LOCK-UP AGREEMENT
This LOCK-UP AGREEMENT (this
“Agreement”) is made as of January ___, 2011, by and between the undersigned
person or entity (the “Restricted Holder”) and 22nd Century Group, Inc., a
Nevada corporation formerly known as Touchstone Mining Limited (the
“Company”). Capitalized terms used and not otherwise defined herein
shall have the meanings given to such terms in the Merger Agreement (as defined
herein).
WHEREAS, pursuant to the transactions
contemplated under that certain Agreement and Plan of Merger and Reorganization,
dated as of January ___, 2011 (the “Merger Agreement”), by and between the
Company, 22nd Century Acquisition Subsidiary, LLC, and 22nd Century Limited,
LLC, a Delaware limited liability company (“22nd Century”), 22nd Century will
merge with 22nd Century Acquisition Subsidiary, LLC, with the result of such
merger being that 22nd Century will be the surviving entity and become a
wholly-owned subsidiary of the Company, with all the owners of 22nd Century
exchanging their membership interests in 22nd Century for shares of common stock
of the Company (the “Common Stock”) and with all the owners of 22nd Century also
exchanging their warrants to purchase additional membership interests in 22nd
Century for warrants issued by the Company to purchase additional shares of
Common Stock (the “Warrants”), all pursuant to the terms of the Merger Agreement
(the “Merger”);
WHEREAS, the Restricted Holder will be
an officer, director and/or key employee of the Company promptly after the
closing of the Merger and/or the Restricted Holder will be a beneficial owner of
ten percent (10%) or more of the outstanding shares of Common Stock of the
Company promptly after the closing of the Merger; and
WHEREAS, the Merger Agreement provides
that, among other things, all the shares of Common Stock and Warrants owned by
the Restricted Holder promptly after the closing of the Merger (the “Restricted
Securities”) shall be subject to certain restrictions on Disposition (as defined
herein) during the period of eighteen (18) months immediately following the
closing date of the Merger (the “Restricted Period”), all as more fully set
forth herein.
NOW, THEREFORE, as an inducement to and
in consideration of the Company’s agreement to enter into the Merger Agreement
and proceed with the Merger, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:
1. Lock Up
Period.
(a) During
the Restricted Period, the Restricted Holder will not, directly or
indirectly: (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant for the sale of, make any short sale, lend or
otherwise dispose of or transfer any Restricted Securities or any securities
convertible into or exercisable or exchangeable for Restricted Securities, or
(ii) enter into any swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, any of the economic
consequences of ownership of any Restricted Securities (with the actions
described in clause (i) or (ii) above being hereinafter referred to as a
“Disposition”). The foregoing restrictions are expressly agreed to
preclude the Restricted Holder from engaging in any hedging or other transaction
which is designed to or which reasonably could be expected to lead to or result
in a sale or disposition of any of the Restricted Securities of the Restricted
Holder during the Restricted Period, even if such securities would be disposed
of by someone other than the Restricted Holder.
(b) In
addition, during the Restricted Period, the Restricted Holder will not, directly
or indirectly, effect or agree to effect any short sale (as defined in Rule 200
under Regulation SHO of the Securities Exchange Act of 1934 (the “Exchange
Act”)), whether or not against the box, establish any “put equivalent position”
(as defined in Rule 16a-1(h) under the Exchange Act) with respect to the Common
Stock, borrow or pre-borrow any shares of Common Stock, or grant any other right
(including, without limitation, any put or call option) with respect to the
Common Stock or with respect to any security that includes, relates to or
derives any significant part of its value from the Common Stock.
(c) Notwithstanding
anything contained herein to the contrary, the Restricted Holder shall be
permitted to engage in any Disposition at any time where the other party to such
Disposition is another Restricted Holder.
2. Legends; Stop Transfer
Instructions.
(a) In
addition to any legends to reflect applicable transfer restrictions under
federal or state securities laws, each stock certificate representing Restricted
Securities shall be stamped or otherwise imprinted with the following
legend:
“THE
SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
LOCK-UP AGREEMENT, DATED AS OF JANUARY ___, 2011, BETWEEN THE HOLDER HEREOF AND
THE ISSUER AND MAY ONLY BE SOLD OR TRANSFERRED IN ACCORDANCE WITH THE TERMS
THEREOF.”
(b) The
Restricted Holder hereby agrees and consents to the entry of stop transfer
instructions with the Company’s transfer agent and registrar against the
transfer of the Restricted Securities or securities convertible into or
exchangeable for Restricted Securities held by the Restricted Holder except in
compliance with this Agreement.
3. Miscellaneous.
(a) Specific
Performance. The Restricted Holder agrees that in the event of
any breach or threatened breach by the Restricted Holder of any covenant,
obligation or other provision contained in this Agreement, then the Company
shall be entitled (in addition to any other remedy that may be available to the
Company) to: (i) a decree or order of specific performance or mandamus to
enforce the observance and performance of such covenant, obligation or other
provision; and (ii) an injunction restraining such breach or threatened
breach. The Restricted Holder further agrees that neither the Company
nor any other person or entity shall be required to obtain, furnish or post any
bond or similar instrument in connection with or as a condition to obtaining any
remedy referred to in this Section 3, and the Restricted Holder irrevocably
waives any right that he, she, or it may have to require the obtaining,
furnishing or posting of any such bond or similar instrument.
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(b) Other
Agreements. Nothing in this Agreement shall limit any of the
rights or remedies of the Company under the Merger Agreement, or any of the
rights or remedies of the Company or any of the obligations of the Restricted
Holder under any other agreement between the Restricted Holder and the Company
or any certificate or instrument executed by the Restricted Holder in favor of
the Company; and nothing in the Merger Agreement or in any other agreement,
certificate or instrument shall limit any of the rights or remedies of the
Company or any of the obligations of the Restricted Holder under this
Agreement.
(c) Notices. Any
notice or other communication required or permitted to be delivered to the
Restricted Holder or the Company under this Agreement shall be in writing and
shall be deemed properly delivered, given and received when delivered (i) for
the Company, to the address or facsimile telephone number set forth below, and
(ii) for the Restricted Holder, to the address or facsimile telephone number set
forth beneath the Restricted Holder’s signature to this Agreement (or to such
other address or facsimile telephone number as such party shall have specified
in a written notice given to the other party):
if to the Company:
0000 Xxxx Xxxxxx, Xxxxx 0
Xxxxxxxxxxxxx, XX 00000
Attn: Xxxxxx
Xxxxxxxxxx
Facsimile: (000) 000-0000
with copy to:
Xxxxx & Lardner LLP
0000 X Xxxxxx X.X., Xxxxx
000
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxx,
Esq.
Facsimile: (000) 000-0000
(d) Severability. Any
term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability of
the remaining terms and provisions hereof or the validity or enforceability of
the offending term or provision in any other situation or in any other
jurisdiction. If the final judgment of a court of competent
jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties hereto agree that the court making such determination
shall have the power to limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified. In the event such
court does not exercise the power granted to it in the prior sentence, the
parties hereto agree to replace such invalid or unenforceable term or provision
with a valid and enforceable term or provision that will achieve, to the extent
possible, the economic, business and other purposes of such invalid or
unenforceable term.
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(e) Applicable Law;
Jurisdiction. THIS AGREEMENT IS MADE UNDER, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. In any action between or
among any of the parties, whether arising out of this Agreement or otherwise,
(i) each of the parties irrevocably and unconditionally consents and
submits to the exclusive jurisdiction and venue of the state and federal courts
having jurisdiction over Erie County, New York; (ii) if any such action is
commended in a state court, then, subject to applicable law, no party shall
object to the removal of such action to any federal court having jurisdiction
over Erie County, New York; (iii) each of the parties irrevocably waives
the right to trial by jury; and (iv) each of the parties irrevocably
consents to service of process by first class certified mail, return receipt
requested, postage prepared, to the address at which such party is to receive
notice in accordance with this Agreement.
(f) Waiver;
Termination. No failure on the part of the Company to exercise
any power, right, privilege or remedy under this Agreement, and no delay on the
part of the Company in exercising any power, right, privilege or remedy under
this Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right, privilege or
remedy shall preclude any other or further exercise thereof or of any other
power, right, privilege or remedy. The Company shall not be deemed to
have waived any claim arising out of this Agreement, or any power, right,
privilege or remedy under this Agreement, unless the waiver of such claim,
power, right, privilege or remedy is expressly set forth in a written instrument
duly executed and delivered on behalf of the Company; and any such waiver shall
not be applicable or have any effect except in the specific instance in which it
is given. If the Merger Agreement is terminated, this Agreement shall
thereupon terminate.
(g) Captions. The
captions contained in this Agreement are for convenience of reference only,
shall not be deemed to be a part of this Agreement and shall not be referred to
in connection with the construction or interpretation of this
Agreement.
(h) Further
Assurances. The Restricted Holder hereby represents and
warrants that the Restricted Holder has full power and authority to enter into
this Agreement and that this Agreement constitutes the legal, valid and binding
obligation of the Restricted Holder, enforceable in accordance with its
terms. The Restricted Holder shall execute and/or cause to be
delivered to the Company such instruments and other documents and shall take
such other actions as the Company may reasonably request to effectuate the
intent and purposes of this Agreement.
(i) Entire
Agreement. This Agreement and the Merger Agreement
collectively set forth the entire understanding of the Company and the
Restricted Holder relating to the subject matter hereof and thereof and
supersedes all other prior agreements and understandings between the Company and
the Restricted Holder relating to the subject matter hereof and
thereof.
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(j) Non-Exclusivity. The
rights and remedies of the Company hereunder are not exclusive of or limited by
any other rights or remedies which the Company may have, whether at law, in
equity, by contract or otherwise, all of which shall be cumulative (and not
alternative).
(k) Amendments. This
Agreement may not be amended, modified, altered or supplemented other than by
means of a written instrument duly executed and delivered on behalf of the
Company and the Restricted Holder.
(l) Assignment. This
Agreement and all obligations of the Restricted Holder hereunder are personal to
the Restricted Holder and may not be transferred or delegated by the Restricted
Holder at any time. The Company may freely assign any or all of its
rights under this Agreement, in whole or in part, to any other person or entity
without obtaining the consent or approval of the Restricted Holder.
(m) Binding
Nature. Subject to Section 3(l) above, this Agreement will
inure to the benefit of the Company and its successors and assigns and will be
binding upon the Restricted Holder and the Restricted Holder’s representatives,
executors, administrators, estate, heirs, successors and assigns.
(n) Survival. Each
of the representations, warranties, covenants and obligations contained in this
Agreement shall survive the consummation of the Merger.
(o) Counterparts. This
Agreement may be executed in separate counterparts, each of which shall be
deemed an original and both of which shall constitute one and the same
instrument.
[the next
page is the signature page]
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IN WITNESS WHEREOF, the parties hereto
have executed and delivered this Agreement as of the date first set forth
above.
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RESTRICTED
HOLDER:
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