EXHIBIT 10.79
THIRD AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
THIS THIRD AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this
“Agreement”) is entered into as of March 14, 2011, by and between STAR
SCIENTIFIC, INC., a Delaware corporation (the “Company”), and PAUL L. PERITO
(“Executive”).
Recitals
A. The Company is engaged in the commercialization of tobacco containing less
toxins (principally tobacco specific nitrosamines (“TSNA”)), development of less
toxic tobacco products and potentially reduced-risk tobacco products, and the
development, testing, and commercialization of certain compounds through its
Rock Creek Pharmaceuticals subsidiary.
B. Executive is the Chairman of the Board, President and Chief Operating Officer
of the Company.
C. The Company and Executive are parties to a certain Amended and Restated
Executive Employment Agreement, dated as of June 14, 2002, as amended and
modified by that certain First Modification Agreement, dated as of November 1,
2002 and as amended and restated in that Second Amended and Restated Executive
Employment Agreement dated December 30, 2005 (collectively, the “Original
Employment Agreement”).
D. The Company and Executive desire to modify and amend certain terms of the
Original Employment Agreement to consolidate all of the terms and conditions of
the Original Employment Agreement as so modified into a single amended and
restated employment agreement.
Agreement
NOW, THEREFORE, in consideration of these premises, the mutual covenants and
agreements of the parties hereunder, and for other good and valuable
consideration the sufficiency and receipt of which are hereby acknowledged, the
parties hereto hereby agree as follows:
§ 1. Employment and Duties.
1.1 Position. The Company hereby employs Executive, and Executive hereby accepts
employment with the Company, as President and Chief Operating Officer of the
Company.
1.2 Duties. Executive agrees to devote his best efforts, and shall have primary
responsibility within the Company, to oversee and manage (i) development and
management of the intellectual property, including all matters relating to
science and technology related to the Company’s business and all related
research and development, (ii) legal affairs of the Company, including all
matters concerning the Company’s corporate governance and structure, securities
laws and other regulatory compliance, employment laws compliance and counseling,
contract negotiation and dispute resolution, and litigation involving the
Company, (iii) financial affairs of the Company, (iv) government relations and
lobbying concerning the Company’s business and affairs, (v) public and investor
relations concerning the Company’s business and affairs, and (vi) such other
duties, including management and oversight functions, consistent with the
foregoing, assigned to him by the Board of Directors of the Company (the “Board
of Directors”). Executive shall perform his duties in a trustworthy,
businesslike and loyal manner.
1.3 Authority to Select Counsel and Government and Public Relations
Professionals. Executive shall have sole authority, subject only to confirmation
and ratification by the Board of Directors, to select all outside counsel,
lobbyists and other government relations professionals, and public relations
professionals as Executive deems necessary and appropriate in the performance of
his duties hereunder.
1.4 Reporting. Executive shall report to the Board of Directors.

 

 

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1.5 Place of Employment. The Company shall maintain and pay all costs associated
with the Company’s Washington, D.C. and Bethesda offices which shall be the
principal offices in which Executive shall perform his services hereunder, as
well as the Company’s principal offices for the regulatory functions of the
Company.
1.6 Change of Duties. The duties of Executive may be modified from time to time
by the mutual consent of the Company and Executive without resulting in a
rescission of this Agreement. The mutual written consent of the Company and
Executive shall constitute execution of that modification. Notwithstanding any
such change, the employment of Executive shall be construed as continuing under
this Agreement as so modified.
1.7 Devotion of Time to Company’s Business. During the Term of this Agreement
(as such term is defined in Section 1.9. hereof), Executive agrees (i) to devote
substantially all of his productive time, ability and attention to the business
of the Company during normal working hours, (ii) not to engage in any other
business duties or business pursuits whatsoever which conflict with his duties
to the Company, (iii) whether directly or indirectly, not to render any services
of a commercial or professional nature to any individual, trust, partnership,
company, corporation, business, organization, group or other entity (each, a
“Person”) which conflict with his duties to the Company, whether for
compensation or otherwise, without the prior written consent of the Board of
Directors, and (iv) whether directly or indirectly, not to acquire, hold or
retain more than a one percent (1%) 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); provided, however, the expenditure of reasonable
amounts of time for litigation support, book projects, charitable, professional
educational or professional activities or, subject to the foregoing, the making
of passive personal investments shall not be deemed a breach of this Agreement
or require the prior written consent of the Company if those activities do not
materially interfere with the services required of Executive under this
Agreement. For purposes of this Agreement, “Affiliates” shall mean any Person
that, directly or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Company.
1.8 Term. Unless sooner terminated as provided in Section 4 hereof the term of
this Agreement shall commence on effective as of January 1, 2011 and shall
continue through December 31, 2012 (the “Term”). The Company and Executive shall
consult on extension of the Term as soon as reasonably practicable in the month
of September 2012 but neither the Company nor the Executive shall be under any
obligation to extend the Term. The Term, together with any extension or renewal
terms shall be referred to in this Agreement as the “Term of this Agreement.”
1.9 Observance of Company Rules, Regulations and Policies. Executive shall duly,
punctually and faithfully perform and observe any and all rules, regulations and
policies which the Company may now or hereafter reasonably establish governing
the conduct of its business or its employees to the extent such rules,
regulations and policies are not in conflict with this Agreement. Executive
shall promptly provide written notice to the Board of Directors of any such
apparent conflict of which Executive becomes aware.
§ 2. Compensation.
2.1 Base Salary. During the Term of this Agreement, the Company shall pay to
Executive an annual base salary in such amounts as the Compensation Committee of
the Board of Directors shall recommend to the full Board of Directors for
approval (the “Base Salary”) and the Base Salary for 2011 shall initially be set
at $1,000,000, subject to adjustment from time to time in the good faith
discretion of the Board of Directors, payable in arrears on a monthly or
semi-monthly basis in accordance with the Company’s standard payroll procedures
in effect at the time of payment.
2.2 Performance Bonuses. In addition to the Base Salary, the Company may pay to
Executive bonuses based on the Company’s performance and/or Executive’s
performance as follows:
(a) Discretionary/Special Bonuses. Based upon performance of the Company as
reflected by satisfaction of the performance goals that may be established from
time to time by the Compensation Committee and approved by the Board of
Directors, the Company may pay Executive a bonus in addition to Base Salary.
(b) Establishment of Annual Bonus Performance Goals. The Company may propose new
performance goals for purposes of determining additional annual bonuses payable
to Executive, in consultation with Executive.
2.3 Stock Options. The Company and Executive acknowledge the entry on or about
March 14, 2011, into an agreement granting to Executive an option to purchase
4,000,000 shares of the Common Stock of the Company upon terms set forth in such
agreement. Such options shall vest and become exercisable solely upon
stockholder approval and achievement of the performance goals set forth in
Schedule 2.3 attached hereto.

 

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2.4 Incentive Plans. In addition to all other benefits and compensation provided
by this Agreement, Executive shall be eligible to participate in such of the
Company’s equity, compensation and incentive plans as are generally available to
any of the management executives of the Company, including without limitation
any executive and performance bonus or incentive plans.
2.5 Vacation. Executive shall be entitled to such annual vacation time with full
pay as the Company may provide in its standard policies and practices for any
other management executives; provided, however, that in any event Executive
shall be entitled to a minimum of twenty (20) days annual paid vacation time.
2.6 Directors and Officers Liability Insurance; Professional Liability
Insurance. Executive shall be entitled to participation in, and have the benefit
of directors and officers liability insurance providing coverage in an amount of
less than that provided by the Company for its Chief Executive Officer and/or
Chairman of the Board. The Company shall acquire and maintain professional
liability insurance for Executive insuring against any claims against Executive
arising from his performance of legal services to the Company while acting in
his capacity as an officer and employee of the Company.
2.7 Term Life Insurance. The Company shall maintain the term life insurance
policy in the amount of $5,000,000 as presently provided by the Company with the
Perito 1995 Family Trust U/A/D 53195, Robin Crawford Perito, Trustee, as
beneficiary thereunder, and shall pay the premiums due on such policy and
maintain such policy in full force and effect during the Term of this Agreement.
2.8 Disability Insurance. The Company shall maintain the disability insurance
policy presently provided by the Company and the Company shall pay the premiums
due on such policy and maintain such policy in full force and effect during the
Term of this Agreement.
2.9 Automobile. The Company will furnish Executive with an automobile equipped
with a car telephone and will reimburse Executive all reasonable costs and
expenses relating to Executive’s use of such automobile and car telephone,
including without limitation, amounts incurred for insurance, gas and general
maintenance and repairs.
2.10 Mobile Telephone. Executive shall have use of a wireless mobile telephone
of his choice and the Company will be responsible for payment of all business
usage charges and all usual operational and maintenance expenses associated with
the use by Executive of such telephone.
2.11 Club Dues. The Company shall reimburse Executive for monthly and/or annual
dues related to Executives membership in the City Club, Georgetown Club,
University Club and Kenwood Golf Club.
2.12 Outside Counsel for Executive. In order for Executive to have the benefit
of counsel to advise and counsel Executive with respect to the employment issues
relating to terms of this Agreement, the Company shall pay the reasonable
attorneys’ fees and expenses incurred by Executive in connection with such
advise and counsel and the drafting and execution of this Agreement.
2.13 Other Benefits. Executive shall participate in and have the benefits of all
present and future vacation, holiday, paid leave, unpaid leave, life, accident,
disability, dental, vision and health insurance plans, pension, profit-sharing
and savings plans and all other plans and benefits which the Company now or in
the future from time to time makes available to any of its management
executives.
2.14 Withholding. The parties shall comply with all applicable legal withholding
requirements in connection with all regular monthly and/or bi-monthly
compensation payable to Executive hereunder.
§ 3. Expense Reimbursement.
3.1 General Business Expenses. The Company shall reimburse Executive for all
business travel and other out-of-pocket expenses reasonably incurred by
Executive in the course of performing his duties under this Agreement. All
reimbursable expenses shall be appropriately documented and shall be in
reasonable detail and in a format and manner consistent with the Company’s
expense reporting policy, as well as applicable federal and state tax record
keeping requirements.

 

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3.2 Professional Educational Expenses and Fees. In addition, the Company shall
reimburse Executive for (i) all reasonable expenses incurred for continuing
education courses required to maintain Executive’s professional status and bar
membership as an attorney, and (ii) all reasonable professional fees, licenses,
and dues associated with Executive’s professional status and bar membership as
an attorney.
§ 4. Termination and Rights on Termination. This Agreement shall terminate upon
the occurrence of any of the following events:
4.1 Death. Upon the death of Executive, in which event the Company shall, within
thirty (30) days of receiving notice of such death, pay Executive’s estate all
salary and other compensation hereunder, then due and payable and all accrued
vacation pay and bonuses, if any, in each case payable or accrued through the
date of death. In addition, the Company shall pay Executive’s estate, at the
time or times otherwise payable under the terms of this Agreement, all salary
and accrued benefits that would have been payable hereunder by the Company to
Executive during the one year period immediately following Executive’s death.
Any payment due under this Section 4.1 may be funded by one or more policies of
life insurance to be purchased by the Company and which provide for a benefit in
the amount payable to Executive as beneficiary under such policy or policies
equal to that due Executive under this Section. In the event the Company
purchases such policy or policies and thereafter maintains such policy or
policies in continuous and full force and effect during the term hereof, then
Executive agrees to look solely to such policy or policies for payment of any
amount due hereunder; provided, however, that in the event the Company does not
purchase such policy or policies and thereafter maintain such policy or policies
in continuous and full force and effect during term hereof, then the Company
shall be directly and fully obligated to Executive for such payment.
4.2 Disability. Upon the mental or physical Disability (as such term is defined
below) of Executive, in which event the Company shall, within thirty (30) days
following the determination of Disability, pay Executive all salary then due and
payable and all accrued vacation pay and bonuses, if any, in each case payable
or accrued through the date of determination. In addition, the Company shall pay
all salary and accrued benefits that would have been payable hereunder by the
Company to Executive during the one year period immediately following
Executive’s disability. For purposes of this Agreement, “Disability” shall mean
a physical or mental condition, verified by a physician designated by the
Company, which prevents Executive from carrying out one or more of the material
aspects of his assigned duties for at least ninety (90) consecutive days, or for
a total of ninety (90) days in any six (6) month period. Any payment due under
this Section 4.2 may be funded by one or more policies of disability insurance
to be purchased by the Company and which provide for a benefit in the amount
payable to Executive as beneficiary under such policy or policies equal to that
due Executive under this Section. In the event the Company purchases such policy
or policies and thereafter maintains such policy or policies in continuous and
full force and effect during the term hereof, then Executive agrees to look
solely to such policy or policies for payment of any amount due hereunder;
provided, however, that in the event the Company does not purchase such policy
or policies and thereafter maintain such policy or policies in continuous and
full force and effect during term hereof, then the Company shall be directly and
fully obligated to Executive for such payment.
4.3 Termination by the Company For Cause. Upon delivery by the Company to
Executive of a written notice terminating this Agreement for Cause (as such term
is defined below), which notice shall be supported by a reasonably detailed
statement of the relevant facts and reasons for termination, in which event the
Company shall, within thirty (30) days following such termination, pay Executive
all salary then due and payable through the date of termination. Executive shall
not be entitled to any severance compensation or any accrued vacation pay or
bonuses. For purposes of this Agreement, “Cause” shall mean:
(a) Executive shall have committed an act of dishonesty, fraud, embezzlement or
theft with respect to the property, business or affairs of the Company, in any
such event in such a manner as to cause material loss, damage or injury to the
Company;

 

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(b) Executive shall have materially breached this Agreement and such breach
shall have continued for a period of twenty (20) days after receipt of written
notice from the Company specifying such breach;
(c) Executive shall have been grossly negligent in the performance of his duties
hereunder, intentionally not performed or misperformed any of such duties, or
refused to abide by or comply with the directives of the Board of Directors,
which action shall have continued for a period of twenty (20) days after receipt
of written notice from the Company demanding such action cease or be cured;
(d) Executive shall have been found guilty of, or has plead nolo contendere to,
the commission of a felony offense or other crime involving moral turpitude; or
(e) Executive shall have abused alcohol or drugs (legal or illegal) that, in the
reasonable judgment of the Board of Directors, materially impairs Executive’s
ability to perform his duties hereunder.
4.4 Termination by the Company Without Cause. Thirty (30) days after delivery by
the Company to Executive of a written notice terminating Executive’s employment
under this Agreement for any reason without cause, in which event the Company
shall continue to pay Executive all salary, benefits, bonuses and other
compensation that would be due hereunder through the end of the Term of this
Agreement had the Company not terminated Executive’s employment.
4.5 Voluntary Termination by Executive. Thirty (30) days after delivery by
Executive to the Company of a written notice terminating this Agreement for any
reason without cause, in which event the Company shall, within thirty (30) days
following the effective date of termination, pay Executive all salary then due
and payable through the date of termination. Executive shall not be entitled to
any severance compensation or any accrued vacation pay or bonuses.
4.6 Termination by Executive for Good Reason. Thirty (30) days after delivery by
Executive to the Company of a written notice terminating this Agreement for Good
Reason (as such term is defined below), in which event the Company shall pay
Executive such amounts in such manner as provided for in Section 4.4 hereof. For
purposes of this Agreement, “Good Reason” shall mean:
(a) The assignment of Executive to any duties inconsistent with, or any adverse
change in, Executive’s positions, duties, responsibilities, functions or status
with the Company, or the removal of Executive from, or failure to reelect
Executive to, any of such positions; provided, however, that a change in
Executive’s positions, duties, responsibilities, functions or status that
Executive shall agree to in writing shall not be an event of Good Reason or give
rise to termination under this Section 4.6;
(b) A reduction by the Company of Executive’s Base Salary without his written
consent;
(c) The failure by the Company to continue in effect for Executive any material
benefit provided herein or otherwise available to any of the management
executives of the Company, including without limitation, any retirement, pension
or incentive plans, life, accident, disability or health insurance plans, equity
or cash bonus plans or savings and profit sharing plans, or any action by the
Company which would adversely affect Executive’s participation in or reduce
Executive’s benefits under any of such plans or deprive Executive of any fringe
benefit enjoyed by Executive; or
(d) Any other material breach by the Company of this Agreement which is not
cured within twenty (20) days of delivery of written notice thereof by Executive
to the Company.
4.7 Termination by Executive upon Certain Change of Management. Thirty (30) days
after delivery by Executive to the Company of a written notice terminating this
Agreement upon (a) a change in the senior management of the Company resulting
from the death or disability of Jonnie R. Williams, or (b) a removal and
replacement of a majority of the Board of Directors, including such other
persons elected to serve as directors with the approval of the Board of
Directors subsequent to the date hereof, by the stockholders of the Company at a
special meeting of the stockholders, held in accordance with the terms of the
Company’s Certificate of Incorporation and By-Laws and in accordance with all
applicable laws, called by a stockholder or a group of stockholders of the
Company for such purpose, in which event the Company shall, within thirty
(30) days following the effective date of termination, pay Executive the sum of
$2,500,000. Although the parties have been advised that 26 U.S.C. 280G is not
applicable to any payment that may become due Executive hereunder, if 26 U.S.C.
280G is found to be applicable, then the Company shall pay any tax due by
Executive under Section 280G as a result of any payment to Executive under this
Section 4.7. It is anticipated by the parties that payment that may become due
under (b) above will be funded by one or more policies of life and/or disability
insurance to be purchased by the Company which provide for a benefit in the
amount of $2,500,000 payable to Executive as beneficiary under such policy or
policies. In the event the Company purchases such policy or policies and
thereafter maintains such policy or policies in continuous and full force and
effect during the term hereof, then Executive agrees to look solely to such
policy or policies for payment of any amount due under (ii) above; provided,
however, that in the event the Company does not purchase such policy or policies
and thereafter maintain such policy or policies in continuous and full force and
effect during the term hereof, then the Company shall be directly and fully
obligated to Executive for such payment.

 

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4.8 Effect of Termination; Executive’s Stock Options. All rights and obligations
of the Company and Executive under this Agreement shall cease as of the
effective date of termination, except that the obligations of the Company under
this Section 4 and Executive’s obligations under Sections 5 and 6 hereof shall
survive such termination in accordance with their respective terms. In addition,
notwithstanding anything to the contrary contained herein or in any agreement
with respect thereto, (a) upon termination of Executive’s employment pursuant to
Sections 4.3 or 4.5, all equity options, restricted equity grants and similar
rights held by Executive with respect to securities of the Company, including
without limitation Executive’s stock options referred to in Section 2.3 herein
shall, to the extent not then fully vested, immediately terminate and revert to
the Company, (b) upon termination of Executive’s employment pursuant to
Section 4.4, all equity options, restricted equity grants and similar rights
held by Executive with respect to securities of the Company, including without
limitation Executive’s stock options referred to in Section 2.3 herein shall,
remain in full force and effect and shall not be affected by such termination,
and (c) upon termination of Executive’s employment pursuant to any other
provision of this Section 4, all equity options, restricted equity grants and
similar rights held by Executive with respect to securities of the Company,
including without limitation Executive’s stock options referred to in
Section 2.3 herein, if such stock options shall have been approved by the
Company’s stockholders, shall, to the extent not then fully vested, immediately
become fully vested.
4.9 No Termination by Merger; Transfer of Assets or Dissolution. This Agreement
shall not be terminated by any dissolution of the Company resulting from either
merger or consolidation in which the Company is not the consolidated or
surviving corporation or other entity or transfer of all or substantially all of
the assets of the Company. In such event, the rights, benefits and obligations
herein shall automatically be deemed to be assigned to the surviving or
resulting corporation or other entity or to the transferee of the assets, as the
case may be, with the consent of Executive.
§ 5. Restriction on Competition.
5.1 Covenant Not to Compete. During the Term of this Agreement and for a period
of twelve (12) months from the termination of this Agreement, Executive shall
not, without the prior written consent of the Company, either directly or
indirectly, for himself or on behalf of or in conjunction with any other Person
(i) own, manage, operate, control, be employed by, participate in, render
services to, or be associated in any manner with the ownership, management,
operation or control of, any business similar to the type of business conducted
by the Company or any of its Affiliates within any of the geographic territories
in which the Company or any of its Affiliates conducts business, (ii) solicit
business of the same or similar type being carried on by the Company or any of
its Affiliates from any Person known by Executive to be a customer of the
Company or any of its Affiliates, whether or not Executive had personal contact
with such Person during and by reason of Executive’s employment with the
Company, or (iii) endeavor or attempt in any way to interfere with or induce a
breach of any contractual relationship that the Company or any of its Affiliates
may have with any employee, customer, contractor, supplier, representative or
distributor.
5.2 No Breach for Activities Deemed Not Competitive. It is further agreed that,
in the event that Executive shall cease to be employed by the Company and enter
into a business or pursue other activities that, at such time, are not in
competition with the Company or any of its Affiliates, Executive shall not be
chargeable with a violation of this Section 5 if the Company subsequently enters
the same (or a similar) competitive business or activity. In addition, if
Executive has no actual knowledge that his actions violate the terms of this
Section 5, Executive shall not be deemed to have breached the restrictive
covenants contained herein if, promptly after being notified by the Company of
such breach, Executive ceases the prohibited actions.
5.3 Severability. The covenants in this Section 5 are severable and separate,
and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. If any provision of this Section 5 relating to
the time period or geographic area of the restrictive covenants shall be
declared by a court of competent jurisdiction to exceed the maximum time period
or geographic area, as applicable, that such court deems reasonable and
enforceable, such time period or geographic area shall be deemed to be, and
thereafter shall become, the maximum time period or largest geographic area that
such court deems reasonable and enforceable and this Agreement shall
automatically be considered to have been amended and revised to reflect such
determination.

 

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5.4 Fair and Reasonable. Executive has carefully read and considered the
provisions of this Section 5 and, having done so, agrees that the restrictive
covenants in this Section 5 impose a fair and reasonable restraint on Executive
and are reasonably required to protect the interests of the Company, its
Affiliates and their respective officers, directors, employees and stockholders.
It is further agreed that the Company and Executive intend that such covenants
be construed and enforced in accordance with the changing activities, business
and locations of the Company throughout the term of these covenants.
§ 6. Confidential Information.
6.1 Confidential Information. Executive hereby agrees to hold in strict
confidence and not to disclose to any third party, other than employees and
agents of the Company or persons retained by the Company to represent its
interests, any of the valuable, confidential and proprietary business,
financial, technical, economic, sales and/or other types of proprietary business
information relating to the Company or any of its Affiliates (including all
trade secrets) in whatever form, whether oral, written, or electronic
(collectively, the “Confidential Information”), to which Executive has, or is
given (or has had or been given), access during the course of his employment
with the Company. It is agreed that the Confidential Information is confidential
and proprietary to the Company because such Confidential Information encompasses
technical know-how, trade secrets, or technical, financial, organizational,
sales or other valuable aspects of the business and trade of the Company or its
Affiliates, including without limitation, technologies, products, processes,
plans, clients, personnel, operations and business activities. This restriction
shall not apply to any Confidential Information that (a) becomes known generally
to the public through no fault of the Executive, (b) is required by applicable
law, legal process, or any order or mandate of a court or other governmental
authority to be disclosed, or (c) is reasonably believed by Executive, based
upon the advice of legal counsel, to be required to be disclosed in defense of a
lawsuit or other legal or administrative action brought against Executive;
provided, however, that in the case of clause (b) or (c), Executive shall give
the Company reasonable advance written notice of the Confidential Information
intended to be disclosed and the reasons and circumstances surrounding such
disclosure, in order to permit the Company to seek a protective order or other
appropriate request for confidential treatment of the applicable Confidential
Information.
6.2 Return of Company Property. In the event of termination of Executive’s
employment with the Company for whatever reason or no reason, (a) Executive
agrees not to copy, make known, disclose or use, any of the Confidential
Information without the Company’s prior written consent, and (b) Executive or
Executive’s personal representative shall return to the Company (i) all
Confidential Information, (ii) all other records, designs, patents, business
plans, financial statements, manuals, memoranda, lists, correspondence, reports,
records, charts, advertising materials and other data or property delivered to
or compiled by Executive by or on behalf of the Company or its respective
representatives, vendors or customers that pertain to the business of the
Company or any of its Affiliates, whether in paper, electronic or other form,
and (iii) all keys, credit cards, vehicles and other property of the Company.
Executive shall not retain or cause to be retained any copies of the foregoing.
Executive hereby agrees that all of the foregoing shall be and remain the
property of the Company and the applicable Affiliates and be subject at all
times to their discretion and control.
§ 7. Corporate Opportunities.
7.1 Duty to Notify. During the Term of this Agreement, in the event that
Executive shall become aware of any business opportunity related to the business
of the Company, Executive shall promptly notify the Board of Directors of such
opportunity. Executive shall not appropriate for himself or for any other Person
other than the Company (or any Affiliate) any such opportunity unless, as to any
particular opportunity, the Board of Directors fails to take appropriate action
within thirty (30) days. Executive’s duty to notify the Board of Directors and
to refrain from appropriating all such opportunities for thirty (30) days shall
neither be limited by, nor shall such duty limit, the application of the general
laws relating to the fiduciary duties of an agent or employee.
7.2 Failure to Notify. In the event that Executive fails to notify the Board of
Directors or so appropriates any such opportunity without the express written
consent of the Board of Directors, Executive shall be deemed to have violated
the provisions of this Section notwithstanding the following:
(a) The capacity in which Executive shall have acquired such opportunity; or
(b) The probable success in the hands of the Company of such opportunity.

 

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§ 8. No Prior Agreements. Executive hereby represents and warrants to the
Company that the execution of this Agreement by Executive, his employment by the
Company, and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer or any other Person. Further,
Executive agrees to indemnify and hold harmless the Company and its officers,
directors and representatives for any claim, including, but not limited to,
reasonable attorneys’ fees and expenses of investigation, of any such third
party that such third party may now have or may hereafter come to have against
the Company or such other persons, based upon or arising out of any
non-competition agreement, invention, secrecy or other agreement between
Executive and such third party that was in existence as of the effective date of
this Agreement. To the extent that Executive had any oral or written employment
agreement or understanding with the Company, this Agreement shall automatically
supersede such agreement or understanding, and upon execution of this Agreement
by Executive and the Company, such prior agreement or understanding
automatically shall be deemed to have been terminated and shall be null and
void.
§ 9. Representation. Executive acknowledges that he (a) has reviewed this
Agreement in its entirety, (b) has had an opportunity to obtain the advice of
separate legal counsel prior to executing this Agreement, and (c) fully
understands all provisions of this Agreement.
§ 10. Assignment; Binding Effect. Executive understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Executive agrees, therefore, that he
cannot assign or delegate all or any portion of his performance under this
Agreement. This Agreement may not be assigned or transferred by the Company
without the prior written consent of Executive. Subject to the preceding two
sentences, this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors, and assigns. Notwithstanding the foregoing, if
Executive accepts employment with an Affiliate, unless Executive and his new
employer agree otherwise in writing, this Agreement shall automatically be
deemed to have been assigned to such new employer (which shall thereafter be an
additional or substitute beneficiary of the covenants contained herein, as
appropriate), with the consent of Executive, such assignment shall be considered
a condition of employment by such new employer, and references to the “Company”
in this Agreement shall be deemed to refer to such new employer.
§ 11. Complete Agreement; Waiver: Amendment. Executive has no oral
representations, understandings or agreements with the Company or any of its
officers, directors or representatives covering the same subject matter as this
Agreement. This Agreement is the final, complete and exclusive statement and
expression of the agreement between the Company and Executive with respect to
the subject matter hereof and thereof, and cannot be varied, contradicted, or
supplemented by evidence of any prior or contemporaneous oral or written
agreements. This Agreement may not be later modified except by a further writing
signed by a duly authorized officer of the Company and Executive, and no term of
this Agreement may be waived except by writing signed by the party waiving the
benefit of such term.
§ 12. Notices. All notices, requests, demands and other communications required
or permitted to be given under this Agreement shall be in writing and shall be
given or made by personally delivering the same to or sending the same by
prepaid certified or registered mail, return receipt requested, or by reputable
overnight courier, or by facsimile machine to the party to which it is directed
at the address set out on the signature page to this Agreement, with copies to
counsel as indicated, or at such other address as such party shall have
specified by written notice to the other party as provided in this Section, and
shall be deemed to be given if delivered personally at the time of delivery, or
if sent by certified or registered mail as herein provided three (3) days after
the same shall have been posted, or if sent by reputable overnight courier upon
receipt, or if sent by facsimile machine as soon as the sender receives written
or telephonic confirmation that the facsimile was received by the recipient and
such facsimile is followed the same day by mailing by prepaid first class mail.
§ 13. Severability; Headings. If any portion of this Agreement is held invalid
or inoperative, the other portions of this Agreement shall be deemed valid and
operative and, so far as is reasonable and possible, effect shall be given to
the intent manifested by the portion held invalid and inoperative. This
severability provision shall be in addition to, and not in place of, the
provisions of Section 5.3 above. The Sections headings herein are for reference
purposes only and are not intended in any way to describe, interpret, define or
limit the extent or intent of this Agreement or of any part hereof.
§ 14. Equitable Remedy. Because of the difficulty of measuring economic losses
to the Company as a result of a breach of the restrictive covenants set forth in
Sections 5 and 6 hereof, and because of the immediate and irreparable damage
that would be caused to the Company for which monetary damages would not be a
sufficient remedy, it is hereby agreed that in addition to all other remedies
that may be available to the Company or Executive at law or in equity, the
Company or Executive shall be entitled to specific performance and any
injunctive or other equitable relief as a remedy for any breach or threatened
breach of the aforementioned restrictive covenants.

 

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§ 15. Arbitration. Any unresolved dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
conducted in accordance with the rules of the American Arbitration Association
then in effect. The arbitrators shall not have the authority to add to, detract
from, or modify any provision hereof nor to award punitive damages to any
injured party. A decision by a majority of the arbitration panel shall be final
and binding. Judgment may be entered on the arbitrators’ award in any court
having jurisdiction. Notwithstanding the foregoing, the Company shall be
entitled to seek injunctive or other equitable relief, as contemplated by
Section 15 hereof, from any court of competent jurisdiction, without the need to
resort to arbitration. Should judicial proceedings be commenced to enforce or
carry out this provision or any arbitration award, the prevailing party in such
proceedings shall be entitled to reasonable attorneys’ fees and costs in
addition to other relief.
§ 16. Governing Law. This Agreement shall in all respects be construed according
to the laws of the Commonwealth of Virginia, without regard to its conflict of
laws principles.
§ 17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the parties to
this Agreement, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
§ 18. Signatures. The parties shall be entitled to rely upon and enforce a
facsimile of any authorized signatures as if it were the original.
[Signatures on following page.]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.

            COMPANY:
STAR SCIENTIFIC, INC.
      By:   /s/Jonnie R. Williams         Jonnie R. Williams        Chief
Executive Officer        Address for Notices:

4470 Cox Road
Suite 110
Glen Allen, VA 23060
Attention: Mr. Jonnie R. Williams

EXECUTIVE:
      /s/ Paul L. Perito       Paul L. Perito     
Address for Notices:
7 Newlands Street
Chevy Chase, Maryland 20815     

Attachment: Schedule 2.3

 

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Schedule 2.3
March 14, 2011
Star Scientific, Inc.
Performance Criteria and Percentage Allocation for Option Vesting

•   The introduction of Anatabloc™ into the market for sale as a dietary
supplement, following a successful clinical trial of the product and a related
clinical study report by an independent third party issued by such party (80% of
options granted on March 14, 2011)

•   Gross sales of CigRx® surpass $1,000,000 on a cumulative basis (20%)   •  
Public stock of Star Scientific trades at above $5.00 at close of NASDAQ market
on any one trading day (50%)

•   The Company enters into an agreement with a major tobacco company (including
one of the top three US tobacco companies) for licensing and/or sale of one of
its three BDL smokeless products and/or the licensing or sale of the current
versions of Stonewall or Ariva (25%)

•   The Company enters into an agreement for the development of an isomer of its
RCP006 compound as a drug product (20%)

•   The United States Court of Appeals for the Federal Circuit reverses the jury
verdict in favor of RJR and remands the case back to the Federal District Court
for a retrial (40%)

•   The Food & Drug Administration (FDA), after review and consideration, acts
favorably on any one of the three (3) pending Modified Risk Applications under
§911 of the Tobacco Act of 2009 for the Company’s low-TSNA smokeless tobacco
products (20%)

•   The PTO rules in Star’s favor on the two pending Reexamination Petitions
addressing claims in the ‘649 and ‘401 patents (15%)

 

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