Exhibit 10.2

 

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made effective as of June 10,
2019, between 22nd Century Group, Inc., a Nevada corporation with its office
located at 8560 Main Street, Suite 4, Williamsville, New York 14221 (the
“Company”), and Michael J. Zercher, an individual residing at 127 S Forest Rd,
Williamsville, New York 14221 (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 materially
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 June 10,
2019.

 

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. During the Term of this Agreement 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 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, all as described in Addendum A hereto. Employee shall
receive the relocation benefits described in Addendum A, 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 and
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.

 

 

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4.2       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.

 

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 material 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 making specific reference to this Section 4.3 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 4.3, 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.

 

 

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(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; a material reduction in the
Employee’s Base Salary; a material reduction in the Employee’s bonus
opportunity; a relocation of the Employee’s principal place of employment by
more than 25 miles; any material breach by the Company of any material provision
of this Agreement or any material provision of any other agreement between the
Employee and the Company; or a material, adverse change in the Employee’s title,
authority, duties, or responsibilities (other than temporarily while the
Employee is physically or mentally incapacitated or as required by applicable
law). 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 7, pertaining to Severance Benefits, provided that the Employee elects
to comply with the Restrictive Covenants set forth in Section 6. If Employee
disavows the Restrictive Covenants and chooses to compete with the Company in
violation of the covenants set forth in Section 6, then Employee forfeits all
Severance Benefits provided in Section 7.

 

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. As detailed in Addendum A hereto, Employee’s unvested Time-Vested Stock
Option (if any) will automatically vest in the case of the Employee’s
termination of employment with the Company by death or disability. 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 three (3) 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,

 

 

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(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 7, pertaining to Severance Benefits, provided that the Employee elects
to comply with the Restrictive Covenants set forth in Section 6. If Employee
disavows the Restrictive Covenants and chooses to compete with the Company in
violation of the covenants set forth in Section 6, then Employee forfeits all
Severance Benefits provided in Section 7.

 

(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.

 

(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

 

 

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(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.

 

4.7       Termination of Officer/Director. In the event that Employee separates
from employment with the Company regardless of the reason(s), any officer and/or
director position held by the Employee shall automatically terminate on the same
date as Employee’s separation from the Company.

 

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.

 

 

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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, if still in the possession and/or control
of Employee, 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, and/or
(ii) conceived or made by Employee, either alone or with others, with the use of
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 twenty-four (24)
months 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.
Notwithstanding the foregoing provisions of this Section 6.2(a), the Company
recognizes that Employee has experience in the tobacco industry as a prior
employee of certain large tobacco companies that market and sell traditional
combustible cigarettes and cigars and, as such, the Company agrees that Employee
may work for another tobacco company on products that are traditional
combustible cigarettes and cigars, but which are not the Same or Substantially
Similar Services of the Company with respect to very low nicotine or very high
nicotine tobacco products.

 

(b)       Non-Interference With Customers or Prospective Customers. Employee
further agrees that, for the term of Employee’s employment and for a period of
twenty-four (24) months 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 (excluding suppliers and distributors), Prospective
Customer (excluding suppliers and distributors), researcher, 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 two (2) 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
position 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 two (2)
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;

 

 

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(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

 

(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.

 

 

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(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).

 

7.SEVERANCE BENEFITS.

 

If termination occurs under Section 4.2, Section 4.4 or Section 4.6, and
provided that Employee elects to comply with the Restrictive Covenants in
Section 6, then 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 twenty-four (24)
months following termination. Under this Section, Employee shall also be paid
for any bonus earned through the date of termination. As described in Addendum A
hereto, (i) Employee’s unvested Time-Vested Stock Option (if any) will
automatically vest on the date that Employee is terminated under Section 4.2,
Section 4.4 or Section 4.6.

 

In the event that Employee elects to compete with the Company in violation of
the covenants set forth in Section 6, then Employee forfeits all Severance
Benefits hereunder.

 

8.GENERAL PROVISIONS

 

8.1       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.

 

 

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8.2       Amendments: Termination of Prior Employment Agreement. This Agreement
may not be amended or modified except by a writing executed by all of the
parties hereto. The parties hereby terminate the prior Employment Agreement,
dated September 27, 2016, other than to the extent the provisions of such prior
Employment Agreement relate to the grant by the Company of options to purchase
the Company’s common stock which stock options are currently held by Employee
and are being amended hereby.

 

8.3       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.

 

8.4       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.

 

8.5       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.

 

8.6       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.

 

8.7       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.

 

 

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

 

8.9       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/ Michael J. Zercher   By: /s/
Thomas L. James Michael J. Zercher   Thomas L. James, Esq.   Vice President,
General Counsel and Secretary       Dated: September 9, 2019   Dated: September
9, 2019

 

 

Page 14 of 14

 

 

 

ADDENDUM A
TO

EMPLOYMENT AGREEMENT OF MICHAEL J. ZERCHER

 

This Addendum A is dated as of September 9, 2019 (the “Addendum”), to the
Employment Agreement between 22nd Century Group, Inc., (“Company”) and Michael
J. Zercher (“Employee”), dated as of September 9, 2019 (the “Agreement). This
Addendum shall be effective on June 10, 2019.

 

A.Employee’s title for purposes of the Agreement shall be Chief Operating
Officer. Employee shall commence his employment in this position on June 10,
2019.

 

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 $350,000 per year (paid bi-weekly at a
gross rate of $13,461.54 per pay period prior to required deductions and
withholdings) 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: (i) cash bonuses, from time to time, in an
amount as determined by the Company, and (ii) 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 as
the Chief Operating Officer, the Company has agreed to modify the vesting
provisions of the options to purchase the Company’s privately issued shares of
the Company’s common stock that were issued to the Employee in connection with
his previous Employment Agreement with the Company, dated September 27, 2016
(the “Previous Employment Agreement”), which vesting provisions are amended and
restated as set forth below and which will become effective on the date the
Employee executes the new Employment Agreement and this Addendum:

 

(i)       the previously issued stock option to purchase Two Hundred Fifty
Thousand (250,000) privately issued shares of the Company’s common stock (the
“Shares”) at $1.07 per share, the exercise price equal to the closing price of
the Company’s common stock on the NYSE MKT on August 24, 2016 (the date of
approval of this stock option by the Company’s Board of Directors as contained
in Employee’s offer letter, dated August 24, 2016), with such stock option grant
being subject to Employee’s continued employment with the Company (“Time-Vested
Stock Option”) that will vest as follows: (i) One Hundred Sixty Six Thousand Six
Hundred and Sixty Six (166,666) of the Shares are currently vested and
exercisable, and (ii) Eighty Three Thousand Three Hundred Thirty Four (83,334)
of the Shares will be exercisable on and after September 15, 2019. However,
Employee’s unvested Time-Vested Stock Option 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 this Employment Agreement), (ii) termination of
Employee’s employment with the Company by death or disability (as defined in
this Employment Agreement), (iii) termination by Employee of Employee’s
employment with the Company for good reason (as defined in this Employment
Agreement), or (iv) termination of Employee’s employment by the Company without
cause (as defined in this Employment Agreement).

 

 

 

 

(ii)       The previously issued stock option to purchase Three Hundred Thousand
(300,000) privately issued shares of the Company’s common stock at $1.07 per
share, the exercise price equal to the closing price of the Company’s common
stock on the NYSE MKT on August 24, 2016 (the date of approval of this stock
option by the Company’s Board of Directors as contained in Employee’s offer
letter, dated August 24, 2016), with such stock option (“First Performance-Based
Stock Option”) vesting and becoming fully exercisable by Employee on the date
this Agreement is executed by the Employee and for the period of time set forth
in the stock option agreement relating thereto.

 

(iii)       The previously issued stock option to purchase One Hundred Thousand
(100,000) privately issued shares of the Company’s common stock at $1.07 per
share, the exercise price equal to the closing price of the Company’s common
stock on the NYSE MKT on August 24, 2016 (the date of approval of this stock
option by the Company’s Board of Directors as contained in Employee’s offer
letter, dated August 24, 2016), with such stock option (“Second
Performance-Based Stock Option”) vesting and exercisable by Employee on the date
this Agreement is executed by the Employee for the period of time set forth in
the stock option agreement relating thereto.

 

F.As of the date of this Addendum, the Company pays 100% of Employee’s premiums
for BlueCross BlueShield HMO 110 Plus Platinum Health Insurance – family
coverage and 100% of Employee’s premiums for Delta Dental PPO plus Premier Plan
3 (family coverage). Health insurance plans are subject to change by the
Company, but at all times the Company shall pay 100% of Employee’s premiums for
family coverage.

 

G.Employee may defer a percentage (up to the maximum permitted by law) of
Employee’s 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. Employee must designate how he
would like his 401(k) account invested.

 

 

 

 

H.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),
Employee will be entitled to an annual grant of four weeks (20 business days)
paid vacation time in addition to five sick/personal days. Employee shall be
permitted to carry over a maximum of eight (8) weeks of unused leave. Such
unused leave shall be paid out at termination of employment.

 

EMPLOYEE:   22nd Century Group, Inc.       /s/ Michael J. Zercher   By: /s/
Thomas L. James Michael J. Zercher   Thomas L. James, Esq.   Vice President,
General Counsel and Secretary       Dated: September 9, 2019   Dated: September
9, 2019