UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of Report (Date of earliest event reported): May 28, 2015
22nd
Century Group, Inc.
(Exact
Name of Registrant as Specified in Charter)
Nevada |
001-36338 |
98-0468420 |
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(I.R.S. Employer
Identification No.) |
9530 Main Street
Clarence, New York
(Address of Principal Executive Office) |
14031
(Zip Code) |
Registrant’s telephone number, including
area code: (716) 270-1523
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
| Item 1.01. | Entry into a Material Definitive Agreement. |
On May 28, 2015, 22nd Century Group, Inc.
(the “Company”) entered into a placement agency agreement (the “Placement Agency Agreement”) with Chardan
Capital Markets, LLC (the “Placement Agent”) relating to the Company’s registered direct offering, issuance and
sale (the “Offering”) to select investors (the “Investors”) of up to 6,000,000 shares (the “Offered
Shares”) of the Company’s common stock (the “Common Stock”) and Common Stock Purchase Warrants (the “Warrants”)
to purchase up to 3,000,000 shares of Common Stock (the “Warrant Shares”). A copy of the Placement Agent Agreement
is attached hereto as Exhibit 1.1.
Pursuant to the Placement Agency Agreement,
the Company has agreed to pay the Placement Agent a cash fee of 6.0% of the gross proceeds from the Offering and a cash fee equal
to 2.0% of the gross proceeds received by the Company, if any, from the cash exercise of any Warrants. The Placement Agent has
no commitment to purchase any of the shares of Common Stock or Warrants and is acting only as an agent in obtaining indications
of interest from investors who will purchase the shares of Common Stock and Warrants directly from the Company. The Placement Agency
Agreement requires us to indemnify the Placement Agent and certain of its affiliates against certain liabilities, including liabilities
under the Securities Act of 1933, as amended (the “Act”), or to contribute to payments the Placement Agent may be required
to make because of any of those liabilities.
In addition, on May 28, 2015, the Company
and one institutional Investor introduced to the Company by the Placement Agent entered into a securities purchase agreement (the
“Securities Purchase Agreement”) relating to the issuance and sale of the Offered Shares and the Warrants. The Offered
Shares and Warrants will be sold in units, with each unit consisting of one Offered Share and a Warrant to purchase 0.5 Warrant
Shares. The purchase price per unit is $1.00. The Warrants will provide for an exercise price of $1.25 per share and will be exercisable
starting six months after the issue date of the Warrants and will have a term of 5.5 years. The exercise price of the Warrants
will also be adjusted in the event of stock splits, reverse stock splits and the like pursuant to their terms. Except upon at least
61 days’ prior notice from the holder to the Company, the holder will not have the right to exercise any portion of the Warrant
if the holder, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of the Company’s
common stock (including securities convertible into common stock) outstanding immediately after the exercise; provided, however,
that the holder may not increase this limitation at any time in excess of 9.99%. The Securities Purchase Agreement provides that, subject to certain
exceptions, for a period ending on the earlier of (i) 90 days after the closing of the Offering and (ii) the trading day following
the day that the closing price of the Company’s common stock exceeds $1.25 for ten consecutive trading days, neither the
Company nor any of its subsidiaries will issue, enter into any agreement to issue or announce the issuance or proposed issuance
of any shares of Common Stock or Common Stock equivalents.
The Securities Purchase Agreement provides that, subject
to certain exceptions, until the Warrants are no longer outstanding, the Company will be prohibited from effecting or entering
into an agreement to effect any issuance by the Company or any of its subsidiaries of Common Stock or Common Stock equivalents
(or a combination of units thereof) involving a variable rate transaction, which generally includes any transaction in which the
Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include
the right to receive additional shares of Common Stock either (A) at a conversion price or exchange rate that is based upon and/or
varies with the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such securities,
or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance
of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the
business of the Company or the market for the Common Stock or (ii) enters into any agreement, whereby the Company may issue securities
at a future determined price. A copy of the form of Securities Purchase Agreement is filed as Exhibit 10.1 to this Current Report
on Form 8-K. A copy of the form of Warrant to be issued by the Company is attached hereto as Exhibit 10.2.
The net proceeds to the Company from the
Offering, after deducting Placement Agent fees and the Company’s estimated offering expenses, and excluding the proceeds,
if any, from the exercise of the Warrants, are expected to be approximately $5.6 million. The Offering is expected to close on
or before June 2, 2015.
The Offered Shares and the Warrant Shares
are registered under the Act on the Company’s Registration Statement on Form S-3 (Registration No. 333-195386) previously
filed with the Securities and Exchange Commission and declared effective on June 5, 2014. The Common Stock and Warrants in this
Offering are being offered and sold pursuant to a base prospectus and a prospectus supplement filed as part of the Registration
Statement.
Attached as Exhibit
5.1 is the opinion of Foley & Lardner LLP relating to the legality of the issuance and sale of the Offered Shares and the issuance
of the Warrant Shares upon exercise of the Warrants.
The foregoing summaries
of the terms of the Placement Agency Agreement, the Securities Purchase Agreement and the Warrants are subject to, and qualified
in their entirety by, such documents attached hereto as Exhibits 1.1, 10.1, and 10.2, respectively, and incorporated herein by
reference. The Company’s press release announcing the Offering is filed as Exhibit 99.1 to this Current Report on Form 8-K
and is incorporated by reference herein. Each of the Placement Agency Agreement and the Securities Purchase Agreement contains
representations and warranties that the respective parties made to, and solely for the benefit of, the other parties thereto in
the context of all of the terms and conditions of that agreement and in the context of the specific relationship between the parties.
The provisions of the Placement Agency Agreement and the Securities Purchase Agreement, including the representations and warranties
contained therein, are not for the benefit of any party other than the parties to such agreements or as stated therein and are
not intended as documents for investors and the public to obtain factual information about the current state of affairs of the
parties to those documents and agreements. Rather, investors and the public should look to other disclosures contained in the Company’s
filings with the Securities and Exchange Commission.
Item 9.01(d). Financial Statements and
Exhibits.
(d) Exhibits.
1.1 Placement Agency Agreement, dated May
28, 2015 between 22nd Century Group, Inc. and Chardan Capital Markets, LLC.
5.1 Opinion of Foley & Lardner LLP.
10.1 Form of Securities Purchase Agreement,
dated May 28, 2015, by and between 22nd Century Group, Inc., and each of the Purchasers (as defined therein).
10.2 Form of Common Stock Purchase Warrant.
23.1 Consent of Foley & Lardner LLP
(included in Exhibit 5.1).
99.1 Press Release issued by 22nd Century
Group, Inc. on May 29, 2015.
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
|
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22nd Century Group, Inc. |
|
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|
|
|
/s/ Henry Sicignano, III |
Date: |
May 29, 2015 |
Henry Sicignano, III |
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President and Chief Executive Officer |
Exhibit 1.1
PLACEMENT AGENCY AGREEMENT
Chardan Capital Markets, LLC
17 State Street
Suite 1600
New York, NY 10004
Ladies and Gentlemen:
Introduction.
Subject to the terms and conditions herein (this “Agreement”), 22nd Century Group, Inc., a Nevada
corporation (the “Company”), proposes to sell registered securities (the “Securities”) of the Company,
consisting of up to an aggregate of 6,000,000 shares (the “Shares”) of the Company’s common stock, $0.00001
par value per share (the "Common Stock”), and, together with each share of Common Stock sold, common stock purchase
warrants exercisable for .5 of a share of Common Stock for each Share purchased (for an aggregate of up to 3,000,000 shares of
common stock) (the “Warrants” and, together with the Shares, the “Securities”) directly to
certain investors (each, an “Investor” and, collectively, the “Investors”) through Chardan
Capital Markets, LLC, as placement agent (the “Placement Agent”). The Company expressly acknowledges and agrees
that the Placement Agent’s involvement in the offering is strictly on a reasonable best efforts basis and that the consummation
of the offering will be subject to, among other things, market conditions. The execution of this Agreement does not constitute
a commitment by the Placement Agent to purchase the Securities and does not ensure a successful offering of the Securities. The
Placement Agent may retain other brokers or dealers to act as sub-agents or selected-dealers on its behalf in connection with the
Offering (as defined below). Defined terms not otherwise defined herein shall have the meanings set forth in that certain securities
purchase agreement dated on or about the date hereof among the Company and the Investors (the “Purchase Agreement”).
The Company and Placement
Agent agree as follows:
Section
1. Agreement to Act as Placement Agent.
(a) On
the basis of the representations, warranties and agreements of the Company herein contained, and subject to all the terms and conditions
of this Agreement, the Placement Agent shall be the exclusive Placement Agent in connection with the offering and sale by the Company
of the Securities to the Investors pursuant to the Company's registration statement on Form S-3 File No. 333-195386) (the “Registration
Statement”), with the terms of such offering (the “Offering”) to be subject to market conditions and
negotiations between the Company, the Placement Agent and the prospective Investors. The Placement Agent will act on a reasonable
best efforts basis and the Company agrees and acknowledges that there is no guarantee of the successful placement of the Securities,
or any portion thereof, in the prospective Offering. Under no circumstances will the placement Agent or any of its “Affiliates”
(as defined below) be obligated to underwrite or purchase any of the Securities for its own account or otherwise provide any financing
and the Company is under no obligation to sell any Securities. The Placement Agent shall act solely as the Company’s agent
and not as principal. The Placement Agent shall have no authority to bind the Company with respect to any prospective offer to
purchase Securities and the Company shall have the sole right to accept offers to purchase Securities and may reject any such offer,
in whole or in part. Subject to the terms and conditions hereof, payment of the purchase price for, and delivery of, the Securities
shall be made at one or more closings (each a “Closing” and the date on which each Closing occurs, a “Closing
Date”). As compensation for services rendered, on each Closing Date, the Company shall pay to the Placement Agent the
fees and expenses set forth below from the gross proceeds received by the Company:
(i) A
cash fee equal to six percent (6%) of the gross proceeds received by the Company from the sale of the Securities at the closing
of the Offering (the “Closing”);
(ii) A
cash fee equal to two percent (2%) of the gross proceeds received by the Company, if any, from the cash exercise of any Warrants
sold in this Offering; and
(iii) Provided
that the Company sells Securities in this Offering, the Company also agrees to reimburse Placement Agent’s reasonable expenses
(with supporting invoices/receipts) up to a maximum of $25,000, including all legal fees and costs of the Placement Agent.
(b) The
term of the Placement Agent's exclusive engagement will be until the completion of the Offering (the “Exclusive Term”);
provided, however, that a party hereto may terminate this Agreement and the engagement with respect to itself at
any time upon five (5) days written notice to the other parties. Notwithstanding anything to the contrary contained herein, the
provisions concerning confidentiality, indemnification and contribution contained herein and the Company’s obligations contained
in the indemnification provisions will survive any expiration or termination of this Agreement, and the Company’s obligation
to pay fees actually earned and payable and to reimburse expenses actually incurred and reimbursable pursuant to Section 1 hereof
and which are permitted to be reimbursed under Financial Industry Regulatory Authority (“FINRA”) Rule 5110(f)(2)(D),
will survive any expiration or termination of this Agreement. Nothing in this Agreement shall be construed to limit the ability
of the Placement Agent or its Affiliates to pursue, investigate, analyze, invest in, or engage in investment banking, financial
advisory or any other business relationship with Persons (as defined below) other than the Company. As used herein (i) “Persons”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind and (ii) “Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person as such terms are used in and construed under Rule 405 under the Securities Act of 1933, as amended (the
“Securities Act”).
Section
2. Representations, Warranties and Covenants of the Company. The
Company hereby represents, warrants and covenants to the Placement Agent that, as of each Closing Date:
(a) Securities
Law Filings. The Company has filed with the Securities and Exchange Commission (the “Commission”) the Registration
Statement under the Securities Act of 1933, as amended (the “Securities Act”), which was initially filed on
April 18, 2014, subsequently amended, and declared effective on June 5, 2014 for the registration under the Securities Act of the
Securities. Following the determination of pricing among the Company and the prospective Investors introduced to the Company by
Placement Agent, the Company will file with the Commission pursuant to Rules 430A and 424(b) under the Securities Act, and the
rules and regulations (the “Rules and Regulations”) of the Commission promulgated thereunder, a prospectus supplement
relating to the placement of the Securities, their respective pricings and the plan of distribution thereof and will advise the
Placement Agent of all further information (financial and other) with respect to the Company required to be set forth therein.
Such registration statement, at any given time, including the exhibits thereto filed at such time, as amended at such time, is
hereinafter called the “Registration Statement”; such prospectus in the form in which it appears in the Registration
Statement is hereinafter called the “Base Prospectus”; and the amended or supplemented form of prospectus, in
the form in which it will be filed with the Commission pursuant to Rules 430A and/or 424(b) (including the Base Prospectus as so
amended or supplemented) is hereinafter called the “Prospectus Supplement.” The Registration Statement at the
time it originally became effective is hereinafter called the “Original Registration Statement.” Any reference
in this Agreement to the Registration Statement, the Original Registration Statement, the Base Prospectus or the Prospectus Supplement
shall be deemed to refer to and include the documents incorporated by reference therein (the “Incorporated Documents”),
if any, which were or are filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
at any given time, as the case may be; and any reference in this Agreement to the terms “amend,” “amendment”
or “supplement” with respect to the Registration Statement, the Original Registration Statement, the Base Prospectus
or the Prospectus Supplement shall be deemed to refer to and include the filing of any document under the Exchange Act after the
date of this Agreement, or the issue date of the Base Prospectus or the Prospectus Supplement, as the case may be, deemed to be
incorporated therein by reference. All references in this Agreement to financial statements and schedules and other information
which is “contained,” “included,” “described,” “referenced,” “set forth”
or “stated” in the Registration Statement, the Base Prospectus or the Prospectus Supplement (and all other references
of like import) shall be deemed to mean and include all such financial statements and schedules and other information which is
or is deemed to be incorporated by reference in the Registration Statement, the Base Prospectus or the Prospectus Supplement, as
the case may be. The Company has not received any notice that the Commission has issued or intends to issue a stop order suspending
the effectiveness of the Registration Statement or the use of the Base Prospectus or the Prospectus Supplement or intends to commence
a proceeding for any such purpose.
(b) Assurances.
The Original Registration Statement, as amended (and any further documents to be filed with the Commission) contains all exhibits
and schedules as required by the Securities Act. Each of the Registration Statement and any post-effective amendment thereto, at
the time it became effective, complied in all material respects with the Securities Act and the applicable Rules and Regulations
and did not each, as of its effective time, contain any untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading. The Base Prospectus, and the Prospectus Supplement,
each as of its respective date, comply or will comply in all material respects with the Securities Act and the applicable Rules
and Regulations. Each of the Base Prospectus and the Prospectus Supplement, as amended or supplemented, each as of its effective
time, did not and will not contain as of the date thereof any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The
Incorporated Documents, when they were filed with the Commission, conformed in all material respects to the requirements of the
Exchange Act and the applicable rules and regulations promulgated thereunder, and none of such documents, when they were filed
with the Commission, contained any untrue statement of a material fact or omitted to state a material fact necessary to make the
statements therein (with respect to Incorporated Documents incorporated by reference in the Base Prospectus or Prospectus Supplement),
in light of the circumstances under which they were made not misleading. No post-effective amendment to the Registration Statement
reflecting any facts or events arising after the date thereof which represent, individually or in the aggregate, a fundamental
change in the information set forth therein is required to be filed with the Commission. Except for this Agreement and the various
agreements entered into with prospective Investors, there are no documents required to be filed with the Commission in connection
with the transaction contemplated hereby that (x) have not been filed as required pursuant to the Securities Act or (y) will not
be filed within the requisite time period. Except for this Agreement and the various agreements entered into with prospective Investors,
there are no contracts or other documents required to be described in the Base Prospectus or Prospectus Supplement, or to be filed
as exhibits or schedules to the Registration Statement, which have not been described or filed as required.
(c) Offering
Materials. Neither the Company nor any of its directors and officers has distributed and none of them will distribute, prior
to each Closing Date, any offering material in connection with the offering and sale of the Securities other than the Base Prospectus,
the Prospectus Supplement, the Registration Statement, copies of the documents incorporated by reference therein and any other
materials permitted by the Securities Act.
(d) Subsidiaries.
All of the significant subsidiaries (as defined in Regulation S-X) of the Company are set forth in the SEC Reports. Except as set
forth in the SEC Reports, the Company owns, directly or indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens except for standard blanket security interests from lenders as described in the SEC Reports,
and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable
and free of preemptive and similar rights to subscribe for or purchase securities.
(e) Organization
and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power
and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company
nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business
and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as
the case may be, would not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity
or enforceability of this Agreement or any other Transaction Document, (ii) a material adverse effect on the results of operations,
assets, business or financial condition of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect
on the Company’s ability to perform in any material respect on a timely basis its obligations under this Agreement or any
Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and, to the Company’s knowledge
no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail
such power and authority or qualification.
(f) Authorization;
Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated
by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by
it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company
and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection herewith
or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which
it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance
with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification
and contribution provisions may be limited by applicable law.
(g) No
Conflicts. The execution, delivery and performance by the Company of this Agreement, the Purchase Agreement and the other Transaction
Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated
hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s
certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute
a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required
Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities
laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case
of each of clauses (ii) and (iii), such as would not have or reasonably be expected to result in a Material Adverse Effect.
(h) Filings,
Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the Company the Transaction Documents, other than: (i) the
filings required pursuant to Section 4.4 of the Purchase Agreement, (ii) the filing with the Commission of the Prospectus
Supplement, (iii) application(s) to each applicable Trading Market for the listing of the Shares and Warrant Shares for trading
thereon in the time and manner required thereby and (iv) such filings as are required to be made under applicable state securities
laws (collectively, the “Required Approvals”).
(i) Issuance
of the Securities; Registration. The Securities are duly authorized and, when issued and paid for in accordance with applicable
Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the
Company. The Warrant Shares, when issued and paid for (in cash or via a “cashless exercise”) in accordance with the
terms of the Warrants, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company.
The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant
to the Prospectus Supplement.
(j) Capitalization.
The capitalization of the Company is as set forth in the SEC Reports. The Company has not issued any capital stock since its most
recently filed periodic report under the Exchange Act, other than pursuant to the exercise of stock options under the Company’s
stock incentive plans, the issuance of shares of Common Stock pursuant to the Company’s stock incentive plans, the issuance
of shares of Common Stock pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of
the most recently filed periodic report under the Exchange Act. No Person has any right of first refusal, preemptive right, right
of participation, or any similar right to participate in the transactions contemplated by this Agreement and the transactions contemplated
pursuant to the Prospectus Supplement. Except as a result of the purchase and sale of the Securities or described in this Agreement
or the SEC Reports, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements
by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents.
The issuance and sale of the Securities will not obligate the Company or any Subsidiary to issue shares of Common Stock or other
securities to any Person (other than the Investors) and will not result in a right of any holder of Company securities to adjust
the exercise, conversion, exchange or reset price under any of such securities except that the sale of the Securities and/or exercise
price of the Warrants may result in a right of certain holders of Company outstanding securities of the Company as disclosed in
the SEC Reports. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid
and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval
or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities.
There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital
stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.
(k) SEC
Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the one year preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such
material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, together with
the Prospectus and the Prospectus Supplement, being collectively referred to herein as the “SEC Reports”) on
a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration
of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of
the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in all
material respects in accordance with United States generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements do not contain all items required by GAAP, and fairly present in all material
respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results
of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end
audit adjustments.
(l) Material
Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof, (i) there has
been no event, occurrence or development that has had or that would reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any material liabilities (contingent or otherwise), (iii) the Company has not altered its method
of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders
or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not
issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock incentive plans.
The Company does not have pending before the Commission any request for confidential treatment of information. Except for the issuance
of the Securities contemplated by this Agreement, no event, liability, fact, circumstance, occurrence or development has occurred
or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses,
properties, operations, assets or financial condition that would be required to be disclosed by the Company under applicable securities
laws at the time this representation is made or deemed made that has not been publicly disclosed at least 1 Trading Day prior to
the date that this representation is made.
(m) Litigation.
Other than actions described in the SEC Reports, there is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective
properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county,
local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity
or enforceability of any of the Transaction Documents or the Securities or (ii) would, if there were an unfavorable decision, have
or reasonably be expected to result in a Material Adverse Effect. Other than actions described in the SEC Reports, neither the
Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and
to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company
or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending
the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities
Act.
(n) Labor
Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of
the Company, which would reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’
employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither
the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. To the knowledge of the Company, no current executive officer of the Company
or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company
or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are
in material compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment
practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(o) Compliance.
Except as set forth in the SEC Reports, neither the Company nor any Subsidiary: (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company
or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that
it is in violation of, any material indenture, loan or credit agreement or any other agreement or instrument to which it is a party
or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation
of any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation
of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal,
state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and
employment and labor matters, except in each case as would not have or reasonably be expected to result in a Material Adverse Effect.
(p) Regulatory
Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports,
except where the failure to possess such permits would not reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation
or modification of any Material Permit.
(q) Title
to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them
and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries,
in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens
for the payment of federal, state or other taxes, for which appropriate reserves have been made in accordance with GAAP and, the
payment of which is not delinquent. Any real property and facilities held under lease by the Company and the Subsidiaries are held
by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance, except for
matters which are not expected to cause a Material Adverse Effect.
(r) Intellectual
Property. The Company and the Subsidiaries have, or have rights to use, all material patents, patent applications, trademarks,
trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property
rights and similar rights necessary or required for use in connection with their respective businesses as described in the SEC
Reports and which the failure to so have would have a Material Adverse Effect (collectively, the “Intellectual Property
Rights”). None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of,
the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned,
within two (2) years from the date of this Agreement except where such action is not expected to result in a Material Adverse Effect.
Neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements included within
the SEC Reports, a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe
upon the rights of any Person, except as would not have or reasonably be expected to not have a Material Adverse Effect. To the
knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing material infringement
by another Person of any of the Intellectual Property Rights. The Company and its Subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so would
not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(s) Insurance.
The Company and the Subsidiaries are insured against such losses and risks and in such amounts as the Company believes to be adequate,
including, but not limited to, directors and officers insurance coverage at least equal to the aggregate Subscription Amount. Neither
the Company nor any Subsidiary has any 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
a significant increase in cost.
(t) Transactions
With Affiliates and Employees. Except as set forth in the SEC Reports, none of the officers or directors of the Company or
any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party
to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or
personal property to or from, providing for the borrowing of money from or lending of money to or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case
in excess of $120,000 other than for (i) payment of compensation or consulting fees for services rendered, (ii) reimbursement for
expenses incurred on behalf of the Company and (iii) other employee benefits, including stock awards under any stock incentive
plan of the Company.
(u) Sarbanes-Oxley;
Internal Accounting Controls. Except as set forth in the SEC Reports, the Company and the Subsidiaries are in compliance with
any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all
applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof and as of the
Closing Date. Except as set forth in the SEC Reports, the Company and the Subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general
or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity
with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s
general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. Except as set forth in the SEC Reports, the Company
and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information required to
be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission’s rules and forms. The Company’s certifying officers have evaluated
the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of the period covered
by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”). The Company
presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation
Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act)
of the Company and its Subsidiaries that have materially affected, or is reasonably likely to materially affect, the internal control
over financial reporting of the Company and its Subsidiaries.
(v) Certain
Fees. Except as set forth in the Prospectus Supplement, no brokerage or finder’s fees or commissions are or will be payable
by the Company or any Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank
or other Person with respect to the transactions contemplated by the Transaction Documents. The Investors shall have no obligation
with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in
this Section that may be due in connection with the transactions contemplated by the Transaction Documents.
(w) Investment
Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will
not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject
to registration under the Investment Company Act of 1940, as amended.
(x) Registration
Rights. Except as set forth in the SEC Reports, no Person has any right to cause the Company or any Subsidiary to effect the
registration under the Securities Act of any securities of the Company or any Subsidiary.
(y) Listing
and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration
of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating
such registration. The Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on
which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and maintenance requirements.
(z) Application
of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s certificate of incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become applicable to the Investors as a result of the Investors and
the Company fulfilling their obligations or exercising their rights under this Agreement and the transactions contemplated pursuant
to the Prospectus Supplement, including without limitation as a result of the Company’s issuance of the Securities and the
Investors’ ownership of the Securities.
(aa) Disclosure.
Except with respect to the material terms and conditions of the transactions contemplated by this Agreement and the transactions
contemplated pursuant to the Prospectus Supplement, the Company confirms that neither it nor any other Person acting on its behalf
has provided any of the Investors or their agents or counsel with any information that it believes constitutes or might constitute
material, non-public information which is not otherwise disclosed in the Prospectus Supplement. The Company understands and confirms
that the Investors will rely on the foregoing representation in effecting transactions in securities of the Company. All of the
disclosure furnished by or on behalf of the Company to the Investors regarding the Company, its business and the transactions contemplated
hereby, including the Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
(bb) No
Integrated Offering. Assuming the accuracy of the Investors’ representations and warranties set forth in Section 3.2
of the Purchase Agreement, neither the Company, nor, to the Company’s knowledge, any of its Affiliates, nor to the Company’s
knowledge, any Person acting on its or their 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 this offering of the Securities to be integrated with prior
offerings by the Company for purposes of any applicable shareholder approval provisions of any Trading Market on which any of the
securities of the Company are listed or designated.
(cc) Solvency.
Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the
Company of the proceeds from the sale of the Securities hereunder, the fair saleable value of the Company’s 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. 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). The Company has no
knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the
bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. The SEC Reports set forth all outstanding
secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments.
For the purposes of this Agreement, “Indebtedness” means (x) any liabilities for borrowed money or amounts owed
in excess of $200,000 (other than trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements
and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the
Company’s consolidated balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of business; and (z) the present value of any lease payments
in excess of $50,000 due under leases required to be capitalized in accordance with GAAP. Except as set forth in the SEC Reports,
neither the Company nor any Subsidiary is in default with respect to any Indebtedness.
(dd) Tax
Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all United States federal, state and local
income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due
on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of
all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid
taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or
of any Subsidiary know of no basis for any such claim.
(ee) Foreign
Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent
or other person acting on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns
from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its
behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of the
Foreign Corrupt Practices Act of 1977, as amended.
(ff) Accountants.
The Company’s accounting firm is set forth in the SEC Reports. To the knowledge and belief of the Company, such accounting
firm (i) is a registered public accounting firm as required by the Exchange Act and (ii) shall express its opinion with respect
to the financial statements to be included in the Company’s Annual Report for the fiscal year ending December 31, 2015.
(gg) Regulation
M Compliance. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate
the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or, paid any compensation for soliciting purchases
of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any
other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Company’s placement
agent in connection with the placement of the Securities.
(hh) Office
of Foreign Assets Control. Neither the Company nor, to the Company's knowledge, any director, officer, agent, employee or affiliate
of the Company is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury
Department (“OFAC”).
(ii) U.S.
Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Investor’s
request.
(jj) Bank
Holding Company Act. Neither the Company nor any of its Subsidiaries is subject to the Bank Holding Company Act of 1956, as
amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal
Reserve”). Neither the Company nor any of its Subsidiaries owns or controls, directly or indirectly, five percent (5%)
or more of the outstanding shares of any class of voting securities or twenty-five percent or more of the total equity of a bank
or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries
exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation
by the Federal Reserve.
(kk) Money
Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in material compliance
with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970,
as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money
Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body
or any arbitrator involving the Company with respect to the Money Laundering Laws is pending or, to the knowledge of the Company,
threatened.
(ll) Certificates.
Any certificate signed by an officer of the Company and delivered to the Placement Agent or to counsel for the Placement
Agent shall be deemed to be a representation and warranty by the Company to the Placement Agent as to the matters set forth
therein.
(mm) Reliance.
The Company acknowledges that the Placement Agent will rely upon the accuracy and truthfulness of the foregoing representations
and warranties and hereby consents to such reliance.
(nn) FINRA
Affiliations. There are no affiliations with any FINRA member firm among the Company’s officers, directors or, to the
knowledge of the Company, any five percent (5%) or greater stockholder of the Company.
Section
3. Delivery and Payment. Each Closing shall occur at the offices
of the Ellenoff Grossman & Schole LLP, 1345 Avenue of the Americas, New York, New York 10105 (or at such other place as shall
be agreed upon by the Placement Agent and the Company) (“Placement Agent Counsel”). Subject to the terms and
conditions hereof, at each Closing payment of the purchase price for the Securities sold on such Closing Date shall be made by
Federal Funds wire transfer, against delivery of such Securities, and such Securities shall be registered in such name or names
and shall be in such denominations, as the Placement Agent may request at least one business day before the time of purchase (as
defined below).
Deliveries of the documents
with respect to the purchase of the Securities, if any, shall be made at the offices of Placement Agent Counsel. All actions taken
at a Closing shall be deemed to have occurred simultaneously.
Section
4. Covenants and Agreements of the Company. The Company further
covenants and agrees with the Placement Agent as follows:
(a) Registration
Statement Matters. The Company will advise the Placement Agent promptly after it receives notice thereof of the time when any
amendment to the Registration Statement has been filed or becomes effective or any supplement to any Prospectus Supplement or any
amended Prospectus Supplement has been filed and will furnish the Placement Agent with electronic copies thereof. The Company will
file all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant
to Section 13(a), 14 or 15(d) of the Exchange Act subsequent to the date of any Prospectus Supplement and for so long as the delivery
of a prospectus is required in connection with the Offering. The Company will advise the Placement Agent, promptly after it receives
notice thereof (i) of any request by the Commission to amend the Registration Statement or to amend or supplement any Prospectus
Supplement or for additional information, and (ii) of the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or any post-effective amendment thereto or any order directed at any Incorporated Document, if any,
or any amendment or supplement thereto or any order preventing or suspending the use of the Base Prospectus or any Prospectus Supplement
or any amendment or supplement thereto or any post-effective amendment to the Registration Statement, of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, of the institution or threatened institution of any proceeding
for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or a
Prospectus Supplement or for additional information. The Company shall use its best efforts to prevent the issuance of any such
stop order or prevention or suspension of such use. If the Commission shall enter any such stop order or order or notice
of prevention or suspension at any time, the Company will use its best efforts to obtain the lifting of such order at the earliest
possible moment, or will file a new registration statement and use its best efforts to have such new registration statement declared
effective as soon as practicable. Additionally, the Company agrees that it shall comply with the provisions of Rules 424(b),
430A, 430B and 430C, as applicable, under the Securities Act, including with respect to the timely filing of documents thereunder,
and will use its reasonable efforts to confirm that any filings made by the Company under such Rule 424(b) are received
in a timely manner by the Commission.
(b) Blue
Sky Compliance. The Company will cooperate with the Placement Agent and the Investors in endeavoring to qualify the Securities
for sale under the securities laws of United States jurisdictions as the Placement Agent and the Investors may reasonably request
and will make such applications, file such documents, and furnish such information as may be reasonably required for that purpose,
provided the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process
in any jurisdiction where it is not now so qualified or required to file such a consent, and provided further that the Company
shall not be required to produce any new disclosure document other than a Prospectus Supplement. The Company will, from time to
time, prepare and file such statements, reports and other documents as are or may be required to continue such qualifications in
effect for so long a period as the Placement Agent may reasonably request for distribution of the Securities. The Company will
advise the Placement Agent promptly of the suspension of the qualification or registration of (or any such exemption relating to)
the Securities for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose,
and in the event of the issuance of any order suspending such qualification, registration or exemption, the Company shall use its
best efforts to obtain the withdrawal thereof at the earliest possible moment.
(c) Amendments
and Supplements to a Prospectus Supplement and Other Matters. The Company will comply in all material respects with the Securities
Act and the Exchange Act, and the rules and regulations of the Commission thereunder, so as to permit the completion of the distribution
of the Securities as contemplated in this Agreement, the Incorporated Documents and any Prospectus Supplement. If during the period
in which a prospectus is required by law to be delivered in connection with the distribution of Securities contemplated by the
Incorporated Documents or any Prospectus Supplement (the “Prospectus Delivery Period”), any event shall occur
as a result of which, in the judgment of the Company or in the opinion of the Placement Agent or counsel for the Placement Agent,
it becomes necessary to amend or supplement the Incorporated Documents or any Prospectus Supplement in order to make the statements
therein, in the light of the circumstances under which they were made, as the case may be, not misleading, or if it is necessary
at any time to amend or supplement the Incorporated Documents or any Prospectus Supplement or to file under the Exchange Act any
Incorporated Document to comply with any law, the Company will promptly prepare and file with the Commission, and furnish electronically
at its own expense to the Placement Agent and to dealers, an appropriate amendment to the Registration Statement or supplement
to the Registration Statement, the Incorporated Documents or any Prospectus Supplement that is necessary in order to make the statements
in the Incorporated Documents and any Prospectus Supplement as so amended or supplemented, in the light of the circumstances under
which they were made, as the case may be, not misleading, or so that the Registration Statement, the Incorporated Documents or
any Prospectus Supplement, as so amended or supplemented, will comply with law. Before amending the Registration Statement or supplementing
the Incorporated Documents or any Prospectus Supplement in connection with the Offering, the Company will furnish the Placement
Agent with a copy of such proposed amendment or supplement and will not file any such amendment or supplement to which the Placement
Agent reasonably objects.
(d) Copies
of any Amendments and Supplements to a Prospectus Supplement. The Company will furnish the Placement Agent, without charge,
during the period beginning on the date hereof and ending on the later of the last Closing Date of the Offering, as many electronic
copies of the Incorporated Documents and any Prospectus Supplement and any amendments and supplements thereto (including any Incorporated
Documents, if any) as the Placement Agent may reasonably request.
(e) Free
Writing Prospectus. The Company covenants that it will not, unless it obtains the prior written consent of the Placement Agent,
make any offer relating to the Securities that would constitute an Company Free Writing Prospectus or that would otherwise constitute
a “free writing prospectus” (as defined in Rule 405 of the Securities Act) required to be filed by the Company
with the Commission or retained by the Company under Rule 433 of the Securities Act. In the event that the Placement Agent expressly
consents in writing to any such free writing prospectus (a “Permitted Free Writing Prospectus”), the Company
covenants that it shall (i) treat each Permitted Free Writing Prospectus as an Company Free Writing Prospectus, and (ii) comply
with the requirements of Rule 164 and 433 of the Securities Act applicable to such Permitted Free Writing Prospectus, including
in respect of timely filing with the Commission, legending and record keeping.
(f) Transfer
Agent. The Company will maintain, at its expense, a registrar and transfer agent for the Common Stock.
(g) Periodic
Reporting Obligations. During the Prospectus Delivery Period, the Company will duly file, on a timely basis, with the Commission
and the Trading Market all reports and documents required to be filed under the Exchange Act within the time periods and in the
manner required by the Exchange Act.
(h) Additional
Documents. The Company will enter into any subscription, purchase or other customary agreements as necessary or appropriate
to consummate the Offering, all of which will be in form and substance reasonably acceptable to the Company and the Investors.
(i) No
Manipulation of Price. The Company will not take, directly or indirectly, any action designed to cause or result
in, or that has constituted or might reasonably be expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.
(j) Acknowledgment.
The Company acknowledges that any advice given by the Placement Agent to the Company is solely for the benefit and use of the Board
of Directors of the Company and may not be used, reproduced, disseminated, quoted or referred to, without the Placement Agent's
prior written consent.
Section
5. Conditions of the Obligations of the Placement Agent. The obligations
of the Placement Agent hereunder shall be subject to the accuracy of the representations and warranties on the part of the Company
set forth in Section 2 hereof, in each case as of each Closing Date as though then made, to the timely performance by each of the
Company of its covenants and other obligations hereunder on and as of such dates, and to each of the following additional conditions:
(a) Compliance
with Registration Requirements; No Stop Order; No Objection from the FINRA. Each Prospectus Supplement (in accordance with
Rule 424(b)) and “free writing prospectus” (as defined in Rule 405 of the Securities Act), if any, shall have
been duly filed with the Commission, as appropriate; no stop order suspending the effectiveness of the Registration Statement or
any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission;
no order preventing or suspending the use of any Prospectus Supplement shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission; no order having the effect of ceasing or suspending the distribution
of the Securities or any other securities of the Company shall have been issued by any securities commission, securities regulatory
authority or stock exchange and no proceedings for that purpose shall have been instituted or shall be pending or, to the knowledge
of the Company, contemplated by any securities commission, securities regulatory authority or stock exchange; all requests for
additional information on the part of the Commission shall have been complied with; and the FINRA shall have raised no objection
to the fairness and reasonableness of the placement terms and arrangements.
(b) Corporate
Proceedings. All necessary corporate proceedings and other legal matters in connection with this Agreement, the Registration
Statement and each Prospectus Supplement, and the registration, sale and delivery of the Securities, shall have been completed.
(c) No
Material Adverse Change. Subsequent to the execution and delivery of this Agreement and prior to each Closing Date, in the
Placement Agent's sole good faith and reasonable judgment after consultation with the Company, there shall not have occurred any
Material Adverse Change or Material Adverse Effect.
(d) Opinion
of Counsel for the Company. The Placement Agent shall have received on each Closing Date the opinion of US legal counsel to
the Company, dated as of such Closing Date, including, without limitation, a negative assurance letter addressed to the Placement
Agent and in form and substance reasonably satisfactory to the Placement Agent.
(e) Officers’
Certificate. The Placement Agent shall have received on each Closing Date a certificate of the Company, dated as of such Closing
Date, signed by the Chief Executive Officer and Chief Financial Officer of the Company, to the effect that,:
(i) The
representations and warranties of the Company in this Agreement are true and correct in all material respects, as if made on and
as of such Closing Date, and the Company has complied with all the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to such Closing Date except as waived by the Placement Agent;
(ii) No
stop order suspending the effectiveness of the Registration Statement or the use of the Base Prospectus or any Prospectus Supplement
has been issued and no proceedings for that purpose have been instituted or are pending or, to the Company’s knowledge, threatened
under the Securities Act; no order having the effect of ceasing or suspending the distribution of the Securities or any other securities
of the Company has been issued by any securities commission, securities regulatory authority or stock exchange in the United States
and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company, contemplated by any
securities commission, securities regulatory authority or stock exchange in the United States;
(iii) When
the Registration Statement became effective, at the time of sale, and at all times subsequent thereto up to the delivery of such
certificate, the Registration Statement and the Incorporated Documents, if any, when such documents became effective or were filed
with the Commission, contained in all material respects, all material information required to be included therein by the Securities
Act and the Exchange Act and the applicable rules and regulations of the Commission thereunder, as the case may be, and in all
material respects conformed to the requirements of the Securities Act and the Exchange Act and the applicable rules and regulations
of the Commission thereunder, as the case may be, and the Registration Statement and the Incorporated Documents, if any, did not
and do not include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided, however,
that the preceding representations and warranties contained in this paragraph (iii) shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in writing to the Company by the Placement Agent expressly for
use therein) and, since the effective date of the Registration Statement, there has occurred no event required by the Securities
Act and the rules and regulations of the Commission thereunder to be set forth in the Incorporated Documents which has not been
so set forth; and
(iv) Subsequent
to the respective dates as of which information is given in the Registration Statement, the Incorporated Documents and any Prospectus
Supplement, there has not been: (a) any Material Adverse Change; (b) any transaction that is material to the Company and the Subsidiaries
taken as a whole, except transactions entered into in the ordinary course of business; (c) any obligation, direct or contingent,
that is material to the Company and the Subsidiaries taken as a whole, incurred by the Company or any Subsidiary, except obligations
incurred in the ordinary course of business; (d) any material change in the capital stock or outstanding indebtedness of the Company
or any Subsidiary; (e) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company; or
(f) any loss or damage (whether or not insured) to the property of the Company or any Subsidiary which has been sustained or will
have been sustained which has a Material Adverse Effect.
(f) Stock
Exchange Listing. The Common Stock shall be registered under the Exchange Act and shall be listed on the Trading Market, and
the Company shall not have taken any action designed to terminate, or likely to have the effect of terminating, the registration
of the Common Stock under the Exchange Act or delisting or suspending from trading the Common Stock from the Trading Market, nor
shall the Company have received any information suggesting that the Commission or the Trading Market is contemplating terminating
such registration or listing.
(g) Additional
Documents. On or before each Closing Date, the Placement Agent and counsel for the Placement Agent shall have received such
information and documents as they may reasonably require for the purposes of enabling them to pass upon the issuance and sale of
the Securities as contemplated herein, or in order to evidence the accuracy of any of the representations and warranties, or the
satisfaction of any of the conditions or agreements, herein contained.
If any condition specified
in this Section 5 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Placement Agent
by notice to the Company at any time on or prior to a Closing Date, which termination shall be without liability on the part of
any party to any other party, except that Section 6 (Payment of Expenses), Section 7 (Indemnification and Contribution) and Section
8 (Representations and Indemnities to Survive Delivery) shall at all times be effective and shall survive such termination.
Section
6. Payment of Expenses. The Company agrees to pay all costs, fees
and expenses incurred by the Company in connection with the performance of its obligations hereunder and in connection with the
transactions contemplated hereby, including, without limitation: (i) all expenses incident to the issuance, delivery and qualification
of the Securities (including all printing and engraving costs); (ii) all fees and expenses of the registrar and transfer agent
of the Common Stock; (iii) all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of the
Securities; (iv) all fees and expenses of the Company’s counsel, independent public or certified public accountants
and other advisors; (v) all costs and expenses incurred in connection with the preparation, filing and distribution of the Registration
Statement, the Base Prospectus and each Prospectus Supplement, and all amendments and supplements thereto, and this Agreement;
(vi) all filing fees, reasonable attorneys’ fees and expenses incurred by the Company or the Placement Agent in connection
with qualifying or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Securities
for offer and sale under the United States state securities or blue sky laws and, if required, preparing and printing a “Blue
Sky Survey,” or other memorandum, and any supplements thereto, advising the Placement Agent of such qualifications, registrations
and exemptions; (vii) if applicable, the filing fees incident to the review and approval by the FINRA of the Placement Agent's
participation in the offering and distribution of the Securities; (viii) the fees and expenses associated with including the Securities
on the Trading Market; (ix) all costs and expenses incident to the travel and accommodation of the Company’s employees on
the “roadshow,” if any; and (x) all other fees, costs and expenses referred to in Part II of the Registration
Statement and (xi) as provided in Section 1, if Securities are sold in the Offering, the reasonable out of pocket expenses of the
Placement Agent not to exceed $25,000, which amount includes all of the fees and expenses of the Placement Agent’s legal
counsel.
Section
7. Indemnification and Contribution.
(a) In
connection with the Company’s engagement of Placement Agent as placement agent in the Offering, the Company hereby agrees
to indemnify and hold harmless Placement Agent and its affiliates, and the respective controlling persons, directors, officers,
members, shareholders, agents and employees of any of the foregoing (collectively the “Indemnified Persons”), from
and against any and all claims, actions, suits, proceedings (including those of shareholders), damages, liabilities and expenses
incurred by any of them (including the reasonable fees and expenses of counsel), as incurred, (collectively a “Claim”),
that are (A) related to or arise out of (i) any actions taken or omitted to be taken (including any untrue statements made or any
statements omitted to be made) by the Company, or (ii) any actions taken or omitted to be taken by any Indemnified Person in connection
with the Company’s engagement of Placement Agent, or (B) otherwise relate to or arise out of Placement Agent’s activities
on the Company’s behalf under Placement Agent’s engagement, and the Company shall reimburse any Indemnified Person
for all expenses (including the reasonable fees and expenses of counsel) as incurred by such Indemnified Person in connection with
investigating, preparing or defending any such claim, action, suit or proceeding, whether or not in connection with pending or
threatened litigation in which any Indemnified Person is a party; provided, however, that the Company will not be responsible for
any Claim that is determined to have resulted from the gross negligence, willful misconduct or failure to act when there was a
duty or responsibility to act by Placement Agent or any of the Indemnified Persons. The Company further agrees that no Indemnified
Person shall have any liability to the Company for or in connection with the Company’s engagement of Placement Agent except
for any Claim incurred by the Company as a result of such Indemnified Person’s gross negligence, willful misconduct or failure
to act when there was a duty or responsibility to act by any such Indemnified Person.
(b) The
Company further agrees that it will not, without the prior written consent of Placement Agent, settle, compromise or consent to
the entry of any judgment in any pending or threatened Claim in respect of which indemnification may be sought hereunder (whether
or not any Indemnified Person is an actual or potential party to such Claim), unless such settlement, compromise or consent includes
an unconditional, irrevocable release of each Indemnified Person from any and all liability arising out of such Claim.
(c) Promptly
upon receipt by an Indemnified Person of notice of any complaint or the assertion or institution of any Claim with respect to which
indemnification is being sought hereunder, such Indemnified Person shall notify the Company in writing of such complaint or of
such assertion or institution but failure to so notify the Company shall not relieve the Company from any obligation it may have
hereunder, except and only in the event such failure results in the forfeiture by the Company of substantial rights and defenses.
If the Company so elects, the Company will assume the defense of such Claim, including the employment of counsel and the payment
of the fees and expenses of such counsel. In the event, however, that outside legal counsel to such Indemnified Person reasonably
determines that having common counsel would present such common counsel with a conflict of interest, then such Indemnified Person
may employ its own separate counsel to represent or defend him, her or it in any such Claim and the Company shall pay the reasonable
fees and expenses of such counsel. If the Company fails timely or diligently to defend, contest, or otherwise protect against any
Claim for any reason other than an Indemnified Person failed to give timely notice of the Claim to the Company or the Claim is
not covered by the indemnification obligations of the Company as described herein, then in such event the relevant Indemnified
Party shall have the right, but not the obligation, to defend, contest, compromise, settle, assert crossclaims, or counterclaims
or otherwise protect against the same, and shall be fully indemnified by the Company therefor, including without limitation, for
the reasonable fees and expenses of its counsel and all amounts paid as a result of such Claim or the compromise or settlement
thereof; provided, however, that no Indemnified Person nor his/her/its counsel shall have any right to consent to, compromise or
settle any Claim unless such consent, compromise or settlement includes an unconditional, irrevocable release of the Company and
all of its affiliates from any and all liability arising out of such Claim. In addition, with respect to any Claim in which the
Company assumes the defense, the Indemnified Person shall have the right to participate in such Claim and to retain his, her or
its own counsel therefor at his, her or its own expense.
(d) The
Company agrees that if any indemnity sought by an Indemnified Person hereunder is held by a court to be unavailable for any reason,
then the Company shall not have any indemnification obligation hereunder.
(e) The
Company’s indemnity, reimbursement and contribution obligations under this Agreement (a) shall be effective whether or not
the Company is at fault in any way and (b) shall not be effective in the event the Company is excused from its indemnification
obligations as provided in this section.
(f) The
Company acknowledges that Placement Agent has been retained only by the Company, that Placement Agent is providing services hereunder
as an independent contractor (and not in any fiduciary or agency capacity) and that the Company’s engagement of Placement
Agent is not deemed to be on behalf of, and is not intended to confer rights upon, any shareholder, owner or partner of the Company
or any other person not a party hereto as against Placement Agent or any of its affiliates, or any of its or their respective officers,
directors, controlling persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”)), employees or agents. Unless otherwise expressly agreed in writing by
Placement Agent, no one other than the Company is authorized to rely upon this Agreement or any other statements or conduct of
Placement Agent, and no one other than the Company is intended to be a beneficiary of this Agreement. The Company acknowledges
that any recommendation or advice, written or oral, given by Placement Agent to the Company in connection with Placement Agent’s
engagement is intended solely for the benefit and use of the Company’s management and directors in considering a possible
Offering, and any such recommendation or advice is not on behalf of, and shall not confer any rights or remedies upon, any other
person or be used or relied upon for any other purpose. Placement Agent shall not have the authority to make any commitment binding
on the Company. The Company, in its sole discretion, shall have the right to reject any investor introduced to it by Placement
Agent.
(g) The
Placement Agent and the Company further agree that neither Placement Agent nor any of its affiliates or any of its or their respective
officers, directors, controlling persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act), employees or agents shall have any liability to the Company, its security holders or creditors, or any person asserting claims
on behalf of or in the right of the Company (whether direct or indirect, in contract, tort, for an act of negligence or otherwise)
for any losses, fees, damages, liabilities, costs, expenses or equitable relief arising out of or relating to this Agreement or
the Services rendered hereunder, except for losses, fees, damages, liabilities, costs or expenses that arise out of or are based
on any action of or failure to act by Placement Agent and that are determined to have resulted solely from the gross negligence,
willful misconduct or failure to act when there was a duty or responsibility to act by Placement Agent or any of the Indemnified
Persons.
Section
8. Representations and Indemnities to Survive Delivery. The respective
indemnities, agreements, representations, warranties and other statements of the Company or any person controlling the Company,
of its officers, and of the Placement Agent set forth in or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of the Placement Agent, the Company, or any of its or their partners, officers
or directors or any controlling person, as the case may be, and will survive delivery of and payment for the Securities sold hereunder
and any termination of this Agreement, provided, that the representations and warranties of the Company shall only survive for
a period of one year from the Closing Date. A successor to a Placement Agent, or to the Company, its directors or officers or any
person controlling the Company, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained
in this Agreement.
Section
9. Notices. All communications hereunder shall be in writing and
shall be sent by a national overnight delivery service, hand delivered or telecopied and confirmed to the parties hereto as follows:
If to the Placement Agent to the address
set forth above, attn.: ______, Facsimile: _________
With a copy to:
Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas, 11th
Floor
New York, New York 10105
Attention: Robert Charron, Esq.
If to the Company:
22nd Century Group, Inc.
9530 Main Street
Clarence, New York 14031
Facsimile: 716-877-3064
Attention: Thomas L. James, Esq.
With a copy to:
Foley & Lardner LLP
One Independent Drive – Suite 1300
Jacksonville, FL 32202
Facsimile: 904-359-8700
Attention: John J. Wolfel, Esq.
Any party hereto may
change the address for receipt of communications by giving written notice to the others. Notices will be effective on the earlier
of either receipt of the notice or (i) in the case of notices provided by hand delivery or sent by facsimile transmission, the
notices will be deemed effective upon verified receipt, and (ii) in the case of notices provided by national overnight delivery
service, the notices will be deemed effective on the next business day immediately following the provision of the notice to such
national overnight delivery company for delivery of such notice on the next business morning, with the sender of the notice being
responsible for all costs of delivery.
Section
10. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto, and to the benefit of the employees, officers and directors and controlling persons referred to in Section
7 hereof, and to their respective successors, and personal representative, and no other person will have any right or obligation
hereunder.
Section
11. Partial Unenforceability. The invalidity or unenforceability of any
section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other section, paragraph
or provision hereof. If any section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable,
there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.
Section
12. Governing Law Provisions. This Agreement shall be deemed to have been
made and delivered in New York City and both this engagement letter and the transactions contemplated hereby shall be governed
as to validity, interpretation, construction, effect and in all other respects by the internal laws of the State of New York, without
regard to the conflict of laws principles thereof. Each of the Placement Agent and the Company: (i) agrees that any legal suit,
action or proceeding arising out of or relating to this engagement letter and/or the transactions contemplated hereby shall be
instituted exclusively in New York Supreme Court, County of New York, or in the United States District Court for the Southern District
of New York, (ii) waives any objection which it may have or hereafter to the venue of any such suit, action or proceeding, and
(iii) irrevocably consents to the jurisdiction of the New York Supreme Court, County of New York, and the United States District
Court for the Southern District of New York in any such suit, action or proceeding. Each of the Placement Agent and the Company
further agrees to accept and acknowledge service of any and all process which may be served in any such suit, action or proceeding
in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York
and agrees that service of process upon the Company mailed by certified mail to the Company’s address shall be deemed in
every respect effective service of process upon the Company, in any such suit, action or proceeding, and service of process upon
the Placement Agent mailed by certified mail to the Placement Agent’s address shall be deemed in every respect effective
service process upon the Placement Agent, in any such suit, action or proceeding. If either party shall commence an action or proceeding
to enforce any provision of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorney’s fees and other costs and expenses incurred with the investigation, preparation and prosecution
of such action or proceeding.
Section
13. General Provisions.
(a) This
Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous
oral agreements, understandings and negotiations with respect to the subject matter hereof. Notwithstanding anything herein to
the contrary, the engagement letter agreement (the “Engagement Letter”), dated May 27, 2015, between the Company and
the Placement Agent shall continue to be effective, including, without limitation, the provisions of Section A.2, and the terms
therein shall continue to survive and be enforceable by the Placement Agent in accordance with its terms, provided, however, the
compensation terms in Section 1 and indemnification hereunder shall supersede Sections A(1), A(3) and Section (F) of the Engagement
Letter in respect of the Offering. This Agreement may be executed in two or more counterparts, each one of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement may not be amended or
modified unless in writing by all of the parties hereto, and no condition herein (express or implied) may be waived unless waived
in writing by each party whom the condition is meant to benefit. Section headings herein are for the convenience of the parties
only and shall not affect the construction or interpretation of this Agreement.
(b) The
Company acknowledges that in connection with the offering of the Securities: (i) the Placement Agent has acted at arms length,
are not agents of, and owe no fiduciary duties to the Company or any other person, (ii) the Placement Agent owes the Company only
those duties and obligations set forth in this Agreement and (iii) the Placement Agent may have interests that differ from those
of the Company. The Company waives to the full extent permitted by applicable law any claims it may have against the Placement
Agent arising from an alleged breach of fiduciary duty in connection with the offering of the Securities.
[The remainder of this page has been
intentionally left blank.]
If the foregoing is
in accordance with your understanding of our agreement, please sign below whereupon this instrument, along with all counterparts
hereof, shall become a binding agreement in accordance with its terms.
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22nd century group, inc. |
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Title: |
The foregoing Placement
Agency Agreement is hereby confirmed and accepted as of the date first above written.
CHARDAN CAPITAL MARKETS, LLC |
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ATTORNEYS AT LAW
One Independent Drive, Suite 1300
Jacksonville, FL 32202-5017
904.359.2000 TEL
904.359.8700 FAX
www.foley.com |
EXHIBIT 5.1
May 28, 2015
22nd Century Group, Inc.
9530 Main Street
Clarence, New York 14031
Ladies and Gentlemen:
We have acted as securities
counsel for 22nd Century Group, Inc., a Nevada corporation (the “Company”), in connection with the sale by the
Company of up to 6,000,000 shares (the “Shares”) of common stock, $0.00001 par value per share, of the Company
(“Common Stock”), warrants to purchase up to an aggregate of 3,000,000 shares of Common Stock (the “Warrants”)
and shares of Common Stock issuable upon exercise of the Warrants (the “Warrant Shares” and, together with the
Warrants and the Shares, the “Securities”) pursuant to the Registration Statement on Form S-3, Registration
No. 333-195386, filed by the Company with the Securities and Exchange Commission (the “Commission”) and
declared effective on June 5, 2014 (the “Registration Statement”). The prospectus included within the Registration
Statement is hereinafter referred to as the “Base Prospectus.” The prospectus supplement dated May 28, 2015,
in the form filed with the Commission under Rule 424(b) promulgated under the Securities Act of 1933, as amended, is hereinafter
referred to as the “Prospectus Supplement.” The Shares and the Warrants are to be sold to one institutional
investor pursuant to a securities purchase agreement dated May 28, 2015 (the “Purchase Agreement”).
As counsel to the Company
in connection with the proposed potential issuance and sale of the above-referenced Securities, we have examined: (i) the Company’s
Articles of Incorporation and Bylaws, each as amended to date; (ii) certain resolutions of the Board of Directors and a pricing
committee of the Board of Directors of the Company relating to the sale of the Securities; (iii) the Purchase Agreement and (iv)
such other proceedings, documents and records as we have deemed necessary to enable us to render this opinion.
In our examination
of the above-referenced documents, we have assumed the genuineness of all signatures, the authenticity of all documents, certificates
and instruments submitted to us as originals and the conformity with the originals of all documents submitted to us as copies.
We have also assumed the due execution and delivery of all documents where due execution and delivery are prerequisite to the effectiveness
thereof.
Boston
Brussels
CHICAGO
Detroit |
JACKSONVILLE
LOS ANGELES
MADISON
MIAMI |
MILWAUKEE
NEW YORK
ORLANDO
SACRAMENTO |
SAN DIEGO
SAN FRANCISCO
SHANGHAI
SILICON VALLEY |
TALLAHASSEE
TAMPA
TOKYO
WASHINGTON, D.C. |
22nd Century Group, Inc.
May 28, 2015
Page 2
Our opinions expressed
herein are subject to the following qualifications and exceptions: (i) the effect of bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws relating to or affecting the rights of creditors generally, including, without limitation, laws
relating to fraudulent transfers or conveyances, preferences and equitable subordination; (ii) the effect of general principles
of equity, including without limitation concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether
considered in a proceeding in equity or at law). (iii) we render no opinion as to the effect of the laws of any state or jurisdiction
other than the corporate law of the State of Nevada.
Based upon the foregoing,
we are of the opinion that:
1. The Shares, when
issued and sold in accordance with the terms and conditions of the Purchase Agreement, will be validly issued, fully paid and nonassessable.
2. The Warrants,
when issued and sold in accordance with the terms and conditions of the Purchase Agreement and duly executed and delivered by the
Company, will constitute valid and legally binding obligations of the Company, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, arrangement, moratorium and other similar laws related to or affecting creditors’ rights and to general equity
principles.
3. The Warrant Shares,
when issued and paid for upon the exercise of the Warrants, and in accordance with the provisions thereof, will be validly issued,
fully paid and nonassessable.
It is understood that
this opinion is to be used only in connection with the offer, sale and issuance of the Securities while the Registration Statement
is in effect.
We hereby consent to
the use of this opinion as an exhibit to the Company’s Current Report on Form 8-K dated May 28, 2015, which is incorporated
by reference in the Registration Statement and to the use of our name under the caption “Legal Matters” in the Prospectus
Supplement. In giving this consent, we do not admit that we are “experts” within the meaning of Section 11 of
the Securities Act or within the category of persons whose consent is required by Section 7 of the Securities Act.
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Very truly yours, |
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/s/ Foley & Lardner LLP |
Exhibit
10.1
SECURITIES
PURCHASE AGREEMENT
This Securities Purchase
Agreement (this “Agreement”) is dated as of May 28, 2015, between 22nd Century Group, Inc., a Nevada
corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and collectively the “Purchasers”).
WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant to an effective registration statement under the Securities Act
of 1933, as amended (the “Securities Act”), the Company desires to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in
this Agreement.
NOW, THEREFORE, IN
CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions.
In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the
meanings set forth in this Section 1.1:
“Acquiring
Person” shall have the meaning ascribed to such term in Section 4.5.
“Action”
shall have the meaning ascribed to such term in Section 3.1(j).
“Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person as such terms are used in and construed under Rule 405 under the Securities Act.
“Board
of Directors” means the board of directors of the Company.
“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to
close.
“Closing”
means the closing of the purchase and sale of the Securities pursuant to Section 2.1.
“Closing
Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable
parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii)
the Company’s obligations to deliver the Securities, in each case, have been satisfied or waived, but in no event later than
the third Trading Day following the date hereof.
“Commission”
means the United States Securities and Exchange Commission.
“Common
Stock” means the common stock of the Company, par value $0.00001 per share, and any other class of securities into which
such securities may hereafter be reclassified or changed.
“Common
Stock Equivalents” means any securities which would entitle the holder thereof to acquire at any time Common Stock, including,
without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into
or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Company
Counsel” means Foley & Lardner LLP, with offices located at One Independent Drive – Suite 1300, Jacksonville,
FL 32202.
“EGS”
means Ellenoff Grossman & Schole LLP, with offices located at 1345 Avenue of the Americas, New York, New York 10105-0302.
“Evaluation
Date” shall have the meaning ascribed to such term in Section 3.1(r).
“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exempt
Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers, directors or consultants
(consistent with past practice) of the Company pursuant to any stock incentive plan duly adopted for such purpose, by a majority
of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established
for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other
securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such
securities or to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with
stock splits or combinations) or to extend the term of such securities, (c) securities issued pursuant to acquisitions or strategic
transactions approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be
to a Person (or to the equityholders of a Person) which is, itself or through its subsidiaries, believed by the Company to be an
operating company or an owner of an asset in a business synergistic with the business of the Company, and (d) issuances of shares
pursuant to the Company’s existing Red Sun Trade Partners Program.
“FCPA”
means the Foreign Corrupt Practices Act of 1977, as amended.
“GAAP”
shall have the meaning ascribed to such term in Section 3.1(h).
“Indebtedness”
shall have the meaning ascribed to such term in Section 3.1(z).
“Intellectual
Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).
“Liens”
means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“Material
Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).
“Material
Permits” shall have the meaning ascribed to such term in Section 3.1(m).
“Per
Share Purchase Price” equals $1.00.
“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Placement
Agent” means Chardan Capital Markets, LLC.
“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
“Prospectus”
means the final prospectus filed for the Registration Statement.
“Prospectus
Supplement” means the supplement to the Prospectus complying with Rule 424(b) of the Securities Act that is filed with
the Commission and delivered electronically by the Company to each Purchaser at the Closing.
“Purchaser
Party” shall have the meaning ascribed to such term in Section 4.8.
“Registration
Statement” means the effective registration statement with Commission file No. 333-195386 which registers the sale of
the Shares, the Warrants and the Warrant Shares to the Purchasers.
“Regulation
FD” means Regulation FD promulgated by the Commission pursuant to the Exchange Act, as such Regulation may be amended
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Regulation.
“Required
Approvals” shall have the meaning ascribed to such term in Section 3.1(e).
“Rule
144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.
“Rule
424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.
“SEC
Reports” shall have the meaning ascribed to such term in Section 3.1(h).
“Securities”
means the Shares, the Warrants and the Warrant Shares.
“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Shares”
means the shares of Common Stock issued or issuable to each Purchaser pursuant to this Agreement.
“Short
Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall
not be deemed to include the location and/or reservation of borrowable shares of Common Stock).
“Subscription
Amount” means, as to each Purchaser, the aggregate amount to be paid for Shares and Warrants purchased hereunder as specified
below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,”
in United States dollars and in immediately available funds.
“Subsidiary”
means any significant subsidiary (as defined under Regulation S-X) of the Company as set forth in the SEC Reports, and shall, where
applicable, also include any direct or indirect significant subsidiary of the Company formed or acquired after the date hereof.
“Trading
Day” means a day on which the principal Trading Market is open for trading.
“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the
New York Stock Exchange (or any successors to any of the foregoing).
“Transaction
Documents” means this Agreement, the Warrants and any other documents or agreements executed in connection with the transactions
contemplated hereunder.
“Transfer
Agent” means Continental Stock Transfer & Trust Company, the current transfer agent of the Company, with a mailing
address of 17 Battery Place, 8th Floor, New York, NY 10004, and any successor transfer agent of the Company.
“Variable
Rate Transaction” shall have the meaning ascribed to such term in Section 4.12(b).
“Warrants”
means, collectively, the Common Stock purchase warrants delivered to the Purchasers at the Closing in accordance with Section 2.2(a)
hereof, which Warrants shall be exercisable six months following their issuance and have a term of exercise expiring 5.5 years
from the Closing Date, in the form of Exhibit A attached hereto.
“Warrant
Shares” means the shares of Common Stock issuable upon exercise of the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing.
On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution
and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly,
agree to purchase, up to an aggregate of $6,000,000 of Shares and Warrants. Each Purchaser shall deliver to the Company, via wire
transfer or a certified check, immediately available funds equal to such Purchaser’s Subscription Amount as set forth on
the signature page hereto executed by such Purchaser and the Company shall deliver to each Purchaser its respective Shares and
a Warrant as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth
in Section 2.2 deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3,
the Closing shall occur at the offices of EGS or such other location as the parties shall mutually agree.
2.2 Deliveries.
(a) On
or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:
(i) this
Agreement duly executed by the Company;
(ii) a
legal opinion of Company Counsel, substantially in the form provided to the Placement Agent;
(iii) a
copy of the irrevocable instructions to the Transfer Agent instructing the Transfer Agent to deliver on an expedited basis via
The Depository Trust Company Deposit or Withdrawal at Custodian system (“DWAC”) Shares equal to such Purchaser’s
Subscription Amount divided by the Per Share Purchase Price, registered in the name of such Purchaser;
(iv) a
Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 50% of such Purchaser’s
Shares, with an exercise price equal to $1.25, subject to adjustment therein (such Warrant certificate may be delivered within
three Trading Days of the Closing Date); and
(v) an
electronic copy of the Prospectus and Prospectus Supplement (which may be delivered in accordance with Rule 172 under the Securities
Act).
(b) On
or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following:
(i) this
Agreement duly executed by such Purchaser; and
(ii) to
the Company, such Purchaser’s Subscription Amount by wire transfer to the account specified in writing by the Company.
2.3 Closing
Conditions.
(a) The
obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:
(i) the
accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse
Effect, in all respects) on the Closing Date of the representations and warranties of the Purchasers contained herein (unless as
of a specific date therein in which case they shall be accurate as of such date);
(ii) all
obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been
performed; and
(iii) the
delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.
(b) The
respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being
met:
(i) the
accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse
Effect, in all respects) when made and on the Closing Date of the representations and warranties of the Company contained herein
(unless as of a specific date therein);
(ii) all
obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;
(iii) the
delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;
(iv) there
shall have been no Material Adverse Effect with respect to the Company since the date hereof; and
(v) from
the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company’s
principal Trading Market, and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg
L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are
reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States
or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national
or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in
each case, in the reasonable judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Securities at the
Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations
and Warranties of the Company. The Company hereby makes the following representations and warranties to each Purchaser:
(a) Subsidiaries.
All of the significant subsidiaries (as defined in Regulation S-X) of the Company are set forth in the SEC Reports. Except as set
forth in the SEC Reports, the Company owns, directly or indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens except for standard blanket security interests from lenders as described in the SEC Reports,
and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable
and free of preemptive and similar rights to subscribe for or purchase securities.
(b) Organization
and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power
and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company
nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business
and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as
the case may be, would not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity
or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, or
financial condition of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s
ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or
(iii), a “Material Adverse Effect”) and, to the Company’s knowledge, no Proceeding has been instituted
in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
(c) Authorization;
Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated
by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by
it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company
and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection herewith
or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which
it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance
with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification
and contribution provisions may be limited by applicable law.
(d) No
Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to
which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby
and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default
(or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any
of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing
a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which
any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict
with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court
or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations),
or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii)
and (iii), such as would not have or reasonably be expected to result in a Material Adverse Effect.
(e) Filings,
Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i)
the filings required pursuant to Section 4.4 of this Agreement, (ii) the filing with the Commission of the Prospectus Supplement,
(iii) application(s) to each applicable Trading Market for the listing of the Shares and Warrant Shares for trading thereon in
the time and manner required thereby and (iv) such filings as are required to be made under applicable state securities laws (collectively,
the “Required Approvals”).
(f) Issuance
of the Securities; Registration. The Securities are duly authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the
Company. The Warrant Shares, when issued and paid for (in cash or via a “cashless exercise”) in accordance with the
terms of the Warrants, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company.
The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant
to this Agreement and the Warrants. The Company has prepared and filed the Registration Statement in conformity with the requirements
of the Securities Act, which became effective on June 5, 2014 (the “Effective Date”), including the Prospectus,
and such amendments and supplements thereto as may have been required to the date of this Agreement. The Registration Statement
is effective under the Securities Act and no stop order preventing or suspending the effectiveness of the Registration Statement
or suspending or preventing the use of the Prospectus has been issued by the Commission and no proceedings for that purpose have
been instituted or, to the knowledge of the Company, are threatened by the Commission. The Company, if required by the rules and
regulations of the Commission, shall file the Prospectus with the Commission pursuant to Rule 424(b). At the time the Registration
Statement and any amendments thereto became effective, at the date of this Agreement and at the Closing Date, the Registration
Statement and any amendments thereto conformed and will conform in all material respects to the requirements of the Securities
Act and did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading; and the Prospectus and any amendments or supplements
thereto, at the time the Prospectus or any amendment or supplement thereto was filed and at the Closing Date, conformed and will
conform in all material respects to the requirements of the Securities Act and did not and will not contain an untrue statement
of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(g) Capitalization.
The capitalization of the Company is as set forth in the SEC Reports. The Company has not issued any capital stock since its most
recently filed periodic report under the Exchange Act, other than pursuant to the exercise of stock options under the Company’s
stock incentive plans, the issuance of shares of Common Stock pursuant to the Company’s stock incentive plans, the issuance
of shares of Common Stock pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of
the most recently filed periodic report under the Exchange Act. No Person has any right of first refusal, preemptive right, right
of participation, or any similar right to participate in the transactions contemplated by this Agreement and the transactions contemplated
pursuant to the Prospectus Supplement. Except as a result of the purchase and sale of the Securities or described in this Agreement
or the SEC Reports, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements
by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents.
The issuance and sale of the Securities will not obligate the Company or any Subsidiary to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust
the exercise, conversion, exchange or reset price under any of such securities except that the sale of the Securities and/or exercise
price of the Warrants will result in adjustment to the exercise price of outstanding warrants exercisable for 37,177 shares to
$1.1903 and result in the number of shares issuable under such warrants to be increased from 37,177 to 37,536. All of the outstanding
shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights
or similar rights to subscribe for or purchase securities. No further approval or authorization of any stockholder, the Board of
Directors or others is required for the issuance and sale of the Securities. There are no stockholders agreements, voting agreements
or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge
of the Company, between or among any of the Company’s stockholders.
(h) SEC
Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the one year preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such
material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, together with
the Registration Statement, Prospectus and the Prospectus Supplement, being collectively referred to herein as the “SEC
Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports
prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements
of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been
prepared in all material respects in accordance with United States generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements
or the notes thereto and except that unaudited financial statements do not contain all items required by GAAP, and fairly present
in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof
and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(i) Material
Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof, (i) there has
been no event, occurrence or development that has had or that would reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any material liabilities (contingent or otherwise), (iii) the Company has not altered its method
of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders
or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not
issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock incentive plans.
The Company does not have pending before the Commission any request for confidential treatment of information. Except for the issuance
of the Securities contemplated by this Agreement, no event, liability, fact, circumstance, occurrence or development has occurred
or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses,
properties, operations, assets or financial condition that would be required to be disclosed by the Company under applicable securities
laws at the time this representation is made or deemed made that has not been publicly disclosed at least 1 Trading Day prior to
the date that this representation is made.
(j) Litigation.
Other than actions described in the most recent SEC Report, which disclosure has been supplementally provided to the Purchasers,
there is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”)
which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities
or (ii) would, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Other
than actions described in the SEC Reports, neither the Company nor any Subsidiary, nor any director or officer thereof, is or has
been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim
of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission
has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or
any Subsidiary under the Exchange Act or the Securities Act.
(k) Labor
Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of
the Company, which would reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’
employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither
the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. To the knowledge of the Company, no current executive officer of the Company
or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company
or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are
in material compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment
practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(l) Compliance.
Except as set forth in the SEC Reports, neither the Company nor any Subsidiary: (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company
or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that
it is in violation of, any material indenture, loan or credit agreement or any other agreement or instrument to which it is a party
or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation
of any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation
of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal,
state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and
employment and labor matters, except in each case as would not have or reasonably be expected to result in a Material Adverse Effect.
(m) Environmental
Laws. The Company and its Subsidiaries (i) are in material compliance
with all federal, state, local and foreign laws relating to pollution or protection of human health or the environment (including
ambient air, surface water, groundwater, land surface or subsurface strata), including laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively,
“Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees,
demands, or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations,
issued, entered, promulgated or approved thereunder (“Environmental Laws”); (ii) have received all permits
licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (iii)
are in compliance with all terms and conditions of any such permit, license or approval where in each clause (i), (ii) and (iii),
the failure to so comply would be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.
(n) Regulatory
Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports,
except where the failure to possess such permits would not reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation
or modification of any Material Permit.
(o) Title
to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them
and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries,
in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens
for the payment of federal, state or other taxes, for which appropriate reserves have been made in accordance with GAAP and, the
payment of which is not delinquent. Any real property and facilities held under lease by the Company and the Subsidiaries are held
by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance, except for
matters which are not expected to cause a Material Adverse Effect.
(p) Intellectual
Property. The Company and the Subsidiaries have, or have rights to use, all material patents, patent applications, trademarks,
trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property
rights and similar rights necessary or required for use in connection with their respective businesses as described in the SEC
Reports and which the failure to so have would have a Material Adverse Effect (collectively, the “Intellectual Property
Rights”). None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of,
the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned,
within two (2) years from the date of this Agreement except where such action is not expected to result in a Material Adverse Effect.
Neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements included within
the SEC Reports, a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe
upon the rights of any Person, except as would not have or reasonably be expected to not have a Material Adverse Effect. To the
knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing material infringement
by another Person of any of the Intellectual Property Rights. The Company and its Subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so would
not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(q) Insurance.
The Company and the Subsidiaries are insured against such losses and risks and in such amounts as the Company believes to be adequate,
including, but not limited to, directors and officers insurance coverage at least equal to the aggregate Subscription Amount. Neither
the Company nor any Subsidiary has any 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
a significant increase in cost.
(r) Transactions
With Affiliates and Employees. Except as set forth in the SEC Reports, none of the officers or directors of the Company or
any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party
to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or
personal property to or from, providing for the borrowing of money from or lending of money to or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case
in excess of $120,000 other than for (i) payment of compensation or consulting fees for services rendered, (ii) reimbursement for
expenses incurred on behalf of the Company and (iii) other employee benefits, including stock awards under any stock incentive
plan of the Company.
(s) Sarbanes-Oxley;
Internal Accounting Controls. Except as set forth in the SEC Reports, the Company and the Subsidiaries are in compliance with
any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all
applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof and as of the
Closing Date. Except as set forth in the SEC Reports, the Company and the Subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general
or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity
with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s
general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. Except as set forth in the SEC Reports, the Company
and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information required to
be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission’s rules and forms. The Company’s certifying officers have evaluated
the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of the period covered
by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”). The Company
presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation
Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act)
of the Company and its Subsidiaries that have materially affected, or is reasonably likely to materially affect, the internal control
over financial reporting of the Company and its Subsidiaries.
(t) Certain
Fees. Except as set forth in the Prospectus Supplement, no brokerage or finder’s fees or commissions are or will be payable
by the Company or any Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank
or other Person with respect to the transactions contemplated by the Transaction Documents. The Purchasers shall have no obligation
with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in
this Section that may be due in connection with the transactions contemplated by the Transaction Documents.
(u) Investment
Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will
not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject
to registration under the Investment Company Act of 1940, as amended.
(v) Registration
Rights. Except as set forth in the SEC Reports, no Person has any right to cause the Company or any Subsidiary to effect the
registration under the Securities Act of any securities of the Company or any Subsidiary.
(w) Listing
and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration
of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating
such registration. The Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on
which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and maintenance requirements. The Common Stock is currently eligible
for electronic transfer through the Depository Trust Company or another established clearing corporation and the Company is current
in payment of the fees to the Depository Trust Company (or such other established clearing corporation) in connection with such
electronic transfer.
(x) Application
of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s certificate of incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become applicable to the Purchasers as a result of the Purchasers and
the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation
as a result of the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities.
(y) Disclosure.
Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company
confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel
with any information that it believes constitutes or might constitute material, non-public information which is not otherwise disclosed
in the Prospectus Supplement. The Company understands and confirms that the Purchasers will rely on the foregoing representation
in effecting transactions in securities of the Company. All of the disclosure furnished by or on behalf of the Company to the Purchasers
regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, is true and correct
and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were made, not misleading. The Company acknowledges and
agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby
other than those specifically set forth in Section 3.2 hereof.
(z) No
Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2,
neither the Company, nor, to the Company’s knowledge, any of its Affiliates, nor to the Company’s knowledge, any Person
acting on its or their 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 this offering of the Securities to be integrated with prior offerings by
the Company for purposes of any applicable shareholder approval provisions of any Trading Market on which any of the securities
of the Company are listed or designated.
(aa) Solvency.
Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the
Company of the proceeds from the sale of the Securities hereunder, (i) the fair saleable value of the Company’s 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 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, consolidated 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 liabilities 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).
The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation
under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. The SEC Reports set forth
all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary
has commitments. For the purposes of this Agreement, “Indebtedness” means (x) any liabilities for borrowed money
or amounts owed in excess of $200,000 (other than trade accounts payable incurred in the ordinary course of business), (y) all
guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or
should be reflected in the Company’s consolidated balance sheet (or the notes thereto), except guaranties by endorsement
of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (z) the present
value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP. Except as
set forth in the SEC Reports, neither the Company nor any Subsidiary is in default with respect to any Indebtedness.
(bb) Tax
Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all United States federal, state and local
income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due
on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of
all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid
taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or
of any Subsidiary know of no basis for any such claim.
(cc) Foreign
Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent
or other person acting on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns
from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person
acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any
provision of FCPA.
(dd) Accountants.
The Company’s accounting firm is set forth in the SEC Reports. To the knowledge and belief of the Company, such accounting
firm (i) is a registered public accounting firm as required by the Exchange Act and (ii) shall express its opinion with respect
to the financial statements to be included in the Company’s Annual Report for the fiscal year ending December 31, 2015.
(ee) Acknowledgment
Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting
solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated
thereby. 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 Transaction Documents and the transactions contemplated thereby and any advice given
by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions
contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities. The Company further represents to
each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based
solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.
(ff) Acknowledgement
Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere
herein to the contrary notwithstanding (except for Sections 3.2(f) and 4.14 hereof), it is understood and acknowledged by the
Company that: (i) none of the Purchasers has been asked by the Company to agree, nor has any Purchaser agreed, to desist from
purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities
issued by the Company or to hold the Securities for any specified term; (ii) past or future open market or other transactions
by any Purchaser, specifically including, without limitation, Short Sales or “derivative” transactions, before or
after the closing of this or future private placement transactions, may negatively impact the market price of the Company’s
publicly-traded securities; (iii) any Purchaser, and counter-parties in “derivative” transactions to which any such
Purchaser is a party, directly or indirectly, presently may have a “short” position in the Common Stock, and (iv)
each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative”
transaction. The Company further understands and acknowledges that (y) one or more Purchasers may engage in hedging activities
at various times during the period that the Securities are outstanding, including, without limitation, during the periods that
the value of the Warrant Shares deliverable with respect to Securities are being determined, and (z) such hedging activities (if
any) could reduce the value of the existing stockholders' equity interests in the Company at and after the time that the hedging
activities are being conducted. The Company acknowledges that such aforementioned hedging activities do not constitute a
breach of any of the Transaction Documents.
(gg) Regulation
M Compliance. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate
the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or, paid any compensation for soliciting purchases
of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any
other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Company’s placement
agent in connection with the placement of the Securities.
(hh) [RESERVED]
(ii) Office
of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company's knowledge, any director, officer, agent,
employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of
Foreign Assets Control of the U.S. Treasury Department (“OFAC”).
(jj) U.S.
Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Purchaser’s
request.
(kk) Bank
Holding Company Act. Neither the Company nor any of its Subsidiaries is subject to the Bank Holding Company Act of 1956, as
amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal
Reserve”). Neither the Company nor any of its Subsidiaries owns or controls, directly or indirectly, five percent (5%)
or more of the outstanding shares of any class of voting securities or twenty-five percent or more of the total equity of a bank
or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries
exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation
by the Federal Reserve.
(ll) Money
Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in material compliance
with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970,
as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money
Laundering Laws”), and no Action or Proceeding by or before any court or governmental agency, authority or body or any
arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of
the Company or any Subsidiary, threatened.
3.2 Representations
and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as
of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein):
(a) Organization;
Authority. Such Purchaser is either an individual or an entity duly incorporation or formation, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited
liability company or similar power and authority to enter into and to consummate the transactions contemplated by this Agreement
and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and performance
by such Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate, partnership,
limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction Document to which it
is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof,
will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms,
except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.
(b) Understandings
or Arrangements. Such Purchaser is acquiring the Securities as principal for its own account and has no direct or indirect
arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities (this representation
and warranty not limiting such Purchaser’s right to sell the Securities pursuant to the Registration Statement or otherwise
in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the ordinary
course of its business.
(c) Purchaser
Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on
which it exercises any Warrants, it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2),
(a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a)
under the Securities Act.
(d) Experience
of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk
of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.
(e) Access
to Information. Such Purchaser acknowledges that it has had the opportunity to review the Transaction Documents (including
all exhibits and schedules thereto) and the SEC Reports and has been afforded, subject to the requirements of Regulation FD, (i)
the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares; (ii) access
to information about the Company and its financial condition, results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that is necessary
to make an informed investment decision with respect to the investment. Such Purchaser acknowledges and agrees that neither
the Placement Agent nor any Affiliate of the Placement Agent has provided such Purchaser with any information or advice with respect
to the Securities nor is such information or advice necessary or desired. Neither the Placement Agent nor any Affiliate has
made or makes any representation as to the Company or the quality of the Securities and the Placement Agent and any Affiliate may
have acquired non-public information with respect to the Company which such Purchaser agrees need not be provided to it.
In connection with the issuance of the Securities to such Purchaser, neither the Placement Agent nor any of its Affiliates has
acted as a financial advisor or fiduciary to such Purchaser.
(f) Certain
Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, such Purchaser has not,
nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or indirectly executed any
purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that
such Purchaser first received knowledge of the transactions contemplated hereunder and ending immediately prior to the execution
hereof. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth
above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision
to purchase the Securities covered by this Agreement. Other than to other Persons party to this Agreement or to such Purchaser’s
representatives, including, without limitation, its officers, directors, partners, legal and other advisors, employees, agents
and Affiliates, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction
(including the existence and terms of this transaction). Notwithstanding the foregoing, for avoidance of doubt, nothing contained
herein shall constitute a representation or warranty, or preclude any actions, with respect to the identification of the availability
of, or securing of, available shares to borrow in order to effect Short Sales or similar transactions in the future.
(g) Validity.
The execution and delivery of the Transaction Documents to which such Purchaser is a party and the consummation by it of the transactions
contemplated hereby and thereby have been duly and validly authorized by all necessary action on the part of such Purchaser and
no further consent or authorization of such Purchaser or its members (or shareholders) is required.
The Company acknowledges
and agrees that the representations contained in this Section 3.2 shall not modify, amend or affect such Purchaser’s right
to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties
contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this
Agreement or the consummation of the transaction contemplated hereby.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Warrant
Shares. If all or any portion of a Warrant is exercised at a time when there is an effective registration statement to cover
the issuance or resale of the Warrant Shares or if the Warrant is exercised via cashless exercise, the Warrant Shares issued pursuant
to any such exercise shall be issued free of all legends. If at any time following the date hereof the Registration Statement (or
any subsequent registration statement registering the sale or resale of the Warrant Shares) is not effective or is not otherwise
available for the sale or resale of the Warrant Shares, the Company shall immediately notify the holders of the Warrants in writing
that such registration statement is not then effective and thereafter shall promptly notify such holders when the registration
statement is effective again and available for the sale or resale of the Warrant Shares (it being understood and agreed that the
foregoing shall not limit the ability of the Company to issue, or any Purchaser to sell, any of the Warrant Shares in compliance
with applicable federal and state securities laws).
4.2 Furnishing
of Information. Until the earliest of the time that (i) no Purchaser owns Securities or (ii) the Warrants have expired, the
Company covenants to use commercially reasonable efforts to timely file (or obtain extensions in respect thereof and file within
the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act.
4.3 Integration.
The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined
in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction
unless shareholder approval is obtained before the closing of such subsequent transaction.
4.4 Securities
Laws Disclosure; Publicity. The Company shall (a) by 9:00 a.m. (New York City time) on the Trading Day immediately following
the date hereof, issue a press release disclosing the material terms of the transactions contemplated hereby, and (b) file a Current
Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the Commission within the time required by the
Exchange Act (the “8-K Filing”). From and after the issuance of such press release, the Company represents to
the Purchasers that it shall have publicly disclosed all material, non-public information delivered to any of the Purchasers by
the Company or any of its Subsidiaries, or any of their respective officers, directors, employees or agents in connection with
the transactions contemplated by the Transaction Documents. In addition, effective upon the issuance of such press release, the
Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, whether written or
oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates
on the one hand, and any of the Purchaser or any of their Affiliates on the other hand, shall terminate. The Company and each Purchaser
shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither
the Company nor any Purchaser shall issue any such press release nor otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of each Purchaser named
in any further press release or public statement, with respect to any press release of the Company, which consent shall not unreasonably
be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide
the other party with prior notice of such public statement or communication. For clarity, any public statement or press release
of the Company that does not name any Purchaser and includes disclosure about the transactions consistent with the initial press
release and 8-K Filing described above shall not require further consent from any Purchaser. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission
or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except (a) as required by federal
securities law in connection with the filing of final Transaction Documents with the Commission and (b) to the extent such disclosure
is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such
disclosure permitted under this clause (b).
4.5 Shareholder
Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any
Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including
any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company,
or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities
under the Transaction Documents or under any other agreement between the Company and the Purchasers.
4.6 Non-Public
Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents,
the Company covenants and agrees that neither it, nor any other Person acting on its behalf will provide any Purchaser or its agents
or counsel with any information that constitutes or the Company reasonably believes constitutes material non-public information,
unless prior thereto such Purchaser shall have entered into a written agreement with the Company regarding the confidentiality
and use of such information. To the extent that the Company delivers any material, non-public information to a Purchaser without
such Purchaser’s consent, the Company hereby covenants and agrees that such Purchaser shall not have any duty of confidentiality
to the Company, any of its Subsidiaries, or any of their respective officers, directors, agents, employees or Affiliates, or a
duty to the Company, and of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates not
to trade on the basis of, such material, non-public information. To the extent that any notice provided pursuant to any Transaction
Document constitutes, or contains, material, non-public information regarding the Company or any Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Company understands and confirms
that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.
4.7 Use
of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes
and shall not use such proceeds: (a) for the satisfaction of any portion of the Company’s debt (other than payment of trade
payables in the ordinary course of the Company’s business and prior practices), (b) for the redemption of any Common Stock
or Common Stock Equivalents, (c) for the settlement of any outstanding litigation or (d) in violation of FCPA or OFAC regulations.
4.8 Indemnification
of Purchasers. Subject to the provisions of this Section 4.8, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a
Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within
the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser
Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or
agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against the
Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not
an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless
such action is based upon a breach of such Purchaser Party’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such
Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence,
willful misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect of which indemnity may
be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall
have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any
Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time
to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material
conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the
Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not
be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s
prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a
loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties,
covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification
required by this Section 4.8 shall be made by periodic payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or are incurred.
4.9 Reservation
of Common Stock. As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available
at all times, free of preemptive rights, a sufficient number of shares of Common Stock for the purpose of enabling the Company
to issue Shares pursuant to this Agreement and Warrant Shares pursuant to any exercise of the Warrants.
4.10 Listing
of Common Stock. The Company hereby agrees to use best efforts to maintain the listing or quotation of the Common Stock on
the Trading Market on which it is currently listed, and concurrently with the Closing, the Company shall apply to list or quote
all of the Shares and Warrant Shares on such Trading Market and promptly secure the listing of all of the Shares and Warrant Shares
on such Trading Market. The Company further agrees, if the Company applies to have the Common Stock traded on any other Trading
Market, it will then include in such application all of the Shares and Warrant Shares, and will take such other action as is necessary
to cause all of the Shares and Warrant Shares to be listed or quoted on such other Trading Market as promptly as possible. The
Company will then take all action reasonably necessary to continue the listing and trading of its Common Stock on a Trading Market
and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the
Trading Market. The Company agrees to maintain the eligibility of the Common Stock for electronic transfer through the Depository
Trust Company or another established clearing corporation, including, without limitation, by timely payment of fees to the Depository
Trust Company or such other established clearing corporation in connection with such electronic transfer.
4.11 FAST
Compliance. While any Warrants are outstanding, the Company shall maintain a transfer agent that participates in the DTC Fast
Automated Securities Transfer Program.
4.12 Subsequent
Equity Sales.
(a) From
the date hereof until the earlier of (i) 90 days after the Closing Date or (ii) the Trading Day following the date that the Common
Stock’s closing price exceeds $1.25 (subject to adjustment for forward and reverse stock splits and the like) for a period
of 10 consecutive Trading Days, neither the Company nor any Subsidiary shall issue, enter into any agreement to issue or announce
the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents.
(b) From
the date hereof until the Warrants are no longer outstanding, the Company shall be prohibited from effecting or entering into an
agreement to effect any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents (or a combination
of units thereof) involving a Variable Rate Transaction. “Variable Rate Transaction” means a transaction in
which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for,
or include the right to receive additional shares of Common Stock either (A) at a conversion price, exercise price or exchange
rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at
any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that
is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence
of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock
or (ii) enters into any agreement, including, but not limited to, an equity line of credit, whereby the Company may issue securities
at a future determined price (other than standard and customary “preemptive” or “participation” rights,
pursuant to a shareholder rights plan or pursuant to an agreement with a third party for an investment, acquisition or other business
combination transaction or pursuant to any program established whereby suppliers and/or vendors may acquire shares as an incentive
to sell products). Any Purchaser shall be entitled to obtain injunctive relief against the Company to preclude any such issuance,
which remedy shall be in addition to any right to collect damages.
(c) Notwithstanding
the foregoing, this Section 4.12 shall not apply in respect of an Exempt Issuance, except that no Variable Rate Transaction shall
be an Exempt Issuance.
4.13 Equal
Treatment of Purchasers. No consideration (including any modification of any Transaction Document) shall be offered or paid
to any Person to amend or consent to a waiver or modification of any provision of the Transaction Documents unless the same consideration
is also offered to all of the parties to such Transaction Document. For clarification purposes, this provision constitutes a separate
right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to
treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect
to the purchase, disposition or voting of Securities or otherwise.
4.14 Certain
Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither
it nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including
Short Sales of any of the Company’s securities during the period commencing with the execution of this Agreement and ending
at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release
as described in Section 4.4. Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such
time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to the initial press release
as described in Section 4.4, such Purchaser will maintain the confidentiality of the existence and terms of this transaction.
Notwithstanding the foregoing and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges
and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions
in any securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in Section 4.4, (ii) no Purchaser shall be restricted or prohibited from effecting
any transactions in any securities of the Company in accordance with applicable securities laws from and after the time that the
transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in
Section 4.4 and (iii) no Purchaser shall have any duty of confidentiality or duty not to trade in the securities of the Company
to the Company or its Subsidiaries after the issuance of the initial press release as described in Section 4.4. Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions
made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant set forth above shall only
apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the
Securities covered by this Agreement.
4.15 Exercise
Procedures. The form of Notice of Exercise included in the Warrants set forth the totality of the procedures required of the
Purchasers in order to exercise the Warrants. No additional legal opinion, other information or instructions shall be required
of the Purchasers to exercise their Warrants. Without limiting the preceding sentences, no ink-original Notice of Exercise shall
be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required
in order to exercise the Warrants. The Company shall honor exercises of the Warrants and shall deliver Warrant Shares in accordance
with the terms, conditions and time periods set forth in the Transaction Documents.
ARTICLE V.
MISCELLANEOUS
5.1 Termination.
This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing
has not been consummated on or before June 8, 2015; provided, however, that no such termination will affect the right
of any party to sue for any breach by any other party (or parties).
5.2 Fees
and Expenses. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident
to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent
fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company
and any exercise notice delivered by a Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery
of any Securities to the Purchasers.
5.3 Entire
Agreement. The Transaction Documents, together with the exhibits and schedules thereto, the Prospectus and the Prospectus Supplement,
contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements
and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents,
exhibits and schedules.
5.4 Notices.
Any and all notices or other communications or deliveries required or permitted to be provided hereunder 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
via facsimile or email attachment at the facsimile number or email address as set forth on the signature pages attached hereto
at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile or email attachment at the facsimile number or email address as set forth on
the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight
courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices
and communications shall be as set forth on the signature pages attached hereto. To the extent that any notice provided pursuant
to any Transaction Document constitutes, or contains, material, non-public information regarding the Company or any Subsidiaries,
the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.
5.5 Amendments;
Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed,
in the case of an amendment, by the Company and the Purchasers who purchased at least a majority in interest of the Shares based
on the initial Subscription Amounts hereunder or, in the case of a waiver, by the party against whom enforcement of any such waived
provision is sought, provided that if any amendment, modification or waiver disproportionately and adversely impacts a Purchaser
(or group of Purchasers), the consent of such disproportionately impacted Purchaser (or group of Purchasers) shall also be required.
No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.
Any proposed amendment or waiver that disproportionately, materially and adversely affects the rights and obligations of any Purchaser
relative to the comparable rights and obligations of the other Purchasers shall require the prior written consent of such adversely
affected Purchaser, Any amendment effected in accordance with accordance with this Section 5.5 shall be binding upon each Purchaser
and holder of Securities and the Company.
5.6 Headings.
The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.7 Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of
each Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to
whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect
to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”
5.8 No
Third-Party Beneficiaries. The Placement Agent shall be the third party beneficiary of the representations and warranties of
the Purchasers in Section 3.2. This Agreement is intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise
set forth in Section 4.8 and this Section 5.8.
5.9 Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall
be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all legal Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party
hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Action
or Proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such Action or Proceeding
is improper or is an inconvenient venue for such Proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such Action or Proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in effect for 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 other manner permitted by law. If any party shall commence an Action
or Proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under
Section 4.8, the prevailing party in such Action or Proceeding shall be reimbursed by the non-prevailing party for its reasonable
attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Action
or Proceeding.
5.10 Survival.
The representations and warranties contained herein shall survive the Closing and the delivery of the Securities.
5.11 Execution.
This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being
understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.
5.12 Severability.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
5.13 Replacement
of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or
in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory
to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.
5.14 Remedies.
In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of
the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert in any Action for specific performance of any such obligation
the defense that a remedy at law would be adequate.
5.15 Payment
Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document
or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from,
disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.
5.16 Independent
Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several
and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance
or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any
other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind of 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 by the Transaction
Documents. Each Purchaser shall be entitled to independently protect and enforce its rights including, without limitation, the
rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser
to be joined as an additional party in any Proceeding for such purpose. Each Purchaser has been represented by its own separate
legal counsel in its review and negotiation of the Transaction Documents. For reasons of administrative convenience only, each
Purchaser and its respective counsel have chosen to communicate with the Company through EGS. EGS does not represent any of the
Purchasers and only represents the Placement Agent. The Company has elected to provide all Purchasers with the same terms and Transaction
Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers. It
is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between
the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the
Purchasers.
5.17 Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken
or such right may be exercised on the next succeeding Business Day.
5.18 Construction.
The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and
every reference to share prices and shares of Common Stock in this Agreement shall be subject to adjustment for reverse and forward
stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date
of this Agreement and prior to the Closing Date.
5.19 WAIVER
OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE
PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY,
IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
(Signature Pages Follow)
IN WITNESS WHEREOF,
the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories
as of the date first indicated above.
22ND CENTURY GROUP, INC. |
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Address for Notice: |
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E-mail: |
With a copy to (which shall not constitute notice): |
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
[PURCHASER SIGNATURE PAGES TO XXII SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF,
the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as
of the date first indicated above.
Name of Purchaser: ________________________________________________________
Signature of Authorized Signatory of
Purchaser: _________________________________
Name of Authorized Signatory: _______________________________________________
Title of Authorized Signatory: ________________________________________________
Email Address of Authorized Signatory:
_________________________________________
Facsimile Number of Authorized Signatory: __________________________________________
Address for Notice to Purchaser:
Address for Delivery of Warrants to Purchaser (if not same as
address for notice):
Subscription Amount: $_________________
Shares: _________________
Warrant Shares: __________________
EIN Number: _______________________
Exhibit 10.2
EXHIBIT A
COMMON STOCK PURCHASE WARRANT
22ND
CENTURY GROUP, inc.
Warrant Shares: [______] |
Initial Exercise Date: December ___, 2015 |
|
Issue Date: June ____, 2015 |
THIS COMMON STOCK PURCHASE
WARRANT (the “Warrant”) certifies that, for value received, __________ or its assigns (the “Holder”)
is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on
or after December __, 2015 (the “Initial Exercise Date”) and on or prior to the close of business on December
___, 2020 (the “Termination Date”) but not thereafter, to subscribe for and purchase from 22nd Century Group,
Inc., a Nevada corporation (the “Company”), up to ______ shares (as subject to adjustment hereunder, the “Warrant
Shares”) of Common Stock. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise
Price, as defined in Section 2(b).
Section 1. Definitions.
Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement
(the “Purchase Agreement”), dated May 28, 2015, among the Company and the purchasers signatory thereto.
Section 2. Exercise.
a) Exercise
of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial
Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as
it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company)
of a duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise in the form annexed hereto. Within three (3)
Trading Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares
specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the
cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original
Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice
of Exercise form be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender
this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been
exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading
Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases
of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number
of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and
the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall
deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee,
by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase
of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may
be less than the amount stated on the face hereof.
b) Exercise
Price. The exercise price per share of the Common Stock under this Warrant shall be $1.25, subject to adjustment hereunder
(the “Exercise Price”).
c) Cashless
Exercise. If at the time of exercise hereof there is no effective registration statement registering, or the prospectus contained
therein is not available for the issuance of the Warrant Shares to the Holder, then this Warrant may also be exercised, in whole
or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number
of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the
VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless
exercise,” as set forth in the applicable Notice of Exercise;
(B) = the
Exercise Price of this Warrant, as adjusted hereunder; and
(X) =
the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant
if such exercise were by means of a cash exercise rather than a cashless exercise.
If
Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9)
of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised, and the
holding period of the Warrants being exercised may be tacked on to the holding period of the Warrant Shares. The Company
agrees not to take any position contrary to this Section 2(c).
“VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed
or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding
date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading
Day from 9:30 a.m. (New York City time) to 4:00 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market,
the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable,
(c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then
reported in the “Pink Sheets” published by OTC Markets, Inc. (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases,
the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers
of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of
which shall be paid by the Company.
d) Mechanics
of Exercise.
i. Delivery
of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer
Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository
Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant
in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or
resale of the Warrant Shares by Holder or (B) this Warrant is being exercised via “cashless exercise”, and otherwise
by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee,
for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder
in the Notice of Exercise by the date that is three (3) Trading Days after the delivery to the Company of the Notice of Exercise
(such date, the “Warrant Share Delivery Date”). The Warrant Shares shall be deemed to have been issued, and
Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for
all purposes, as of the date the Warrant has been exercised, with payment to the Company of the Exercise Price (or by cashless
exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance
of such shares, having been paid.
ii. Delivery
of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder
and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant.
iii. Rescission
Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i)
by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
iv. Compensation
for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder,
if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions
of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder
is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise
purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated
receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount,
if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common
Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required
to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such
purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver
to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise
and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000
to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such
purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the
Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the
Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right
to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.
v. No
Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise
of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the
Company shall, pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise
Price.
vi. Charges,
Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or
other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the
Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder;
provided, however, that in the event Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder
and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental
thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees
to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day
electronic delivery of the Warrant Shares.
vii. Closing
of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this
Warrant, pursuant to the terms hereof.
e) Holder’s
Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise
any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after
exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other
Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of
the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock
which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder
or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of
the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates. Except as set forth
in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company
is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder
is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained
in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by
the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of
the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant
is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this
Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to
verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above
shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by
the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares
of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates
since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation”
shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares
of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial
Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99%
of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock
upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase
in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the
Company and shall only be effective with regard to such Holder. The provisions of this Section 2(e) shall be construed and implemented
in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this Section 2(e) shall
apply to a successor holder of this Warrant.
Section 3. Certain
Adjustments.
a) Stock
Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise
makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable
in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon
exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including
by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification
of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately
after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the
aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
b) [RESERVED]
c) [RESERVED]
d) Pro
Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other
distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of
a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a "Distribution"),
at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution
to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock
acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation,
the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in
such Distribution (provided, however, to the extent that the Holder's right to participate in any such Distribution
would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate
in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution
to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if
ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
e) Extraordinary
Transaction. If, (i) the Company effects any merger or consolidation of the Company with or into another Person, (ii) the Company
effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or
exchange offer by the Company is completed pursuant to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property
(in any such case, an “Extraordinary Transaction”), then this Warrant will become the right thereafter to receive,
upon exercise, the same amount and kind of securities, cash or property as the Holder would have been entitled to receive upon
the occurrence of such Extraordinary Transaction if it had been, immediately prior to such Extraordinary Transaction, the holder
of the number of Warrant Shares then issuable upon exercise in full of the relevant Warrant (the “Alternate Consideration”)
in lieu of Common Stock. The aggregate Exercise Price for each Warrant will not be affected by any such Extraordinary Transaction,
but the Company shall apportion such aggregate Exercise Price among the Alternate Consideration in a reasonable manner reflecting
the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice
as to the securities, cash or property to be received in an Extraordinary Transaction, then the Holder, to the extent practicable,
shall be given the same choice as to the Alternate Consideration it receives upon any exercise of its Warrant following such Extraordinary
Transaction. In addition, at the request of the Holder, upon surrender of this Warrant, any successor to the Company or surviving
entity in such Extraordinary Transaction shall issue to such Holder a new warrant consistent with the foregoing provisions and
evidencing the Holder’s right to purchase the Alternate Consideration for the aggregate Exercise Price upon exercise thereof.
Each such new warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to
an Extraordinary Transaction.
f) Calculations.
All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall
be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
g) Notice
to Holder.
i. Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly
mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of
Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice
to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the
Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the
Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection
with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer
of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last
address as it shall appear upon the Warrant Register of the Company, (unless such notice is filed with the Commission, which in
such case, no additional notice is required to be provided to the Holder), at least 10 calendar days prior to the applicable record
or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of
the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined
or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective
or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their
shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided
in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the
Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain
entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering
such notice except as may otherwise be expressly set forth herein.
Section 4. Transfer
of Warrant.
a) Transferability.
This Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in
part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment
of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient
to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company
shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination
or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion
of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding
anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the
Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3)
Trading Days of the date the Holder delivers an assignment form to the Company assigning this Warrant full. The Warrant,
if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without
having a new Warrant issued.
b) New
Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the
Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by
the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants
to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial
issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant
thereto.
c) Warrant
Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant
Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered
Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and
for all other purposes, absent actual notice to the contrary.
Section 5. Miscellaneous.
a) No
Rights as Stockholder Until Exercise. Except as set forth Section 3, this Warrant does not entitle the Holder to any voting
rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i).
b) Loss,
Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant
Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of
the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate,
if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation,
in lieu of such Warrant or stock certificate.
c) Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or
granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding
Business Day.
d) Authorized
Shares.
The Company covenants
that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.
The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged
with the duty of executing stock certificates to execute and issue the necessary Warrant Shares upon the exercise of the purchase
rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market
upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise
of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment
for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from
all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
Except and
to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending
its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions
as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting
the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable
therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant
and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory
body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
Before taking
any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary
from any public regulatory body or bodies having jurisdiction thereof.
e) Jurisdiction.
All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.
f) Restrictions.
The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does
not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
g) Nonwaiver
and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate
as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision
of this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant,
which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to
cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings,
incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
h) Notices.
Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered
in accordance with the notice provisions of the Purchase Agreement.
i) Limitation
of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase
Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder
for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company
or by creditors of the Company.
j) Remedies.
The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled
to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert
the defense in any action for specific performance that a remedy at law would be adequate.
k) Successors
and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure
to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns
of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and
shall be enforceable by the Holder or holder of Warrant Shares.
l) Amendment.
This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
m) Severability.
Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions
of this Warrant.
n) Headings.
The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of
this Warrant.
********************
(Signature Page Follows)
IN WITNESS WHEREOF,
the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
|
22ND CENTURY GROUP, INC. |
|
|
|
By: |
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Name: |
|
Title: |
NOTICE OF EXERCISE
| To: | 22nd century group,
INC. |
(1) The undersigned
hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised
in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment
shall take the form of (check applicable box):
[ ] in lawful
money of the United States; or
[ ] if permitted
the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c),
to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure
set forth in subsection 2(c).
(3) Please
issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
_______________________________
The Warrant Shares shall be delivered to
the following DWAC Account Number:
_______________________________
_______________________________
_______________________________
[SIGNATURE
OF HOLDER]
Name of Investing Entity: ________________________________________________________________________
Signature of Authorized Signatory of
Investing Entity: _________________________________________________
Name of Authorized Signatory: ___________________________________________________________________
Title of Authorized Signatory: ____________________________________________________________________
Date: ________________________________________________________________________________________
EXHIBIT B
ASSIGNMENT
FORM
(To assign the
foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED,
the foregoing Warrant and all rights evidenced thereby are hereby assigned to
Name: |
|
|
(Please Print) |
|
|
Address: |
|
|
(Please Print) |
|
|
Dated: _______________ __, ______ |
|
|
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Holder’s Signature:___________________ |
|
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|
Holder’s Address: ___________________ |
|
Exhibit 99.1
22nd Century Group Announces $6 Million
Registered Direct Offering
May 29, 2015
Clarence, N.Y. – 22nd Century Group, Inc. (NYSE MKT:
XXII), a plant biotechnology company whose mission is to reduce the harm caused by smoking, announced today that it has
entered into an agreement with a single institutional investor to receive $6 million in gross proceeds in a registered direct
offering through the sale of common stock and warrants consisting of 6,000,000 shares of the Company’s common stock and
66-month warrants to purchase 3,000,000 shares of common stock at an exercise price of $1.25 per share (not exercisable for six
months from issuance). If the warrants are exercised for cash in full, the Company would receive additional gross proceeds of
approximately $3.75 million.
The offering is expected to close on or about June 2, 2015,
subject to customary closing conditions. The net proceeds of the financing will be used for general corporate purposes, including
working capital.
Henry Sicignano III, President and Chief Executive Officer of
22nd Century, commented, "We are preparing for an exciting second half of 2015 on multiple fronts. Our key priorities remain
the successful launch of RED SUN in the U.S. and MAGIC in Europe; signing agreements with leading distributors in the U.S. and
abroad; potential strategic partnerships for X-22, the Company’s novel smoking cessation aid in development; submission of
a modified risk tobacco product application with the FDA for very low nicotine Brand A cigarettes; joint venture partnerships in
Asia; and the continuation of our world renowned research in tobacco technology." Mr. Sicignano continued, "We believe
this capital raise – with a single institutional investor – is a strong vote of confidence in 22nd Century and an important
step forward in executing our strategy."
Chardan Capital Markets, LLC acted as the sole placement agent
for this transaction.
The securities described above are being offered by 22nd Century
through a prospectus supplement pursuant to 22nd Century’s shelf registration statement on Form S-3 as previously filed and
declared effective by the Securities and Exchange Commission and the base prospectus contained therein (Registration No. 333-195386).
A prospectus supplement related to the offering will be filed with the Securities and Exchange Commission. This news release shall
not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any
state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under
the securities laws of any such state or jurisdiction. The securities are being be offered only by means of a prospectus, including
a prospectus supplement, forming a part of the effective registration statement. Copies of the final prospectus supplement and
accompanying base prospectus may be obtained, when available, by contacting Chardan Capital Markets, LLC, 150 East 58th Street,
28th Floor, New York, NY 10155, at (646) 465-9028, or the Securities and Exchange Commission's website at http://www.sec.gov.
About 22nd Century Group, Inc.
22nd Century Group is a plant biotechnology company focused
on technology which allows it to increase or decrease the level of nicotine in tobacco plants through genetic engineering and
plant breeding. The Company’s mission is to reduce the harm caused by smoking. 22nd Century owns or exclusively controls
128 issued patents plus an additional 52 pending patent applications in 96 countries. The Company’s strong IP position led
to a licensing agreement with British American Tobacco (“BAT”), the world’s second largest tobacco company.
Visit www.xxiicentury.com for more information.
Cautionary Note Regarding Forward-Looking Statements: This
press release contains forward-looking information, including all statements that are not statements of historical fact regarding
the intent, belief or current expectations of 22nd Century Group, Inc., its directors or its officers with respect to the contents
of this press release. The words “may,” “would,” “will,” “expect,” “estimate,”
“anticipate,” “believe,” “intend” and similar expressions and variations thereof are intended
to identify forward-looking statements. We cannot guarantee future results, levels of activity or performance. You should not place
undue reliance on these forward-looking statements, which speak only as of the date that they were made. These cautionary statements
should be considered with any written or oral forward-looking statements that we may issue in the future. Except as required by
applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements
to conform these statements to reflect actual results, later events or circumstances, or to reflect the occurrence of unanticipated
events. You should carefully review and consider the various disclosures made by us in our annual report on Form 10-K for the fiscal
year ended December 31, 2014, filed on February 6, 2015, including the section entitled “Risk Factors,” and our other
reports filed with the U.S. Securities and Exchange Commission which attempt to advise interested parties of the risks and factors
that may affect our business, financial condition, results of operation and cash flows. If one or more of these risks or uncertainties
materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.
Investor Relations:
IRTH Communications
Andrew Haag, 866-976-4784
xxii@irthcommunications.com
or
Redington, Inc.
Tom Redington, 203-222-7399
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