AGREEMENT

 

This Agreement is made as of January 24, 2012, by and between 22nd Century
Group, Inc., a Nevada corporation (“22nd Century”), and Foley & Lardner LLP, a
Wisconsin limited liability partnership (“Foley”).

 

WHEREAS, Foley has performed and continues to perform legal work on behalf of
22nd Century for which 22nd Century owes Foley an aggregate amount of accounts
receivable and work in progress equal to approximately Two Hundred Fifty Nine
Thousand Seven Hundred Fifty Four Dollars ($259,754.00) as of January 19, 2012,
as reflected on the summary of the historical invoices and the summary work in
progress report attached hereto (collectively, the “Debt”), which Debt does not
include the additional indebtedness owed by 22nd Century to Foley as evidenced
by an outstanding Promissory Note, dated March 30, 2011, as previously issued by
22nd Century to Foley in the principal amount of Three Hundred Fifty Thousand
Dollars ($350,000.00);

 

WHEREAS, Foley and 22nd Century mutually desire to resolve such Debt prior to
the fiscal year end of Foley on January 31, 2012; and

 

WHEREAS, Foley is willing to accept from 22nd Century, and 22nd Century is
willing to pay to Foley, a combination of cash and shares of common stock of
22nd Century as further described in this Agreement in order to resolve the
Debt.

 

NOW, THEREFORE, in consideration for the mutual premises set forth herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto intending to be legally bound do
hereby agree as follows:

 

1. 22nd Century hereby agrees to pay to Foley, and Foley hereby agrees to accept
from 22nd Century, the following amounts at the following times in consideration
for the extinguishment of the Debt: (i) Fifty Thousand Dollars ($50,000.00) in
cash by wire transfer of immediately available funds from 22nd Century to Foley
on the next business day immediately following the date of execution of this
Agreement by 22nd Century and Foley, and (ii) One Million (1,000,000) shares
(the “Shares”) of common stock, par value $0.00001 per share (the “Common
Stock”), of 22nd Century to be privately issued by 22nd Century to Foley, with
the physical delivery of the stock certificates evidencing the Shares issued in
the name of Foley & Lardner LLP to be made to Foley within five (5) business
days immediately following the date of execution of this Agreement by 22nd
Century and Foley, and with such delivery to be made by overnight delivery
service from the stock transfer agent of 22nd Century to the following person
and address on behalf of Foley: Stephen A. Bent, Esq., Foley & Lardner LLP, 3000
K Street, N.W., Sixth floor, Washington, D.C. 20007 (phone: 202-672-5404). 22nd
Century and Foley mutually understand and agree that the total number and market
value of the Shares and such cash amount are greater than the total amount of
the Debt for many reasons, including but not limited to the following: (i) Foley
is being induced by 22nd Century to accept the Shares under the terms of this
Agreement in lieu of greater cash amount for payment of the Debt in order to
help the Company conserve its cash for its operating needs, (ii) the Shares will
be “restricted securities” under the securities laws because the Shares are
being privately issued by 22nd Century to Foley, (iii) the Shares will not be
able to be sold by Foley until either the expiration of the holding period under
Rule 144 as promulgated under the Securities Act of 1933 or the registration of
the resale of the Shares as provided in Section 3 of this Agreement, (iv) the
public trading market of the Shares is limited, and (v) 22nd Century is issuing
the Shares to Foley, and Foley is accepting the Shares from 22nd Century, at a
price per share equal to approximately the average of the closing sale price per
share of the Common Stock on the over-the-counter market for the ten (10)
trading days prior to the date of this Agreement, (equating to $381,000 per
Nasdaq.com).

 

 

 

 

2. Foley hereby agrees that, upon the actual receipt by Foley from 22nd Century
of the cash and Shares described in Section 1 of this Agreement, Foley shall
consider the Debt to be fully paid, and any excess value of the Shares that is
greater than the Debt will be a credit against which Foley bills its future
legal services until the earlier of either (i) the exhaustion of such credit
amount or (ii) 22nd Century’s closing upon a licensing transaction, acquisition
transaction, and/or capital raising transaction that provides 22nd Century with
cash, in which event 22nd Century shall recommence paying its legal fees to
Foley in cash. Nothing in this Agreement shall affect the ongoing obligation of
22nd Century to continue to pay Foley in cash for out-of-pocket costs, filing
fees, and reimbursable expenses.  

3. The Shares to be issued by 22nd Century to Foley under this Agreement shall
have “piggy-back” registration rights. 22nd Century hereby agrees to include the
Shares in the first registration statement filed by 22nd Century with the U.S.
Securities Exchange Commission (“SEC”) after the date of this Agreement and to
cause such registration statement to be declared effective by the SEC as
promptly as practicable thereafter, with 22nd Century to be solely liable for
all costs relating thereto. 

 

4. 22nd Century has been advised by Foley to seek review of this Agreement by
separate legal counsel. 22nd Century hereby waives any conflict of interest and
any other claims against Foley with respect to the resolution of the issues
covered by this Agreement, since Foley is one of the current and continuing
legal counsels of 22nd Century.

 

5. Each party represents and warrants that it has obtained all necessary
approvals and consents to enter into this Agreement and that the terms of this
Agreement do not violate any other agreement to which such party is bound or
obligated.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above. 

 

22nd Century Group, Inc. 22nd Century Group, Inc.     /s/ Joseph Pandolfino /s/
Henry Sicignano III Joseph Pandolfino Henry Sicignano III Chief Executive
Officer President

 

 

Foley & Lardner LLP

 

/s/ Stephen A. Bent

Stephen A. Bent

Partner