incorporated by reference (the “Incorporated Documents”), including, unless the context otherwise requires, the documents, if any, filed as exhibits to such Incorporated Documents. Any reference herein to the terms “amend,” “amendment” or “supplement” with respect to the Registration Statement, any base prospectus, any Prospectus Supplement, the Prospectus or any Issuer Free Writing Prospectus shall be deemed to refer to and include the filing of any document under the Exchange Act on or after the most recent effective date of the Registration Statement, or the respective dates of the base prospectus, such Prospectus Supplement, the Prospectus or such Issuer Free Writing Prospectus, as the case may be, and deemed to incorporated by reference therein. For purposes of this Agreement, all references to the Registration Statement, the Prospectus or any amendment or supplement thereto shall be deemed to include the most recent copy filed with the Commission pursuant to its Electronic Data Gathering Analysis and Retrieval system or, if applicable, the Interactive Data Electronic Application system when used by the Commission (collectively, “EDGAR”).
2. Placements. Each time that the Company wishes to issue and sell Placement Shares hereunder (each, a “Placement”), it will notify the Sales Agent by email notice (or other method mutually agreed to by the parties) (each such notice, a “Placement Notice”) containing the parameters in accordance with which the Company desires such Placement Shares to be sold, which at a minimum shall include the maximum number or amount of Placement Shares to be sold, the time period during which sales are requested to be made, any limitation on the number or amount of Placement Shares that may be sold in any day on which the Common Stock is traded on the Exchange (any such day, a “Trading Day”) and any minimum price below which sales may not be made, the form of which is attached hereto as Schedule 1. The Placement Notice shall originate from any of the individuals from the Company set forth on Schedule 3 (with a copy to each of the other individuals from the Company listed on such Schedule 3), and shall be addressed to each of the individuals from the Sales Agent set forth on Schedule 3, as such Schedule 3 may be amended from time to time. The Placement Notice shall be effective upon receipt by the Sales Agent unless and until (a) the Sales Agent declines to accept the terms contained therein for any reason, in its sole discretion, (b) the Sales Agent suspends sales under the Placement Notice for any reason in its sole discretion in accordance with this Agreement, (c) the entire number or amount of the Placement Shares thereunder or under this Agreement have been sold, (d) the Company suspends or terminates the Placement Notice or (e) this Agreement has been terminated under the provisions of Section 11. The amount of any discount, commission or other compensation to be paid by the Company to the Sales Agent in connection with the sale of the Placement Shares shall be calculated in accordance with the terms set forth in Schedule 2. It is expressly acknowledged and agreed that neither the Company nor the Sales Agent will have any obligation whatsoever with respect to a Placement or any Placement Shares unless and until the Company delivers a Placement Notice to the Sales Agent and the Sales Agent does not decline such Placement Notice pursuant to the terms set forth above, and then only upon the terms specified therein and herein. In the event of a conflict between the terms of this Agreement and the terms of a Placement Notice, the terms of the Placement Notice will control with respect to the matters covered thereby.
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3. Sale of Placement Shares by the Sales Agent. On the basis of the representations, warranties and agreements of the Company herein contained and subject to all the terms and conditions of this Agreement, upon the Sales Agent’s acceptance of the terms of a Placement Notice, and unless the sale of the Placement Shares described therein has been declined, suspended or otherwise terminated in accordance with the terms of this Agreement, the Sales Agent, for the period specified in the Placement Notice, will use its commercially reasonable efforts consistent with its normal trading and sales practices and applicable laws and regulations and the rules of the Nasdaq Capital Market (the “Exchange”) to sell such Placement Shares up to the number or amount specified in, and otherwise in accordance with the terms of, such Placement Notice. The Sales Agent will provide written confirmation to the Company no later than the opening of the Trading Day immediately following the Trading Day on which it has made sales of Placement Shares hereunder setting forth the number or amount of Placement Shares sold on such Trading Day, the average price at which Placement Shares were sold and the gross proceeds generated from such sales. Subject to the terms of the Placement Notice, the Sales Agent may sell Placement Shares by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Rules and Regulations, including sales made directly on or through the Exchange or any other existing trading market for the Common Stock, in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices and/or any other method permitted by law. The Company acknowledges and agrees that (a) there can be no assurance that the Sales Agent will be successful in selling Placement Shares, (b) the Sales Agent will incur no liability or obligation to the Company or any other person or entity if it does not sell Placement Shares for any reason other than a failure by the Sales Agent to use its commercially reasonable efforts consistent with its normal trading and sales practices and applicable laws and regulations to sell such Placement Shares as required under this Agreement and (c) the Sales Agent shall be under no obligation to purchase Placement Shares on a principal basis pursuant to this Agreement, except as otherwise agreed by the Sales Agent and the Company in a separate written agreement setting forth the terms of such sale.
4. Suspension of Sales.
(a) The Company or the Sales Agent may, upon notice to the other party in writing (including by email correspondence to each of the individuals of the other party set forth on Schedule 3, if receipt of such correspondence is actually acknowledged by any of the individuals to whom the notice is sent, other than automatic reply) or by telephone (confirmed immediately by verifiable facsimile transmission or email correspondence to each of the individuals of the other party set forth on Schedule 3), suspend any sale of Placement Shares (each, a “Suspension”); provided, however, that such Suspension shall not affect or impair any party’s obligations with respect to any Placement Shares sold hereunder prior to the receipt of such notice. While a Suspension is in effect, any obligation under Sections 7(s), 7(t), and 7(u) with respect to the delivery of certificates, opinions and comfort letters to the Sales Agent, shall be waived. Each of the parties agrees that no notice under this Section 4 shall be effective against the other party unless notice is sent by one of the individuals named on Schedule 3 hereto to one of the individuals named on Schedule 3 hereto, as such Schedule may be amended from time to time.
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(b) Notwithstanding any other provision of this Agreement, during any period in which the Company is, or would reasonably be deemed to be, in possession of material non-public information, the Company and the Sales Agent agree that (i) no sale of Placement Shares will take place, (ii) the Company shall not request the sale of any Placement Shares and shall cancel any effective Placement Notices instructing the Sales Agent to make any sales and (iii) the Sales Agent shall not be obligated to sell or offer to sell any Placement Shares.
5. Settlement and Delivery.
(a) Unless otherwise specified in the applicable Placement Notice, settlement for sales of Placement Shares will occur on the first Trading Day (or such other day as is industry practice for regular-way trading) following the date on which such sales are made (each, a “Settlement Date”). The amount of proceeds to be delivered to the Company on a Settlement Date against receipt of the Placement Shares sold (the “Net Proceeds”) will be equal to the aggregate gross sales price received by the Sales Agent, after deduction of (i) the Sales Agent’s commission, discount or other compensation for such sales payable by the Company pursuant to Section 2 hereof, (ii) any other amounts due and payable by the Company to the Sales Agent pursuant to Section 7(i) of this Agreement and (iii) any transaction fees imposed by any governmental or self-regulatory organization in respect of such sales.
(b) On or before each Settlement Date, the Company will, or will cause its transfer agent to, electronically transfer the Placement Shares being sold by crediting the Sales Agent’s or its designee’s account (provided the Sales Agent shall have given the Company written notice of such designee at least one Trading Day prior to the Settlement Date) at The Depository Trust Company through its Deposit and Withdrawal at Custodian System or by such other means of delivery as may be mutually agreed upon by the parties hereto, which in all cases shall be duly authorized, freely tradeable, transferable, registered shares of Common Stock in good deliverable form. On each Settlement Date, the Sales Agent will deliver the related Net Proceeds in same day funds to an account designated by the Company on or prior to the Settlement Date. In addition to and in no way limiting the rights and obligations set forth in Section 9 hereto, the Company agrees that if the Company or its transfer agent (if applicable), defaults in its obligation to deliver duly authorized, freely tradeable, transferable, registered Placement Shares on a Settlement Date, the Company will (i) hold the Sales Agent harmless against any loss, claim, damage, or expense (including reasonable legal fees and expenses), as incurred, arising out of or in connection with such default by the Company or its transfer agent (if applicable), (ii) pay to the Sales Agent any commission, discount or other compensation to which it would otherwise have been entitled absent such default and (iii) take all necessary action to cause the full amount of any Net Proceeds that were delivered to the Company’s account with respect to such settlement, together with any out of pocket costs incurred by the Sales Agent in connection with recovering such Net Proceeds, to be immediately returned to the Sales Agent no later than 5:00 p.m., New York City time, on such Settlement Date, by wire transfer of immediately available funds to an account designated by the Sales Agent.
(c) Certificates for the Placement Shares, if any, shall be in such denominations and registered in such names as the Sales Agent may request in writing one Business Day (as defined below) before the applicable Settlement Date. Certificates for the Placement Shares, if any, will be made available by the Company for examination and packaging by the Sales Agent in New York City not later than 12:00 p.m., New York City time, on the Business Day prior to the applicable Settlement Date.
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(d) Under no circumstances shall the Company cause or request the offer or sale of any Placement Shares if, after giving effect to the sale of such Placement Shares, the aggregate number or gross sales proceeds of Placement Shares sold pursuant to this Agreement would exceed the lesser of (i) together with all sales of Placement Shares under this Agreement, the Maximum Amount, (ii) the amount available for offer and sale under the then-effective Registration Statement and (iii) the amount authorized from time to time to be issued and sold under this Agreement by the Company’s board of directors or a duly authorized committee thereof, and notified to the Sales Agent in writing. Under no circumstances shall the Company cause or request the offer or sale of any Placement Shares pursuant to this Agreement at a price lower than the minimum price authorized from time to time by the Company’s board of directors or a duly authorized committee thereof, and notified to the Sales Agent in writing. Notwithstanding anything to the contrary contained herein, the parties hereto acknowledge and agree that compliance with the limitations set forth in this Section 5(d) on the number or dollar amount of Placement Shares that may be issued and sold under this Agreement from time to time shall be the sole responsibility of the Company, and the Sales Agent shall have no obligation in connection with such compliance.
6. Representations and Warranties of the Company
The Company represents, warrants and covenants to the Sales Agent that as of the date of this Agreement and as of each Applicable Time (as defined below):
(a) The Company and the transactions contemplated by this Agreement meet the requirements for and comply with the conditions for the use of Form S-3 (including General Instructions I.A and I.B.1.) under the Act. The Registration Statement has been filed with the Commission and has been declared effective by the Commission under the Act prior to the issuance of any Placement Notice by the Company. The Prospectus Supplement will name the Sales Agent as the agent engaged by the Company in the section entitled “Plan of Distribution.” The Registration Statement and the offer and sale of Placement Shares as contemplated hereby meet the requirements of Rule 415 under the Rules and Regulations and comply in all material respects with such Rule. The Company has not received, and has no notice from the Commission of, any notice pursuant to Rule 401(g)(1) under the Act objecting to the use of the shelf registration statement form. Any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement have been so described or filed. Copies of the Registration Statement, the Prospectus and any such amendments or supplements and all documents incorporated by reference therein that were filed with the Commission on or prior to the date of this Agreement have been delivered electronically to the Sales Agent and its counsel, or are available through EDGAR. The Company has not distributed and, prior to the later to occur of each Settlement Date and completion of the distribution of the Placement Shares, will not distribute any offering material in connection with the offering or sale of the Placement Shares other than the Registration Statement and the Prospectus and any Issuer Free Writing Prospectus to which the Sales Agent has consented.
(b) No order preventing or suspending the use of the any Prospectus Supplement, the Prospectus or any Issuer Free Writing Prospectus has been issued by the Commission, and no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued, and no proceeding for that purpose has been initiated or threatened by the Commission. On the date the Registration Statement became or becomes effective (the “Effective Date”), on the date any Prospectus Supplement, the Prospectus, any Issuer Free Writing Prospectus or any amendment or supplement thereto was or is filed with the Commission pursuant to the Act or the Exchange Act, at each Applicable Time and at all times during the period through and including any Settlement Date and when any post-effective amendment to the Registration Statement becomes effective, the Registration Statement, the Prospectus and any Issuer Free Writing Prospectus (in each case, as amended or as supplemented, if applicable), including the financial statements, if any, included or incorporated by reference therein, did and will comply with all applicable requirements of the Act, the Exchange Act, the Exchange Act Rules and Regulations and the Rules and Regulations in all material respects, and did and will contain all statements required to be stated therein in accordance with the Act, the Exchange Act, the Exchange Act Rules and Regulations and the Rules and Regulations in all material respects. There are no contracts or other documents that are required under the Act to be filed as exhibits to the Registration Statement that are not so filed.
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When it became, becomes or is deemed to become effective, no part of the Registration Statement or any amendment or supplement thereto did, does or will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Prospectus and any amendment and supplement thereto, as of its date and at each Applicable Time, did not, does not and will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Each Issuer Free Writing Prospectus, as of its issue date and as of each Applicable Time, did not, does not and will not include any information that conflicted, conflicts or will conflict with the information contained in the Registration Statement or the Prospectus, including any document incorporated by reference therein that has not been superseded or modified.
As used in this subsection and elsewhere in this Agreement:
“Applicable Time” means (i) each Representation Date (as defined below), (ii) the time of each sale of any Placement Shares pursuant to this Agreement and (iii) each Settlement Date.
“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of the Rules and Regulations (“Rule 433”), relating to the Placement Shares that (i) is required to be filed with the Commission by the Company or (ii) is exempt from filing pursuant to Rule 433(d)(5)(i), in each case, in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g).
The foregoing representations and warranties in this Section 6(b) do not apply to any statements or omissions made in reliance on, and in conformity with, information relating to the Sales Agent furnished in writing to the Company by the Sales Agent specifically for inclusion in the Registration Statement, the Prospectus Supplement, the Prospectus or any Issuer Free Writing Prospectus, or any amendment or supplement thereto. The Company acknowledges that the statements set forth in the tenth paragraph under the caption “Plan of Distribution” in the Prospectus Supplement (the “Sales Agent Information”) constitute the only information relating to the Sales Agent furnished in writing to the Company by the Sales Agent specifically for inclusion in the Registration Statement, the Prospectus Supplement, the Prospectus and any Issuer Free Writing Prospectus.
(c) In connection with the offering of the Placement Shares, (i) at the times specified in Rule 164 and Rule 433 of the Rules and Regulations and (ii) as of the date hereof, the Company was not and is not an “ineligible issuer” (as defined in Rule 405 of the Rules and Regulations (“Rule 405”)), without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an ineligible issuer.
(d) The Incorporated Documents, when they became or become effective or were or are filed with the Commission, as the case may be, complied or will comply in all material respects with the requirements of the Act and the Exchange Act, as applicable, and the Rules and Regulations and the Exchange Act Rules and Regulations, as applicable; and any further documents filed and incorporated by reference subsequent to the Effective Date shall, when they are filed with the Commission, comply in all material respects with the requirements of the Act and the Exchange Act, as applicable, and the Rules and Regulations and the Exchange Act Rules and Regulations, as applicable. Each Incorporated Document did not, and any further documents filed and incorporated by reference therein will not, when filed with the Commission, contain an untrue statement of a material fact or omit to state a material fact required to be stated in such document or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
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(e) The Company does not own, directly or indirectly, any shares of stock or any other equity or long-term debt securities of any corporation or have any material equity interest in any corporation, firm, partnership, joint venture, association or other entity, other than the subsidiaries listed in Exhibit 21 to its most recent Annual Report on Form 10-K (collectively, the “Subsidiaries”). The Company and each of its Subsidiaries is duly organized and validly existing. The Company and each of its Subsidiaries has full power and authority to conduct all the activities conducted by it, to own or lease all the assets owned or leased by it and to conduct its business as described in the Registration Statement and the Prospectus. The Company and each of its Subsidiaries is duly licensed or qualified to do business and in good standing in all jurisdictions in which the nature of the activities conducted by it or the character of the assets owned or leased by it makes such license or qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not, individually or in the aggregate, have a material adverse effect or would reasonably be expected to have a material adverse effect on the Company and its Subsidiaries, taken as a whole, or their respective assets, businesses, operations, earnings, properties, prospects, conditions (financial or other), stockholders’ equity or results of operations, or prevent or materially interfere with consummation of the transactions contemplated hereby (such effect is referred to herein as a “Material Adverse Effect”). All of the outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued, are fully paid and nonassessable and free of any preemptive or similar rights, and are wholly owned by the Company free and clear of all claims, liens, charges, security interests, rights of first refusal and encumbrances; there are no securities outstanding that are convertible into or exercisable or exchangeable for capital stock of any Subsidiary. The Company and its Subsidiaries are not engaged in any discussions or a party to any agreement or understanding, written or oral, regarding the acquisition of an interest in any corporation, firm, partnership, joint venture, association or other entity where such discussions, agreements or understandings would require disclosure in, or amendment to, the Registration Statement. Complete and correct copies of the Certificate of Incorporation and of the By-laws of the Company and the organizational documents of each of its Subsidiaries and all amendments thereto have been delivered to the Sales Agent and its counsel, or are available through EDGAR, and no changes therein will be made subsequent to the date hereof and prior to the termination of this Agreement without the Sales Agent’s prior written consent (which consent shall not be unreasonably withheld, conditioned or denied).
(f) The Company has authorized, issued and outstanding capital stock as set forth in its most recent Quarterly Report on Form 10-Q, as modified by subsequently filed Current Reports on Form 8-K, as of the respective dates set forth therein (other than the grant of additional options under the Company’s existing stock option plans, or changes in the number of outstanding shares of Common Stock of the Company due to the issuance of shares upon the exercise or conversion of securities exercisable for, or convertible into, Common Stock outstanding on the date hereof) and such authorized capital stock conforms to the description thereof set forth in the Registration Statement and the Prospectus. All of the outstanding shares of capital stock of the Company have been duly authorized, validly issued, are fully paid and nonassessable, were issued in compliance with all applicable state and federal securities laws and are not subject to any preemptive rights, rights of first refusal or similar rights. The Placement Shares have been duly authorized and, when issued and delivered by the Company against payment therefor as contemplated hereby, will be validly issued, fully paid and nonassessable, free and clear of any pledge, lien, encumbrance, security interest or other claim, and will be registered pursuant to Section 12 of the Exchange Act; no preemptive rights, rights of first refusal or similar rights exist with respect to any of the Placement Shares or the issue and sale thereof. The description of the capital stock of the Company included or incorporated by reference in the Registration Statement, the Prospectus Supplement and the Prospectus is complete and accurate in all material respects. The Placement Shares, when issued, will conform to the description thereof set forth in or incorporated into the Prospectus. Except as set forth in the Prospectus Supplement and the Prospectus, the Company does not have outstanding and will not have outstanding any options to purchase, or any rights or warrants to subscribe for, or any other securities or obligations convertible into, or any other contracts or commitments to issue or sell, any shares of capital stock, or any such warrants, convertible securities or obligations. The certificates evidencing the Placement Shares, if any, are in due and proper legal form and have been duly authorized for issuance by the Company. The issuance and sale of the Placement Shares as contemplated hereby will not cause any holder of any share capital, securities convertible into or exchangeable or exercisable for share capital or options, warrants or other rights to purchase share capital or any other securities of the Company to have any right to acquire any preferred shares or other securities of the Company.
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(g) At the time the Registration Statement was originally declared effective, and at the time the Company’s most recent Annual Report on Form 10-K was filed with the Commission, the Company met the then-applicable requirements for the use of Form S-3 under the Act, including, but not limited to, General Instruction I.B.1. of Form S-3. The Company meets the requirements for use of Form S-3 under the Act specified in Conduct Rule 5110(b)(7)(C)(i) of the Financial Industry Regulatory Authority, Inc. (“FINRA”). The aggregate market value of the outstanding voting and non-voting common equity (as defined in Rule 405) of the Company held by persons other than affiliates of the Company (pursuant to Rule 144 of the Rules and Regulations, those that directly, or indirectly through one or more intermediaries, control, or are controlled by, or are under common control with, the Company) (the “Non-Affiliate Shares”), was equal to or greater than $75 million (calculated by multiplying (i) the highest price at which the common equity of the Company closed on the Exchange on a date subsequent to the date the Company’s most recent Annual Report on Form 10-K was filed with the Commission by (ii) the number of Non-Affiliate Shares) on a date within 60 days of the closing price set forth in (i). The Company is not a shell company (as defined in Rule 405) and has not been a shell company for at least 12 calendar months previously and if it has been a shell company at any time previously, has filed current Form 10 information (as defined in Instruction I.B.6. of Form S-3) with the Commission at least 12 calendar months previously reflecting its status as an entity that is not a shell company.
(h) The financial statements, together with the related notes and schedules, included or incorporated by reference in the Registration Statement or the Prospectus present fairly in all material respects the financial condition of the Company and its consolidated Subsidiaries as of the respective dates thereof and the results of operations, cash flows and changes in stockholders’ equity of the Company and its consolidated Subsidiaries for the respective periods covered thereby, all in conformity with generally accepted accounting principles applied on a consistent basis throughout the entire period involved. No other financial statements or schedules (historical or pro forma) are required by the Act, the Exchange Act, the Exchange Act Rules and Regulations or the Rules and Regulations to be included or incorporated by reference in the Registration Statement or the Prospectus. To the extent applicable, any pro forma financial statements, information or data included or incorporated by reference in the Registration Statement and the Prospectus comply with the requirements of Regulation S-X of the Act, including, without limitation, Article 11 thereof, fairly present the information set forth therein in all material respects, and the assumptions used in the preparation of such pro forma financial statements and data are reasonable, the pro forma adjustments used therein are appropriate to give effect to the circumstances referred to therein and the pro forma adjustments have been properly applied to the historical amounts in the compilation of those statements and data. Withum Smith+Brown, PC (formerly Feed Maxick P.C.) (the “Accountants”), who have reported on the consolidated financial statements and schedules of the Company, are and, during the periods covered by their report were, an independent registered public accounting firm with respect to the Company within the meaning of, and as required by, the Act, the Rules and Regulations and the Public Company Accounting Oversight Board (United States) (“PCAOB”). To the Company’s knowledge, the Accountant is not in violation of the auditor independence requirements of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) with respect to the Company. The other financial and statistical data included and incorporated by reference in the Registration Statement and the Prospectus present accurately and fairly the information shown therein in all material respects and have been compiled on a basis consistent with the audited financial statements incorporated by reference in the Registration Statement and the Prospectus and the books and records of the Company. All disclosures contained in the Registration Statement, the Prospectus and any Issuer Free Writing Prospectus regarding “non-GAAP financial measures” (as such term is defined in the Rules and Regulations) comply with Regulation G of the Exchange Act and Item 10(e) of Regulation S-K under the Act, to the extent applicable. The interactive data in eXtensible Business Reporting Language included or incorporated by reference in the Registration Statement and the Prospectus fairly presents the information called for in all material respects and has been prepared in accordance with the Commission’s rules and guidelines applicable thereto. The Prospectus delivered to Sales Agent for use in connection with the sale of the Placement Shares pursuant to this Agreement will be identical to the versions of the Prospectus created to be transmitted to the Commission for filing via EDGAR, except to the extent permitted by Regulation S-T.
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(i) No person, as such term is defined in Rule 1-02 of Regulation S-X under the Rules and Regulations (each, a “Person”), has the right, contractual or otherwise, to cause the Company to issue or sell to such Person any Common Stock or shares of any other capital stock or other securities of the Company. Except as set forth in the Registration Statement and the Prospectus (which rights have been waived with respect to the offering contemplated hereby), no Person has any preemptive rights, resale rights, rights of first refusal, rights of co-sale or any other rights (whether pursuant to a “poison pill” provision or otherwise) to purchase any Common Stock or shares of any other capital stock or other securities of the Company. Except as contemplated by this Agreement, no Person has the right to act as an underwriter or as a financial advisor to the Company in connection with the offer and sale of the Common Stock.
(j) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, (i) there has not been any Material Adverse Effect, the occurrence of any development that the Company reasonably expects would result in a Material Adverse Effect or any material adverse change, or any development that would reasonably be expected to result in a material adverse change, in the general affairs, business, management, condition (financial or otherwise), earnings, results of operations, properties, operations, assets, prospects or liabilities of the Company and its Subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business (a “Material Adverse Change”), (ii) there has not been any change in the capitalization or long-term indebtedness of the Company of the Company (other than in connection with the exercise of options to purchase the Common Stock granted pursuant to the Company’s stock option plans from the shares reserved therefor as described in the Registration Statement and the Prospectus, the exercise of warrants described in the Registration Statement and the Prospectus, and the grant of stock options in the ordinary course of business and consistent with the past practice of the Company), (iii) neither the Company nor any of its Subsidiaries has incurred, except in the ordinary course of business as described in the Prospectus, any material liabilities or obligations, direct or contingent (including any off-balance sheet obligations), nor has the Company or any of its Subsidiaries entered into any material transactions other than pursuant to this Agreement and the transactions referred to herein and (iv) the Company has not paid, made or declared any dividends or other distributions of any kind on any class of its capital stock or the capital stock of any Subsidiary.
(k) The Company and its Subsidiaries are not, will not become as a result of or after giving effect to the transactions contemplated hereby (including the offer and sale of the Placement Shares), and will not conduct their business in a manner that would cause any of them to be, an “investment company,” an entity “controlled” by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company,” as each such terms are defined in the Investment Company Act of 1940.
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(l) Neither the issuance, sale and delivery of the Placement Shares nor the application of the proceeds thereof by the Company as described in the Registration Statement and the Prospectus will violate Regulation T, U or X of the Board of Governors of the Federal Reserve System or any other regulation of such Board of Governors.
(m) Except as set forth in the Registration Statement, the Pricing Prospectus and the Prospectus, there are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company, any of its Subsidiaries or any of its or their officers in their capacity as such, nor any basis therefor, before or by any federal or state court, commission, regulatory body, administrative agency or other governmental body, domestic or foreign, wherein an unfavorable ruling, decision or finding could have a Material Adverse Effect. To the knowledge of the Company, there are no current or pending legal, governmental or regulatory audits or investigations, actions, suits or proceedings that are required under the Act to be described in the Registration Statement or the Prospectus that are not so described.
(n) The Company and each Subsidiary has and will have performed all the obligations required to be performed by it, and is not and will not be, (i) in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or any other contract, agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or to which any of the property or assets of the Company or any of its Subsidiaries are subject or (ii) in violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, which default, in the cases of clauses (i) or (ii), would reasonably be expected to have a Material Adverse Effect. To the knowledge of the Company, no other party under any contract or other instrument to which it or any of its Subsidiaries is a party is in default in any respect thereunder, which default would reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is or will be in violation of any provision of its certificate or articles of incorporation or by-laws or similar organizational documents. Neither the Company nor any of its Subsidiaries has (i) failed to pay any dividend or sinking fund installment on preferred stock or (ii) defaulted on any installment or other payment on indebtedness for borrowed money or on any rental on one or more long-term leases, which defaults, individually or in the aggregate, could have a Material Adverse Effect.
(o) No consent, approval, authorization or order of, or any filing or declaration with, any court, arbitrator or governmental or regulatory agency or body is required for the consummation of the transactions contemplated hereby, except such as have been obtained under the Act or the Rules and Regulations and such as may be required under state securities or Blue Sky laws, the by-laws and rules of FINRA or the Exchange in connection with the sale of the Placement Shares by the Sales Agent.
(p) The Company has full corporate power and authority to enter into this Agreement and perform the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by the Company and constitutes a legal, valid and binding agreement of the Company, enforceable against the Company in accordance with the terms hereof. The execution and performance of this Agreement and the consummation of the transactions contemplated hereby (including the issuance and sale of the Placement Shares) will not result in the creation or imposition of any lien, charge or encumbrance upon any of the assets of the Company or any of its Subsidiaries pursuant to the terms or provisions of, or result in a breach or violation of any of the terms or provisions of, or conflict with or constitute a default under, or give any party a right to terminate any of its obligations under, or result in the acceleration of any obligation under, (i) the certificate or articles of incorporation or by-laws or other organizational documents of the Company or any of its Subsidiaries, (ii) any indenture, mortgage, deed of trust, voting trust agreement, loan agreement, bond, debenture, note agreement or other evidence of indebtedness, lease, contract or other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company, any of its Subsidiaries or any of its or their properties is bound or affected, or (iii) violate or conflict with any judgment, ruling, decree, order, statute, rule or regulation of any court or other governmental agency or body applicable to the business or properties of the Company or any of its Subsidiaries.
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(q) The Company and its Subsidiaries have good and marketable title in fee simple to all properties and assets described in the Registration Statement and the Prospectus as owned by them, free and clear of all liens, charges, encumbrances, claims or restrictions, except such as are not material to the business of the Company or its Subsidiaries. The Company and its Subsidiaries have valid, subsisting and enforceable leases for the properties described in the Registration Statement and the Prospectus as leased by them. The Company and its Subsidiaries own or lease all such properties as are necessary to their operations as now conducted or as proposed to be conducted, except where the failure to so own or lease would not be reasonably expected to have a Material Adverse Effect. Each of the properties of the Company and its Subsidiaries complies in all material respects with all applicable codes, laws and regulations (including, without limitation, building and zoning codes, laws and regulations and laws relating to access to such properties), except for such failures to comply that would not, individually or in the aggregate, reasonably be expected to interfere in any material respect with the use made and proposed to be made of such property by the Company and its Subsidiaries or otherwise have a Material Adverse Effect. None of the Company or its Subsidiaries has received from any governmental or regulatory authorities any notice of any condemnation of, or zoning change affecting, the properties of the Company and its Subsidiaries, and the Company knows of no such condemnation or zoning change that is threatened, except for such that would not reasonably be expected to interfere in any material respect with the use made and proposed to be made of such property by the Company and its Subsidiaries or otherwise could have, individually or in the aggregate, a Material Adverse Effect.
(r) There is no document, contract, permit or instrument, transaction, relationship, arrangement or off-balance sheet transaction (including, without limitation, any structural finance, special purpose or limited purpose entity or any “variable interests” in “variable interest entities,” as such terms are defined in Financial Accounting Standards Board Interpretation No. 46, as codified in Accounting Standards Codification Topic 810) of a character required to be described in the Registration Statement or the Prospectus or to be filed as an exhibit to the Registration Statement that is not described or filed as required. All contracts to which the Company or any of its Subsidiaries is a party that are described in, or filed with, the Registration Statement or the Prospectus have been duly authorized, executed and delivered by the Company or such Subsidiary, constitute valid and binding agreements of the Company or such Subsidiary and are enforceable against and by the Company or such Subsidiary in accordance with the terms thereof.
(s) None of the Company, any of its Subsidiaries or any of their respective directors, officers or controlling persons has taken, directly or indirectly, any action designed, or that might reasonably be expected to cause or result, under the Act or otherwise, in, or that has constituted, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Placement Shares.
(t) No holder of securities of the Company has rights, contractual or otherwise, to require the Company to register any securities, or to include any securities in the Registration Statement or the offering contemplated thereby, whether as a result of the filing or effectiveness of the Registration Statement, the sale of the Placement Shares as contemplated hereby or otherwise, which rights have not been duly waived in a writing furnished to the Sales Agent by the holder thereof as of the date hereof.
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(u) The Common Stock is registered under Section 12(b) of the Exchange Act and is currently listed on the Exchange under the trading symbol “XXII.” There is no action pending by the Company or, to the Company’s knowledge, by the Exchange designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or delisting the Common Stock from the Exchange, nor has the Company received any notification that the Commission or the Exchange is contemplating terminating such registration or listing. The Company is in compliance with all applicable listing requirements of the Exchange.
(v) (i) The Company and each of its Subsidiaries owns or has adequate rights to use all trademarks, trade names, domain names, patents, patent rights, mask works, copyrights, technology, know-how (including trade secrets and other unpatented or unpatentable proprietary or confidential information, systems or procedures), service marks, trade dress rights and other intellectual property and registrations and applications for registration for any of the foregoing (collectively, “Intellectual Property”) and has such other licenses, approvals and governmental authorizations, in each case, sufficient to conduct its business as now conducted and as now proposed to be conducted, and, to the Company’s and its Subsidiaries’ knowledge, there are no rights of third parties to any such Intellectual Property owned by the Company and its Subsidiaries and none of the foregoing Intellectual Property rights owned or licensed by the Company or any of its Subsidiaries is invalid or unenforceable, (ii) the Company has no knowledge of any infringement by it or any of its Subsidiaries of Intellectual Property rights of others, and there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others that the Company and its Subsidiaries infringe or otherwise violate any Intellectual Property rights of others, (iii) the Company is not aware of any infringement, misappropriation or violation by others of, or conflict by others with rights of the Company or any of its Subsidiaries with respect to, any Intellectual Property, (iv) there is no suit, proceeding or claim being made against the Company or any of its Subsidiaries or, to the knowledge of the Company and its Subsidiaries, any employee of the Company or any of its Subsidiaries, regarding Intellectual Property, challenging the Company’s and its Subsidiaries’ rights in or to any such Intellectual Property or alleging other infringement that could have a Material Adverse Effect, and the Company is unaware of any facts which could form a reasonable basis for any such action, suit, proceeding or claim, (v) to the Company’s knowledge, there is no third-party U.S. patent or published U.S. patent application that contains claims for which an “interference proceeding” (as defined in 35 U.S.C. § 135) has been commenced against any patent or patent application described in the Prospectus as being owned by or licensed to the Company and (vi) the Company and its Subsidiaries have not received any notice of infringement with respect to any patent or any notice challenging the validity, scope or enforceability of any Intellectual Property owned by or licensed to the Company or any of its Subsidiaries, in each case the loss of which patent or Intellectual Property (or loss of rights thereto) would be reasonably expected to have a Material Adverse Effect. The Company and its Subsidiaries have taken all reasonable steps necessary to secure their interests in such Intellectual Property from their employees and contractors (including, but not limited to, assignments of such Intellectual Property from such employees and contractors) and to protect the confidentiality of all of their confidential information and trade secrets and that of third parties in their possession to the extent contractually required to do so.
(w) None of the Intellectual Property or technology (including information technology and outsourced arrangements) employed by the Company or the Subsidiaries has been obtained or is being used by the Company or the Subsidiaries in violation of any contractual obligation binding on the Company or any of the Subsidiaries or any of their respective officers, directors or employees. The Company and the Subsidiaries own or have a valid right to access and use all computer systems, networks, hardware, software, databases, websites and equipment used to process, store, maintain and operate data, information and functions used in connection with the business of the Company and the Subsidiaries (the “Company IT Systems”). The Company IT Systems are adequate for, and operate and perform in all material respects as required in connection with, the operation of the business of the Company and the Subsidiaries as currently conducted, except as would not reasonably expected to have a Material Adverse Effect.
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(x) The Company and each of its Subsidiaries have filed all federal, state, local and foreign tax returns that have been required to be filed and has paid all taxes and assessments shown thereon to the extent that such taxes or assessments have become due. Neither the Company nor any of its Subsidiaries has any tax deficiency, penalty or assessment that has been or, to the knowledge of the Company, might be asserted or threatened against it that could have a Material Adverse Effect. On each Settlement Date, all stock transfer or other taxes (other than income taxes) that are required to be paid in connection with the sale and transfer of the Placement Shares to be sold hereunder will be, or will have been, fully paid or provided for by the Company and all laws imposing such taxes will be or will have been fully complied with.
(y) The Company and its Subsidiaries own or possess all authorizations, approvals, orders, licenses, registrations, other certificates and permits of and from all governmental regulatory officials and bodies, necessary to conduct their respective businesses as contemplated in the Registration Statement and the Prospectus, except where the failure to own or possess all such authorizations, approvals, orders, licenses, registrations, other certificates and permits would not reasonably be expected to have a Material Adverse Effect. There is no proceeding pending or threatened (or any basis therefor known to the Company) that may cause any such authorization, approval, order, license, registration, other certificate or permit to be revoked, withdrawn, cancelled, suspended or not renewed; and the Company and each of its Subsidiaries is conducting its business in compliance with all laws, rules and regulations applicable thereto (including, without limitation, all applicable federal, state and local environmental laws and regulations); the Company has not received a notice of non-compliance, nor knows of, nor has reasonable grounds to know of, any facts that could give rise to a notice of non-compliance with any such laws, rules and regulations, and is not aware of any pending change or contemplated change to any applicable laws, rules and regulations or governmental positions; in each case that would materially adversely affect the business of the Company or the business or legal environment under which the Company operates.
(z) The Company and each of its Subsidiaries maintains or is covered by insurance of the types and in the amounts reasonably deemed adequate for its business and customary for companies engaged in similar businesses in similar industries, including, but not limited to, insurance covering real and personal property owned or leased by the Company and its Subsidiaries against theft, damage, destruction, acts of vandalism and all other risks customarily insured against, all of which insurance is in full force and effect.
(aa) Other than as contemplated by this Agreement, the Company has not incurred and will not incur any liability for any finder’s or broker’s fee or agent’s commission in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.
(bb) The Company is in compliance with, and there has been no failure on the part of the Company or any of the Company’s directors or officers, in their capacities as such, to comply with, all applicable provisions of the Sarbanes-Oxley Act and the rules and regulations of the Commission thereunder. Each of the principal executive officer and the principal financial officer of the Company (or each former principal executive officer of the Company and each former principal financial officer of the Company, as applicable) has made all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act with respect to all reports, schedules, forms, statements and other documents required to be filed or furnished to the Commission. For purposes of the preceding sentence, “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in the Sarbanes-Oxley Act.
(cc) Neither the Company nor any of its Subsidiaries nor, to the best of the Company’s knowledge, any director, officer, agent, employee or other person associated with or acting on behalf of the Company or any of its Subsidiaries has, directly or indirectly, (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity, (ii) made any unlawful payment from corporate funds to any foreign or domestic government official or employee or foreign or domestic political party or campaign, (iii) violated any provision of the Foreign Corrupt Practices Act of 1977 or any comparable applicable law in another jurisdiction, or (iv) made any bribe, illegal rebate, payoff, influence payment, kickback or other unlawful payment. The Company, its Subsidiaries and each of their respective affiliates have instituted and maintain, and will continue to maintain, policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith.
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(dd) The books, records and accounts of the Company and its Subsidiaries accurately and fairly reflect, in reasonable detail, the transactions in, and dispositions of, the assets of, and the results of operations of, the Company and its Subsidiaries. The Company and each of its Subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorization, (ii) transactions are recorded as necessary to permit preparation of the Company’s consolidated financial statements in accordance with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company’s internal control over financial reporting is effective and the Company is not aware of any material weaknesses in its internal control over financial reporting. Since the date of the latest audited financial statements included or incorporated by reference in the Prospectus, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
(ee) The Company has established and maintains disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)); such disclosure controls and procedures have been designed to ensure that material information relating to the Company and its Subsidiaries is made known to the Company’s principal executive officer and principal financial officer by others within those entities, particularly during the period in which the Company’s Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may be, is being prepared. The Company’s certifying officers have evaluated the effectiveness of the Company’s disclosure controls and procedures as of a date within 90 days prior to the filing date of the Form 10-K for the most recently ended fiscal year (such date, the “Evaluation Date”). The Company presented in its Form 10-K for the most recently ended fiscal year the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date and the disclosure controls and procedures are effective. Since the Evaluation Date, there have been no significant changes in the Company’s disclosure controls or, to the Company’s knowledge, in other factors that could significantly affect the Company’s disclosure controls.
(ff) There are no affiliations or associations between any member of FINRA and any of the Company’s officers, directors or 5% or greater securityholders, except as set forth in the Registration Statement and the Prospectus. Neither the Company nor any of the Subsidiaries (i) is required to register as a “broker” or “dealer” in accordance with the provisions of the Exchange Act or (ii) directly or indirectly through one or more intermediaries, controls or is a “person associated with a member” or “associated person of a member” (within the meaning set forth by FINRA).
(gg) Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee, affiliate or representative of the Company or any of its Subsidiaries is a government, individual or entity that is, or is owned or controlled by an individual or entity that is (i) the subject of any sanctions administered or enforced by the Office of Foreign Assets Control of the U.S. Treasury Department, the United Nations Security Council, the European Union, Her Majesty’s Treasury or other relevant sanctions authority (“Sanctions”), nor (ii) located, organized or resident in a country or territory that is the subject of Sanctions (including, without limitation, Burma/Myanmar, Cuba, Iran, Libya, North Korea, Sudan and Syria). The Company and its Subsidiaries have not engaged in, and are not now engaged in, and will not engage in any dealings or transactions with any government, individual or entity, or in any country or territory, that at the time of the dealing or transaction is or was the subject of Sanctions, and have instituted and maintain policies and procedures designed to promote and achieve compliance with such Sanctions. The Company and its Subsidiaries will not, directly or indirectly, use the proceeds of the issuance and sale of the Placement Shares, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person (A) to fund or facilitate any activities or business of or with any government, individual or entity or in any country or territory that, at the time of such funding or facilitation, is the subject of Sanctions; or (B) in any other manner that will result in a violation of Sanctions by any government, individual or entity (including any government, individual or entity participating in the offering, whether as underwriter, advisor, investor or otherwise).
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(hh) The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, the money laundering laws of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines administered or enforced by any applicable governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its Subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
(ii) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) each of the Company and each of its Subsidiaries (A) is in compliance with all applicable rules, laws and regulation relating to pollution, the protection of health or the environment, and the use, transportation, treatment, storage and disposal of, or exposure to, hazardous or toxic substances or wastes, (“Environmental Law”) and (B) has received and is in compliance with all permits, licenses or other approvals required of them under applicable Environmental Law to conduct their respective businesses as described in the Registration Statement and the Prospectus, (ii) none of the Company nor any of its Subsidiaries has received any notice from any governmental authority or third party, or otherwise has knowledge, of any asserted claim under Environmental Laws, and (iii) no facts currently exist that could subject the Company or any of its Subsidiaries to liability under Environmental Laws, including any liability for remediation of any releases or threatened releases of hazardous or toxic substances.
(jj) The statistical, industry-related and market-related data included or incorporated by reference in the Registration Statement and the Prospectus are based on or derived from sources the Company reasonably and in good faith believes are reliable and accurate, and such data agrees with the sources from which they are derived, and the Company has obtained the written consent to the use of such data from such sources to the extent required.
(kk) The Company and each of its Subsidiaries is in compliance in all material respects with all applicable provisions of the Employee Retirement Income Security Act of 1974, including the regulations and published interpretations thereunder (“ERISA”); no “reportable event” (as defined in ERISA) has occurred with respect to any “pension plan” (as defined in ERISA) for which the Company and each of its Subsidiaries would have any liability; each of the Company and each of its Subsidiaries has not incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “pension plan” or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, including the regulations and published interpretations thereunder (the “Code”); and each “pension plan” for which the Company or any Subsidiary would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification.
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(ll) No material labor dispute with the employees of the Company or any of its Subsidiaries exists or, to the knowledge of the Company, is imminent; and the Company is not aware of any existing, threatened or imminent labor disturbance by the employees of any of its principal suppliers, manufacturers or contractors that could have a Material Adverse Effect.
(mm) No Subsidiary is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such Subsidiary’s capital stock, from repaying to the Company any loans or advances to such Subsidiary from the Company or from transferring any of such Subsidiary’s property or assets to the Company or any other Subsidiary of the Company.
(nn) The Company and its Subsidiaries have operated its business in a manner compliant in all material respects with all privacy and data protection laws and regulations applicable to the Company’s and its Subsidiaries’ collection, handling, and storage of its customers’ data. The Company and its Subsidiaries have policies and procedures in place designed to ensure the integrity and security of the data collected, handled or stored in connection with the delivery of its product offerings. The Company and its Subsidiaries comply with, have policies and procedures in place designed to ensure privacy and data protection laws are complied with and takes appropriate steps which are reasonably designed to assure compliance in all material respects with such policies and procedures.
(oo) No forward-looking statement (within the meaning of Section 27A of the Act and Section 21E of the Exchange Act) contained in the Registration Statement and the Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.
(pp) The Company is not a party to any agreement with an agent or underwriter for any other “at the market” or continuous equity transaction.
(qq) The Company acknowledges and agrees that Sales Agent has informed the Company that the Sales Agent may, to the extent permitted under the Act and the Exchange Act, purchase and sell Common Stock for its own account while this Agreement is in effect, provided, that (i) no such purchase or sales shall take place while a Placement Notice is in effect (except to the extent the Sales Agent may engage in sales of Placement Shares purchased or deemed purchased from the Company as a “riskless principal” or in a similar capacity) and (ii) the Company shall not be deemed to have authorized or consented to any such purchases or sales by the Sales Agent.
(rr) No statement, representation, warranty or covenant made by the Company in this Agreement or made in any certificate or document required by this Agreement to be delivered to the Sales Agent was or will be, when made, inaccurate, untrue or incorrect in any material respect.
Any certificate signed by an officer of the Company and delivered to the Sales Agent or to counsel for the Sales Agent pursuant to or in connection with this Agreement shall be deemed to be a representation and warranty by the Company, as applicable, to the Sales Agent as to the matters set forth therein.
7. Agreements of the Company.
The Company covenants and agrees with the Sales Agent as follows:
(a) The Company will not, either prior to the first Applicable Time or thereafter during such period as the Prospectus is required by law to be delivered in connection with sales of the Placement Shares by the Sales Agent or a dealer, file any amendment, supplement or other document under the Exchange Act or the Exchange Act Rules and Regulations relating to the Placement Shares or a security convertible into the Placement Shares, if such document would be deemed to be incorporated by reference into the Registration Statement or the Prospectus, unless a copy thereof shall first have been submitted to the Sales Agent for approval within a reasonable period of time prior to the filing thereof (provided, however, that the failure of the Company to obtain the Sales Agent’s approval shall not relieve the Company of any obligation or liability hereunder, or affect the Sales Agent’s right to rely on the representations and warranties made by the Company in this Agreement).
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(b) So long as delivery of the Prospectus relating to any Placement Shares may be required to be delivered by the Sales Agent or any dealer under the Act (including in circumstances where such requirement may be satisfied pursuant to Rule 172 of the Rules and Regulations or any similar rule), the Company will notify the Sales Agent promptly, and will confirm such advice in writing, (i) when any amendment to the Registration Statement has been filed or becomes effective or any amendment or supplement to the Prospectus has been filed, in each case, other than documents incorporated by reference, (ii) of any request by the Commission for amendments or supplements to the Registration Statement or the Prospectus or for additional information related to the offering of the Placement Shares or to the Registration Statement, the Prospectus or any Issuer Free Writing Prospectus, (iii) of its receipt of notice or its knowledge of the issuance or threatened issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or preventing or suspending the use of the Prospectus Supplement, the Prospectus or any Issuer Free Writing Prospectus or the initiation of any proceedings for that purpose or the threat thereof, (iv) of the suspension of the qualification of the Placement Shares for offering and sale in any jurisdiction, or the initiation or threatening of any proceeding for that purpose, and (v) of receipt by the Company or any representative or counsel to the Company of any other communication from the Commission relating to the Company, the Registration Statement, the Prospectus Supplement, the Prospectus or the issuance and sale of the Placement Shares. If at any time the Commission shall issue any order suspending the effectiveness of the Registration Statement or preventing or suspending the use of the Prospectus Supplement, the Prospectus or any Issuer Free Writing Prospectus, the Company will make every reasonable effort to obtain the withdrawal of such order at the earliest possible moment. If the Company has omitted any information from the Registration Statement pursuant to Rule 430B of the Rules and Regulations, the Company will comply with the provisions of and make all requisite filings with the Commission pursuant to said Rule 430B and notify the Sales Agent promptly of all such filings. The Company will cause each amendment or supplement to the Prospectus to be filed with the Commission as required pursuant to the applicable paragraph of Rule 424(b) of the Act or, in the case of any document to be incorporated by reference therein, to be filed with the Commission as required pursuant to the Exchange Act, within the time period prescribed. If the Company elects to rely upon Rule 462(b) under the Act, the Company shall file a registration statement under Rule 462(b) with the Commission in compliance with Rule 462(b) by 10:00 p.m., Washington, D.C. time, on the date of this Agreement, and the Company shall at the time of filing either pay to the Commission the filing fee for such Rule 462(b) registration statement or give irrevocable instructions for the payment of such fee pursuant to the Rules and Regulations. So long as delivery of the Prospectus relating to any Placement Shares may be required to be delivered by the Sales Agent or any dealer under the Act (including in circumstances where such requirement may be satisfied pursuant to Rule 172 of the Rules and Regulations or any similar rule), the Company will comply with all requirements imposed upon it by the Act, as from time to time in force, and to file on or before their respective due dates all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14, 15(d) or any other provision of or under the Exchange Act.
(c) The Company will furnish to the Sales Agent, without charge, electronic copies of each of the Registration Statement and of any pre- or post-effective amendment thereto, including financial statements and schedules, and all exhibits thereto, the Prospectus (including all documents incorporated by reference therein), the Prospectus Supplement, each Issuer Free Writing Prospectus and all amendments and supplements thereto that are filed with the Commission during any period that a Prospectus relating to the Placement Shares is required to be delivered under the Act, in each case as soon as reasonably practicable and in such quantities as the Sales Agent may from time to time reasonably request and, at the Sales Agent’s request, will also furnish electronic copies of the Prospectus to each exchange or market on which sales of the Placement Shares may be made; provided, however, that the Company shall not be required to furnish any document (other than the Prospectus) to the Sales Agent to the extent such document is available on EDGAR.
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(d) The Company will use its commercially reasonable best efforts to comply with all requirements imposed upon it by the Act and the Exchange Act as from time to time in force, so far as necessary to permit the sales of, or dealings in, the Placement Shares as contemplated by the provisions hereof and the Prospectus.
(e) So long as delivery of the Prospectus relating to any Placement Shares may be required to be delivered by the Sales Agent or any dealer under the Act (including in circumstances where such requirement may be satisfied pursuant to Rule 172 of the Rules and Regulations or any similar rule), the Company will prepare and file with the Commission, promptly upon the Sales Agent’s request, any amendments or supplements to the Registration Statement or the Prospectus that, in the Sales Agent’s reasonable opinion, may be necessary or advisable in connection with the distribution of the Placement Shares by the Sales Agent (provided, however, that the failure of the Sales Agent to make such request shall not relieve the Company of any obligation or liability hereunder, or affect the Sales Agent’s right to rely on the representations and warranties made by the Company in this Agreement). The Company consents to the use of the Prospectus Supplement, the Prospectus, each Issuer Free Writing Prospectus and any amendment or supplement thereto by the Sales Agent and by all dealers to whom the Placement Shares may be sold, both in connection with the offering or sale of the Placement Shares and for any period of time thereafter during which the Prospectus is required by law to be delivered in connection therewith. If during such period of time any event shall occur that in the judgment of the Company or counsel to the Sales Agent should be set forth in the Prospectus in order to make any statement therein, in the light of the circumstances under which it was made, not misleading, or if it is necessary to supplement or amend the Prospectus to comply with law, the Company will notify the Sales Agent to suspend the offering of Placement Shares during such period and the Company will forthwith prepare and duly file with the Commission an appropriate supplement or amendment thereto, and will deliver to the Sales Agent, without charge, such number of copies of such supplement or amendment to the Prospectus as the Sales Agent may reasonably request. If at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement, the Prospectus Supplement or the Prospectus or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequent time, not misleading, the Company will promptly notify the Sales Agent and, if requested by the Sales Agent, will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.
(f) The Company will use its commercially reasonable best efforts and cooperate with the Sales Agent in connection with the registration or qualification of the Placement Shares for offer and sale under the state or foreign securities or Blue Sky laws of such jurisdictions as the Sales Agent may request and to maintain such registration or qualification in effect for so long as required for the distribution of the Placement Shares (but in no event for less than one year from the date of this Agreement); provided, that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action that would subject it to general service of process in any jurisdiction where it is not now so subject. In each applicable jurisdiction, the Company will file such statements and reports as may be required by the laws of such jurisdiction to continue such registration or qualification in effect for so long as required for the distribution of the Placement Shares (but in no event for less than one year from the date of this Agreement).
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(g) The Company will, so long as required under the Rules and Regulations, furnish to its stockholders as soon as practicable after the end of each fiscal year an annual report (including a balance sheet and statements of income, stockholders’ equity and cash flow of the Company and its consolidated Subsidiaries, if any, certified by independent public accountants) and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the Effective Date), consolidated summary financial information of the Company and its Subsidiaries, if any, for such quarter in reasonable detail.
(h) The Company will make generally available to holders of its securities as soon as practicable, but in no event later than 15 months after the end of the Company’s current fiscal quarter, an earning statement covering a period of 12 months that satisfies the provisions of Section 11(a) of the Act (including Rule 158 of the Rules and Regulations).
(i) Whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, the Company will pay or reimburse if paid by the Sales Agent all costs and expenses incident to the performance of the obligations of the Company under this Agreement and in connection with the transactions contemplated hereby, including but not limited to costs and expenses of or relating to (i) the preparation and filing of the Registration Statement and exhibits to it, the Prospectus Supplement, the Prospectus, any Issuer Free Writing Prospectus and any amendment or supplement to any of the foregoing, including any fees required by the Commission in connection therewith, (ii) the preparation and delivery of certificates, if any, representing the Placement Shares, including any stock or other transfer taxes and any capital duties, stamp duties or other duties or taxes payable upon the sale, issuance or delivery of the Placement Shares to the Sales Agent, (iii) furnishing electronic copies of the Registration Statement, the Prospectus Supplement, the Prospectus and any Issuer Free Writing Prospectus, and all amendments and supplements thereto, as may be requested by the Sales Agent for use in connection with the offering and sale of the Placement Shares, (iv) the listing of the Placement Shares on the Exchange, (v) any filings required to be made in connection with clearance of the offering of the Placement Shares with FINRA (including the fees, disbursements and other charges of counsel for the Sales Agent in connection therewith), (vi) the registration or qualification of the Placement Shares for offer and sale under state or foreign securities or Blue Sky laws and the preparation, printing and distribution of any Blue Sky memoranda (including the fees, disbursements and other charges of counsel to the Sales Agent in connection therewith), (vii) fees, disbursements and other charges of counsel to the Company and of the Accountants, (viii) the transfer agent for the Placement Shares and (ix) all other costs and expenses of the Sales Agent incident to the performance of its obligations hereunder not otherwise specifically provided for herein, including the fees, disbursements and other charges of counsel to the Sales Agent (in addition to those set forth in clauses (v) and (vi)); provided, however, that in no event under this clause (x) shall the Company be required to pay or reimburse any Sales Agent costs and expenses in excess of $100,000 in connection with the establishment of the ATM Program and $10,000 for each periodic update of the ATM Program.
(j) The Company will not at any time, directly or indirectly, (i) take any action designed or that might reasonably be expected to cause or result in, or that will constitute, stabilization of the price of the shares of Common Stock to facilitate the sale or resale of any of the Placement Shares or (ii) sell, bid for, or purchase Common Stock in violation of Regulation M, or pay anyone any compensation for soliciting purchases of the Placement Shares other than the Sales Agent.
(k) The Company will conduct its affairs in such a manner so as to reasonably ensure that neither it nor any of its Subsidiaries will be or become, at any time prior to the termination of this Agreement, required to register as an “investment company,” as such term is defined in the Investment Company Act.
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(l) The Company will use the Net Proceeds in the manner set forth in the Prospectus under the caption “Use of Proceeds.”
(m) The Company and the Subsidiaries will maintain and keep accurate books and records reflecting their assets and maintain internal accounting controls in a manner designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and including those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of the Company’s consolidated financial statements in accordance with generally accepted accounting principles, (iii) receipts and expenditures of the Company are being made only in accordance with management’s and the Company’s directors’ authorization and (iv) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on its financial statements. The Company and the Subsidiaries will maintain such controls and other procedures, including, without limitation, those required by Sections 302 and 906 of the Sarbanes-Oxley Act, and the applicable regulations thereunder that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, including, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure and to ensure that material information relating to the Company or the Subsidiaries is made known to them by others within those entities, particularly during the period in which such periodic reports are being prepared.
(n) Without the prior written consent of the Sales Agent, the Company will not, directly or indirectly, offer to sell, sell, contract to sell, grant any option to sell or otherwise dispose of any shares of Common Stock (other than the Placement Shares offered pursuant to this Agreement) or securities convertible into or exchangeable or exercisable for shares of Common Stock, warrants or any rights to purchase or acquire, shares of Common Stock during the period beginning on the fifth Trading Day immediately prior to the date on which any Placement Notice is delivered to Sales Agent hereunder and ending on the fifth Trading Day immediately following the final Settlement Date with respect to Placement Shares sold pursuant to such Placement Notice (or, if the Placement Notice has been terminated or suspended prior to the sale of all Placement Shares covered by a Placement Notice, the date of such suspension or termination); and will not directly or indirectly in any other “at the market offering” or continuous equity transaction offer to sell, sell, contract to sell, grant any option to sell or otherwise dispose of any Common Stock (other than the Placement Shares offered pursuant to this Agreement) or securities convertible into or exchangeable or exercisable for shares of Common Stock, warrants or any rights to purchase or acquire, shares of Common Stock prior to the later of the termination of this Agreement and the sixtieth day immediately following the final Settlement Date with respect to Placement Shares sold pursuant to such Placement Notice; provided, however, that such restrictions will not be required in connection with the Company’s issuance or sale of (i) shares of Common Stock, options to purchase shares of Common Stock or shares of Common Stock issuable upon the exercise of options, pursuant to any employee or director stock option or benefits plan, stock ownership plan or dividend reinvestment plan (but not shares Common Stock subject to a waiver to exceed plan limits in its dividend reinvestment plan) of the Company whether now in effect or hereafter implemented, (ii) shares of Common Stock issuable upon conversion of securities or the exercise of warrants, options or other rights in effect or outstanding, and disclosed in filings by the Company available on EDGAR or otherwise in writing to the Sales Agent and (iii) shares of Common Stock or securities convertible into or exchangeable for shares of Common Stock as consideration for mergers, acquisitions, other business combinations or strategic alliances occurring after the date of this Agreement which are not issued for capital raising purposes.
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(o) Prior to the date of the first Placement Notice, the Company will use its commercially reasonable best efforts to cause the Placement Shares to be listed on the Exchange.
(p) The Company will, at any time during the pendency of a Placement Notice, advise the Sales Agent promptly after it shall have received notice or obtained knowledge thereof, of any information or fact that would alter or affect in any material respect any opinion, certificate, letter or other document required to be provided to the Sales Agent pursuant to this Agreement.
(q) The Company will cooperate with any reasonable due diligence review conducted by the Sales Agent, its representatives and its counsel in connection with the transactions contemplated hereby, including, without limitation, providing information and making available documents and senior corporate officers, during regular business hours and at the Company’s principal offices, as the Sales Agent may reasonably request.
(r) The Company agrees that on or prior to such dates as the Act shall require, the Company will (i) file a prospectus supplement with the Commission under the applicable paragraph of Rule 424(b), which prospectus supplement will set forth, within the relevant period, the number or amount of Placement Shares sold through the Sales Agent, the Net Proceeds to the Company and the compensation payable by the Company to the Sales Agent with respect to such Placement Shares, and (ii) deliver such number of electronic copies of each such prospectus supplement to each exchange or market on which such sales were effected as may be required by the rules or regulations of such exchange or market; provided, that, unless a prospectus supplement containing such information is required to be filed under the Act, the requirement of this Section 7(r) may be satisfied by Company’s inclusion in the Company’s Form 10-K or Form 10-Q, as applicable, of the number or amount of Placement Shares sold through the Sales Agent, the Net Proceeds to the Company and the compensation payable by the Company to the Sales Agent with respect to such Placement Shares during the relevant period.
(s) Prior to the date on which the Company first delivers a Placement Notice and each time the Company:
(i) files the Prospectus relating to the Placement Shares or amends or supplements (other than a prospectus supplement relating solely to an offering of securities other than the Placement Shares) the Registration Statement or the Prospectus relating to the Placement Shares by means of a post-effective amendment, sticker or supplement but not by means of incorporation of documents by reference into the Registration Statement or the Prospectus relating to the Placement Shares;
(ii) files an annual report on Form 10-K under the Exchange Act (including any Form 10-K/A containing amended financial information or a material amendment to the previously filed Form 10-K);
(iii) files a quarterly report on Form 10-Q under the Exchange Act; or
(iv) files a current report on Form 8-K containing amended financial information (other than information “furnished” pursuant to Items 2.02 or 7.01 of Form 8-K) under the Exchange Act (each date of filing of one or more of the documents referred to in clauses (i) through (iv) shall be a “Representation Date”),
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the Company shall furnish the Sales Agent (but in the case of clause (iv) above only if the Sales Agent reasonably determines that the information contained in such Form 8-K is material at a time when a Placement Notice is pending or in effect and the Sales Agent requests a certificate within three Trading Days of the Company’s filing of such Form 8-K) with a certificate, in the form attached hereto, dated the Representation Date, modified, as necessary, to relate to the Registration Statement and the Prospectus as amended or supplemented. The requirement to provide a certificate under this Section 7(s) shall be waived for any Representation Date occurring at a time a Suspension is in effect, which waiver shall continue until the earlier to occur of the date on which the Company delivers instructions for the sale of Placement Shares hereunder (which for such calendar quarter shall be considered a Representation Date) and the next occurring Representation Date. Notwithstanding the foregoing, if the Company subsequently decides to sell Placement Shares following a Representation Date when a Suspension was in effect and did not provide the Sales Agent with a certificate under this Section 7(s), then before the Company delivers the instructions for the sale of Placement Shares or the Sales Agent sells any Placement Shares pursuant to such instructions, the Company shall provide the Sales Agent with a certificate in conformity with this Section 7(s) dated as of the date that the instructions for the sale of Placement Shares are issued.
(t) Prior to the date of the first Placement Notice and within five Trading Days of each Representation Date with respect to which the Company is obligated to deliver a certificate pursuant to Section 7(s) for which no waiver is applicable, the Company shall cause to be furnished to the Sales Agent a written opinion^1^ and negative assurance letter of Foley & Lardner LLP (“Company Counsel”), or other counsel satisfactory to the Sales Agent, in form and substance satisfactory to Sales Agent and its counsel, modified, as necessary, to relate to the Registration Statement and the Prospectus as then amended or supplemented; provided, however, that in lieu of such opinion or negative assurance letter for subsequent Representation Dates, Company counsel may furnish the Sales Agent with a letter (a “Reliance Letter”) to the effect that the Sales Agent may rely on a prior opinion delivered under this Section 7(t) to the same extent as if it were dated the date of such letter (except that statements in such prior opinion or negative assurance letter shall be deemed to relate to the Registration Statement and the Prospectus as amended or supplemented as of the date of the Reliance Letter).
(u) Prior to the date of the first Placement Notice and within five Trading Days of each Representation Date with respect to which the Company is obligated to deliver a certificate pursuant to Section 7(s) for which no waiver is applicable, the Company shall cause the Accountant to furnish the Sales Agent letters (the “Comfort Letters”), dated the date the Comfort Letter is delivered, which shall meet the requirements set forth in this Section 7(u); provided, that if requested by the Sales Agent, the Company shall cause a Comfort Letter to be furnished to the Sales Agent within 10 Trading Days of the date of occurrence of any material transaction or event, including the restatement of the Company’s financial statements. The Comfort Letter shall be in a form and substance satisfactory to the Sales Agent, (i) confirming that they are an independent registered public accounting firm within the meaning of the Act and the PCAOB, (ii) stating, as of such date, the conclusions and findings of such firm with respect to the financial information and other matters ordinarily covered by accountants’ “comfort letters” to underwriters in connection with registered public offerings (the first such letter, the “Initial Comfort Letter”) and (iii) updating the Initial Comfort Letter with any information that would have been included in the Initial Comfort Letter had it been given on such date and modified as necessary to relate to the Registration Statement and the Prospectus, as amended and supplemented to the date of such letter.
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(v) If, immediately prior to the third anniversary of the initial effective date of the Registration Statement (the “Renewal Date”), any of the Placement Shares remain unsold and this Agreement has not been terminated, the Company will, prior to the Renewal Date, file a new shelf registration statement or, if applicable, an automatic shelf registration statement relating to the Common Stock that may be offered and sold pursuant to this Agreement (which shall include a prospectus reflecting the number or amount of Placement Shares that may be offered and sold pursuant to this Agreement), in a form satisfactory to the Sales Agent and its counsel, and, if such registration statement is not an automatic shelf registration statement, will use its best efforts to cause such registration statement to be declared effective within 180 days after the Renewal Date. The Company will take all other reasonable actions necessary or appropriate to permit the public offer and sale of the Placement Shares to continue as contemplated in the expired registration statement and this Agreement. From and after the effective date thereof, references herein to the “Registration Statement” shall include such new shelf registration statement or such new automatic shelf registration statement, as the case may be.
(w) If, from and after the date of this Agreement, the Company is no longer eligible to use Form S-3 (including pursuant to General Instruction I.B.6.) at the time it files with the Commission an annual report on Form 10-K or any post-effective amendment to the Registration Statement, then it shall promptly notify the Sales Agent and, within two Business Days after the date of filing of such annual report on Form 10-K or amendment to the Registration Statement, the Company shall file a new prospectus supplement with the Commission reflecting the number of shares of Common Stock available to be offered and sold by the Company under this Agreement pursuant to General Instruction I.B.6. of Form S-3; provided, however, that the Company may delay the filing of any such prospectus supplement for up to 30 days if, in the reasonable judgment of the Company, it is in the best interest of the Company to do so, provided that no Placement Notice is in effect or pending during such time. Until such time as the Company shall have corrected such misstatement or omission or effected such compliance, the Company shall not notify the Sales Agent to resume the offering of Placement Shares.
(x) The Company represents and agrees that, without the prior written consent of the Sales Agent, and the Sales Agent represents and agrees that, without the prior written consent of the Company, it (including its agents and representatives, other than the Sales Agent in its capacity as such) has not made and will not make, use, prepare, authorize, approve or refer to any written communication that constitutes an offer to sell or solicitation of an offer to buy Placement Shares hereunder or otherwise make any offer relating to the Placement Shares that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus” (as defined in Rule 405), required to be filed with the Commission. Any such free writing prospectus the use of which has been consented to by the Company and the Sales Agent, as the case may be, is herein called a “Permitted Free Writing Prospectus.” The Company represents and agrees that it has treated and will treat, as the case may be, each Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus and that it has complied and will comply, as the case may be, with the requirements of Rules 164 and 433 of the Rules and Regulations applicable to any Permitted Free Writing Prospectus, including timely filing with the Commission, where required, recordkeeping and legending. For the purposes of clarity, the parties hereto agree that all free writing prospectuses, if any, listed in Schedule 4 hereto are Permitted Free Writing Prospectuses.
8. Conditions of the Obligations of the Sales Agent.
The obligations of the Sales Agent hereunder with respect to a Placement will be subject to the continuing accuracy and completeness of the representations and warranties made by the Company herein, to the due performance by the Company of its obligations hereunder, to the completion by the Sales Agent of a due diligence review satisfactory to the Sales Agent, and to the continuing satisfaction (or waiver by the Sales Agent in its sole discretion) of the following additional conditions:
(a) The Registration Statement shall be effective and shall be available for the (i) resale of all Placement Shares issued to the Sales Agent and not yet sold by the Sales Agent and (ii) sale of all Placement Shares contemplated to be issued by any Placement Notice. All filings required by Rule 424 shall have been made, including timely filing of the Prospectus Supplement pursuant to Rule 424(b).
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(b) (i) No stop order suspending the effectiveness of the Registration Statement or preventing or suspending the use of the Prospectus Supplement, the Prospectus or any Issuer Free Writing Prospectus shall have been issued and no proceedings for that purpose shall be pending or threatened by the Commission; (ii) no order suspending the qualification or registration of the Placement Shares under the securities or Blue Sky laws of any jurisdiction shall be in effect and no proceeding for such purpose shall be pending before or threatened or contemplated by any applicable governmental authorities; (iii) the Company shall not have received any request for additional information from the Commission or any other federal or state governmental authority during the period of effectiveness of the Registration Statement, the response to which would require any post-effective amendments or supplements to the Registration Statement or the Prospectus; (iv) there shall not have occurred or be continuing any event that makes any material statement made in the Registration Statement or the Prospectus or any material Incorporated Document untrue in any material respect or that requires the making of any changes in the Registration Statement, the Prospectus or Incorporated Documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and, in the case of the Prospectus, so that it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(c) The Sales Agent shall not have advised the Company that the Registration Statement or the Prospectus, or any amendment or supplement thereto, contains an untrue statement of fact that in the Sales Agent’s opinion is material, or omits to state a fact that in the Sales Agent’s opinion is material and is required to be stated therein or is necessary to make the statements therein not misleading.
(d) Except as contemplated in the Prospectus, or disclosed in the Company’s reports filed with the Commission, (i) there shall not have been (A) a Material Adverse Change or any material adverse change, on a consolidated basis, in the authorized capital stock of the Company, (B) any Material Adverse Effect or the occurrence of any development that the Company reasonably expects would result in a Material Adverse Effect or (C) any downgrading in or withdrawal of the rating assigned to any of the Company’s securities (other than asset-backed securities), if any, by any rating organization or a public announcement by any rating organization that it has under surveillance or review its rating of any of the Company’s securities (other than asset-backed securities), if any, and (ii) neither the Company nor any of its Subsidiaries shall have sustained any material loss or interference with its business or properties from fire, explosion, flood or other casualty, whether or not covered by insurance, or from any labor dispute or any court or legislative or other governmental action, order or decree, if in the judgment of the Sales Agent (without relieving the Company of any obligation or liability it may otherwise have), any such development makes it impracticable or inadvisable to proceed with the offering of the Placement Shares on the terms and in the manner contemplated in the Prospectus.
(e) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, there shall have been no litigation or other proceeding instituted against the Company, any of its Subsidiaries or any of its or their officers or directors in their capacities as such, before or by any federal, state or local court, commission, regulatory body, administrative agency or other governmental body, domestic or foreign, in which litigation or proceeding an unfavorable ruling, decision or finding could, in the judgment of the Sales Agent, have a Material Adverse Effect or if, in the judgment of the Sales Agent, any such development makes it impracticable or inadvisable to proceed with the offering of the Placement Shares on the terms and in the manner contemplated in the Prospectus.
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(f) Each of the representations and warranties of the Company contained herein shall be true and correct in all respects (in the case of any representation and warranty containing a materiality or Material Adverse Effect qualification) or in all material respects (in the case of any other representation and warranty), and all covenants and agreements contained herein to be performed on the part of the Company and all conditions contained herein to be fulfilled or complied with by the Company shall have been duly performed, fulfilled or complied with.
(g) The Sales Agent shall have received the opinion and negative assurance letter from Company Counsel required to be delivered pursuant to Section 7(t) on or before the date on which delivery of such opinion and negative assurance letter is required pursuant to Section 7(t).
(h) The Sales Agent shall have received an opinion and negative assurance letter from Faegre Drinker Biddle & Reath LLP, counsel to the Sales Agent, on or before the date on which delivery of the opinion of Company Counsel is required pursuant to Section 7(t), which opinion and negative assurance letter shall be reasonably satisfactory in all respects to the Sales Agent, and the Company shall have furnished to such counsel such documents as they may request to enable counsel to the Sales Agent to pass upon such matters.
(i) The Sales Agent shall have received the Comfort Letter required to be delivered pursuant to Section 7(u) on or before the date on which such delivery of such Comfort Letter is required pursuant to Section 7(u).
(j) The Sales Agent shall have received the certificate required to be delivered pursuant to Section 7(s) on or before the date on which delivery of such certificate is required pursuant to Section 7(s).
(k) Prior to the date of the first Placement Notice and at subsequent Representation Dates as may be requested by the Sales Agent, the Company shall deliver to the Sales Agent a certificate of the Secretary of the Company and attested to by an executive officer of the Company, dated as of such date and in form and substance satisfactory to the Sales Agent and its counsel, certifying as to (i) the Certificate of Incorporation of the Company, (ii) the By-laws of the Company, (iii) the resolutions of the board of directors of the Company or a duly authorized committee thereof authorizing the execution, delivery and performance of this Agreement and the issuance of the Placement Shares and (iv) the incumbency of the officers duly authorized to execute this Agreement and the other documents contemplated by this Agreement.
(l) The Placement Shares shall be qualified for sale in such jurisdictions as the Sales Agent may reasonably request and each such qualification shall be in effect and not subject to any stop order or other proceeding.
(m) Either (i) the Placement Shares shall have been approved for listing on the Exchange, subject only to notice of issuance, or (ii) the Company shall have filed an application for listing of the Placement Shares on the Exchange at, or prior to, the issuance of the first Placement Notice and the Exchange shall have reviewed such application and not provided any objections thereto. Trading in the Common Stock shall not have been suspended on the Exchange and the Common Stock shall not have been delisted from the Exchange.
(n) All filings with the Commission required by Rule 424(b) or Rule 433 under the Act to have been filed prior to the issuance of any Placement Notice hereunder shall have been made within the applicable time period prescribed for such filing by Rule 424(b) (without reliance on Rule 424(b)(8)) or Rule 433, as applicable.
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(o) If applicable, FINRA shall have raised no objection to the terms of the offering contemplated hereby and the amount of compensation allowable or payable to the Sales Agent as described in the Prospectus.
(p) On each date on which the Company is required to deliver a certificate pursuant to Section 7(s), the Company shall have furnished to the Sales Agent such further information, opinions, certificates, letters and other documents, in addition to those specifically mentioned herein, as the Sales Agent may have reasonably requested. All such information, opinions, certificates, letters and other documents shall have been in compliance with the provisions hereof.
(q) There shall not have occurred any event that would permit the Sales Agent to terminate this Agreement pursuant to Section 11(a).
9. Indemnification and Contribution.
(a) The Company will indemnify and hold harmless the Sales Agent, its partners, members, directors, officers, employees, agents and affiliates and each person, if any, who controls the Sales Agent within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and against any and all losses, claims, liabilities, expenses and damages (including any and all investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted), to which they, or any of them, may become subject under the Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, liabilities, expenses or damages arise out of or are based on any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, Prospectus Supplement, the Prospectus or any amendment or supplement thereto or any Issuer Free Writing Prospectus or any “issuer information” filed or required to be filed pursuant to Rule 433(d) of the Rules and Regulations, or the omission or alleged omission to state in such document a material fact required to be stated in it or necessary to make the statements in it not misleading in the light of the circumstances in which they were made, or arise out of or are based in whole or in part on any inaccuracy in the representations and warranties of the Company contained herein or any failure of the Company to perform its obligations hereunder or under law in connection with the transactions contemplated hereby; provided, however, that the Company will not be liable to the extent that such loss, claim, liability, expense or damage arises from the sale of the Placement Shares to any person by the Sales Agent and is based on the Sales Agent Information. This indemnity agreement will be in addition to any liability that the Company might otherwise have.
(b) The Sales Agent will indemnify and hold harmless the Company, each director of the Company, each officer of the Company who signs the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent as the foregoing indemnity from the Company to Sales Agent, as set forth in Section 9(a), but only insofar as losses, claims, liabilities, expenses or damages arise out of or are based on any untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with the Sales Agent Information. This indemnity will be in addition to any liability that the Sales Agent might otherwise have.
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(c) Any party that proposes to assert the right to be indemnified under this Section 9 shall, promptly after receipt of notice of commencement of any action against such party in respect of which a claim is to be made against an indemnifying party or parties under this Section 9, notify each such indemnifying party in writing of the commencement of such action, enclosing with such notice a copy of all papers served, but the omission so to notify such indemnifying party will not relieve it from any liability that it may have to any indemnified party under the foregoing provisions of this Section 9 unless, and only to the extent that, such omission results in the loss of substantive rights or defenses by the indemnifying party. If any such action is brought against any indemnified party and it notifies the indemnifying party of its commencement, the indemnifying party will be entitled to participate in and, to the extent that it elects by delivering written notice to the indemnified party promptly after receiving notice of the commencement of the action from the indemnified party, jointly with any other indemnifying party similarly notified, to assume the defense of the action, with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense, the indemnifying party will not be liable to the indemnified party for any legal or other expenses except as provided below and except for the reasonable costs of investigation incurred by the indemnified party in connection with the defense. The indemnified party will have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel will be at the expense of such indemnified party unless (i) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (ii) the indemnified party has reasonably concluded (based on advice of counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (iii) a conflict or potential conflict exists (based on advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party), or (iv) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm (plus local counsel) admitted to practice in such jurisdiction at any one time for all such indemnified party or parties. All such reasonable fees, disbursements and other charges will be reimbursed by the indemnifying party promptly as they are incurred. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (A) includes an unconditional release of such indemnified party, in form and substance reasonably satisfactory to the indemnified party, from all liability on any claims that are the subject matter of such action and (B) does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of an indemnified party. An indemnifying party will not be liable for any settlement of any action or claim effected without its written consent (which consent will not be unreasonably withheld or delayed).
(d) If an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for reasonable fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by this Section 9 effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.
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(e) If the indemnification provided for in this Section 9 is applicable in accordance with its terms but for any reason is held to be unavailable to or insufficient to hold harmless an indemnified party under this Section 9 in respect of any losses, claims, liabilities, expenses and damages referred to therein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable (including any investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted, but after deducting any contribution received by the Company from persons other than the Sales Agent, such as persons who control the Company within the meaning of the Act, officers of the Company who signed the Registration Statement and directors of the Company, who also may be liable for contribution) by such indemnified party as a result of such losses, claims, liabilities, expenses and damages in such proportion as shall be appropriate to reflect the relative benefits received by the Company, on the one hand, and the Sales Agent, on the other hand. The relative benefits received by the Company, on the one hand, and the Sales Agent, on the other hand, shall be deemed to be in the same proportion as the total Net Proceeds from the sale of the Placement Shares (before deducting expenses) received by the Company bear to the total compensation received by the Sales Agent from the sale of the Placement Shares on behalf of the Company. If, but only if, the allocation provided by the foregoing sentence is not permitted by applicable law, the allocation of contribution shall be made in such proportion as is appropriate to reflect not only the relative benefits referred to in the foregoing sentence but also the relative fault of the Company, on the one hand, and the Sales Agent, on the other hand, with respect to the statements or omissions that resulted in such loss, claim, liability, expense or damage, or action in respect thereof, as well as any other relevant equitable considerations with respect to such offering. Such relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Sales Agent, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Sales Agent agree that it would not be just and equitable if contributions pursuant to this Section 9(e) were to be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss claim, liability, expense or damage, or action in respect thereof, referred to above in this Section 9(e) shall be deemed to include, for purposes of this Section 9(e), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 9(e), the Sales Agent shall not be required to contribute any amount in excess of the commissions received by it and no person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) will be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 9(e), any person who controls a party to this Agreement within the meaning of the Act will have the same rights to contribution as that party, and each officer of the Company who signed the Registration Statement will have the same rights to contribution as the Company, subject in each case to the provisions hereof. Any party entitled to contribution, promptly after receipt of notice of commencement of any action against any such party in respect of which a claim for contribution may be made under this Section 9(e), will notify any such party or parties from whom contribution may be sought, but the omission so to notify will not relieve the party or parties from whom contribution may be sought from any other obligation it or they may have under this Section 9(e). No party will be liable for contribution with respect to any action or claim settled without its written consent if such consent is required pursuant to Section 9 hereof.
(f) The indemnity and contribution agreements contained in this Section 9 and the representations and warranties of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of the Sales Agent, (ii) acceptance of any of the Placement Shares and payment therefor or (iii) any termination of this Agreement.
10. Reimbursement of Certain Expenses.
In addition to its other obligations under Section 9(a) of this Agreement, the Company hereby agrees to reimburse the Sales Agent on a quarterly basis for all reasonable legal and other expenses incurred in connection with investigating or defending any claim, action, investigation, inquiry or other proceeding arising out of or based upon, in whole or in part, any statement or omission or alleged statement or omission or any inaccuracy in the representations and warranties of the Company contained herein or failure of the Company to perform its obligations hereunder or under law, all as described in Section 9(a), notwithstanding the absence of a judicial determination as to the propriety and enforceability of the obligations under this Section 10 and the possibility that such payment might later be held to be improper; provided, however, that, to the extent any such payment is ultimately held to be improper, the persons receiving such payments shall promptly refund them.
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11. Termination.
(a) The obligations of the Sales Agent under this Agreement may be terminated and the Sales Agent may terminate this Agreement at any time, by notice to the Company from the Sales Agent, without liability on the part of the Sales Agent to the Company if, in the sole judgment of the Sales Agent, (i) there has been, since the time of execution of this Agreement or since the date as of which information is given in the Prospectus, any Material Adverse Effect, any Material Adverse Change or any development that would reasonably be expected to result in a Material Adverse Effect or a Material Adverse Change, whether or not arising in the ordinary course of business, which individually or in the aggregate, in the sole judgment of the Sales Agent is material and adverse and makes it impractical or inadvisable to sell the Placement Shares or to enforce contracts for the sale of the Placement Shares, (ii) trading in any of the equity securities of the Company shall have been suspended or limited by the Commission or by the Exchange or trading of any securities of the Company on any exchange or in the over-the-counter market shall have occurred and be continuing, (iii) trading in securities generally on the Exchange shall have been suspended or limited or minimum or maximum prices shall have been generally established on the Exchange, or material governmental restrictions shall have been imposed upon trading in securities generally by the Exchange, by order of the Commission or any court or other governmental authority or by the Exchange, (iv) a banking moratorium shall have been declared by either federal or New York State authorities or any material disruption of the securities settlement or clearance services in the United States shall have occurred, or (v) any material adverse change in the financial or securities markets in the United States or elsewhere or in political, financial or economic conditions in the United States or elsewhere, any outbreak or material escalation of hostilities, a declaration of a national emergency or war, or other calamity or crisis, either within or outside the United States, shall have occurred, the effect of which is such as to make it, in the sole judgment of the Sales Agent, impracticable or inadvisable to sell the Placement Shares or to enforce contracts for the sale of the Placement Shares. If this Agreement is terminated pursuant to this Section 11(a), neither party shall have any liability to the other party, except that Sections 7(i), 9, 10 and 13 hereof shall remain in full force and effect notwithstanding such termination; If the Sales Agent elects to terminate this Agreement as provided in this Section 11(a), the Sales Agent shall provide the required notice as specified in Section 13.
(b) The Company shall have the right, by giving 10 days’ prior notice as hereinafter specified to terminate this Agreement in its sole discretion at any time after the date of this Agreement. Any such termination shall be without liability of any party to any other party except that the provisions of Sections 7(i), 9, 10 and 13 hereof shall remain in full force and effect notwithstanding such termination.
(c) The Sales Agent shall have the right, by giving 10 days’ prior notice as hereinafter specified to terminate this Agreement in its sole discretion at any time after the date of this Agreement. Any such termination shall be without liability of any party to any other party except that the provisions of Sections 7(i), 9, 10 and 13 hereof shall remain in full force and effect notwithstanding such termination.
(d) This Agreement shall remain in full force and effect unless terminated pursuant to Sections 11(a), (b), or (c) above or otherwise by mutual agreement of the parties; provided, however, that any such termination by mutual agreement shall in all cases be deemed to provide that Sections 7(i), 9, 10 and 13 hereof shall remain in full force and effect.
(e) Any termination of this Agreement shall be effective on the date specified in such notice of termination; provided, however, that such termination shall not be effective until the close of business on the date of receipt of such notice by the Sales Agent or the Company, as the case may be. If such termination shall occur prior to the Settlement Date for any sale of Placement Shares, such Placement Shares shall settle in accordance with the provisions of this Agreement.
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12. No Fiduciary Relationship.
Notwithstanding any preexisting relationship, advisory or otherwise, between the parties or any oral representations or assurances previously or subsequently made by the Sales Agent, the Company acknowledges and agrees that (a) the offering and sale of the Placement Shares pursuant to this Agreement is an arm’s-length commercial transaction between the Company and the Sales Agent,(b) the Sales Agent is acting solely as agent in connection with the public offering of the Placement Shares and in connection with each transaction contemplated by this Agreement and the process leading to such transactions, and the Sales Agent has not assumed an advisory or fiduciary responsibility in favor of the Company with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether the Sales Agent has advised or is currently advising the Company on other matters) or any other obligation to the Company except the obligations expressly set forth in this Agreement, (c) the Sales Agent and its affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company and the Sales Agent has no obligation to disclose or account to the Company for any of such differing interests, and (d) the Company has consulted its own legal, tax, accounting and financial advisors to the extent it deemed appropriate, is capable of evaluating and understanding, and understands and accepts, the terms, risks and conditions of the transactions contemplated by this Agreement and has not relied upon the Sales Agent or legal counsel for the Sales Agent for any legal, tax, accounting and financial advice in connection with the offering and sale of the Placement Shares. The Company hereby waives any claim, and agrees that it will not claim, that the Sales Agent or its affiliates have rendered advisory services of any nature or respect, or owe a fiduciary or similar duty to the Company, in connection with the sale of Placement Shares under this Agreement or the process leading thereto. The Company agrees that the Sales Agent and its affiliates shall not have any liability (whether direct or indirect, in contract, tort or otherwise) to it in respect of such a fiduciary duty claim or to any person asserting a fiduciary duty claim on its behalf or in right of it or the Company, employees or creditors of Company.
13. Miscellaneous.
(a) Notice given pursuant to any of the provisions of this Agreement shall be in writing and, unless otherwise specified, shall be mailed or delivered (a) if to the Company, at the office of the Company, 22^nd^ Century Group Inc., 321 Farmington Road, Mocksville, NC 27028, Attention: Larry Firestone, email: lfirestone@xxiicentury.com, with a copy (which shall not constitute notice) to Foley & Lardner LLP, Attention: John Wolfel, email: jwolfel@foley.com, or (b) if to the Sales Agent at the offices of Needham & Company, LLC, 250 Park Avenue, New York, NY 10177, Attention: Matthew Castrovince, email: mcastrovince@needhamco.com, with a copy (which shall not constitute notice) to Faegre Drinker Biddle & Reath LLP, 2200 Wells Fargo Center 90 S. 7th Street, Minneapolis, Minnesota 55402, Attention: Jonathan Zimmerman, facsimile: (612) 766-1600, email jon.zimmerman@faegredrinker.com. Each party to this Agreement may change such address for notices by sending to the parties to this Agreement written notice of a new address for such purpose. Each such notice or other communication shall be deemed given (i) when delivered personally or by verifiable facsimile transmission (with an original to follow) on or before 4:30 p.m., New York City time, on a Business Day or, if such day is not a Business Day, on the next succeeding Business Day, (ii) on the next Business Day after timely delivery to a nationally-recognized overnight courier, (iii) on the Business Day actually received if deposited in the U.S. mail (certified or registered mail, return receipt requested, postage prepaid) and (iv) by Electronic Notice as set forth in the following paragraph. For purposes of this Agreement, “Business Day” shall mean any day on which the Exchange and commercial banks in New York City are open for business.
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An electronic communication (“Electronic Notice”) shall be deemed written notice for purposes of this Section 13(a) if sent to the electronic mail address specified by the receiving party in this Section 13(a). Electronic Notice shall be deemed received at the time the party sending Electronic Notice receives actual acknowledgment of receipt from the person to whom notice is sent, other than automatic reply. Any party receiving Electronic Notice may request and shall be entitled to receive the notice on paper, in a nonelectronic form (“Nonelectronic Notice”), which shall be sent to the requesting party within 10 days of receipt of the written request for Nonelectronic Notice.
(b) This Agreement has been and is made solely for the benefit of the Sales Agent, the Company, and the persons referred to in Section 9, and their respective successors and permitted assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. The term “successors and assigns” as used in this Agreement shall not include a purchaser, as such purchaser, of Placement Shares. Neither party may assign its rights or obligations under this Agreement without the prior written consent of the other party; provided, however, that the Sales Agent may assign its rights and obligations hereunder to an affiliate thereof without obtaining the Company’s consent.
(c) The parties acknowledge and agree that all share-related numbers contained in this Agreement shall be adjusted to take into account any stock split, stock dividend or similar event effected with respect to the Common Stock.
(d) This Agreement (including all schedules and exhibits attached hereto and Placement Notices issued pursuant hereto) constitutes the entire agreement and supersedes all other prior and contemporaneous agreements and undertakings, both written and oral, among the parties hereto with regard to the subject matter hereof. Neither this Agreement nor any term hereof may be amended except pursuant to a written instrument executed by the Company and the Sales Agent.
(e) This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State and without regard to principles of conflicts of laws. Unless stated otherwise, specified times of day refer to New York City time.
(f) No implied waiver by a party shall arise in the absence of a waiver in writing signed by such party. No failure or delay in exercising any right, power, or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power, or privilege hereunder.
(g) This Agreement may be signed in two or more counterparts with the same effect as if the signatures thereto and hereto were upon the same instrument. Delivery of an executed Agreement by one party to the other may be made by facsimile or electronic transmission.
(h) In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable as written by a court of competent jurisdiction, then such provision shall be given full force and effect to the fullest possible extent that it is valid, legal and enforceable, and the remainder of the terms and provisions herein shall be construed as if such invalid, illegal or unenforceable term or provision was not contained herein, but only to the extent that giving effect to such provision and the remainder of the terms and provisions hereof shall be in accordance with the intent of the parties as reflected in this Agreement.
(i) EACH OF THE COMPANY AND THE AGENT HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED UPON, RELATINGTO OR ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
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(j) Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in New York City, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection with any of the transactions contemplated hereby, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum, or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy (certified or registered mail, return receipt requested) to such party at the address in effect for notices under Section 13(a) of this Agreement and agrees that such service shall constitute good and sufficient notice of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.
(k) For purposes of this Agreement:
(i) The section, exhibit and schedule headings herein are for convenience only and shall not affect the construction hereof.
(ii) Words defined in the singular shall have a comparable meaning when used in the plural, and vice versa.
(iii) The words “hereof,” “hereto,” “herein” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement.
(iv) Wherever the word “include,” “includes” or “including” is used in this Agreement, it shall be deemed to be followed by the words “without limitation.”
(v) References herein to any gender shall include each other gender.
(vi) References herein to any law, statute, ordinance, code, regulation, rule or other requirement of any governmental authority shall be deemed to refer to such law, statute, ordinance, code, regulation, rule or other requirement of any governmental authority as amended, reenacted, supplemented or superseded in whole or in part and in effect from time to time and also to all rules and regulations promulgated thereunder.
(vii) All references in this Agreement to financial statements and schedules and other information that is “contained,” “included” or “stated” in the Registration Statement or the Prospectus (and all other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information that is incorporated by reference in the Registration Statement or the Prospectus, as the case may be.
(viii) All references in this Agreement to the Registration Statement, the Prospectus or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to EDGAR; all references in this Agreement to any Issuer Free Writing Prospectus (other than any Issuer Free Writing Prospectuses that, pursuant to Rule 433, are not required to be filed with the Commission) shall be deemed to include the copy thereof filed with the Commission pursuant to EDGAR; and all references in this Agreement to “supplements” to the Prospectus shall include, without limitation, any supplements, “wrappers” or similar materials prepared in connection with any offering, sale or private placement of any Placement Shares by the Sales Agent outside of the United States.
[Signaturepages follow]
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Please confirm that the foregoing correctly sets forth the agreement among the Company and the Sales Agent.
| Very<br> truly yours, |
|---|
| 22^nd^<br> Century Group Inc. |
| By: |
| Name: |
| Title: |
Confirmed as of the date first
above mentioned:
| Needham<br> & Company, LLC |
|---|
| By: |
| Name: |
| Title: |
[SignaturePage to Sales Agreement]
SCHEDULE1
Formof Placement Notice
| From: | 22^nd^<br> Century Group, Inc. |
|---|---|
| To: | Needham<br> & Company, LLC |
| Attention:<br> Matthew Castrovince | |
| Subject: | Placement<br> Notice |
| Date: | [____],<br> 20[____] |
Ladies and Gentlemen:
Pursuant to the terms and subject to the conditions contained in the Sales Agreement between 22^nd^ Century Group, Inc., a Nevada corporation (the “Company”), and Needham & Company, LLC (the “Sales Agent”), dated [___], 20[__], the Company hereby requests that the Sales Agent sell up to [___] shares of the Company’s common stock, par value $[___] per share (the “Shares”), at a minimum price of $[___] per share, during the time period beginning [month, day, time] and ending [month, day, time][until all Shares that are the subject of this Placement Notice are sold].
SCHEDULE2
Compensation
The Company shall pay to the Sales Agent in cash, upon each sale of Placement Shares pursuant to the Sales Agreement of which this Schedule 2 forms a part, an amount equal to 3% of the aggregate gross proceeds from each sale of Placement Shares.
Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Sales Agreement.
SCHEDULE3
NoticeParties
The Company
Lawrence Firestone - lfirestone@xxiicentury.com
Daniel Otto - DOtto@xxiicentury.com
Jonathan Staffeldt - jstaffeldt@xxiicentury.com
The Sales Agent
Needham
Shawn Messner – smessner@needhamco.com
Matthew Castrovince – mcastrovince@needhamco.com
Brandon Lebow – blebow@needhamco.com
SCHEDULE4
PermittedFree Writing Prospectus
None.
Formof Representation Date Certificate
Each of [_____], the duly qualified and elected Chief Executive Officer of 22^nd^ Century Group, Inc., a Nevada corporation (the “Company”), and [____], the duly qualified and elected Chief Financial Officer of the Company, does hereby certify in the undersigned’s respective capacity and on behalf of the Company, pursuant to Section [7(s)] of the Sales Agreement, dated [____], 20[___] (the “Sales Agreement”), by and between the Company and Needham & Company, LLC, that, after due inquiry, to the best of the knowledge of the undersigned:
(a) Each of the representations and warranties of the Company contained in the Sales Agreement are true and correct in all respects (in the case of any representation and warranty containing a materiality or Material Adverse Effect qualification) or in all material respects (in the case of any other representation and warranty), in each case as of the date hereof with the same force and effect as if expressly made on and as of the date hereof.
(b) Each of the covenants required to be performed by the Company under the Sales Agreement on or prior to the date hereof has been duly, timely and fully performed and each condition required to be satisfied or fulfilled under the Sales Agreement on or prior to the date hereof has been duly, timely and fully satisfied or fulfilled.
(c) The undersigned has carefully examined the Registration Statement and the Prospectus (including any Incorporated Documents) and (i) as of the date hereof, the Registration Statement complies in all material respects with the requirements of the Act and does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, (ii) as of the date hereof, the Prospectus complies in all material respects with the requirements of the Act does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading and (iii) since the Effective Date and as of the date hereof, no event has occurred as a result of which it is necessary to amend or supplement the Registration Statement or the Prospectus in order to make the statements therein not untrue or misleading or for clauses (i) and (ii) above, to be true and correct.
(d) There has been no material adverse change, or any development that would reasonably be expected to result in a material adverse change, in the general affairs, business, management, condition (financial or otherwise), earnings, results of operations, properties, operations, assets, prospects or liabilities of the Company and its Subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, since the date as of which information is given in the Prospectus, as amended or supplemented to the date hereof.
(e) The Company does not possess any material non-public information.
(f) The maximum amount of Placement Shares that may be sold pursuant to the Sales Agreement has been duly authorized by the Company’s board of directors or a duly authorized committee thereof pursuant to a resolution or unanimous written consent in accordance with the Company’s organizational documents and applicable law.
Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Sales Agreement.
[Signaturepages follow]
IN WITNESS WHEREOF, each of the undersigned, in such individual’s respective capacity as Chief Executive Officer or Chief Financial Officer of the Company, has executed this Officers’ Certificate on behalf of the Company.
| By: | |
|---|---|
| Name: | |
| Title: | Chief<br> Executive Officer |
| Date: | |
| By: | |
| --- | --- |
| Name: | |
| Title: | Chief<br> Financial Officer |
| Date: |
[SignaturePage to Representation Date Certificate]
Exhibit 10.2
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (this “Agreement”) is between [________] (“Executive”) and 22nd Century Group, Inc. (“22nd Century” and, together with its Affiliates, the “Company”).
WHEREAS, Executive is currently employed by 22nd Century and Executive’s services are valuable to the conduct of the business of the Company; and
WHEREAS, 22nd Century and Executive desire to specify the terms and conditions on which Executive will continue employment on and after [______] (the “Effective Date”), and under which Executive will receive severance in the event that Executive separates from service with the Company under the circumstances described in this Agreement.
NOW,THEREFORE, for the consideration described above and other good and valuable consideration, and intending to be legally bound, the parties agree as follows:
1. Effective Date; Term. This Agreement shall become effective on the Effective Date and continue until the date that is [_____] months after the Effective Date (the “Initial Term”). Thereafter, the Agreement shall renew automatically for successive one (1) year periods unless and until either party provides written notice to the other party of the intent not to renew the Agreement at least ninety (90) days prior to the end of the Initial Term or any subsequent one-year term. Notwithstanding the foregoing, if a Change of Control occurs prior to the end of the Initial Term or any subsequent one-year term, then the Agreement shall be extended automatically for two (2) years from the date of the Change of Control. The expiration of the Agreement due to the Company’s notice of non-renewal shall not be considered a termination of Executive by the Company for other than Cause. Rather, if the Initial Term or any subsequent one-year term expires as a result of non-renewal by either party, and if Executive remains employed with the Company thereafter, then Executive will be an at-will employee of the Company during the period that Executive remains employed with the Company.
2. Definitions. For purposes of this Agreement, the following terms shall have the meanings ascribed to them:
(a) “Accrued Benefits” shall mean the following amounts, payable as described herein: (i) all Base Salary that has accrued but is unpaid as of the Termination Date; (ii) reimbursement of Executive for his or her reasonable and necessary expenses, which have been approved in accord with Company policy and which were incurred by Executive on behalf of the Company as of the Termination Date; (iii) any and all other cash earned by Executive through the Termination Date and deferred at the election of Executive pursuant to any deferred compensation plan then in effect; and (iv) all other payments and benefits to which Executive (or in the event of Executive’s death, Executive’s surviving spouse or other beneficiary) is entitled on the Termination Date under the terms of any benefit plan of the Company, excluding severance payments under any Company severance policy, practice or agreement in effect on the Termination Date. Payment of Accrued Benefits shall be made promptly in accordance with the Company’s prevailing practice with respect to clauses (i) and (ii) or, with respect to clauses (iii) and (iv), pursuant to the terms of the benefit plan or practice establishing such benefits, and any applicable law.
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(b) “Affiliate” shall mean, with respect to 22nd Century, any partnership, corporation, limited liability company, joint stock company, unincorporated organization or association, trust, joint venture, or other organization that, directly or through one or more intermediaries, is controlled by, controls, or is under common control with, 22nd Century within the meaning of Code Section 414(b) or (c); provided that, in applying such provisions, the phrase “at least 50 percent” shall be used in place of “at least 80 percent” each place it appears therein.
(c) “Base Salary” shall mean Executive’s annual base salary with the Company as in effect from time to time.
(d) “Board” shall mean the board of directors of 22nd Century or a committee of such Board authorized to act on its behalf in certain circumstances, including the Compensation Committee of the Board.
(e) “Cause” shall mean any of the following, as determined by the Company in its reasonable judgment, exercised in good faith: (i) any willful act or omission that constitutes a material breach by Executive of any of his or her material obligations under this Agreement or any material written Company policy or procedure; (ii) the continued willful failure or refusal of the Executive to substantially perform the duties reasonably required of him or her as an employee of the Company; (iii) an act of moral turpitude, dishonesty or fraud by, or criminal conviction (excluding non-felony convictions relating solely to vehicle and traffic offenses) of, Executive; (iv) any material misappropriation of Company property by the Executive; or (v) any other willful misconduct by Executive that is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company; provided that prior to a termination due to Executive’s acts or omissions described in clauses (i) or (ii) herein, the Company shall have provided Executive with a written notice setting forth in reasonable detail the acts or omissions constituting Cause, and Executive shall have failed to cure such acts or omissions within thirty (30) days of his or her receipt of the written notice. If the alleged conduct or act constituting Cause is not curable, then Executive’s employment will terminate on the date specified in the written notice of termination (which may be immediate). If the alleged conduct or act constituting Cause is curable but Executive does not timely cure such conduct or act, then Executive’s employment will terminate on the date immediately following the end of the cure period.
(f) “Change of Control” shall mean a “Change of Control” as defined in the 22nd Century Group, Inc. 2021 Omnibus Incentive Plan, as amended and in effect from time to time, or any successor incentive plan thereto.
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(g) “Change of Control Employment Period” shall mean the twenty-four (24) month period commencing on the date of a Change of Control and ending at 11:59 p.m. on the second anniversary of such date.
(h) “COBRA” shall mean the provisions of Code Section 4980B.
(i) “Code” shall mean the Internal Revenue Code of 1986, as amended, as interpreted by rules and regulations issued pursuant thereto, all as amended and in effect from time to time. Any reference to a specific provision of the Code shall be deemed to include reference to any successor provision thereto.
(j) “Disability” shall mean, subject to applicable law, the good faith determination by the Board that a medically determinable physical or mental impairment of Executive renders Executive unable to perform the essential functions of his or her position with the Company, with a reasonable accommodation.
(k) “Good Reason” shall mean the occurrence of any of the following events during the Change of Control Employment Period without Executive’s written consent:
(i) any breach of this Agreement by 22nd Century or any successor thereto in the Change of Control or any affiliate thereof that employs Executive (the “Employer”), other than an isolated, insubstantial and inadvertent failure not occurring in bad faith that the Employer remedies;
(ii) any reduction in Executive’s (A) base salary, (B) percentage of base salary available as cash incentive compensation or bonus opportunity, (C) grant date fair value of annual equity-based awards or (D) other benefits, in each case relative to those most favorable to Executive in effect at any time during the 180-day period prior to the Change of Control or, to the extent more favorable to the Executive, those in effect at any time during the Change of Control Employment Period;
(iii) the removal of Executive from, or any failure to reelect or reappoint Executive to, any of the positions held with the Employer on the date of the Change of Control or any other positions with the Employer to which Executive shall thereafter be elected, appointed or assigned, except in the event that such removal or failure to reelect or reappoint relates to the termination by the Employer of Executive’s employment for Cause or by reason of death or Disability pursuant to Section 4(a)(i) or (ii);
(iv) a good faith determination by Executive that there has been a material adverse change in Executive’s working conditions or status with the Employer relative to the most favorable working conditions or status in effect during the 180-day period prior to the Change of Control, or, to the extent more favorable to Executive, those in effect at any time during the Change of Control Employment Period, including but not limited to (A) a significant change in the nature or scope of Executive’s authority, powers, functions, duties or responsibilities (including a change in reporting structure that entails a significant change in such nature or scope), or (B) a significant reduction in the level of support services, staff, secretarial and other assistance, office space and accoutrements, but in each case excluding for this purpose an isolated, insubstantial and inadvertent event not occurring in bad faith that the Employer remedies;
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(v) the relocation of Executive’s principal place of employment to a location more than 50 miles from Executive’s principal place of employment on the date 180 days prior to the Change of Control (or if Executive has not been employed for 180 days prior to the Change of Control, as in effect on the date Executive entered into this Agreement);
(vi) the Employer requires the Executive to travel on Employer business 20% in excess of the average number of days per month the Executive was required to travel during the 180-day period prior to the Change of Control; or
(vii) failure by 22nd Century to obtain the agreement referred to in Section 10;
provided that such event shall constitute Good Reason only if: (A) Executive continues to satisfactorily perform his or her job duties as assigned through his or her last day of employment and continues to comply with all of the covenants set forth herein (including the terms of Section 7 hereof) and any other non-compete, confidentiality, invention or other written agreements otherwise applicable to him or her; (B) Executive provides the Employer written notice of resignation, specifying in reasonable detail the event constituting Good Reason, within thirty (30) days after the initial existence of such event; and (C) the Employer fails to cure the Good Reason event within thirty (30) days following receipt of such notice. If 22nd Century timely cures the Good Reason event, then Executive’s notice of resignation shall be automatically rescinded. If the Employer does not timely cure the Good Reason event, then Executive’s Termination Date shall be the date immediately following the end of the cure period.
(l) “Separation Agreement” shall mean an agreement in such form as is determined by 22nd Century which provides for, among other things: (i) the release and waiver of all claims that Executive, and anyone who may succeed to any claims of Executive, has or may have against 22nd Century, its board of directors, any of its subsidiaries or Affiliates, or any of their employees, directors, officers, employees, agents, plan sponsors, administrators, successors, fiduciaries, attorneys, or insurers, including but not limited to claims arising out of Executive’s employment with, and termination of employment from, the Company, but excluding claims for Accrued Benefits, Severance Benefits and equity awards; (ii) an obligation for Executive not to make any derogatory remarks or comments about the Company; (iii) an affirmation and assurance by Executive of his or her obligations to which he or she is subject under Section 7 herein; and (iv) such other clauses or obligations that 22nd Century may reasonably include.
(m) “Separation from Service” shall mean Executive’s separation from service (within the meaning of Code Section 409A) from 22nd Century and its Affiliates.
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(n) “Severance Benefits” shall mean the payments and benefits described in Section 5(d) hereof.
(o) “Severance Payment” shall mean the product of (A) [For the CEO: 1.5*][For other executives:* 1.0*]* multiplied by (B) the sum of Executive’s Base Salary plus Executive’s target annual bonus for the fiscal year in which the Termination Date occurs (or, if Executive’s target annual bonus for such fiscal year has not yet been established, Executive’s target annual bonus from the prior fiscal year) (the “Target Annual Bonus Amount”); provided that if Executive’s Termination Date occurs during the Change of Control Employment Period, then the Severance Payment shall mean the product of (A) [Forthe CEO: 2.5*][For other executives:* 1.5*]* multiplied by (B) the sum of Executive’s Base Salary plus the greater of the Target Annual Bonus Amount or the actual bonus earned by Executive for the prior fiscal year. For purposes of this definition, the Executive’s Base Salary shall be the amount in effect immediately preceding the Termination Date; provided that if a reduction in Executive’s Base Salary constituted a Good Reason for the termination, then Base Salary shall be the amount in effect immediately prior to such reduction.
(p) “Termination Date” shall mean the date of Executive’s termination of employment from the Company, as further described in Section 4.
3. Employment of Executive
(a) Position.
(i) Executive shall serve as the [________] of 22nd Century, accountable to the [For the CEO: Board*][For other executives:* Chief Executive Officer of 22nd Century*]. In such position, Executive shall have such duties and authority as are customarily associated with such position and shall have such other titles and duties, consistent with Executive’s position, as may be assigned from time to time by the [For the CEO: Board][For other executives:* Chief Executive Officer of 22nd Century*]*.
(ii) Executive shall devote all of his or her business time and efforts to the performance of his or her duties on behalf of the Company, and will not engage in or be concerned with any other commercial duties or pursuits, either directly or indirectly, without the prior written consent of the Board. Notwithstanding the foregoing, nothing herein shall preclude Executive from (1) serving as an officer or a member of charitable, educational or civic organizations; (2) engaging in charitable activities and community affairs; and (3) managing Executive’s personal investments and affairs; provided, however, that such service and activities do not, in the Company’s reasonable opinion, interfere with the performance of his or her duties on behalf of the Company, create any conflict of interest as it relates to the Company, and are not represented in a manner that suggests the Company supports or endorses the services or activities without the advance approval of the Company. Executive shall be responsible for complying with all policies and operating procedures of the Company (that are provided or made available to the Executive) in the performance of his or her duties on behalf of the Company.
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(iii) Executive’s position is eligible for remote work. Executive will be required to travel to 22nd Century’s headquarters, to current and potential customer sites globally as needed and to such other places, including, without limitation, the site of such facilities of the Company and its Affiliates as are established from time to time, at such times as are advisable for the performance of Executive’s duties and responsibilities under this Agreement.
(iv) Executive shall submit to the Company all business, commercial and investment opportunities or offers presented to Executive or of which Executive becomes aware which relate to the business of the Company (the “Company Opportunities”). Unless approved by the Board, Executive shall not accept or pursue, directly or indirectly, any Company Opportunities on Executive’s own behalf.
(b) Base Salary. 22nd Century shall pay Executive a Base Salary at an annual rate of $[_____] (pro rated for any partial year), payable in regular installments in accordance with the Company’s usual payroll practices.
(c) Bonus and Equity Incentives.
(i) Executive is and shall be eligible to participate in such annual cash incentive plans and programs of 22nd Century as are generally provided to the senior executives of 22nd Century pursuant to such terms and conditions as the Board may prescribe from time to time. Executive’s target annual cash incentive award shall be no lower than [___]% of Base Salary.
(ii) Executive is and shall be eligible to participate in such long-term cash and equity incentive plans and programs of 22nd Century as are generally provided to the senior executives of 22nd Century, as determined by the Board in its discretion.
(d) Executive Benefits. Executive shall be eligible to participate in the Company’s employee benefit plans (in addition to the annual and/or long-term incentive programs, which are addressed in subsection (c)) as in effect from time to time on the same basis as those benefits are generally made available to other similarly-situated senior executives of 22nd Century.
(e) Business Expenses. The Company shall reimburse Executive for any reasonable business expenses incurred by Executive in the performance of Executive’s duties hereunder subject to and in accordance with Company policies.
(f) Withholding. All payments under this Agreement shall be subject to payroll taxes and other withholdings in accordance with the Company’s (or the applicable employer of record’s) standard payroll practices and applicable law.
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4. Termination of Employment.
(a) Date and Manner of Termination. Executive’s employment with the Company will terminate during the term of the Agreement, and this Agreement will terminate on the date of such termination, as follows:
(i) Executive’s employment will terminate on the date of Executive’s death.
(ii) If Executive is subject to a Disability, and if within one hundred eighty (180) days after 22nd Century notifies Executive in writing that it intends to terminate Executive’s employment, Executive shall not have returned to the performance of Executive’s essential functions (either with or without a reasonable accommodation), 22nd Century may terminate Executive’s employment, effective immediately following the end of such thirty-day period.
(iii) 22nd Century may terminate Executive’s employment with or without Cause (other than as a result of Disability which is governed by subsection (ii)). If the termination is without Cause, then Executive’s employment will terminate on the date set forth in 22nd Century’s written notice of termination to Executive (which may be immediate). If the termination is for Cause, then Executive’s employment will terminate in accordance with Section 2(e). Unless otherwise directed by 22nd Century, from and after the date of the written notice of proposed termination, Executive shall be relieved of his or her duties and responsibilities and shall be considered to be on a paid leave of absence pending any final action by 22nd Century confirming such proposed termination.
(iv) Executive may terminate his or her employment for any reason outside of the Change of Control Employment Period or, during the Change of Control Employment Period, with or without Good Reason. If the termination is outside of the Change of Control Employment Period for any reason or during the Change of Control Employment Period without Good Reason, then Executive must provide at least thirty (30) but no more than ninety (90) days’ advance written notice to 22nd Century; provided that the Company may immediately relieve Executive of all duties and responsibilities upon receipt of such notice, and choose to terminate Executive’s employment without further notice or delay, which termination shall not constitute a termination without Cause. If the termination is during the Change of Control Employment Period for Good Reason, then Executive’s employment will terminate in accordance with Section 2(k).
(b) Relinquishment of Positions Upon Termination. Upon termination of employment for any reason, Executive shall resign all officerships, directorships or other positions that he or she then holds with the Company or any of its Affiliates.
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5. Payments upon Termination.
(a) Entitlement to Accrued Benefits and Equity Awards. Upon termination of Executive’s employment for any reason, whether by the Company or by Executive, the Company shall pay or provide Executive with the Accrued Benefits and all of Executive’s outstanding equity awards shall be subject to the terms of the applicable award agreement and plan.
(b) Entitlement to Severance. Subject to the other terms and conditions of this Agreement, Executive shall be entitled to Severance Benefits in either of the following circumstances:
(i) Executive’s employment is terminated by 22nd Century without Cause, except in the case of death or Disability; or
(ii) During the Change of Control Employment Period, Executive terminates his or her employment with the Company for Good Reason.
If Executive dies after receiving a notice by 22nd Century that Executive is being terminated without Cause, or after providing notice of termination for Good Reason during a Change of Control Employment Period, then Executive’s estate, heirs and beneficiaries (as the case may be) shall be entitled to the Accrued Benefits and the Severance Benefits at the same time such amounts would have been paid or benefits provided to Executive had he or she lived.
(c) Requirement for Severance Benefits. As an additional prerequisite for receipt of the Severance Benefits, Executive must (i) execute, deliver to 22nd Century, and not revoke (to the extent Executive is allowed to do so) a Separation Agreement within twenty (20) calendar days (or such longer period as is provided in the Separation Agreement) following the Executive’s receipt of such Separation Agreement, which 22nd Century must provide Executive within ten (10) days following Executive’s Termination Date, (ii) return all property, Confidential Information (as defined below), documents and other materials belonging to the Company in an unaltered form and without retaining any copies, and (iii) comply with all of Executive’s covenants set forth in this Agreement.
(d) Severance Benefits; Timing and Form of Payment. Subject to the limitations imposed by Section 6, if Executive is entitled to severance benefits, then:
(i) The Company shall pay Executive the Severance Payment in equal installments, consistent with the Company’s normal payroll practices, over the [For the CEO: 18 month*][For other executives:* 12 month*]* period following (or, in the case of a termination of employment during the Change of Control Employment Period, in a lump sum, provided such Change of Control meets the requirements of Code Section 409A and such lump sum payment is permitted consistent with the requirements of Code Section 409A, promptly following) the date of his or her Separation from Service; provided that any amounts that would be payable prior to the effectiveness of the Separation Agreement shall be delayed until the Separation Agreement becomes effective. Notwithstanding the foregoing, if, as of the date of Executive’s Separation from Service (i) he or she is a “specified employee” as determined under Code Section 409A, then any portion of the Severance Payment that is subject to Code Section 409A and that would otherwise be payable within the first six (6) months following such Separation from Service shall be delayed until the first regular payroll date of the Company following the six (6) month anniversary of Executive’s Separation from Service (or the date of his or her death, if earlier than that anniversary) to the extent required for compliance with Code Section 409A or (ii) he or she is not a “specified employee” as determined under Code Section 409A, then any portion of the Severance Payment that is subject to Code Section 409A and that would be otherwise payable within the first ninety (90) days after Executive’s Separation from Service shall be paid ninety (90) days after Executive’s Separation from Service (and not promptly following the effectiveness of the Separation Agreement).
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(ii) The Company shall continue to provide to Executive and his or her dependents (as applicable) for a period of [For the CEO: eighteen (18)][For other executives: twelve (12)] consecutive months after the Termination Date, group health, dental and life insurance benefits to the extent that such benefits were in effect for Executive and his family as of the Termination Date, subject to Executive’s timely election of group health and/or dental continuation coverage pursuant to COBRA or similar state laws and timely payment of his or her share of the applicable premiums at the same rate (if any) he or she was paying before the Termination Date. Benefit continuation under this Section 5(d)(ii) shall be concurrent with any coverage under the Company’s plans pursuant to COBRA or similar state laws. Such benefits shall be terminated prior to the applicable period to the extent permitted by COBRA (for health and dental coverage) at such time as Executive has obtained new employment and is covered by benefits which in the aggregate are comparable to such continued benefits. Executive shall promptly notify the Company when he or she becomes employed after the Termination Date and shall provide such reasonable cooperation as the Company requests with respect to determining whether Executive is covered by comparable benefits with such new employer. If provision of health or dental benefits under this Section 5(d)(ii) would subject the Company or its benefits arrangements to a penalty or adverse tax treatment, then the Company shall provide a cash payment to Executive in an amount reasonably determined by the Company to be equivalent to the portion of the COBRA premiums that the Company would have paid for such benefits.
6. Limitations on Severance Payments and Benefits. Notwithstanding any other provision of this Agreement, if any portion of the Severance Payment or any other payment under this Agreement, or under any other agreement with or plan of the Company (in the aggregate “Total Payments”), would constitute an “excess parachute payment,” then the Total Payments to be made to Executive shall be reduced such that the value of the aggregate Total Payments that Executive is entitled to receive shall be One Dollar ($1) less than the maximum amount which Executive may receive without becoming subject to the tax imposed by Code Section 4999 or which the Company may pay without loss of deduction under Code Section 280G(a); provided that the foregoing reduction in the amount of Total Payments shall not apply if the After-Tax Value to Executive of the Total Payments prior to reduction in accordance herewith is greater than the After-Tax Value to Executive if Total Payments are reduced in accordance herewith. For purposes of this Agreement, the terms “excess parachute payment” and “parachute payments” shall have the meanings assigned to them in Code Section 280G, and such “parachute payments” shall be valued as provided therein. Present value for purposes of this Agreement shall be calculated in accordance with Code Section 1274(b)(2). Within twenty (20) business days following delivery of the notice of termination or notice by 22nd Century to Executive of its belief that there is a payment or benefit due Executive that will result in an excess parachute payment as defined in Code Section 280G, Executive and 22nd Century, at 22nd Century’s expense, shall obtain the opinion (which need not be unqualified) of nationally recognized tax counsel selected by 22nd Century, which opinion sets forth: (A) the amount of the Base Period Income, (B) the amount and present value of Total Payments, (C) the amount and present value of any excess parachute payments without regard to the limitations of this Section 6, (D) the After-Tax Value of the Total Payments if the reduction in Total Payments contemplated under this Section 6 did not apply, and (E) the After-Tax Value of the Total Payments taking into account the reduction in Total Payments contemplated under this Section 6. As used in this Section 6, the term “Base Period Income” means an amount equal to Executive’s “annualized includible compensation for the base period” as defined in Code Section 280G(d)(1). For purposes of such opinion, the value of any noncash benefits or any deferred payment or benefit shall be determined by 22nd Century’s independent auditors in accordance with the principles of Code Sections 280G(d)(3) and (4), which determination shall be evidenced in a certificate of such auditors addressed to 22nd Century and Executive. For purposes of determining the After-Tax Value of Total Payments, Executive shall be deemed to pay federal income taxes and employment taxes at the highest marginal rate of federal income and employment taxation in the calendar year in which the Severance Payment is to be made and state and local income taxes at the highest marginal rates of taxation in the state and locality of Executive’s domicile for income tax purposes on the date the Severance Payment is to be made, net of the maximum reduction in federal income taxes that may be obtained from deduction of such state and local taxes. Such opinion shall be dated as of the Termination Date and addressed to 22nd Century and Executive and shall be binding upon 22nd Century and Executive. If such opinion determines that there would be an excess parachute payment and that the After-Tax Value of the Total Payments taking into account the reduction contemplated under this Section 6 is greater than the After-Tax Value of the Total Payments if the reduction in Total Payments contemplated under this Section 6 did not apply, then the Severance Payment hereunder or any other payment determined by such counsel to be includible in Total Payments shall be reduced or eliminated as specified by Executive in writing delivered to 22nd Century within five business days of Executive’s receipt of such opinion or, if Executive fails to so notify 22nd Century, then as 22nd Century shall reasonably determine, so that under the bases of calculations set forth in such opinion there will be no excess parachute payment. If such legal counsel so requests in connection with the opinion required by this Section 6, Executive and 22nd Century shall obtain, at 22nd Century’s expense, and the legal counsel may rely on in providing the opinion, the advice of a firm of recognized executive compensation consultants as to the reasonableness of any item of compensation to be received by Executive. If the provisions of Code Sections 280G and 4999 are repealed without succession, then this Section 6 shall be of no further force or effect.
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Covenants by Executive.
(a) Confidentiality. Executive covenants and agrees with the Company that he or she will not any time during the term of this Agreement and thereafter, except in performance of his or her obligations to the Company hereunder or with the prior written consent of the Company, directly or indirectly, disclose any secret or Confidential Information that he or she may learn or has learned by reason of his or her association with the Company. The term “Confidential Information” includes information not previously made generally available to the public by the Company, with respect to the Company’s products, facilities, applications and methods, trade secrets and other intellectual property, systems, procedures, manuals, confidential reports, product price lists, customer lists, technical information, financial information (including the revenues, costs or profits associated with any of the Company’s products), business and strategic plans, prospects or opportunities, but shall exclude any information which the Company intentionally makes generally available to the public other than as a result of disclosure by Executive in violation of this Section 7(a). Executive will be released of his or her obligations under this Section 7(a) to the extent Executive is required to disclose under any applicable laws, regulations or directives of any government agency, tribunal or authority having jurisdiction in the matter or under subpoena or other process of law provided that Executive provides the Company with prompt written notice of such requirement. In addition, Executive will not be in breach of any obligations under Section 7(a), and will not be criminally or civilly liable under any Federal or state trade secret law, for the disclosure of Confidential Information that is made in confidence to a Federal, state or local government official, either directly or indirectly, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law involving the Company or is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. If Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law involving the Company, Executive may disclose Confidential Information, including trade secrets, to his or her attorney and use such Confidential Information in the court proceeding if such Confidential Information is filed under seal.
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(b) Acknowledgment of Company Assets. Executive acknowledges that the Company, at the Company’s expense, has acquired, created and maintains, and will continue to acquire, create and maintain, significant goodwill with its current and prospective customers, strategic partners, vendors and employees and significant Confidential Information, and that such goodwill and Confidential Information is valuable property of the Company. Executive further acknowledges that to the extent such goodwill and Confidential Information will be generated through Executive’s efforts, such efforts will be funded by the Company and Executive will be fairly compensated for such efforts. Executive acknowledges that all goodwill developed by Executive relative to the Company’s customers, strategic partners, vendors and employees, and all Confidential Information developed by Executive, shall be the sole and exclusive property of the Company and shall not be personal to Executive. Accordingly, in order to afford the Company reasonable protection of such goodwill and of the Company’s Confidential Information, Executive agrees as follows:
(i) [First alternative language: During the term of this Agreement and for a period of 12 months after termination of employment for any reason (such period, the “Post-Termination Restrictive Covenant Period”), Executive shall not, directly or indirectly, as an investor, lender, officer, director, manager, or as an employee, associate, consultant or agent of any individual or entity, or in any other capacity: (A) solicit or endeavor to entice away from the Company any individual who is employed by the Company (except pursuant to a general solicitation which is not directed specifically at any such employees); (B) solicit or endeavor to entice away from the Company any entity who is at the time of termination, or was within the then most recent 12-month period, a customer of the Company; (C) interfere with the business relationship between the Company and any customer, strategic partner, supplier or vendor of the Company or attempt to persuade or encourage any customer, strategic partner, supplier or vendor of the Company to cease doing business with the Company or to engage in any activity competitive with the Company; or (D) make or publish any disparaging remarks about the Company, its products, prospects or management. The Company agrees not to make or publish any disparaging remarks about Executive during the Post-Termination Restrictive Covenant Period.] [Second alternative language: During the term of this Agreement, Executive shall not, directly or indirectly, as an investor, lender, officer, director, manager, or as an employee, associate, consultant or agent of any individual or entity, or in any other capacity: (A) solicit or endeavor to entice away from the Company any individual who is employed by the Company (except pursuant to a general solicitation which is not directed specifically at any such employees); (B) solicit or endeavor to entice away from the Company any entity who is a customer of the Company; (C) interfere with the business relationship between the Company and any customer, strategic partner, supplier or vendor of the Company or attempt to persuade or encourage any customer, strategic partner, supplier or vendor of the Company to cease doing business with the Company or to engage in any activity competitive with the Company; or (D) make or publish any disparaging remarks about the Company, its products, prospects or management. In addition, for a period of [For CEO: 18*] [Second alternative language (other than for CEO):* 12] months after termination of employment for any reason (such period, the “Post-Termination Restrictive Covenant Period”), Executive shall not, directly or indirectly, as an investor, lender, officer, director, manager, or as an employee, associate, consultant or agent of any individual or entity, or in any other capacity, make or publish any disparaging remarks about the Company, its products, prospects or management.] The Company agrees not to make or publish any disparaging remarks about Executive during the Post-Termination Restrictive Covenant Period.
(ii) During the term of this Agreement [First alternative language: and during the Post-Termination Restrictive Covenant Period], Executive shall not, directly or indirectly, as an investor, lender, officer, director, manager, or as an employee, associate, consultant or agent of any individual or entity, or in any other capacity, (other than as an investor owning not more than a 1% interest in a publicly-traded entity), engage in the Restricted Business (as defined below) anywhere in the world other than on behalf of the Company. Executive acknowledges and agrees that the Company conducts business throughout the world, that the Company’s legitimate and protectable business interests are throughout the world, and therefore this Section 7(b) is intended to prohibit competitive activities by Executive throughout the world. “Restricted Business” means research and product development with respect to, the manufacture, distribution, marketing or sale of, or the licensing of intellectual property related to, tobacco products or other products made from or related to the tobacco plant. The non-competition provisions of this Section 7(b) shall not apply to Executive’s practice of law, to the extent applicable.
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(c) Exclusive Property. Executive confirms that all Confidential Information is and shall remain the exclusive property of the Company. All business records, and documents (whether in paper or electronic media) kept or made by Executive relating to the business of the Company shall be and remain the property of the Company. Upon termination of Executive’s employment with the Company for any reason, Executive promptly deliver to the Company all of the following that are in Executive’s possession or under his or her control: (i) all computers, telecommunication devices and other tangible property of the Company, and (ii) all documents and other materials, in whatever form, which include Confidential Information or which otherwise relate in whole or in part to the present or prospective business of the Company, including but not limited to, drawings, graphs, charts, specifications, notes, reports, memoranda, and computer disks and tapes, and all copies thereof.
(d) Injunctive Relief; Tolling. Without intending to limit the remedies available to the Company, Executive acknowledges that a breach of any of the covenants contained in this Section 7 may result in material and irreparable injury to the Company or its affiliates or subsidiaries for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to seek a temporary restraining order and/or a preliminary or permanent injunction restraining Executive from engaging in activities prohibited by this Section 7 or such other relief as may be required specifically to enforce any of the covenants in this Section 7. If for any reason, it is held that the restrictions under this Section 7 are not reasonable or that consideration therefore is inadequate, such restrictions shall be interpreted or modified to include as much of the duration and scope identified in this Section 7 as will render such restrictions valid and enforceable including, if applicable, modifications to the geographic scope of Section 7(b). The Post-Termination Restrictive Covenant Period will not include any period during which Executive is in violation of Sections 7(a) or 7(b).
(e) Communication to Third Parties. Executive agrees that the Company shall have the right to communicate the terms of this Section 7 to any third parties, including but not limited to, any prospective employer of Executive. Executive waives any right to assert any claim for damages against Company or any officer, employee or agent of Company arising from such disclosure of the terms of this Section 7.
(f) Independent Obligations. The provisions of this Section 7 shall be independent of any other provision of this Agreement. The existence of any claim or cause of action by Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense of the enforcement of this Section 7 by the Company.
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(g) Non-Exclusivity. The Company’s rights and Executive’s obligations set forth in this Section 7 are in addition to, and not in lieu of, all rights and obligations provided by applicable statutory or common law.
(h) Inventions. The term “Invention” means any discovery, concept or idea, whether or not patentable or copyrightable, including but not limited to processes, methods, formulae and techniques, as well as improvements thereof or know- how related thereto. Executive will promptly and fully inform the Company in writing of any Invention which is conceived, made, or reduced to practice by Executive, either solely or jointly with another or others, during the term of this Agreement or within 12 months after termination of Executive’s employment for any reason, setting forth in detail the procedures employed and the results achieved. The Company and/or its nominee or assign will be the sole owner, without payment of royalty or any other compensation to Executive, of any such Invention which (i) is conceived, made or reduced to practice with the use of Confidential Information or the Company’s equipment, facilities, materials, personnel or other resources, or (ii) at the time it is conceived, made or reduced to practice relates to the Company’s present or prospective business or actual or demonstrably anticipated research or development, or (iii) is the result of any work performed by Executive for the Company. With respect to each such Invention of which the Company is the owner, Executive will execute and deliver promptly to the Company (without charge to the Company but at its expense) such written instruments and do such other acts as may be necessary in the opinion of the Company to obtain and maintain United States and/or foreign letters patent or United States and/or foreign copyright registrations and to vest the entire right and title thereto in the Company.
(i) Defend Trade Secrets Act. Nothing in this Agreement is intended to discourage or restrict Executive from reporting any theft of trade secrets pursuant to the Defend Trade Secrets Act of 2016 (the “DTSA”) or other applicable state or federal law. The DTSA prohibits retaliation against an employee or individual independent contractor because of whistleblower activity in connection with the disclosure of trade secrets, so long as any such disclosure is made either (i) in confidence to an attorney or a federal, state, or local government official and solely to report or investigate a suspected violation of the law, or (ii) under seal in a complaint or other document filed in a lawsuit or other proceeding. If Executive believes that any employee or any third party has misappropriated or improperly used or disclosed Trade Secrets or Confidential Information, Executive should report such activity to the Company’s General Counsel (or, if Executive is the General Counsel, to the Company’s Chief Executive Officer). Nothing in this Agreement shall limit, curtail or diminish the Company’s statutory rights under the DTSA, any applicable state law regarding trade secrets or common law.
8. Notice. Any notice, request, demand or other communication required or permitted herein will be deemed to be properly given when personally served in writing, by email or when deposited in the United States mail, postage prepaid, addressed to Executive at the address (or email address) last appearing in 22nd Century’s personnel records and to the Company at its headquarters with attention (or an email) to the General Counsel (or, if Executive is the General Counsel, to the Chief Executive Officer) of 22nd Century. Either party may change its address by written notice in accordance with this paragraph.
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9. Set Off; Mitigation. The Company’s obligation to pay Executive the amounts and to provide the benefits hereunder shall be subject to set-off, counterclaim or recoupment of amounts owed by Executive to the Company. However, Executive shall not be required to mitigate the amount of any payment provided for pursuant to this Agreement by seeking other employment or otherwise.
10. Benefit of Agreement. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective executors, administrators, successors and assigns. If 22nd Century sells, assigns or transfers all or substantially all of its business and assets to any person or entity, then 22nd Century shall assign all of its right, title and interest in this Agreement as of the date of such event to such person or entity, and 22nd Century shall cause such person or entity, by written agreement, to expressly assume and agree to perform from and after the date of such assignment all of the terms, conditions and provisions imposed by this Agreement upon the Company. In case of such assignment by 22nd Century and assumption and agreement by such person or entity, as used in this Agreement, “22nd Century” shall thereafter mean the person which executes and delivers the agreement provided for in this Section 10 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, and this Agreement shall inure to the benefit of, and be enforceable by, such person or entity. This Agreement shall not be assignable by Executive. This Agreement shall not be terminated by the voluntary or involuntary dissolution of 22nd Century.
11. Applicable Law and Jurisdiction. This Agreement is to be governed by and construed under the laws of the United States and of the State of [North Carolina][Texas] without resort to [North Carolina’s][Texas’s] choice of law rules. Each party hereby agrees that the forum and venue for any legal or equitable action or proceeding arising out of, or in connection with, this Agreement will lie in the appropriate federal or state courts located in [Davie County, North Carolina][Texas] and specifically waives any and all objections to such jurisdiction and venue.
12. Captions and Paragraph Headings. Captions and section or paragraph headings used herein are for convenience only and are not a part of this Agreement and will not be used in construing it.
13. Divisibility of Agreement or Modification By Court. To the extent permitted by law, the invalidity of any provision of this Agreement will not and shall not be deemed to affect the validity of any other provision. In the event that any provision of this Agreement is held to be invalid, it shall be, to the further extent permitted by law, modified to the extent necessary to be interpreted in a manner most consistent with the present terms of the provision, to give effect to the provision. Finally, in the event that any provision of this Agreement is held to be invalid and not capable of modification by a court, then it shall be considered expunged, and the parties agree that the remaining provisions shall be deemed to be in full force and effect as if they had been executed by both parties subsequent to the expungement of the invalid provision.
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14. No Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.
15. Survival. The termination or expiration of this Agreement will not affect the rights or obligations of the parties hereunder arising out of, or relating to, circumstances occurring prior to the termination or expiration of this Agreement, which rights and obligations will survive the termination or expiration of this Agreement. In addition, the following provisions shall survive the termination or expiration of this Agreement: Sections 5 and 6 (as necessary for the payments and benefits due thereunder to be paid or provided), and Sections 7, 8, 9, and 11 through 18.
16. Entire Agreement. This Agreement contains the entire agreement of the parties with respect to the subject matter of this Agreement except where other agreements are specifically noted, adopted, or incorporated by reference. This Agreement otherwise supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to the employment of Executive by Company, and all such agreements shall be void and of no effect. Each party to this Agreement acknowledges that no representations, inducements, promises, or agreements, oral or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not embodied herein, and that no other agreement, statement, or promise not contained in this Agreement will be valid or binding.
17. Modification or Amendment. This Agreement may not be modified or amended except through a writing signed by both an authorized representative of 22nd Century and Executive, except as required by a court with competent jurisdiction in order to enforce this Agreement.
18. Claims by Executive. Executive acknowledges and agrees that any claim or cause of action by him or her against the Company shall not constitute a defense to the enforcement of the restrictions and covenants set forth in this Agreement and shall not be used to prohibit injunctive relief.
19. Directors and Officers Insurance. During the term of this Agreement, the Company shall maintain commercially reasonable directors and officers insurance. Any release requirement set forth in the Separation Agreement shall not require Executive to waive any right or claim for coverage under such insurance.
20. Execution of Agreement. This Agreement may be executed in multiple counterparts, any one of which need not contain the signature of more than one (1) party, but all such counterparts taken together shall constitute one and the same instrument. Further, this Agreement may be signed and delivered by means of facsimile or scanned pages via electronic mail, and such scanned or facsimile signatures shall be treated in all manner and respects as an original signature and shall be considered to have the same binding legal effect as if it were an original signature, and no party may raise the use of facsimile or scanned signatures as a defense to the formation of this Agreement.
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21. Review by Counsel. Executive represents and warrants that this Agreement is the result of full and otherwise fair and good faith bargaining over its terms following a full and otherwise fair opportunity to have legal counsel for Executive review this Agreement, propose modifications and changes, and to verify that the terms and provisions of this Agreement are reasonable and enforceable. Executive acknowledges that he or she has read and understands the foregoing provisions and that such provisions are reasonable and enforceable. This Agreement has been jointly drafted by both parties and shall not be interpreted as against one party as the drafter.
IN WITNESS WHEREOF, the parties hereto have executed, or caused to be executed, this Agreement on the Effective Date.
EXECUTIVE
22ND CENTURY GROUP, Inc.
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Exhibit99.1
22ndCentury Group Reports Third Quarter 2025 Financial Results
SignificantBalance Sheet Improvement - Debt Free, Receives $9.5 Million in Non-Dilutive Cash
VLN^®^and Partner VLN^®^ Launches Underway, Rapidly Expanding Store Counts and Availability
MOCKSVILLE,N.C., November 4, 2025 —22nd Century Group, Inc. (Nasdaq: XXII), the only tobacco products company that has for 27 years led and continues to lead the fight against the harms of smoking driven by nicotine addiction, today announced results for the third quarter-ended September 30, 2025, and provided an update on recent business highlights.
“The third quarter represents the launch point for a full pivot to a branded products strategy that will drive our future. Multiple brands of our VLN*^®^* products are now available for purchase, our store count is increasing every month, and we are securing new distribution agreements to expand our reach.
“As the leader in the Tobacco Harm Reduction Movement, we believe that all tobacco companies should complement their full nicotine products with a set of low nicotine products within their brand families. Our technology roadmap makes this possible, with short time to market and at any scale required, through both Partner VLN*^®^* and licensing capabilities, allowing every tobacco company to become fully aligned with the FDA’s Low Nicotine Mandate instead of resisting. By doing so, tobacco companies can for the first time truly deliver on their claims of supporting tobacco harm reduction efforts. As important, smoking consumers can access a new way to change in their smoking habit with a form factor that they are accustomed to, the combustible cigarette, but without the highly addictive nicotine that drives addiction,” said Larry Firestone, CEO of 22nd Century Group.
“Additionally, we are now in the best financial position of the past two years and have begun the growth phase of our company. With the $9.5 million settlement of our prior insurance claims from the Grass Valley facility fire in 2022 and a debt free balance sheet, we now have a well-funded cash position on which to build the market, both directly and in partnership with our growing list of brand partners adopting VLN*^®^* based products. We have recently announced further expansion of both state authorizations and store counts across our VLN*^®^* based products, with stocking orders underway now to support our continued expansion.”
“We are also exploring other ways to bring VLN*^®^* based products to the forefront of the industry and make low nicotine a fundamental part of the fabric of the tobacco industry.”
ThirdQuarter 2025 Financial Results (compared to Second Quarter 2025, except as noted)
All figures reported below reflect continuing operations, excluding discontinued operations related to the sale and exit of the Company’s hemp/cannabis business in late 2023, except as noted.
| ● | Net<br> revenues decreased slightly to $4.0 million from $4.1 million. |
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| ● | Gross<br> profit (loss) was $(1.1) million, compared to $(0.6) million. |
| ● | Operating<br> expenses were $2.2 million, decreased from $2.3 million. |
| ● | Operating<br> loss increased to $3.2 million, compared to $3.0 million. |
| ● | Consolidated<br> net income increased to $5.5 million, compared to net loss of $3.4 million, reflecting the<br> $9.5 million insurance settlement in discontinued operations. |
| ● | Adjusted<br> EBITDA loss was $2.9 million, compared to a loss of $2.6 million. |
| ● | Ended<br> the third quarter 2025 with cash of $4.8 million. |
RecentBusiness Highlights
| ● | Strong<br> balance sheet improvement, ending third quarter 2025 with no outstanding debt and an additional<br> $9.5 million in cash received in November 2025 from the insurance settlement. |
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| ● | Expanded<br> market access to both VLN^®^ and Partner VLN^®^ brand launches,<br> new natural style cigarette products and increased state authorizations as part of the relaunch<br> of the Company’s branded products. State authorizations now include: |
| ○ | 22nd<br> Century VLN^®^ – 45 States |
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| ○ | Smoker<br> Friendly VLN^®^ – 38 States |
| ○ | Pinnacle^®^<br> VLN^®^ – 38 States |
| ○ | Smoker<br> Friendly – 46 States |
| ○ | Pinnacle^®^<br> – 43 States |
| ● | Delivered<br> first shipments of Pinnacle^®^ VLN^®^ products to top-5 convenience<br> store chain stores across 12 states; began store rollout to approximately 1,000 initial stores<br> as part of a staged launch initiative. |
| --- | --- |
| ● | Continued<br> to advance negotiations with new customers to expand VLN^®^distribution and<br> launch additional VLN^®^ partner brands, further diversifying the reduced nicotine<br> content product category. |
| ● | Implemented<br> margin expansion, cost savings and efficiency initiatives of our manufacturing operations<br> to align from the historically low margin CMO volume to our higher margin branded products,<br> including VLN^®^ and Partner VLN^®^. |
| ● | Advanced<br> plans for 100mm format VLN^®^ cigarettes, plus international combustible products<br> tailored to consumer preferences in those markets, as well as additional filtered cigar products. |
ThirdQuarter 2025 Product Line Net Revenues
| ● | Cigarette<br> net revenues were $2.5 million, from $2.7 million in the third quarter of 2025, reflecting<br> an increase in certain customer pricing incentives, offset by increased CMO volumes. Additional<br> expansion of new natural style cigarette products launched in 2025 will continue to accelerate<br> revenue and margin growth in this category. |
|---|---|
| ● | Filtered<br> cigar net revenues were stable at $1.3 million, reflecting ongoing volume from remaining<br> CMO customers. |
| ● | Cigarillo<br> distribution net revenues were negligible and reflect the time necessary for initial stocking<br> orders to be sold through our distributors before additional reorders are fulfilled in later<br> 2025. |
| ● | VLN^®^<br> cigarette net revenues were $0.2 million, reflecting initial stocking order activity of partner<br> VLN^®^ products, offset by customer returns and product exchanges to the new<br> VLN^®^ branding. Additional partner brand agreements are in progress as part<br> of a relaunch of its VLN^®^ reduced nicotine content products. |
BalanceSheet
| ● | The<br> Company reported zero long-term debt at quarter end, having extinguished the remaining $3.9<br> million of its senior secured debt in full. |
|---|---|
| ● | Cash<br> and equivalents were $4.8 million at quarter end. |
| ● | Subsequent<br> to the quarter end, the Company received $9.5 million in insurance proceeds due from the<br> previously announced settlement of its Grass Valley Fire claim. |
ConferenceCall
22nd Century will host a live webcast today at 8:00 a.m. E.T. to discuss its third quarter 2025 financial results and business highlights. The live and archived webcast will be accessible in the Events section on 22nd Century’s Investor Relations website at https://ir.xxiicentury.com/events.
SummaryFinancial Results
(dollars in thousands, except per share data)
| Three Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | Change | ||||||||||
| 2025 | 2024 | % | |||||||||
| Revenues, net | $ | 4,011 | $ | 5,946 | ) | (32.5 | ) | ||||
| Gross loss | $ | (1,059 | ) | $ | (588 | ) | ) | 80.1 | |||
| Operating loss | $ | (3,212 | ) | $ | (3,377 | ) | (4.9 | ) | |||
| Net loss from continuing operations | $ | (3,763 | ) | $ | (3,585 | ) | ) | 5.0 | |||
| Basic and diluted loss per common share from continuing operations | $ | (1.06 | ) | $ | (848.84 | ) | (99.9 | ) | |||
| Adjusted EBITDA (a) | $ | (2,885 | ) | $ | (3,178 | ) | 9.2 |
All values are in US Dollars.
| Nine Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | Change | ||||||||||
| 2025 | 2024 | % | |||||||||
| Revenues, net | $ | 14,050 | $ | 20,361 | ) | (31.0 | ) | ||||
| Gross loss | $ | (2,303 | ) | $ | (1,147 | ) | ) | 100.8 | |||
| Operating loss | $ | (8,763 | ) | $ | (9,858 | ) | (11.1 | ) | |||
| Net loss from continuing operations | $ | (10,333 | ) | $ | (11,248 | ) | (8.1 | ) | |||
| Basic and diluted loss per common share from continuing operations | $ | (7.94 | ) | $ | (4,297.69 | ) | (99.8 | ) | |||
| Adjusted EBITDA (a) | $ | (7,845 | ) | $ | (9,247 | ) | 15.2 |
All values are in US Dollars.
(a) Adjusted EBITDA is a non-GAAP financial measure. Please see “Notes Regarding Non-GAAP Financial Information” for additional information regarding our use of non-GAAP financial measures. Refer to Tables A at the end of this release for reconciliations of adjusted amounts to the closest corresponding GAAP financial measures.
SummaryProduct Line Results
(in thousands)
| Three Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | |||||||||||
| 2025 | 2024 | Change | |||||||||
| Cartons | Cartons | Cartons | |||||||||
| Contract Manufacturing | |||||||||||
| Cigarettes | 345 | 156 | ) | 189 | |||||||
| Filtered Cigars | 168 | 253 | ) | (85 | ) | ||||||
| Cigarillos | - | 30 | ) | (30 | ) | ||||||
| Total Contract Manufacturing | 513 | 439 | ) | 74 | |||||||
| VLN® | 4 | - | 4 | ||||||||
| Total Product Line Revenues | 517 | 439 | ) | 78 |
All values are in US Dollars.
| Nine Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | |||||||||||
| 2025 | 2024 | Change | |||||||||
| Cartons | Cartons | Cartons | |||||||||
| Contract Manufacturing | |||||||||||
| Cigarettes | 1,370 | 416 | ) | 954 | |||||||
| Filtered Cigars | 498 | 1,249 | ) | (751 | ) | ||||||
| Cigarillos | 14 | 120 | ) | (106 | ) | ||||||
| Total Contract Manufacturing | 1,882 | 1,785 | ) | 97 | |||||||
| VLN® | 1 | 1 | ) | 0 | |||||||
| Total Product Line Revenues | 1,883 | 1,786 | ) | 97 |
All values are in US Dollars.
About22nd Century Group, Inc.
22nd Century Group is pioneering the tobacco harm reduction movement by enabling smokers to take control of their nicotine consumption.
OurTechnology is Tobacco
Our proprietary non-GMO reduced nicotine tobacco plants were developed using our patented technologies that regulate alkaloid biosynthesis activities resulting in a tobacco plant that contains 95% less nicotine than traditional tobacco plants. Our extensive patent portfolio has been developed to ensure that our high-quality tobacco can be grown commercially at scale. We continue to develop our intellectual property to ensure our ongoing leadership in the tobacco harm reduction movement.
OurProducts
We created our flagship product, the VLN^®^ cigarette using our low nicotine tobacco, to give traditional cigarette smokers an authentic and familiar alternative in the form of a combustible cigarette that helps them take control of their nicotine consumption. VLN^®^ cigarettes have 95% less nicotine compared to traditional cigarettes and have been proven to allow consumers to greatly reduce their nicotine consumption.
VLN^®^ and Helps You Smoke Less^®^ are registered trademarks of 22nd Century Limited LLC.
Learn more at xxiicentury.com, on X (formerly Twitter), on LinkedIn, and on YouTube.
Learn more about VLN^®^ at tryvln.com.
CautionaryNote 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) our cost reduction initiatives, (ii) our expectations regarding regulatory enforcement, including our ability to receive an exemption from new regulations, and (iii) our financial and operating performance. 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 20, 2025 and Quarterly Reports on Form 10-Q on May 13, 2025, August 14, 2025, and November 4, 2025. All information provided in this 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.
Notesregarding Non-GAAP Financial Information
In addition to the Company’s reported results in accordance with generally accepted accounting principles in the United States of America (“GAAP”), the Company provides EBITDA and Adjusted EBITDA.
In order to calculate EBITDA, the Company adjusts net (loss) income by adding back interest expense (income), provision (benefit) for income taxes, and depreciation and amortization expense. Adjusted EBITDA consists of EBITDA adjusted by the Company for certain non-cash and/or non-operating expenses, including adding back equity-based employee compensation expense, restructuring and restructuring-related charges such as impairment, acquisition and transaction costs, and other unusual or infrequently occurring items, if applicable, such as inventory reserves and adjustments, gains or losses on disposal of property, plant and equipment, and gains or losses on investments.
The Company believes that the presentation of EBITDA and Adjusted EBITDA are important financial measures that supplement discussion and analysis of its financial condition and results of operations and enhances an understanding of its operating performance. While management considers EBITDA and Adjusted EBITDA to be important, these financial performance measures should be considered in addition to, but not as a substitute for or superior to, other measures of financial performance prepared in accordance with GAAP, such as operating (loss) income, net (loss) income and cash flows from operations. Adjusted EBITDA is susceptible to varying calculations and the Company’s measurement of Adjusted EBITDA may not be comparable to those of other companies.
InvestorRelations & Media Contact
Matt Kreps
Investor Relations
22nd Century Group
investorrelations@xxiicentury.com
214-597-8200
22ndCENTURY GROUP, INC.
CONDENSEDCONSOLIDATED BALANCE SHEETS
(Unaudited)
(amountsin thousands, except share and per-share data)
| December 31, 2024 | |||||
|---|---|---|---|---|---|
| ASSETS | |||||
| Current assets: | |||||
| Cash and cash equivalents | 4,846 | $ | 4,422 | ||
| Accounts receivable, net | 2,993 | 1,698 | |||
| Inventories | 2,906 | 2,015 | |||
| Insurance recoveries | 9,500 | 768 | |||
| GVB promissory note, net | — | 500 | |||
| Prepaid expenses and other current assets | 2,678 | 1,068 | |||
| Current assets of discontinued operations held for sale | — | 1,051 | |||
| Total current assets | 22,923 | 11,522 | |||
| Property, plant and equipment, net | 2,452 | 2,773 | |||
| Operating lease right-of-use assets, net | 767 | 1,639 | |||
| Intangible assets, net | 6,210 | 5,724 | |||
| Other assets | 15 | 15 | |||
| Total assets | 32,367 | $ | 21,673 | ||
| LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY | |||||
| Current liabilities: | |||||
| Notes and loans payable - current | 368 | $ | 254 | ||
| Current portion of long-term debt | — | 1,500 | |||
| Operating lease obligations | 163 | 261 | |||
| Accounts payable | 2,598 | 2,401 | |||
| Accrued expenses | 2,234 | 1,021 | |||
| Accrued litigation | — | 768 | |||
| Accrued payroll | 140 | 318 | |||
| Accrued excise taxes and fees | 3,399 | 2,038 | |||
| Deferred income | 79 | 20 | |||
| Other current liabilities | 1,231 | 100 | |||
| Current liabilities of discontinued operations held for sale | 333 | 1,281 | |||
| Total current liabilities | 10,545 | 9,962 | |||
| Long-term liabilities: | |||||
| Operating lease obligations | 644 | 1,437 | |||
| Long-term debt | — | 5,165 | |||
| Other long-term liabilities | 74 | 1,097 | |||
| Total liabilities | 11,263 | 17,661 | |||
| Mezzanine equity: | |||||
| Series A convertible preferred<br> shares, 0.00001 par value; 9,650 shares issued and outstanding at September 30, 2025 and 0 at December 31, 2024, respectively | 2,734 | — | |||
| Total mezzanine equity | 2,734 | — | |||
| Shareholders' equity: | |||||
| Common stock, .00001 par value, 500,000,000 shares authorized, 6,987,290 shares issued and outstanding at September 30, 2025 and 31,727 at December 31, 2024, respectively | |||||
| Common stock, par value | — | — | |||
| Capital in excess of par value | 414,487 | 397,883 | |||
| Accumulated deficit | (396,117 | ) | (393,871 | ) | |
| Total shareholders’ equity | 18,370 | 4,012 | |||
| Total liabilities, mezzanine equity and shareholders’ equity | 32,367 | $ | 21,673 |
All values are in US Dollars.
22ndCENTURY GROUP, INC.
CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(amountsin thousands, except share and per-share data)
| Three Months Ended | Nine Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | September 30, | |||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||
| Revenues, net | $ | 4,011 | $ | 5,946 | $ | 14,050 | $ | 20,361 | ||||
| Cost of goods sold | 2,557 | 3,102 | 8,304 | 11,184 | ||||||||
| Excise taxes and fees on products | 2,513 | 3,432 | 8,049 | 10,324 | ||||||||
| Gross loss | (1,059 | ) | (588 | ) | (2,303 | ) | (1,147 | ) | ||||
| Operating expenses: | ||||||||||||
| Sales, general and administrative | 1,849 | 2,547 | 5,766 | 7,814 | ||||||||
| Research and development | 193 | 240 | 583 | 915 | ||||||||
| Other operating expense (income), net | 111 | 2 | 111 | (18 | ) | |||||||
| Total operating expenses | 2,153 | 2,789 | 6,460 | 8,711 | ||||||||
| Operating loss from continuing operations | (3,212 | ) | (3,377 | ) | (8,763 | ) | (9,858 | ) | ||||
| Other income (expense): | ||||||||||||
| Other income (expense), net | (33 | ) | 100 | (207 | ) | 439 | ||||||
| Interest income, net | 16 | 3 | 46 | 26 | ||||||||
| Interest expense | (534 | ) | (311 | ) | (1,443 | ) | (1,828 | ) | ||||
| Total other income (expense), net | (551 | ) | (208 | ) | (1,604 | ) | (1,363 | ) | ||||
| Loss from continuing operations before income taxes | (3,763 | ) | (3,585 | ) | (10,367 | ) | (11,221 | ) | ||||
| (Benefit) provision for income taxes | — | — | (34 | ) | 27 | |||||||
| Net loss from continuing operations | $ | (3,763 | ) | $ | (3,585 | ) | $ | (10,333 | ) | $ | (11,248 | ) |
| Discontinued operations: | ||||||||||||
| Income (loss) from discontinued operations before income taxes | $ | 9,252 | $ | (172 | ) | $ | 8,087 | $ | 640 | |||
| Provision for income taxes | — | — | — | — | ||||||||
| Income (loss) from discontinued operations | $ | 9,252 | $ | (172 | ) | $ | 8,087 | $ | 640 | |||
| Net income (loss) | $ | 5,489 | $ | (3,757 | ) | $ | (2,246 | ) | $ | (10,608 | ) | |
| Comprehensive income (loss) | $ | 5,489 | $ | (3,757 | ) | $ | (2,246 | ) | $ | (10,608 | ) | |
| Net income (loss) | $ | 5,489 | $ | (3,757 | ) | $ | (2,246 | ) | $ | (10,608 | ) | |
| Deemed dividends | — | (3,677 | ) | — | (7,711 | ) | ||||||
| Net income (loss) available to common shareholders | $ | 5,489 | $ | (7,434 | ) | $ | (2,246 | ) | $ | (18,319 | ) | |
| Basic income (loss) per share: | ||||||||||||
| Basic loss per common share from continuing operations | $ | (1.06 | ) | $ | (848.84 | ) | $ | (7.94 | ) | $ | (4,297.69 | ) |
| Basic income (loss) per common share from discontinued operations | $ | 2.61 | $ | (40.77 | ) | $ | 6.21 | $ | 244.44 | |||
| Basic loss per common share from deemed dividends | $ | — | $ | (870.65 | ) | $ | — | $ | (2,946.25 | ) | ||
| Basic income (loss) per common share | $ | 1.55 | $ | (1,760.26 | ) | $ | (1.73 | ) | $ | (6,999.50 | ) | |
| Diluted income (loss) per share: | ||||||||||||
| Diluted loss per common share from continuing operations | $ | (1.06 | ) | $ | (848.84 | ) | $ | (7.94 | ) | $ | (4,297.69 | ) |
| Diluted income (loss) per common share from discontinued operations | $ | 0.78 | $ | (40.77 | ) | $ | 1.99 | $ | 137.00 | |||
| Diluted loss per common share from deemed dividends | $ | — | $ | (870.65 | ) | $ | — | $ | (2,946.25 | ) | ||
| Diluted income (loss) per common share | $ | (0.28 | ) | $ | (1,760.26 | ) | $ | (5.95 | ) | $ | (7,106.94 | ) |
| Weighted average shares outstanding: | ||||||||||||
| Basic | 3,541,337 | 4,223 | 1,301,656 | 2,617 | ||||||||
| Diluted | 11,888,488 | 7,182 | 4,070,266 | 4,670 |
TableA – Reconciliations of Non-GAAP Measures
(dollars in thousands, except share and per-share data)
Below is a table containing information relating to the Company’s Net loss, EBITDA and Adjusted EBITDA for the three and nine months ended September 30, 2025 and 2024, including a reconciliation of these Non-GAAP measures for such periods.
| Quarter Ended | |||||||
|---|---|---|---|---|---|---|---|
| September 30, | |||||||
| Amounts in thousands (000’s) | |||||||
| except share and per share data | |||||||
| (UNAUDITED) | |||||||
| Change | |||||||
| 2025 | 2024 | fav / (unfav)1 | |||||
| Net loss from continuing operations | ) | $ | (3,585 | ) | ) | ||
| Interest (income)/expense, net | 308 | ||||||
| Provision (benefit) for income taxes | — | ||||||
| Amortization and depreciation | 249 | ) | |||||
| EBITDA | ) | $ | (3,028 | ) | |||
| Adjustments: | |||||||
| Restructuring and impairment | (23 | ) | |||||
| Inventory write-down | — | ||||||
| Change in fair value of derivative liabilities | (23 | ) | |||||
| Change in fair value of warrant liabilities | (100 | ) | |||||
| Equity-based employee compensation expense | (4 | ) | |||||
| Adjusted EBITDA | ) | $ | (3,178 | ) | |||
| Adjusted EBITDA loss per common share | ) | $ | (752.58 | ) | |||
| Weighted average common shares outstanding - basic and diluted | 4,223 |
All values are in US Dollars.
| Year Ended | |||||||
|---|---|---|---|---|---|---|---|
| September 30, | |||||||
| Amounts in thousands (000’s) | |||||||
| except share and per share data | |||||||
| (UNAUDITED) | |||||||
| Change | |||||||
| 2025 | 2024 | fav / (unfav)1 | |||||
| Net loss from continuing operations | ) | $ | (11,248 | ) | |||
| Interest (income)/expense, net | 1,802 | ) | |||||
| Provision (benefit) for income taxes | ) | 27 | ) | ||||
| Amortization and depreciation | 762 | ) | |||||
| EBITDA | ) | $ | (8,657 | ) | |||
| Adjustments: | |||||||
| Restructuring and impairment | (348 | ) | |||||
| Inventory write-down | 431 | ) | |||||
| Change in fair value of derivative liabilities | (482 | ) | |||||
| Change in fair value of warrant liabilities | (424 | ) | |||||
| Equity-based employee compensation expense | 233 | ) | |||||
| Adjusted EBITDA | ) | $ | (9,247 | ) | |||
| Adjusted EBITDA loss per common share | ) | $ | (3,533.20 | ) | |||
| Weighted average common shares outstanding - basic and diluted | 2,617 |
All values are in US Dollars.
^1^Fav = Favorable variance, which increases EBITDA and Adjusted EBITDA; Unfav = unfavorable variance, which reduces EBITDA and Adjusted EBITDA