Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made as of October 7, 2015,
between 22nd Century Group, Inc., a Nevada corporation with its office located
at 9530 Main Street, Clarence, New York 14031 (the “Company”), and Dr. Paul
Rushton, an individual residing at 3608 Llano River Trail, McKinney, Texas 75070
(the “Employee”).

 

1.Employment Duties and Responsibilities

 

1.1 Position and Title. The Company hereby agrees to employ the Employee in the
position(s) described on Addendum A attached hereto and the Employee hereby
accepts such position(s) and agrees to serve the Company, including Company
Affiliates (as defined below), in such capacity until this Agreement expires as
set forth in Addendum A or this Agreement is earlier terminated by one of the
parties in accordance with the terms set forth in Section 4 below.

 

1.2 Company Policies and Procedures. The Employee agrees to abide by all
applicable policies and procedures of the Company and its Affiliates (as defined
below) for which notice of the policy or procedure has been given in writing by
Company and acknowledgement of receipt has been given in writing by Employee,
and Employee agrees to perform job duties to the best of his ability.

 

1.3 Attention. During the term of this Agreement, excluding any periods of
vacation and sick leave to which Employee is entitled, Employee agrees (i) to
devote Employee’s full time, ability and attention to the business of the
Company and its Affiliates (as defined below), during normal working hours, and
(ii) not to acquire, hold or retain, whether directly or indirectly, more than a
two percent (2%) passive investment interest in any business competing with or
similar in nature to the business of the Company or any of its Affiliates. For
purposes of this Agreement, “Affiliates” shall mean any person or entity that,
directly or indirectly through one or more intermediaries, controls or is
controlled by, or is under the common control of, the Company.

 

2.TERM OF EMPLOYMENT

 

2.1 Effective Date. The Effective Date of this Agreement shall be October 30,
2015.

 

2.2. Term. The initial term of this Agreement shall be set forth on Addendum A
hereto, and the Company agrees to employ the Employee and the Employee hereby
agrees to serve the Company until this Agreement is terminated by one of the
parties in accordance with the terms set forth in Section 4 below.

 

3.COMPENSATION

 

3.1 Base Salary. The Company shall pay to Employee, and Employee shall accept
from the Company, a bi-weekly base salary in the amount set forth on Addendum A
attached hereto (the “Base Salary”), payable on the Company’s standard pay
schedule, provided that the Employee has been in active service during the
specified pay period. Employee’s Base Salary may not be decreased at any time
during this Agreement without the express written consent of the Employee. The
Base Salary will be increased as set forth in Addendum A hereto, as well as in
such other amounts as the Company may determine in its sole discretion from time
to time, but nothing herein shall be deemed to require any such increase other
than as set forth in Addendum A hereto.

 

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3.2 Incentive Compensation/Bonus. Employee may be eligible to receive a bonus
based upon satisfactory achievement of personal performance objectives and
business performance objectives as may be determined by the Company and the
Employee from time to time, and/or such other incentive compensation
arrangements that may be entered into between the Company and the Employee in
the future.

 

3.3 Stock Options/Restricted Stock Grants. Employee will be eligible for stock
options and/or restricted stock as may be awarded by the Company, in its sole
discretion, from time to time, subject to the terms of the Company’s 2014
Omnibus Incentive Plan or any similar plan or agreement then being offered by
the Company during the term of this Agreement.

 

3.4. Expenses. Employee shall be entitled to reimbursement of pre-approved
business expenses that are incurred in the furtherance of Company business and
are consistent with the Company’s policies for such expense reimbursement.

 

3.5 Benefits. Employee shall receive health (family or single coverage), dental
(family or single coverage), personal disability, retirement, and/or other
fringe benefits as are provided to similarly situated executives of the Company
from time to time, as well as Employee may participate in the Company’s 401(k)
retirement plan, Employee shall receive the relocation benefits described in
Addendum A hereto, and Employee shall be eligible for paid time off as described
in Addendum A.

 

3.6 Equipment. Company will provide Employee with use of a computer, use of a
company cellular phone or reimbursement for monthly cellular phone charges (not
to exceed $60.00 per month), in each case at the option of the Company, for
Employee to conduct business and/or remain in contact with the office(s) or
employees while Employee is away from the office.

 

4.Termination of Employment

 

Employee’s employment with the Company may be terminated, prior to the
expiration of any term of this Employment Agreement as set forth on Addendum A
hereto, in accordance with any of the following provisions:

 

4.1 Termination By Employee Without Good Reason. The Employee may terminate
employment at any time during the course of this Agreement by giving thirty (30)
days' notice in writing to the Chief Executive Officer or President of the
Company. During the notice period, Employee must fulfill all Employee’s duties
and responsibilities set forth above and use Employee’s best efforts to train
and support Employee’s replacement, if any. Failure to comply with this
requirement may result in Termination for Cause described below, but otherwise
Employee's salary and benefits will remain unchanged during the 30-day
notification period. The Company, at its option, may relieve Employee of all
Employee’s duties and responsibilities at any time during the notice period, but
will, in such instance, be required to continue to maintain Employee’s pay and
benefits through the remainder of the 30-day notice period.

 

4.2(a) Termination By The Company Without Cause. The Company may terminate
Employee’s employment without cause at any time during the term of this
Agreement by giving the Employee thirty (30) days’ notice of such termination,
during which period Employee will continue to receive the compensation and
benefits to which Employee would normally be entitled under the terms of this
Agreement. During the notice period, Employee must fulfill all of Employee’s
duties and responsibilities and use Employee’s best efforts to train and support
Employee’s replacement, if any. Notwithstanding the foregoing, the Company, at
its option, may instruct Employee during such period not to undertake any active
duties on behalf of the Company.

 

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4.2(b) If Employee is terminated under this section, within thirty (30) days
following the conclusion of the notice period, the Company shall provide a
severance benefit to Employee as follows: Employee will continue to receive
Employee's Base Salary then in effect, paid in accordance with standard payroll
practices for a period of twelve months following termination. Under this
section, Employee shall not be entitled to receive any portion of any bonus for
the period in which the termination occurs.

 

4.3 Termination By The Company For Cause. The Company may, at any time and
without notice (except as required below), terminate the Employee for “cause.”
Termination by the Company of the Employee for “cause” shall be limited to
termination based on any of the following grounds: (a) fraud, misappropriation,
embezzlement or acts of similar dishonesty; (b) conviction of a felony crime;
(c) intentional and willful misconduct that subjects the Company to criminal or
civil liability; (d) breach of the Employee’s duty of loyalty to the Company or
diversion or usurpation of corporate opportunities properly belonging to the
Company; (e) material breach of this Agreement and/or any other agreement
entered into between the Company and the Employee; and/or (f) willful and/or
continued failure to satisfactorily perform the duties of Employee’s position;
provided, however, that Employee shall not be terminated for cause under
subsection (e) or (f) above unless the Company first has provided Employee with
written notice that the Company considers the Employee to be in violation of
Employee’s obligations under those subsections and Employee fails, within thirty
(30) days of such notice, to cure the conduct that has given rise to the notice.

 

In the event of a termination by the Company for Cause, Employee shall be
entitled to receive only that Base Salary earned on or before the Employee’s
last day of active service and other post-employment benefits required by law or
under Company policy. Under this section, Employee shall not be entitled to
receive any portion of any bonus for the period in which the termination occurs.

 

4.4 Termination by the Employee For Good Reason.

 

a. This Agreement may be terminated by the Employee upon notice to the Company
of any event constituting "Good Reason" as defined herein.

 

b. As used herein, the term "Good Reason" means the failure of the Company to
pay Employee’s compensation in accordance with this Agreement without the prior
written consent of the Employee; provided, however, that the Employee shall not
be deemed to have Good Reason pursuant to this provision unless the Employee
gives the Company written notice that the specified conduct or event has
occurred and making specific reference to this Section 4.4 and the Company fails
to cure such conduct or event within thirty (30) days of receipt of such notice.

 

c. In the event the Employee terminates this Agreement under this Section 4.4,
Employee shall be entitled to the severance benefits described under Section
4.2(b) pertaining to Termination By the Company Without Cause.

 

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4.5 Termination By Death Or Disability. The Employee’s employment and rights to
compensation under this Agreement shall terminate if the Employee is unable to
perform the duties of Employee’s position due to death or disability; and the
Employee, or the Employee’s heirs, beneficiaries, successors, or assigns, shall
be entitled only to receive any compensation fully earned prior to the date of
the Employee’s last day of active employment prior to such death or
incapacitation due to disability and shall not be entitled to any other
compensation or benefits, except: (a) to the extent specifically provided in
this Agreement; (b) to the extent required by law; or (c) to the extent that
such benefit plans or policies under which Employee is covered provide a benefit
to the Employee or to the Employee’s heirs, beneficiaries, successors, or
assigns. For purpose of this agreement, “disability” shall be defined as the
Employee’s failure, due to a mental or physical condition, to perform the
essential functions of Employee’s position for more than 180 days in any 360 day
period.

 

4.6 Change In Control and Termination Provisions.

 

(a) If within a one (1) year period following any Change in Control (as defined
below), after the date hereof, there occurs any of the following:

 

(i) any termination of the Employee (other than as set forth in Section 4.3
(Termination by the Company for Cause) or Section 4.5 (Termination by Death or
Disability),

 

(ii) a diminution of the Employee’s responsibilities, as compared to the
Employee’s responsibilities immediately prior to the Change in Control,
including a change in duties within the Company,

 

(iii) any reduction in the Base Salary or any other compensation as compared to
such Base Salary or any other compensation as of the date immediately prior to
the Change in Control, or

 

(iv) any material breach of this Agreement by the Company;

 

then, at the option of the Employee, exercisable by the Employee within ninety
(90) days after the occurrence of any of the foregoing events, the Employee may
resign his employment with the Company (or, if involuntarily terminated, give
notice of his intention to collect benefits under this Agreement) by delivering
a notice in writing (the “Notice of Termination”) to the Company, and the
Employee shall be entitled to receive the severance benefits described under
Section 4.2(b) pertaining to Termination by the Company Without Cause.

  

(b) Notwithstanding any provisions now or hereafter existing under the Company’s
2014 Omnibus Incentive Plan or any other stock option plan or restricted share
plan of the Company or any entity which directly or indirectly controls the
Company, in the event of a Change in Control, all options and all restricted
shares provided and/or to be provided to the Employee pursuant to this
Agreement, the Company’s 2014 Omnibus Incentive Plan and/or any other agreement
between the Company (or any entity which directly or indirectly controls the
Company) and Employee shall be granted and shall immediately fully vest as of
the date of such Change in Control with such options and restricted shares being
valued at the closing price of the common stock underlying such options and/or
restricted stock grants on the day prior to the day of the Change of Control or,
in the event such common stock is not then traded and quoted on a securities
exchange or automated quotation system, then the value per share of such common
stock shall be the higher of either (i) the book value per share of such common
stock, (ii) the price per share of such common stock on the effective date
hereof, or (iii) the average price per share of such common stock during the six
(6) month period immediately preceding the date on which such shares of common
stock were no longer traded and/or quoted on a securities exchange or automated
quotation system.

 

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(c) For purposes of this Agreement, a “Change in Control” shall be deemed to
exist if any of the following occurs after the date hereof:

 

(i) a person, as defined in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934 (other than the Employee or a group including the Employee), either
(A) acquires thirty percent (30%) or more of the combined voting power of the
outstanding securities of the Company or any entity which directly or indirectly
controls the Company, which securities have the right to vote in elections of
directors of the Company or any entity which directly or indirectly controls the
Company, and such acquisition shall not have been approved within sixty (60)
days following such acquisition by a majority of the Continuing Directors (as
hereinafter defined) then in office, or (B) acquires fifty percent (50%) or more
of the combined voting power of the outstanding securities of the Company or any
entity which directly or indirectly controls the Company, which securities have
the right to vote in elections of directors of the Company or any entity which
directly or indirectly controls the Company; or

 

(ii) Continuing Directors shall for any reason cease to constitute a majority of
the Board of Directors; or

 

(iii) the Company or any entity which directly or indirectly controls the
Company disposes, by sale of stock, assets or otherwise, of all or substantially
all of the business of the Company or the business of any entity which directly
or indirectly controls the Company to a party or parties other than a subsidiary
or other affiliate of the Company or any entity which directly or indirectly
controls the Company pursuant to a partial or complete liquidation of the
Company or any entity which directly or indirectly controls the Company; or

 

(iv) the Board of Directors of the Company or any entity which directly or
indirectly controls the Company approves the consolidation or merger of the
Company or any entity which directly or indirectly controls the Company with or
into any other person or entity (other than a wholly-owned subsidiary of the
Company or any other entity which is directly or indirectly controlled by the
Company), or any other person’s consolidation or merger with or into the Company
or any entity which directly or indirectly controls the Company, which results
in all or part of the outstanding shares of common stock of the Company or any
entity which directly or indirectly controls the Company being changed in any
way or converted into or exchanged for stock or other securities or cash or any
other property.

 

For purposes of this Agreement, the term “Continuing Director” shall mean a
member of the Board of Directors of the Company or any entity which directly or
indirectly controls the Company who either was a member of such Board of
Directors on the date hereof or who subsequently became a Director of the
Company or any entity which directly or indirectly controls the Company and
whose election, or nomination for election, was approved by a vote of at least
two-thirds (2/3) of the Continuing Directors then in office.

 

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5.CONFIDENTIALITY AND NONDISCLOSURE

 

5.1 Non-Disclosure of Confidential Information. Employee recognizes that
Employee’s position with Company is one of the highest trust and confidence and
that Employee will have access to and contact with the trade secrets and
confidential and proprietary business information of Company. Employee agrees
that Employee shall not, while employed by Company or thereafter, directly or
indirectly, use for Employee’s own benefit or for the benefit of another, or
disclose to another any trade secret or Confidential Information (as defined
below) of the Company, except such use or disclosure is required in the
discharge of Employee’s duties and obligations on behalf of the Company.

 

5.2 Definition of “Confidential Information.” For purposes of this Agreement,
“Confidential Information” shall include proprietary or sensitive information,
materials, knowledge, data or other information of the Company not generally
known or available to the public relating to (a) the services, products,
Biological Materials (as hereinafter defined), customer lists, business plans,
marketing plans, pricing strategies, or similar confidential information of the
Company, including but not limited to the Company’s trade secrets, patents,
intellectual property, systems, procedures, manuals, cost and pricing
information, solicitations, proposals, bids, contracts, confidential reports and
work product prepared in connection with projects and contracts, supporting
information for any of the above items, the identities and records of government
agencies and offices and contacts, contractors and contacts, and subcontractors
and contacts with whom the Company has done business or is seeking to do
business, the identities and records of vendors and suppliers of personnel,
material and/or raw materials, all accounting and financial information,
business plans and budgets, and all other information pertaining to the business
activities and affairs of the Company of every nature and type; (b) the business
of any Company customer, including without limitation, knowledge of the
customer’s current business or staffing needs; and (c) the identities and
records of current or former employees of the Company or potential hires and
their compensation arrangements with the Company.

 

5.3 Return of Materials, Equipment and Biological Materials. Employee further
agrees that all memoranda, notes, computer files, records, drawings, reports or
other documents, in any format, made or compiled by Employee or made available
to Employee while employed by Company concerning any Company activity shall be
the property of Company and shall be delivered to Company upon termination of
Employee's employment or at any other time upon request. Employee also agrees to
return to the Company and not retain any and all equipment, including laptop
computers, and Biological Materials belonging to the Company on or before
Employee’s last day of employment with Company.

 

5.4 No Prior Restrictions. The Employee hereby represents and warrants to the
Company that the execution, delivery, and performance of this Agreement does not
violate any provision of any agreement or restrictive covenant which the
Employee has with any former employer which is not a Company Affiliate (a
“Former Employer”). The Employee further acknowledges that to the extent the
Employee has an obligation to the Former Employer not to disclose certain
confidential information, Employee intends to honor such obligation and the
Company hereby agrees not to knowingly request the Employee to disclose such
confidential information.

 

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6.Restrictive CovenantS

 

Employee acknowledges that Employee’s services to be rendered hereunder are of a
special and unusual character, which have a unique value to the Company and that
the Company will be investing time, effort, and expense in Employee. In view of
the unique value to the Company of the services of the Employee for which the
Company has contracted hereunder, the investments by the Company in the
Employee, and as a material inducement for the Company to enter into this
Agreement and to pay to the Employee the compensation provided hereunder,
Employee covenants and agrees as follows:

 

6.1. Definitions. The following definitions shall be applicable to each of the
covenants set forth in this section.

 

a. Definition of “Same or Substantially Similar Services.” As used herein, “Same
or Substantially Similar Services” means services, including without limitation
the provision of goods and/or services that are identical or substantially
similar, in whole or in part, to goods and/or services (i) which were provided
by Employee while Employee was employed with the Company; (ii) which were
provided by employees, contractors or third-parties whom Employee was directly
or indirectly managing or with whom Employee interacted on behalf of the Company
at any time during Employee’s employment with Company; or (iii) which were the
subject of proposals, contracts or negotiations with which Employee was involved
while employed with the Company.

 

b. Definition of “Customer.” As used herein, “Customer” is defined as any person
or entity, including without limitation a Government Agency, to whom Employee,
directly or indirectly (e.g., the end user of the services if the Company is a
subcontractor), provided services while employed with the Company or with whom
Employee interacted on behalf of the Company at any time during Employee’s
employment with Company.

 

c. Definition of “Prospective Customer.” As used herein, “Prospective Customer”
shall mean any person or entity, including without limitation a Government
Agency, whom the Employee, at any time during the twelve (12) month period
preceding the termination of Employee’s employment, was involved in working on a
proposal for, soliciting or making a proposal to, on behalf of the Company, for
the provision of services.

 

d. Definition of “Government Agency.” As used herein, “Government Agency” shall
be limited to the division, department, operating unit, group, or other
appropriate sub-entity of an agency to which the Employee provided services
while employed with the Company or with whom Employee interacted on behalf of
the Company at any time during Employee’s employment with Company.

 

e. Definition of “Biological Materials.” As used herein, “Biological Materials”
shall mean any plant, seed, propagule, embryo, leaf, root and/or other plant
part or tissue, and/or gene construct or fragment thereof, belonging to or
produced for the Company and/or its Affiliates, including any of the foregoing
produced by Employee or produced by others during Employee’s employment with the
Company.

 

f. Definition of “Intellectual Property” As used herein, “Intellectual Property”
shall mean any and all inventions, developments, formulas, discoveries,
concepts, trademarks, improvements, designs, innovations, data, processes,
software, works of authorship, know-how, plants, plant varieties (whether
registered for plant variety protection or not), tobacco products, smoking
cessation aids, cannabis products, cannabinoids, cannabinoid products, drugs and
ideas (whether patentable or not) directly or indirectly related to the Company
and/or its Affiliates (i) conceived or made by Employee, either alone or with
others, while employed by the Company or its Affiliates, (ii) conceived or made
by Employee, either alone or with others, with the use of Confidential
Information, and/or (iii) conceived or made by Employee, either alone or with
others, within one (1) year after the Employee’s last day of active service
unless conclusively proven by Employee to have been first conceived or made by
Employee after Employee’s last day of active service without reference to any
Confidential Information.

 

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6.2 Covenants.

 

a. Non-Competition with Customers, Prospective Customers and Industry. During
Employee's employment by the Company and for a period of three (3) years after
Employee ceases to be employed by the Company for any reason, then Employee will
not (except on behalf of the Company), directly or indirectly, as either an
employee, contractor, or consultant, whether personally or through another
entity, provide or offer to provide any goods or Same or Substantially Similar
Services to any person or entity planning to engage in or engaged in developing,
growing, making, offering, marketing, distributing and/or selling of smoking
cessation products, tobacco products, cannabis products, cannabinoids or other
similar products made from or related to the tobacco (Nicotiana) plant or the
cannabis plant ((e.g., Cannabis indica, Cannabis sativa, etc.) and/or providing
or offering to provide the Same or Substantially Similar Services to any
Customer or Prospective Customer. Employee specifically recognizes and agrees
that the restrictions set forth in this subsection are reasonable.

 

b. Non-Interference With Customers or Prospective Customers. Employee further
agrees that, for the term of Employee’s employment and for a period of four (4)
years after Employee ceases to be employed by the Company, the Employee shall
not undertake to interfere with the Company’s relationship with any Customer,
Prospective Customer, researcher, supplier, distributer, farmer and/or
manufacturer. This means that Employee shall refrain: (i) from making
disparaging comments about the Company or its board, management or employees to
any Customer or Prospective Customer; (ii) from attempting to persuade any
Customer, Prospective Customer, researcher, supplier, distributer, farmer and/or
manufacturer to cease or reduce doing business with the Company; (iii) from
soliciting any Customer, Prospective Customer, researcher, supplier,
distributer, farmer and/or manufacturer for the purpose of providing services
competitive with the Company Business; or (iv) from assisting any person or
entity in doing any of the foregoing.

 

c. Non-Solicitation and Non-Hiring of Employees. Employee agrees that, for the
term of Employee’s employment and for a period of three (3) years after Employee
ceases to be employed by the Company, the Employee shall not, directly or
indirectly, as an employee, consultant, contractor, principal, agent, or owner,
on Employee’s own behalf or the behalf of another person or entity: (i) induce
or attempt to induce any person employed or otherwise retained by the Company to
leave their employment or retention with the Company; (ii) hire or employ, or
attempt to hire or employ, any person employed or otherwise retained by the
Company; or (iii) assist or facilitate in any way any other person or entity in
the hiring or other retention of any person employed or otherwise retained by
the Company. The foregoing restriction also shall apply with respect to any
person who was an employee, consultant, subcontractor or other retained positon
with the Company at the time of, or at any time during the six (6) months
preceding, the Employee’s termination from the Company. This provision shall not
limit the scope or the enforceability of the confidentiality restriction
prohibiting the use or disclosure of any information pertaining to current or
former employees of the Company or potential hires that was obtained in any
manner during the period of Employee’s employment with the Company.

 

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d. Further Covenants. Employee further agrees, for the term of Employee’s
employment with the Company or any of its affiliates and for a period of three
(3) years after Employee ceases to be employed by the Company or any of its
affiliates, as follows:

 

(i) To disclose promptly in writing to the Company (but to no others), in such
manner as the Company may from time to time prescribe, all Intellectual
Property, whether patentable or not. All such Intellectual Property shall be the
sole and exclusive property of the Company;

 

(ii) To assign and convey to the Company, upon request, the complete worldwide
right, title and interest in and to all Intellectual Property conceived or made
by Employee. Upon the request of the Company, Employee shall execute such
further assignments and other instruments as may be necessary or desirable to
fully and completely assign all such Intellectual Property to the Company and to
assist the Company in applying for, obtaining and enforcing patents or
copyrights or other rights in the United States and in any other jurisdiction
with respect to any such Intellectual Property;

 

(iii) To promptly deliver to the Company any and all written records (in the
form of notes, sketches, drawings and any other form as may be specified by the
Company) documenting the concepts and/or actual reduction to practice of any
such Intellectual Property. Such written records shall at all times be and
remain the sole property of the Company;

 

(iv) Employee shall not be entitled to any payments or awards by reason of any
patent application made by the Company or the granting of any patent thereon
and, in the event the Company is required by its contracts with its customers,
including the United States Government, to transfer rights to certain
Intellectual Property to said customers, Employee also shall not be entitled to
any payments or awards by reason of any patent application made by any of said
customers, or the granting of any patent thereon;

 

(v) During the Employee’s employment with the Company and thereafter, Employee
shall do all lawful acts, including the execution of papers and giving of
testimony that may be necessary or helpful, in obtaining, sustaining, reissuing
and renewing United States patents and foreign jurisdiction patents on all such
Intellectual Property and/or for perfecting and maintaining the title of the
Company thereto; and to otherwise cooperate with the Company in any controversy
or legal proceedings relating to such Intellectual Property or to patent
applications or patents based thereon;

 

(vi) Insofar as reports, papers and technical information created by Employee
and/or the Company contain unique, proprietary, non-public, and/or copyrightable
material, the Employee agrees that the Company shall have the sole and exclusive
right to disclose, publish, reproduce, distribute and circulate said material,
without cost or liability; and Employee hereby grants all rights of Employee
therein to the Company and Employee further releases the Company, its affiliates
and its customers from any and all liability for disclosing, publishing,
reproducing, distributing and/or circulating any such materials; and

 

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(vii) All information and/or materials related to the Company and/or its
business as created, in whole or in part, by the Employee during the course of
Employee’s employment with the Company shall be solely owned by the Company as
“Works Made for Hire”, as defined by the United States Copyright Act. To the
extent any such works are not, by operation of law, “works made for hire”, then
Employee hereby assigns to the Company the sole and exclusive ownership of any
and all rights of copyright in such works, including, without limitation, all
Intellectual Property, and the Company shall have the sole right to obtain and
hold in its own name all copyrights, copyright registrations and similar
protections that may be available in such materials, works and Intellectual
Property.

 

6.3 Enforcement and Remedies.

 

a. Reasonableness of Restrictions. Employee has carefully read and considered
the provisions of this Section 6 and, having done so, agrees that the
restrictions set forth in such provisions (including, but not limited to, the
time period of the restrictions) are fair and reasonable and are reasonably
required for the protection of the interests of the Company, its shareholders,
directors, officers, and employees.

 

b. Severability and Reformation. In the event that, notwithstanding the
foregoing, any portions of this Section 6 hereof shall be held to be invalid or
unenforceable, the remaining portions thereof shall nevertheless continue to be
valid and enforceable as though the invalid or unenforceable portions had not
been included therein. In the event that any provision of this Section 6 shall
be declared by a court of competent jurisdiction to be invalid due to overly
broad, the parties do hereby authorize the court to reform the offending
provision so as to make it enforceable.

 

c. Successors. Employee specifically acknowledges and agrees that these
covenants contained in this Section 6 shall be enforceable by any successor to
the Company.

 

d. Extension of Term of Covenant In Event of Breach. In the event Employee
breaches any of the restrictions set forth in Section 6.2, then, in addition to
any other remedies to which the Company may be entitled, the duration of the
restrictions shall be extended automatically to two years from the latest date
on which Employee shall have ceased to violate the covenants.

 

e. Additional Remedies. In the event that Employee breaches any of the covenants
contained herein, the Company shall be entitled to its remedies at law and in
equity, including but not limited to compensatory and punitive damages, and
payment by Employee of the reasonable attorneys’ fees, court costs, and other
expenses incurred by the Company in enforcing the terms of this Agreement. The
parties also recognize that any breach of the covenants contained herein may
result in irreparable damage and injury to Company which will not be adequately
compensable in monetary damages, and that in addition to any remedy that Company
may have at law, the Company may obtain such preliminary or permanent injunction
or decree as may be necessary to protect Company against, or on account of, any
breach of the provisions contained herein. In addition, Employee covenants and
agrees that, if Employee violates any of the covenants under Section 6.2 above,
the Company shall be entitled to an accounting and repayment of all profits,
compensation, commission, remuneration or benefits which Employee, directly or
indirectly, has realized and/or may realize from the transactions that give rise
to such violation(s).

 

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7.General Provisions

 

7.1 Notices. All notices and other communications required or permitted by this
Agreement to be delivered by the Company or Employee to the other party shall be
delivered in writing, either personally, by a national overnight delivery
service (such as FedEx or UPS) or by certified or express mail, return receipt
requested, postage prepaid, respectively, in each case being to the attention of
the Chief Executive Officer or President at the headquarters of the Company, or
to the address of record of the Employee on file at the Company. If notice is
sent by overnight delivery service, it shall be deemed given and effective on
the next business day after it was deposited with a national overnight delivery
service. If notice is sent by certified mail, it shall be deemed given and
effective on the third day after it was deposited in the mail.

 

7.2 Amendments: Entire Agreement. This Agreement may not be amended or modified
except by a writing executed by all of the parties hereto. This Agreement,
including any addenda hereto, constitutes the entire agreement between Employee
and the Company relating in any way to the employment of Employee by the
Company, and supersedes all prior discussions, understandings and employment
agreements among Employee, Company and Company’s Affiliates with respect
thereto.

 

7.3 Successors and Assigns. This Agreement is personal to Employee and shall not
be assignable by Employee. The Company will assign its rights hereunder to (a)
any corporation resulting from any merger, consolidation or other reorganization
to which the Company is a party or (b) any corporation, partnership, association
or other person to which the Company may transfer all or substantially all of
the assets and business of the Company existing at such time. All of the terms
and provisions of this Agreement shall be binding upon and shall inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns.

 

7.4 Severability: Provisions Subject to Applicable Law. All provisions of this
Agreement shall be applicable only to the extent that they do not violate any
applicable law, and are intended to be limited to the extent necessary so that
they will not render this Agreement invalid, illegal or unenforceable under any
applicable law. If any provision of this Agreement or any application thereof
shall be held to be invalid, illegal or unenforceable, the validity, legality
and enforceability of other provisions of this Agreement or of any other
application of such provision shall in no way be affected thereby.

 

7.5 Waiver of Rights. No waiver by the Company or Employee of a right or remedy
hereunder shall be deemed to be a waiver of any other right or remedy or of any
subsequent right or remedy of the same kind.

 

7.6 Definitions, Headings, and Number. A term defined in any part of this
Agreement shall have the defined meaning wherever such term is used herein. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any manner the meaning or interpretation of this Employment
Agreement. In construing this Agreement, feminine or neuter pronouns shall be
substituted for those masculine in form, and vice versa, and plural terms shall
be substituted for singular and singular for plural, in any place where the
context so requires.

 

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7.7 Governing Law. This Agreement and the parties' performance hereunder shall
be governed by and interpreted under the laws of the State of New York. Employee
agrees to submit to the jurisdiction of the courts of the State of New York,
County of Erie, and that venue for any action arising out of this Agreement or
the parties' performance hereunder shall be in a court of competent jurisdiction
located in and serving the State of New York, County of Erie.

 

7.8. Attorneys’ Fees. In the event of a dispute arising out of the
interpretation or enforcement of this Agreement, the prevailing party shall be
entitled to recover reasonable attorneys' fees and costs.

 

7.9 Construction and Interpretation. This Agreement has been discussed and
negotiated by, all parties hereto and their counsel and shall be given a fair
and reasonable interpretation in accordance with the terms hereof, without
consideration or weight being given to its having been drafted by any party
hereto or its counsel.

 

IN WITNESS WHEREOF, the Company and the Employee have executed and delivered
this Agreement as of the date first written above.

 

 

EMPLOYEE   22nd Century Group, Inc.                         /s/ Dr. Paul
Rushton    By:  /s/ Henry Sicignano, III Dr. Paul Rushton   Henry Sicignano, III
    President and Chief Executive Officer

 

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Addendum A to

Employment agreement of DR. PAUL RUSHTON

 

This Addendum A to the Employment Agreement of Dr. Paul Rushton is made as of
the date of October 7, 2015 and shall be effective as of the date of October 30,
2015.

 

A.Employee’s title for purposes of the Agreement shall be Vice President of
Plant Biotechnology. Employee shall commence his employment with the Company on
October 30, 2015.

 

B.Unless earlier terminated as provided in the Agreement, the Term of the
Agreement is for an initial period of three (3) years, and thereafter the
Agreement shall renew on an annual basis unless earlier terminated by the
Company or the Employee as provided in the Agreement.

 

C.Effective as of the date of this Addendum, Employee’s Base Salary for purposes
of the Agreement shall be equivalent to $150,000 per year (paid bi-weekly at a
rate of $5,769.23 per pay period) for the period immediately following the
effective date of this Addendum. Thereafter, the Base Salary of Employee may be
increased, from time to time, in an amount as determined by the Company.

 

D.Pursuant to the Agreement, Employee shall be eligible for additional
compensation and benefits as follows: participation in the Company’s 2014
Omnibus Incentive Plan and/or any similar stock equity plan that the Company may
establish after the date hereof.

 

E.As a one-time inducement to accept the offer of employment from the Company,
the Employee will receive a grant of an incentive stock option, subject to
approval by the Board of Directors of the Company after Employee executes the
Employment Agreement and this Addendum, to purchase One Hundred Thousand
(100,000) shares of common stock of the Company on the Effective Date of this
Agreement at an exercise price of Eighty-Four Cents ($0.8417) per share, with
such stock option being subject to your continued employment with the Company
and vesting on November 1, 2016; provided, however, that your unvested stock
options will automatically vest on the first to occur (if any) of the following:
(i) the event of a change in control of the Company (as defined in your
Employment Agreement), (ii) termination of your employment with the Company by
death or disability (as defined in your Employment Agreement), (iii) termination
by you of your employment with the Company for good reason (as defined in your
Employment Agreement), or (iv) termination of your employment by the Company
without cause (as defined in your Employment Agreement).

 

F.Employee will receive a one-time, taxable, signing bonus in the amount of
Thirty-Two Thousand Dollars ($32,000).

 

G.During the three-month transition period of November 1, 2015 through January
31, 2016, (i) the Company will reimburse Employee for the amounts paid by
Employee for up to ten (10) round-trip, coach-class airplane tickets for
Employee to fly to and from Buffalo, New York and Dallas, Texas, and (ii) the
Company will pay Coventry Green Apartments, located at 4045 Coventry Green
Circle, Clarence, New York 14221, for the rent of a two-bedroom apartment there
for use by Employee and his family during that time.

 

H.22nd Century currently offers certain full-time employees health insurance. As
of the date of this Addendum, 22nd Century is prepared to pay 100% of your
premiums for BlueCross BlueShield HMO 110 Plus Platinum Health Insurance –
family coverage and 100% of your premiums for Delta Dental PPO plus Premier Plan
3 (family coverage). If you begin your employment October 30, 2015, your
health/dental insurance coverage will begin November 1, 2015.

 

Page 13 of 14 

 

 

I.You may defer a percentage (up to the maximum permitted by law; $18,000
currently) of your pre-tax salary to the Company’s 401(k) plan. As of the date
of this Addendum, the Company makes per pay period Safe Harbor non-elective
contributions to each participant’s individual account in an amount equal to 3%
of the participant’s gross pay for the period, regardless of whether or not the
employee made elective deferrals to the plan. You must designate how you would
like your 401(k) account invested. You will be eligible for this plan at the
6-month anniversary of your start date (i.e. if you begin your employment on
October 30, 2015, then you will be eligible to enroll in the Company’s 401(k)
plan on May 1, 2016).

 

J.In addition to the Company’s six paid national holidays (New Year’s Day,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day),
you will be eligible for four weeks (20 business days) paid vacation time in
addition to five sick/personal days. (However, since the commencement date of
your employment with the Company is on October 30, 2015, then for the remainder
of the calendar year of 2015 you will be eligible for only one week (5 business
days) paid vacation in addition to one sick/personal day).

 

EMPLOYEE   22nd Century Group, Inc.                         /s/ Dr. Paul Rushton
  By: /s/ Henry Sicignano, III  Dr. Paul Rushton   Henry Sicignano, III    
President and Chief Executive Officer

 

Page 14 of 14