electronic cigarettes international group, ltd.filings.irdirect.net/data/1398702/... · phil...

SECURITIES & EXCHANGE COMMISSION EDGAR FILING

Electronic Cigarettes International Group, Ltd.

Form: 8-K

Date Filed: 2015-01-22

Corporate Issuer CIK: 1398702Symbol: ECIGSIC Code: 1000

© Copyright 2015, Issuer Direct Corporation. All Right Reserved. Distribution of this document is strictly prohibited, subject to theterms of use.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 9, 2015

Electronic Cigarettes International Group, Ltd.(Exact name of registrant as specified in its charter)

Nevada 000-52745 98-0534859

(State or other jurisdiction ofincorporation)

(Commission File Number) (IRS Employer Identification No.)

14200 Ironwood Drive, Grand Rapids, MI 49534

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (616) 384-3272

n/a

(Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of theregistrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

1

EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.

Item 4.01 Changes in Registrant’s Certifying Accountant On January 15, 2015, Electronic Cigarettes International Group, Ltd. (the “Company”) agreed to engage Rehmann Robson LLC(“Rehmann”) as its registered public accounting firm, effective January 15, 2015. The decision to appoint Rehmann as the newregistered public accounting firm was approved by the Audit Committee of the Company’s Board of Directors. During the Company’s two most recent fiscal years and through January 15, 2015, the Company did not consult with Rehmann withrespect to any of (i) the application of accounting principles to a specified transaction, either completed or proposed; (ii) the type ofaudit opinion that might be rendered on the Company’s financial statements; or (iii) any matter that was either the subject of adisagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or an event of the type described in Item 304(a)(1)(v) of RegulationS-K. Item 5.01 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; CompensatoryArrangements of Certain Officers Appointment of Executive Chairman On January 9, 2015, the Board of Directors (the “Board”) of the Company appointed Dan O’Neill as Executive Chairman of theCompany, effective March 1, 2015. Mr. O’Neill will perform the services and duties that are normally and customarily associated withthe Executive Chairman position, as well as other associated duties as the Company’s Board reasonably determines. The Board alsoappointed Mr. O’Neill as a member of the Board effective March 1, 2015, increasing the number of directors from nine to ten. Mr.O’Neill, as a director, will hold office until the next annual general meeting of the Company’s shareholders or until removed from officein accordance with the Company’s bylaws. Dan O’Neill, 62, was the President and Chief Executive Officer of WinSport Canada, Canada’s Winter Olympic training facility, fromJanuary 2011 through his appointment as the Company’s Executive Chairman. From June 2005 through December 2010, Mr. O’Neillwas a private investor focusing on identifying acquisition opportunities. From June 2000 through June 2005, Mr. O’Neill was thePresident and Chief Executive Officer of Molson Inc., one of the world’s largest beer companies, and from March 1999 through June2000, Mr. O’Neill was an executive Vice President for Molson Inc., and the President and Chief Operating Officer of Molson Canada.From January 1997 to March 1999, Mr. O’Neill was an Executive Vice President of the H.J. Heinz Company, and the President andChief Executive Officer of Star-Kist Foods, Inc. Mr. O’Neill received a Masters in Business Administration from Queen’s Universityand a Bachelor of Arts from Carleton University in Canada. Mr. O’Neill’s qualifications to serve on the Company’s Board include his vast executive experience. Appointment of Chief Financial Officer On January 9, 2015, Jim McCormick notified the Company that he would resign from his position as Chief Financial Officer of theCompany, effective immediately. Mr. McCormick’s resignation was not as a result of any disagreement with the Company and he willcontinue to be employed by the Company in other positions. On the same day, the Board appointed Phil Anderson as the Chief Financial Officer of the Company, effective immediately. Mr.Anderson will perform the services and duties that are normally and customarily associated with the Chief Financial Officer positionas well as other associated duties as the Company’s Board or Executive Chairman reasonably determines.

2


Phil Anderson, 47, was an independent advisor to Pinnacle Fund, a family office and predecessor hedge fund, from December 2006through his appointment as Chief Financial Officer of the Company. At Pinnacle Fund, Phil oversaw investments in both public andprivate companies. Prior to joining Pinnacle Fund, Mr. Anderson was the director of research at Siar Capital, a family officespecializing in micro- and small-cap public and private investments. Prior to his time spent with Siar Capital, Phil performed sell-sideresearch at C.E. Unterberg and Ladenburg Thalmann. Mr. Anderson holds a Bachelor of Science from Ithaca College and a Mastersof Business Administration from Hofstra University. Employment Agreement with Mr. Anderson On January 15, 2015, the Company entered into an Employment Agreement (the “Employment Agreement”) with Mr. Anderson. TheEmployment Agreement provides for an initial term of three years from the effective date with automatic two year extensions, unlessterminated by Mr. Anderson or by the Company. Pursuant to the terms of the Employment Agreement, the Company agreed to pay Mr. Anderson an annual base salary of $250,000,subject to annual review. Mr. Anderson is eligible for a targeted cash bonus of up to 50% of his base salary as well as an agreedmultiple thereof, as approved by the Compensation Committee. Mr. Anderson is also entitled to participate in all of the Company’sbenefit plans and equity-based compensation plans, which currently consists of the 2014 Long-Term Incentive Plan. The EmploymentAgreement also provides for the accelerated vesting of all outstanding equity awards held by Mr. Anderson upon the occurrence of achange of control of the Company. Mr. Anderson will also receive 15,000,000 options, priced at $0.0473 per share to purchase shares of the Company’s common stock. The options vest as follows: (i) 5,000,000 options are fully vested on the date of grant; (ii) 5,000,000 options vest on the firstanniversary of the Employment Agreement; and (iii) the remaining 5,000,000 options vest on the second anniversary of theEmployment Agreement; provided that Mr. Anderson must be employed by the Company on a vesting date in order to vest in thatportion of the options. Once vested, the options shall remain exercisable throughout their ten year term, notwithstanding anytermination of Mr. Anderson’s employment. If Mr. Anderson terminates his employment for good reason, as defined in the Employment Agreement, or is terminated by theCompany other than for cause, as defined in the Employment Agreement, the Company is required to pay him a lump sum consistingof his earned but unpaid base salary through the termination date, a pro-rata annual bonus, thirty-six months of base salary, and anamount equal to three times his annual bonus. In addition, all stock options, stock appreciation rights, restricted stock andperformance shares he holds will immediately vest. The foregoing description of the terms of the Employment Agreement is qualified in its entirety by reference to the provisions of theagreement filed as Exhibit 10.1 to this Current Report on Form 8-K, which are incorporated by reference herein. Family Relationships There are no family relationships between any of the Company’s directors or officers and Mr. O’Neill or Mr. Anderson.

3


Related Party Transactions There are no related party transactions reportable under item 5.02 of Form 8-K and Item 404(a) of Regulation S-K. Item 8.01 Other Events On January 14, 2015, the Company issued a press release (the “Press Release”) announcing the appointments of Mr. O’Neill as theCompany’s new Executive Chairman and as a director and Mr. Anderson as the Company’s new Chief Financial Officer. A copy of thePress Release is attached hereto as exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. Item 9.01 Financial Statements and Exhibits (d) Exhibits

Exhibit No. Description

10.1 Employment Agreement with Phil Anderson, dated January 15, 201599.1 Press Release dated January 14, 2015

4


SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned hereunto duly authorized. Date: January 22, 2015 ELECTRONIC CIGARETTES INTERNATIONAL

GROUP, LTD. By: /s/ Brent D. Willis Name: Brent D. Willis

Title: Chief Executive Officer

5


Exhibit 10.1

EMPLOYMENT AGREEMENT

BETWEEN

ELECTRONIC CIGARETTES INTERNATIONAL GROUP, LTD.

AND

PHIL ANDERSON

(Executive)

THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated effective as of January 15, 2015 (the “Effective Date”)is entered into by and between Electronic Cigarettes International Group, Ltd, a Nevada corporation (the “Company”), and Phil

Anderson, an individual with a physical address at 60 West 23rd Street, Apartment 601, New York, New York 10010 (the “Executive”)(collectively, the “Parties,” individually, a “Party”).

W I T N E S S E T H:

WHEREAS, the Executive has substantial experience in finance; and WHEREAS, the Company desires to commence the Executive’s employment on the terms and conditions set forth in

this Agreement; WHEREAS, the Company’s board of directors (the “Board”) has determined that it is in the best interests of the

Company, its affiliates, and its stockholders to employ the executive as Chief Financial Officer, notwithstanding the possibility, threat,or occurrence of a Change of Control (as defined in Article Seven herein); and

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein,

the Parties, intending to be legally bound, hereby agree as follows:

ARTICLE ONE

DEFINITIONS

1. Definitions. As used in this Agreement:

(a) The term “Accrued Obligations,” when used in the case of the Executive’s death or disability shall meanthe sum of (1) the portion of Executive’s Base Salary that was not previously paid to the Executive from the last payment date throughthe Date of Termination and (2) an amount equal 24 months’ salary at the level of the Executive’s Base Salary then in effect,

(b) The term “Automatic Extension” shall have the meaning set forth in Section 2(b) herein. (c) The term “Base Salary”, shall have the meaning set forth in Section 3(a) herein.

1


(d) The term “Board” shall have the meaning set forth in the recitals. (e) The term “Cause” shall have the meaning set forth in Section 4.3 herein. (f) The term “Common Stock” shall mean the Common Stock, par value $0.001, of the Company. (g) The term “Compensation Committee” shall mean the Compensation Committee of the Company. (h) The term “Corporate Documents” shall mean the Company’s Articles of Incorporation, as amended

and/or its Bylaws, as amended. (i) The term “Effective Date” shall have the meaning set forth in the preamble. (j) The term “Good Reason” shall have the meaning set forth in Section 4.4 herein. (k) The term “Initial Term” shall have the meaning set forth in Section 2(b) herein. (l) The term “Severance Benefit” shall have the meaning set forth in Section 4.7(a)(i) herein. (m) The term “Without Cause” shall have the meaning set forth in Section 4.3 herein. (n) The term “Without Good Reason” shall have the meaning set forth in Section 4.7 herein.

ARTICLE TWO

POSITION & DUTIES

2. Employment.

(a) Title. The Executive shall serve as the Chief Financial Officer of the Company and agrees to performservices for the Company and such other affiliates of the Company, as described in Section 3 herein.

(b) Term. The Executive’s employment shall be for an initial term of three (3) years (“Initial Term”),

commencing on the Effective Date. The Executive’s employment shall be automatically extended on the day after the second yearanniversary of the Effective Date (“Automatic Extension”), and on each anniversary date thereof, for additional two (2) year periods.

(c) Duties and Responsibilities. The Executive shall report to the Chief Executive Officer and in his capacity

as an officer of the Company shall perform such duties and services as may be appropriate and as are assigned to him by the ChiefExecutive Officer and the Executive Chairman of the Board. During the term of this Agreement Executive shall, subject to the directionof the Board of the Company, oversee and direct the financial operations of the Company together with the Chief Executive Officerand the Executive Chairman, and shall perform such duties as are customarily performed by a Chief Financial Officer of a companysuch as the Company or as are otherwise delegated to him from time to time by the Chief Executive Officer or Executive Chairman,or such authority as implied by such position.

2


(d) Performance of Duties. During the term of the Agreement, except as otherwise approved by the Board or

as provided below, the Executive agrees to devote substantially all his working time to the affairs of the Company and its subsidiaries.The foregoing shall not, however, preclude Executive from devoting reasonable time, attention and energy in connection with thefollowing activities, provided that such activities do not materially interfere with the performance of his duties and services hereunder:

(a) serving as a director or a member of a committee of any company or organization, if serving in

such capacity does not involve any conflict with the business of the Company or any subsidiary and such othercompany or organization is not in competition, in any manner whatsoever, with the business of the Company or anyof its subsidiaries;

(b) fulfilling speaking engagements; (c) engaging in charitable and community activities; (d) managing his personal business and investments; and (e) any other activity approved of by the Board. For purposes of this Agreement, any activity

specifically listed on Schedule A shall be considered as having been approved by the Board.

(e) Representations and Warranties of the Executive with Respect to Conflicts, Past Employers andCorporate Opportunities. The Executive represents and warrants that:

(a) his employment by the Company will not conflict with any obligations which he has to any other

person, firm or entity; (b) he has not brought to the Company (during the period before the signing of this Agreement) and

he will not bring to the Company any materials or documents of a former or present employer, or any confidentialinformation or property of any other person, firm or entity; and

(c) he will not, without disclosure to and approval of the Board, directly or indirectly, assist or have

an active interest in (whether as a principal, stockholder, lender, employee, officer, director, partner, venturer,consultant or otherwise) in any person, firm, partnership, association, corporation or business organization, entity orenterprise that competes with or is engaged in a business which is substantially similar to the business of theCompany; provided, however, that ownership of not more than five percent (5%) of the outstanding securities of anyclass of any publicly held corporation shall not be deemed a violation of this Section 2.5; provided, further, that anyinvestment specifically listed on Schedule A shall not be deemed a violation of this Section 2.5.

(f) Activities and Interests with Companies Doing Business with the Company. In addition to those activities

and interests of Executive disclosed on Schedule A attached hereto, Executive shall promptly disclose to the Board, in accordancewith the Company’s policies, full information concerning any interests, direct or indirect, he holds (whether as a principal, stockholder,lender, executive, director, officer, partner, venturer, consultant or otherwise) in any business which, as reasonably known toExecutive, purchases or provides services or products to, the Company or any of its subsidiaries, provided that the Executive neednot disclose any such interest resulting from ownership of not more than five (5%) of the outstanding securities of any class of anypublicly held corporation.

3


(g) Other Business Opportunities. Nothing in this Agreement shall be deemed to preclude the Executive

from participating in other business opportunities if and to the extent that: (a) such business opportunities are not directly competitivewith, similar to the business of the Company, or would otherwise be deemed to constitute an opportunity appropriate for theCompany; (b) the Executive’s activities with respect to such opportunities do not have a material adverse effect on the performanceof the Executive’s duties hereunder, and (c) the Executive’s activities with respect to such opportunity have been fully disclosed inwriting to the Board.

(h) Reporting Location. For purposes of this Agreement, the Executive’s reporting location shall be New

York, New York, which shall include the metropolitan area within a 25 mile radius from New York, New York.

ARTICLE THREE

COMPENSATION

3. Compensation.

(a) Base Salary. Executive shall receive an initial annual base salary of Two Hundred and Fifty ThousandDollars ($250,000.00), payable according to the Company’s normal payroll policies and procedures (the “Base Salary”) and subject toall federal, state, and municipal withholding requirements. The Base Salary shall be reviewed by the Board annually for adequacy andmay be increased (but not decreased) accordingly. Base Salary, as so increased, shall constitute “Base Salary” thereafter.

(b) Cash Bonus. The Executive shall be eligible for a cash bonus up to an amount of two (2) times a target

bonus, defined as 50% of Base Salary (the “Target Bonus” and the “Annual Bonus” shall be twice the Target Bonus), as determinedby the Compensation Committee of the Board or by the independent directors (as that term is defined by the stock exchange ormarket on which the Company’s shares may be the traded).

(c) Equity-Based Compensation. The Executive shall be entitled to participate in all equity-based

compensation plans offered by the Company and as determined by the Board of Directors.

4


(a) As a sign-on incentive, the Executive will receive fifteen million (15,000,000) options, priced at$0.0473 per share, which the Company will cause to be issued to him within thirty (30) days following the EffectiveDate. The options shall vest as follows: (i) 5,000,000 options shall be fully vested on the date of grant (the “GrantDate”); (ii) 5,000,000 options shall vest on the first anniversary of the Grant Date; and (iii) the remaining 5,000,000options shall vest on the second anniversary of the Grant Date; provided Executive must be employed by theCompany on a vesting date in order to vest in that portion of the options. Once vested, the options shall remainexercisable throughout their ten (10) year term, notwithstanding any termination of Executive’s employment.

(b) the Executive understands that as of the date of this Agreement, the only stock-based plan

offered by the Company is the 2014 Long-Term Incentive Plan. (c) Upon a Change of Control, all equity-based compensation will be deemed to have vested as of

the Change of Control Effective Date (as defined by Article 7 herein).

(d) Participation In Benefit Plans.

(a) Retirement Plans. Executive shall be entitled to participate, without any waiting or eligibilityperiods, in all qualified retirement plans provided to other executive officers and other key employees.

(b) Taxes. The Company shall pay, on a grossed-up basis for federal, state, and local income taxes,

the amount of any excise tax payable by Executive as a result of the exercise of any stock options, the paymentstriggered by this Agreement, or other compensation agreements between Executive and the Company, or any of itssubsidiaries and any income tax payable by Executive as a result of the exercise of any stock options, the paymentsin Common Stock triggered by this Agreement, or other compensation agreements between Executive and theCompany, or any of its subsidiaries, except as might otherwise be provided such benefit plan.

(c) Employee Benefit Plans and Insurance. The Executive shall have the right to participate in

employee benefit plans and insurance programs of the Company that the Company may sponsor from time to timeand to receive customary Company benefits, if those benefits are so offered. Nothing herein shall obligate Executiveto accept such benefits if and when they are offered.

(d) Vacation.

(i) The Executive shall be entitled to take such vacations, with pay, as are customaryamong other chief executive officers of organizations of similar size and nature, which vacation level shall bereviewed by the Compensation Committee from time to time. No more than 1.5 times (1.5x) Executive’sauthorized annual vacation allocation may be accrued, at any given time. In the event that Executive hasreached his maximum authorized vacation allocation, accrual will not re-commence until Executive usessome of his paid vacation credit and thereby brings the balance below his maximum. Accrued paid vacationcredit forfeited because of an excess balance cannot be retroactively reapplied.

(ii) Pay will only be provided for any unused, accrued paid vacation credit at the time of

Executive’s separation from the business by the Company due to a reduction in force, by Executive uponretirement, upon the death of an employee, or as otherwise provided in Article 4; provided that Executive hasbeen a regular full-time employee for three calendar months prior to such event. Termination of employmentfor Cause by the Company, or Executive’s resignation, will result in the forfeiture of any unused paid vacationcredit.

5


(e) Paid Holidays. The Executive shall be entitled to such paid holidays as are generally available toall employees. As of the date of this Agreement, the Company’s employees are permitted to observe ten (10) paidholidays.

(e) Relocation and Business-related Expenses. In the event that Executive is required to move from his

primary residence and consents to such move, then Executive shall be provided with relocation assistance as provided below:

(a) Housing and Temporary Lodging. The Company will pay the costs, for the Executive and hisfamily, of house-hunting trips and the cost of transporting the Executive, his spouse, family, furniture, householdeffects, and vehicles, to the area in which the Company will be headquartered. In addition, the Company will pay thecost of the Executive’s travel, temporary living expenses, including housing, whether hotel or apartment, and meals,during the period prior to the Executive’s move to the city in which the Company will be headquartered.

(b) Reimbursement. Executive shall be entitled to reimbursement within a reasonable time for all

properly documented and approved expenses for travel. The Company shall reimburse business expenses ofExecutive directly related to Company business, including, but not limited to, airfare, lodging, meals, travel expenses,medical expenses while traveling not covered by insurance, business entertainment, expenses associated withentertaining business persons, local expenses to governments or governmental officials, tariffs, applicable taxesoutside of the United States, special expenses associated with travel to certain countries, supplemental life insuranceor supplemental insurance of any kind or special insurance rates or charges for travel outside the United States(unless such insurance is being provided by the Company), rental cars and insurance for rental cars, and any otherexpenses of travel that are reasonable in nature or that have been otherwise pre-approved. Executive shall begoverned by the travel and entertainment policy in effect at the Company.

(c) Specific Business Expenses. In addition to the reimbursement of business expenses described

above, the Executive shall also be entitled to reimbursement by the Company for (i) the monthly cost of maintainingan office in New York, New York, of the Executive’s choosing and (ii) the monthly cost of his office and cell phonesand wireless data service.

(f) Severance Benefit. In the event that Executive’s employment is terminated, other than for Cause,

Executive shall receive compensation pursuant to Section 4.7 herein. (g) Payroll Procedures and Policies. All payments required to be made by the Company to the Executive

pursuant to this Article Three shall be paid on a regular basis in accordance with the Company’s normal payroll procedures andpolicies.

(h) Excise Tax Gross-Up.

(a) If any payment to or in respect of the Executive by the Company or any affiliate, whetherpursuant to this Agreement or otherwise (a “Payment”), is determined to be a “parachute payment” as defined inSection 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the “Code”) (such payment, a “ParachutePayment”) and also to be subject to the excise tax imposed by Section 4999 of the Code, or any interest or penaltiesare incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest andpenalties, being herein collectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive anadditional payment from the Company (the “ Gross-Up Payment ”) in an amount such that the net amount of suchadditional payment retained by the Executive, after payment of all federal, state and local income and employmentand Excise Taxes imposed on the Gross-Up Payment, shall be equal to the Excise Tax imposed on the Payment.Notwithstanding the foregoing or any other provision of this Agreement, if it shall be determined that the Executive isentitled to a Gross-Up Payment but that the net present value of the Parachute Payments (calculated at the discountrate in effect under Section 280G of the Code) do not exceed 110% of the Reduced Amount (as defined below), thenno Gross-Up Payment shall be made to the Executive and the aggregate amount of the Parachute Paymentsotherwise payable under this Agreement shall be reduced to the Reduced Amount; provided, that the foregoingreduction shall not be made if the Accounting Firm (as defined below) determines that the net after-tax benefit of thepayments to the Executive without the reduction imposed is more than 110% of the net after-tax benefit of thepayments to the Executive with the reduction imposed. For purposes of the foregoing, the term “Reduced Amount”shall mean the greatest amount of Parachute Payments that could be paid to the Executive such that the receipt ofsuch Parachute Payments would not give rise to any Excise Tax. The determination of which Payments shall bereduced pursuant to this Section 3(h)(a) shall be made by an independent accounting firm of recognized standingselected by the Company and reasonably acceptable to the Executive (the “Accounting Firm”), in consultation withthe Executive and shall be reasonably acceptable to him, and such determination shall be made at the time it is


determined whether any payments made to the Executive are subject to the Excise Tax.

6


(b) Subject to the provisions of Section 3(h)(c) hereof, all determinations required to be made under

this Section 3(h), including whether and when a Gross-Up Payment is required and the amount of such Gross-UpPayment and the assumptions to be utilized in arriving at such determination, shall be made by the Accounting Firm.The initial determination of whether a Gross-Up Payment is required, and if so, the amounts of the Excise Tax andGross-Up Payment, shall be determined by the Accounting Firm, whose written report shall be delivered to theCompany and to the Executive. Not later than sixty (60) days after any Payment, the Accounting Firm shall determinewhether a Gross-Up Payment is due with respect to such Payment, and such Gross-Up Payment shall be paid by theCompany to the Executive (except to the extent any portion thereof is paid to the taxing authorities on behalf of theExecutive) not later than ten (10) days following the Accounting Firm’s determination. The Executive and theCompany shall cooperate in good faith as to the treatment of a Payment for tax reporting and withholding purposes.

(c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service

that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall begiven as soon as practicable but in no event later than the earlier of (i) thirty (30) days after the Executive is informedin writing of such claim or (ii) fifteen (15) days before the date on which such claim is requested to be paid, and shallapprise the Company of the nature of such claim and the date on which such claim is requested to be paid. TheExecutive shall not pay such claim prior to the expiration of the 30-day period following the date on which theExecutive gives such notice to the Company (or such shorter period ending on the date that any payment of taxeswith respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of suchperiod that it desires to contest such claim, the Executive shall:

7


i. give the Company any information reasonably requested by theCompany relating to such claim;

ii. take such action in connection with contesting such claim as the

Company shall reasonably request in writing from time to time, including without limitation,accepting legal representation with respect to such claim by an attorney selected by the Companyand reasonably acceptable to the Executive;

iii. cooperate with the Company in good faith in order effectively to contest

such claim; and iv. permit the Company to participate in any proceedings relating to such

claim;

provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interestand penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless for anyExcise Tax or federal, state and local income and employment tax (including interest and penalties with respectthereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on theforegoing provisions of this Section 3(h)(c), the Company shall control all proceedings taken in connection with suchcontest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings andconferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive topay the tax claimed and sue for a refund or to contest the claim in any permissible manner, and the Executive agreesto prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and inone or more appellate courts, as the Company shall determine; provided, however, that if the Company directs theExecutive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to theExecutive, on an after-tax basis, and shall hold the Executive harmless from any Excise Tax or federal, state or localincome or employment tax (including interest or penalties with respect thereto) imposed with respect to suchadvance or with respect to any imputed income with respect to such advance. The Company’s control of the contest,however, shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder, and theExecutive shall be entitled to settle or contest, as the case may by, any other issue raised by the Internal RevenueService or any other taxing authority.

(d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section3(h)(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subjectto the Company’s complying with the requirements of Section 3(h)(c)) promptly pay to the Company the amount ofsuch refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt bythe Executive of an amount advanced by the Company pursuant to Section 3(h)(c), a determination is made that theExecutive shall not be entitled to any refund with respect to such claim and the Company does not notify theExecutive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after suchdetermination, then such advance shall be forgiven and shall not be required to be repaid and the amount of suchadvance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

8


(e) In the event that the Excise Tax is subsequently determined to be less than initially determined,

the Executive shall repay to the Company at the time that the amount of such reduction in Excise Tax is determined(but, if previously paid to the taxing authorities, not prior to the time the amount of such reduction is refunded to theExecutive or otherwise realized as a benefit by the Executive) the portion of the Gross-Up Payment that would nothave been paid if the Excise Tax as subsequently determined had been applied initially in calculating the Gross-UpPayment, with the amount of such repayment determined by the Accounting Firm; provided that the amount ofrequired repayment by the Executive shall be reduced, as the Accounting Firm may determine, in order to avoidputting the Executive in a worse after-tax position than he would have enjoyed had the amount of Excise Tax beencorrectly determined in the first instance, such determination to be made on a basis consistent with the intention ofthis Section 3(h), which is to make the Executive whole on an after-tax basis on account of any Excise Tax (includingrelated interest and penalties). Similarly, if the amount of Gross-Up Payments actually made by the Company issubsequently determined by the Accounting Firm to have been inadequate to satisfy the Company’s obligation toprotect the Executive against the Excise Tax (including related interest and penalties), additional Gross-Up Paymentsshall be made as directed by the Accounting Firm. The Executive and the Company shall each have the right at alltimes to have the Accounting Firm review and confirm or revise earlier calculations.

ARTICLE FOUR

TERMINATION OF EMPLOYMENT

4.1 Death. The Executive’s employment shall terminate automatically upon the Executive’s death during theEmployment Term.

4.2 Disability. If the Company determines in good faith that the Disability (as defined below) of the Executive

has occurred during the Employment Term, the Company may give the Executive notice of its intention to terminate the Executive’s

employment. In such event, the Executive’s employment hereunder shall terminate effective on the 30th day after receipt of suchnotice by the Executive (the “Disability Effective Date”); provided, that, within the 30-day period after such receipt, the Executive shallnot have returned to full-time performance of the Executive’s duties. For purposes of this Agreement, “Disability” shall mean theabsence of the Executive from the Executive’s duties hereunder on a full-time basis for an aggregate of 180 days within any givenperiod of 270 consecutive days (in addition to any statutorily required leave of absence and any leave of absence approved by theCompany) as a result of incapacity of the Executive, despite any reasonable accommodation required by law, due to bodily injury ordisease or any other mental or physical illness, which will, in the opinion of a physician selected by the Company or its insurers andacceptable to the Executive or the Executive’s legal representative, be permanent and continuous during the remainder of theExecutive’s life.

4.3 Termination by Company. (a) Termination for Cause.

9


The Company may terminate the Executive’s employment hereunder for Cause (as defined below). For purposes of

this Agreement, “Cause” shall mean:

(i) the willful and continued failure of the Executive to perform substantially the Executive’s duties hereunder(other than any such failure resulting from bodily injury or disease or any other incapacity due to mental or physicalillness) after a written demand for substantial performance is delivered to the Executive by the Board or the Chairmanof the Company, which specifically identifies the manner in which the Board or the Chairman of the Companybelieves the Executive has not substantially performed the Executive’s duties; or

(ii) the willful engaging by the Executive in illegal conduct or gross misconduct that is materially and

demonstrably detrimental to the Company and/or its affiliated companies, monetarily or otherwise. For purposes of this provision, no act, or failure to act, on the part of the Executive shall be considered

“willful” unless done, or omitted to be done, by the Executive in bad faith or without reasonable belief that theExecutive’s action or omission was in the best interests of the Company. Any act, or failure to act, based uponauthority given pursuant to a resolution duly adopted by the Board, upon the instructions of the Chairman or anotherBoard Member of Company, or based upon the advice of counsel for the Company shall be conclusively presumed tobe done, or omitted to be done, by the Executive in good faith and in the best interests of the Company and itsaffiliated companies. The cessation of employment of the Executive shall not be deemed to be for Cause unless anduntil there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote ofnot less than two-thirds of the entire membership of the Board then in office at a meeting of the Board called and heldfor such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity,together with counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executiveis guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail.

(iii) the Executive’s conviction of, or plea of nolo contendere to, any felony of theft, fraud, embezzlement or

violent crime.

(b) Termination without Cause. All terminations by the Company that are not for Cause, shall be considered Without Cause. 4.4 Termination by Executive. The Executive may terminate the Executive’s employment hereunder at any time

during the Employment Term for Good Reason (as defined below). For purposes of this Agreement, “Good Reason” shall mean anyof the following (without the Executive’s express written consent):

(a) The assignment to the Executive of any duties inconsistent in any respect with the Executive’s position

(including status, offices, titles and reporting requirements), duties, functions, responsibilities or authority ascontemplated by Section 2(c) of this Agreement, or any other action by the Company that results in a diminution insuch position, duties, functions, responsibilities or authority, excluding for this purpose an isolated, insubstantial andinadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of noticethereof given by the Executive;

10


(b) Any failure by the Company to comply with any of the provisions of Article 3 of this Agreement, other than

an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Companypromptly after receipt of notice thereof given by the Executive;

(c) The Company’s requiring the Executive to be based at any office or location other than as provided inSection 2(h) of this Agreement or the Company’s requiring the Executive to travel on the Company’s or its affiliatedcompanies’ business to a substantially greater extent than during the three-year period immediately preceding theEffective Date;

(d) Any failure by the Company to comply with and satisfy Article 5 and/or Section 8(h) of this Agreement; or (e) Any purported termination by the Company of the Executive’s employment hereunder otherwise than as

expressly permitted by this Agreement, and for purposes of this Agreement, no such purported termination shall beeffective.

For purposes of this Section 4.4, any good faith determination of “Good Reason” made by the Executive shall be conclusive.

4.5 Notice of Termination. Any termination of the Executive’s employment hereunder by the Company or by theExecutive (other than a termination pursuant to Section 4.1) shall be communicated by a Notice of Termination (as defined below) tothe other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which (a) indicates thespecific termination provision in this Agreement relied upon, (b) in the case of a termination for Disability, Cause or Good Reason,sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employmentunder the provision so indicated, and (c) specifies the Date of Termination (as defined in Section 4.6 below); provided, however, thatnotwithstanding any provision in this Agreement to the contrary, a Notice of Termination given in connection with a termination by theCompany for Cause or by the Executive for Good Reason shall be given by the Company or Executive (as applicable) within areasonable period of time, not to exceed 120 days, following the occurrence of the event giving rise to such right of termination. Thefailure by the Company or the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to ashowing of Disability, Cause or Good Reason shall not waive any right of the Company or the Executive hereunder or preclude theCompany or the Executive from asserting such fact or circumstance in enforcing the Company’s or the Executive’s rights hereunder.

4.6 Date of Termination. For purposes of this Agreement, the “Date of Termination” shall mean the effectivedate of termination of the Executive’s employment hereunder, which date shall be (a) if the Executive’s employment is terminated bythe Executive’s death, the date of the Executive’s death, (b) if the Executive’s employment is terminated because of the Executive’sDisability, the Disability Effective Date, (c) if the Executive’s employment is terminated by the Company (or applicable affiliatedcompany) for Cause or by the Executive for Good Reason, the date on which the Notice of Termination is given, (d) if the Executive’semployment is terminated pursuant to Section 2.2, the date on which the Employment Term ends pursuant to Section 2.2 due to aparty’s delivery of a Notice of Termination thereunder, and (e) if the Executive’s employment is terminated for any other reason, thedate specified in the Notice of Termination, which date shall in no event be earlier than the date such notice is given; provided,however, that if within 30 days after any Notice of Termination is given, the party receiving such Notice of Termination notifies theother party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finallydetermined, either by mutual written agreement of the parties or by a final judgment, order or decree of a court of competentjurisdiction (the time for appeal therefrom having expired and no appeal having been perfected).

11


4.7 Obligations of the Company upon Termination.

( a ) Good Reason or Change of Control; Other Than for Cause. If, during the Employment Term, theCompany (or applicable affiliated company) shall terminate the Executive’s employment hereunder other than forCause or the Executive shall terminate the Executive’s employment either for (1) Good Reason or, (2) any reason (ifduring the Change of Control Period):

(i) the Company shall pay to the Executive in a lump sum (A) the sum of (1) Executive’s

Base Salary, if any, which has been earned but not paid through the Termination Date, (2) theproduct of (x) the Annual Bonus and (y) a fraction, the numerator of which is the number of days inthe current fiscal year through the Termination Date and the denominator of which is 365, (3) theprior year’s Annual Bonus, to the extent earned but not paid, (4) the amount of any unreimbursedbusiness expenses incurred by the Executive on or prior to the Date of Termination, and (5) anyaccrued vacation or other pay pursuant to the Corporation’s vacation policy, to the extent notpreviously paid; and (B) an amount equal to the sum of (1) an amount equal to 36 months ofExecutive’s Base Salary and (2) the Annual Bonus multiplied by a factor of 3;

(ii) all stock options, stock appreciation rights, and restricted stock shall immediately vest;

(iii) all stock options and stock appreciation rights shall be payable in Common Stock and

shall remain exercisable throughout the remainder of their ten (10) year term;

(iv) all performance shares shall immediately vest;

(v) the Company shall pay, on a grossed-up basis (as determined in the same manner asunder Section 3.4(b) herein the amount of any excise and income taxes payable by Executive as aresult of the exercise of any stock options, the payments in Common Stock triggered by thisAgreement, or other agreements between Executive and the Company, or any of its subsidiaries;and

(vi) to the extent not theretofore paid or provided, the Company shall timely pay or provide tothe Executive any other amounts or benefits required to be paid or provided or which the Executive iseligible to receive under any plan, program, policy, practice or arrangement or contract or agreementof the Company and its affiliated companies (such other amounts and benefits hereinafter referred toas the “Other Benefits”).

( b ) Death. If the Executive’s employment is terminated by reason of the Executive’s death during theEmployment Term, this Agreement shall terminate without further compensation obligations to the Executive’s legalrepresentatives under this Agreement, other than for (i) payment of Accrued Obligations (which shall be paid to theExecutive’s estate or beneficiary, as applicable, in a lump sum in cash within 90 days of the Date of Termination) andthe timely payment or settlement of any other amount pursuant the Other Benefits and (ii) treatment of all othercompensation under existing plans as provided by the terms and rules of those plans.

12


(c) Disability. If the Executive’s employment is terminated by reason of the Executive’s Disability during

the Employment Term, this Agreement shall terminate without further compensation obligations to the Executive,other than for (i) payment of Accrued Obligations (which shall be paid to the Executive in a lump sum in cash within90 days of the Date of Termination) and the timely payment or settlement of any other amount pursuant to the OtherBenefits, (ii) treatment of all other compensation under existing plans as provided by the terms and rules of thoseplans, and (iii) payment of any unreimbursed business expenses incurred by the Executive on or prior to the Date ofTermination (which shall be paid to the Executive in a lump sum in cash within 90 days of the Date of Termination).

(d) Cause; Other than for Good Reason. If the Executive’s employment is terminated for Cause during

the Employment Term, this Agreement shall terminate without further compensation obligations to the Executiveother than the obligation to pay to the Executive (x) Base Salary through the Date of Termination plus (y) the amountof any compensation previously deferred by the Executive and any accrued vacation or other pay pursuant to theCorporation’s vacation policy, in each case to the extent theretofore unpaid, and (z) any unreimbursed businessexpenses incurred by the Executive on or prior to the Date of Termination. If the Executive voluntarily terminates theExecutive’s employment during the Employment Term, excluding a termination either (i) for Good Reason or (ii) aChange of Control, this Agreement shall terminate without further compensation obligations to the Executive, otherthan for (1) that portion of Executive’s Base Salary that was not previously paid to the Executive from the lastpayment date through the effective date of the Executive’s voluntary termination, (2) any accrued vacation or otherpay pursuant to the Corporation’s vacation policy and the timely payment or provision of the Other Benefits, asprovided in any applicable plan, and (3) any unreimbursed business expenses incurred by the Executive on or priorto the Date of Termination, and the Executive shall have no further obligations nor liability to the Company. In allcases of payments in this Section 4.7(d), any amounts owed to the Executive shall be paid to the Executive in a lumpsum in cash within 90 days of the Date of Termination subject to applicable laws and regulations (except in the caseof Other Benefits, which shall be provided pursuant to the terms of the applicable plans, programs or arrangements, ifany).

4.8 Continuation of Payments During Disputes. The Parties agree that in the case of:

(a) termination which the Company contends is for Cause, but Executive claims is not for Cause; or (b) termination by Executive under Section 4.4 herein,

13


the Company shall continue to pay all compensation due to Executive hereunder until the resolution of such dispute, but theCompany shall be entitled to repayment of all sums so paid, if it ultimately shall be determined by a court of competent jurisdiction, ina final non-appealable decision, that the termination was for Cause or such termination by Executive was not authorized underSection 4.4 herein, and all sums so repaid shall bear interest at the prime rate as published in The Wall Street Journal on the date onwhich such court makes such determination. Any such reimbursement of payments by Executive shall not include any legal fees orother loss, costs, or expenses incurred by the Company, notwithstanding any provision of the Indemnification Agreement, which isattached as Exhibit A and is considered a part of this Agreement.

ARTICLE FIVE

INDEMNIFICATION

5. Indemnification. The Executive shall be indemnified and held harmless pursuant to the terms and conditions setforth in the Indemnification Agreement substantially in the form attached as Exhibit A hereto and which is incorporated herein byreference.

ARTICLE SIX

CONFIDENTIALITY

6. Confidentially; Non-Competition; and Non-Solicitation.

(a) Confidentiality. In consideration of employment by the Company and Executive’s receipt of the salaryand other benefits associated with Executive’s employment, and in acknowledgment that (a) the Company is engaged in theelectronic cigarette and related businesses, (b) maintains secret and confidential information, (c) during the course of Executive’semployment by the Company such secret or confidential information may become known to Executive, and (d) full protection of theCompany’s business makes it essential that no employee appropriate for his or her own use, or disclose such secret or confidentialinformation, Executive agrees that during the time of Executive’s employment and for a period of two (2) years following thetermination of Executive’s employment with the Company, Executive agrees to hold in strict confidence and shall not, directly orindirectly, disclose or reveal to any person, or use for his own personal benefit or for the benefit of anyone else, any trade secrets,confidential dealings, or other confidential or proprietary information of any kind, nature, or description (whether or not acquired,learned, obtained, or developed by Executive alone or in conjunction with others) belonging to or concerning the Company or any ofits subsidiaries, except (i) with the prior written consent of the Company duly authorized by its Board, (ii) in the course of the properperformance of Executive’s duties hereunder, (iii) for information (x) that becomes generally available to the public other than as aresult of unauthorized disclosure by Executive or his affiliates or (y) that becomes available to Executive on a non-confidential basisfrom a source other than the Company or its subsidiaries who is not bound by a duty of confidentiality, or other contractual, legal, orfiduciary obligation, to the Company, (iv) as required by applicable law or legal process, or (v) as is necessary to enforce Executive’srights under this Agreement and/or any other written agreement between the Company and/or any subsidiary or affiliate and theExecutive.

(b) Non-Competition. During Executive’s employment with the Company and for so long as Executive

receives any Severance Benefit or is receiving any Severance Amount provided under this agreement in respect of the termination ofhis employment, Executive shall not be engaged as an officer or executive of, or in any way be associated in a management orownership capacity with any corporation, company, partnership or other enterprise or venture which conducts a business which is indirect competition with the business of the Company; provided, however, that Executive may own not more than five percent (5%) ofthe outstanding securities, or equivalent equity interests, of any class of any corporation, company, partnership, or either enterprisethat is in direct competition with the business of the Company, which securities are listed on a national securities exchange or tradedin the over-the-counter market. For purposes of this Agreement, a lump sum payment equivalent made to Executive shall be judged inrelation to his most recent annual Base Salary to determine whether Executive is continuing to receive a Severance Benefit orSeverance Amount and shall be measured from the date such payment is received. It is expressly agreed that the remedy at law forbreach of this covenant is inadequate and that injunctive relief shall be available to prevent the breach thereof.

14


(c) Non-Solicitation. Executive also agrees that he will not, directly or indirectly, during the term of his

employment or within one (1) year after termination of his employment for any reason, in any manner, encourage, persuade, orinduce any other employee of the Company to terminate his employment, or any person or entity engaged by the Company torepresent it to terminate that relationship without the express written approval of the Company. It is expressly agreed that the remedyat law for breach of this covenant is inadequate and that injunctive relief shall be available to prevent the breach thereof.

ARTICLE SEVEN

CHANGE OF CONTROL

7. Certain Definitions.

7 . 1 Change of Control Effective Date. The “Change of Control Effective Date” shall mean the first date duringthe Change of Control Period (as defined in Section 7.2) on which a Change of Control occurs. Notwithstanding anything in thisAgreement to the contrary, if a Change of Control occurs and if the Executive’s employment with the Company (or applicable affiliatedcompany) is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executivethat such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect aChange of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of thisAgreement the “Change of Control Effective Date” shall mean the date immediately prior to the date of such termination ofemployment.

7.2 Change of Control Period. The “Change of Control Period” shall mean the period commencing on the date

of this Agreement and ending on the third anniversary of such date; provided, however, that commencing on the date one year afterthe date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof herein referred to asthe “Renewal Date”), the Change of Control Period shall be automatically extended so as to terminate three years after such RenewalDate.

7.3 Change of Control. For purposes of this Agreement, a “Change of Control” shall mean:

(a) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of theExchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under theExchange Act) of 15% or more of either (A) the then outstanding Common Shares the Company (the “OutstandingShares”) or (B) the combined voting power of the then outstanding voting securities of the Company entitled to votegenerally in the election of directors (the “Outstanding Voting Securities”); provided, however, that for purposes of thisSubsection 7.3(a) the following acquisitions shall not constitute a Change of Control: (w) Company-sponsoredrecapitalization that is approved by the Incumbent Board, as defined below; (x) a capital raise initiated by theCompany where the Incumbent Board remains for at least at least 548 days after the closing date of the raise, or (y)an acquisition of another company or asset(s) initiated by the Company and where the Company’s shareholdersimmediately after the transaction own at least 51% of the shares of the combined concern; or

15


(b) individuals who, as of the date of this Agreement, constitute the Company’s Board (the “Incumbent

Board”) cease for any reason to constitute a majority of such Board of Directors; provided, however , that anyindividual becoming a director of the Company shareholders subsequent to the date hereof whose election, ornomination for election by the Company’s shareholders was approved by a vote of a majority of the directors of theCompany then comprising the Incumbent Board shall be considered as though such individual were a member of theIncumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as aresult of either an actual or threatened election contest or other actual or threatened solicitation of proxies orconsents by or on behalf of a Person other than the Company Board; or

(c) consummation of a reorganization, merger, amalgamation or consolidation of the Company, with or

without approval by the shareholders of the Company, in each case, unless, following such reorganization, merger,amalgamation or consolidation, (i) more than 50% of, respectively, the then outstanding shares of common stock (orequivalent security) of the company resulting from such reorganization, merger, amalgamation or consolidation andthe combined voting power of the then outstanding voting securities of such company entitled to vote generally in theelection of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals andentities who were the beneficial owners, respectively, of the Outstanding Shares and Outstanding Voting Securitiesimmediately prior to such reorganization, merger, amalgamation or consolidation in substantially the sameproportions as their ownership, immediately prior to such reorganization, merger, amalgamation or consolidation, ofthe Outstanding Shares and Outstanding Voting Securities, as the case may be, (ii) no Person (excluding a parent ofthe Company that may come into being after the date of this Agreement through any transaction deliberatelyundertaken by the Company after an affirmative vote of its Incumbent Directors and the Company shareholders), anyemployee benefit plan (or related trust) of the Company or such company resulting from such reorganization, merger,amalgamation or consolidation, and any Person beneficially owning, immediately prior to such reorganization,merger, amalgamation or consolidation, directly or indirectly, 15% or more of the Outstanding Shares or OutstandingVoting Securities, as the case may be) beneficially owns, directly or indirectly, 15% or more of, respectively, the thenoutstanding shares of common stock (or equivalent security) of the company resulting from such reorganization,merger, amalgamation or consolidation or the combined voting power of the then outstanding voting securities ofsuch company entitled to vote generally in the election of directors, and (ii) a majority of the members of the board ofdirectors of the company resulting from such reorganization, merger, amalgamation or consolidation were membersof the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger,amalgamation or consolidation; or

(d) consummation of a sale or other disposition of all or substantially all the assets of the Company, with or

without approval by the shareholders of the Company, other than to a corporation, with respect to which followingsuch sale or other disposition, (i) more than 50% of, respectively, the then outstanding shares of common stock (orequivalent security) of such corporation and the combined voting power of the then outstanding voting securities ofsuch corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly,by all or substantially all the individuals and entities who were the beneficial owners, respectively, of the OutstandingShares and Outstanding Voting Securities immediately prior to such sale or other disposition in substantially thesame proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Sharesand Outstanding Voting Securities, as the case may be, (ii) no Person (excluding the Company, any employee benefitplan (or related trust) of the Company or such corporation, and any Person beneficially owning, immediately prior tosuch sale or other disposition, directly or indirectly, 15% or more of the Outstanding Shares or Outstanding VotingSecurities, as the case may be) beneficially owns, directly or indirectly, 15% or more of, respectively, the thenoutstanding shares of common stock (or equivalent security) of such corporation or the combined voting power of thethen outstanding voting securities of such corporation entitled to vote generally in the election of directors, and (C) amajority of the members of the board of directors of such corporation were members of the Incumbent Board at thetime of the execution of the initial agreement or action of the Incumbent Board providing for such sale or otherdisposition of assets of the Company; or

16


(e) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

ARTICLE EIGHT

MISCELLANEOUS

8. Miscellaneous.

(a) Benefit. This Agreement shall inure to the benefit of and be binding upon each of the Parties, and theirrespective successors. This Agreement shall not be assignable by any Party without the prior written consent of the other Party. TheCompany shall require any successor, whether direct or indirect, to all or substantially all the business and/or assets of the Companyto expressly assume and agree to perform, by instrument in a form reasonably satisfactory to Executive, this Agreement and anyother agreements between Executive and the Company or any of its subsidiaries, in the same manner and to the same extent as theCompany.

(b) Governing Law. This Agreement shall be governed by, and construed in accordance with the laws of the

State of Nevada without resort to any principle of conflict of laws that would require application of the laws of any other jurisdiction;provided, however, that Nevada law shall govern with respect to the Executive’s rights under a Change of Control under Article Sevenherein.

(c) Counterparts. This Agreement may be executed in counterparts and via facsimile, each of which shall be

deemed to constitute an original, but all of which together shall constitute one and the same Agreement. Each such counterpart shallbecome effective when one counterpart has been signed by each Party thereto.

(d) Headings. The headings of the various articles and sections of this Agreement are for convenience of

reference only and shall not be deemed a part of this Agreement or considered in construing the provisions thereof.

17


(e) Severability. Any term or provision of this Agreement that shall be prohibited or declared invalid or

unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or declaration,without invalidating the remaining terms and provisions hereof or affecting the validity or enforceability of such provision in any otherjurisdiction, and if any term or provision of this Agreement is held by any court of competent jurisdiction to be void, voidable, invalid orunenforceable in any given circumstance or situation, then all other terms and provisions hereof, being severable, shall remain in fullforce and effect in such circumstance or situation, and such term or provision shall remain valid and in effect in any othercircumstances or situation.

(f) Construction. Use of the masculine pronoun herein shall be deemed to refer to the feminine and neuter

genders and the use of singular references shall be deemed to include the plural and vice versa, as appropriate. No inference in favorof or against any Party shall be drawn from the fact that such Party or such Party’s counsel has drafted any portion of thisAgreement.

(g) Equitable Remedies. The Parties hereto agree that, in the event of a breach of this Agreement by either

Party, the other Party, if not then in breach of this Agreement, may be without an adequate remedy at law owing to the unique natureof the contemplated relationship. In recognition thereof, in addition to (and not in lieu of) any remedies at law that may be available tothe non-breaching Party, the non-breaching Party shall be entitled to obtain equitable relief, including the remedies of specificperformance and injunction, in the event of a breach of this Agreement, by the Party in breach, and no attempt on the part of the non-breaching Party to obtain such equitable relief shall be deemed to constitute an election of remedies by the non-breaching Party thatwould preclude the non-breaching Party from obtaining any remedies at law to which it would otherwise be entitled.

(h) Attorney’s Fees. If any Party hereto shall bring an action at law or in equity to enforce its rights under this

Agreement, the prevailing Party in such action shall be entitled to recover from the Party against whom enforcement is sought itscosts and expenses incurred in connection with such action (including fees, disbursements and expenses of attorneys and costs ofinvestigation). In the event that Executive institutes any legal action to enforce Executive’s legal rights hereunder, or to recoverdamages for breach of this Agreement, Executive, if Executive prevails in whole or in part, shall be entitled to recover from theCompany reasonable attorneys’ fees and disbursements incurred by Executive with respect to the claims or matters on whichExecutive has prevailed. The Company shall promptly pay or reimburse Executive for all legal fees and expenses he incurs in thenegotiation, review, and preparation of this Agreement and related arrangements.

(i) No Waiver. No failure, delay or omission of or by any Party in exercising any right, power or remedy

upon any breach or default of any other Party, or otherwise, shall impair any such rights, powers or remedies of the Party not inbreach or default, nor shall it be construed to be a waiver of any such right, power or remedy, or an acquiescence in any similarbreach or default; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretoforeor thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any Party of any provisions ofthis Agreement must be in writing and be executed by the Parties and shall be effective only to the extent specifically set forth in suchwriting.

(j) Remedies Cumulative. All remedies provided in this Agreement, by law or otherwise, shall be cumulative

and not alternative.

18


9. Amendment. This Agreement may be amended only by a written agreement signed by the parties hereto.

(a) In addition, to the extent that any of the payments hereunder are or may be governed by Section 409A ofthe Code, the parties will work together in a commercially reasonable manner in good faith to amend any provisions asnecessary for compliance or to avoid the imposition of taxes or penalties under Section 409A of the Code in a manner thatmaintains the basic financial provisions of this Agreement. In this connection, each party will make any amendments oradjustments reasonably requested by the other party which satisfy the foregoing condition.

(b) It is the intention of the Company and the Executive that this Agreement comply with the requirements of

Section 409A of the Code, and this Agreement will be interpreted in a manner intended to comply with Section 409A. Allpayments under this Agreement are intended to be excluded from the requirements of Section 409A of the Code or bepayable on a fixed date or schedule in accordance with Section 409A(a)(2)(iv) of the Code. To the extent thatreimbursements or in-kind benefits due to the Executive under this Agreement constitute “deferred compensation” underSection 409A of the Code, any such reimbursements or in-kind benefits shall be paid to the Executive in a manner consistentwith Treasury Regulations Section 1.409A-3(i)(1)(iv).

(c) Notwithstanding anything in this Agreement to the contrary, in the event that the Executive is deemed to

be a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code and the Executive is not “disabled”within the meaning of Section 409A(a)(2)(C) of the Code, no payments hereunder that are “deferred compensation” subject toSection 409A of the Code shall be made to the Executive prior to the date that is six (6) months after the date of theExecutive’s “separation from service” (as defined in Section 409A of the Code) or, if earlier, the Executive’s date of death, ifpaying such payment(s) at their otherwise earlier scheduled due date(s) would violate Section 409A of the Code. Followingany applicable six (6) month delay, all such delayed payments will be paid in a single lump sum on the earliest permissiblepayment date. For purposes of Section 409A of the Code, each of the payments made hereunder shall be designated as a“separate payment.”

(d) For purposes of this Agreement, with respect to payments of any amounts that are considered to be

“deferred compensation” subject to Section 409A of the Code, references to “termination of employment” (and substantiallysimilar phrases) shall be interpreted and applied in a manner that is consistent with the requirements of Section 409A of theCode.

(e) The Executive’s right to any deferred compensation, as defined under Section 409A of the Code, shall

not be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, garnishment bycreditors, or borrowing, to the extent necessary to avoid tax, penalties and/or interest under Section 409A of the Code.

10. Entire Contract. This Agreement and the documents and instruments referred to herein constitute the entire

contract between the parties to this Agreement and supersede all other understandings, written or oral, with respect to the subjectmatter of this Agreement.

11. Survival. This Agreement shall constitute a binding obligation of the Company and any successor thereto.

Notwithstanding any other provision in this Agreement, the obligations under Articles 3 through 6 shall survive termination of thisAgreement.

19


12. Savings Clause. Notwithstanding any other provision of this Agreement, if the indemnification provisions in Exhibit

A hereto or any portion thereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shallnevertheless indemnify Executive as to Expenses, judgments, fines, penalties and amounts paid in settlement with respect to anyProceeding to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated and to thefullest extent permitted by applicable law.

13. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be

deemed to have been given (i) when delivered by hand or (ii) if mailed by certified or registered mail with postage prepaid, on thethird day after the date on which it is so mailed:

(a) if to Executive:

Phil Anderson

60 West 23rd Street, Apt. 601New York, New York 10010

(b) if to the Company:

Electronic Cigarettes International Group, Ltd.14200 Ironwood Dr., NWGrand Rapids, Michigan 49534Attn: Chairman, Compensation Committee

or to such other address as may have been furnished to Executive by the Company or to the Company by Executive, as the casemay be.

14. No Limitation. Notwithstanding any other provision of this Agreement, for avoidance of doubt, the parties confirmthat the foregoing does not apply to or limit Executive’s rights under Nevada law or the Company’s Corporate Documents.

IN WITNESS WHEREOF, the parties have set their hands and seals hereunto on the date first above written.

ELECTRONIC CIGARETTES INTERNATIONAL GROUP,LTD. By:____________________________Name:Title: Chairman, Compensation Committee

EXECUTIVE By:____________________________Name: Phil Anderson

20


Schedule A

Outside ActivitiesPhil Anderson

Company orProject Name

Nature ofBusiness

Date Hired orCommencedInvolvement Position Compensation

Annual Time Commitment,(time away from office)

Dated: Initials: Executive: _____ Company: ______

21


Exhibit A

Indemnification Agreement

22


Exhibit 99.1

PRESS RELEASE

Grand Rapids, Michigan, January 13, 2015

ELECTRONIC CIGARETTES INTERNATIONAL GROUP STRENGTHENS LEADERSHIP WITH THE HIRING OF DAN O’NEILL ASEXECUTIVE CHAIRMAN

· Brings additional significant senior leadership experience in consumer packaged goods and building globalmultinationals

· New Chief Financial Officer, Phil Anderson joining to support the financial strengthening of the firm GRAND RAPIDS, MICHIGAN, January 14, 2015 - Electronic Cigarettes International Group, Ltd. (OTCBB: ECIG), a globalmarketer and distributor of electronic cigarette and vapor products whose brands include VAPESTICK®, FIN®, Victory®, VIP® andothers, today announced the hiring of Dan O’Neill as Executive Chairman. Concurrent with Dan’s joining, Phil Anderson will be joiningas the Company’s new Chief Financial Officer. Dan O’Neill brings a wealth of global experience as a senior leader in consumer packaged goods to the newly created role at ECIG.Throughout his career he has led transformational growth and delivered superior financial performance in a range of geographies andcomplex business environments. Prior to joining ECIG, Dan was the President and Chief Executive Officer of Molson’s, one of theworld’s largest beer companies. Before Molson’s, Dan was the Executive Vice President of H.J. Heinz, a President at the CampbellSoup Company, and Group Managing Director at S.C. Johnson, with leadership roles in North America, Europe, and Latin America.Dan began his career at Colgate Palmolive, following earning a Master’s degree in Business from Queen’s University and aBachelor’s of Arts from Carleton University in Canada. Concurrent with Mr. O’Neill’s joining, Phil Anderson will also be joining ECIG as the Chief Financial Officer. Phil brings more than 20years of experience in financial markets, with particular depth in balance sheet structuring and cash flow management. Prior to joiningECIG, Phil worked with the Pinnacle Family Office, a Dallas-based family office investment fund which is an investor in ECIG. Prior toPinnacle, Phil was the director of research at SIAR Capital, a family office focused on investing in small-cap growth companies andwas also a research analyst at C.E. Unterberg, and Ladenburg Thalmann. Phil earned a Bachelor’s degree in Finance from IthacaCollege and a Masters of Business Administration from Hofstra University. Dan O’Neill commented, “I am extremely excited to be joining ECIG and to lead this enterprise in one of the fastest growing and mostinteresting consumer goods opportunities in the past twenty plus years. The first priorities are to restructure the company’s balancesheet and to improve overall cash flow management. The opportunity to replace tobacco cigarettes is not only a great businessendeavor, but also represents an excellent opportunity to do something positive for society. ECIG is the best positioned companyglobally to take on this challenge, and with a strengthened and restructured balance sheet, coupled with a portfolio of strong brands,the potential of ECIG is tremendous. My goal will be to drive controlled, profitable growth globally and to deliver superior andsustainable returns to our shareholders. I look forward to working with our CEO Brent Willis to deliver on these commitments.”Electronic Cigarettes International Group, Ltd. (ECIG) is one of the largest electronic cigarette companies in the world. ECIG hasbeen rapidly expanding distribution throughout the world and has become the market leader in multiple international markets,including becoming a leading independent e-cigarette company in the United States. Recently the company developed and launchedthe Advanced Vaping System with major retailers that has met with unprecedented success.

1


PRESS RELEASE

Grand Rapids, Michigan, January 13, 2015 Brent Willis, Chief Executive Officer of ECIG remarked, “We are extremely fortunate to have leaders of Dan’s and Phil’s caliber andtrack record of success join ECIG. I look forward to working with them to re-architect the capital structure of the firm and continue todrive profitable growth in what remains an incredible opportunity for ECIG and its shareowners.” About Electronic Cigarettes International Group, Ltd. (ECIG)Electronic Cigarettes International Group (ECIG) is dedicated to providing a compelling alternative to traditional cigarettes for themore than 1 billion current smokers around the world. ECIG is one of the world’s fast growing independent electronic cigarettecompanies, and owns the trademarks VAPESTICK®, FIN®, Victory®, VIP®, and others. The Company owns multiple subsidiarycompanies and has operations in North America, Western Europe, and other geographies. ECIG offers consumers a full productportfolio that incorporates product quality and the latest technology. The Company’s website is www.ecig.co. Safe Harbor DisclosureThis press release contains forward-looking statements that are made pursuant to the safe harbor provisions within the meaning ofSection 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.Forward-looking statements are any statement reflecting management's current expectations regarding future results of operations,economic performance, financial condition and achievements of ECIG, including statements regarding ECIG’s expectation to seecontinued growth. The forward-looking statements are based on the assumption that operating performance and results will continueto materialize consistent with recent trends. Management believes these assumptions to be reasonable but there is no assurancethat they will prove to be accurate. Forward-looking statements, specifically those concerning future performance are subject tocertain risks and uncertainties, and actual results may differ materially. ECIG relies on a single class of products; existing or pendingpatents may affect ECIG’s business; and other factors disclosed in the Company's filings with the Securities and ExchangeCommission. Unless required by applicable law, ECIG undertakes no obligation to update or revise any forward-looking statements.

2


PRESS RELEASE

Grand Rapids, Michigan, January 13, 2015 For investor inquiries please contact:Don Markley/Glenn GarmontThe Piacente Group, Inc.Tel: 212-481-2050Email: [email protected] Follow us on social media:Facebook: @Electronic Cigarettes International Group, Ltd.Twitter: @ECIGCorporate

2
