EXHIBIT 10.1

 

AMENDMENT AGREEMENT

 

This Amendment Agreement (this “Agreement”) is being entered into as of
September 15, 2004 by and between STAR SCIENTIFIC, INC., a Delaware corporation
(the “Company”), and MANCHESTER SECURITIES CORP., a New York Corporation
(“Manchester”).

 

R E C I T A L S:

 

WHEREAS, the Company and Purchaser entered into a Securities Purchase Agreement
dated as of March 25, 2004 (the “Manchester Agreement”) pursuant to which the
Company issued to Manchester an aggregate of $9,000,000 in principal amount of
debentures (the “Debentures”) on the terms and conditions set forth therein and
warrants (the “Warrants”) to purchase 502,681 shares of the Company’s $0.0001
par value common stock (the “Common Stock”);

 

WHEREAS, the Debentures are convertible into shares of Common Stock (the “Common
Shares”) and the Warrants are exercisable for shares of Common Stock (the
“Warrant Shares”);

 

WHEREAS, the Company entered into a separate Securities Purchase Agreement dated
as of April 15, 2004 (the “Elliott Agreement”) with Elliott Associates, L.P.
(“EALP”) and Elliott International, L.P. (“EILP”), affiliates of Manchester,
pursuant to which the Company issued shares (the “Elliott Purchased Shares”) of
Common Stock to each of EALP and EILP;

 

WHEREAS, pursuant to the Elliott Agreement the Company and Manchester amended
and restated the Debenture (as amended and restated, the “Amended Debenture”)
and Warrant (as amended and restated, the “Amended Warrant”), each as of April
15, 2004;

 

WHEREAS, the Company and Manchester now wish to further amend the Amended
Debenture and Amended Warrant as set forth herein and issue the Second Amended
Debenture (as defined below) and Second Amended Warrant (as defined below);

 

WHEREAS, the Company and Manchester agree that the issuance of the Second
Amended Warrant with a reduced Exercise Price is not intended to, and shall not,
trigger any anti-dilution provision under the Amended Debentures or Amended
Warrants;

 

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:

 

T E R M S:

 

1. Second Amended and Restated Debenture. The Company and Manchester agree that
the Amended Debenture shall be amended and restated in the form attached hereto
as Exhibit A (the “Second Amended Debenture”), including for the purposes of
deleting Section 4A(b) of the Amended Debenture in its entirety.

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2. Second Amended and Restated Warrant. The Company and Manchester agree that
the Amended Warrant shall be amended and restated in the form attached hereto as
Exhibit B (the “Second Amended Warrant”), including for the purposes of changing
the “Exercise Price” from $4.476 to $4.00 (subject to adjustment as set forth
therein) in the Amended Warrant.

 

3. Issuance of Second Amended Debenture and Second Amended Warrant.

 

(a) Promptly after the date hereof, the Company shall issue and deliver to
Manchester the originally signed Second Amended Debenture. Upon receipt of the
Second Amended Debenture, Manchester shall promptly mark the originally signed
Debenture (if not previously so marked) and originally signed Amended Debenture,
and any copies of such documents, as “Cancelled,” and return such originally
signed (and cancelled) debentures to the Company (if not previously so returned
with respect to the Debenture). The Amended Debenture shall remain in full force
and effect, as amended hereby, until such Second Amended Debenture has been
issued and delivered to Manchester.

 

(b) Promptly after the date hereof, the Company shall issue and deliver to
Manchester the originally signed Second Amended Warrant Upon receipt of the
Second Amended Warrant, Manchester shall promptly mark the originally signed
Warrant (if not previously so marked) and originally signed Amended Warrant, and
any copies of such documents, as “Cancelled,” and return such originally signed
(and cancelled) warrants to the Company (if not previously so returned with
respect to the Warrant). The Amended Warrant shall remain in full force and
effect, as amended hereby, until such Second Amended Warrant has been issued and
delivered to Manchester.

 

4. Due Authorization. The Company hereby represents and warrants to Manchester
as of the date hereof that the Company has all requisite corporate power and
authority to enter into and perform this Agreement, the Second Amended Debenture
and Second Amended Warrant (collectively, the “Amendment Documents”) and the
transactions contemplated hereby and thereby. The Company further represents and
warrants that this Agreement and the other Amendment Documents constitute valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general application.

 

5. No Anti-Dilution. The Company and Manchester each hereby acknowledge and
agree that neither the execution, delivery nor performance of the Amendment
Documents shall entitle (x) any holder of the Amended Debenture (or Second
Amended Debenture) to a conversion price adjustment pursuant to Section 3(d) of
the Amended Debenture (or Second Amended Debenture), or (y) any holder of the
Amended Warrant (or Second Amended Warrant) to an adjustment of the Exercise
Price, other than the change in the Exercise Price agreed to in Section 2 above
pursuant to the terms of the Amended Warrant (or Second Amended Warrant).

 

6. Miscellaneous.

 

(a) Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF

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LAWS. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE
STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN,
FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH
ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY
WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM
THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT
SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE
VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY
IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING
SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF TO SUCH
PARTY AT THE ADDRESS FOR SUCH NOTICES TO IT UNDER THE MANCHESTER AGREEMENT AND
AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS
AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY
ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. EACH PARTY
HERETO IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY.

 

(b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.

 

(c) Conflicts. All of the terms of the Manchester Agreement and Registration
Rights Agreement (as defined in the Manchester Agreement) shall remain in full
force and effect, except as expressly modified by this Amendment. In case of any
conflict between this Agreement and the terms of the Manchester Agreement and/or
Registration Rights Agreement, as applicable, this Agreement shall govern.

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IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to to be
duly executed as of the date and year first above written.

 

STAR SCIENTIFIC, INC. By:    

Name:

   

Title:

   

MANCHESTER SECURITIES CORP. By:    

Name:

   

Title: