ELECTRO ENERGY INC.
00 Xxxxxxx Xxxx Xxxx
Xxxxxxx, Xxxxxxxxxxx 00000
(000) 000-0000
April 5, 2006
Lithium Nickel Asset Holding I, Inc.
0 Xxxxx Xxxxxx Xxxxxx
Xxxx Xxxxxxxx, XX 00000
Attention: Mr. Xxxxxx Xxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
RE: LOCK-UP AGREEMENT
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Dear Ladies and Gentlemen:
Electro Energy Inc. ("ELECTRO ENERGY" or the "COMPANY") plans to enter
into an asset purchase transaction pursuant to which EEI Acquisition Co., LLC, a
Delaware limited liability company ("BUYER"), a wholly owned subsidiary of the
Company, will purchase from Lithium Nickel Asset Holding I, Inc., a Delaware
corporation ("Seller") certain assets relating to Seller's lithium-ion and
nickel based rechargeable cell and battery manufacturing operation (the "Asset
Purchase"). In connection therewith, the Buyer shall deliver to Seller:
(i) Five Million Seven Hundred Fifty Thousand (5,750,000) newly issued
unregistered shares (the "STOCK CONSIDERATION") of the common voting
stock (the "COMMON STOCK") of the Buyer's parent company, Electro
Energy Inc., a Florida Corporation ("ELECTRO ENERGY"), par value
$.001 per share, subject to the terms and conditions of that certain
Registration Rights Agreement by and between Electro Energy and
Seller, dated April 3, 2006 (the "Registration Rights Agreement");
(ii) a six-year warrant to purchase up to Two Million (2,000,000) shares
of Electro Energy Common Stock at an exercise price of seven dollars
($7.00) per share, subject to the vesting schedule set forth therein
(the "APA WARRANT"); and
(iii) a four-year warrant to purchase up to One Million (1,000,000) shares
of Electro Energy Common Stock at an exercise price of seven dollars
($7.00) per share, subject to the vesting schedule set forth therein
(the "LEASE WARRANT," and together with the APA Warrant, the
"WARRANTS")
Concurrently with the Asset Purchase, we expect to enter into equity
financing in the aggregate amount of at approximately $11 million net available
at closing (the "FINANCING"). We currently expect to close the Financing on or
around March 31, 2006.
You are, or will be at the closing of the Financing, a holder ("HOLDER")
of (i) the Stock Consideration, (ii) the APA Warrants, which may be exercised
for up to Two Million (2,000,000) shares of Electro Energy Common Stock (the
"UNDERLYING APA WARRANT SHARES"); and (iii) the Lease Warrant which may be
exercised for up to One Million (1,000,000) shares of Electro Energy Common
Stock (the "LEASE WARRANT SHARES", and together with the APA Warrant Shares, the
"WARRANT SHARES").
IT IS ESSENTIAL TO THE SUCCESS OF THE FINANCING THAT THE COMPANY AND ITS
FINANCIAL ADVISORS CAN GIVE COMFORT TO POTENTIAL INVESTORS THAT THE "AFTER
MARKET" FOR THE SHARES OF ELECTRO ENERGY WILL NOT BE DISRUPTED BY A VERY
SUBSTANTIAL BLOCK OF SHARES BEING SOLD IN AN INAPPROPRIATE FASHION. By signing
and returning this agreement in the manner indicated below, the undersigned,
Lithium Nickel Asset Holding I, Inc. hereby agrees:
(i) not to, directly or indirectly, publicly sell, contract to sell or
otherwise transfer any of the Stock Consideration, Warrants or
Warrant Shares (collectively referred to as the "SHARES")
beneficially owned by you immediately after the closing of the
Equity Financing, excluding, however, One Million, One Hundred Fifty
Thousand (1,150,000) shares of the Stock Consideration which are the
subject of the Registration Rights Agreement (your "INITIAL
HOLDINGS") during the first 12 months following the closing date
(the "Closing")of the Equity Financing; and
(ii) during the three month period that begins on the day that is 12
months after the Closing, and during each subsequent three-month
interval thereafter, you may sell not more than 1,093,750 of the
shares of Common Stock comprising the Stock Consideration or Warrant
Shares (to the extent you have properly exercised any of the
Warrants in accordance with their terms and have been issued such
Warrant Shares).
To the extent that you do not sell Shares after any of the dates upon
which they may be sold pursuant to this paragraph, the lock-up restrictions with
respect to the Shares that could have been sold after such dates will cease to
be in effect. This agreement and all restrictions on your ability to sell your
Shares set forth herein shall terminate on the date that is 24 months following
the closing date of the Financing.
If Electro Energy engages an underwriter or placement agent during the 12
months after the closing date of the Financing to raise a minimum of $5,000,000
through the sale of Electro Energy's common stock and/or other equity
securities, in a public offering or private placement, upon notice of commencing
such public offering or private placement, all Holders of shares of Electro
Energy subject to lock-up agreements will, if required by the underwriter or
placement agent, refrain from making any sales, transfers or other dispositions
in the course of such offering, but, in any event, for not more than 90 days.
Electro Energy, acting with the consent of its financial advisors, may
waive in writing any provision of the lock-up agreements executed by Holder if
and only if (i) any such waiver is simultaneously applicable to all other
Electro Energy shares issued to Holder, and (ii) at least five business days'
advance written notice of such waiver is provided to all Holders. In the event
that a particular waiver applies to only a percentage of the shares held by each
Holder, then the percentage shall be identical for each such Holder.
By signing and returning this agreement, you further (i) represent and
consent that you have full power and authority to enter into this lock-up
agreement and that, upon request, you will execute any additional documents
necessary or desirable in connection with this lock-up agreement and its
enforcement; and (ii) understand that this lock-up agreement is irrevocable by
you, all authority herein conferred by you or agreed to be conferred by you
shall survive your death or incapacity, and any of your obligations hereunder
shall be binding on you and your heirs, personal representatives, successors and
assigns.
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In order to enable the aforesaid covenant to be enforced, you hereby
consent to the placing of a legend and/or stop-transfer order with the transfer
agent of the common stock with respect to any of the Shares registered in your
name or beneficially owned by you.
Accordingly, to evidence your agreement to the terms hereof, please date,
sign and return this lock-up agreement to the Company by courier, Federal
Express or fax no later than the closing of the Equity Financing and the Asset
Purchase.
[SIGNATURE PAGE FOLLOWS]
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Acknowledged and Agreed
this 5th day of April, 2006:
/s/ Xxx X. Xxxxxxx
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By: Xxx X Xxxxxxx
Lithium Nickel Asset Holding Company I, Inc.
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Entity (if any):
Chairman
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Title (if Shares held by Entity):
RETURN TO THE COMPANY BY FAX: AT (000) 000-0000
-AND-
BY FEDERAL EXPRESS OR OVERNIGHT COURIER TO:
Electro Energy Inc.
00 Xxxxxxx Xxxx Xxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxx, Chairman and CEO
Tel: (000) 000-0000
Accepted:
ELECTRO ENERGY INC.
By:/s/ Xxxxxx X. Xxxxx
-----------------------------------
Xxxxxx X. Xxxxx
Chairman and CEO
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