THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

Star Scientific, Inc. (STSI)

11/15/2005 Proxy Information

The Company has entered into a license agreement (the “License Agreement”) as the licensee with Regent Court Technologies, LLC, of which Jonnie R. Williams, the Company’s founder and Chief Executive Officer and Francis E. O’Donnell, Jr., M.D., the beneficiary of the O’Donnell Trust, which is the Company’s second largest shareholder (after Mr. Williams), are the owners. The License Agreement provides, among other things, for the grant of an exclusive, world-wide, irrevocable license to the Company, with the right to grant sublicenses, to make, use and sell tobacco and products containing tobacco under the licensor’s patent rights and know-how relating to the processes for curing tobacco so as to significantly prevent the formation of certain toxic carcinogens present in tobacco and tobacco smoke, namely the tobacco specific nitrosamines (TSNAs), and to develop products containing such tobacco, whether such patent rights and know-how are now in existence or hereinafter developed. The Company is obligated to pay to Regent Court a royalty of 2% on all net sales of products by it and any affiliated sublicensees, and 6% on all fees and royalties received by it from unaffiliated sublicensees, less any related research and development costs incurred by the Company. The License Agreement expires with the expiration of the last of any applicable patents. Twelve United States patents have been issued, and additional patent applications are pending in the United States and in approximately 80 foreign jurisdictions. To date, the Company has paid no royalties under the License Agreement. The License Agreement may be terminated by the Company upon 30 days written notice or by Regent Court if there is a default in paying royalties or a material breach by the Company or the purchase of Star Scientific’s stock or assets.

Mr. Williams and Dr. O’Donnell have in the past jointly owned an airplane and currently are the principals in a company, Starwood Industries, Inc. (“Starwood”), that acquired an airplane in 2002. The Company has utilized the airplane for business travel throughout the United States and to Mexico to client, vendor and scientific or technical consultant locations that are not near or easily accessible to airports with regularly scheduled or frequent commercial airline services. In late 2002, the Company entered into an agreement with Starwood under which it agreed to pay $2,100 per hour for use of the aircraft up to a maximum amount in any month equal to Starwood’s total monthly payment for the aircraft. Prior to this arrangement with Starwood in 2002, the Company made direct payments for expenses incurred to various arms-length vendors with respect to utilization of the airplane. Payments made by the Company to Starwood (or Messrs. Williams and O’Donnell as predecessors-in-interest to the airplane) with respect to aircraft expenses were $501,008 in 2004, $820,307 in 2003, $656,310 in 2002, $258,992 in 2001 and $191,680 in 2000, and were billed at cost.

On July 27, 2005, Mr. Perito tendered to the Company a payment of $300,000 as full satisfaction of a nonrecourse and unsecured $2 million promissory note issued to the Company in 1999. Mr. Perito issued the note in 1999 to purchase two million shares of the Company’s common stock. Under its terms, the $2 million promissory note was nonrecourse as to accrued interest and 85% of the principal amount of the note, and reflected an inducement to Mr. Perito to join the Company and resign his senior partnership with a national law firm.

In August 2001, the Company made loans to Messrs. Bogaz, Dean, Miller and Pokusa in the amount of $100,000, $180,000, $180,000 and $140,000 respectively, for the purpose of their purchasing shares of Common Stock from an affiliated entity (Irrevocable Trust #1 FBO Francis E. O’Donnell, Jr., M.D.). Each of the officers executed a Full Recourse Promissory Note having a term of four years with interest payments payable annually at a rate of prime plus 1%. On August 17, 2005, the Company purchased a total of 174,860 shares of the Company’s Common Stock from these four officers for an aggregate purchase price of $632,993.20. The proceeds of the sale were used by the officers to retire in full the outstanding loans made by the Company in August 2001. The shares were purchased by the Company at a price of $3.62 per share, the closing price of the Company’s Common Stock on August 16, 2005, as reported on the NASDAQ National Market System. Each officer represented to the Company that it would be necessary for him to sell the shares in open market transactions in order to achieve sufficient liquidity to pay off the loans if the Company did not purchase the shares directly. The officers, in turn, paid the Company an aggregate of $633,000 in full payment for the loans and all accrued interest. By repurchasing the shares, the Company was able to reduce the total number of shares of Common Stock outstanding, and concomitantly reduce the number of shares being offered for sale in the open market. The purchase of the shares was unanimously approved by the Company’s Audit Committee which consists of three “non-employee directors,” as such term is defined in Rule 16b-3(b)(3)(i) promulgated under the Securities Exchange Act of 1934, as amended, and as such the purchase of the shares was a disposition to the Company pursuant to Rule 16b-3(e) promulgated under the Exchange Act. The transaction occurred during a “trading window” for officers and directors pursuant to the Company’s policy against trading on inside information.

In early October 2003, Jonnie R. Williams, Star’s CEO and largest shareholder, loaned Star $2 million in funds for corporate purposes. In a letter dated November 7, 2003, Mr. Williams advised the Company that he would personally extend an additional $8 million (and with the funds previously loaned in October, a total of $10 million) to the Company on an as-needed basis until the Company returned to profitability. As of March 23, 2004, the advances to the Company were approximately $4.5 million. The Company subsequently entered into a loan agreement with Mr. Williams under which he agreed to make a total of $10.0 million available to the Company through March 31, 2005. The loan agreement provided that interest on the outstanding advances by Mr. Williams would be at a rate of 8% per annum on the outstanding balance. In November 2004, the $4.5 million of funds provided by Mr. Williams was repaid in full.

On September 22, 2005, the Board of Directors elected Ambassador Gerald P. Carmen as a new director. Mr. Carmen has previously provided consulting services to the Company from October 2001 to June 2005 relating to the development of federal government strategies in connection with the Company’s introduction and sale of its very low-TSNA smokeless tobacco products. For such services, the Company issued to Mr. Carmen options to purchase an aggregate of 230,000 shares of the Company’s Common Stock. Mr. Carmen subsequently exercised the options and sold the shares issued thereunder. Additionally, the Company has paid to Mr. Carmen for his consulting services an aggregate amount of $210,000, including a final payment of $104,000 received in March 2005.

On October 11, 2005, the Board of Directors elected David C. Vorhoff as a new director. Mr. Vorhoff is a co-founding Partner and President of McColl Partners, LLC, an investment banking firm that performed services for the Company in 2002 and 2003 in connection with a proposed transaction that was not consummated by the Company. In consideration for these services the Company paid McColl Partners an aggregate amount of $291,491, including a final payment of $68,631 in 2004. The payment of $68,631 in 2004 included a reimbursement of $57,502 for McColl Partners’ retention of outside counsel to assist in the Company’s proposed transaction described above. Additionally, in 2002 the Company issued to McColl Partners a warrant to acquire 200,000 shares of the Company’s common stock.

11/4/2004 Proxy Information

The Company has entered into a license agreement (the “License Agreement”) as the licensee with Regent Court Technologies, LLC, of which Jonnie R. Williams, the Company’s founder and Chief Executive Officer and Francis E. O’Donnell, Jr., M.D., the beneficiary of the O’Donnell Trust, which is the Company’s second largest shareholder (after Mr. Williams), are the owners. The License Agreement provides, among other things, for the grant of an exclusive, world-wide, irrevocable license to the Company, with the right to grant sublicenses, to make, use and sell tobacco and products containing tobacco under the licensor’s patent rights and know-how relating to the processes for curing tobacco so as to significantly prevent the formation of certain toxic carcinogens present in tobacco and tobacco smoke, namely the tobacco specific nitrosamines (TSNAs), and to develop products containing such tobacco, whether such patent rights and know-how are now in existence or hereinafter developed. The Company is obligated to pay to Regent Court a royalty of 2% on all net sales of products by it and any affiliated sublicensees, and 6% on all fees and royalties received by it from unaffiliated sublicensees, less any related research and development costs incurred by the Company. The License Agreement expires with the expiration of the last of any applicable patents. Ten United States patents have been issued, and additional patent applications are pending in the United States and in approximately 80 foreign jurisdictions. To date, the Company has paid no royalties under the License Agreement. The License Agreement may be terminated by the Company upon 30 days written notice or by Regent Court if there is a default in paying royalties or a material breach by the Company or the purchase of Star Scientific’s stock or assets.

Mr. Williams and Dr. O’Donnell have in the past jointly owned an airplane and currently are the principals in a company, Starwood Industries, Inc. (“Starwood”), that acquired an airplane in 2002. The Company has utilized the airplane for business travel throughout the United States and to Mexico to client, vendor and scientific or technical consultant locations that are not near or easily accessible to airports with regularly scheduled or frequent commercial airline services. In late 2002, the Company entered into an agreement with Starwood under which it agreed to pay $2,100 per hour for use of the aircraft up to a maximum amount in any month equal to Starwood’s total monthly payment for the aircraft. Prior to this arrangement with Starwood in 2002, the Company made direct payments for expenses incurred to various arms-length vendors with respect to utilization of the airplane. Payments made by the Company to Starwood (or Messrs. Williams and O’Donnell as predecessors-in-interest to the airplane) with respect to aircraft expenses were $820,307 in 2003, $656,310 in 2002, $258,992 in 2001 and $191,680 in 2000, and were billed at cost.

In 1999, Mr. Perito purchased under his original employment agreement 2,000,000 shares of Common Stock at $1 per share, and the Company financed the purchase with a loan bearing interest at 7% (due annually) with all principal due in July 2005. Effective as of January 1, 2002, the interest rate was changed from 7% to the minimum applicable federal rate determined under Section 1274(d) of the Internal Revenue Code of 1986, as amended. The note is non-recourse with respect to accrued unpaid interest and 85% of the principal. The Company has recognized interest income of approximately $21,000, $35,000, $140,000 and $134,000 during 2003, 2002, 2001 and 2000, respectively, in connection with the note.

In 2002, 2001 and 2000, the Company paid $251,882, $372,493 and $288,198 to McSweeney & Crump, P.C. (formerly McSweeney, Burtch & Crump) with respect to various legal services connected with the Company’s business. Patrick M. McSweeney has been and continues to be a named partner in this firm. In addition to payments to the firm, Mr. McSweeney was paid $82,500 and $37,500 as a consultant to the Company during 2000 and 2001, respectively. Mr. McSweeney was elected to the Board of Directors in January 2002 and resigned from the Board of Directors in February 2003.

In August 2001, the Company made loans to Messrs. Bogaz, Dean, Miller and Pokusa in the amount of $100,000, $180,000, $180,000 and $140,000 respectively, for the purpose of their purchasing shares of Common Stock from an affiliated entity (Irrevocable Trust #1 FBO Francis E. O’Donnell, Jr., M.D.). Full Recourse Promissory Notes were executed by each of these officers. The promissory notes, which remain outstanding in full, have a term of four years with interest payments payable annually at a rate of prime plus 1%.

In early October 2003, Jonnie R. Williams, Star’s CEO and largest shareholder, loaned Star $2 million in funds for corporate purposes. Since October 2003, Mr. Williams has from time-to-time advanced amounts up to approximately $5 million to the Company. As of March 23, 2004, the advances to the Company were approximately $4.5 million. In March 2004, the Company entered into a loan agreement with Mr. Williams under which he has agreed to make a total of $10.0 million available to the Company with the understanding that he would not be entitled to demand payment of the principal or interest before March 31, 2005. The loan agreement provides that interest on the outstanding advances by Mr. Williams would be at a rate of 8% per annum on the outstanding balance. On October 28, 2004, the Company determined to repay the outstanding advance of $4.5 million to Mr. Williams together with accrued interest, in order to reduce the Company’s borrowing costs. Mr. Williams remains obligated under the loan agreement to make advances to the Company if required for the Company’s liquidity at any time prior to March 31, 2005 in an amount not to exceed $10 million. After March 31, 2005, subject to restrictions in any other lending documents, any outstanding balance will be repaid to Mr. Williams based on his determination of the Company’s ability to repay such advances.