EMPLOYMENT AGREEMENT


 


THIS EMPLOYMENT AGREEMENT (this “Agreement”) is
made as of May 12, 2014, between 22nd Century Group, Inc., a Nevada corporation (the “Company”), and Thomas L. James
(the “Executive”).


 


1.           EMPLOYMENT
DUTIES AND RESPONSIBILITIES


 


1.1           Position
and Title.  The Company hereby agrees to employ the Executive in the position described on Addendum A attached hereto
and the Executive hereby accepts such position and agrees to serve the Company in such capacity until this Agreement is terminated
by one of the parties in accordance with the terms set forth in Section 4 below. Notwithstanding anything contained in this Agreement
to the contrary, the Company and the Executive agree that the Executive shall join the Company on a full-time basis only after
the Executive has satisfied his required notice and wind-down period with his existing employer.


 


1.2           Company
Policies and Procedures.  The Executive agrees to abide by all applicable policies and procedures of the Company.


 


1.3           Attention.  During
the term of this Agreement, excluding any periods of vacation and sick leave to which Executive is entitled, Executive agrees (i)
to devote the primary portion of his productive time, ability and attention to the business of the Company during normal working
hours, and (ii) not to acquire, hold or retain, whether directly or indirectly, more than a two percent (2%) interest in any business
competing with or similar in nature to the business of the Company or any of its Affiliates (as such term is defined below).  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 the date first set forth above.


 


2.2.           Term.  The
initial term of this Agreement shall be set forth on Addendum A hereto, and the Company agrees to employ the Executive and the
Executive 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 Executive, and Executive shall accept from the Company, a monthly 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 Executive has been in active service during the specified pay period.  Executive’s
Base Salary may not be decreased at any time during this Agreement without the express written consent of the Executive.  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.


 


3.2           Incentive
Compensation/Bonus.  Executive 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 Executive from time to time,
and/or such other incentive compensation arrangements that may be entered into between the Company and the Executive in the future.


 


3.3           Stock
Options/Restricted Stock Grants.  Executive 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.  Executive
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.


 






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3.5           Benefits.  Executive
shall receive such health (family coverage), dental (family coverage), retirement, paid time-off and other fringe benefits as are
provided to similarly situated executives of the Company.  Such benefits may be amended, from time to time, so that they
are at least commensurate with those provided to other senior corporate officers of the Company.  Executive shall also
receive other benefits as may be set forth on Addendum A hereto.


 


3.6           Equipment.  Company
will provide Executive with use of, or monthly reimbursement for, a laptop computer, cellular phone, or other equipment that the
Company may deem necessary or helpful for Executive to conduct business and/or remain in contact with the office(s) or employees
while Executive is away from the office.


 


4.           TERMINATION
OF EMPLOYMENT


 


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


 


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


 


If Executive is terminated under this section, within thirty
(30) days following the conclusion of the notice period, the Company shall provide a severance benefit to Executive as
follows: Executive will continue to receive Executive’s Base Salary then in effect, paid in accordance with standard
payroll practices, until the later of either (i) three (3) years following termination or (ii) the expiration of the initial term
of the employment period as set forth in Addendum A hereto.  Under this section, Executive shall not be entitled to receive
any portion of Executive’s target bonus for the period in which the termination occurs but shall receive any accrued bonus
for any performance period fully completed prior to the date of termination.


 


4.3           Termination
By The Company For Cause.  The Company may, at any time and without notice (except as required below), terminate
the Executive for “Cause.”  Termination by the Company of the Executive 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 Executive’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 Executive; and/or (f) willful and/or continued failure to satisfactorily perform the duties of Executive’s position;
provided, however, that Executive shall not be terminated for cause under subsection (e) or (f) above unless the
Company first has provided Executive with written notice that the Company considers the Executive to be in violation of Executive’s
obligations under those subsections and Executive 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, Executive shall be entitled to receive only that Base Salary earned on or before the Executive’s last day of active
service and other post-employment benefits required by law or under Company policy.  Under this section, Executive shall
not be entitled to receive any portion of Executive’s target bonus for the period in which the termination occurs but shall
receive any accrued bonus for any performance period fully completed prior to the date of termination. 


 






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	 	4.4	Termination by the Executive For Good Reason.


 


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


 


b.           As
used herein, the term "Good Reason" means the occurrence of any of the following, without the prior written consent of
the Executive: (i) failure of the Company to pay Executive’s compensation in accordance with this Agreement; (ii) a change
in the location of the Executive's principal place of employment to a location more than twenty-five (25) miles from Executive’s
current worksite; (iii) a change in job title and/or duties of Executive without the consent of Executive; and/or (iv) a change
in the person to whom the Executive reports within the Company; provided, however, that the Executive shall not be deemed to have
Good Reason pursuant to this provision unless the Executive 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 Executive terminates this Agreement under this Section 4.4, Executive shall be entitled to the severance benefits described
under Section 4.2 pertaining to Termination By the Company Without Cause.


 


4.5           Termination
By Death Or Disability.  The Executive’s employment and rights to compensation under this Employment Agreement
shall terminate if the Executive is unable to perform the duties of Executive’s position due to death or disability; and
the Executive, or the Executive’s heirs, beneficiaries, successors, or assigns, shall be entitled only to receive any compensation
fully earned prior to the date of the Executive’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 Employment Agreement; (b) to the extent required by law; or (c) to the extent that such benefit plans or policies under
which Executive is covered provide a benefit to the Executive or to the Executive’s heirs, beneficiaries, successors, or
assigns.  For purpose of this agreement, “disability” shall be defined as the Executive’s failure,
due to a mental or physical condition, to perform the essential functions of Executive’s position for more than 120 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 Executive
(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 Executive’s
responsibilities, as compared to the Executive’s responsibilities immediately prior to the Change in Control, including but
not limited to a change in the job title, duties and/or person to whom the Executive reports within the Company,


 


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


 


(iv) any failure to provide the
Executive with benefits at least as favorable as those enjoyed by similarly-situated senior corporate officers of the Company after
the Change in Control or as granted to the Executive by this Agreement,


 


(v) any relocation of the Executive’s
principal site of employment to a location more than twenty-five (25) miles from the Executive’s principal place of employment
as of the date immediately prior to the Change in Control, or


 






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


 


then, at the option of the Executive,
exercisable by the Executive within ninety (90) days after the occurrence of any of the foregoing events, the Executive 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 Executive shall be entitled
to receive the greater of either (A) the Base Salary which remains unpaid for the remainder of the initial term of this Agreement
as set forth in Addendum A hereto or (B) the Base Salary for a period of three (3) years following such Notice of Termination.  In
addition, the Company shall pay to the Executive any bonus and/or additional compensation that would have been payable for the
year in which such termination occurs.  In addition, the Company shall, for eighteen (18) months following such termination,
(i) reimburse the Executive for his reasonable costs of medical and dental coverage as provided under COBRA, (ii) reimburse the
Executive for his reasonable costs incurred in maintaining his life and disability insurance coverage, and (iii) reimburse the
Executive for all other benefits granted to the Executive in this Agreement, each at levels substantially equivalent to those provided
by the Company to the Executive immediately prior to the termination of his employment (including such other benefits as shall
be provided to senior corporate officers of the Company in lieu of such benefits from time to time during the eighteen (18) month
payment period), on the same basis, including the Company’s payment of premiums and contributions, as such benefits are provided
to other senior corporate officers of the Company or were provided to the Executive prior to the termination.  Reimbursements
of expenses which provide for nonqualified deferred compensation under Internal Revenue Code Section 409A, if any, shall not be
paid before six (6) months and one day after the Executive’s date of termination of employment.  The amount of
expenses eligible for reimbursement, or in-kind benefits provided, during a taxable year of the Executive may not affect the expenses
eligible for reimbursement, or in-kind benefits to be provided in any other taxable year.  Reimbursements shall be paid
on or before April 1st of the Executive’s taxable year immediately following the taxable year in which the expense was incurred.  The
right to reimbursement hereunder is not subject to liquidation or exchange for another benefit.


 


In addition, for the period commencing from the date
of the Notice of Termination and ending on December 31 of the second calendar year following the calendar year in which the Executive’s
date of termination of employment occurs, the Executive will be provided with outplacement services that are mutually acceptable
to the Company and the Executive.  Rights and benefits of the Executive or transferee under the benefit plans and programs
of the Company shall be determined in accordance with the provisions of such plans and programs. 


 


Notwithstanding the foregoing, in the event that the
death of the Executive occurs within six (6) months following the date of termination of employment, the Company shall pay to the
Executive’s estate any unpaid portion of the amounts due to be paid to the Executive pursuant to this Section 4.6 within
forty-five (45) days following receipt by the Company of notice of Executive’s death.


 


(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 Executive 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 Executive 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 Executive or a group including
the Executive), either (A) acquires forty percent (40%) 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 was a member of such Board of Directors on the date hereof, was appointed or elected to
serve as a member of such Board of Directors within twenty (20) days following the date hereof, or who subsequently became a member
of the Board of Directors 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.


 


5.           CONFIDENTIALITY
AND NONDISCLOSURE


 


5.1           Non-Disclosure
of Confidential Information.  Executive recognizes that Executive’s position with Company is one of the highest
trust and confidence and that Executive will have access to and contact with the trade secrets and confidential and proprietary
business information of Company.  Executive agrees that Executive shall not, while employed by Company or thereafter,
directly or indirectly, use for Executive’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 Executive’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.


 






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5.3          Return
of Materials, Equipment and Biological Materials.  Executive further agrees that all memoranda, notes, computer files,
records, drawings, or other documents, in any format, made or compiled by Executive or made available to Executive while employed
by Company concerning any Company activity shall be the property of Company and shall be delivered to Company upon termination
of Executive's employment or at any other time upon request.  Executive 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 Executive’s
last day of active employment with Company.


 


5.4          No
Prior Restrictions.  The Executive 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 Executive has with
any former employer (a "Former Employer").  The Executive further acknowledges that to the extent the Executive
has an obligation to the Former Employer not to disclose certain confidential information, Executive intends to honor such obligation
and the Company hereby agrees not to knowingly request the Executive to disclose such confidential information.


 


6.           RESTRICTIVE
COVENANTS


 


Executive acknowledges that Executive’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 Executive.  In view of the unique value to the Company of the
services of the Executive for which the Company has contracted hereunder, the investments by the Company in the Executive, and
as a material inducement for the Company to enter into this Agreement and to pay to the Executive the compensation provided hereunder
(including, if applicable, the severance payments referred to in Section 4 above), Executive 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 Executive while Executive was employed with the Company;
(ii) which were provided by employees or contractors whom Executive was directly or indirectly managing while Executive was
employed with the Company; or (iii) which were the subject of proposals or contracts with which Executive 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 Executive, 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 Executive interacted on behalf of the Company
at any time during Executive’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 Executive, at any time during the twelve (12) month period preceding
the termination of Executive’s employment, was involved in 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 Executive provided services while
employed with the Company or with whom Executive interacted on behalf of the Company at any time during Executive’s employment
with Company; provided, however, that the United States Securities and Exchange Commission (SEC”) shall be excluded from
this definition of Government Agency so that nothing shall restrict the Executive from providing legal and business services to
third-party persons and entities in their activities with the SEC at any time after the termination of the Executive’s employment
with the Company, as long as such third-parties are not Customers or Prospective Customers of the Company.


 



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e.           Definition
of “Biological Materials.”  As used herein, “Biological Materials.” shall mean any plant,
seed, propagule, embryo, leaf, and/or other plant part or tissue, and/or gene construct or fragment thereof, belonging to the Company,
including any of the foregoing produced by Executive or produced by others during Executive’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, drugs and ideas (whether patentable or not) directly or indirectly related to the
Company (i) conceived or made by Executive, either alone or with others, while employed by the Company, (ii) conceived or made
by Executive, either alone or with others, with the use of Confidential Information, and/or (iii) conceived or made by Executive,
either alone or with others, within one (1) year after the Executive’s last day of active service unless conclusively proven
by Executive to have been first conceived or made by Executive after Executive’s last day of active service without reference
to any Confidential Information.


 


6.2         Covenants


 


a.           Non-Competition
with Customers, Prospective Customers and Tobacco Industry.  During Executive's employment by the Company and for
a period of two (2) years after Executive ceases to be employed by the Company, then Executive 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 services to any entity or any affiliate of such entity engaged in the United States or
Canada in the making, offering, marketing, distributing and/or selling of products made from or related to the tobacco (Nicotiana)
plant or 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.  Executive specifically recognizes and
agrees that the restrictions set forth in this subsection are reasonable.


 


b.           Non-Interference
With Customers or Prospective Customers.  Executive further agrees that, for the term of Executive’s employment
and for a period of two (2) years after Executive ceases to be employed by the Company, the Executive shall not undertake to interfere
with the Company’s relationship with any Customer, Prospective Customer, supplier, distributer, farmer and/or manufacturer.  This
means that Executive shall refrain: (i) from making disparaging comments about the Company or its management or employees to any
Customer or Prospective Customer; (ii) from attempting to persuade any Customer, Prospective Customer, supplier, distributer, farmer
and/or manufacturer to cease or reduce doing business with the Company; (iii) from soliciting any Customer, Prospective Customer,
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.  Executive agrees that, for the term of Executive’s employment and for a period
of two (2) years after Executive ceases to be employed by the Company, the Executive shall not, directly or indirectly, as an employee,
consultant, contractor, principal, agent, or owner, on Executive’s own behalf or the behalf of another person or entity:
(i) induce or attempt to induce any person employed by the Company to leave their employment with the Company; (ii) hire or employ,
or attempt to hire or employ, any person employed by the Company; or (iii) assist or facilitate in any way any other person or
entity in the hiring of any person employed by the Company.  The foregoing restriction also shall apply with respect
to any person who was an employee, consultant or subcontractor of the Company at the time of, or during the six (6) months preceding,
the Executive’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 Executive’s employment with the Company.


 






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d.           Further
Covenants.  Executive further agrees, for the term of Executive’s employment with the Company or any of its
affiliates and for a period of two (2) years after Executive 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 Executive.  Upon the request of the Company, Executive 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)  Executive 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, Executive 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 Executive’s
employment with the Company and thereafter, Executive 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 Executive and/or the Company contain unique, proprietary, non-public, and/or copyrightable
material, the Executive 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 Executive hereby grants all rights of Executive therein to the Company
and Executive 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 Executive during the course of Executive’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 Executive 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.  Executive 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.


 






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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.  Executive
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 Executive 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 Executive shall have ceased to violate the covenants.


 


e.           Additional
Remedies.  In the event that Executive 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 Executive
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, Executive covenants and agrees
that, if Executive 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 Executive, directly or indirectly, has realized and/or
may realize from the transactions that give rise to such violation(s).


 


7.           GENERAL
PROVISIONS.


 


7.1           Notices.  All
notices and other communications required or permitted by this Agreement to be delivered by the Company or Executive to the other
party shall be delivered in writing, either personally or by certified or express mail, return receipt requested, postage prepaid,
or by overnight delivery services (as such Federal Express), respectively, to the attention of the Chairman or President at the
headquarters of the Company, or to the address of record of the Executive on file at the Company.  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. If notice is sent
by overnight delivery service, it shall be deemed given and effective on the next business day immediately after the day after
it was given to the overnight delivery company.


 


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 Executive and the Company
relating in any way to the employment of Executive by the Company, and supersedes all prior discussions, understandings and employment
agreements between them with respect thereto.


 


7.3           Successors
and Assigns.  This Agreement is personal to Executive and shall not be assignable by Executive.  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.


 






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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 Executive 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.


 


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.  Executive agrees to submit to the jurisdiction of the courts of the State of New York, 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 or serving the State of New York.


 


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 Executive have executed
and delivered this Agreement as of the date first written above.


  








	EXECUTIVE:	22nd Century Group, Inc.	 
	 	 	 	 
	 	 	 	 
	By: 	 /s/ Thomas L. James	 	By:	/s/Joseph Pandolfino	 
	 	Thomas L. James	 	Joseph Pandolfino	 
	 	 	Chief Executive Officer	 







  




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ADDENDUM A TO


EMPLOYMENT AGREEMENT OF THOMAS L. JAMES


 


This Addendum A to the Employment Agreement of Thomas L. James
is made and effective as of the date of May 12, 2014.


 


	A.	Executive’s title for purposes of the Agreement shall be Vice President, General Counsel and Secretary.


 


	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 Executive as provided in the Agreement.


 


	C.	Effective as of the date of this Addendum, Executive’s Base Salary for purposes of the Agreement shall be $200,000.00 for the earlier of the twelve (12) month period immediately following the effective date of this Addendum or the date on which other executive officers of the Company are reviewed for increases in their respective compensation and benefits.  Thereafter, the Base Salary of Executive may be increased in an amount as determined by the Company in conjunction with the increases granted to other executive officers of the Company.


 


	D.	Pursuant to the Agreement, Executive shall be eligible for additional compensation and benefits as follows: (i) participation in the Company’s 2014 Omnibus Incentive Plan and/or similar stock equity plan that the Company may establish after the date hereof.  You will also be eligible for additional long-tem incentive programs and awards as may be awarded by the Company, in its sole discretion.


 


	E.	On the first day of business that you join the Company on a full-time basis after your required notice and wind-down period with your existing employer, the Company shall issue to you one hundred thousand (100,000) shares of Company common stock.  You will have all the rights of a stockholder of the Company with respect to voting the 100,000 shares of common stock awarded under the above-described grant, which shall also be subject to share adjustments, receipt of dividends (if any) and distributions (if any) on such shares.  Subject to your continued employment with the Company, and regardless of the date on which these shares are actually granted, these 100,000 shares will no longer be subject to forfeiture on May 1, 2017.  Furthermore, any such shares that are  subject to forfeiture shall cease to be subject to forfeiture 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 attached Employment Agreement), (ii) termination of your employment with the Company by death or disability (as defined in your attached 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 with the Company without cause (as defined in your attached Employment Agreement)


 


	F.	On the first day of business that you join the Company on a full-time basis after your required notice and wind-down period with your existing employer, the Company shall grant you a stock option under the Company’s 2014 Omnibus Incentive Plan to purchase 300,000 shares of common stock of the Company at the average of the closing prices of the Company’s common stock for the ten (10) trading days prior to the date that is the first business day that you join the Company on a full-time basis after your required notice and wind-down period with your existing (according to the vesting schedule described herein).  Subject to your continued employment with the Company, and regardless of the date on which the shares are actually issued to you, the 300,000 shares of common stock subject to this stock option will vest and become exercisable in accordance with the following schedule:  50,000 shares will vest immediately upon your first day of employment with the Company; 100,000 shares will vest on May 1, 2015; 100,000 shares will vest on May 1, 2016; and 50,000 shares will vest on May 1, 2017.  Furthermore, unvested stock options shall all become automatically fully vested and exercisable 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 attached  Employment Agreement), (ii) termination of your employment with the Company by death or disability (as defined in your attached Employment Agreement), (iii) termination by you of your employment with the Company for Good Reason (as defined in your attached Employment Agreement), or (iv) termination of your employment with the Company without Cause (as defined in your attached Employment Agreement).


 






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	G.	In order to assist you with your moving expenses, a signing bonus of $140,000 will be made to you on your first day of employment with the Company.  This bonus will be subject to a “claw back provision” in three equal increments of $46,666.67 each according to the following schedule:  $46,666.67 will no longer be subject claw back on May 1, 2015; $46,666.67 will no longer be subject claw back on May 1, 2016; and $46,666.67 will no longer be subject to claw back on May 1, 2017.  The $140,000 bonus will also no longer be subject claw back on the first to occur (if any) of the following:  (i) termination of your employment by the Company without Cause (as defined in your attached  Employment Agreement), (ii) termination of your employment by you for Good Reason (as defined in your attached Employment Agreement), (iii) termination of your employment with the Company by death or disability (as defined in your attached Employment Agreement, or (iv) the event of a Change in Control of the Company (as defined in your attached  Employment Agreement).  If however, your employment with the Company ceases at any time before the three-year anniversary of the date that you commence full-time employment with the Company after your required notice and wind-down period with your existing employer due to termination by you without Good Reason (as defined in your attached Employment Agreement), or termination by the Company for Cause (as defined in your attached Employment Agreement), then your signing bonus will e subejt to the claw back schedule described above,


 


	H.	Bonus:   - You will be eligible to receive an annual cash bonus targeted at a percentage of your annual base salary based upon satisfactory achievement of personal performance objectives and business performance objective as may be determined by the Company.  Generally, bonuses are determined and awarded in the first quarter of the calendar year immediately following the year for which performance is measured.


 


	I.	401(k) Retirement Plan:  You may defer a percentage (up to the maximum permitted by law; $17,500 currently) of your pre-tax salary to the Company’s 401(k) plan.  As of the date of the Employment Agreement, the Company makes non-elective contributions per each pay period to each participant’s individual account under the Company’s 401(k) plan 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 401(k) 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 with the Company after your required notice and wind-down period with your existing employer. 


 


	J.	Health Insurance Coverage:   The Company offers full-time employees health insurance.  Since you will be an officer of the Company, the Company will pay 100% of your premiums for BlueCross BlueShield PPO 843 Platinum Health Insurance (family coverage at $1,670.59 per month) and 100% of your premiums for Delta Dental PPO plus Premier Plan 3 (family coverage).  This health insurance coverage and dental insurance coverage will commence on the first day of the month immediately following the month in which you actually commence full-time employment with the Company after your required notice and wind-down period with your existing employer. For example, if you were to begin your employment with the Company at any time in May 2014, then your health/dental insurance coverage with the Company would begin on June 1, 2014.  However, as a further example, if you were to begin your employment with the Company at any time in June 2014, then your health/dental insurance coverage with the Company would begin on Julye 1, 2014. 


 


	K.	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 entitled to four weeks (20 business days) paid vacation time and five sick/personal days.  Generally speaking, vacation/personal time off must be coordinated with the Chief Executive Officer of the Company.  


 


IN WITNESS, WHEREOF, the parties have executed this Addendum
as of the same date as the Employment Agreement.


 





	EXECUTIVE:	22nd Century Group, Inc.	 
	 	 	 	 
	 	 	 	 
	By: 	/s/ Thomas L. James	 	By:	/s/Joseph Pandolfino	 
	 	Thomas L. James	 	Joseph Pandolfino	 
	 	 	Chief Executive Officer	 


 






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