Document:

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                                                                   EXHIBIT 10.33

                                 LOAN AGREEMENT

         This Loan Agreement dated as of October 12, 1999, between Star
Scientific, Inc., a Delaware corporation ("the "Borrower"), and Brown &
Williamson Tobacco Corporation, a Delaware corporation (the "Lender").

                                   ARTICLE I.
                                   DEFINITIONS

         For the purposes of this Agreement, the following terms shall have the
meanings set forth below:

         "Affiliate" shall have the meaning ascribed to it in Section 4.01(l)
hereof.

         "Barns" means the specially fabricated tobacco curing barns utilized by
Borrower to reduce the nitrosamine levels in tobacco.

         "Benefit Commitments" shall have the meaning ascribed to it in Section
4.01(f) hereof.

         "Business Day" shall mean any day other than a Saturday, Sunday, or
public or Lender holiday or the equivalent for Lenders generally under the laws
of the State of Virginia.

         "Collateral" shall have the meaning ascribed to it in Section 7.01.

         "Collateral Documents" shall mean the Security Agreement and all
related financing statements.

         "Debt" shall mean (A) indebtedness for borrowed money or for the
deferred purchase price of property or services, (B) obligations as lessee under
leases which shall have been or should be, in accordance with generally accepted
accounting principles, recorded as capital leases, (C) obligations under direct
or indirect guaranties in respect of, and obligations (contingent or otherwise)
to purchase or otherwise acquire, or otherwise to assure a creditor against loss
in respect of, indebtedness or obligations of others of the kinds referred to in
clause (A) or (B) above, (D) liabilities incurred in respect of Benefit
Commitments in excess of plan assets under Pension Plans.

         "Event of Default" shall have the meaning ascribed to it in Section
6.01 hereof.

         "First Advance" shall mean the first advance by the Lender under the
Loan.

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         "GAAP" shall mean generally accepted accounting principals,
consistently applied.

         "Loan Agreement" shall mean this Agreement.

         "Loan" shall mean the term loan in the aggregate amount of $22,000,000,
but evidenced by two separate credit facilities, one in the amount of
$13,200,000 ("Credit Facility A") and the other in the amount of $8,800,000
("Credit Facility "B") from Lender to Borrower as provided for and subject to
the terms and conditions contained in this Loan Agreement, evidenced by Note A
and Note B respectively, and secured by the Collateral Documents.

         "Loan Documents" shall mean the Loan Agreement, Note A, Note B, and the
Collateral Documents.

         "Master Agreement" shall mean an agreement of like date between Lender
and Borrower relating to, inter alia, the purchase of low-TSNA tobacco from
Borrower by Lender [***].

         "Note A" shall mean the promissory note dated as of the date hereof
executed by the Borrower payable to the Lender in the principal amount of
$13,200,000, in the form attached hereto as Exhibit A.

         "Note B" shall mean the promissory note dated as of the date hereof
executed by the Borrower payable to the Lender in the principal amount of
$8,800,000, in the form attached hereto as Exhibit B.

         "Notes" shall mean Note A and Note B.

         "Obligations" means the obligation of the Borrower: (A) to pay the
principal of and interest on Note A and Note B (but only to the extent funded)
in accordance with the terms thereof and to satisfy all of its other liabilities
to the Lender arising under the Loan Documents, whether now existing or
hereafter incurred, matured or unmatured, direct or contingent, including any
extensions, modifications, renewals thereof and substitutions therefor; (B) to
repay to the Lender all amounts advanced by the Lender hereunder or otherwise on
behalf of the Borrower in connection with the Loan, including, but without
limitation, advances for the payment of insurance, repairs to or maintenance or
storage of any of the Collateral; and (C) to reimburse the Lender, on demand,
for all of the Lender's expenses and costs, including the reasonable fees and
expenses of its counsel, in connection with the enforcement of this Agreement
and the documents required hereunder, including, without limitation, any
proceeding brought or threatened to enforce payment of any of the obligations
referred to in clauses (A) and (B) above.

Note: Redacted portions have been marked with [***]. The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

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         "Person" shall mean any individual, corporation, partnership, trust,
unincorporated association, joint venture, joint stock company or other entity.

         "Prime Rate" shall mean that rate of interest published in The Wall
Street Journal in the Money Rates Section from time to time as the Prime Rate.

         "Security Agreement" shall mean the Security Agreement of even date
herewith by and between the Borrower and Lender in the form attached hereto as
Exhibit C.

         "Taxes" shall mean all federal, state and local income taxes payable by
Borrower during a specified period of time.

         "Unfunded Liabilities" shall have the meaning ascribed to it in Section
4.01(f) hereof.

         "Unmatured Event of Default" shall mean any event of condition which
with passage of time or giving of notice or both would become or create an Event
of Default.

                                   ARTICLE II.
                          AMOUNTS AND TERMS OF THE LOAN

         SECTION 2.01. Credit Facilities. The Lender agrees, on the terms and
conditions hereinafter set forth, including without limiting the generality of
the foregoing, the conditions precedent set forth in Article III hereof, to
make: (i) a term loan to Borrower in the amount of $13,200,000 ("Credit Facility
A") evidenced by Note A, and (ii) subject to the occurrence of certain
conditions, the occurrence of which is solely in Lender's discretion, a term
loan to Borrower in the amount of $8,800,000 ("Credit Facility B") evidenced by
Note B, for the purpose of financing the acquisition of Barns by Borrower. The
Borrower agrees to repay the Obligations (to the extent funded) upon the terms
and conditions and as required by the Loan Documents. No funds will be advanced
by Lender to Borrower pursuant to Credit Facility B unless Lender gives Borrower
[***]. In the event such a notice is not given by Lender, Lender will mark
Note B "canceled" and return it to Borrower.

         SECTION 2.02      Interest Rate and Payments of Interest.  Interest
shall be paid as follows:

             (a)      Interest shall be due and payable as provided for in the
Notes.

Note: Redacted portions have been marked with [***]. The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

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             (b)      Interest shall be calculated on the basis of a 360-day
year, counting the actual number of days elapsed, and shall be payable monthly
on the outstanding principal balances as provided for in the Notes.

         SECTION 2.03.     Advances. Upon two (2) Business Days prior written
notice to Lender, Borrower may request advances under the Loan for the sole
purpose of acquiring Barns at the rate of [***]. With the exception of the first
and last advance under each Note, the minimum advance under either of the Credit
Facilities shall be [***]. Lender may disburse such advances directly to
Borrower or on behalf of and for the account of Borrower directly to the
manufacturer of the Barns.

         SECTION 2.04      Repayment of Principal. The principal advanced and
outstanding under Credit Facility A and Credit Facility B shall be repaid as
provided for in Note A and Note B, respectively.

         SECTION 2.05      Payment to the Lender. All sums payable to the Lender
hereunder shall be paid directly to the Lender in immediately available funds by
wire transfer to:

                      [***]

         SECTION 2.06.     Prepayments. Borrower may prepay the Loan in whole or
in part only on the dates for regularly scheduled principal and interest
payments upon five (5) days prior written notice to Lender. Any amounts prepaid
by Borrower may not be re-borrowed.

         SECTION 2.07.     Payment on Non-Business Days. Whenever any payment to
be made hereunder or under the Note shall be stated to be due on a day other
than a Business Day, such payment may be made on the next succeeding Business
Day, and such extension of time shall in such case be included in the
compensation of payment of interest.

Note: Redacted portions have been marked with [***]. The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

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                                  ARTICLE III.
                              CONDITIONS OF LENDING

         SECTION 3.01.     Condition Precedent to the Loan. The obligation of
the Lender to make the Loan is subject to the condition precedent that the
Lender shall have received on or before the day of the request for the funding
of the First Advance all of the following agreements, duly executed, and other
documents, certificates and items, all of which shall be in form and substance
satisfactory to Lender:

             (a)      The Notes;

             (b)      The Security Agreement together with such UCC financing
statements or other documents as Lender shall deem necessary or appropriate;

             (c)      Copy of the certificate of authority to transact business
in any jurisdiction in which the nature of Borrower's activities require it to
register as a foreign corporation in such jurisdiction;

             (d)      Copy of the articles of incorporation of the Borrower,
certified by the Secretary of State of the State of Delaware;

             (e)      Copies of the bylaws of Borrower, certified by the
Secretary of Borrower;

             (f)      Copies of a resolution of the board of directors of
Borrower, approving the Loan and the execution and delivery of the Loan
Documents to which it is a party, certified by the Secretary of the Borrower;

             (g)      A good standing certificate for the Borrower from the
Secretary of State of the State of Delaware, and of each jurisdiction in which
it transacts business;

             (h)      Legal opinion of Paul, Hastings, Janofsky & Walker LLP,
counsel to Borrower, in form reasonably acceptable to Lender's counsel;

             (i)      UCC judgment and Federal tax lien searches for Borrower in
such jurisdictions as Lender may request;

             (j)      Signature and incumbency certificates with respect to each
officer executing the Loan Documents on behalf of Borrower;

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             (k)      Such other documents or certificates as Lender shall
reasonably require.

         SECTION 3.02.     Conditions Precedent to any Subsequent Advance. The
obligation of the Lender to make any subsequent advance under the Loan shall be
subject to the satisfaction of the following additional conditions precedent on
or before the date of the request for the funding of such Advance:

             (a)  the Lender shall have received a certificate signed by
Borrower, dated the date of the request for the funding of the Advance, stating
that, as of such date, the following statements are true:

                  (i)      the representations and warranties contained in the
Loan Documents are correct on and as of such date;

                  (ii)     no event has occurred and is continuing, or would
result from the Loan, which constitutes an Event of Default or would constitute
an Unmatured Event of Default, and

                  (iii)    the number of Barns being acquired with such Advance
and the serial numbers of such Barns.

             (b)      the Lender shall have received such other approvals,
opinions or documents as the Lender may reasonably request.

         SECTION 3.03.     Priority of Security Interests.  At the time of the
First Advance, the security interests in the Collateral in favor of Lender to
secure the Loan shall be perfected and a first priority on the Collateral

         SECTION 3.04.     Condition Precedent to Credit Facility B. Lender has
no obligation to advance any funds under Credit Facility B and Borrower has no
right to request the advance of any funds under Credit Facility B unless
Borrower receives from Lender [***].

                                   ARTICLE IV.
                         REPRESENTATIONS AND WARRANTIES

         SECTION 4.01.     Representations and Warranties of Borrower. Borrower
represents and warrants to Lender as follows:

Note: Redacted portions have been marked with [***]. The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

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<PAGE>   7

             (a)      The Borrower is duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and is qualified to do
business as a foreign corporation and in good standing in each jurisdiction
where such qualification is necessary.

             (b)      The execution, delivery and performance of the Loan
Documents to which it is a party are within Borrower's corporate powers, have
been authorized by all necessary corporate action, does not contravene its (i)
articles of incorporation or bylaws or (ii) any law or regulation binding on or
affecting it, or any contractual restriction binding on or affecting it and
(iii) does not result in or require the creation of any lien, security interest
or other charge of encumbrance (other than pursuant to the Loan Documents) upon
or with respect to any of its properties.

             (c)      No authorization, consent or approval or other action by,
and no notice to or registration or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and performance by
Borrower of any Loan Document to which it is a party.

             (d)      The Agreement and all of the other Loan Documents to which
it is a party are legal, valid and binding obligations of the Borrower
enforceable against Borrower in accordance with their respective terms.

             (e)      There is no material pending, or to the best of Borrower's
knowledge, threatened action or proceeding at law or in equity before any court,
governmental agency, or arbitrator affecting the Borrower.

             (f)      The Borrower (i) is not party to any indenture, agreement
or other instrument or subject to any restriction materially adversely affecting
its business, properties, assets, operations or conditions (financial or
otherwise), and (ii) is not in material default in the performance, observance
or fulfillment of any of the obligations, covenants or conditions contained in
any material agreement or instrument to which it is a party.

             (g)      The Borrower has obtained all material licenses, permits,
franchises, or other governmental authorizations reasonably necessary for the
ownership of its properties and the conduct of its business. The Borrower
possesses adequate licenses, patents, patent applications, copyrights,
trademarks, trademark applications, and trade names to continue its business as
heretofore conducted by it, without any conflict with the rights of any other
person or entity.

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             (h)      The Borrower and its subsidiaries have not received any
communication from any Person that asserts that Star's Intellectual Property is
infringing the rights of any Person.

                                   ARTICLE V.
                            COVENANTS OF THE BORROWER

         SECTION 5.01.     Affirmative Covenants.  So long as any Obligation
shall remain unpaid Borrower will, unless the Lender shall otherwise consent in
writing:

             (a)      Maintain Corporation. Do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence,
rights and franchises and comply with all applicable laws; continue to conduct
and operate its business substantially as conducted and operated during the
present and preceding calendar year; at all times maintain, preserve and protect
all franchises and trade names and preserve all the remainder of its property
used or useful in the conduct of its business and keep the same in good repair,
working order and condition; and from time to time, make, or cause to be made,
all needed and proper repairs, renewals, replacements, betterments and
improvements thereto so that the business carried on in connection therewith may
be properly and advantageously conducted at all times.

             (b)      Compliance with Laws, Agreements, Etc. Comply (i) in all
material respects with all applicable laws, rules, regulations, and orders, such
compliance to include, without limitation, paying before the same becomes
delinquent all taxes, assessments and governmental charges imposed upon it or
upon its property except to the extent contested in good faith, and strictly
with all Loan Documents, and other material agreements and all governmental
regulatory requirements.

             (c)      Insurance. Keep its insurable properties adequately
insured and maintain (i) insurance against fire and other risks customarily
insured against by companies engaged in the same or a similar business, (ii)
necessary worker's compensation insurance, (iii) public liability, and (iv) such
other insurance as may be required by law or as may be reasonably required in
writing by the Lender, all of which insurance shall be in such amounts,
containing such terms, in such form, for such purposes and written by such
companies as may be satisfactory to the Lender. Borrower will deliver evidence
satisfactory to the Lender that such insurance has been so procured and, with
respect to Borrower's casualty insurance, an endorsement to reflect that Lender
is a loss payee. If Borrower fails to maintain satisfactory insurance as herein
provided, the Lender shall have the option to do so, and Borrower agrees to
repay the Lender on demand, with interest at the rate of [***] per annum above
the Prime Rate, on all amounts so expended by the Lender.

Note: Redacted portions have been marked with [***]. The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

                                      -8-
<PAGE>   9

         SECTION 5.02.     Negative Covenants.  So long as any amount under the
Note shall remain unpaid, Borrower will not, without the prior written consent
of the Lender:

             (a)      Liens, Etc. Create or suffer to exist, any lien, security
interest or other charge or encumbrance, or any other type of preferential
arrangement, upon or with respect to any of the Collateral whether now owned or
hereafter acquired, or assign, any right to receive income, in each case to
secure any Debt of any Person, other than as created or assigned under the Loan
Documents.

             (b)      Debt. Create or suffer to exist any Debt other than Debt
under the Loan Documents, and other Debt entered into in the ordinary course of
business.

             (c)      Mergers, Etc. Merge or consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to, or acquire all or substantially all of the
assets of, any person or entity.

             (d)      Sales, Etc. of Assets. Sell, lease, transfer or otherwise
dispose of any of its assets or any of its interests therein other than in the
normal course of its business without the prior written consent of Lender (which
consent may be conditioned upon using the proceeds of such sale or other
disposition to prepay the Notes).

             (e)      Maintenance of Licenses and Authorizations. Take or fail
to take any action which shall result directly or indirectly in the suspension,
revocation or termination of any license, franchise or other authorization held
by Borrower and necessary for its operations.

             (f)      Extension of Credit. Make loans, advances or extensions of
credit to any Person, except for sales on open account and in the ordinary
course of business.

             (g)      Guarantee Obligations. Guarantee or otherwise in any way
become or be responsible for obligations of any other Person, whether by
agreement to purchase the indebtedness of any other Person, or agreement for the
furnishing of funds of any other Person through the purchase of goods, supplies
or services (or by way of stock purchase, capital contribution, advance or loan)
for the purpose of paying or discharging the indebtedness of any other Person,
or otherwise, except for the endorsement of negotiable instruments in the
ordinary course of business for collection.

             (h)      Prepayment of Debt. Except as provided for in Section
2.06, make any payment in reduction of the principal amount of any Debt (other
than Debt evidenced by the

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Notes) in advance of the scheduled maturity of such Debt except in the ordinary
course of business.

                                   ARTICLE VI.
                                EVENTS OF DEFAULT

         SECTION 6.01.     Events of Default.  If any of the following events
("Events of Default") shall occur and be continuing:

             (a)      Borrower shall fail to pay: (i) the principal of the Note
when due, or (ii) interest on, the Note when due and such failure continues for
more than 60 days after written notice from the Lender to the Borrower; or

             (b)      Lender elects to terminate the Master Agreement pursuant
to the provisions of Section 11(b) (c) (d) or (e) thereof; or

             (c)      A material cessation or stoppage by Star to deliver to any
B&W Affiliates the quantities of Star Curea Tobacco ordered for such year.

                                  ARTICLE VII.
                                    SECURITY

         SECTION 7.01      Composition of the Collateral. The property in which
a lien or security interest is granted pursuant to the provisions of the Loan
Documents is herein collectively called the "Collateral." The Collateral,
together with all of Borrower's other property of any kind held by the Lender,
shall stand as one general, continuing collateral security for all Obligations
and may be retained by the Lender until all Obligations have been satisfied in
full.

         SECTION 7.02      Rights in Property Held by the Lender. As further
security for the prompt satisfaction of all Obligations, the Borrower hereby
assigns, transfers and sets over to the Lender all of its right, title and
interest in and to, and grants the Lender a lien on and a security interest in,
all amounts that may be owing from time to time by the Lender to Borrower in any
capacity, including, but without limitation, any account with the Lender, which
lien and security interest shall be independent of any right of set-off which
the Lender may have.

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                                  ARTICLE VIII.
                                  MISCELLANEOUS

         SECTION 8.01.     Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Note, nor consent to any departure by
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instances and for the specific purpose for which
given.

         SECTION 8.02.     Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic communication)
and shall be effective when delivered or when mailed, postage prepaid, by United
States certified or registered mail, return receipt requested, addressed as
follows:

         If to Borrower:

                  Star Scientific, Inc.
                  16 South Market Street
                  Petersburg, Virginia 23803
                  Attension: Jonnie R. Williams

         with a copy to:

                  Paul, Hastings, Janofsky & Walker
                  1299 Pennsylvania Avenue, N.W.
                  Tenth Floor
                  Washington, D.C.  20004-2400
                  Attention:  Paul L. Perito, Esq.
                  Telecopier No.:  (202) 508-9700

         and

                  Paul, Hastings, Janofsky & Walker
                  600 Peachtree Street, Suite 2400
                  Atlanta, Georgia  30308
                  Attention:  W. Andrew Scott, Esq.
                  Telecopier No.  (404) 815-2424

                                      -11-
<PAGE>   12

And if to the Lender, to:
                  Brown & Williamson Tobacco Corporation
                  1500 Brown & Williamson Tower
                  Louisville, KY 40232
                  Attention:  [***]

         with a copy to:
                  Wiley, Rein & Fielding
                  1776 K Street, N.W.
                  Washington, D.C.  20006
                  Attention:  Stuart F. Carwile

or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party.

         SECTION 8.03.     No Waiver; Remedies. No failure on the part of the
Lender to exercise, and no delay in exercising, any right under any Loan
Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under any Loan Document preclude any other or further
exercise thereof or the exercise of any other right. The remedies provided in
the Loan Documents are cumulative and not exclusive of any remedies existing
law, in equity or otherwise.

         SECTION 8.04.     Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistently applied, except as otherwise stated
herein.

         SECTION 8.05.     Right of Set-Off. Upon the occurrence and during the
continuance of any Event of Default the Lender is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set-off and
apply any and all other indebtedness at any time owing by the Lender to or for
the credit or the account of the Borrower against any and all of the
Obligations, irrespective of whether or not the Lender shall have made any
demand respecting such Obligations and although such Obligations may be
unmatured. The rights of the Lender under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which the Lender may have.

         SECTION 8.06      Binding Effect; Governing Law. This Agreement shall
be binding upon and inure to the benefit of Borrower and the Lender and their
respective successors and assigns, except that Borrower shall not have the right
to assign its rights hereunder or any interest herein without the prior written
consent of the Lender. This Agreement, the Note and the other Loan Documents
(except where otherwise expressly so stated) shall be governed by, and construed
in accordance with, the laws of the State of Virginia.

Note: Redacted portions have been marked with [***]. The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

                                      -12-
<PAGE>   13

         IN WITNESS WHEREOF, the Borrower and the Lender have caused this Loan
Agreement to be executed by their respective officers thereunto duly authorized,
all as of the date first above written.

                                     STAR SCIENTIFIC, INC.

                                     By:
                                        -------------------------------
                                     Name:
                                     Title:

                                     BROWN & WILLIAMSON TOBACCO
                                         CORPORATION

                                     By:
                                        -------------------------------
                                     Name:
                                     Title:

                                      -13-<PAGE>   1

                                                                   EXHIBIT 10.34

                               SECURITY AGREEMENT

         This SECURITY AGREEMENT (this "Agreement") is dated as of December 16,
1999 between STAR SCIENTIFIC, INC., a Delaware corporation ("Debtor"), and BROWN
& WILLIAMSON TOBACCO CORPORATION, a Delaware corporation ("Lender").

                              W I T N E S S E T H :

         WHEREAS, Debtor has entered into a Loan Agreement dated October 12,
1999 (as the same may hereafter be amended, restated, supplemented or otherwise
modified from time to time, the "Loan Agreement") with Lender providing for a
loan in the amount of $13,200,000 under Credit Facility A, and subject to the
fulfillment of certain conditions, a subsequent loan in the amount of $8,800,000
under Credit Facility B (collectively, the "Loan") to be made to Debtor by
Lender;

         WHEREAS, it is a condition precedent to the obligations of the Lender
under the Loan Agreement that Debtor shall have granted the Liens contemplated
by this Agreement;

         WHEREAS, Star is engaged in two lines of business (i) the production
and sale of discount brand cigarettes (the "Discount Cigarette Business") and
(ii) the acquisition of tobacco which has been or will be specially cured to
reduce the nitrosamines levels ("Low TSNA Tobacco") and the development of a low
nitrosamine cigarette using the Low TSNA Tobacco (the "Star Curea Business"),
and

         WHEREAS, Star and Lender have agreed that Star will grant Lender a
security interest in certain of the assets comprising the Star Curea Business.

         NOW, THEREFORE, in consideration of the foregoing and in order to
induce Lender to make the Loan contemplated by the Loan Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor hereby agrees with Lender as follows:

SECTION 1.        Definitions

         1.1    Certain Defined Terms. Unless otherwise defined herein, all
capitalized terms used herein shall have the respective meanings given to such
terms in the Loan Agreement or in Exhibit A annexed hereto.

         1.2    Other Definition Provisions. References to "Sections",
"subsections", "Exhibits" and "Schedules" shall be to Sections, subsections,
Exhibits and Schedules, respectively, of this Agreement unless otherwise
specifically provided. Any of the terms defined in Exhibit A may, unless the
context otherwise requires, be used in the singular or the plural depending on
the reference. All references to statutes and related regulations shall include
(unless otherwise specifically provided herein) any amendments of same and any
successor statutes and regulations.

                                      -1-
<PAGE>   2

SECTION 2.        Grant of Security Interests

         In order to secure the prompt and complete payment and performance of
the Secured Obligations in accordance with the terms thereof, Debtor hereby
grants to Lender, a purchase money continuing first priority security interest
in and to all right, title and interest of Debtor in the following property,
whether now owned or existing or hereafter acquired or arising and regardless of
where located (all being collectively referred to as the "Collateral"):

         (A)    Barns;

         (B)    Leaf Inventory;

         (C)    Proceeds of all or any of the property described in subparts
(A) - (B) above.

SECTION 3.        Security for Secured Obligations

         This Agreement secures the prompt and complete payment and performance
of the obligations of Debtor hereunder and under the Loan Agreement and Other
Loan Documents to which it is a party, now or hereafter existing, and all
renewals, extensions and restructurings of any of the above (all such debts,
obligations and liabilities of Debtor being collectively referred to herein as
the "Secured Obligations".

SECTION 4.        Representations and Warranties

         Debtor represents and warrants as follows:

         4.1    Binding Obligation. This Agreement constitutes the legal, valid
and binding obligation of Debtor, enforceable against Debtor in accordance with
its terms.

         4.2    Location of Equipment and Inventory. All of the Equipment and
Inventory is located at the places specified on Schedule I. The Barns comprising
a part of the Equipment are mobile and will be located in one or more of the
following states: Virginia, North Carolina, Georgia and Florida. Debtor will
annually and, upon request from Lender, promptly within ten (10) Business Days
inventory the Collateral and provide Lender with the current location and serial
numbers of the Barns. Upon the occurrence of an Event of Default, Debtor will
within ten (10) Business Days assemble the Collateral at a location designated
by Lender.

         4.3    Ownership of Collateral. Debtor owns the Collateral free and
clear of any Lien.

         4.4    Office Locations; Fictitious Names. The principal place of
business, the chief executive office and the office where Debtor keeps its books
and records are located at the places specified in subpart A of Schedule I. All
other locations of Collateral are specified in subpart B of Schedule I. If any
location specified on Schedule I is not owned by Debtor, the name and address of
the owner of such property is set forth opposite such location. Debtor

                                      -2-
<PAGE>   3

does not do business and has not done business during the past five years under
any corporate name, trade-name or fictitious business name except as disclosed
on Schedule II.

         4.5    Perfection. This Agreement creates a valid first priority
security interest in the Collateral, securing the payment of the Secured
Obligations.

SECTION 5.        Further Assurances; Covenants

         5.1.   Other Documents and Actions. Debtor will, from time to time,
promptly execute and deliver all further instruments and documents and take all
further action that may be necessary, or that Lender may reasonably request, in
order to perfect and protect the Security Interests granted or purported to be
granted hereby or to enable Lender to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, Debtor will: (a) execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary, or as Lender may reasonably request, in order to
perfect and preserve the Security Interests granted or purported to be granted
hereby; (b) during normal business hours and, prior to the occurrence of an
Event of Default, upon two (2) Business Days' prior notice from Lender, allow
inspection of the Collateral by Lender or persons designated by Lender, and (c)
upon Lender's request, appear in and defend any action or proceeding that may
affect Debtor's title to, or the Security Interests of the Lender in, the
Collateral.

         5.2    Lender Authorized. Debtor hereby authorizes Lender to file one
or more financing or continuation statements, and amendments thereto, relating
to all or any part of the Collateral and reflecting the terms of this Agreement
without the signature of Debtor to the extent permitted by law.

         5.3    Corporate or Name Change. Without the prior written consent of
Lender, Debtor will not change Debtor's name.

         5.4    Business Locations. Debtor will give Lender thirty (30) days
prior written notice of any change in Debtor's chief place of business, of any
new location of business, and of any new location for any of the Collateral.
With respect to any new location (which in any event shall be within the
continental United States), Debtor will execute such documents and take such
actions as Lender deems necessary to perfect and protect the Security Interests.

         5.5    Instruments. Upon the occurrence and during the continuance of
an Event of Default (i) Debtor will deliver and pledge to Lender all Instruments
duly endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to Lender and (ii) Debtor
will mark conspicuously all chattel paper with a legend, in form and substance
reasonably satisfactory to Lender, indicating that such chattel paper is subject
to the Security Interests and will, upon Lender's request from time to time,
deliver possession thereof to Lender.

                                      -3-
<PAGE>   4

         5.6    Certificates of Title. Upon Lender's request, Debtor shall
promptly deliver to Lender any and all certificates of title, applications for
title or similar evidence of ownership of all Equipment and shall cause Lender
to be named as lienholder on any such certificate of title or other evidence of
ownership. Debtor shall not permit any Equipment to become a fixture to real
estate.

         5.7    Collateral Description. Debtor will furnish to Lender, from time
to time, statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as Lender
may reasonably request, all in reasonable detail.

         5.8    No Transfer/Assignment. Debtor shall not sell, assign, transfer,
convey or otherwise dispose of any of the Collateral other than immaterial
dispositions in the ordinary course of business of items replaced with items of
equal or greater value, nor create, incur or permit to exist any pledge,
mortgage, lien, charge, encumbrance or security interest in or upon any of the
Collateral except in favor of the Lender. Notwithstanding the foregoing, so long
as no Event of Default (which when used herein shall have the meaning ascribed
to such term in the Loan Agreement) has occurred and is continuing, Debtor shall
have the exclusive, nontransferable right and license to use the Intellectual
Property and the exclusive right to grant to other Persons licenses and
sublicenses with respect to the Intellectual Property.

         5.9    Taxes. Debtor shall, at its cost and expense, pay when due all
taxes, charges and assessments against any of the Collateral, except those
contested in good faith by appropriate proceedings with timely payment of any
amounts due prior to delinquency, and all rent due on any and all premises where
the Collateral may be located.

         5.10   Defense of Claims. Debtor shall, at its cost and expense, defend
against all actions, claims and demands affecting the Collateral, the Security
Interest or Debtors' or Lender's right, title, interest or benefit in or to the
Collateral; Debtors shall give Lender notice of any such action, claim or demand
promptly and in any event within five (5) days;

         5.11   Maintenance. Debtor shall maintain the Collateral in good
condition, ordinary wear and tear resulting from its intended use excepted.

SECTION 6.        Lender Appointed Attorney-in-Fact

         Debtor hereby irrevocably appoints Lender as Debtor's attorney-in-fact,
with full authority in the place and stead of Debtor and in the name of Debtor,
Lender or otherwise, from time to time after the occurrence and during the
continuance of an Event of Default in Lender's discretion to take any action and
to execute any instrument that Lender may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation:

         (a)    to obtain and adjust insurance required to be paid to Lender;

                                      -4-
<PAGE>   5

         (b)    to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;

         (c)    to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clauses (a) and (b)
above;

         (d)    to file any claims or take any action or institute any
proceedings that Lender may reasonably deem necessary for the collection of any
of the Collateral or otherwise to enforce the rights of Lender with respect to
any of the Collateral;

         (e)    to pay or discharge taxes or Liens, levied or placed upon or
threatened in writing against the Collateral, the legality or validity thereof
and the amounts necessary to discharge the same to be determined by Lender in
its sole discretion;

         (f)    to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, assignments, verifications and
notices in connection with Accounts and other documents (including without
limitation financing statements, continuation statements and other documents
necessary or advisable to perfect the Security Interests) relating to the
Collateral; and

         (g)    generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and completely
as though Lender were the absolute owner thereof for all purposes, and to do, at
Lender's option and Debtor's expense, at any time or from time to time, all acts
and things that Lender reasonably deems necessary to protect, preserve or
realize upon the Collateral.

Debtor hereby ratifies and approves all acts of Lender made or taken pursuant to
this Section 7. Neither Lender nor any person designated by Lender shall be
liable for any acts or omissions or for any error of judgment or mistake of fact
or law excluding gross negligence and willful misconduct. This power, being
coupled with an interest, is irrevocable so long as this Agreement shall remain
in force.

                                      -5-
<PAGE>   6

SECTION 7.        Remedies

         If any Event of Default shall have occurred and be continuing, Lender
may exercise in respect of the Collateral, in addition to all other rights and
remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the UCC (whether or not the UCC
applies to the affected Collateral) and also may: (a) require Debtor to, and
Debtor hereby agrees that it will, at its expense and upon request of Lender
forthwith, assemble all or part of the Collateral as directed by Lender and make
it available to Lender at a place to be designated by Lender; (b) without notice
or demand or legal process, except as otherwise required by law, enter upon any
premises of Debtor and take possession of the Collateral; and (c) without notice
except as specified below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at the Lender's offices or elsewhere, at
such time or times, for cash, on credit or for future delivery, and at such
price or prices and upon such other terms as Lender may deem commercially
reasonable. Debtor agrees that, to the extent notice of sale shall be required
by law, at least ten (10) days notice to Debtor of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute commercially reasonable notification. At any sale of the Collateral,
if permitted by law, Lender may bid (which bid may be, in whole or in part, in
the form of cancellation of indebtedness) for the purchase of the Collateral or
any portion thereof for the account of Lender. Lender shall not be obligated to
make any sale of Collateral regardless of notice of sale having been given. To
the extent permitted by law, Debtor hereby specifically waives all rights of
redemption, stay or appraisal which it has or may have under any law now
existing or hereafter enacted.

SECTION 8.        License of Intellectual Property

         [***]

Note: Redacted portions have been marked with [***]. The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

                                      -6-
<PAGE>   7

SECTION 9.        Limitation on Duty of Lender with Respect to Collateral

         Lender shall have no duty with respect to any Collateral in its
possession or control (or in the possession or control of any agent or bailee of
Lender) or with respect to any income thereon or the preservation of rights
against prior parties or any other rights pertaining thereto except for Lender's
gross negligence or willful misconduct. Lender shall not be liable or
responsible for any loss or damage to any of the Collateral, or for any
diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other agent or bailee
selected by Lender in good faith.

SECTION 10.       Application of Proceeds

         Upon the occurrence and during the continuance of an Event of Default,
the proceeds of any sale of, or other realization upon, all or any part of the
Collateral and any cash held in any of Debtor's accounts shall be applied:
first, to all fees, costs and expenses incurred by Lender with respect to the
Loan Agreement, the Other Loan Documents or the Collateral; second, to accrued
and unpaid interest on the Secured Obligations (including any interest which but
for the provisions of the Bankruptcy Code, would have accrued on such amounts);
third, to the principal amounts of the Secured Obligations outstanding; and
fourth, the surplus, if any, to Debtor.

SECTION 11.       Expenses

         Upon the occurrence and during the continuance of any Event of Default,
all costs and expenses (including attorneys' fees, legal expenses and court
costs) incurred by Lender in enforcing or protecting the Security Interests or
any of its remedies under this Agreement shall be payable by Debtor on demand,
shall constitute Secured Obligations, shall bear interest until paid at the
highest rate provided in the Loan Agreement and shall be secured by the
Collateral.

SECTION 12.       Termination of Security Interests: Release of Collateral

         Upon payment in full of all Secured Obligations, the Security Interests
shall terminate and all rights to the Collateral shall revert to Debtor. Upon
such termination of the Security Interests or release of any Collateral, Lender
will, execute and deliver to Debtor such documents as Debtor shall reasonably
request to evidence the termination of the Security Interests or the release of
such Collateral, as the case may be.

                                      -7-
<PAGE>   8

SECTION 13.       Reinstatement.

         Notwithstanding the provisions of Section 12, this Agreement shall
continue to be effective or be reinstated, as the case may be, if at any time
any amount received by Lender in respect of the Secured Obligations is rescinded
or must otherwise be restored or returned by Lender upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of any Debtor or upon the
appointment of any intervenor or conservator of, or trustee or similar official
for any Debtor or any substantial part of its properties, or otherwise, all as
though such payments had not been made.

SECTION 14.       Notices

         All notices, approvals, requests, demands and other communications
hereunder shall be given in accordance with the notice provisions of the Loan
Agreement.

SECTION 15.       Successors and Assigns

         This Agreement is for the benefit of Lender and its successors and
assigns, and in the event of an assignment of all or any of the Secured
Obligations as permitted under the Loan Agreement, the rights hereunder, to the
extent applicable to the Secured Obligations so assigned, may be transferred
with such Secured Obligations. This Agreement shall be binding on Debtor and its
successors and assigns.

SECTION 16.       Changes in Writing

         No amendment, modification, termination or waiver of any provision of
this Agreement or consent to any departure by Debtor therefrom, shall in any
event be effective without the written concurrence of Lender and Debtor.

SECTION 17.       Applicable Law

         Except as otherwise provided for herein, this Agreement shall be
governed by, and shall be construed and enforced in accordance with, the
internal laws of the State of Virginia, without regard to conflicts of laws
principles.

                                      -8-
<PAGE>   9

SECTION 18.       Failure or Indulgence Not Waiver: Remedies
                  Cumulative

         No failure or delay on the part of Lender in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or any other right, power or privilege. All rights
and remedies existing under this Agreement are cumulative to, and not exclusive
of, any rights or remedies otherwise available.

SECTION 19.       Headings

         Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.

SECTION 20.       Counterparts

         This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Agreement by signing any such counterpart.

                            [SIGNATURE PAGE FOLLOWS]

                                      -9-
<PAGE>   10

                     [SIGNATURE PAGE FOR SECURITY AGREEMENT]

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

STAR SCIENTIFIC, INC.                       BROWN & WILLIAMSON TOBACCO
                                                CORPORATION

By:                                         By:
    ------------------------------              -----------------------------
Name:                                       Name:
Title:                                      Title:

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