Executive Employment Agreement [Amendment No. 2] - Star Scientific Inc., Jonnie R. Williams and Paul L. Perito
SECOND MODIFICATION AGREEMENT
THIS SECOND MODIFICATION AGREEMENT, dated as of October 6, 2000, by and
among STAR SCIENTIFIC, INC., a Delaware corporation (the "Company"), JONNIE R.
WILLIAMS ("Mr. Williams"), and PAUL L. PERITO, ESQUIRE ("Executive").
Recitals
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A. The Company, Mr. Williams and Executive are parties to that certain
Star Scientific, Inc. Executive Employment Agreement, dated as of April 27,
1999, as amended and modified by that certain Modification Agreement, dated as
of December 1, 1999 (collectively, the "Employment Agreement"), pursuant to
which Executive was employed by the Company initially as General Counsel,
Executive Vice President and Secretary, and subsequently as President and Chief
Operating Officer of the Company. Certain of the Company's obligations to
Executive are secured by the terms of that certain Pledge Agreement, dated as of
April 27, 1999 (the "Pledge Agreement"), from Mr. Williams in favor of
Executive.
B. The Company desires to modify certain provisions of the Employment
Agreement relating to the compensation payable to Executive and Executive is
agreeable to such modifications, subject to and in accordance with the terms set
forth in this Second Modification Agreement.
Agreement
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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 Agreement. The Employment Agreement is modified and amended
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as follows:
a. Section 2.a. is modified by replacing the phrase "One Million Two
Hundred Thousand Dollars ($1,200,000)" with "One Million Dollars ($1,000,000)."
b. Section 2.c. is modified by replacing such subsection with the
following:
c. Quarterly, Annual and Special Annual Bonuses.
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i. Quarterly Bonus. If the Company's cigarette sales during
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any fiscal quarter (beginning in the second fiscal quarter of 2000)
increase by ten percent (10%) or more over cigarette sales for the
same fiscal quarter for the
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previous year, the Company shall, in addition to Base Salary and
any annual bonuses, pay to Executive, on or before the last day of
the month immediately following the end of such fiscal quarter,
quarterly bonuses in the amount of $175,000 for each such quarter;
provided, however, that the aggregate amount of all quarterly and
annual bonuses payable under this Section 2.c.i. or under Section
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2.c.ii. for any fiscal year shall not exceed $750,000.
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ii. Annual Bonus. For any of the annual targets listed in
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Exhibit A satisfied during any fiscal year, the Company shall, in
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addition to Base Salary and any quarterly and special annual
bonuses, pay to Executive, on or before March 31 of the next fiscal
year, an annual bonus in the amount of $200,000; provided, however,
that the aggregate amount of all annual and quarterly bonuses
payable under this Section 2.c.ii. or under Section 2.c.i. for any
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fiscal year shall not exceed $750,000.
iii. Special Annual Bonus. If any one of the annual targets
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listed in Exhibit B is satisfied during fiscal year, the Company
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shall, in addition to Base Salary and any quarterly and other
annual bonuses, pay to Executive, on or before March 31 of the next
fiscal year, an annual bonus in the amount of $150,000, payable by
the Company in the form of a $150,000 reduction in the amount of
principal and/or interest due to the Company from Executive under
that certain promissory note dated April 27, 1999, in the original
principal amount of 2,000,000 made by Executive and payable to the
order of the Company. Executive shall not be entitled to more than
one $150,000 special annual bonus per fiscal year, notwithstanding
the fact that more than one of the annual targets listed in Exhibit
B may be met during such fiscal year.
iv. Establishment of Annual Targets for Years After Fiscal
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Year 2000. For each fiscal year after fiscal year 2000, the
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Company shall
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propose new annual targets for purposes of determining subsequent
annual and special annual bonuses payable to Executive under
Sections 2.c.ii. and 2.c.iii above, with such annual targets to
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be subject to Executive's agreement. Upon Executive's agreement
with the proposed new annual targets, such annual targets shall
be set forth in new Exhibits A & B and the parties hereto shall
execute and deliver an amendment to this Agreement substituting
such new Exhibits A and B in lieu of the original Exhibits A and
B attached hereto.
c. The Company and Executive will use their reasonable efforts to try
to reach agreement as to new annual targets by March 15 of each year. In the
event that the Company and Executive cannot reach agreement as to new annual
targets as provided for in Section 2.c.iv. (as set forth in this Second
Modification) for years subsequent to fiscal year 2000, then the terms of
Section 2 and 3 set forth in this Second Modification shall no longer apply but
shall be replaced by Sections 2 and 3 as in effect immediately prior to this
Second Modification.
d. Except as expressly modified above in Sections 1.a.-c. above, all
of the terms of the Employment Agreement are hereby ratified and confirmed and
remain in full force and effect.
2. Pledge Agreement. Mr. Williams hereby ratifies and confirms the terms
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of the Pledge Agreement which is hereby ratified and confirmed and remains in
full force and effect.
3. Governing Law. This agreement shall in all respects be construed
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according to the laws of the Commonwealth of Virginia, without regard to its
conflict of laws principles.
4. Counterparts. This Agreement may be executed in any number of
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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 al of which together shall constitute one
instrument.
5. Signatures. The parties shall be entitled to rely upon and enforce a
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facsimile of any authorized signatures as if it were the original.
[Signatures on the following page.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
COMPANY:
STAR SCIENTIFIC, INC.
By: /s/ Jonnie R. Williams
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Jonnie R. Williams
Chief Executive Officer
Mr. Williams:
/s/ Jonnie R. Williams
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Jonnie R. Williams
EXECUTIVE:
/s/ Paul L. Perito
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Paul L. Perito
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Exhibit A
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Second Modification Agreement
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Annual Targets--Section 3,ii.
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. Increase in the Company's EBITDA for current fiscal year by more than
twenty percent (20%) over the previous fiscal year
. Increase in the Company's gross revenues for current fiscal year by more
than fifty percent (50%) over the previous fiscal year
. If the price of the Company's common stock, determined based on the average
daily closing bid price on the NASDAQ for the Company's stock during either
(1) the thirty (30) day period ending on December 31, 2000, and/or (2) any
ninety (90) day period during the period January 2, 2000, through December
30, 2000, increases by fifty percent (50%) or more over such price for the
thirty (30) day period ending on December 31, 1999
. Issuance of Notice of Allowance relating to any pending patent applications
. Initiation by the Company or by a third party in response to the Company's
request or encouragement of an oral health safety and/or hard tobacco study
relating to smokeless tobacco
. Execution of a written agreement for a joint venture and/or strategic
alliance with a third party with respect to a smokeless tobacco product
. Initiation of sales or other commercialization of a first Star brand
cigarette containing very low TSNA tobacco
. Erection of fifty (50) or more burley tobacco curing barns
. Completion of a clinical pharmacokinetic study on a lozenge (cessation)
product or hard tobacco
. Execution of a written agreement with a pharmaceutical company for a joint
venture and/or participatory development (cost sharing) of a lozenge
(cessation) product
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. Agreement by Brown & Williamson Tobacco Corporation to purchase at least
5,000,000 pounds of tobacco in excess of its present obligation to purchase
5,000,000 pounds of tobacco in 2000
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Exhibit A
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Second Modification Agreement
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Special Annual Targets--Section 3,iii.
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. Increase in the Company's gross revenues for current fiscal year by more
than one hundred percent (100%) over the previous fiscal year
. Initiation of sales or other commercialization of a smokeless tobacco
product by the Company or by another party under authority granted by the
Company
. Initiation of sales or other commercialization of a smoking cessation
product by the Company or by another party under authority granted by the
Company
. Erection of one hundred (100) or more burley tobacco curing barns
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