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EXECUTION VERSION MEMBERSHIP INTEREST PURCHASE AGREEMENT by and among CRONOS GROUP INC., REDWOOD HOLDING GROUP, LLC and, solely for purposes of Article 4, Section 6.6, Section 6.7(a), Section 7.2(a)(ii), Section 7.2(c)(i

Thursday, August 1, 2019 11 min read
Key Takeaway: MEMBERSHIP INTEREST PURCHASE AGREEMENT REDWOOD HOLDING GROUP, LLC solely for purposes of Article 4, Section 6.6, Section 6.7(a), Section 7.2(a)(ii), Section 7.2(c)(ii), Section 9.2, Article 10 and Exhibit A, the KEY PERSONS (as hereinafter defined) Dated as of August 1, 201

Full Press Release Details

MEMBERSHIP INTEREST PURCHASE AGREEMENT
REDWOOD HOLDING GROUP, LLC
solely for purposes of
Article 4, Section 6.6, Section 6.7(a), Section 7.2(a)(ii), Section 7.2(c)(ii),
Section 9.2, Article 10 and Exhibit A,
the KEY PERSONS (as hereinafter defined)
Dated as of August 1, 2019
Page
ARTICLE 1 PURCHASE AND SALE 4
Section 1.1 Purchase 4
Section 1.2 Purchase Price 4
Section 1.3 Closing 6
Section 1.4 Deliveries by Seller 6
Section 1.5 Deliveries by Buyer 7
Section 1.6 Deliveries of Stock Consideration 8
Section 1.7 Payment Obligations 8
Section 1.8 Forfeited Bonus Payment 10
Section 1.9 Withholding 10
ARTICLE 2 PURCHASE PRICE ADJUSTMENT 11
Section 2.1 Post-Closing Determination 11
Section 2.2 Post-Closing Adjustment of the Estimated Cash Consideration 13
Section 2.3 Escrow 14
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER 16
Section 3.1 Organization and Qualification 16
Section 3.2 Authorization 16
Section 3.3 Binding Effect 17
Section 3.4 Regulatory Approvals 17
Section 3.5 Non-Contravention 17
Section 3.6 Capitalization 18
Section 3.7 Financial Statements; Controls 19
Section 3.8 No Undisclosed Liabilities 19
Section 3.9 Absence of Certain Changes or Events 20
Section 3.10 Properties 20
Section 3.11 Intellectual Property 20
Section 3.12 Employee Benefits 23
Section 3.13 Employment Matters 24
Section 3.14 Material Contracts 24
Section 3.15 NR Termination; IP License Termination Agreement; Contribution and Waiver Agreement; Laurel Canyon Services Termination Agreement 26
Section 3.16 Customers and Suppliers 28
Section 3.17 Real Property 28
Section 3.18 Taxes 29
Section 3.19 Insurance 30
Section 3.20 Compliance with Law; Licenses 31
Section 3.21 Litigation 31
Section 3.22 FDA Compliance 32
Section 3.23 Controlled Substances Compliance 33
Section 3.24 Environmental Matters 34
Section 3.25 Anti-Corruption Matters; Anti-Money Laundering 34
Section 3.26 Related Party Transactions 35
Section 3.27 Brokers Fees 35
Section 3.28 Securities Law Matters 35
Section 3.29 Solvency and Existence 36
Section 3.30 No Other Representations 36
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE KEY PERSONS 37
Section 4.1 Authorization 37
Section 4.2 Binding Effect 37
Section 4.3 Interests in the Business 37
Section 4.4 No Other Representations 37
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER 38
Section 5.1 Organization and Qualification 38
Section 5.2 Corporate Authorization 38
Section 5.3 Binding Effect 38
Section 5.4 Capitalization 39
Section 5.5 Regulatory Approvals and Third-Party Consents 39
Section 5.6 Non-Contravention 40
Section 5.7 Actions 40
Section 5.8 Financial Capability 40
Section 5.9 Compliance with Laws 40
Section 5.10 Stock Consideration 41
Section 5.11 Investment Representations 41
Section 5.12 Securities Law Matters 42
Section 5.13 Financial Statements 42
Section 5.14 Solvency 42
Section 5.15 No Rejected Opportunities 43
Section 5.16 Brokers Fees 43
Section 5.17 No Other Representations 43
ARTICLE 6 COVENANTS 43
Section 6.1 Pre-Closing Access and Reports 43
Section 6.2 Efforts to Consummate; Certain Governmental Matters 44
Section 6.3 Third-Party Consents 45
Section 6.4 Securities Law Covenants 46
Section 6.5 Interim Operating Covenants of Seller 49
Section 6.6 Interim Operating Covenants of the Key Persons 52
Section 6.7 Public Disclosure; Bid Confidentiality Agreements; Confidentiality 52
Section 6.8 Exclusive Dealing 54
Section 6.9 Release 54
Section 6.10 Access to Records After Closing 54
Section 6.11 Directors and Officers Indemnification and Exculpation; Resignations 56
Section 6.12 Employment Matters 57
Section 6.13 Tax Matters 58
Section 6.14 Restricted Names 62
Section 6.15 Intercompany Arrangements 62
Section 6.16 Non-Dissolution 62
Section 6.17 Non-Compete; Non-Solicitation; Non-Disparagement 63
Section 6.18 Transfer of Contracts 64
Section 6.19 Further Assurances 64
Section 6.20 RWI Policy 64
Section 6.21 Social Media Account Transfer 64
Section 6.22 Transition Planning 64
ARTICLE 7 CONDITIONS TO CLOSING 65
Section 7.1 Conditions to Mutual Obligations 65
Section 7.2 Conditions to Obligations of Buyer 65
Section 7.3 Conditions to Obligations of Seller 67
ARTICLE 8 INDEMNIFICATION 68
Section 8.1 Survival 68
Section 8.2 Indemnification by Seller 69
Section 8.3 Indemnification by Buyer 69
Section 8.4 Limitations 70
Section 8.5 Direct Claim Indemnification Procedures 72
Section 8.6 Third-Party Claim Procedures 72
Section 8.7 Characterization of Indemnification Payments 74
Section 8.8 Adjustment to Losses 74
Section 8.9 Payments 75
Section 8.10 Exclusive Remedy 75
ARTICLE 9 TERMINATION 76
Section 9.1 Termination 76
Section 9.2 Effect of Termination 77
ARTICLE 10 MISCELLANEOUS 77
Section 10.1 Specific Performance 77
Section 10.2 Notices 78
Section 10.3 Entire Agreement 80
Section 10.4 Amendment; Waiver 81
Section 10.5 No Assignment or Benefit to Third Parties 81
Section 10.6 Expenses 81
Section 10.7 Disclosure Schedules 81
Section 10.8 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial 82
Section 10.9 Interpretation 83
Section 10.10 Counterparts 85
Section 10.11 Severability 85
Section 10.12 Non-Recourse 85
Section 10.13 Legal Representation 86
EXHIBITS AND SCHEDULES
Exhibit A Definitions
Exhibit B-1 NR Termination Agreement
Exhibit B-2 IP License Termination Agreement
Exhibit C Contribution and Waiver Agreement
Exhibit D-1 RR Employment Agreement
Exhibit D-2 CC Employment Agreement
Exhibit D-3 MM Employment Agreement
Exhibit D-4 RW Employment Agreement
Exhibit E-1 RR Restrictive Agreement
Exhibit E-2 CC Restrictive Agreement
Exhibit E-3 MM Restrictive Agreement
Exhibit E-4 RW Restrictive Agreement
Exhibit F Lockup Agreement
Exhibit G Laurel Canyon Services Termination Agreement
Exhibit H Escrow Agreement
Exhibit I Form of Press Release
Exhibit J Example Statement of Working Capital
Exhibit K Form of Instrument of Assignment
SCHEDULES
Schedule I Member Schedule
Seller Disclosure Schedule
Buyer Disclosure Schedule
MEMBERSHIP INTEREST PURCHASE AGREEMENT
This MEMBERSHIP INTEREST PURCHASE AGREEMENT (this Agreement ), dated as of August 1, 2019, is entered
into by and among Cronos Group Inc., a corporation formed under the Business Corporations Act (Ontario) ( Buyer ), Redwood Holding Group, LLC, a Delaware limited liability company ( Seller ), and, solely for
purposes of Article 4, Section 6.6, Section 6.7(a), Section 7.2(a)(ii), Section 7.2(c)(ii), Section 7.2(e)(ii), Section 9.2, Article 10 and Exhibit A, the Key Persons (together with Buyer and Seller, the
Parties (it being understood that, for the avoidance of doubt, the Key Persons shall each be a Party solely for such provisions)). Exhibit A contains definitions of certain capitalized terms used in this
W I T N E S S E T H:
WHEREAS, Seller owns all the issued and outstanding (a) units of limited liability company interests of Redwood Wellness,
LLC, a Delaware limited liability company ( Redwood Wellness ), (b) units of limited liability company interests of Redwood IP Holding, LLC, a Delaware limited liability company ( Redwood IP ),
(c) membership interests of Redwood Retail, LLC, a California limited liability company ( Redwood Retail ), and (d) membership interests of Redwood Operations CA, LLC, a California limited liability company
( Redwood Operations and, together with Redwood Wellness, Redwood IP and Redwood Retail, the Acquired Companies , and the units of limited liability company interests and membership interests
referred to in the foregoing clauses (a) through (d), collectively, the Acquired Company Interests );
WHEREAS, on the terms and subject to the conditions set forth in this Agreement, as a result of the transactions contemplated
by this Agreement, each of the Key Persons will receive direct and substantial economic benefit in exchange for the sale, assignment, transfer, conveyance and delivery of all of their respective indirect ownership interests in the Acquired Companies
WHEREAS, on the terms and subject to the conditions set forth in this Agreement, Seller desires to
sell, assign, transfer, convey and deliver to Zeus Cannabinoids LLC, a Delaware limited liability company and Wholly Owned Subsidiary of Buyer ( Cronos Acquisitions ), and Buyer desires to cause Cronos Acquisitions to purchase,
acquire, accept and receive from Seller, the Acquired Company Interests, free and clear of any Liens;
the execution and delivery of this Agreement, and as a material inducement to Buyer s willingness to enter into this Agreement, Seller has, and has caused its Affiliates to, (a) terminate all Contracts between or among Seller and/or any
one or more of its Affiliates, on the one hand, and Conscious Confections, LLC, a Colorado limited liability company, Conscious Confections II, LLC, a Colorado limited liability company, NR Parentco, LLC, a Colorado limited liability
company (collectively, NR ) and/or any one or more of their respective Affiliates, on the other hand, other than the NDAs, and (b) take all actions as may be necessary to satisfy and extinguish all liabilities or other
obligations under such Contracts, including causing Redwood Design & Supply, LLC, a Delaware limited liability company and Wholly Owned Subsidiary of Seller ( Redwood Design & Supply ) to enter into a
termination and release agreement with NR, dated and effective July 8, 2019 (the NR Termination Agreement ), a true, complete and correct copy of which is set forth in
Exhibit B-1, providing for, among other things, (i) the termination of the NR Agreements, (ii) the extinguishment of all rights, licenses and
obligations of all of the parties to the NR Agreements (other than with respect to certain confidentiality obligations thereunder), (iii) the cessation of use of any Company Owned IP by NR, and (iv) the return of all equipment and the
destruction of all property, products, goods or materials, in whatever form, that include, embody or reference any Company Owned IP by NR (collectively, such termination and actions, including entry into and the performance of the obligations under
the NR Termination Agreement, the NR Termination );
WHEREAS, concurrently with the execution and
delivery of this Agreement, and as a material inducement to Buyer s willingness to enter into this Agreement, Redwood IP and Redwood Design & Supply entered into a termination agreement with respect to the IP License Agreement, made
and entered into as of November 15, 2017, by and between Redwood IP and Redwood Design & Supply, a true, complete and correct copy of which is set forth in Exhibit B-2 (the IP
License Termination Agreement ), dated and effective as of the date hereof;
WHEREAS, prior to the execution and
delivery of this Agreement, and as a material inducement to Buyer s willingness to enter into this Agreement, Seller, Redwood IP, Rosenheck, Capobianco and Rader have entered into a contribution and waiver agreement, a true, complete and
correct copy of which is set forth in Exhibit C, assigning to Redwood IP and waiving Seller s, Rosenheck s, Capobianco s and Rader s respective rights in, as applicable, any Company Intellectual Property that Seller,
Rosenheck, Capobianco or Rader might own or be deemed to own under applicable Law (the Contribution and Waiver Agreement ), dated as of July 31, 2019, and effective as of the date hereof;
WHEREAS, concurrently with the execution and delivery of this Agreement, and as a material inducement to Buyer s
willingness to enter into this Agreement, Rosenheck has entered into an employment agreement with Redwood Wellness, a true, complete and correct copy of which is set forth in Exhibit D-1 (the RR
Employment Agreement ), dated as of the date hereof, but only effective as of the Closing pursuant to its terms;
WHEREAS, concurrently with the execution and delivery of this Agreement, and as a material inducement to Buyer s
willingness to enter into this Agreement, Capobianco has entered into an employment agreement with Redwood Wellness, a true, complete and correct copy of which is set forth in Exhibit D-2 (the CC
Employment Agreement ), dated as of the date hereof, but only effective as of, and conditioned upon the occurrence of, the Closing pursuant to its terms;
WHEREAS, concurrently with the execution and delivery of this Agreement, and as a material inducement to Buyer s
willingness to enter into this Agreement, MM has entered into an employment agreement with Redwood Wellness, a true, complete and correct copy of which is set forth in Exhibit D-3 (the MM
Employment Agreement ), dated as of the date hereof, but only effective as of, and conditioned upon the occurrence of, the Closing pursuant to its terms;
WHEREAS, concurrently with the execution and delivery of this Agreement, and as a material inducement to Buyer s
willingness to enter into this Agreement, RW has entered into an employment agreement with Redwood Wellness, a true, complete and correct copy of which is set forth in Exhibit D-4 (the RW
Employment Agreement and, together with the RR Employment Agreement, CC Employment Agreement and MM Employment Agreement, the Employment
Agreements ), dated as of the date hereof, but only effective as of, and conditioned upon the occurrence of, the Closing pursuant to its terms;
WHEREAS, concurrently with the execution and delivery of this Agreement, and as a material inducement to Buyer s
willingness to enter into this Agreement, Rosenheck has entered into a confidentiality, non-competition and non-solicitation agreement with Buyer, a true, complete and
correct copy of which is set forth in Exhibit E-1, providing for certain restrictive covenants on Rosenheck (the RR Restrictive Agreement ), dated as of the date hereof, but only
effective as of, and conditioned upon the occurrence of, the Closing pursuant to its terms;
WHEREAS, concurrently with
the execution and delivery of this Agreement, and as a material inducement to Buyer s willingness to enter into this Agreement, Capobianco has entered into a confidentiality, non-competition and non-solicitation agreement with Buyer, a true, complete and correct copy of which is set forth in Exhibit E-2, providing for certain restrictive covenants on Capobianco
(the CC Restrictive Agreement ), dated as of the date hereof, but only effective as of, and conditioned upon the occurrence of, the Closing pursuant to its terms;
WHEREAS, concurrently with the execution and delivery of this Agreement, and as a material inducement to Buyer s
willingness to enter into this Agreement, MM has entered into a confidentiality, non-competition and non-solicitation agreement with Buyer, a true, complete and correct
copy of which is set forth in Exhibit E-3, providing for certain restrictive covenants on MM (the MM Restrictive Agreement ), dated as of the date hereof, but only effective as of, and
conditioned upon the occurrence of, the Closing pursuant to its terms;
WHEREAS, concurrently with the execution and
delivery of this Agreement, and as a material inducement to Buyer s willingness to enter into this Agreement, RW has entered into a confidentiality, non-competition and
non-solicitation agreement with Buyer, a true, complete and correct copy of which is set forth in Exhibit E-4, providing for certain restrictive covenants on RW
(the RW Restrictive Agreement and, together with the RR Restrictive Agreement, the CC Restrictive Agreement and the MM Restrictive Agreement, the Restrictive Agreements ), dated as of the date hereof, but only
effective as of, and conditioned upon the occurrence of, the Closing pursuant to its terms;
WHEREAS, concurrently with
the execution and delivery of this Agreement, and as a material inducement to Buyer s willingness to enter into this Agreement, Rosenheck and Capobianco have entered into a lockup agreement, a true, complete and correct copy of which is set
forth in Exhibit F, with respect to the aggregate Member Stock Allocation to be received directly or indirectly by Rosenheck and Capobianco on the terms and subject to the conditions set forth in this Agreement (the Lockup
Agreement ), dated as of the date hereof, but only effective, and conditioned upon the occurrence of, as of the Closing pursuant to its terms;
WHEREAS, concurrently with the execution and delivery of this Agreement, and as a material inducement to Buyer s
willingness to enter into this Agreement, Laurel Canyon Associates, LLC, a California limited liability company ( Laurel Canyon ), and Seller have entered into a termination agreement, a true, complete and correct copy of which is
set forth in Exhibit G, with respect to the Laurel Canyon Services Agreement (the Laurel Canyon Services Termination Agreement and, together with the IP License Termination Agreement, the
Termination Agreements ), dated as of the date hereof, but only effective as of, and conditioned upon the occurrence of, the Closing pursuant to its terms;
WHEREAS, Seller has received (a) from the Required Holders a written consent approving the execution and delivery of this
Agreement, the performance of this Agreement and the Transaction Documents to which Seller and its Affiliates are or will be a party and the consummation of the transactions contemplated hereby and thereby (the Seller Requisite
Consent ) and (b) from the Members representing a majority in interests of the voting Units (as defined in the Seller LLC Agreement) (other than any Member that is, or that has an Affiliate (as defined in the Seller LLC Agreement)
that is, directly or indirectly interested in such transaction) of Seller approving the execution and delivery of this Agreement and the transactions contemplated hereby for purposes of Section 6.7 of the Seller LLC Agreement (the
Affiliate Transaction Consent );
WHEREAS, prior to the date of this Agreement, each of Seller, Redwood
Wellness and Redwood IP has amended its applicable Organizational Documents to provide, among other things, that none of Seller, Redwood Wellness or Redwood IP will be automatically dissolved in accordance with the terms of such Organizational
Documents in effect prior to such amendments in connection with the consummation of the transactions contemplated hereby; and
WHEREAS, the Parties desire to make certain representations, warranties, covenants and agreements in connection with this
Agreement and the transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises
and of the representations, warranties, covenants and agreements set forth in this Agreement, the Parties, intending to be legally bound, agree as follows:
Section 1.1 Purchase. On the terms and subject to the conditions set forth in
this Agreement, at the Closing, Seller shall sell, assign, transfer, convey and deliver to Cronos Acquisitions, and Buyer shall cause Cronos Acquisitions to purchase, acquire, accept and receive from Seller, the Acquired Company Interests, free and
Section 1.2 Purchase Price.
(a) Delivery of Pre-Closing Statement. At least two
Business Days prior to the anticipated Closing Date, Seller shall prepare and deliver to Buyer the Funds Flow Memorandum and a written statement (the Pre-Closing Statement ) that shall
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Last updated: Aug 1, 2019