Executive Employment Agreement - Star Scientific Inc. and James A. McNulty
STAR SCIENTIFIC, INC.
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is entered
into as of April 12, 1999, by and between STAR SCIENTIFIC, INC., a Delaware
corporation (the "Company"), and JAMES A. McNULTY ("Executive").
RECITALS
A. The Company is engaged in the research, development and
commercialization of smoking cessation products and reduced-risk smoking
products, and the manufacture and sale of cigarettes.
B. The Company wishes to continue to employ Executive and to have
the benefit of his skills and services, and Executive agrees to continue
employment with the Company, initially as Chief Financial Officer of the Company
and, after a senior Chief Financial Officer ("CFO") is recruited, as Vice
President of Finance.
AGREEMENT
NOW, THEREFORE, the parties hereto hereby agree as follows:
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1. EMPLOYMENT AND DUTIES.
(a) POSITION. The Company hereby employs Executive, and Executive
hereby accepts employment with the Company, initially as Chief Financial Officer
of the Company and, as set forth above, as Vice President of Finance if, and
when, a senior CFO is recruited and employed by the Company. Executive will
continue to serve as a member of the Company's Board of Directors, but agrees
not to stand for reelection to the Board.
(b) DUTIES. Executive agrees to devote his best efforts to perform
all duties assigned to him by the Company's Executive Vice President and General
Counsel in a trustworthy business like and loyal manner, and, when a new CFO is
recruited, to perform all such duties assigned to him by the CFO who shall, in
turn, report to the Executive Vice President and General Counsel.
(c) REPORTING. Executive shall initially report to the Company's
Executive Vice President and General Counsel, and, when a new CFO is recruited,
to the CFO.
(d) DEVOTION OF TIME TO COMPANY'S BUSINESS. During the Term of this
Agreement (as such term is defined in Section 1(e) hereof), Executive agrees (i)
to devote his entire 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, (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"), whether for
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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 project, charitable, professional
educational 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
the common control of, the Company.
(e) TERM. Unless sooner terminated as provided in Section 4 hereof,
the term of this Agreement shall be deemed to have commenced on October 15, 1998
and shall continue for a term of fifteen (15) months (the "Initial Term")
through January 15, 2000, and shall be renewable for successive one (1) year
terms (each, a "Renewal Term") at the option of the Company. Notice of renewal,
if applicable, shall be given to Executive in writing at least thirty (30) days
prior to the end of the Initial Term or the applicable Renewal Term, as the case
may be. The Initial Term, together with any Renewal Terms shall be referred to
in this Agreement as the "Term of this Agreement." If the Company does not
provide notice of its intent to renew the Term of this Agreement in accordance
with this paragraph, the Agreement shall continue on a month-to-month basis
until either party notifies the other of the intent not to continue the
Agreement on a month-to-month basis.
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Notice of an intent not to continue the Agreement on a month-to-month basis
shall be effective if provided at least fifteen (15) days prior to the
complection of the then current monthly term.
(f) 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 have or hereafter establish
governing the conduct of its business or its employees to the extent such rules,
regulations and policies are not in conflict with this Agreement. Executive
shall promptly provide written notice to the Board of Directors of any such
apparent conflict of which Executive becomes aware.
2. COMPENSATION.
(a) BASE SALARY. During the Term of this Agreement, the Company
shall pay to Executive a base salary of two hundred thousand dollars ($200,000)
per year in monthly increments of approximately $16,666 (the "Base Salary"),
subject to increase from time to time in the complete and sole discretion of the
Board of Directors, payable in arrears on a regular basis in accordance with the
Company's standard payroll procedures for senior management in effect at the
time of payment.
(b) DISCRETIONARY BONUS. In addition to the Base Salary, the Company
shall pay to Executive such bonuses based on Executive's performance, as well as
that of the Company, as the Board of Directors shall determine, from time to
time, in its complete and sole discretion.
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(c) RESTRICTED STOCK GRANT. In order to encourage Executive's
contribution to the successful performance of the Company, Executive shall be
granted as of October 15, 1998, a total of one hundred thousand (100,000) shares
of Common Stock of the Company (the "Restricted Stock") subject to the
conditions and restrictions set forth in a restricted stock award agreement
substantially in the form attached hereto as Exhibit A, which agreement shall
provide that restrictions shall lapse and Executive shall become vested as to
all such shares of Restricted Stock on October 15, 1999.
(d) STOCK OPTION.
(i) NON-QUALIFIED STOCK OPTION. The parties acknowledge and
agree that, as additional incentive to Executive, Executive shall be granted,
immediately upon execution of this Agreement, a non-qualified stock option (the
"Option") to purchase two hundred thousand (200,000) shares of Common Stock of
the Company at an exercise price of Two Dollars ($2.00) per share pursuant to
an option agreement on the Company's standard form under its 1998 Stock Option
Plan (the "Plan"). Subject to the forfeiture provision and repurchase right of
the Company described below, the option agreement shall provide that:
(ii) VESTING. The Option shall be fully vested on October 15,
1999.
(iii) TERMINATION. To the extent not then fully vested, the
Option shall immediately terminate upon the earlier to occur of (A) March 1,
2009, (B) the effective date of
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termination of this Agreement by the Company for Cause (as such term is defined
in Section 4(c) hereof) or by the Executive without Good Reason (as such term is
defined in Section 4(f) hereof), or (C) the date of notice by the Company to
Executive that, in the good faith determination of the Board of Directors,
Executive has breached his covenant not to compete contained herein.
(iv) ACCELERATED TERMINATION AND FORFEITURE OF OPTION;
COMPANY REPURCHASE RIGHT. On the effective date of termination of this
Agreement by the Company, for Cause or by the Executive without Good Reason, or
as of the date of notice by the Company to Executive that, in the good faith
determination of the Board of Directors, Executive has breached his covenant not
to compete contained herein, as the case may be, (A) the Option shall
immediately terminate and revert to the Company (including all vested but
unexercised shares subject to the Option); and (B) any and all shares issued
upon exercise of the Option on or prior to such effective date of termination or
date of notice shall be subject to a repurchase right in favor of the Company at
a purchase price equal to the exercise price of such shares.
(e) 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.
(f) 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
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executives; provided, however, that in any event Executive shall be entitled to
a minimum of fourteen (14) days annual paid vacation time.
(g) DIRECTORS AND OFFICERS LIABILITY INSURANCE. Executive shall be
entitled to continued participation in, and have the benefit of, directors and
officers liability insurance to the same extent such coverage is provided to the
Company's other management executives.
(h) HOUSING ALLOWANCE. The Company will reimburse Executive for his
reasonable and documented expenses for temporary housing in Petersburg,
Virginia, not to exceed Twenty Thousand Dollars ($20,000).
(i) AUTOMOBILE. The Company will furnish Executive with an
automobile and will reimburse Executive all reasonable costs and expenses
relating to Executive's use of the automobile, including without limitation,
amounts incurred for insurance, gas and general maintenance and repairs.
(j) 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.
(k) 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
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health insurance plans (including any key man executive health and benefit
programs), 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.
(l) WITHHOLDING. The parties shall comply with all applicable
withholding requirements in connection with all compensation payable to
Executive.
3. EXPENSE REIMBURSEMENT.
(a) GENERAL BUSINESS EXPENSES. The Company shall reimburse Executive
for all business travel and other out-of-pocket expenses reasonably incurred by
Executive in the course of performing his duties under this Agreement. All
reimbursable expenses shall be appropriately documented and shall be in
reasonable detail and in a format and manner consistent with the Company's
expense reporting policy, as well as applicable federal and state tax record
keeping requirements.
(b) PROFESSIONAL EDUCATIONAL EXPENSES AND FEES. In addition, the
Company shall reimburse Executive for (i) all reasonable expenses incurred for
continuing education courses required to maintain Executive's professional
status as a certified public accountant, and (ii) all reasonable professional
fees and dues associated with Executive's professional status as a certified
public accountant.
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4. TERMINATION AND RIGHTS ON TERMINATION. This Agreement shall
terminate upon the occurrence of any of the following events:
(a) 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 then due and payable and all accrued vacation pay
and bonuses, if any, in each case payable or accrued through the date of death.
Executive's estate shall not be entitled to any severance compensation.
(b) 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. 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. Executive shall not be entitled to any severance compensation.
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate
this Agreement at any time for Cause (as such term is defined below). In this
event, the Company shall, within thirty (30) days following such termination,
pay Executive all salary then due and payable through the date of termination.
Executive shall not be entitled to any severance compensation or any accrued
vacation pay or bonuses. For purposes of this Agreement, "Cause" shall mean:
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(i) Any conduct which, in the sole judgment of the
Board of Directors, has diminished the professional reputation of the Executive
or has adversely affected his ability to serve as Chief Financial Officer of the
Company or Vice President of Finance. By way of example, and not of limitation,
the following types of conduct would be "cause" for termination hereunder;
engaging in competition with the Company, inducing any employee or any
significant customer, contractor, supplier, representative or distributor of the
Company to breach any contract with the Company, or to cease doing business, or
limit business activity, with the Company, intentionally making an unauthorized
disclosure of material confidential information of the Company, committing an
act of dishonesty, fraud, embezzlement or theft, otherwise engaging in
misconduct with respect to the property, business or affairs of the Company, or
deliberately disregarding the rules, regulations and policies of the Company in
such a manner as to cause loss, damage or injury to, otherwise materially
endanger, or, in the sole judgment of the Board of Directors, adversely affect
the property, reputation, operations or employees of the Company;
(ii) Gross negligence by Executive in the performance of
his duties hereunder, dereliction or negligence in performing any of such
duties, or refusal to abide by or comply with the directives of the Board of
Directors;
(iii) Conviction for a felony offense, a crime involving
moral turpitude, or any other offense which could reflect adversely upon the
Company; or
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(iv) Abuse of alcohol or drugs (legal or illegal) that,
in the sole judgment of the Board of Directors, impairs Executive's ability to
perform his duties hereunder.
(d) TERMINATION BY THE COMPANY WITHOUT CAUSE. Thirty (30) days
after delivery by the Company to Executive of a written notice terminating this
Agreement for any reason without cause, in which event the Company shall, within
thirty (30) days following the effective date of termination, pay Executive a
lump sum equal to (i) all salary then due and payable and all accrued vacation
pay and bonuses, if any, in each case payable or accrued through the effective
date of termination, plus (ii) as severance compensation, an amount equal to
three (3) months of Executive's then Base Salary.
(e) VOLUNTARY TERMINATION BY EXECUTIVE. Thirty (30) days after
delivery by Executive to the Company of a written notice terminating this
Agreement for any reason without cause, in which event the Company shall, within
thirty (30) days following the effective date of termination, pay Executive all
salary then due and payable through the date of termination. Executive shall not
be entitled to any severance compensation or any accrued vacation pay or
bonuses.
(f) TERMINATION BY EXECUTIVE FOR GOOD REASON. Thirty (30) days
after delivery by Executive to the Company of a written notice terminating this
Agreement for Good Reason (as such term is defined below), in which event the
Company shall, within thirty (30) days following the effective date of
termination, pay Executive such amounts in such manner as provided for in
Section 4(d) hereof. For purposes of this Agreement, "Good Reason" shall mean:
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(i) The assignment of Executive to any duties
inconsistent with, or any substantial, material and adverse change in,
Executive's positions, duties, responsibilities, functions or status with the
Company, or the removal of Executive from, or failure to reelect Executive to,
any of such positions; provided, however, that a change in Executive's
positions, duties, responsibilities, functions or status that Executive shall
agree to in writing shall not be an event of Good Reason or give rise to
termination under this Section 4(f);
(ii) A reduction by the Company of Executive's Base
Salary without his written consent;
(iii) The failure by the Company to continue in effect
for Executive any material benefit available to any of the management executives
of the Company, including without limitation, any retirement, pension or
incentive plans, life, accident, disability or health insurance plans, equity or
cash bonus plans or savings and profit sharing plans, or any action by the
Company which would adversely affect Executive's participation in or reduce
Executive's benefits under any of such plans or deprive Executive of any fringe
benefit enjoyed by Executive; or
(iv) Any other material breach by the Company of this
Agreement which is not cured within twenty (20) days of delivery of written
notice thereof by Executive to the Company.
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(g) EFFECT OF TERMINATION; OPTIONS. All rights and obligations of
the Company and Executive under this Agreement shall cease as of the effective
date of termination, except that the obligations of the Company under this
Section 4 and Executive's obligations under Sections 5 and 6 hereof shall
survive such termination in accordance with their respective terms. In addition,
notwithstanding anything to the contrary contained herein or in any agreement
with respect thereto, upon termination of Executive's employment pursuant to
this Section 4, all equity options, restricted equity grants and similar rights
held by Executive with respect to securities of the Company, including without
limitation the Option, shall, to the extent not then fully vested, immediately
terminate and revert to the Company.
5. RESTRICTION ON COMPETITION.
(a) COVENANT NOT TO COMPETE. The parties acknowledge that Company
is placing Executive in a position of great trust, responsibility and authority
by virtue of this Agreement, and as a result, that Executive will be exposed to
Company's most sensitive commercial and proprietary information. The parties
also recognize and acknowledge that by virtue of his position, Executive will
come to be identified closely with the Company in the business and industries in
which Company operates. Executive further acknowledges that the Company's
interests in protecting its confidential information and its relationships with
suppliers, customers, and others are both significant and difficult to quantify
economically. Therefore, Executive agrees that during the Term of this Agreement
and for a period of twelve (12) months from the termination of this Agreement,
Executive shall not, without the prior written consent of the Company, either
directly or indirectly,
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for himself or on behalf of or in conjunction with any other Person (i) own,
manage, operate, control, be employed by, participate in, render services to, or
be associated in any manner with the ownership, management, operation or control
of, any business similar to the type of business conducted by the Company or any
of its Affiliates (which are described in Recitals, section A above) within any
of the geographic territories in which the Company or any of its Affiliates
conducts business, (ii) solicit business of the same or similar type being
carried on by the Company or any of its Affiliates from any Person (as defined
in Section 1(d) above) known by Executive to be a customer of the Company or any
of its Affiliates, whether or not Executive had personal contact with such
Person during and by reason of Executive's employment with the Company, or (iii)
solicit any employee or contractor of the Company to terminate that relationship
or endeavor or attempt in any way to interfere with or induce a breach of any
contractual relationship that the Company or any of its Affiliates may have with
any employee, customer, contractor, supplier, representative or distributor.
(b) NO BREACH FOR ACTIVITIES DEEMED NOT COMPETITIVE. It is further
agreed that, in the event that Executive shall cease to be employed by the
Company and enter into a business or pursue other activities that, at such time,
are not in competition with the Company or any of its Affiliates, Executive
shall not be chargeable with a violation of this Section 5 if the Company
subsequently enters the same (or a similar) competitive business or activity.
(c) SEVERABILITY. The parties desire the provisions of this
Section 5 to be enforceable to the greatest degree possible. Therefore, the
covenants in this Section 5 are severable and separate,
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and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. If any provision of this Section 5 relating to
the time period or geographic area of the restrictive covenants shall be
declared by a court of competent jurisdiction to exceed the maximum time period
or geographic area, as applicable, that such court deems reasonable and
enforceable, such time period or geographic area shall be deemed to be, and
thereafter shall become, the maximum time period or largest geographic area that
such court deems reasonable and enforceable and this Agreement shall
automatically be considered to have been amended and revised to reflect such
determination.
(d) FAIR AND REASONABLE. Executive has carefully read and
considered the provisions of this Section 5 and, having done so, agrees that the
restrictive covenants in this Section 5 impose a fair and reasonable restraint
on Executive and are reasonably required to protect the interests of the
Company, its Affiliates and their respective officers, directors, employees and
stockholders. It is further agreed that the Company and Executive intend that
such covenants be construed and enforced in accordance with the changing
activities, business and locations of the Company throughout the term of these
covenants.
6. CONFIDENTIAL INFORMATION.
(a) CONFIDENTIAL INFORMATION. Executive hereby agrees to hold in
strict confidence and not to disclose to any third party any of the confidential
and proprietary business, financial, technical, economic, sales and/or other
types of proprietary business information relating to the
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Company or any of its Affiliates (including all trade secrets) in whatever form,
whether oral, written, or electronic (collectively, the "Confidential
Information"), to which Executive has, or is given (or has had or been given),
access during the course of his employment with the Company. It is agreed that
the Confidential Information is confidential and proprietary to the Company
because such Confidential Information encompasses technical know-how, trade
secrets, or technical, financial, organizational, sales or other valuable
aspects of the business and trade of the Company or its Affiliates, including
without limitation, technologies, products, processes, plans, clients,
personnel, operations and business activities. This restriction shall not apply
to any Confidential Information that (a) becomes known generally to the public
through no fault of the Executive, (b) is required by applicable law, legal
process, or any order or mandate of a court or other governmental authority to
be disclosed, or (c) is reasonably believed by Executive, based upon the advice
of legal counsel, to be required to be disclosed in defense of a lawsuit or
other legal or administrative action brought against Executive; provided,
however, that in the case of clause (b) or (c), Executive shall give the Company
reasonable advance written notice of the Confidential Information intended to be
disclosed and the reasons and circumstances surrounding such disclosure, in
order to permit the Company to seek a protective order or other appropriate
request for confidential treatment of the applicable Confidential Information.
(b) RETURN OF COMPANY PROPERTY. In the event of termination of
Executive's employment with the Company for whatever reason or no reason, (a)
Executive agrees not to copy, make known, disclose or use, any of the
Confidential Information without the Company's prior written consent, and (b)
Executive or Executive's personal representative shall return to the
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Company (i) all Confidential Information, (ii) all other records, designs,
patents, patent applications, business plans, financial statements, manuals,
memoranda, lists, correspondence, reports, records, charts, advertising
materials and other data or property delivered to or compiled by Executive by or
on behalf of the Company or its respective representatives, vendors or customers
that pertain to the business of the Company or any of its Affiliates, whether in
paper, electronic or other form, and (iii) all keys, credit cards, vehicles and
other property of the Company. Executive shall not retain or cause to be
retained any copies of the foregoing. Executive hereby agrees that all of the
foregoing shall be and remain the property of the Company and the applicable
Affiliates and be subject at all times to their discretion and control.
7. CORPORATE OPPORTUNITIES.
(a) DUTY TO NOTIFY. During the Term of this Agreement, in the
event that Executive shall become aware of any business opportunity related to
the business of the Company, Executive shall promptly notify the Board of
Directors of such opportunity. Executive shall not appropriate for himself or
for any other Person (as herein defined) other than the Company (or any
Affiliate) any such opportunity unless, as to any particular opportunity, the
Board of Directors fails to take appropriate action within thirty (30) days.
Executive's duty to notify the Board of Directors and to refrain from
appropriating all such opportunities for thirty (30) days shall neither be
limited by, nor shall such duty limit, the application of the general laws
relating to the fiduciary duties of an agent or employee.
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(b) FAILURE TO NOTIFY. In the event that Executive fails to notify
the Board of Directors or so appropriates any such opportunity without the
express written consent of the Board of Directors, Executive shall be deemed to
have violated the provisions of this Section notwithstanding the following:
(i) The capacity in which Executive shall have acquired
such opportunity; or
(ii) The probable success in the hands of the Company of
such opportunity.
8. NO PRIOR AGREEMENTS. Executive hereby represents and warrants to
the Company that the execution of this Agreement by Executive, his employment
by the Company, and the performance of his duties hereunder will not violate or
be a breach of any agreement with a former employer, client or any other
Person. Further, Executive agrees to indemnify and hold harmless the Company
and its officers, directors and representatives for any claim, including, but
not limited to, reasonable attorneys' fees and expenses of investigation, of
any such third party that such third party may now have or may hereafter come
to have against the Company or such other persons, based upon or arising out of
any noncompetition agreement, invention, secrecy or other agreement between
Executive and such third party that was in existence as of the effective date
of this Agreement. To the extent that Executive had any oral or written
employment agreement or understanding with the Company, this Agreement shall
automatically supersede such agreement or understanding, and upon execution of
this Agreement by Executive and the Company, such prior agreement or
understanding automatically shall be deemed to have been terminated and shall
be null and void.
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9. REPRESENTATION. Executive acknowledges that he (a) has
reviewed this Agreement in its entirety, (b) has had an opportunity to obtain
the advice of separate legal counsel prior to executing this Agreement, and (c)
fully understands all provisions of this Agreement.
10. ASSIGNMENT; BINDING EFFECT. Executive understands that he has
been selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Executive agrees, therefore, that he
cannot assign or delegate all or any portion of his performance under this
Agreement. This Agreement may not be assigned or transferred by the Company
without the prior written consent of Executive. Subject to the preceding two
sentences, this Agreement shall be binding upon, inure to the benefit of, and
be enforceable by the parties hereto and their respective heirs, legal
representatives, successors, and assigns. Notwithstanding the foregoing, if
Executive accepts employment with an Affiliate, unless Executive and his new
employer agree otherwise in writing, this Agreement shall automatically be
deemed to have been assigned to such new employer (which shall thereafter be an
additional or substitute beneficiary of the covenants contained herein, as
appropriate), with the consent of Executive, such assignment shall be
considered a condition of employment by such new employer, and references to
the "Company" in this Agreement shall be deemed to refer to such new employer.
11. COMPLETE AGREEMENT; WAIVER; AMENDMENT. This Agreement is not
a promise of future employment. Executive has no oral representations,
understandings or agreements with the Company or any of its officers, directors
or representatives covering the same subject matter as this
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Agreement. This Agreement, along with the Restricted Stock Award Agreement and
the Stock Option Agreement, are the final, complete and exclusive statement and
expression of the agreement between the Company and Executive with respect to
the subject matter hereof and thereof, and cannot be varied, contradicted, or
supplemented by evidence of any prior or contemporaneous oral or written
agreements. This Agreement may not be later modified except by a further writing
signed by a duly authorized officer of the Company and Executive, and no term of
this Agreement may be waived except by a writing signed by the party waiving the
benefit of such term.
12. NOTICE. All notices, requests, demands and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be given or made by personally delivering the same to or
sending the same by prepaid certified or registered mail, return receipt
requested, or by reputable overnight courier, or by facsimile machine to the
party to which it is directed at the address set out on the signature page to
this Agreement or at such other address as such party shall have specified by
written notice to the other party as provided in this Section, and shall be
deemed to be given if delivered personally at the time of delivery, or if sent
by certified or registered mail as herein provided three (3) days after the
same shall have been posted, or if sent by reputable overnight courier upon
receipt, or if sent by facsimile machine as soon as the sender receives written
or telephonic confirmation that the facsimile was received by the recipient and
such facsimile is followed the same day by mailing by prepaid first class mail.
13. SEVERABILITY; HEADINGS. If any portion of this Agreement is
held invalid or inoperative, the other portions of this Agreement shall be
deemed valid and operative and, so far as is reasonable and
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possible, effect shall be given to the intent manifested by the portion held
invalid and inoperative. This severability provision shall be in addition to,
and not in place of, the provisions of Section 5(c) above. The Sections headings
herein are for reference purposes only and are not intended in any way to
describe, interpret, define or limit the extent or intent of this Agreement or
of any part hereof.
14. EQUITABLE REMEDY. Because of the difficulty of measuring
economic losses to the Company as a result of a breach of the restrictive
covenants set forth in Sections 5 and 6 hereof, and because of the immediate
and irreparable damage that would be caused to the Company for which monetary
damages would not be a sufficient remedy, it is hereby agreed that in addition
to all other remedies that may be available to the Company at law or in equity,
the Company shall be entitled to specific performance and any injunctive or
other equitable relief as a remedy for any breach or threatened breach of the
aforementioned restrictive covenants.
15. ARBITRATION. Except as provided in Section 14 hereof, any
unresolved dispute or controversy arising under or in connection with this
Agreement or otherwise concerning Executive's relationship with the Company,
whether arising in contract, tort or otherwise, shall be settled exclusively by
arbitration conducted in accordance with the rules of the American Arbitration
Association applicable to the arbitration of employment disputes then in
effect. The arbitrators shall not have the authority to add to, detract from,
or modify any provision hereof, nor to award punitive damages to any injured
party. A decision by a majority of the arbitration panel shall be final and
binding. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The arbitration proceeding shall be held in the city where the
principal office of the Company is located.
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Notwithstanding the foregoing, the Company shall be entitled to seek injunctive
or other equitable relief, as contemplated by Section 14 hereof, from any court
of competent jurisdiction, without the need to resort to arbitration. Should
judicial proceedings be commenced to enforce or carry out this provision or any
arbitration award, the prevailing party in such proceedings shall be entitled to
reasonable attorneys' fees and costs in addition to other relief.
16. GOVERNING LAW AND GOVERNING VENUE. Any or all disputes,
disagreements, or litigation relating to or under terms of this Agreement,
including any arbitration or litigation relating to any arbitration under
Section 15, must be litigated and/or arbitrated in the Commonwealth of
Virginia. In order to effectuate this provision, the parties expressly consent
to personal jurisdiction in Virginia and to a Virginia venue. This Agreement
shall in all respects be construed according to the substantive laws of the
Commonwealth of Virginia, without regard to its conflict of laws principles.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the parties to
this Agreement, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
18. SIGNATURES. The parties shall be entitled to rely upon and
enforce a facsimile of any authorized signatures as if it were the original.
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<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
COMPANY:
STAR SCIENTIFIC, INC. EXECUTIVE:
By: /s/ Paul L. Perito
-------------------------
(Signature) By: /s/ James A. .McNulty
------------------------------
Paul L. Perito, Executive Vice President and (Signature)
--------------------------------------------
General Counsel JAMES A. McNULTY, C.P.A.
-------------------------------------------- 6204 Greenwick Drive
(Print Name and Title) Glen Allen, Virginia 23060
Star Scientific, Inc.
16 South Market Street
Petersburg, Virginia 23803 Date: October 19, 1999
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Date: October 27, 1999
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