AGREEMENT


 


 


This
Agreement is entered into as of the 30th day of April, 2014, by and among Star Scientific, Inc., with its principal place of business
at 4470 Cox Road, Glen Allen, Virginia 23060 and Robert E. Pokusa, Esquire, 5322 Neville Court, Alexandria, VA 22310.


 


INTRODUCTION


 


WHEREAS,
Robert E. Pokusa, Esquire (“Employee”) has been employed by Star Scientific, Inc. (“Company”) as General
Counsel and Secretary of the Company since March 2001, pursuant to an Executive Employment Agreement (“Executive Employment
Agreement”) that is continuing on a month to month basis according to its terms; and


 


WHEREAS,
the Company wishes to provide Employee with certain assurances inasmuch as the Employee’s position with the Company is to
be terminated by the Company on a basis other than for cause as part of the Company’s transition of its business operations.


 


NOW
THEREFORE, in consideration of the premises, covenants and undertaking set forth herein the Parties set forth their agreement
with respect to the severance and other benefits to which the Parties have mutually agreed will apply with respect to the termination
of employment as noted above.


 


NOW
THEREFORE, in consideration of the premises, covenants and undertaking set forth herein the Parties set forth their agreement
with respect to the anticipated severance and other benefits which the Parties have mutually agreed will apply with respect to
the termination of employment as noted above.


 


1.Employee’s
Executive Employment Agreement will continue pursuant to its term until April 30, 2014, at which point Employee’s status
as an employee will be terminated. Employee will not be required to continue to provide services under his Executive Employment
Agreement between the date of this Agreement and the date of the expiration of his Executive Employment Agreement (Separation
Date).


 


2.On
or within 14 days of the Separation Date the Company shall pay Employee the amount of unreimbursed expenses incurred by Employee
and submitted to Company for reimbursement. As of the Separation Date, Employee is entitled to payment for fifty (50) days of
accrued but unused vacation pay, totaling $74,038.00. This amount (less required deductions for taxes) shall be paid by the Company
to Employee in equal installments over the next four (4) pay periods following the Termination Date. Employee acknowledges that
he was not required to sign this Agreement, including the incorporated General Release and Waiver, in order to receive payment
of the same. In addition, The Company will pay to Employee eighteen (18) months of salary continuation payments. The salary continuation
payments will be calculated based on Employee’s yearly base compensation of $385,000 per year (i.e. 1/12 of the yearly base
compensation per month) and will be paid as set forth in Section 3 below.


 






    	 



    	 



    

 


3.
 During the first six months following the Termination Date, the salary continuation payments will be paid in cash in accordance
with the Company’s customary payroll practices. Thereafter, the salary continuation payments will be paid
in four quarterly grants of fully registered and freely tradable shares of the Company’s common stock issued under the Company’s
2008 Incentive Award Plan (“Plan”), to the extent such shares are available for issuance under the Plan, as set forth
in and subject to the terms and conditions set forth in Appendix “A”.


 


4.Employee’s
medical, dental and Company life insurance benefit coverage’s that are in place on April 17, 2014 also will continue in
effect for the eighteen month period following the Separation Date, unless benefit eligibility requirements cease to be maintained
during the severance period. Subsequent to the expiration of the eighteen month period following the Separation Date (during which
Employee is covered under the Company’s medical and dental coverages), Employee shall, if permitted, shall be eligible to
elect to continue his participation in the Company’s medical and dental plan through the provisions of the Consolidated
Omnibus Reconciliation Act (“COBRA”), at Employee’s sole expense. Employee will continue to be charged the applicable
employee contribution portion for any such insurance coverage’s as well as any supplemental coverage, such as AFLAC, and
those costs along with applicable taxes and other required withholdings will be deducted from Employee’s periodic severance
payments.  Company shall withhold from these payments any applicable Federal and State income taxes and the applicable
employee contribution portion for medical, dental and Company life insurance or other benefit coverage's in place on April 17,
2014, which coverage the Company agrees to continue in force for Employee for the eighteen month period following the Separation
Date.


 


5.Further,
as authorized by the Company’s 2000 Equity Incentive Plan or 2008 Incentive Award Plan, the Compensation Committee of the
Board of Directors has approved, and the Company hereby exercises its discretion to extend the period during which Employee may
exercise Stock Options grants issued to Employee for a period which is the lesser of three years from the Separation Date (the
“Extended period of Exercisability”) or the expiration date of any particular Stock Option that would terminate earlier
than the Extended Period of Exercisability, as reflected in the agreement attached hereto as Appendix “B”.
The Extended Period of Exercisability shall become effective on the date following Employees termination of employment on which
Employee shall have delivered the executed version of the Release to the Company and shall not have terminated the Release within
the period permitted after execution.


 


6.Company
and its Officers and Directors know of no improper action or conduct by Mr. Pokusa at any time during his employment with Star
Scientific, Inc.


 


7.
Company agrees to indemnify Employee to the fullest extent permitted by Section 145 of the General Corporation Law of the
State of Delaware and Article Tenth of the Company’s Ninth Amended and Restated Certificate of Incorporation with respect
to claims made based upon acts or omissions by Employee or others during his employment by Company. Company agrees that its obligation
to indemnify Employee in accordance with said Article Tenth and this Agreement shall not be diminished by any subsequent amendment
or rescission of said Article Tenth, and shall continue in full force and effect after this Agreement terminates in whole or in
part for any reason. The obligation to indemnify shall apply in any suit or proceeding in which Employee is called as a witness
or is required to answer questions or respond to interrogatories whether or not Employee is a named defendant. Employee’s
right to indemnification includes reasonable reimbursement for lost salary and expenses incurred in connection with Employee’s
participation in the type of matters described above. Subject to the right to indemnification, Employee agrees to reasonably cooperate
with Company with respect to any current or future litigation and regulatory matters and to assist the Company in defending against
any such litigation and in responding to any regulatory matters.


 






    	 



    	 



    

 


8.The
consideration referenced in Sections 2 through 5 is contingent on and subject to Employee delivering and not revoking an executed
form of the Release attached hereto as Appendix “C”, which will extinguish, among other things, any obligation
for the Company to otherwise pay Employee severance under any prior agreement or understanding.


 


9.In
consideration for the grants and other benefits provided in Sections 2 through 5, Employee agrees as follows:


 


		(1)	To
                                         keep all trade secrets and commercially sensitive information (“Confidential Information”),
                                         confidential in accordance with the terms and conditions of Section 6 of Employee’s
                                         Executive Employment Agreement and to comply with the other provision contained in Section
                                         6 of his Executive Employment Agreement.



 


		(2)	During
                                         and after termination of employment, Employee agrees not to make any disparaging comment
                                         or statement about the Company, whether or not true, including any statements that could
                                         adversely affect the conduct of the business of the Company, its plans, proposals or
                                         it reputation.



 


		(3)	To
                                         comply with the restrictions on competition set forth in Section 5 of Employee’s
                                         Executive Employment Agreement prior to and following the termination of his employment.



 


10.This
Agreement and the terms of Employee’s Executive Employment Agreement, to the extent it governs Employee’s conduct
following termination of employment, contain the entire and only agreement between the Parties with respect to Employee’s
termination as an employee of Company and any oral or written representations or assurances regarding Employee’s termination
as an employee of Company other than those contained or referenced in this Agreement shall have no force and effect. This Agreement
may only be modified by a written agreement signed by both Parties.


 


11.This
Agreement shall be construed in accordance with the laws of Virginia without regard to its conflict of law principles.


 






    	 



    	 



    

 


In
witness whereof the Parties hereto executed this Agreement as of the date first written above.


 


	STAR SCIENTIFIC, INC.	 	 	 	 
	/s/ Michael J. Mullan	 	 	/s/ Robert E. Pokusa	 
	Michael J. Mullan MBBS (M.D.), Ph.D	 	 	Robert E. Pokusa	 
	Chairman and CEO




	 	 		 






 






    	 



    	 



    

 


Appendix
A


 


STOCK
GRANT TERMS


 


The
stock grants (“Stock Grants”) shall be made pursuant to Section 8.4 of the Company’s 2008 Incentive Award Plan
(“Plan”) and shall be subject to the terms set forth in this Appendix “A”
and the Plan. Capitalized terms that are used but not defined in the Agreement or in this Appendix
“A” shall have the meaning ascribed to them in the Plan.


 


		1.	Payment,
                                         Grant and Vesting Schedules. 



 


		(a)	The
                                         Company shall pay the Stock Grants in four (4) quarterly installments (each a “Quarterly
                                         Severance Payment”) as set forth below:



 


		(i)	The
                                         Quarterly Severance Payments shall be paid to Employee as grants of shares of common
                                         stock of the Company on November 1, 2014, February 1, 2015, May 1, 2015 and August 1,
                                         2015. Each of the quarterly Stock Grants shall vest on the applicable grant date. The
                                         amount of shares of common stock to be issued as a Quarterly Severance Payment shall
                                         be determined by dividing 3/12s of Employees yearly base compensation by the closing
                                         bid price of the common stock of the Company on the NASDAQ Stock Market (“NASDAQ”)
                                         on the business day immediately preceding the applicable grant date for each Stock Grant.
                                         



 


		(b)	Notwithstanding
                                         the foregoing, no Stock Grant (or portion thereof) shall be effective with respect to
                                         shares of the common stock of the Company that, as of the applicable grant data, would
                                         exceed the limitations set forth in the Plan concerning (i) the aggregate number of shares
                                         of common stock of the Company that may be awarded to all persons under the Plan at the
                                         time of the Quarterly Severance Payment or (ii) the aggregate number of shares of common
                                         stock of the Company that may be awarded to any person under the Plan in one (1) calendar
                                         year at the time of the Quarterly Severance Payment (together the “Plan Limitations”.
                                         In the event that the Company is unable to grant all of or a portion of any Quarterly
                                         Severance Payment due to Plan Limitations, the Company shall make the Quarterly Severance
                                         Payment with respect to all shares of common stock of the Company that are not subject
                                         to the Plan Limitations, if any, in shares of common stock and make the remaining portion
                                         of the Quarterly Severance Payment in a cash payment in immediately available funds in
                                         an amount equal to the sum of the number of shares of common stock of the Company subject
                                         to the Plan Limitations multiplied by the closing bid price of the common stock of the
                                         Company on the NASDAQ Stock Market (“NASDAQ”) on the business day immediate
                                         preceding the applicable grant date, such cash payment to be made within ten (10) business
                                         days of the applicable grant date.



 


 



    	 



    	 



    




 


		2.	Restrictions.
                                         Subject to any exceptions set forth in the Agreement or the Plan, during the period prior
                                         to grant and vesting, neither the Stock nor the rights relating thereto may be assigned,
                                         alienated, pledged, attached, sold or otherwise transferred or encumbered by Executive.
                                         Any attempt to assign, alienate, pledge, attach, sell or otherwise transfer or encumber
                                         the Stock or the rights relating thereto during the period prior to grant and vesting
                                         shall be wholly ineffective. 



 


		3.	Rights
                                         as Shareholder; Dividends. After grant and vesting, Employee shall be the record
                                         owner of the number of shares of common stock issued on the grant and vesting date until
                                         such shares of common stock are sold or otherwise disposed of, and Employee shall be
                                         entitled to all of the rights of a shareholder of the Company with respect to such shares
                                         including, without limitation, the right to vote such shares and receive all dividends
                                         or other distributions paid with respect to such shares. The Company may issue stock
                                         certificates or evidence of Employee’s interest by using a book entry account with
                                         the Company’s transfer agent. 



 


		4.	No
                                         Right to Continued Service. Neither the Plan nor the Agreement shall confer upon
                                         Employee any right to be retained in any position, as an employee, consultant, agent,
                                         representative or director of the Company. 



 


		5.	Adjustments.
                                         If any change is made to the outstanding common stock of the Company or the capital structure
                                         of the Company, if required, the shares of Stock shall be adjusted or terminated in any
                                         manner as contemplated by Section 11 of the Plan.



 


		6.	Tax
                                         Liability and Withholding. Employee shall be required to pay to the Company, and
                                         the Company shall have the right to deduct from any compensation paid to Employee pursuant
                                         to the Plan, the amount of any required withholding taxes in respect of the Stock and
                                         to take all such other action as the Company deems necessary to satisfy all obligations
                                         for the payment of such withholding taxes. The Compensation Committee may permit Employee
                                         to satisfy any federal, state or local tax withholding obligation by any of the following
                                         means, or by a combination of such means: 



 


		(a)	tendering
                                         a cash payment.



 


		(b)	authorizing
                                         Employee to sell a sufficient number of shares from any award of stock to satisfy Employee’s
                                         tax obligations and to remit such funds to Company promptly after such sale.



 


		(c)	By
                                         such other means as approved by the Compensation Committee in its sole discretion.



 


Notwithstanding
any action the Company takes with respect to any or all income tax, social insurance, payroll tax, or other tax-related withholding
(“Tax-Related Items”), the ultimate liability for all Tax-Related Items is and remains Employee’s responsibility
and the Company makes no representation or undertakings regarding the treatment of any Tax-Related Items in connection with the
award or vesting of the Stock or the subsequent sale of any shares and does not commit to structure the Stock to reduce or eliminate
Employee’s liability for Tax-Related Items.


 






    	 



    	 



    

 





		7.	Compliance
                                         with Law. The issuance and transfer of shares of Stock shall be subject to compliance
                                         by Employee with all applicable requirements of federal and state securities laws and
                                         with all applicable requirements of the NASDAQ. No shares of Stock shall be issued or
                                         transferred unless and until any then applicable requirements of state and federal laws
                                         and regulatory agencies have been fully complied with to the satisfaction of the Company
                                         and its counsel. Except with respect to the Plan, Employee understands that the Company
                                         is under no obligation to register the shares of common stock with the Securities and
                                         Exchange Commission, any state securities commission or any stock exchange to effect
                                         such compliance.



 


		8.	Legends.
                                         A legend may be placed on any certificate(s) or other document(s) delivered to Employee
                                         indicating restrictions on transferability of the shares of Stock pursuant to the Agreement
                                         or any other restrictions that the Company may deem advisable under the rules, regulations
                                         and other requirements of the Securities and Exchange Commission, any applicable federal
                                         or state securities laws or the NASDAQ.



 


		9.	Stock
                                         Subject to Plan. The Agreement is subject to the Plan as approved by the Company’s
                                         shareholders. The terms and provisions of the Plan as it may be amended from time to
                                         time are hereby incorporated herein by reference. In the event of a conflict between
                                         any term or provision contained herein and a term or provision of the Plan, the applicable
                                         term or provision of the Plan will govern. Employee acknowledges that the Plan is discretionary
                                         and may be amended, cancelled or terminated by the Company at any time, in its discretion.
                                         The grant of the Stock in this Agreement does not create any contractual right or other
                                         right to receive any stock or other awards in the future. 



 


		10.	Acceptance.
                                         Employee hereby acknowledges receipt of a copy of the Plan and the Agreement. Employee
                                         has read and understands the terms and provisions thereof, and accepts the Stock award
                                         subject to all of the terms and conditions of the Plan and the Agreement. Employee acknowledges
                                         that there may be adverse tax consequences upon the grant or vesting of the Stock or
                                         disposition of the underlying shares and that Employee has been advised to consult a
                                         tax advisor prior to such grant, vesting or disposition.



 


		11.	Successors
                                         and Assigns. This Appendix will be binding upon and inure to the benefit of the successors
                                         and assigns of the Company. Subject to the restrictions on transfer set forth herein,
                                         this Appendix will be binding upon Employee and Employee’s beneficiaries, executors,
                                         administrators and the person(s) to whom the stock may be transferred by will or the
                                         laws of descent or distribution



 


 



    	 



    	 



    

 


Appendix
“B”


 


 


AMENDMENT
TO STOCK OPTION AWARD AGREEMENT(S)


 


Reference
is made to certain Stock Option Award Agreement(s) (hereinafter the “Stock Option Agreement(s)”) dated: (i) May 6,
2008 for 225,000 Option Shares; and (ii) April 5, 2012 for 35,000 Option Shares entered into between Star Scientific, Inc. (the
“Company”) and Robert E. Pokusa (the “Employee”).


 


As
authorized pursuant to the Company’s 2000 Equity Award Plan and/or 2008 Incentive Award Plan, the Company is hereby exercising
its discretion to extend the duration of the exercise period of the Stock Options issued under the Stock Option Agreement(s) for
a period of three years from the date of this Agreement or until the expiration date of the Stock Option Agreement(s), if that
period is less than the extended time period set forth immediately above (the “Extended Period of Exercisability”).


 


Except
with respect to any transfer by operation of law in connection with the death of the Employee or as otherwise agreed to by the
Board or a committee thereof, the Stock Options may not be transferred, assigned, pledged or hypothecated in any way (whether
by operation of law or otherwise) nor shall the Stock Options be subject to execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of the Stock Options contrary to the provisions hereof,
or upon the levy of any attachment or similar process upon the Stock Options, the Stock Options shall, at the election of the
Company, become null and void.


 


The
Stock Option Agreement(s) are hereby ratified and confirmed and the Parties acknowledge that they are in full force and effect,
as provided herein and this instrument shall be deemed to be a part of such Stock Option Agreement(s). If this instrument is inconsistent
with any provision of the Stock Option Agreement(s), this instrument shall control.


 


Executed as
of this 30th day of April, 2014.


 





 


	 	STAR SCIENTIFIC, INC.
	 	 
	 	By: 	/s/ Michael
J. Mullan
	 	 	Michael
J. Mullan, MBBS (M.D.), Ph.D

Chairman and CEO






	 	
	 	By: 	/s/ Robert
E. Pokusa
	 	 	Robert
E. Pokusa




 






    	 



    	 



    




 Appendix “C”


 


 


GENERAL
RELEASE AND WAIVER OF CLAIMS


  


 


1.
For and in consideration of the payments and other benefits due to Robert E. Pokusa, Esquire (the “Employee”)
pursuant to the Agreement, dated as of April 30, 2014, (the “Severance Agreement”) by and between Star Scientific,
Inc. (the “Company”) and the Employee, and for other good and valuable consideration, part or all of which
consideration Employee is not otherwise entitled to receive, Employee irrevocably and unconditionally releases (gives up) any
and all claims of any kind arising out of, or related to, his employment with the Company, its affiliates and subsidiaries (collectively,
with the Company, the “Affiliated Entities”), or arising out of or related to the Employee’s separation
from employment with the Affiliated Entities, which the Employee currently has against the Released Parties, whether known or
unknown to the Employee, by reason of facts which have occurred on or prior to the date that the Employee has signed this General
Release and Waiver of Claims (“Release”), except for (a) any contractual or statutory rights to indemnification
to which Employee would be entitled to by virtue of his employment by the Company or by virtue of the terms and conditions of
the Agreement to which this document is attached as Appendix “C,” or (b) any of the claims identified in Paragraph
2. Subject to Paragraph 2, such released claims include, without limitation, any and all claims relating to the foregoing under
federal, state or local laws pertaining to employment, including, without limitation, the Age Discrimination in Employment Act,
Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Section 2000e et. seq., the Fair Labor Standards
Act, as amended, 29 U.S.C. Section 201 et. seq., the Americans with Disabilities Act, as amended, 42 U.S.C.
Section 12101 et. seq. the Reconstruction Era Civil Rights Act, as amended, 42 U.S.C. Section 1981 et.
seq., the Rehabilitation Act of 1973, as amended, 29 U.S.C. Section 701 et. seq., the Family and Medical
Leave Act of 1992, 29 U.S.C. Section 2601 et. seq., and any and all state or local laws regarding employment
discrimination and/or federal, state or local laws of any type or description regarding employment, including but not limited
to any claims arising from or derivative of the Employee’s employment with the Affiliated Entities, as well as any and all
such claims under state contract or tort law. As used herein, “Released Parties” means the Company, or any
of its divisions, affiliates, subsidiaries, parents, branches, predecessors, successors, assigns, and, with respect to such entities,
their officers, directors, trustees, employees, agents, shareholders, administrators, general or limited partners, representatives,
attorneys, insurers and fiduciaries, past, present and future.


 


2.
This Release does not release any claims that the law does not permit Employee to release, including any future claims. This Release
does not (a) limit or affect Employee’s right to challenge the validity of this Release under the ADEA or Older Workers
Benefit Protection Act or (b) preclude Employee from filing an administrative charge or otherwise communicating with any federal,
state or local government office, official or agency. Employee promises never to seek or accept any damages, remedies or other
relief for Employee personally with respect to any claim released herein.


 






    	 



    	 



    

 


3.
Employee has read this Release carefully and acknowledges that he has had a chance to review the listing of information regarding
the Company’s restructuring attached hereto as Exhibit “1” and which has been provided to meet the requirements
of the Older Workers Benefit Protection Act (“OWBPA”). Employee further acknowledges that Employee has been given
at least forty-five (45) days after termination of employment to consider this Release and has been advised to consult with an
attorney and any other advisors of the Employee’s choice prior to executing this Release, and the Employee fully understands
that by signing below the Employee is voluntarily giving up any right which the Employee may have to sue or bring any of the claims
released above against the Released Parties. The Employee also understands that the Employee has a period of seven (7) days after
signing this Release within which to revoke this agreement, with a signed, written revocation delivered to Paul L. Perito, Esquire,
and that neither the Company nor any other person is obligated to make any payments or provide any other benefits to the Employee
pursuant to the Employment Agreement until seven (7) days have passed since the Employee’s signing of this Release without
the Employee’s signature having been revoked other than any accrued obligations or other benefits payable pursuant to the
terms of the Company’s normal payroll practices or employee benefit plans. However, notwithstanding the foregoing, the Company
agrees to make payments to Employee through the date of termination, regardless of whether Employee executes this Release or revokes
the Release within seven days thereafter. Finally, the Employee has not been forced or pressured in any manner whatsoever to sign
this Release, and the Employee agrees to all of its terms voluntarily.


 


4.
Notwithstanding anything else herein to the contrary, this Release shall not affect: (i) the Company’s obligations
under any compensation or employee benefit plan, program or arrangement (including, without limitation, obligations to the Employee
under any stock option, stock award or agreements or obligations under any pension, deferred compensation or retention plan) provided
by the Affiliated Entities where the Employee’s compensation or benefits are intended to continue or the Employee is to
be provided with compensation or benefits, in accordance with the express written terms of such plan, program or arrangement,
beyond the date of the Employee’s termination; or (ii) rights to indemnification or liability insurance coverage the
Employee may have under the by-laws of the Company or applicable law or the terms of the Agreement of which this Release is Appendix
“C.”


 


If
Employee does not timely revoke this Release as provided herein, it will become enforceable, final and binding on the eighth day
after Employee signs it (regardless of whether Company has signed it yet). Thereafter, the Release may not be changed or modified
except in a writing signed by both parties.


 


 


 


	

    Date: 4/30/14	

        /s/ Robert E. Pokusa

        Robert
        E. Pokusa

	 	 
	

    Date:________________________	

        STAR SCIENTIFIC, INC.

         

        By: /s/ Michael J. Mullan________________

        Michael
        J. Mullan, MBBS (M.D.), Ph.D

        Chairman
        and CEO

         

         

	 	 



 






    	 



    	 



    

 


 


EXHIBIT “1”


 


 


	 	Job
    Title	Age	No.
    Selected	No.
    Not Selected
	1	General
    Counsel	 63	 
             1	             0
	2	 	 	 	 
	3	 	 	 	 
	4	 	 	 	 
	5