Document:

AMENDMENT
NO. 1,

    DATED
JANUARY 4, 2011,

    TO
THE

    CONFIDENTIAL
PRIVATE PLACEMENT MEMORANDUM,

    DATED
DECEMBER 16, 2010,

    AND

    SECURITIES
PURCHASE AGREEMENT AND ALL OTHER INVESTMENT DOCUMENTS

    OF

    22ND
CENTURY LIMITED, LLC

    FOR
ACCREDITED INVESTORS AND NON-U.S. PERSONS ONLY

    

    Amendment No. 1, dated as of January 4,
2011 (the “Amendment”), to each of the Confidential Private Placement
Memorandum, dated as of December 16, 2010, the Securities Purchase Agreement,
and all other investment documents (collectively, the “Documents”) previously
provided by 22nd Century Limited, LLC (the “Company”) relating to an investment
in the Units of the Company as described in the Documents.  All
capitalized terms used in this Amendment have the same meanings as given to such
terms in the Documents.  Pursuant to this Amendment, the Documents are
hereby amended as follows:

    1.           All
references contained in the Documents and the exhibits thereto to the
termination of the Offering and/or the Closing being on or before a date in
December 2010, subject to extension as mutually determined by the Company and
Rodman & Renshaw, LLC, as the Placement Agent, to a later date in December
2010, or phrases of similar import are hereby amended to read that the
termination of the Offering and/or the Closing shall be “on or before January
19, 2011, with the Company and the Placement Agent reserving the right to
further extend the termination date of the Offering and/or the Closing without
further notice.”

    2.           The
Securities Purchase Agreement and all other applicable Documents are hereby
amended to include the following new last paragraph, which will make each
Purchaser a party to the Company’s limited liability company operating agreement
for the period of time beginning on the Closing of the Offering and ending on
the closing of the Merger:  “Upon acceptance by the Company of the
investment documents of the Purchaser in the Offering, including but not limited
to the Securities Purchase Agreement, each Purchaser shall become a part to and
be bound by the terms of the Company’s Amended and Restated Limited Liability
Company Agreement dated as of January 1, 2008, as amended through the Closing
Date.”

    This Amendment together with the
Documents constitutes the final investment documents upon which all Purchasers
of the Company’s securities should rely in making their investment
decision.  Except as expressly set forth herein, no other amendments
or modifications are made to the Documents, which shall remain in full force and
effect.

    IN WITNESS WHEREOF, the parties have
executed this Amendment as of the date first set forth above.

    
      
        
          
            	
                    22ND
      CENTURY LIMITED, LLC

                  	
                    Entity Name:

                  	
                                 

                  
	
                    By:

                  	 	
                                

                  	
                    By:

                  	
                                     

                  
	
                    Name:

                  	
                    Name:

                  
	
                    Title:

                  	
                    Title:

                  

          

        

      

    

    
      
         

      

      
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    SECURITIES
PURCHASE AGREEMENT

     

    This
Securities Purchase Agreement (this “Agreement”) is made
and entered into as of January 25, 2011 by and among 22nd Century Limited, LLC,
a Delaware limited liability company (the “Company”), the
purchaser(s) identified on the signature pages hereto (each a “Purchaser” and
collectively, the “Purchasers”), and
22nd Century Group, Inc., a Nevada corporation (the “Parent”), solely for
the purposes of Section E and Section G hereof.

     

    WHEREAS, subject to the terms
and conditions set forth in this Agreement and pursuant to Section 4(2), Section
4(6), and Regulation S of the Securities Act of 1933, as amended (the “Securities Act”), and
Rule 506 of Regulation D promulgated thereunder, the Company desires to offer,
issue and sell to the Purchasers (the “Offering”), and the
Purchasers, severally and not jointly, desire to purchase from the Company, in
the aggregate, not less than 4,000,000 units (the “Minimum Amount”) and
up to 9,000,000 units of the Company, with each “unit” being hereinafter
referred to as a “PPO
Unit” and with each PPO Unit consisting of (i) one (1) limited liability
company membership unit of the Company (with each membership unit being
hereinafter referred to as a “Membership Unit”) and (ii) a
five-year warrant to purchase one-half (1/2) of a Membership Unit at an exercise
price of One Dollar and Fifty Cents ($1.50) per whole Membership Unit (with each
such warrant being hereinafter referred to as a “PPO Warrant”), with the
purchase price of each PPO Unit being One Dollar ($1.00);

     

    WHEREAS, immediately following
the Closing (as defined below) of the Offering, the Company intends to enter
into a business combination with the Parent and a wholly-owned limited liability
company subsidiary of the Parent (the “Merger”) pursuant to
which each PPO Unit shall be exchanged as follows: (i) each Membership Unit
contained in each PPO Unit shall will be exchanged for one (1) share of the
Parent’s common stock, $0.00001 par value per share (each share of the Parent’s
common stock being hereinafter referred to as a share of “Parent Common Stock”
and the shares of Parent Common Stock issued upon exchange of the Membership
Units included in the PPO Units being collectively referred to hereinafter as
the “PPO
Shares”) and (ii) each PPO Warrant contained in each PPO Unit shall be
exchanged for a warrant issued by the Parent to purchase one-half (1/2) of a
share of Parent Common Stock, exercisable for a period of five years, at an
exercise price of One Dollar and Fifty Cents ($1.50) per whole share of Parent
Common Stock containing, among other things, a cashless exercise provision to
become operative upon the later of: (A) one (1) year following the Parent’s
filing of a Form 8-K with respect to the Merger (the “Form 8-K
Anniversary”) if a registration statement pursuant to the Securities Act
with regard to the shares of Parent Common Stock issuable upon exercise of the
PPO Conversion Warrants (as defined below) has not been filed by the Form 8-K
Anniversary and (B) thirty (30) days following the date on which the earlier
filed registration statement with regard to the PPO Shares has been declared
effective by the United States Securities and Exchange Commission (the “SEC”) if a
registration statement pursuant to the Securities Act with regard to the shares
of Parent Common Stock issuable upon exercise of the PPO Conversion Warrants has
not been filed prior to the expiry of such thirty (30) day period, (with each
such warrant to be issued by the Parent in exchange for the PPO Warrants being
hereinafter referred to as a “PPO Conversion
Warrant”); and with each of the PPO Units, the Membership Units, the PPO
Warrants, the PPO Shares, the PPO Conversion Warrants, and the shares of Parent
Common Stock issuable upon exercise of the PPO Conversion Warrants
being hereinafter collectively referred to as the “Securities”;

    
      
         

      

      
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    WHEREAS, in connection with
the Offering, the Company is obligated to compensate the Placement Agent (as
defined below) with an aggregate cash commission equal to eight percent (8%) of
the gross proceeds resulting from the Offering and to issue to the Placement
Agent a warrant to purchase an aggregate number of Membership Units equal to
eight percent (8%) of the aggregate number of PPO Units sold in the Offering,
exercisable for a period of five years, at an exercise price equal to $1.50 per
Membership Unit (the “Placement Agent
Warrant”); and

     

    WHEREAS, in connection with
the Merger, the Placement Agent Warrant shall be exchanged for a warrant to
purchase such number of shares of Parent Common Stock equal to the number of
Membership Units subject to the Placement Agent Warrant, exercisable for a
period of five years, at an exercise price equal to $1.50 per share of Parent
Common Stock (the “Placement Agent Conversion
Warrant”).

     

    NOW, THEREFORE, in consideration
of the mutual covenants and agreements contained in this Agreement, and for
other good and valuable consideration the receipt and adequacy of which is
hereby acknowledged, the Company, the Parent, and each of the Purchasers agree
as follows:

     

    
      	
              A.

            	
              Purchase
      and Sale

            

    

     

    (1)           Subject
to the terms and conditions set forth in this Agreement, at the Closing the
Company shall issue and sell to each Purchaser, and each Purchaser shall,
severally and not jointly, purchase from the Company, the number of PPO Units
set forth on such Purchaser’s signature page to this Agreement.  The
Closing shall take place at the offices of Foley & Lardner LLP, 90 Park
Avenue, New York, New York 10016, on the Closing Date or at such other
location or time as the parties may agree (the “Closing”).  “Closing Date” means the business day on
which all of the conditions set forth in Sections H(1) and H(2) hereof are
satisfied or waived, or such other date as the parties may mutually agree in
writing.

     

    (2)           At
the Closing, each Purchaser shall deliver or cause to be delivered to the
Company the aggregate purchase price for the PPO Units to be purchased by such
Purchaser as set forth on the signature page of such Purchaser hereto (the
“Investment
Amount”).  Wire transfer instructions are set forth on Schedule A attached
hereto.  Such funds will be held for the Purchaser’s benefit, and will
be returned promptly, without interest or setoff, if this Agreement is not
accepted by the Company, the Offering is terminated pursuant to its terms by the
Company, or the Minimum Amount is not sold.

     

    (3)           The
PPO Units to be issued to a Purchaser hereunder shall consist of such number of
PPO Units as is equal to the quotient of (x) the Investment Amount, divided
by (y) the Offering Price (as defined below), rounded down to the nearest whole
number. For purposes of this Agreement, the “Offering Price” shall
be One Dollar ($1.00) per each PPO Unit.

    
      
         

      

      
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    (4)           At
the Closing, the Company shall deliver to the Purchasers and to Rodman &
Renshaw, LLC, the placement agent for the Offering (the “Placement Agent”), a
certificate stating that the representations and warranties made by the Company
in Section C of this Agreement were true and correct in all material respects
when made and are true and correct in all material respects on the Closing Date
relating to the Securities purchased pursuant to this Agreement as though made
on and as of such Closing Date (provided, however, that representations and
warranties that speak as of a specific date shall continue to be true and
correct as of the Closing with respect to such date).  The foregoing
obligations of the Company shall be conditions precedent to each Purchaser’s
obligation to complete the purchase of the Securities as contemplated by this
Agreement.

     

    (5)           Each
Purchaser acknowledges and agrees that the purchase of PPO Units, including the
Membership Units and the PPO Warrants contained therein, by such Purchaser
pursuant to the Offering is subject to all the terms and conditions set forth in
this Agreement.

     

    (6)           The
Purchaser understands and agrees that the Company in its sole discretion
reserves the right to accept or reject this or any other subscription for PPO
Units, in whole or in part, notwithstanding prior receipt by the Purchaser of
notice of acceptance of this subscription.  The Company shall have no
obligation hereunder until the Company shall execute and deliver to the
Subscriber an executed copy of this Agreement.  If this subscription
is rejected in whole, or the Offering is terminated, all funds received from the
Purchaser will be returned without interest or offset, and this Agreement shall
thereafter be of no further force or effect.  If this subscription is
rejected in part, the funds for the rejected portion of this subscription will
be returned without interest or offset, and this Agreement will continue in full
force and effect to the extent this subscription was accepted.

     

    
      	
              B.

            	
              Representations
      and Warranties of the Purchaser

            

    

     

    Each Purchaser, severally and not
jointly, hereby represents and warrants to the Company as of the date hereof and
as of the Closing Date, and agrees with the Company as follows:

     

    (1)       The
Purchaser has carefully read this Agreement, the Private Placement Memorandum of
the Company, dated December 16, 2010 (as amended and supplemented from time to
time, including all attachments, schedules and exhibits thereto, the “Offering
Memorandum”), and the form of
PPO Warrant attached hereto as Exhibit A
(collectively the “Offering Documents”),
and is familiar with and understands the terms of the Offering, including but
not limited to the portions of the Offering Memorandum consisting of the
financial statements included therein and the sections therein entitled “Risk
Factors” and “Our Business”.  The Purchaser fully understands all of
the risks related to the purchase of the Securities.  The Purchaser
has carefully considered and has discussed with the Purchaser’s professional
legal, tax, accounting and financial advisors, to the extent the Purchaser has
deemed necessary, the suitability of an investment in the Securities for the
Purchaser’s particular tax and financial situation and has determined that the
Securities being purchased by the Purchaser are a suitable investment for the
Purchaser.  The Purchaser recognizes that an investment in the
Securities involves substantial risks, including the possible loss of the entire
amount of such investment.  The Purchaser further recognizes that the
Company has broad discretion concerning the use and application of the proceeds
from the Offering.

    
      
         

      

      
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    (2)       The
Purchaser acknowledges that (i) the Purchaser has had the opportunity to request
copies of any documents, records and books pertaining to this investment and
(ii) any such documents, records and books that the Purchaser requested have
been made available for inspection by the Purchaser, the Purchaser’s attorney,
accountant or other advisor(s).  The Purchaser has requested,
received, reviewed and considered all information it deems relevant in making an
informed decision to purchase the Securities.

     

    (3)       The
Purchaser and the Purchaser’s advisor(s) have had a reasonable opportunity to
ask questions of and receive answers from representatives of the Company or
Persons (as defined below) acting on behalf of the Company concerning the
Company, the Parent, the Offering and the Securities and all such questions have
been answered to the full satisfaction of the Purchaser.  For purposes
of this Agreement, “Person” means an
individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization, any other entity and a
government or any department or agency thereof.

     

    (4)       The
Purchaser is not subscribing for Securities as a result of or subsequent to any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television, radio or the
Internet (including without limitation, internet “blogs,” bulletin boards,
discussion groups and social networking sites) or presented at any seminar,
meeting or conference whose attendees have been invited by any general
solicitation or general advertising.

     

    (5)       If
the Purchaser is a natural Person, the Purchaser has reached the age of majority
in the state in which the Purchaser resides.  The Purchaser has
adequate means of providing for the Purchaser’s current financial needs and
contingencies, is able to bear the substantial economic risks of an investment
in the Securities for an indefinite period of time, has no need for liquidity in
such investment and can afford a complete loss of such investment.

     

    (6)       The
Purchaser has sufficient knowledge and experience in financial, tax and business
matters to enable the Purchaser to utilize the information made available to the
Purchaser in connection with the Offering, to evaluate the merits and risks of
an investment in the Securities and to make an informed investment decision with
respect to an investment in the Securities on the terms described in the
Offering Documents.  The Purchaser has independently evaluated the
merits and risks of its decision to purchase the Securities pursuant to the
Offering Documents, and the Purchaser confirms that it has not relied on the
advice of the Company’s or any other Purchaser’s business and/or legal counsel
in making such decision.  Such Purchaser has not relied on the
business or legal advice of the Placement Agent or any of its agents, counsel or
affiliates in making its investment decision hereunder, and confirms that none
of such Persons has made any representations or warranties to such Purchaser in
connection with the transactions contemplated by the Offering
Documents.

    
      
         

      

      
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    (7)       The
Purchaser will not sell or otherwise transfer the Securities without
registration under the Securities Act and applicable state securities laws or an
applicable exemption therefrom.  The Purchaser acknowledges that
neither the offer nor sale of the Securities has been registered under the
Securities Act or under the securities laws of any state.  The
Purchaser represents and warrants that the Purchaser is acquiring the Securities
for the Purchaser’s own account, for investment purposes and not with a view
toward resale or distribution within the meaning of the Securities Act, except
pursuant to sales registered or exempted under the Securities
Act.  The Purchaser is acquiring the Securities in the ordinary course
of business.  The Purchaser has not offered or sold the Securities
being acquired nor does the Purchaser have any present intention of selling,
distributing or otherwise disposing of such Securities either currently or after
the passage of a fixed or determinable period of time or upon the occurrence or
non-occurrence of any predetermined event or circumstances in violation of the
Securities Act.  The Purchaser is aware that (i) the Securities are
not currently eligible for sale in reliance upon Rule 144 (as defined below) and
(ii) the Company has no obligation to register the Securities purchased
hereunder, except as provided in Section E hereof. By making these
representations herein, the Purchaser is not making any representation or
agreement to hold the Securities for any minimum or other specific term and
reserves the right to dispose of the Securities at any time in accordance with
or pursuant to a registration statement or an available exemption to the
registration requirements of the Securities Act.

     

    (8)       The
Purchaser understands that except as provided in Section E hereof: (i) the
Securities have not been and are not being registered under the Securities Act
or any state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, (B) the Purchaser
shall have delivered to the Company an opinion of counsel, in a form reasonably
acceptable to the Company, to the effect that such Securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an
exemption from such registration, or (C) the Purchaser provides the Company with
reasonable assurance that such Securities can be sold, assigned or transferred
pursuant to Rule 144 or Rule 144A promulgated under the Securities Act (or a
successor rule thereto) (collectively, “Rule 144”); (ii) any
sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the Person through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the Securities Act) may require compliance with some
other exemption under the Securities Act or the rules and regulations of the SEC
thereunder; and (iii) neither the Company nor any other Person is under any
obligation to register the Securities under the Securities Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder.

     

    (9)       The
Purchaser acknowledges that any certificates or other evidence that may be
issued representing the Securities shall bear any legend required by the
securities laws of any state and be stamped or otherwise imprinted with a legend
substantially in the following form:

     

    The
securities represented hereby have not been registered under the Securities Act
of 1933, as amended, or any state securities laws and neither the securities nor
any interest therein may be offered, sold, transferred, pledged or otherwise
disposed of except pursuant to an effective registration under such act or an
exemption from registration, which, in the opinion of counsel reasonably
satisfactory to this corporation, is available.

    
      
         

      

      
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    Certificates evidencing the Securities
shall not be required to contain such legend or any other legend (i) following
any sale of such Securities pursuant to Rule 144, or (ii) if such Securities
have been sold pursuant to the Registration Statement (as hereafter defined) and
in compliance with the obligations set forth in Section E(6) below, or (iii)
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the Staff of
the SEC), in each such case (i) through (iii) to the extent reasonably
determined by the Company’s legal counsel.  Each Purchaser, severally
and not jointly with the other Purchasers, agrees that the removal of such
legend from certificates evidencing the Securities is predicated upon (i) the
reliance by the Company and the Parent that the Purchaser will sell such
Securities pursuant to either the registration requirements of the Securities
Act, including any applicable prospectus delivery requirements, or an exemption
therefrom, and/or (ii) that in the context of a sale under Rule 144, if
requested by the transfer agent of the Securities, the Purchaser shall have
signed and delivered a representation letter relating to the Purchaser’s
Securities.

    

    (10)     If
this Agreement is executed and delivered on behalf of a partnership,
corporation, trust, estate or other entity:  (i) such partnership,
corporation, trust, estate or other entity is duly organized and validly
existing and has the full legal right and power and all authority and approval
required (a) to execute and deliver this Agreement and all other instruments
executed and delivered by or on behalf of such partnership, corporation, trust,
estate or other entity in connection with the purchase of its Securities, and
(b) to purchase and hold such Securities; (ii) the signature of the party
signing on behalf of such partnership, corporation, trust, estate or other
entity is binding upon such partnership, corporation, trust, estate or other
entity; and (iii) such partnership, corporation, trust or other entity has not
been formed for the specific purpose of acquiring such Securities, unless each
beneficial owner of such entity is qualified as an accredited investor within
the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act
and has submitted information to the Company substantiating such individual
qualification.

     

    (11)     If
the Purchaser is a retirement plan or is investing on behalf of a retirement
plan, the Purchaser acknowledges that an investment in the Securities poses
additional risks, including the inability to use losses generated by an
investment in the Securities to offset taxable income.

    
      
         

      

      
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    (12)     The
information contained in the purchaser questionnaire in the form of Exhibit B attached
hereto (the “Purchaser
Questionnaire”) delivered by the Purchaser in connection with this
Agreement is complete and accurate in all respects.  The Purchaser is
(i) an “accredited investor” as defined in Rule 501(a) of Regulation D under the
Securities Act (“Regulation D”) on the
basis indicated therein, or (ii) is not a U.S. Person as defined in Regulation S
under the Securities Act (“Regulation S”) and is
a resident of the jurisdiction set forth therein.  The Purchaser is
not required to be a registered broker-dealer under Section 15 of the Securities
Exchange Act of 1934, as amended (the “Exchange
Act”).  The information contained in the selling stockholder
questionnaire in the form of Exhibit C attached hereto
(the “Selling
Stockholder
Questionnaire”) and the anti-money laundering information form in the
form of Exhibit
D
attached hereto (the “Anti-Money Laundering
Information Form”) delivered by
the Purchaser in connection with this Agreement are complete and accurate in all
respects. The Purchaser will notify the Company and the Parent immediately
of any changes in any such information contained in such Purchaser’s Purchaser
Questionnaire, Selling Stockholder Questionnaire, or Anti-Money Laundering
Information Form until such time as the Purchaser has sold all of its shares of
Parent Common Stock issuable in the Merger and issuable upon the exercise of the
PPO Conversion Warrants or until the Parent is no longer required to keep the
Registration Statement, as defined in Section E below, effective, except to the
extent that such changed information is not required under the Securities Act to
be disclosed in an amendment or supplement to the Registration
Statement.

     

    (13)     The
Purchaser acknowledges that the Company will have the authority to issue
additional Membership Units in excess of those being issued in connection with
the Offering, and that the Company may issue additional Membership Units from
time to time.  The issuance of additional Membership Units may cause
dilution of the existing Membership Units and a decrease in the value of such
existing Membership Units.  The Purchaser further acknowledges that
the Parent will have the authority to issue additional shares of Parent Common
Stock and other securities of Parent in excess of those being issued in
connection with the Merger, and that the Parent may issue additional shares of
Parent Common Stock and other securities of Parent from time to time, which may
cause dilution of the existing shares of Parent Common Stock and a decrease in
the market price of such existing shares of Parent Common Stock.

     

    (14)     The
Purchaser acknowledges that the Company has engaged the Placement Agent in
connection with the Offering and, as consideration for its services, has agreed
to pay the Placement Agent an aggregate cash commission equal to eight
percent (8%) of the
gross proceeds resulting from the Offering and to issue to the Placement
Agent the Placement Agent Warrant.

     

    (15)     The
Purchaser understands that the Securities are being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying in part
upon the truth and accuracy of, and the Purchaser's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Purchaser set forth herein in order to determine the availability of such
exemptions and the eligibility of the Purchaser to acquire the
Securities.

     

    (16)     The
Purchaser understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.

    
      
         

      

      
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    (17)     This
Agreement has been duly and validly authorized, executed and delivered on behalf
of the Purchaser and shall constitute the legal, valid and binding obligations
of such Purchaser enforceable against the Purchaser in accordance its
terms.

     

    (18)     The
execution, delivery and performance by the Purchaser of this Agreement and the
consummation by the Purchaser of the transactions contemplated hereby will not
(i) result in a violation of the organizational documents of the Purchaser or
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Purchaser is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws) applicable to the Purchaser,
except in the case of clauses (ii) and (iii) above, for such conflicts,
defaults, rights or violations which would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
ability of the Purchaser to perform its obligations hereunder.

     

    (19)     The
Purchaser acknowledges that any estimates or forward-looking statements or
projections included in the Offering Memorandum were prepared by the Company in
good faith but that the attainment of any such projections, estimates or
forward-looking statements cannot be guaranteed by the Company and should not be
relied upon.

     

    (20)     No
oral or written representations have been made, or oral or written information
furnished, to the Purchaser or its advisers, if any, in connection with the
Offering which are in any way inconsistent with the information contained in the
Offering Memorandum.

     

    (21)     Other
than consideration payable to the Placement Agent by the Company, the Purchaser
has not entered into any agreement or arrangement that would entitle any broker
or finder to compensation by the Company in connection with the sale of the
Securities to such Purchaser.

     

    (22)     The
Purchaser has, in connection with its purchase of the Securities, complied with
all applicable provisions of the Securities Act, including the rules and
regulations promulgated by the SEC thereunder, and applicable state securities
laws.

     

    (23)     Each
Purchaser who is not a US Person as defined in Regulation S (“US Person”)
represents and warrants as follows:

     

    (i)       (a)
the Purchaser is not a US Person and is not acting for the account or benefit of
a US Person and (b) the Purchaser is purchasing the Securities in an offshore
transaction pursuant to Regulation S;

     

    
      
         

      

      
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    (ii)      the
Purchaser understands that the Securities have not been and will not be
registered under the Securities Act and may not be offered, resold, pledged or
otherwise transferred by such Purchaser except (a) (i) in the United States to a
person whom the seller reasonably believes is a qualified institutional buyer in
a transaction meeting the requirements of Rule 144, (ii) outside the United
States in a transaction complying with the provisions of Rule 903 or Rule 904 of
Regulation S, (iii) pursuant to an exemption from registration under the
Securities Act provided by Rule 144 (if available), or (iv) pursuant to an
effective registration statement under the Securities Act, and (b) in accordance
with any applicable securities laws of any state of the United States and other
jurisdictions;

     

    (iii)     the
Purchaser understands and agrees that, if in the future it decides to resell,
pledge or otherwise transfer the Securities or any beneficial interests in any
Securities prior to the date which is twelve (12) months after the later of (a)
the date when the Securities are first offered to persons (other than
distributors) pursuant to Regulation S and (b) the date of closing of the
Offering, it will do so only (i) in compliance with the restrictions set forth
herein, (ii) pursuant to an effective registration statement under the
Securities Act, or (iii) in accordance with the provisions of Rule 144 (if
available) or Regulation S, and in each of such cases in accordance with any
applicable securities laws of any state of the United States;

     

    (iv)     the
Purchaser agrees to, and each subsequent holder is required to, notify any
purchaser of the Securities from it of the resale restrictions referred to in
paragraphs (ii) and (iii) above, if then applicable;

     

    (v)      the
Purchaser acknowledges that, prior to any proposed transfer of the Securities
other than pursuant to an effective registration statement, the transferee of
the Securities may be required to provide certifications and other documentation
relating to the non-US Person status of such transferee.

     

    The
Purchaser should check the Office of Foreign Assets Control (“OFAC”) website at
<http://www.treas.gov/ofac> before making the representations contained in
Sections B(24) and B(25) hereof.

     

    (24)     The
Purchaser represents that the amounts invested by it in the Company in the
Offering were not and are not directly or indirectly derived from activities
that contravene federal, state or international laws and regulations, including
anti-money laundering laws and regulations. Federal regulations and Executive
Orders administered by OFAC prohibit, among other things, the engagement in
transactions with, and the provision of services to, certain foreign countries,
territories, entities and individuals.  The lists of OFAC prohibited
countries, territories, persons and entities can be found on the OFAC website at
<http://www.treas.gov/ofac>.  In addition, the programs
administered by OFAC (the “OFAC Programs”)
prohibit dealing with individuals1 or entities in certain countries regardless of
whether such individuals or entities appear on the OFAC lists.

      

      

    

    1 These individuals include
specially designated nationals, specially designated narcotics traffickers and
other parties subject to OFAC sanctions and embargo programs.

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    (25)     To
the best of the Purchaser’s knowledge, none of: (1) the Purchaser; (2) any
Person controlling or controlled by the Purchaser; (3) if the Purchaser is a
privately-held entity, any Person having a beneficial interest in the Purchaser;
or (4) any Person for whom the Purchaser is acting as agent or nominee in
connection with this investment is a country, territory, individual or entity
named on an OFAC list, or a person or entity prohibited under the OFAC
Programs.  Please be advised that the Company may not accept any
amounts from a prospective investor if such prospective investor cannot make the
representation set forth in the preceding paragraph.  The Purchaser
agrees to promptly notify the Company should the Purchaser become aware of any
change in the information set forth in these representations.  The
Purchaser understands and acknowledges that, by law, the Company may be
obligated to “freeze the account” of the Purchaser, either by prohibiting
additional subscriptions from the Purchaser, declining any redemption requests
and/or segregating the assets in the account in compliance with governmental
regulations.  The Purchaser further acknowledges that the Company may,
by written notice to the Purchaser, suspend the redemption rights, if any, of
the Purchaser if the Company reasonably deems it necessary to do so to comply
with anti-money laundering regulations applicable to the Company or any of the
Company’s other service providers.  These individuals include
specially designated nationals, specially designated narcotics traffickers and
other parties subject to OFAC sanctions and embargo programs.

     

    (26)     To
the best of the Purchaser’s knowledge, none of: (1) the Purchaser; (2) any
Person controlling or controlled by the Purchaser; (3) if the Purchaser is a
privately-held entity, any Person having a beneficial interest in the Purchaser;
or (4) any Person for whom the Purchaser is acting as agent or nominee in
connection with this investment is a senior foreign political figure,2 or any immediate family3 member or close associate4 of a senior foreign political figure, as such
terms are defined in the footnotes below.

     

    
      

    

       
      2 A “senior foreign
political figure” is defined as a senior official in the executive, legislative,
administrative, military or judicial branches of a foreign government (whether
elected or not), a senior official of a major foreign political party, or a
senior executive of a foreign government-owned corporation. In addition, a
“senior foreign political figure” includes any corporation, business or other
entity that has been formed by, or for the benefit of, a senior foreign
political figure.

    

      
      3 “Immediate family” of a
senior foreign political figure typically includes the figure’s parents,
siblings, spouse, children and in-laws.

    

      
      4 A “close associate” of a senior foreign
political figure is a person who is widely and publicly known to maintain an
unusually close relationship with the senior foreign political figure, and
includes a person who is in a position to conduct substantial domestic and
international financial transactions on behalf of the senior foreign political
figure.

    

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    (27)     If
the Purchaser is affiliated with a non-U.S. banking institution (a “Foreign Bank”), or if
the Purchaser receives deposits from, makes payments on behalf of, or handles
other financial transactions related to a Foreign Bank, the Purchaser represents
and warrants to the Company that: (i) the Foreign Bank has a fixed address,
other than solely an electronic address, in a country in which the Foreign Bank
is authorized to conduct banking activities; (ii) the Foreign Bank maintains
operating records related to its banking activities; (iii) the Foreign Bank is
subject to inspection by the banking authority that licensed the Foreign Bank to
conduct banking activities; and (iv) the Foreign Bank does not provide banking
services to any other Foreign Bank that does not have a physical presence in any
country and that is not a regulated affiliate.

     

    
      	
              C.

            	
              Representations
      and Warranties of the Company

            

    

     

    Except as set forth herein or in the
Company Disclosure Schedule annexed hereto as Exhibit E, the Company hereby
makes the following representations and warranties to the
Purchasers.  For purposes of this Section C, the phrase “to the
knowledge of the Company” or any phrase of similar import shall be deemed to
refer to the actual knowledge Joseph Pandolfino or Henry Sicignano III, as well
as any other knowledge that such individuals would have possessed had they made
reasonable inquiry with respect to the matters in question.

     

    (1)       Organization, Good Standing
and Qualification.  The Company is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full limited liability company power and authority to
conduct its business as currently conducted.  The Company is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions in which the character of the property owned or leased or the
nature of the business transacted by it makes qualification necessary, except
where any failure to be so qualified would not, individually or in the
aggregate, have a material adverse effect on (i) the business, properties,
financial condition or results of operations of the Company or (ii) the
transactions contemplated hereby and by the other Offering Documents or by the
agreements and instruments to be entered into in connection herewith or
therewith or on the ability of the Company to perform its obligations under the
Offering Documents (a “Material Adverse
Effect”).  The Company is not a participant in any joint
venture, partnership or similar arrangement material to the business of the
Company.

     

    (2)       Capitalization.  As
of the date of this Agreement, 16,000,000 Membership Units of the Company and
warrants to purchase an additional 5,000,000 Membership Units of the Company are
issued and outstanding.  Other than the Placement Agent Warrant, the
transactions contemplated by the Merger, and as otherwise set forth above or as
contemplated in this Agreement, (a) there are no other options, warrants, calls,
rights, commitments or agreements of any character to which the Company is a
party or by which either the Company is bound or obligating the Company to
issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of the capital stock of the Company or
obligating the Company to grant, extend or enter into any such option, warrant,
call, right, commitment or agreement and (b) the issuance and sale of the
Securities contemplated hereby will not give rise to any preemptive rights,
rights of first refusal or other similar rights on behalf of any
Person.

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    (3)       Issuance of
Securities.  The issuance of the PPO Units has been duly and
validly authorized by all necessary action and no further action is required by
the Company or its members or managers in connection therewith.  The
PPO Units, when issued and paid for pursuant to this Agreement, will be validly
issued, fully paid and non-assessable securities of the Company consisting of
Membership Units and PPO Warrants.  The issuance of the PPO Units,
including the Membership Units and the PPO Warrants contained therein, have been
duly and validly authorized by all necessary action and no further action is
required by the Company or its members or managers in connection
therewith.  The issuance of the Securities will not result in the
right of any holder of any securities of the Company to adjust the exercise,
conversion, exchange or reset price under such securities. 

     

    (4)       Authorization;
Enforceability.  The Company has all limited liability company
right, power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby.  All limited liability company
action on the part of the Company necessary for the authorization, execution,
delivery and performance of this Agreement by the Company has been taken and no
further action is required by the Company or its members or managers in
connection therewith.  This Agreement has been (or upon delivery will
have been) duly executed by the Company and, when delivered in accordance with
the terms hereof, will constitute the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms except as
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally, (ii) laws relating to the availability of specific performance,
injunctive relief or other equitable remedies, and (iii) laws, or public policy
underlying such laws, relating to indemnification and contribution.

     

    
      	
               
      

            	
              (5)

            	
              No Conflict;
      Governmental and Other
Consents.

            

    

     

    (a)      The
execution and delivery by the Company of this Agreement, the issuance of the
Securities by the Company, and the consummation of the transactions contemplated
hereby will not result in the violation (i) assuming the accuracy of the
representations and warranties of each Purchaser, of any law, statute, rule,
regulation, order, writ, injunction, judgment or decree of any court or
governmental authority to or by which the Company is bound, or (ii) of any
provision of the Certificate of Formation or Operating Agreement of the Company,
and will not conflict with, or result in a breach or violation of, any of the
terms or provisions of, or constitute (with due notice or lapse of time or both)
a default under or give to others any rights of termination, amendment,
acceleration or cancellation of, any lease, loan agreement, mortgage, security
agreement, trust indenture or other agreement or instrument to which the Company
is a party or by which it is bound or to which any of its properties or assets
is subject, nor result in the creation or imposition of any lien upon any of the
properties or assets of the Company, except in each case to the extent that any
such violation, conflict or breach would not be reasonably likely to have a
Material Adverse Effect.

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    (b)      Assuming
the accuracy of the representations and warranties of each Purchaser party
hereto, no consent, approval, authorization or other order of any governmental
authority or stock exchange, or other third-party is required to be obtained by
the Company in connection with the authorization, execution and delivery of this
Agreement or with the authorization, issue and sale of the Securities, except
such post-Closing filings as may be required to be made with the SEC, and with
any state or foreign “Blue Sky” or securities regulatory authority, or as would
not be reasonably likely to have a Material Adverse Effect on the
Company.

     

    (6)       Litigation.  There
are no pending or, to the Company’s knowledge, threatened legal or governmental
proceedings against the Company or any of its subsidiaries or any of their
respective officers or directors, which, if adversely determined, would
individually or in the aggregate be reasonably likely to have a Material Adverse
Effect on the Company.  There is no action, suit, proceeding, inquiry
or investigation before or by any court, public board or body pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its subsidiaries or any of their respective officers or directors, wherein an
unfavorable decision, ruling or finding could adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under this Agreement.  Neither the Company nor any
Subsidiary (as defined below), nor any director or officer thereof (in his or
her capacity as such), is or has been the subject of any action involving a
claim or violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty.

     

    (7)       Financial
Information.  The Company’s financial statements that appear in
the Offering Memorandum have been prepared in accordance with United States
generally accepted accounting principles (“GAAP”), except in the
case of unaudited statements or as may be indicated therein or in the notes
thereto, applied on a consistent basis throughout the periods indicated and
such financial statements fairly present in all material respects the financial
condition and results of operations and cash flows of the Company as of the
dates and for the periods indicated therein (subject, in the case of unaudited
statements, to normal year-end audit adjustments).

     

    (8)       Absence of Certain
Changes.  Since the date of the Company’s most recent financial
statements contained in the Offering Memorandum, (i) there has not occurred any
undisclosed event that individually or in the aggregate has caused a Material
Adverse Effect or any occurrence, circumstance or combination thereof that
reasonably would be likely to result in a Material Adverse Effect, (ii) the
Company has not incurred any liabilities (contingent or otherwise) other than
(A) trade payables and accrued expenses incurred in the ordinary course of
business, (B) liabilities that would not be required to be reflected in the
Company's financial statements pursuant to GAAP, or (C) obligations pursuant to
the engagement agreement with the Placement Agent (the “Placement Agent
Agreement”) (iii) the Company has not (A) declared or paid any dividends,
(B) amended or changed the Certificate of Formation or Operating Agreement of
the Company or its Subsidiaries, or (C) altered its method of accounting or the
identity of its auditors and (iv) the Company has not made a material change in
officer compensation except in the ordinary course of business consistent with
past practice.

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    (9)       Investment
Company.  The Company is not an “investment company” within the
meaning of such term under the Investment Company Act of 1940, as amended, and
the rules and regulations of the SEC thereunder.

     

    (10)     Subsidiaries.  Except
for Xodus LLC, which is a 96% owned Subsidiary of the Company, the Company has
no other Subsidiaries.  For the purposes of this Agreement, “Subsidiary” shall
mean any company or other entity of which at least 50% of the securities or
other ownership interest having ordinary voting power for the election of
directors or other Persons performing similar functions are at the time owned
directly or indirectly by the Company or any of its other
Subsidiaries.  The Company or one of its Subsidiaries has the
unrestricted right to vote, and subject to limitations imposed by applicable
law, to receive dividends and distributions on all capital securities of its
Subsidiaries as owned by the Company or such Subsidiary.

     

    (11)     Certain
Fees.  Other than compensation payable to the Placement Agent
in the Offering, no brokers’, finders’ or financial advisory fees or commissions
will be payable by the Company with respect to the transactions contemplated by
this Agreement.

     

    (12)     Material
Agreements.  Section 12 of the Company Disclosure Schedule sets
forth all material agreements to which the Company is a party or to which its
property or assets are subject.  The Company has not received any
notice of default by the Company, and, to the Company’s knowledge, the Company
is not in default under, any such material agreement now in effect, the result
of which would individually or in the aggregate be reasonably likely to have a
Material Adverse Effect.

     

    (13)     Transactions with
Affiliates.  Except as set forth on Section 13 of the Company
Disclosure Schedule or in the Offering Memorandum, none of the officers or
directors of the Company has entered into any transaction with the Company that
would be required to be disclosed pursuant to Item 404(a) of Regulation S-K
promulgated by the SEC.

     

    (14)     Taxes.  The
Company has filed or has valid extensions of the time to file all necessary
material federal, state, and foreign income and franchise tax returns due prior
to the date hereof and has paid or accrued all taxes shown as due thereon, and
the Company has no knowledge of any material tax deficiency which has been or
might be asserted or threatened against it which could reasonably be expected to
result in a Material Adverse Effect.

     

    (15)     Insurance.  The
Company is insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as the Company believes are prudent
and customary in the businesses in which the Company is engaged.  The
Company has no reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business
without an increase in cost significantly greater than general increases in cost
experienced for similar companies in similar industries with respect to similar
coverage.

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    (16)     Intellectual Property Rights
and Licenses.  Except as set forth on Section 16 of the Company
Disclosure Schedule, the Company owns or possesses adequate rights or licenses
to use any and all information, know-how, trade secrets, patents, copyrights,
trademarks, service marks, trade names, domain names, software, formulae,
methods, processes and other intangible properties (“Intangible Rights”)
that are of a such nature and significance to its business that the failure to
own or have the right to use or derivatize such items individually or in the
aggregate would have a Material Adverse Effect.  The Company has not
received any notice that it is in conflict with or infringing upon the asserted
intellectual property rights of others, and neither the use of the Intangible
Rights nor the operation of the Company’s businesses is infringing or has
infringed upon any intellectual property rights of others.  All
payments have been duly made that are necessary to maintain the Intangible
Rights in force.  Except as set forth on Section 16 of the Company
Disclosure Schedule, no claims have been made and no claims are threatened, that
oppose or challenge the validity, scope or title to any Intangible Right of the
Company.  The Company and each of its Subsidiaries have taken
reasonable steps to obtain and maintain in force all licenses and other
permissions under Intangible Rights of third parties necessary to conduct their
businesses as heretofore conducted by them, now being conducted by them or are
otherwise reasonably anticipated to be conducted, and the Company and each of
its Subsidiaries are not, have not been and do not anticipate being in material
breach of any such license or other permission.

     

    (17)     Compliance with Law; Foreign
Corrupt Practices.  The Company is in compliance with all
applicable laws, except for such noncompliance that individually or in the
aggregate would not reasonably be likely to have a Material Adverse
Effect.  The Company has not received any notice of, nor does the
Company have any knowledge of, any violation (or of any investigation,
inspection, audit or other proceeding by any governmental entity involving
allegations of any violation) of any applicable law involving or related to the
Company which has not been dismissed or otherwise disposed of that individually
or in the aggregate would be reasonably likely to have a Material Adverse
Effect.  The Company has not received notice or otherwise has any
knowledge that the Company is charged with, threatened with or under
investigation with respect to, any violation of any applicable law that
individually or in the aggregate would reasonably be likely to have a Material
Adverse Effect.

     

    (18)     Ownership of
Property.  Except as set forth in the Company’s financial
statements included, or otherwise disclosed in the Offering Memorandum, or
as set forth on Section 18 of the Company Disclosure Schedule, the Company has
(i) good and marketable fee simple title to its owned real property, if any,
free and clear of all liens, except for liens which do not individually or in
the aggregate have a Material Adverse Effect; (ii) a valid leasehold interest in
all leased real property, and each of such leases is valid and enforceable in
accordance with its terms (subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies, and to
limitations of public policy), except as would not be reasonably likely to have
a Material Adverse Effect, and (iii) good title to, or valid leasehold interests
in, all of its other material properties and assets free and clear of all liens,
except for liens which do not individually or in the aggregate have a Material
Adverse Effect.

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    (19)     No Integrated
Offering.  Neither the Company, nor, to its knowledge, any of
its affiliates or other Person acting on the Company’s behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the Offering of the
Securities to be integrated with prior offerings by the Company for purposes of
the Securities Act, when integration would cause the Offering not to be exempt
from the registration requirements of Section 5 of the Securities
Act.

     

    (20)     No General
Solicitation.  Neither the Company nor, to its knowledge, any
Person acting on behalf of the Company, has offered or sold any of the
Securities by any form of “general solicitation” within the meaning of Rule 502
under the Securities Act.  To the knowledge of the Company, no Person
acting on its behalf has offered the Securities for sale other than to the
Purchasers and certain other “accredited investors” within the meaning of Rule
501 under the Securities Act.

     

    (21)     No
Registration.  Assuming the accuracy of the representations and
warranties made by, and compliance with the covenants of, the Purchasers in
Section B hereof, and other than as required under this Agreement, no
registration of the Securities under the Securities Act is required in
connection with the offer and sale of the Securities by the Company to the
Purchasers.

     

    (22)     No
Brokers.  Except with respect to the Placement Agent, neither
the Company nor any Subsidiary of the Company has taken action that would give
rise to any claim by any Person for brokerage commissions, finder’s fees or
similar payments in connection with the transactions contemplated by this
Agreement and neither the Company nor any of its Subsidiaries has incurred, or
shall incur, directly or indirectly, any liability for any claim for brokerage
commissions, finder’s fees or similar payments in connection with this Agreement
or the Offering Documents or any transaction contemplated hereby or
thereby.

     

    (23)     Solvency.  Based
on the financial condition of the Company as of the Closing Date (and assuming
the Closing shall have occurred), (i) the Company’s fair saleable value of its
assets exceeds the amount that will be required to be paid on or in respect of
the Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business for the current fiscal year
as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company, together
with the proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debt when such amounts are
required to be paid.  The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its
debt).

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    (24)     Transfer
Taxes.  On the Closing Date, all stock transfer or other taxes
(other than income or similar taxes) which are required to be paid in connection
with the sale and transfer of the Securities to be sold to each Purchaser
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 complied
with.

     

    (25)     Environmental
Matters. The Company has obtained, or has applied for, and is in
compliance with and in good standing under all permits required under
Environmental Laws (except for such failures that individually or in the
aggregate would not be reasonably likely to have a Material Adverse Effect) and
the Company has no knowledge of any proceedings to substantially modify or to
revoke any such permit.  There are no investigations, proceedings or
litigation pending or, to the Company's knowledge, threatened against the
Company or any of the Company’s facilities relating to Environmental Laws or
hazardous substances.  “Environmental Laws”
shall mean all federal, national, state, regional and local laws, statutes,
ordinances and regulations, in each case as amended or supplemented from time to
time, and any judicial or administrative interpretation thereof, including
orders, consent decrees or judgments relating to the regulation and protection
of human health, safety, the environment and natural resources.

     

    (26)     Disclosure.  To
the Company’s knowledge, no material event or circumstance has occurred or
information exists with respect to the Company or its business, properties,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed.

     

    (27)     Acknowledgment Regarding
Purchaser's Purchase of Securities.  The Company acknowledges
and agrees that except as set forth on the signature page of this Agreement, no
Purchaser is (i) an officer or director of the Company, (ii) an “affiliate” of
the Company (as defined in Rule 144) or (iii) to the knowledge of the Company, a
“beneficial owner” of more than 10% of the shares of Common Stock (as defined
for purposes of Rule 13d-3 of the Exchange Act).  The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to the Offering Documents
and the transactions contemplated hereby and thereby.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    (28)     Employee
Relations.

     

    (a)      The
Company is not a party to any collective bargaining agreement and, to its
knowledge, its employees are not union members.  The Company believes
that its relations with its employees are good.  No executive officer
of the Company (as defined in Rule 501(f) of the Securities Act) has notified
the Company that such officer intends to leave the Company or otherwise
terminate such officer's employment with the Company.  No executive
officer of the Company, to the knowledge of the Company, is in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant relating to such executive
officer’s employment with the Company, and the continued employment of each such
executive officer does not, to the knowledge of the Company, subject the Company
to any liability with respect to any of the foregoing matters.

     

    (b)      Each
of the Company and its Subsidiaries is in compliance with all federal, state,
local and foreign laws and regulations respecting labor, employment and
employment practices and benefits, terms and conditions of employment and wages
and hours, except where failure to be in compliance would not, either
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.

     

    (c)      No
material labor dispute exists or, to the knowledge of the Company, is imminent
with respect to any employees of the Company.

    

    (29)     Indebtedness and Other
Contracts.    Except as set forth on Section 29 of
the Company Disclosure Schedule or in the Offering Memorandum, neither the
Company nor any of its Subsidiaries (i) has any outstanding Indebtedness (as
defined below), (ii) is a party to any contract, agreement or instrument, the
violation of which, or default under which, by the other party(ies) to such
contract, agreement or instrument could reasonably be expected to result in a
Material Adverse Effect, (iii) is in violation of any term of or in default
under any contract, agreement or instrument relating to any Indebtedness, except
where such violations and defaults would not result, individually or in the
aggregate, in a Material Adverse Effect, or (iv) is a party to any contract,
agreement or instrument relating to any Indebtedness, the performance of which,
in the judgment of the Company’s officers, has or is expected to have a Material
Adverse Effect.  Except as set forth on Section 29 of the Company
Disclosure Schedule, there are no financing statements securing obligations in
any material amounts, either singly or in the aggregate, filed in connection
with the Company or any of its Subsidiaries.  For purposes of this
Agreement: (x) “Indebtedness” of any
Person means, without duplication (A) all indebtedness for borrowed money, (B)
all obligations issued, undertaken or assumed as the deferred purchase price of
property or services, including (without limitation) “capital leases” in
accordance with generally accepted accounting principles (other than trade
payables entered into in the ordinary course of business), (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations for which the Company can
be legally liable in respect of indebtedness or obligations of others of the
kinds referred to in clauses (A) through (G) above; and (y) “Contingent
Obligation” means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness, lease,
dividend or other obligation of another Person if the primary purpose or intent
of the Person incurring such liability, or the primary effect thereof, is to
provide assurance to the obligee of such liability that such liability will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or in
part) against loss with respect thereto.

    
      
         

      

      
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    (30)     Use of
Proceeds.  The Company intends to use the proceeds from the
Offering as described in the Offering Memorandum.

     

    
      
        	
                D. 

              	
                Understandings

              

      

    

     

    Each of the Purchasers understands,
acknowledges and agrees with the Company as follows:

     

    (1)       No
federal, state or foreign agency or authority has made any finding or
determination as to the accuracy or adequacy of the Offering Documents or as to
the fairness of the terms of the Offering nor any recommendation or endorsement
of the Securities.  Any representation to the contrary is a criminal
offense.  In making an investment decision, the Purchasers must rely
on their own examination of the Company and the terms of the Offering, including
the merits and risks involved.

     

    (2)       The
Offering is intended to be exempt from registration under the Securities Act by
virtue of Sections 4(2) and 4(6) of the Securities Act and the provisions of
Rule 506 of Regulation D and the provisions of Regulation S thereunder, which is
in part dependent upon the truth, completeness and accuracy of the statements
made by the Purchaser herein and in the Purchaser Questionnaire.

     

    (3)       Notwithstanding
the registration obligations provided herein, there can be no assurance that the
Purchaser will be able to sell or dispose of the Securities.  It is
understood that in order not to jeopardize the Offering’s exempt status under
Section 4(2) of the Securities Act, Regulation D and Regulation S, any
transferee may, at a minimum, be required to fulfill the investor suitability
requirements thereunder.

     

    (4)       The
Securities purchased hereunder by any Purchaser who is not a US Person under
Regulation S are subject to the conditions listed under Section 903(b)(3), or
Category 3, of Regulation S. Under Category 3, Offering Restrictions (as defined
under Regulation S) must be in place in connection with the offering and
additional restrictions are imposed on resales of the Securities as described
below.  Prior to six months after the later of (1) the time when the
Securities are first offered to persons other than distributors in reliance upon
Regulation S or (2) the date of closing of the Offering (the "Compliance Period"),
each Purchaser who is not a US Person:

    
      
         

      

      
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    (a)      certifies
that it is not a US Person and is not acquiring the securities for the account
or benefit of any US Person or is a US Person who purchased securities in a
transaction that did not require registration under the Securities
Act;

     

    (b)      agrees
to resell such Securities only in accordance with the provisions of Rule 144 (if
available) or Regulation S, or pursuant to registration under the Securities
Act, and agrees to not engage in hedging transactions with regard to the
Securities, directly or indirectly, unless in compliance with the Securities
Act;

     

    (c)      acknowledges
that the Purchaser has been notified that it is subject to the same restrictions
on offers and sales that apply to a distributor;

     

    (d)      agrees
that the Company will be required to refuse to register any transfer of the
Securities not made in accordance with the provisions of Rule 144 (if available)
or Regulation S, or pursuant to registration under the Securities Act;
and

     

    (e)      any certificates evidencing the Securities
will contain a legend to the effect that transfer is prohibited except in
accordance with the restrictions set forth in (b) above during the Compliance
Period.

     

    
      	
              E.

            	
              Registration
      Rights

            

    

     

    (1)           Certain
Definitions.  For purposes of this Section E, the following
terms shall have the meanings ascribed to them below.

     

    (a)      “Prospectus” means the
prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the Offering of any
portion of the Immediately Registrable Securities covered by the Registration
Statement, and all other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.

    
      
         

      

      
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    (b)      “Immediately Registrable
Securities” means the PPO Shares issued pursuant to the exchange of
Membership Units included in the PPO Units upon consummation of the Merger
together with any securities issued or issuable upon any stock split, dividend
or other distribution, adjustment, recapitalization or similar event with
respect to the foregoing; but excluding (i) any Immediately Registrable
Securities that have been publicly sold or may be sold immediately without
registration under the Securities Act either pursuant to Rule 144 or otherwise,
(ii) any Immediately Registrable Securities sold by a Person in a transaction
pursuant to a registration statement filed under the Securities Act, or (iii)
any Immediately Registrable Securities that are at the time subject to an
effective registration statement under the Securities Act.

     

    (c)      “Piggy-Back Registrable
Securities” means the shares of Parent Common Stock issuable upon
exercise of the PPO Conversion Warrants, the shares of Parent Common Stock
issuable upon exercise of the Placement Agent Warrant, and any shares of Parent
Common Stock intended to be treated as Immediately Registrable Securities but
excluded from the Registration Statement as a result any SEC comment limiting
the number of shares of Parent Common Stock that may be included in the
Registration Statement (a “Cutback Comment”)
together with any securities issued or issuable upon any stock split, dividend
or other distribution, adjustment, recapitalization or similar event with
respect to the foregoing; but excluding (i) any Piggy-Back Registrable
Securities that have been publicly sold or may be sold immediately without
registration under the Securities Act either pursuant to Rule 144 or otherwise,
(ii) any Piggy-Back Registrable Securities sold by a Person in a transaction
pursuant to a registration statement filed under the Securities Act, or (iii)
any Piggy-Back Registrable Securities that are at the time subject to an
effective registration statement under the Securities Act.

     

    (d)      “Registrable
Securities” means, collectively, the Immediately Registrable Securities
and the Piggy-Back Registrable Securities.

     

    (e)      “Registration
Statement” means the registration statement required to be filed under
this Section E, including the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration
statement.

     

    (f)       “SEC Guidelines” means
(i) any publicly available written or oral guidance, comments, requirements or
requests of the SEC and (ii) the Securities Act and its rules.

    
      
         

      

      
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              (2)

            	
              Registration
      Statement.

            

    

     

    (a)      The
Parent shall use its commercially reasonable efforts to prepare and file with
the SEC on or prior to the 75th day following the Closing (such date of actual
filing, the “Filing
Date”) a Registration Statement covering the resale of all
Immediately Registrable Securities allowed under SEC Guidelines for an offering
to be made on a continuous basis pursuant to Rule 415 under the Securities
Act.  The Registration Statement shall be on such form as is
appropriate for such purpose and shall contain (except if otherwise directed by
the Purchasers and reasonably agreed to by the Company) a “Plan of Distribution”
substantially in the form attached hereto as Exhibit F.  Each
Purchaser will furnish to the Parent, at the Closing, a completed Purchaser
Questionnaire in the form set forth as Exhibit B hereto, a completed
Selling Stockholder Questionnaire in the form set forth as Exhibit C, and a
completed Anti-Money Laundering Information Form in the form set forth as Exhibit D. Each
Purchaser agrees to promptly update such questionnaires in order to make the
information previously furnished to the Parent by such Purchaser not materially
misleading and deliver such updated questionnaires to the
Parent.  Within two business days following the date on which the
Registration Statement is declared effective by the SEC, the Parent shall file
with the SEC in accordance with Rule 424 under the Securities Act the final
prospectus to be used in connection with sales pursuant to such Registration
Statement.

     

    (b)      The
Parent shall use its commercially reasonable efforts to cause the Registration
Statement to be declared effective by the SEC (the “Effective Date”) on
or prior to the 180th day following the Closing or on the 240th day following
the Closing in the event that the SEC has reviewed the Registration Statement,
and shall use its commercially reasonable efforts to keep the Registration
Statement continuously effective under the Securities Act until the earliest of
(i) the second anniversary of the Effective Date of the Registration Statement
or (ii) the date when all Immediately Registrable Securities are eligible for
unlimited resale under Rule 144 of the Securities Act (“Effectiveness
Period”).

     

    (c)      The
Parent shall request effectiveness of the Registration Statement (and any
post-effective amendments thereto) within five (5) business days following the
Parent’s receipt of notice from the SEC that the Registration Statement will not
be reviewed by the SEC or that the SEC has completed its review of such
Registration Statement and has no further comments.

     

    (d)      Upon
the occurrence of any Event (as defined below), as relief for the damages
suffered therefrom by the Purchaser (the parties hereto agree that the
liquidated damages provided for in this Paragraph (2)(d) constitute a reasonable
estimate of the damages that may be incurred by the Purchaser by reason of an
Event), the Parent shall pay to each Purchaser, as liquidated damages and not as
a penalty (it being agreed that it would not be feasible to ascertain the extent
of such damages with precision), such amounts and at such times as shall be
determined pursuant to this Paragraph (2)(d).  For such purposes, each of
the following shall constitute an “Event”: (x) the
Filing Date does not occur on or prior to the 75th day
following the Closing Date or (y) the Effective Date does not occur on or prior
to (i) the 180th day
following the Closing Date if the SEC does not review of the Registration
Statement or (ii) the 240th day
following the Closing Date if the SEC does review the Registration
Statement.  Upon the occurrence of an Event, each holder of
Immediately Registrable Securities shall be entitled to liquidated damages in an
amount in cash equal to one half of one percent (0.5%) of the Offering Price per
PPO Unit paid in the Offering for such Immediately Registrable Securities for
each full period of 30 days during which such Event occurs and is continuing
(which shall be pro rated for any period less than 30 days); provided, however,
liquidated damages shall be paid only with respect to such holder’s Immediately
Registrable Securities.  Each such payment shall be due and payable
within ten (10) days after the end of each full 30-day period of the occurrence
of an Event until the termination of the Event and within ten (10) days after
such termination.  The payment obligations of the Parent under this
Section E(2)(d) shall be cumulative.  Notwithstanding anything to the
contrary contained herein, in no event shall the amount of liquidated damages
payable by the Parent pursuant to this Paragraph 2(d) exceed five percent (5%)
of the Offering Price per PPO Unit paid in the Offering for the Immediately
Registrable Securities held by such holder at the time of the first occurrence
of an Event.

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

     

    (e)      Notwithstanding anything to the
contrary contained in this Agreement, the Parent shall not be required under this
Agreement to file or amend a Registration Statement for any offering that would
be deemed by the SEC to constitute a primary offering of securities by the
Parent.  In the event that, as a
result of the operation of the preceding sentence, the Parent cannot include all of the Immediately Registrable Securities in the
Registration Statement, then the Parent shall include in the Registration
Statement the maximum number of Immediately Registrable Securities that can be
included therein without causing the Registration Statement to be deemed to
register a primary offering by the Parent, with the number of Immediately Registrable Securities included in the
Registration Statement to
be allocated among the holders thereof in proportion to the total Immediately Registrable Securities held by each
such holder on the date that the Registration
Statement is filed.  Any Immediately Registrable Securities that are not
included in the Registration Statement as a result of the occurrence of the
foregoing shall be deemed to be Piggy-Back Registrable
Securities.

     

    (3)       Registration
Procedures.  In connection with the Parent’s registration
obligations hereunder, the Parent shall:

     

    (a)      (i)
Prepare and file with the SEC such amendments, including post-effective
amendments, to the Registration Statement as may be necessary to keep the
Registration Statement continuously effective as to the Immediately Registrable
Securities for the Effectiveness Period; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; and (iii) respond as
promptly as reasonably practicable to any comments received from the SEC with
respect to the Registration Statement or any amendment thereto.

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    (b)      Notify
the Placement Agent and the Purchasers as promptly as reasonably possible, and
(if reasonably requested by the Placement Agent) confirm such notice in writing,
of any of the following events:  (i) the SEC notifies the Parent
whether there will be a “review” of the Registration Statement; (ii) if the SEC
issues any stop order suspending the effectiveness of the Registration Statement
or initiates any action, claim, suit, investigation or proceeding (a “Proceeding”) for that
purpose; (iii) the Parent receives notice of any suspension of the qualification
or exemption from qualification of any Immediately Registrable Securities for
sale in any jurisdiction, or the initiation or threat of any Proceeding for such
purpose; or (iv) the financial statements included in the Registration Statement
become ineligible for inclusion therein or any statement made in the
Registration Statement or Prospectus or any document incorporated or deemed to
be incorporated therein by reference is untrue in any material respect or any
revision to the Registration Statement, Prospectus or other document is required
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 light of the circumstances under which they were made,
not misleading.  Notwithstanding the foregoing, the Parent shall not
intentionally include any material non-public information in any notice provided
to any Purchaser under this Section E(3)(b).

     

    (c)      Use
its commercially reasonable efforts to avoid the issuance of or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of the
Registration Statement or (ii) any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment; provided, however, that the
Parent may suspend sales pursuant to the Registration Statement for a period of
up to thirty (30) days (unless the holders of at least 60 percent of the
then-eligible Immediately Registrable Securities consent in writing to a longer
delay of up to an additional thirty (30) days) no more than once in any
twelve-month period if the Parent furnishes to the holders of the Immediately
Registrable Securities a certificate signed by the Parent’s Chief Executive
Officer stating that in the good faith judgment of the Parent’s Board of
Directors, (i) the offering could reasonably be expected to interfere in any
material respect with any acquisition, corporate reorganization or other
material transaction under consideration by the Parent or (ii) there is some
other material development relating to the operations or condition (financial or
other) of the Parent that has not been disclosed to the general public and as to
which it is in the Parent’s best interests not to disclose such development;
provided further, however, that the Parent may not so suspend sales more than
once in any calendar year without the written consent of the holders of at least
a majority of the then-eligible Immediately Registrable
Securities.  Each violation of the Parent’s obligation not to suspend
sales pursuant to the Registration Statement longer than permitted pursuant to
the proviso of this Paragraph 3(c) shall be deemed an “Event” and for each
such default, the Purchaser shall be entitled to the payment provisions set
forth in Paragraph 2(d).

     

    (d)      Deliver
to Purchaser, which delivery may be made electronically, by the business day
after the date first available, without charge, such reasonable number of copies
of the Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Purchasers may reasonably
request.

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

     

    (e)      To
the extent required by law, prior to any public offering of Registrable
Securities, use its commercially reasonable efforts to register or qualify or
cooperate with the selling Purchasers in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or “Blue Sky”
laws of such jurisdictions within the United States as any Purchaser requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a registration statement;
provided, however, that the Parent shall not be required for any such purpose to
(i) qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not be otherwise required to qualify but for the
requirements of this Paragraph (3)(e), or (ii) subject itself to
taxation.

     

    (f)       Comply
in all material respects with all applicable rules and regulations of the SEC
and the principal stock exchange or market on which the Parent Common Stock is
then listed or eligible for trading.

     

    (4)       Registration
Expenses.  The Parent shall pay all fees and expenses incident
to the performance of or compliance with this Agreement by the Parent, including
without limitation (a) all registration and filing fees and expenses, including
without limitation those related to filings with the SEC, in connection with
applicable state securities or “Blue Sky” laws, and to the OTC Bulletin Board
(the “OTCBB”),
(b) printing expenses (including, without limitation, expenses of printing
copies of Prospectuses reasonably requested by the Purchasers), (c) fees and
disbursements of counsel for the Parent and (d) fees and expenses of all other
Persons retained by the Parent in connection with the consummation of the
transactions contemplated by this Agreement.  Notwithstanding the
foregoing, each Purchaser shall pay any and all costs, fees, discounts or
commissions attributable to the sale of its respective Registrable Securities
and all fees and expenses of its counsel and other advisors.

     

    
      
         

      

      
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              (5)

            	
              Indemnification.

            

    

     

    (a)      Indemnification by the
Parent.  The
Parent agrees to indemnify and hold harmless each Purchaser, the partners,
members, officers and directors of each Purchaser and each Person or entity, if
any, who controls such Purchaser or any of the foregoing within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, from and
against any losses, claims, damages or liabilities (collectively, “Losses”) to which
they may become subject (under the Securities Act or otherwise) insofar as such
Losses (or actions or proceedings in respect thereof) arise out of, or are based
upon, any material breach of this Agreement or any other Offering Document by
the Parent or any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading or arise out of any failure by the Parent to fulfill any
undertaking included in the Registration Statement and the Parent will, as
incurred, reimburse such Purchaser, partner, member, officer, director or
controlling Person for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, however, that the Parent shall not be liable in any such case
to the extent that such Loss arises out of, or is based upon, an untrue
statement or omission or alleged untrue statement or omission made in such
Registration Statement in reliance upon and in conformity with written
information furnished to the Parent by or on behalf of such Purchaser, partner,
member, officer, director or controlling Person specifically for use in
preparation of the Registration Statement or any breach of this Agreement by
such Purchaser; provided further, however, that the Parent shall not be liable
to any Purchaser of Registrable Securities (or any partner, member, officer,
director or controlling Person of such Purchaser) to the extent that any such
Loss is caused by an untrue statement or omission or alleged untrue statement or
omission made in any preliminary prospectus if either (i) (A) such Purchaser
failed to send or deliver a copy of the final prospectus with or prior to, or,
if Rule 172 is then in effect, such Purchaser failed to confirm that a final
prospectus was deemed to be delivered prior to, the delivery of written
confirmation of the sale by such Purchaser to the Person asserting the claim
from which such Loss resulted and (B) the final prospectus corrected such untrue
statement or omission, (ii) (X) such untrue statement or omission is corrected
in an amendment or supplement to the prospectus and (Y) having previously been
furnished by or on behalf of the Parent with copies of the prospectus as so
amended or supplemented or, if Rule 172 is then in effect, notified by the
Parent that such amended or supplemented prospectus has been filed with the SEC,
such Purchaser thereafter fails to deliver such prospectus as so amended or
supplemented, with or prior to, or, if Rule 172 is then in effect, such
Purchaser fails to confirm that the prospectus as so amended or supplemented was
deemed to be delivered prior to, the delivery of written confirmation of the
sale of a Registrable Security to the Person asserting the claim from which such
Loss resulted or (iii) such Purchaser sold Registrable Securities in violation
of such Purchaser’s covenant contained in Paragraph (6) below.

     

    
      
         

      

      
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    (b)      Indemnification by
Purchasers.  Each Purchaser, severally and not jointly, agrees
to indemnify and hold harmless the Parent (and each Person, if any, who controls
the Parent within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, each officer of the Parent who signs the Registration
Statement and each director of the Parent), from and against any losses, claims,
damages or liabilities to which the Parent (or any such officer, director or
controlling Person) may become subject (under the Securities Act or otherwise),
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, any material
breach of this Agreement by such Purchaser or any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading in each case, on the
Effective Date thereof, if, and to the extent, such untrue statement or omission
or alleged untrue statement or omission was made in reliance upon and in
conformity with written information furnished by or on behalf of such Purchaser
specifically for use in preparation of the Registration Statement, including,
without limitation the Purchaser Questionnaire, the Selling Stockholder
Questionnaire, and the Anti-Money Laundering Information Form, and such
Purchaser will reimburse the Parent (and each of its officers, directors or
controlling Persons) for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, however, that in no event shall any indemnity under this
Paragraph 5(b) be greater in amount than the dollar amount of the proceeds (net
of (i) the purchase price of the Registrable Securities included in the
Registration Statement giving rise to such indemnification obligation and (ii)
the amount of any damages such Purchaser has otherwise been required to pay by
reason of such untrue statement or omission or alleged untrue statement or
omission) received by such Purchaser upon the sale of such Registrable
Securities.

     

    (c)      Conduct of Indemnification
Proceedings.  If any Proceeding shall be brought or asserted
against any Person entitled to indemnity hereunder (an “Indemnified Party”),
such Indemnified Party shall promptly notify the Person from whom indemnity is
sought (the “Indemnifying Party”)
in writing, and the Indemnifying Party shall be entitled to participate therein,
and to the extent that it shall wish, assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense
thereof.  After notice from the Indemnifying Party to such Indemnified
Party of its election to assume the defense thereof, such Indemnifying Party
shall not be liable to such Indemnified Party for any legal expenses
subsequently incurred by Indemnified Party in connection with the defense
thereof.  An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties.  If there exists or shall exist a
conflict of interest that would make it inappropriate in the reasonable judgment
of the Indemnified Party for the same counsel to represent both the Indemnified
Party and such Indemnifying Party or any affiliate or associate thereof, the
Indemnified Party shall be entitled to retain its own counsel at the expense of
such Indemnifying Party; provided, further, that no Indemnifying Party be
responsible for the fees and expense of more than one separate counsel for all
Indemnified Parties.  The Indemnifying Party shall not settle an
action without the consent of the Indemnified Party, which consent shall not be
unreasonably withheld, unless such settlement includes an unconditional release
of such Indemnified Party from all liability on claims that are the subject
matter of such Proceeding.  All reasonable fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent incurred
in connection with investigating or preparing to defend such Proceeding in a
manner not inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within ten business days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).

     

    
      
         

      

      
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    (d)      Contribution.  If
a claim for indemnification under Paragraph (5)(a) or (b) is unavailable to an
Indemnified Party (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations.  The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or related to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission.  The amount paid or payable by a party
as a result of any Losses shall be deemed to include, subject to the limitations
set forth in Paragraph (5)(c), any reasonable attorneys’ or other reasonable
fees or expenses incurred by such party in connection with any Proceeding to the
extent such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Paragraph 5(d) was available to such party
in accordance with its terms.

     

    The parties hereto agree that it would
not be just and equitable if contribution pursuant to this Paragraph (5)(d) were
determined by pro rata allocation or by any other method of allocation that does
not take into account the equitable considerations referred to in the
immediately preceding paragraph.  Notwithstanding the provision of
this Paragraph (5)(d), no Purchaser shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the net proceeds actually
received by such Purchaser from the sale of the Registrable Securities subject
to the Proceeding exceeds the amount of any damages that such Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.  No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.

    
      
         

      

      
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    (6)   Dispositions.  Each
Purchaser agrees that it will comply with the prospectus delivery requirements
of the Securities Act as applicable to it in connection with sales of
Registrable Securities pursuant to the Registration Statement.  Each
Purchaser further agrees that, upon receipt of a notice from the Parent of the
occurrence of any event of the kind described in Paragraphs (3)(b) and 3(c),
such Purchaser will discontinue disposition of such Registrable Securities under
the Registration Statement until such Purchaser’s receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement, or until it is
advised in writing (the “Advice”) by the
Parent that the use of the applicable Prospectus may be resumed, and, in either
case, has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.  The Parent may provide appropriate stop
orders to enforce the provisions of this paragraph.

     

    (7)   Piggy-Back
Registrations.  If at any time during the Effectiveness Period,
other than any suspension period referred to in Paragraphs (3)(b) and 3(c),
there is not an effective registration statement covering all of the Registrable
Securities and the Parent shall determine to prepare and file with the SEC a
registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents or other registration forms relating to equity
securities to be issued in connection with any acquisition of any entity or
business or equity securities issuable in connection with stock option or other
employee benefit plans, then the Parent shall send to each Purchaser written
notice of such determination and if, within fifteen (15) days after receipt of
such notice, any such Purchaser shall so request in writing, the Parent shall
include in such registration statement all or any part of the Piggy-Back
Registrable Securities not already covered by an effective registration
statement such Purchaser requests to be registered.  Notwithstanding
anything to the contrary contained herein, this Paragraph (7) will not apply to
an underwritten public offering where the managing underwriter of the offering
prohibits such registration.

     

    (8)   Rule
144.  Until such time as the Registrable Securities are
eligible for unlimited resale pursuant to Rule 144 under the Securities
Act, the Parent agrees with each holder of Registrable Securities
to:

     

    (a)      comply
with the requirements of Rule 144(c) under the Securities Act with respect to
current public information about the Parent;

     

    (b)      to
file with the SEC in a timely manner all reports and other documents required of
the Parent under the Securities Act and the Exchange Act (at any time it is
subject to such reporting requirements); and

     

    (c)      furnish
to any holder of Registrable Securities upon request (i) a written statement by
the Parent as to its compliance with the requirements of said Rule 144(c) and
the reporting requirements of the Securities Act and the Exchange Act (at any
time it is subject to such reporting requirements), (ii) a copy of the most
recent annual or quarterly report of the Parent, and (iii) such other reports
and documents of the Parent as such holder may reasonably request to avail
itself of any similar rule or regulation of the SEC allowing it to sell any such
Registrable Securities without registration.

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

     

    
      	
              F.

            	
              Covenants
      of the Company

            

    

     

    (1)       The
Company agrees to file one or more Forms D with respect to the Securities on a
timely basis as required under Regulation D under the Securities Act to claim
the exemption provided by Rule 506 of Regulation D and to provide a copy thereof
to the Placement Agent and their counsel promptly after such
filing.  The Company, on or before the Closing Date, shall take such
action as the Company shall reasonably determine is necessary in order to obtain
an exemption for or to qualify the Securities for sale to the Purchasers at the
Closing pursuant to this Agreement under applicable securities or “Blue Sky”
laws of the states of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so taken to the
Purchasers on or prior to the Closing Date.  The Company shall make
all filings and reports relating to the offer and sale of the Securities
required under applicable securities or “Blue Sky” laws of the states of the
United States following the Closing Date.

     

    
      	
              G.

            	
              Covenants
      of the Parent

            

    

     

    (1)       The
Parent shall make a public announcement of the Closing of the Offering and the
Merger by filing with the SEC a Current Report on Form 8-K and issuing a press
release within the time periods required under the federal securities
laws.

     

    (2)       The
Parent shall not publicly disclose the name of any Purchaser, or include the
name of any Purchaser in any filing or press release without the prior written
consent of such Purchaser, unless otherwise required by law.  The
Purchaser consents to the disclosure of its name and details of its purchase in
the Registration Statement.  The Parent shall not, and shall cause
each of its officers, directors, employees and agents to not, knowingly provide
any Purchaser with any material nonpublic information regarding the Parent from
and after the issuance of the above referenced filings and press release without
the express written consent of such Purchaser.

     

    (3)       The
Parent shall use its commercially reasonable efforts to maintain the listing
eligibility of the Parent Common Stock for quotation on the OTCBB unless it
lists its shares for trading on an alternative stock exchange including at least
one in the United States.

     

    (4)       Other
than pursuant to the Registration Statement, prior to the Effective Date, the
Parent may not file any registration statement (other than on Form S-8 or S-4)
with the SEC with respect to any securities of the Parent.  Until 90
days after the Effective Date, the Parent will not, directly or indirectly,
offer, sell or grant any option to purchase, or otherwise dispose of (or
announce any of the foregoing) any of its or its subsidiaries’ equity or equity
equivalent securities, including, without limitation, any debt, preferred stock
or other instrument or security that is, at any time during its life and under
any circumstances, convertible into or exchangeable or exercisable for Parent
Common Stock or Parent Common Stock equivalents, other than with respect to (i)
grants of options or sales of Parent Common Stock pursuant to the Parent’s 2010
Equity Incentive Plan or (ii) to the sellers of, and in connection with the
acquisition of, all of the capital stock or all or substantially all of the
assets of another business.

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

     

    (5)       The
Parent will not sell, offer to sell, solicit offers to buy or otherwise
negotiate in respect of any “security” (as defined in the Securities Act) that
is or could be integrated with the sale of the Securities in a manner that would
require the registration of the Securities under the Securities
Act.

     

    (6)       During
the Effectiveness Period, as long as any Purchaser owns any Registrable
Securities, the Parent covenants (i) to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Parent after the date hereof pursuant to the
Exchange Act, and (ii) maintain compliance with all applicable provisions of the
Sarbanes-Oxley Act of 2002 and all rules and regulations promulgated thereunder,
except where noncompliance would not have, individually or in the aggregate, a
Material Adverse Effect.  During the Effectiveness Period, as long as
any Purchaser owns any Registrable Securities, if the Parent is not required to
file reports pursuant to such laws, it will prepare and furnish to the
Purchasers and make publicly available in accordance with Rule 144(c) such
information as is required for the Purchasers to sell the PPO Shares and the
shares of Parent Common Stock issuable upon exercise of the PPO Conversion
Warrants under Rule 144. The Parent further covenants that it will take such
further action during the Effectiveness Period as any holder of any Registrable
Securities reasonably request, all to the extent required from time to time to
enable such Person to sell the shares of Parent Common Stock held by such Person
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144.

     

    
      	
              H.

            	
              Conditions
      to Closing; Termination

            

    

     

    (1)       Conditions Precedent to the
Obligations of the Purchasers to Purchase Securities.  The
obligation of each Purchaser to acquire Securities at the Closing is subject to
the satisfaction or waiver by such Purchaser, at or before the Closing, of each
of the following conditions:

     

    (a)      The
representations and warranties of the Company contained herein shall be true and
correct in all material respects (other than those representations and
warranties that are qualified by “materiality” or Material Adverse Effect
qualifiers shall be true and correct in all respects) as of the date when made
and as of the Closing as though made on and as of such date (except to the
extent that such representation or warranty speaks of an earlier date, in which
case such representation and warranty shall be true and correct in all material
respects as of the Closing Date with respect to such date);

     

    (b)      The
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Offering Documents
to be performed, satisfied or complied with by it at or prior to the
Closing;

    
      
         

      

      
        32

        
          

        

      

      
         

      

    

     

    (c)      No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of
the transactions contemplated by the Offering Documents;

     

    (d)      Since
the date of execution of this Agreement, no event or series of events shall have
occurred that reasonably could have or result in a Material Adverse
Effect;

     

    (e)      Trading
in the Parent Common Stock shall not have been suspended by the SEC or the
OTCBB (except for any suspensions of trading of limited duration agreed to
by the Company) at any time since the date of execution of this Agreement, and
the Parent Common Stock shall have been at all times since such date eligible
for quotation on the OTCBB;

     

    (f)       The
Company and the Parent shall have executed and delivered an Agreement and Plan
of Merger and Reorganization by and among the Parent, the Company, and a wholly
owned limited liability company subsidiary of the Parent, to be executed and to
become effective immediately following the Closing;

     

    (g)      The
Company shall have delivered the items required to be delivered by the Company
in accordance with Section A(4); and

     

    (h)      This
Agreement shall not have been terminated as to such Purchaser in accordance with
Section H(3).

     

    (2)       Conditions Precedent to the
Obligations of the Company to sell Securities.  The obligation
of the Company to sell Securities at the Closing is subject to the satisfaction
or waiver by the Company, at or before the Closing, of each of the following
conditions:

     

    (a)      The
representations and warranties of each Purchaser contained herein shall be true
and correct in all material respects (other than those representations and
warranties that are qualified by “materiality” or Material Adverse Effect
qualifiers, which shall be true and correct in all respects) as of the date when
made and as of the Closing Date as though made on and as of such
date;

     

    (b)      Each
Purchaser shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Offering Documents
to be performed, satisfied or complied with by such Purchaser at or prior to the
Closing;

     

    (c)      No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of
the transactions contemplated by the Offering Documents;

    
      
         

      

      
        33

        
          

        

      

      
         

      

    

     

    (d)      The
Company and the Parent shall have executed and delivered an Agreement and Plan
of Merger and Reorganization by and among the Parent, the Company, and a wholly
owned limited liability company subsidiary of the Parent, to be executed and to
become effective immediately following the Closing;

     

    (e)      Each
Purchaser shall have delivered its Investment Amount in accordance with Section
A(2); and

     

    (f)       This
Agreement shall not have been terminated as to such Purchaser in accordance with
Section H(3).

     

    (3)       Termination. This
Agreement may be terminated prior to Closing:

     

    (a)      By
written agreement of the Purchasers and the Company; and

     

    (b)      By
the Company or a Purchaser (as to itself but no other Purchaser) upon written
notice to the other, if the Closing shall not have taken place by 6:30 p.m.
Eastern time on or before December 29, 2010 (with the Company and the Placement
Agent reserving the right to further extend the termination date of the Offering
to December 31, 2010 without further notice); provided, that the right to
terminate this Agreement under this Section H(3) shall not be available to any
Person whose failure to comply with its obligations under this Agreement has
been the cause of or resulted in the failure of the Closing to occur on or
before such time.

     

    In the event of a termination
pursuant to Section H(3)(a), the Company shall promptly notify all
non-terminating Purchasers. Upon a termination in accordance with this Section
H(3), the Company and the terminating Purchaser(s) shall not have any further
obligation or liability (including as arising from such termination) to the
other and no Purchaser will have any liability to any other Purchaser under the
Offering Documents as a result thereof.

     

    
      	
              I.

            	
              Miscellaneous

            

    

     

    (1)       All
pronouns and any variations thereof used herein shall be deemed to refer to the
masculine, feminine, singular or plural, as identity of the Person or Persons
may require.

     

    
      
         

      

      
        34

        
          

        

      

      
         

      

    

    (2)       Any
notice or other communication required or permitted to be given or delivered
under this Agreement shall be in writing and shall be deemed given and effective
on the earliest of (a) the date of transmission, if such notice or communication
is delivered by fax prior to 6:30 p.m. Eastern Time on a business day, (b) the
next business day after the date of transmission, if such notice or
communication is delivered by fax on a day that is not a business day or later
than 6:30 p.m. Eastern Time on a business day, (c) upon receipt, if sent by an
internationally recognized overnight delivery service (with charges prepaid), or
(d) upon actual receipt by the party to whom such notice or other communication
is required to be given:

     

    (a)      if
to the Company, to it at:

     

    22nd
Century Limited, LLC

    8201 Main
Street, Suite 6

    Williamsville,
NY 14221

    Fax No.:
(716) 877-3964

    Attention:
Joseph Pandolfino

    

    or such
other address as it shall have specified to the Purchaser in writing, with a
copy (which shall not constitute notice) to:

    

    Foley
& Lardner LLP

    3000 K
Street N.W., Suite 600

    Washington,
D.C. 20007

    Fax No.:
(202) 672-5399

    Attention:
Thomas L. James, Esq.

      and

    Foley
& Lardner LLP

    111
Huntington Avenue

    Boston,
MA 02199

    Fax No.:
(617) 342-4001

    Attention:
Paul D. Broude, Esq.

    

    (b)      if
to the Parent, to it at:

     

    22nd
Century Group, Inc.

    11923 SW
37 Terrace

    Miami, FL
33175

    Attention:
David Rector

    

    or such
other address as it shall have specified to the Company and the Purchaser in
writing, with a copy (which shall not constitute notice) to:

    

    Gottbetter
& Partners, LLP

    488
Madison Avenue, 12th Floor

    New York,
NY  10022

    Fax No.:
(212) 400-6901

    Attention:
Adam S. Gottbetter, Esq.

    
      
         

      

      
        35

        
          

        

      

      
         

      

    

    

    (c)      if
to a Purchaser, to it at its address set forth on the signature page to this
Agreement, or such other address as it shall have specified to the Company in
writing.

     

    (3)       This
Agreement shall not confer any rights or remedies upon any person other than the
parties hereto and their respective successors and permitted assigns; provided, however, that the
provisions in Section E and Section G hereto as applicable to the Piggy-Back
Registrable Securities are intended, in part, for the benefit of the Placement
Agent.

     

    (4)       Failure
of the Company or the Parent to exercise any right or remedy under this
Agreement or any other agreement among the Company, the Parent and the
Purchaser, or otherwise, or delay by the Company or the Parent in exercising
such right or remedy, will not operate as a waiver thereof.  No waiver
by the Company or the Parent will be effective unless and until it is in writing
and signed by the Company or the Parent, as the case may be.

     

    (5)       This
Agreement shall be enforced, governed and construed in all respects in
accordance with the laws of the State of New York, as such laws are applied by
the New York courts to agreements entered into and to be performed in New York
by and between residents of New York, and shall be binding upon the Purchaser,
the Purchaser’s heirs, estate, legal representatives, successors and assigns and
shall inure to the benefit of the Company, its successors and
assigns.  The Company and each Purchaser hereby agree to submit to the
jurisdiction of the courts of the State of New York located within County of
Erie with respect to any proceeding arising out of or relating to this
Agreement, 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 thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service 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.  EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

     

    (6)       If
any provision of this Agreement is held to be invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed modified
to conform with such statute or rule of law.  Any provision hereof
that may prove invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provisions hereof.

     

    
      
         

      

      
        36

        
          

        

      

      
         

      

    

     

    (7)       The
parties understand and agree that, unless provided otherwise herein, money
damages would not be a sufficient remedy for any breach of the Agreement by the
Company or the Purchaser and that the party against which such breach is
committed shall be entitled to equitable relief, including injunction and
specific performance, as a remedy for any such breach.  Such remedies
shall not, unless provided otherwise herein, be deemed to be the exclusive
remedies for a breach by either party of the Agreement but shall be in addition
to all other remedies available at law or equity to the party against which such
breach is committed.

     

    (8)       The
obligations of each Purchaser under this Agreement are several and not joint
with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder, except as may result from the actions of any such Purchaser
other than through the execution hereof.  Nothing contained herein
solely by virtue of being contained herein shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any similar
entity, or create a presumption that the Purchasers are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated hereby.

     

    (9)       This
Agreement, together with the agreements and documents executed and delivered in
connection with this Agreement, constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof.

     

    (10)     This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if the
signature were an original, not a facsimile signature.

     

    (11)     The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.

     

    (12)     This
Agreement and the other Offering Documents (including any schedules and exhibits
hereto and thereto) supersede all other prior oral or written agreements between
the Purchaser, the Company, the Parent, their affiliates and Persons acting on
their behalf with respect to the matters discussed herein, and this Agreement
and other Offering Documents (including any schedules and exhibits hereto and
thereto) and the instruments referenced herein contain the entire understanding
of the parties with respect to the matters covered herein and therein and,
except as specifically set forth herein or therein, neither the Company, the
Parent nor any Purchaser makes any representation, warranty, covenant or
undertaking with respect to such matters.

     

    (13)     No
provision of this Agreement may be amended other than by an instrument in
writing signed by the Company, the Parent (with respect to Section E and Section
G hereof) and the Purchasers holding or being obligated to purchase at least a
majority of the PPO Units.  No consideration shall be offered or paid
to any Purchaser to amend or consent to a waiver or modification of any
provision of any Offering Document unless the same consideration is also offered
to all Purchasers who then hold PPO Units.  No provision hereof may be
waived other than by an instrument in writing signed by the party against whom
enforcement is sought.

     

    
      
         

      

      
        37

        
          

        

      

      
         

      

    

     

    (14)     Any
Purchaser may assign any or all of its rights under this Agreement to any
Person, provided that such transferee agrees in writing to be bound by the terms
and provisions of this Agreement and, to the extent applicable, the other
Offering Documents, and such transfer is in compliance with the terms and
provisions of this Agreement and permitted by federal and state securities
laws.

     

    (15)     The
representations and warranties of the parties contained herein or in any other
agreements or documents executed in connection herewith shall survive the
Closing.

     

    (16)     Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.

     

    (17)     By
executing and delivering this Agreement, upon acceptance of this Agreement by
the Company each Purchaser shall become a party to and be bound by the terms of
the Company's Amended and Restated Limited Liability Company Agreement dated as
of January 1, 2008, as amended through the Closing Date.

     

    [Signature
Pages to Follow]

    
      
         

      

      
        38

        
          

        

      

      
         

      

    

     

    SIGNATURE
PAGE

     

    The Purchaser hereby agrees to purchase
the number of PPO Units exchange for the Investment Amount, as set forth below,
and agrees to be bound by the terms and conditions of this
Agreement.

     

    PURCHASER

     

    
      	
              1.

            	
              Investment
      Amount:  $__________

            

    

     

    
      	
              2.

            	
              Number
      of PPO Units
Purchased:  ________

            

    

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      	
                                               

                                            	 
      	
                                               

                                            
	
                                              Signature
      of Purchaser

                                            	 
      	
                                              Signature
      of Joint Purchaser

                                            
	
                                              (and
      title, if applicable)

                                            	 
      	
                                              (if
      any)

                                            
	 	 	 
	
                                                
      

                                            	 
      	
                                               
      

                                            
	
                                              Taxpayer
      Identification or Social

                                            	 
      	
                                              Taxpayer
      Identification or Social

                                            
	
                                              Security
      Number

                                            	 
      	
                                              Security
      Number of Joint Purchaser (if any)

                                            
	 	 	 
	
                                               
      

                                            	 
      	 
        
	
                                              Name
      (please print as name will appear

                                            	 
      	 
      
	
                                              on
      stock certificate)

                                            	 
      	 
      
	 	 	 
	
                                               
      

                                            	 
      	 
      
	
                                              Number
      and Street

                                            	 
      	 
      
	 	 	 
	
                                               
      

                                            	 
      	 
      
	 City,
      State            
      	
                                                
      Zip
      Code

                                            	 
      	
                                               

                                            
	 
      	 
      	 
      
	
                                              ACCEPTED
      BY:

                                            	 
      	
                                              ACKNOWLEDGED
      BY (SOLELY FOR THE

                                              PURPOSES
      OF SECTION E AND SECTION G):

                                            
	 	 	 
	
                                              22ND
      CENTURY LIMITED, LLC

                                            	 
      	
                                              22ND
      CENTURY GROUP,
INC.

                                            

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
        
          
            
              
                	
                        By:

                      	
                                

                      	 
      	
                        By:

                      	
                                 

                      
	 
      	
                        Name:  Joseph
      Pandolfino

                      	 
      	 
      	
                        Name:  David
      Rector

                      
	
                          

                      	
                        Title:  Chief
      Executive Officer   

                      	
                          

                      	 
      	
                        Title:  Chief
      Executive
OfficerUnassociated Document

    CONVERSION
AGREEMENT

    

    This Conversion Agreement is made by
and between 22nd Century Limited, LLC, a Delaware limited liability company
(“22nd Century”), and ______________________, a ______________
[corporation/partnership/limited liability company] (the “Holder”), effective as
of December ____, 2010.

    

    WHEREAS, 22nd Century previously issued
to Holder a promissory note, dated __________, in the original principal amount
of ___________________ Dollars ($________________) made payable to Holder (the
“Note”);

    

    WHEREAS, the total amount due under the
Note is $_____________ as of the effective date hereof; and

    

    WHEREAS,
Holder desires to convert and exchange the amount of ___________________ Dollars
($________________) of this indebtedness evidenced by the Note for _______ Units
of 22nd Century as described in the Private Placement Memorandum, dated December
16, 2010 (the “Units”).

    

    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.           Holder
hereby sells, assigns, conveys, transfers, converts, exchanges and delivers to
22nd Century, and 22nd Century hereby accepts, all of Holder’s right, title and
interest in and to the indebtedness evidenced by the Note in the amount of
___________________ Dollars ($________________), free and clear of all liens,
claims, encumbrances and interests in property of every kind and
nature.

    

    2.           Holder
acknowledges and confirms receipt of (i) the Units in exchange for the
above-described amount of the indebtedness evidenced by the Note and, if
necessary, (ii) a new promissory note issued by 22nd Century to Holder for the
remaining, unconverted balance of the Note in the amount of ___________________
Dollars ($________________).

    

    3.           At
any time and from time to time, upon request of 22nd Century, Holder agrees to
do, execute, acknowledge and deliver, or cause to be done, executed,
acknowledged and delivered, such further acts, instruments, documents, deeds,
assignments, transfers, mortgages, conveyances, powers of attorney,
confirmations and assurances as 22nd Century may reasonably request to more
effectively convey, perfect, assign and transfer to and vest in 22nd Century,
its successors and assigns, full legal right, title and interest in and actual
possession of the above-described amount of the Note which has been converted
under this Conversion Agreement.

    

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

    

    
      
        	
                22nd
      Century Limited, LLC

              	 
      	
                [_________________________]

              
	 
      	 
      	 
      
	
                By: 

              	
                  

              	
                   

              	
                By: 

              	
                  

              
	
                Name:

              	 
      	
                Name:

              
	
                Title:

              	 
      	
                Title:

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