Item 1.01 Entry into a Material Definitive
Agreement.
On July 24, 2016, 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
(the “Offering”) to select investors (the “Investors”). Pursuant to the Placement Agency Agreement, the
Company agreed to pay the Placement Agent a cash fee of 6.0% of the gross proceeds from the Offering. The Placement Agent had no
commitment to purchase any of the securities and acted only as an agent in obtaining indications of interest from investors who
would purchase the securities directly from the Company. The Placement Agency Agreement requires us to indemnify the Placement
Agent and certain of its affiliates against certain customary liabilities.
In addition, on July
24, 2016, the Company and one existing 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 units, with each unit
consisting of one share of common stock and a warrant to purchase 1.141 shares of common stock. The purchase price per unit is
$0.81 and the investor is purchasing $5.0 million of units, consisting of an aggregate of 6,172,840 shares of common stock and
warrants to purchase up to 7,043,211 shares of common stock. The warrants will provide for an exercise price of $1.00 per share
and 1,543,210 of the warrants will be exercisable immediately upon issuance and 5,500,001 of the warrants will be exercisable six
months from the date of issuance. All of the warrants 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. 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 increase or decrease this limitation at any time, although any increase
shall not be effective until the 61
st
day following the notice of increase and the holder may not increase this limitation
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 $1.15 per share 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.
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 $4.7 million. The Offering is expected
to close on or before July 27, 2016.
The common stock and
shares underlying the warrants are registered under the Securities Act of 1933, as amended, 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.
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, 10.2 and 10.3, respectively, and incorporated herein
by reference. 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.