EXHIBIT 10.86


 


EXECUTIVE
EMPLOYMENT AGREEMENT


 


  


THIS EXECUTIVE EMPLOYMENT
AGREEMENT (this "Agreement") is entered into as of December 27, 2013, by and between STAR SCIENTIFIC, INC., a Delaware
corporation and its successors (the "Company"), and Christopher C. Chapman ("Executive").


 


Recitals


 


A. The Company is engaged
in the research, development, manufacturing and commercialization of nutraceutical dietary supplements and potentially related
pharmaceutical products designed to enhance a healthy lifestyle, other allied consumer tobacco products and the licensing of technology
related to such products, as well as the licensing of technology related to the production of low-TSNA tobacco and related low-TSNA
tobacco products,


 


B. Executive is being
hired as the President of the Company, and Executive and the Company desire to set forth the terms and conditions of the Executive's
employment by the Company 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 of the Company. Executive
shall also be nominated for election to the Board of Directors of the Company (the “Board of Directors”) and the Executive
agrees to serve as a member of the Board of Directors.


 


1.2 Duties. Executive
agrees to devote his best efforts, and shall have such duties and responsibilities that would be commensurate with the role of
President, including management and oversight functions and to perform such other duties assigned to him by the Board of Directors.
As a member of the Board of Directors, the Executive shall have the duties and responsibilities designated for such position in
the bylaws of the Company (if any) and as specified by the Board of Directors from time to time. Executive shall perform his duties
in a trustworthy, businesslike and loyal manner.


 


1.3 Reporting. In his
capacity as President, Executive shall report to the Board of Directors.


 






    	 



    	 



    

 


1.4 Place of Employment.
Executive’s principal place of employment shall be in Atlanta, Georgia, although Executive understands and agrees that Executive
will be required to travel to the Company’s principal office and to the Company’s other offices for business reasons.


 


1.5 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.


 


1.6 Devotion of Time
to Company's Business. During the Term of this Agreement (as such term is defined in Section 1.7. hereof), Executive agrees
(i) to devote a substantial portion 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 without the prior written consent of the Board of Directors, (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 the business of the Company or any of its Affiliates (as such
term is defined below) without the prior written consent of the Board of Directors; provided, however, the expenditure of
reasonable amounts of time 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. Notwithstanding
the foregoing, the Executive shall be permitted to serve as an officer and director of Chapman Pharmaceutical Consulting, Inc.
and as Chairman of Chapman Pharmaceutical Health Foundation, and the Company acknowledges and agrees that the Executive’s
continued involvement with these businesses and organizations shall not be in violation of or inconsistent with the provisions
of this Section 1.6 or the Restriction on Competition provisions of Section 5. 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.


 


1.7 Term. Unless sooner terminated
as provided in Section 4 hereof the term of this Agreement shall commence on December 27, 2013 and shall continue through December
26, 2015, and shall renew automatically thereafter for successive terms of one year each (the "Term”), unless either
party has delivered written notice to the other at least six (6) months prior to the end of the Term that the Term will not be
extended. The Term, together with any extensions or renewal terms shall be referred to in this Agreement as the "Term of this
Agreement."


 



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1.8 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 between this Agreement and the rules, regulations and policies of
the Company of which Executive becomes aware.


 


§ 2. Compensation.


 


2.1 Base Salary.
During the first year of the Term of this Agreement, the Company shall pay the Executive a Base Salary of $300,000. During the
remaining Term of this Agreement, the Company shall pay to Executive an annual base salary of $375,000, subject to upward adjustment
from time to time in the good faith discretion of the Board of Directors. The Base Salary shall be 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.


 


2.2Performance Bonus.
In addition to the Base Salary the Company shall pay to the Executive a bonus in the amount of seventy-five thousand dollars ($75,000)
within thirty (30) days of the date on which the Company completes pre-market testing of the time release version of its Anatabloc
dietary supplement.


 


2.3 Equity Awards.


 


(a) Stock Options.
On December 27, 2013 (“Grant Date”) the Executive shall be granted an Option under the Star Scientific Inc. 2008 Incentive
Award Plan ( as amended) to purchase three million (3,000,000) shares of the Company’s common stock. Such Options shall expire
no earlier than the tenth anniversary of the Grant Date and shall vest and be exercisable as follows:


 


(i) the Option to purchase
five hundred thousand (500,000) shares shall be fully vested on the Grant Date and shall remain exercisable until the expiration
date of the Option.


 


(ii) the option to
purchase two million five hundred thousand (2,500,000) shares shall vest and become exercisable upon achievement of the performance
goals set forth in Schedule 2.3 attached hereto.


 


(b) Stock Payments.
Upon achievement of the performance goals set forth in Schedule 2.3 attached hereto, the Company shall immediately pay to
the Executive the amounts specified to be paid upon satisfaction of each performance goal, such payments to be settled in common
stock of the Company under the Company’s 2008 Incentive Award Plan (as amended).


 






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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 Indemnification;
Directors and Officers Liability Insurance. To the fullest extent permitted by the Company’s certificate of incorporation
and bylaws or, if greater, the laws of the State of Delaware, the Company shall promptly indemnify and hold harmless the Executive
for all losses, costs, expenses or other amounts, including without limitation, attorney fees, incurred or paid by the Executive
in connection with the performance by the Executive of his duties or with his employment hereunder. During the Term of the Agreement,
and for a period of six years thereafter, the Executive shall be entitled to participation in, and have the benefit of directors’
and officers’ liability insurance providing coverage in an amount not less than that provided by the Company for its most
senior executives or members of the Board of Directors.


 


2.7 Term Life Insurance.
The Company shall maintain term life insurance in the amount of $5,000,000, with such beneficiary or beneficiaries thereunder as
may be designated from time to time by Executive, 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 a disability insurance policy for the benefit of the Executive to the same extent generally made available
to senior executives of 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. During
the Term of this Agreement, and in addition to the Base Salary and other benefits herein provided, the Company shall pay to the
Executive an automobile allowance in the amount of $1,500.00 per month which shall be used to purchase or lease, and maintain a
vehicle. The car allowance shall be paid periodically together with the Executive’s Base Salary. The Company shall reimburse
the Executive at the IRS standard mileage rate for any business use of the vehicle.


 


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.


 






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2.11 Club Dues.
The Company shall reimburse Executive for monthly and/or annual dues related to Executives membership in a club or clubs, consistent
with the Company's practice with the Company's other senior executives.


 


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,
benefits and perquisites 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.
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 or otherwise incurred in the scope and course of his employment with
the Company. 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.


 


§ 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.


 






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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 or essential functions 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 the 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, subject
to applicable law, 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, including a notice by the Company of nonrenewal pursuant to Section
1.7, 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, subject to applicable law, 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;


 






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(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 upon
a Change in Control. Thirty (30) days after delivery by either the Executive or the Company of a written notice to the other
party terminating this Agreement upon (i) a change in ownership or control of the Company effected through a transaction or series
of transactions whereby any person or persons acting in concert directly or indirectly acquires beneficial ownership of securities
of the Company possessing more than fifty present (50%) of the total combined voting power of the Company’s securities outstanding
immediately after such transaction, or (ii) a sale or disposition, in one or a series of related transactions, of all or substantially
all of the assets of the Company to any person or persons acting in concert (a “Change in Control”) the Company shall,
within thirty (30) days following the effective date of termination, pay Executive the sum of $2,500,000. If 26 U.S.C. 280G is
found to be applicable to any payment that may become due to the Executive hereunder, then the Company shall pay any tax due by
Executive due to the application of 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 Equity Awards. 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, equity grants and similar rights held by Executive with respect to securities
of the Company, including without limitation any stock Options and Stock Payments referred to in Section 2.3 herein shall, to the
extent not then vested, immediately terminate and revert to the Company, (b) upon termination of Executive's employment pursuant
to Section 4.4 (including nonrenewal by the Company of this Agreement) or Section 4.6, all equity options, equity grants and similar
rights held by Executive with respect to securities of the Company, including without limitation Executive's stock Options and
Stock Payments referred to in Section 2.3 herein shall, remain in full force and effect and shall not be affected by such termination;
provided, however, that the Stock Payment Awards referred to in Section 2.3 shall remaining in effect for a period of no longer
than three (3) years following such termination, at which point unless previously vested, such Stock Payments shall be forfeited
and shall be of no future force or effect; (c) upon termination of Executive's employment pursuant to any other provision of this
Section 4, all equity options, equity grants and similar rights held by Executive with respect to securities of the Company,
including without limitation Executive's stock Options and Stock Payments referred to in section 2.3 herein, if such stock Options
and Stock Payments shall have been approved by the Company's stockholders, shall, to the extent not then fully vested, immediately
become fully vested, and, if applicable, shall be immediately payable.


 


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 (unless or to the extent permitted under Section 1.6) with the ownership, management, operation
or control of, any business that is competitive with the 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.
Notwithstanding the foregoing, the Executive shall be permitted to serve as an officer, director and stockholder of Chapman Pharmaceutical
Consulting, Inc. and as Chairman of Chapman Pharmaceutical Health Foundation and the Company acknowledges and agrees that the Executive’s
continued involvement in any capacity with these businesses and organizations shall not be in violation of the Restriction on Competition
of this Section 5 or the provisions of Section 1.6.


 






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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.


 


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 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, provided the Company has taken
reasonable steps to maintain the confidentiality of such information and it is valuable by virtue of being unknown to the Company’s
competitors. 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 or in prosecution of any
such proceeding on behalf of 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.


 






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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 Corporate 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. “Corporate Opportunity”
as used in this section is an opportunity within the Company’s lines of business and involving business activity as to which
the Company has fundamental knowledge, practical experience and the ability to pursue.


 






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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.


 


§ 8. Assignment of
Intellectual Property. Executive agrees that any matter that is patentable or otherwise protectable through registration under
federal patent, copyright or trade mark laws, including designs, ideas, processes, methods, formulas, scientific and mathematical
models, reports, programs, software, systems, materials, notes, records, drawings, inventions, improvements, developments and trade
secrets conceived, created, discovered, developed, prepared, made or suggested by Executive during the term of this Agreement,
solely or in collaboration with others, in or in connection with the performance of services hereunder (“Inventions”)
shall be solely and exclusively owned by the Company and that Executive shall have no property interest therein. Executive further
agrees to assign (or cause to be assigned), without further consideration, and does hereby assign to the Company all of his right,
title and interest, free and clear of all liens and encumbrances of any kind whatsoever, in and to all Inventions and all copyright
or other proprietary rights therein


 


§ 9. 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.


 


§ 10. 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.


 






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§ 11. 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.


 


§ 12. 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.


 


§ 13. 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.


 


§ 14. 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.


 






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§ 15. 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.


 


§ 16. 409A Compliance.
This Agreement and any amendments thereto shall, to the extent applicable, comply with and be interpreted in such a manner as to
be consistent with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended. In addition, notwithstanding
any provision herein to the contrary, if Executive is determined to be a “specified employee” as defined in Section
409A, any payment due and payable hereunder as a result of the Executive’s separation from service shall not be made before
the date which is six (6) months after Executive’s date of separation from service.


 


§ 17. Governing
Law. This Agreement shall in all respects be construed according to the laws of the State of Florida, without regard to its
conflict of laws principles.


 


§ 18. 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.


 


§ 19. 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.


 


 





	 	STAR SCIENTIFIC, INC. 
	 	 	 	 
	 	BY:	/s/ Michael J. Mullan           
	 	 	Name:  	Michael J. Mullan
	 	 	Title:  	Chairman and CEO
		 	Address:	4770 Cox Road
	 	 	 	Suite 110
	 	 	 	Glen Allen, Virginia 23060
	 	 	 	 
	 	 	Address for Notices:
	 	 	 	 
	 	EXECUTIVE:
	 	 	 	 
	 	BY:	 /s/ Christopher C. Chapman    
	 	 	Name: 	Christopher C. Chapman
		 	Address:	800 Falls Lake Drive
	 	 	 	Mitchellville, MD 20721







 


 


 


 


 


Attachment: Schedule 2.3


 






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Schedule 2.3


December 27, 2013


 


 


Star Scientific, Inc.


Performance Criteria and
Allocations for Option Vesting and Stock Payments


 


 


	 	 	 	Option Vesting	Value of Stock Payments
	 	 	 	 	 
	1.	Date of the Company’s first Investigational New Drug (IND) and/or Clinical Trial Application (CTA) filing occurring after December 27, 2013	 	500,000 shares	$250,000
	 	 	 	 	 
	2.	Last day of first calendar quarter occurring after December 27, 2013 within which the Company’s cash receipts attributable to operations of the Company’s consumer products line of business exceeds expenses (without regard to overhead) attributable to such operation 	 	500,000 shares	$250,000
	 	 	 	 	 
	3.	Last day of the first calendar quarter occurring after December 27, 2013 within which earnings of the Company (without regard to interest, depreciation, amortization or taxes) is reported as positive 	 	500,000 shares	$250,000
	 	 	 	 	 
	4.	Date of commencement of human clinical trials with respect to the Company’s first IND and/or CTA filing occurring after December 27, 2013 	 	1 million shares	$500,000


 




 


 






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