Exhibit 99.1
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT
(this “Agreement”) is entered into as of December 30,
2005, by and between STAR SCIENTIFIC, INC., a Delaware corporation
(the “Company”), and JONNIE R. WILLIAMS
(“Executive”).
Recitals
A. The Company is engaged in the
commercialization of tobacco containing less toxins (principally
tobacco specific nitrosamines (“TSNA”)), development of
less toxic tobacco products and potentially reduced-risk tobacco
products, and the licensing, manufacture and sale of very low-TSNA
StarCured ® tobacco and tobacco products.
B. Executive is the Chief Executive
Officer 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 Chief Executive Officer of the
Company.
1.2 Duties . Executive agrees
to devote his best efforts, and shall have primary responsibility
within the Company, to act as the senior executive of the Company
and have responsibility for the effective operation of the Company,
including day to day oversight and responsibility for the
Company’s wholly owned subsidiary, Star Tobacco, Inc., and
including oversight and responsibility for the its leaf operations
and hard and moist tobacco products (including Stonewall
®
moist and dry snuff and ARIVA
®
, a compressed tobacco product),
certain of which activities are conducted by the Company, but
excluding those functions and operations specifically delegated to
the President and Chief Operating Officer (being primarily legal,
legislative and regulatory affairs, scientific issues including
testing and evaluation, and dealings with the media, public
interest groups and third persons outside the Company relating to
public health and related interests) and to perform such other
duties assigned to him by the Board of Directors of the Company
(the “Board of Directors”). Executive shall perform his
duties in a trustworthy, businesslike and loyal manner.
1.3 Reporting . Executive
shall report to the Board of Directors.
-1-
1.4 Place of Employment .
Executive shall perform his services hereunder at the
Company’s Chester, Petersburg and Chase City, VA offices.
Executive’s primary office shall be in Chester, VA, however,
Executive shall spend a portion of his time in the Company’s
primary office for scientific and regulatory operations and for
certain executive functions of the Company located in Bethesda,
MD.
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 substantially all of his
productive time, ability and attention to the business of the
Company during normal working hours, (ii) not to engage in any
other business duties or business pursuits whatsoever which
conflict with his duties to the Company, (iii) whether
directly or indirectly, not to render any services of a commercial
or professional nature to any individual, trust, partnership,
company, corporation, business, organization, group or other entity
(each, a “Person”) which conflict with his duties to
the Company, whether for compensation or otherwise, without the
prior written consent of the Board of Directors, and
(iv) whether directly or indirectly, not to acquire, hold or
retain more than a one percent (1%) interest in any business
competing with or similar in nature to the business of the Company
or any of its Affiliates (as such term is defined below);
provided, however , the expenditure of reasonable amounts of
time for litigation support, book projects, charitable,
professional educational or professional activities or, subject to
the foregoing, the making of passive personal investments shall not
be deemed a breach of this Agreement or require the prior written
consent of the Company if those activities do not materially
interfere with the services required of Executive under this
Agreement. For purposes of this Agreement, “Affiliates”
shall mean any Person that, directly or indirectly through one or
more intermediaries, controls or is controlled by, or is under
common control with, the Company.
1.7 Term . Unless sooner
terminated as provided in Section 4 hereof the term of
this Agreement shall commence on January 1, 2006 and shall
continue until December 31, 2006 (the “Term”), and
shall be renewable for successive one (1) year terms (each, a
“Renewal Term”) at the option of the Company. The
Company and Executive shall consult on extension of the Term as
soon as reasonably practicable in the month of September 2006.
Notice of renewal or, if applicable, the Company’s option not
to renew, shall be given to Executive in writing at least ninety
(90) days prior to the end of the Term or the applicable
Renewal Term, as the case may be. The Term, together with any
Renewal Terms shall be referred to in this Agreement as the
“Term of this Agreement.”
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
-2-
business or its employees to the
extent such rules, regulations and policies are not in conflict
with this Agreement. Executive shall promptly provide written
notice to the Board of Directors of any such apparent conflict of
which Executive becomes aware.
§ 2. Compensation
.
2.1 Base Salary . During the
Term of this Agreement, the Company shall pay to Executive a base
salary of One Million Dollars ($1,000,000) per year (the
“Base Salary”), subject to increase from time to time
in the good faith discretion of the Board of Directors, payable in
arrears on a monthly or semi-monthly basis in accordance with the
Company’s standard payroll procedures in effect at the time
of payment.
2.2 Performance Bonuses . In
addition to the Base Salary, the Company shall pay to Executive
bonuses based on the Company’s performance and/or
Executive’s performance as follows:
(a) Discretionary/Special
Bonuses .
Based upon performance of the
Company as reflected by satisfaction of the performance goal listed
in Exhibit A , attached hereto, the Company shall pay
Executive a bonus in addition to Base Salary in such amount as may
be determined by the Board of Directors.
(b) Establishment of Annual Bonus
Performance Goals . The Company shall propose new performance
goals for purposes of determining additional annual bonuses payable
to Executive, in consultation with Executive. Upon determination of
the new performance goals, such performance goals shall be set
forth in a new exhibit or exhibits to replace Exhibit A ,
and the parties hereto shall execute and deliver an amendment to
this Agreement substituting such new exhibit or exhibits in lieu of
Exhibit A attached hereto, and making such other conforming
changes as may be necessary to reflect the new performance goals
and bonuses. The Company and Executive will use their reasonable
efforts to try to reach agreement as to new performance goals by
March 30, 2006.
2.3 Disposition Transaction .
Upon the occurrence of a Disposition Transaction, as defined below,
Executive shall be entitled to receive for each share of common
stock then owned by Executive and for each vested but unexercised
share subject to any Stock Option, consideration per share of not
less than, and payable on the same terms as, the consideration per
share received by Francis O’Donnell, Jr., M.D., Paul L.
Perito, and/or Regent Court Technologies, L.L.C., as a result of
the Disposition Transaction, and/or to participate on terms no less
favorable than terms available to Francis O’Donnell, Jr.,
M.D., Paul L. Perito, and/or Regent Court Technologies, L.L.C., in
the case of a Deposition Transaction involving issuance by the
Company of shares of its stock in an offering pursuant to a
registration statement filed with the Securities Exchange
Commission. A “Disposition Transaction” shall occur if
at any time after the date hereof, the Company, Francis
O’Donnell, Jr., M.D., Paul L. Perito, or Regent Court
Technologies, L.L.C., or any combination thereof (a) accepts
any offer to purchase thirty percent (30%) or more of the
aggregate shares of capital stock of the Company actually or
beneficially owned by Francis O’Donnell, Jr., M.D., Paul L.
Perito, and/or Regent Court
-3-
Technologies, L.L.C., and/or (b)
accepts any offer to purchase shares of the capital stock of the
Company constituting at least fifty percent (50%) of all of
the then outstanding shares of the Company, and/or (c) accepts any
offer to merge or consolidate the Company, or enter into a share
exchange, with another corporation or entity, and/or (d) accepts
any offer to sell all or substantially all of the assets of the
Company, and/or (e) accepts any other offer to enter into a
transaction the result of which will be to transfer voting control
of the Company to any party other than Francis O’Donnell,
Jr., M.D., Paul L. Perito, and/or Regent Court Technologies, L.L.C.
The Company covenants and agrees not to enter into any Disposition
Transaction that does not expressly recognize and give effect to
the terms of this Section 2.3 .
2.4 Incentive Plans . In
addition to all other benefits and compensation provided by this
Agreement, Executive shall be eligible to participate in such of
the Company’s equity, compensation and incentive plans as are
generally available to any of the management executives of the
Company, including without limitation any executive and performance
bonus or incentive plans.
2.5 Vacation . Executive
shall be entitled to such annual vacation time with full pay as the
Company may provide in its standard policies and practices for any
other management executives; provided, however, that in any
event Executive shall be entitled to a minimum of twenty
(20) days annual paid vacation time.
2.6 Directors and Officers
Liability Insurance . Executive shall be entitled to
participation in, and have the benefit of directors and officers
liability insurance providing coverage in an amount of less than
that provided by the Company for its Chief Operating Officer and/or
Chairman of the Board.
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 the disability insurance policy
presently provided by the Company and the Company shall pay the
premiums due on such policy and maintain such policy in full force
and effect during the Term of this Agreement.
2.9 Automobile . The Company
will furnish Executive with an automobile equipped with a car
telephone and will reimburse Executive all reasonable costs and
expenses relating to Executive’s use of such automobile and
car telephone, including without limitation, amounts incurred for
insurance, gas and general maintenance and repairs.
2.10 Mobile Telephone .
Executive shall have use of a wireless mobile telephone of his
choice and the Company will be responsible for payment of all
business usage charges and all usual operational and maintenance
expenses associated with the use by Executive of such
telephone.
-4-
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 and
benefits which the Company now or in the future from time to time
makes available to any of its management executives.
2.14 Withholding . The
parties shall comply with all applicable legal withholding
requirements in connection with all regular monthly and/or
bi-monthly compensation payable to Executive hereunder.
§ 3. Expense
Reimbursement . The Company shall reimburse Executive for all
business travel and other out-of-pocket expenses reasonably
incurred by Executive in the course of performing his duties under
this Agreement. All reimbursable expenses shall be appropriately
documented and shall be in reasonable detail and in a format and
manner consistent with the Company’s expense reporting
policy, as well as applicable federal and state tax record keeping
requirements.
§ 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
-5-
maintain such policy or policies in
continuous and full force and effect during term hereof, then the
Company shall be directly and fully obligated to Executive for such
payment.
4.2 Disability . Upon the
mental or physical Disability (as such term is defined below) of
Executive, in which event the Company shall, within thirty
(30) days following the determination of Disability, pay
Executive all salary then due and payable and all accrued vacation
pay and bonuses, if any, in each case payable or accrued through
the date of determination. In addition, the Company shall pay all
salary and accrued benefits that would have been payable hereunder
by the Company to Executive during the one year period immediately
following Executive’s disability. For purposes of this
Agreement, “Disability” shall mean a physical or mental
condition, verified by a physician designated by the Company, which
prevents Executive from carrying out one or more of the material
aspects of his assigned duties for at least ninety
(90) consecutive days, or for a total of ninety (90) days
in any six (6) month period. Any payment due under this
Section 4.2 may be funded by one or more policies of
disability insurance to be purchased by the Company and which
provide for a benefit in the amount payable to Executive as
beneficiary under such policy or policies equal to that due
Executive under this Section. In the event the Company purchases
such policy or policies and thereafter maintains such policy or
policies in continuous and full force and effect during the term
hereof, then Executive agrees to look solely to such
poli
