Exhibit 10.2


 


 


 


SECURITIES
PURCHASE AND REGISTRATION RIGHTS AGREEMENT


 


Between


 


STAR
SCIENTIFIC, INC.,


 


as
Issuer,


 


And


 


The
Investor Set Forth on Schedule I hereto


 


 


 


 


 


 


 


February
28, 2012


 


 


 


 


 


 


 


 


 


 



 






    	 



    	 



    
 


 


This SECURITIES PURCHASE AND REGISTRATION
RIGHTS AGREEMENT (this “Agreement”) is entered into and effective as of February 28, 2012, between Star Scientific,
Inc., a Delaware corporation (the “Company”), and the investor set forth on Schedule I hereto (the “Investor”).



 


WHEREAS, the Investor has previously entered
into one or more securities purchase and registration rights agreements with the Company (each a “Prior Agreement”),
whereby the Company sold to the Investor and the Investor purchased from the Company warrants (each a “Prior Warrant”
and collectively, the “Prior Warrants”), to purchase the aggregate amount of shares of the Company’s common
stock, par value $0.0001 per share (“Common Stock”), set forth opposite the Investor’s name under the
heading “Prior Warrant Shares” on Schedule I hereto (the “Prior Warrant Shares”), having
per share exercise prices set forth opposite the Investor’s name under the heading “Prior Exercise Price” on
Schedule I hereto;


 


WHEREAS, the Company and the Investor desire
that upon the terms and conditions set forth herein that: (i) Investor will exercise the Prior Warrants thereby purchasing the
Prior Warrant Shares (A) at their exercise prices and (B) for the aggregate exercise price set forth opposite the Investor’s
name under the headings “Exercise Price” and “Aggregate Exercise Price”, respectively, on Schedule I
hereto and that the Company issue to the Investor the Prior Warrant Shares; and (ii) Investor will purchase from the Company and
the Company will sell and issue to the Investor one or more warrants, substantially in the form attached hereto as Exhibit A
(the “Warrant”), to purchase the amount of shares of the Company’s Common Stock set forth opposite the
Investor’s name under the heading “New Warrants” on Schedule I hereto (the “Warrant Shares”),
having an exercise price set forth opposite Investor’s name under the heading “New Exercise Price” on Schedule
I hereto;


 


WHEREAS, the Investor acknowledges that
as an inducement for the Company to enter into this Agreement, the Investor has waived its rights under Section 12 of its Prior
Warrant, with regard to the transactions contemplated hereby; and


 


WHEREAS, the Investor will have registration
rights with respect to the Warrant Shares and other Registrable Securities (as defined herein) pursuant to the terms of this Agreement.


 


NOW, THEREFORE, in consideration of the
foregoing premises and the covenants contained herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:


 


1.Agreement to Sell and Purchase
the Prior Warrant Shares and Warrant. At the Closing (as defined herein), the Company will sell to the Investor, and the Investor
will purchase from the Company, upon the terms and subject to the conditions hereinafter set forth, the Prior Warrant Shares and
the Warrant for the aggregate purchase price set forth opposite the Investor’s name under the heading “Aggregate Exercise
Price” on Schedule I hereto.


 






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2.Delivery of the Prior Warrant Shares
and Warrant at Closing. The completion of the purchase, sale and issuance of the Prior Warrant Shares and the Warrant (the
“Closing”) shall occur on the date of this Agreement (the “Closing Date”) (or upon such other
date as the Company and the Investor shall agree), at the offices of the Company’s counsel. At the Closing, the Company shall
issue to the Investor as indicated on Schedule I hereto (i) one or more stock certificates, registered in the Investor’s
name and address as set forth on Schedule I hereto, representing the Prior Warrant Shares and (ii) the Warrant issued in
the name of the Investor. The Company’s obligation to issue the Prior Warrant Shares and the Warrant to the Investor shall
be subject to the following conditions, any one or more of which may be waived by the Company: (i) receipt by the Company of a
wire transfer of immediately available funds to an account designated in writing by the Company, in the full amount of the total
purchase price payable by the Investor for the Prior Warrant Shares and Warrant that the Investor is hereby agreeing to purchase
set forth opposite the name of the Investor under the heading “Aggregate Exercise Price” on Schedule I hereto;
(ii) receipt by the Company of an executed Notice of Exercise Form annexed to the respective Prior Warrants covering the applicable
Prior Warrant Shares of the Investor; and (iii) the accuracy, in all material respects, of the representations and warranties made
by the Investor and the fulfillment, in all material respects, of those undertakings of the Investor to be fulfilled prior to the
Closing. The Investor’s obligation to purchase the Prior Warrant Shares shall be subject to the following conditions, any
one or more of which may be waived by an Investor (provided that no such waiver shall be deemed given unless in writing and executed
by the Investor): (i) receipt by the Investor of a counter-signed copy of this Agreement executed by the Company; (ii) receipt
by the Investor of a copy of the Warrant; (iii) receipt by the Investor of evidence of irrevocable instructions
issued by the Company to the Company’s transfer agent instructing the transfer agent to issue to the Investor a stock certificate
representing the Investor’s Prior Warrant Shares (subject to full satisfaction of the conditions to Closing set forth in
this Section 2); and (iv) the accuracy, in all material respects, of the representations and warranties made by the Company
and the fulfillment, in all material respects, of those undertakings of the Company to be fulfilled prior to the Closing.


 


3.Representations, Warranties and
Covenants of the Company. The Company hereby represents and warrants to, and covenants with the Investor, as follows:


 


3.1Organization. Each of the Company
and its Subsidiaries (as defined in Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”))
is duly organized and validly existing in good standing under the laws of the jurisdiction of its organization. Each of the Company
and its Subsidiaries has full power and authority to own, operate and occupy its properties and to conduct its business as presently
conducted and is registered or qualified to do business and in good standing in each jurisdiction in which it owns or leases property
or transacts business and where the failure to be so qualified would have a material adverse effect upon the financial condition
or business, operations, assets or prospects of the Company and its Subsidiaries, taken as a whole (a “Material Adverse
Effect”).


 


3.2Due Authorization. The Company
has all requisite power and authority to execute, deliver and perform its obligations under this Agreement and the Warrant, and
has taken all necessary corporate action to enter into and perform this Agreement, to issue the Prior Warrant Shares in accordance
with the terms of this Agreement, to enter into and perform the Warrant, and to issue the Warrant Shares in accordance with the
terms of the Warrant. This Agreement has been, and upon the Closing in accordance with the terms of the Agreement, the Warrant
will be, duly authorized, validly executed and delivered by the Company and constitutes, or will constitute, a legal, valid and
binding agreement of the Company enforceable against the Company in accordance with their respective terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and
contracting parties’ rights generally and except as enforceability may be subject to general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at law). Upon their issuance in accordance with the terms
of this Agreement and the Prior Warrants, the Prior Warrant Shares will be duly authorized, validly issued, fully paid and non-assessable,
the Warrant will be duly authorized and validly issued, and the Warrant Shares, upon exercise of the Warrant in accordance with
its terms, will be duly authorized.


 






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3.3Non-Contravention. Except as
would not reasonably be expected to have a Material Adverse Effect, the execution and delivery of this Agreement, the issuance
and sale of the Prior Warrant Shares and the Warrant under this Agreement, the fulfillment of the terms of this Agreement and the
consummation of the transactions contemplated hereby will not (i) conflict with or constitute a violation of, or default (with
or without the giving of notice or the passage of time or both) under, (A) any material bond, debenture, note or other evidence
of indebtedness, or under any material lease, indenture, mortgage, deed of trust, loan agreement, joint venture or other agreement
or instrument to which the Company or any Subsidiary is a party or by which it or any of its Subsidiaries or their respective properties
are bound, (B) the charter, by-laws or other organizational documents of the Company or any Subsidiary, or (C) any law,
administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to
the Company or any Subsidiary or their respective properties, or (ii) result in the creation or imposition of any lien, encumbrance,
claim, security interest or restriction whatsoever upon any of the material properties or assets of the Company or any Subsidiary
or an acceleration of indebtedness pursuant to any obligation, agreement or condition contained in any material bond, debenture,
note or any other evidence of indebtedness or any material indenture, mortgage, deed of trust or any other agreement or instrument
to which the Company or any Subsidiary is a party or by which any of them is bound or to which any of the property or assets of
the Company or any Subsidiary is subject. No consent, approval, authorization or other order of, or registration, qualification
or filing with, any regulatory body, administrative agency, self-regulatory organization, stock exchange or market, or other governmental
body in the United States is required for the execution and delivery of this Agreement, the valid issuance and sale of the Prior
Warrant Shares and Warrant pursuant to this Agreement, other than such as have been or will be made or obtained prior to the Closing
Date, and except for any securities filings required to be made under federal or state securities laws.


 


3.4SEC Filings. Since January 1,
2011, the Company and its Subsidiaries have filed all reports, schedules, forms, statements and other documents required to be
filed by it with the Securities and Exchange Commission (the “Commission”) pursuant to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (such reports, including exhibits thereto
and documents incorporated by reference therein collectively, the “SEC Documents”). To the best of the Company’s
knowledge, as of their respective filing dates, none of the SEC Documents contained an untrue statement of material fact or omitted
to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light
and circumstances under which they were made, not misleading, except to the extent corrected by subsequently filed SEC Documents.


 


3.5Absence of Certain Change. Except
as disclosed in the SEC Documents, since September 30, 2011, there has been no adverse change or adverse development in the business,
properties, assets, operations, financial condition, prospects, liabilities or results of operations of the Company or its Subsidiaries
which to the knowledge of the Company would reasonably be expected to have a Material Adverse Effect.


 






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3.6Capitalization. As of February
28, 2012, the authorized capital stock of the Company consisted of (i) 207,500,000 shares of Common Stock, of which 139,255,505
shares were issued and outstanding and 51,298,722 shares were issuable and reserved for issuance pursuant to the Company’s
stock option plans or securities exercisable or exchangeable for, or convertible into, shares of Common Stock, and (ii) 100,000
shares of preferred stock, of which as of the date hereof no shares were issued. All of such outstanding shares have been, or upon
issuance will be, validly issued, fully paid and nonassessable. Except as disclosed in the SEC Documents, as of the date hereof,
(i) no shares of the Company’s capital stock are subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company, (ii) there are no outstanding options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries
or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities
or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, (iii) there are no outstanding
securities of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a
security of the Company or any of its Subsidiaries, and (iv) the Company does not have any stock appreciation rights or “phantom
stock” plans or agreements or any similar plan or agreement. The Company disclosed in its SEC Documents or has furnished
to Investor true and correct copies of the Company’s Certificate of Incorporation, as amended and as in effect on the date
hereof (the “Certificate of Incorporation”), and the Company’s By-laws, as in effect on the date hereof
(the “By-laws”).


 


3.7Registration of the Prior Warrant
Shares.


 


(a)The Prior Warrant Shares have been
duly registered for resale upon exercise of the Prior Warrants pursuant to registration statements on Form S-3 (each a “Prior
Registration Statement”) filed pursuant to a Prior Agreement.


 


(b)The Prior Registration Statement has
been declared effective by the Commission, and no stop order relating thereto has been issued and, to the Company’s knowledge,
no such stop order has been threatened or proceeding to issue such a stop order commenced.


 


(c)The prospectus contained in the Prior
Registration Statement is current and may be used by the Investor for resale of the Prior Warrant Shares.


 


(d)The Prior Warrant Shares are duly listed
for trading on the Nasdaq Global Market (the “Principal Market”) upon issuance.


 


3.8Broker. The Company has taken
no action which would give rise to any claim by any person for brokerage commissions, finder’s fees or similar payments by
the Company or the Investors relating to this Agreement or the transactions contemplated hereby.


 






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4.Representations, Warranties and
Covenants of Investor. The Investor represents and warrants to, and covenants with, the Company, as follows:


 


4.1Due Authorization; Organization.
Investor has all requisite power, authority and capacity to execute, deliver and perform its obligations under this Agreement,
and has taken all necessary corporate, company, partnership or individual action as the case may be to enter and perform this Agreement.
This Agreement has been duly authorized and validly executed and delivered by Investor and constitutes a legal, valid and binding
agreement of Investor enforceable against Investor in accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and contracting parties’ rights
generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). Any individual retirement account (“IRA”)
to which the Prior Warrant Shares, the Warrant or Warrant Shares may be issued and delivered on behalf of the Investor, if applicable,
is duly organized and validly existing in good standing under the laws of the jurisdiction of its organization. Such IRA has full
power and authority to own, operate and occupy its properties and to conduct its business as presently conducted and is registered
or qualified to do business and in good standing in each jurisdiction in which it owns or leases property or transacts business
and where the failure to be so qualified would have a material adverse effect on the financial condition of Investor or such IRA.


 


4.2Non-Contravention. The execution
and delivery of this Agreement, the purchase of the Prior Warrant Shares and the Warrant under this Agreement, the fulfillment
of the terms of this Agreement and the consummation of the transactions contemplated hereby will not (i) conflict with or constitute
a violation of, or default (with or without the giving of notice or the passage of time or both) under, (A) any material bond,
debenture, note or other evidence of indebtedness, or under any material lease, indenture, mortgage, deed of trust, loan agreement,
joint venture or other agreement or instrument to which Investor is a party, (B) the charter, by-laws or other organizational
documents of Investor, as applicable, or (C) any law, administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority applicable to Investor or its property, or (ii) result in the creation or imposition of
any lien, encumbrance, claim, security interest or restriction whatsoever upon any of the material properties or assets of Investor
or an acceleration of indebtedness pursuant to any obligation, agreement or condition contained in any material bond, debenture,
note or any other evidence of indebtedness or any material indenture, mortgage, deed of trust or any other agreement or instrument
to which Investor is a party or by which any of them is bound or to which any of the property or assets of Investor is subject.
No consent, approval, authorization or other order of, or registration, qualification or filing with, any regulatory body, administrative
agency, self-regulatory organization, stock exchange or market, or other governmental body in the United States is required for
the execution and delivery of this Agreement and the purchase of the Prior Warrant Shares and the Warrant by Investor, other than
such as have been made or obtained.


 


4.3Private Placement. Investor
represents and warrants to, and covenants with, the Company that Investor is acquiring the Prior Warrant Shares and the Warrant
for its own account for investment only and with no present intention of distributing any of the Prior Warrant Shares, the Warrant
or the Warrant Shares in violation of the applicable securities laws, or any arrangement or understanding with any other persons
regarding the distribution of the Prior Warrant Shares, Warrant or Warrant Shares. Investor has been advised and understands that
neither the Warrant nor the Warrant Shares have been registered under the Securities Act or under the “blue sky” or
similar laws of any jurisdiction and may be resold only if registered pursuant to the provisions of the Securities Act and such
other laws, if applicable, or, subject to the terms and conditions of this Agreement, if an exemption from registration is available.
Investor has been advised and understands that the Company, in issuing the Prior Warrant Shares and the Warrant, is relying upon,
among other things, the representations and warranties of Investor herein in concluding that such issuance is a “private
offering” and is exempt from the registration provisions of the Securities Act.


 






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4.4Certain Trading Activities.
Neither Investor nor any of its affiliates has directly or indirectly, nor has any person acting on behalf of or pursuant to any
understanding with such Investor, engaged in any purchase or sale of Common Stock (including, without limitation, any Short Sales
(as defined below) involving the Company’s securities) since the date that such Investor became aware of the transactions
contemplated hereby.  For the purposes of this Section 4.4, “Short Sales” include, without limitation,
all “short sales” as defined in Rule 200 of Regulation SHO adopted under the Exchange Act and all types of direct and
indirect stock pledges, forward sales contracts, options, puts, calls, short sales and other transaction through non-US broker-dealers
or foreign regulated brokers having the effect of hedging the securities of the Company or the investment contemplated under this
Agreement.  The Investor covenants that neither it, nor any person acting on its behalf or pursuant to any understanding with
it, will engage in any transaction in the securities of the Company (including short sales) prior to the filing of a Current Report
on Form 8-K, Annual Report on Form 10-K, press release, or other applicable Exchange Act report reporting this transaction.


 


4.5No Advice. Investor understands
that nothing in this Agreement or any other materials presented to Investor in connection with the purchase and sale of the Prior
Warrant Shares and the Warrant constitutes legal, tax or investment advice. Investor has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Prior Warrant
Shares and the Warrant.


 


4.6Accredited Investor. Investor
is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D under the Securities Act and is
able to bear the risk of its investment in the Prior Warrant Shares, Warrant, and Warrant Shares. Investor has such knowledge and
experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of the Prior
Warrant Shares, Warrant and Warrant Shares.


 


4.7Limited Representations. Investor
and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company
and its Subsidiaries which have been requested and materials relating to the offer and sale of the Prior Warrant Shares, Warrant,
and Warrant Shares, which have been requested by Investor. Investor and its advisors, if any, have been afforded the opportunity
to ask such questions of the Company as they deem appropriate for purposes of the investment contemplated hereby. Investor acknowledges
and agrees that the most recent disclosure of the Company’s results is for the three and nine month periods ended on, and
the most recent disclosure of the Company’s financial condition is at, September 30, 2011, as reported on the Company’s
quarterly report on Form 10-Q, filed with the Commission on November 9, 2011, and that, except as disclosed in the SEC documents,
no information more recent than such date has been provided to Investor as to the Company’s results, operations, financial
condition, business or prospects. Investor understands that its purchase of the Prior Warrant Shares, Warrant and, if applicable,
Warrant Shares involves a high degree of risk and that Investor may lose its entire investment in the Prior Warrant Shares, Warrant
and, if applicable, Warrant Shares, and that Investor can afford to do so without material adverse consequences to its financial
condition. Investor is not relying on any information provided by the Company and its Subsidiaries, except to the extent provided
in Section 3 herein.


 






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4.8No Recommendation. Investor
understands that no United States federal or state agency or any other government or governmental agency has passed on or made
any recommendation or endorsement of the Prior Warrant Shares, Warrant or Warrant Shares or the fairness or suitability of an investment
in the Prior Warrant Shares, Warrant or Warrant Shares nor have such authorities passed upon or endorsed the merits thereof.


 


4.9Restrictive Legend. The Company
shall issue the Warrant and certificates for the Prior Warrant Shares and, if applicable, Warrant Shares to Investor with a legend
as described in Section 6 below. Investor covenants that, in connection with any transfer of any Prior Warrant Shares or
Warrant Shares pursuant to a Prior Registration Statement or registration statement contemplated by Section 5 hereof, as
applicable, including the prospectuses contained therein, Investor will comply with the applicable prospectus delivery requirements
of the Securities Act, provided that copies of a current prospectus relating to such effective registration statements are available
to Investor.


 


4.10Residence. Investor is a resident
or organized under the laws of the jurisdiction set forth under the Investor’s name on Schedule I hereto.


 


4.11No Market. Investor understands
that the Prior Warrants are and, upon exercise of the Warrant, the Warrant Shares will be, restricted securities and that there
is no public trading market for the Warrant, that none is expected to develop, and that the Warrant and Warrant Shares must be
held indefinitely unless and until the resale of the Warrant or Warrant Shares is registered under the Securities Act or subject
to the terms and conditions of this Agreement and the applicable securities laws, an exemption from registration is available.
Investor has been advised or is aware of the provisions of Rule 144 promulgated under the Securities Act.


 


4.12No Commissions. Investor has
taken no action which would give rise to any claim by any person for brokerage commissions, finder's fees or similar payments by
the Company or Investor relating to this Agreement or the transactions contemplated hereby.


 


4.13Transactional Exemption. Investor
understands that the Prior Warrant Shares, Warrant and Warrant Shares are being offered and sold in reliance on a transactional
exemption from the registration requirements of federal and state securities laws and that the Company is relying upon the truth
and accuracy of the representations, warranties, agreements, acknowledgments and understandings of Investor set forth herein in
order to determine the applicability of such exemptions and the suitability of Investor to acquire the Prior Warrant Shares, Warrant
and Warrant Shares.


 


4.14.Investor
Undertaking. Investor covenants that it will not sell, transfer, assign, hypothecate or pledge in any way any of the
Prior Warrant Shares or the Warrant Shares unless the resale of the Prior Warrant Shares or Warrant Shares, as applicable, have
been registered for resale under the Securities Act and in compliance with applicable prospectus delivery requirements, if any,
or otherwise in compliance with the requirements of an available exemption from registration under the Securities Act and the rules
and regulations promulgated thereunder. Investor further agrees to indemnify the Company against any
loss, cost or expenses, including reasonable expenses, incurred as a result of such legend removal on Investor’s behalf.


 






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5.Registration Rights.


 


5.1Certain Definitions


 


“Holder” and “Holders”
shall include Investor and any transferee or transferees of Registrable Securities to whom the registration rights conferred by
this Agreement and a Prior Agreement, have been transferred in compliance with this Agreement and a Prior Agreement.


 


The terms “register,” “registered”
and “registration” shall refer to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations thereunder, and the declaration or ordering of the effectiveness
of such registration statement.


 


“Registrable Securities”
shall mean: (i) Warrant Shares issued or issuable to each Holder (A) with respect to the Warrant Shares, upon exercise of the Warrant,
(B) upon any distribution with respect to, any exchange for or any replacement of such Warrant, or (C) upon any conversion, exercise
or exchange of any securities issued in connection with any such distribution, exchange or replacement; (ii) securities issued
or issuable upon any stock split, stock dividend, recapitalization or similar event with respect to the foregoing; and (iii) any
other security issued as a dividend or other distribution with respect to, in exchange for or in replacement of the securities
referred to in the preceding clauses, except that any such Warrant Shares or other securities shall cease to be Registrable Securities
when (D) they have been sold to the public or (E) they may be sold by the Holder thereof without restriction pursuant to Rule 144.


 


“Registration Expenses”
shall mean all expenses to be incurred by the Company in connection with each Holder’s registration rights under this Agreement
(such amount not to exceed $5,000 in the aggregate), including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company, and blue sky fees and expenses, reasonable fees and disbursements
of counsel to Holders (using a single counsel selected by a majority in interest of the Holders) for a review of the Registration
Statement (as defined herein) and related documents, and the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company, which shall be paid in any event by the Company).


 


“Selling Expenses” shall
mean all underwriting discounts, selling commissions and transfer taxes applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for Holders not included within “Registration Expenses”.


 


5.2Registration Requirements. The
Company shall use its reasonable best efforts to effect the registration of the resale of the Registrable Securities (including,
without limitation, the execution of an undertaking to file post-effective amendments, appropriate qualification under applicable
blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act)
as would permit or facilitate the resale of all the Registrable Securities in the manner (including manner of sale) and in all
states reasonably requested by the Holder. Such reasonable best efforts by the Company shall include, without limitation, the following:


 






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(a)The Company shall, as expeditiously
as possible:


 


(i)But in any event within 60
days of the Closing, prepare and file a registration statement with the Commission pursuant to Rule 415 under the Securities Act
on Form S-3 under the Securities Act (or in the event that the Company is ineligible to use such form, such other form as the Company
is eligible to use under the Securities Act provided that such other form shall be converted into a Form S-3 promptly after Form
S-3 becomes available to the Company) covering resales by the Holders as selling stockholders (not underwriters) of the Warrant
Shares issuable upon full exercise of the Warrant (the “Registration Statement”).
The Company shall use its reasonable best efforts to cause such Registration Statement and other filings to be declared
effective as soon as possible, and in any event prior to 120 days (or, if the Commission elects to review the Registration Statement,
180 days) following the Closing.


 


(ii)Without limiting the foregoing,
the Company will promptly respond to all Commission comments, inquiries and requests, and shall request acceleration of effectiveness
of the Registration Statement at the earliest possible date. The Company shall provide the Holders reasonable opportunity to review
the portions of any such Registration Statement or amendment or supplement thereto containing disclosure regarding the Holders
prior to filing.


 


(iii)Prepare and file with the
Commission such amendments and supplements to such Registration Statement and the prospectus used in connection with such Registration
Statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities
covered by such Registration Statement and notify the Holders of the filing and effectiveness of such Registration Statement and
any amendments or supplements.


 


(iv)Furnish or otherwise make
available to each Holder copies of a current prospectus included in the Registration Statement conforming with the requirements
of the Securities Act, copies of the Registration Statement, any amendment or supplement thereto and any documents incorporated
by reference therein and such other documents as such Holder may reasonably require in order to facilitate the disposition of Registrable
Securities owned by such Holder.


 


(v)Register and qualify the
securities covered by the Registration Statement under the securities or “blue sky” laws of all domestic jurisdictions,
to the extent required; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify
to do business or to file a general consent to service of process in any such states or jurisdictions.


 


(vi)Notify each Holder immediately
of the happening of any event (but not the substance or details of any such events unless specifically requested by a Holder) as
a result of which the prospectus (including any supplements thereto or thereof) included in such Registration Statement, as then
in effect, includes an untrue statement of material fact or omits to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances then existing, and use its reasonable best efforts
to promptly update and/or correct such prospectus.


 






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(vii)Notify each Holder immediately
of the issuance by the Commission or any state securities commission or agency of any stop order suspending the effectiveness of
the Registration Statement or the threat or initiation of any proceedings for that purpose. The Company shall use its reasonable
best efforts to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest
possible time.


 


(viii)Upon request, permit counsel
to the Holders to review the Registration Statement and all amendments and supplements thereto within a reasonable period of time
(but not less than two (2) full days on which there is trading on the Principal Market or such other market or exchange on which
the Common Stock is then principally traded) prior to each filing and will not request acceleration of the Registration Statement
without prior notice to such counsel, provided, however, that the Company shall not be obligated to
comply with this Section 5.2(a)(viii) if compliance would cause the Company to fail to comply with any other provisions
hereunder.


 


(ix)If required by the Principal
Market or the principal securities exchange and/or market on which the Common Stock is then listed, qualify the Registrable Securities
covered by such Registration Statement for listing on the Principal Market or the principal securities exchange and/or market on
which the Common Stock is then listed, including the preparation and filing of any required filings with such principal market
or exchange.


 


(b)In the event that the Registration
Statement has been declared effective by the Commission and, afterwards, any Holder’s ability to sell Registrable Securities
registered for resale under the Registration Statement is suspended for more than (i) 45 days in any 90-day period or (ii) 90 days
in any calendar year, including without limitation by reason of any suspension or stop order with respect to the Registration Statement
or the fact that an event has occurred as a result of which the prospectus (including any supplements thereto) included in the
Registration Statement then in effect includes an untrue statement of material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, then
the Company shall take such action as may be necessary to amend or supplement the Registration Statement or the prospectus (including
any supplements thereto) included in the Registration Statement, such that the Registration Statement or the prospectus, as so
amended, shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements not misleading.


 


(c)If any Holder intends to distribute
the Registrable Securities by means of an underwriting, such Holder shall so advise the Company. Any such underwriting may only
be administered by nationally or regionally recognized investment bankers reasonably satisfactory to the Company.


 






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(d)Subject to Section 5.2(c) above,
the Company shall enter into such customary agreements (including an underwriting agreement containing such representations and
warranties by the Company and such other terms and provisions, as are customarily contained in underwriting agreements for comparable
offerings and are reasonably satisfactory to the Company) and take all such other actions as the Holder or the underwriters participating
in such offering and sale may reasonably request in order to expedite or facilitate such offering and sale other than such actions
which are disruptive to the Company or require significant management availability.


 


(e)The Company shall make available for
inspection by the Holders, representative(s) of all the Holders together, any underwriter participating in any disposition pursuant
to the Registration Statement, and any attorney or accountant retained by any Holder or underwriter, all financial and other records
customary for purposes of the Holders’ due diligence examination of the Company and review of the Registration Statement,
all documents filed with the Commission subsequent to the Closing, pertinent corporate documents and properties of the Company,
and cause the Company’s officers, directors and employees to supply all information reasonably requested by any such representative,
underwriter, attorney or accountant in connection with the Registration Statement, provided that such parties agree to keep such
information confidential. Notwithstanding the foregoing, the foregoing right shall not extend to any Holder (i) who is not a financial
investor or entity or (ii) who, itself or through any affiliate, has any strategic business interest that would reasonably be expected
to be in conflict with any business of the Company or its Subsidiaries.


 


(f)The Company may suspend the use of
any prospectus used in connection with the Registration Statement only in the event, and for such period of time as, (i) such a
suspension is required by the rules and regulations of the Commission or (ii) it is determined in good faith by the Board of Directors
of the Company that because of valid business reasons (not including the avoidance of the Company’s obligations hereunder),
it is in the best interests of the Company to suspend such use, and prior to suspending such use in accordance with this clause
(f)(ii) the Company provides the Holders with written notice of such suspension, which notice need not specify the nature of the
event giving rise to such suspension. The Company will use reasonable best efforts to cause such suspension to terminate at the
earliest possible date.


 


(g)The Company shall prepare and file
with the Commission such amendments (including post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the Securities Act, as may be necessary to keep the Registration Statement effective at all times during the Registration
Period (as defined below), and, during such period, comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities of the Company covered by the Registration Statement. In the case of amendments and supplements to
the Registration Statement which are required to be filed pursuant to this Agreement (including pursuant to this Section 5.2(g))
by reason of the Company filing a report on Form 10-K, Form 10-Q or Form 8-K or any analogous report under the Exchange Act, the
Company shall have incorporated such report by reference into the Registration Statement, if applicable, or shall file such amendments
or supplements with the Commission on the same day on which the Exchange Act report is filed which created the requirement for
the Company to amend or supplement the Registration Statement.


 






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(h)Each Holder agrees by its acquisition
of the Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any event of the kind described
in Sections 5.2(a)(vi) or 5.2(a)(vii), and upon notice of any suspension under Section 5.2(f), such Holder will forthwith
discontinue disposition of such Registrable Securities under the Registration Statement until such Holder’s receipt of the
copies of the supplemented prospectus and/or amendment to the Registration Statement contemplated by this Section 5.2, or
until it is advised in writing by the Company that the use of the applicable prospectus may be resumed, and, in either case, has
received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such
prospectus or the Registration Statement. The Company may provide appropriate stop orders to enforce the provisions of this paragraph.


 


(i)If requested by a Holder, the Company
shall (i) as soon as practicable incorporate in a prospectus supplement or post-effective amendment such information as a Holder
reasonably requests to be included therein relating to the sale and distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable Securities being offered or sold, the purchase price being paid
therefor and any other terms of the offering of the Registrable Securities to be sold in such offering, (ii) as soon as practicable
make all required filings of such prospectus supplement or post-effective amendment after being notified of the matters to be incorporated
in such prospectus supplement or post-effective amendment, and (iii) as soon as practicable, supplement or make amendments to the
Registration Statement if reasonably requested by a Holder holding any Registrable Securities.


 


5.3Expenses of Registration. All
Registration Expenses in connection with any registration, qualification or compliance with registration pursuant to this Agreement
shall be borne by the Company, and all Selling Expenses of a Holder shall be borne by such Holder.


 


5.4Registration on Form S-3. The
Company shall use its reasonable best efforts to remain qualified for registration on Form S-3 or any comparable or successor form
or forms, or in the event that the Company is ineligible to use such form, such form as the Company is eligible to use under the
Securities Act, provided that if such other form is used, the Company shall convert such other form to a Form S-3 promptly after
the Company becomes so eligible, provided that the Company shall maintain the effectiveness of the Registration Statement then
in effect until such time as the Registration Statement covering the Registrable Securities has been declared effective by the
Commission.


 


5.5Registration Period. In the
case of the registration effected by the Company pursuant to this Agreement, the Company shall keep such registration effective
from the date on which the Registration Statement initially became effective until the earlier of (i) the date on which all the
Holders have completed the sales or distribution described in the Registration Statement relating to the Registrable Securities
registered for resale thereunder or, (ii) until such Registrable Securities may be sold by the Holders without restriction pursuant
to Rule 144 (or any successor thereto) (provided that the Company’s transfer agent has accepted an instruction from the Company
to such effect) (the “Registration Period”). Thereafter, the Company shall be entitled to withdraw such Registration
Statement and the Holders shall have no further right to offer or sell any of the Registrable Securities registered for resale
thereon pursuant to the Registration Statement (or any prospectus relating thereto).


 






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5.6Indemnification.


 


(a)Company Indemnity. The Company
will indemnify and hold harmless each Holder, each of its officers, directors, agents and partners, and each person controlling
each of the foregoing, within the meaning of Section 15 of the Securities Act and the rules and regulations thereunder with respect
to which registration, qualification or compliance has been effected pursuant to this Agreement, and each underwriter, if any,
and each person who controls, within the meaning of Section 15 of the Securities Act and the rules and regulations thereunder,
any underwriter, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on
any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the like) incident to any such registration, qualification or compliance,
or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances under which they were made, or any violation by the Company
of the Securities Act or any state securities law or in either case, any rule or regulation thereunder applicable to the Company
and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance,
and will reimburse each Holder, each of its officers, directors, agents and partners, and each person controlling each of the foregoing,
each such underwriter and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred
in connection with investigating and defending any such claim, loss, damage, liability or action, provided that the Company will
not be liable in any such case to a Holder to the extent that any such claim, loss, damage, liability or expense arises out of
or is based (i) on any untrue statement or omission based upon written information furnished to the Company by a Holder or the
underwriter (if any) therefore, (ii) the failure of a Holder to deliver at or prior to the written confirmation of sale, the most
recent prospectus, as amended or supplemented, or (iii) the failure of a Holder otherwise to comply with this Agreement. The indemnity
agreement contained in this Section 5.6(a) shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the Company (which consent will not be unreasonably withheld).


 


(b)Holder Indemnity. Each Holder
will, severally and not jointly, if Registrable Securities held by it are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify and hold harmless the Company, each of its directors, officers, agents
and partners, and each underwriter, if any, of the Company’s securities covered by such a registration statement, each person
who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act and the rules and regulations
thereunder, each other Holder (if any), and each of their officers, directors and partners, and each person controlling such other
Holder(s) against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular
or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary
to make a statement therein not misleading in light of the circumstances under which they were made, and will reimburse the Company
and such other Holder(s) and their directors, officers and partners, underwriters or control persons for any legal or any other
expenses reasonably incurred in connection with investigating and defending any such claim, loss, damage, liability or action,
in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity
with written information furnished to the Company by such Holder and stated to be specifically for use therein, and provided that
the maximum amount for which such Holder shall be liable under this indemnity shall not exceed the net proceeds received by such
Holder from the sale of the Registrable Securities pursuant to the registration statement in question. The indemnity agreement
contained in this Section 5.6(b) shall not apply to amounts paid in settlement of any such claims, losses, damages or liabilities
if such settlement is effected without the consent of such Holder (which consent shall not be unreasonably withheld).


 






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(c)Procedure. Each party entitled
to indemnification under this Section 5.6 (the “Indemnified Party”) shall give notice to the party required
to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge
of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim
in any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such
claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at its own expense, and provided further that the failure
of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this
Section 5.6 except to the extent that the Indemnifying Party is materially and adversely affected by such failure to provide
notice. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.
Each Indemnified Party shall furnish such non-privileged information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation
resulting therefrom.


 


5.7Contribution. If the indemnification
provided for in Section 5.6 herein is unavailable to the Indemnified Parties in respect of any losses, claims, damages or
liabilities referred to herein (other than by reason of the exceptions provided therein), then each such Indemnifying Party, in
lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages or liabilities as between the Company on the one hand and any Holder on the other, in such proportion
as is appropriate to reflect the relative fault of the Company and of such Holder in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative
fault of the Company on the one hand and of any Holder on the other shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information
supplied by the Company or by such Holder.


 


In no event shall the obligation of any Indemnifying
Party to contribute under this Section 5.7 exceed the amount that such Indemnifying Party would have been obligated to pay
by way of indemnification if the indemnification provided for under Sections 5.6(a) or 5.6(b) hereof had been available
under the circumstances.


 


The Company and the Holders agree that it
would not be just and equitable if contribution pursuant to this Section 5.7 were determined by pro rata allocation (even
if the Holders or the underwriters were treated as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to in the immediately preceding paragraphs. The amount paid or payable
by an Indemnified Party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraphs
shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this
section, no Holder or underwriter shall be required to contribute any amount in excess of the amount by which (i) in the case of
any Holder, the net proceeds received by such Holder from the sale of Registrable Securities pursuant to the registration statement
in question or (ii) in the case of an underwriter, the total price at which the Registrable Securities purchased by it and distributed
to the public were offered to the public exceeds, in any such case, the amount of any damages that such Holder or underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.


 






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5.8Survival. The indemnity and
contribution agreements contained in Sections 5.6 and 5.7 and the representations and warranties of the Company referred
to in Section 5.2(d) shall remain operative and in full force and effect regardless of (i) any termination of this Agreement
or any underwriting agreement, (ii) any investigation made by or on behalf of any Indemnified Party or by or on behalf of the Company,
and (iii) the consummation of the sale or successive resales of the Registrable Securities.


 


5.9Information by Holders. Each
Holder shall promptly furnish to the Company such information regarding such Holder and the distribution and/or sale proposed by
such Holder as the Company may from time to time reasonably request in writing in connection with any registration, qualification
or compliance referred to in this Agreement, and the Company may exclude from such registration the Registrable Securities of any
Holder who unreasonably fails to furnish such information within a reasonable time after receiving such request. The intended method
or methods of disposition and/or sale of such securities as so provided by such purchaser shall be included without alteration
in the Registration Statement covering the Registrable Securities and shall not be changed without written consent of such Holder.
Each Holder agrees that, other than ordinary course brokerage arrangements, in the event it enters into any arrangement with a
broker dealer for the sale of any Registrable Securities through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, such Holder shall promptly deliver to the Company in writing all applicable information
required in order for the Company to be able to timely file a supplement to the Prospectus pursuant to Rule 424(b), or take any
other action, under the Securities Act, to the extent that such supplement or other action is legally required. Such information
shall include a description of (i) the name of such Holder and of the participating broker dealer(s), (ii) the number of Registrable
Securities involved, (iii) the price at which such Registrable Securities were or are to be sold, and (iv) the commissions paid
or to be paid or discounts or concessions allowed or to be allowed to such broker dealer(s), where applicable.


 


6.Stock Legend.


 


6.1Upon payment therefor as provided in
this Agreement, the Company will issue the Prior Warrant Shares and the Warrant Shares in the name of each Investor.


 






    	15



    	 



    
 


 


Any certificate representing Prior Warrant
Shares shall be stamped or otherwise imprinted with a legend in substantially the following form:


 


THESE SECURITIES HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, AND AFTER RECEIPT BY THE COMPANY OF AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OR THAT THE PROSPECTUS DELIVERY
REQUIREMENTS HAVE BEEN MET.


 


Any certificate representing the Warrant Shares
issued by the Company shall also be stamped or otherwise imprinted with a legend in substantially the following form:


 


THESE SECURITIES REPRESENTED HEREBY ARE
ALSO SUBJECT TO RIGHTS AND OBLIGATIONS AS SET FORTH IN A SECURITIES PURCHASE AND REGISTRATION RIGHTS AGREEMENT DATED AS OF FEBRUARY
28, 2012 BY AND AMONG STAR SCIENTIFIC, INC. AND THE SEVERAL INVESTORS PARTY THERETO AS SUCH MAY BE AMENDED FROM TIME TO TIME.


 


The Warrant shall be imprinted with the legends
set forth in the Warrant on Exhibit A hereto.


 


The Company agrees to issue the Prior Warrant
Shares or Warrant Shares, issued upon exercise of the Prior Warrants or Warrant, as applicable, without the legends set forth above
at such time as the Holder thereof is (i) permitted to transfer such Prior Warrant Shares or Warrant Shares, as applicable, without
restriction pursuant to an available exemption from registration under the Securities Act, and upon such transfer after delivery
to the Company of a customary representation satisfactory to the Company that such exemption has been met, or (ii) at such time
the Prior Warrant Shares or Warrant Shares, as applicable, have been registered for resale under the Securities Act, and upon such
resale after delivery to the Company of a customary representation that the Holder has complied with the plan of distribution in
the applicable prospectus contained in the registration statement and that the prospectus delivery requirements have been met,
if any.


 


7.Survival of Representations, Warranties
and Agreements. Notwithstanding any investigation made by any party to this Agreement, all covenants, agreements, representations
and warranties made by the Company and Investor herein shall survive the execution of this Agreement, the delivery to Investor
of the Prior Warrant Shares and the Warrant being purchased and the payment therefor.


 


8.Notices. All notices, requests,
consents and other communications hereunder shall be in writing, shall be mailed (i) if within domestic United States by first-class
registered or certified airmail, or nationally recognized overnight express courier, postage prepaid, or by facsimile, or (ii) if
delivered from outside the United States, by International Federal Express or facsimile, and shall be deemed given (A) if
delivered by first-class registered or certified mail domestic, three business days after so mailed, (B) if delivered by nationally
recognized overnight carrier, one business day after so mailed, (C) if delivered by International Federal Express, two business
days after so mailed, and (D) if delivered by facsimile, upon electric confirmation of receipt and shall be delivered as addressed
as follows:


 






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(a)if to the Company, to:


 


Star Scientific, Inc.

4470 Cox Road

Glen Allen, Virginia 23060

Telephone: (804) 527-1970

Facsimile: (804) 527-1976

Attention: Chief Financial Officer


 


with copies to:


 


Star Scientific, Inc.

7475 Wisconsin Ave.

Bethesda, MD 20814

Attn: Robert E. Pokusa

General Counsel

Phone: (301) 654-8300

Telecopy: (301) 654-9308;


 


and


 


Latham & Watkins LLP

555 Eleventh Street, N.W.

Suite 1000

Washington, DC 20004

Attn: William P. O’Neill

Phone: (202) 637-2200

Telecopy: (202) 637-2201


 


(b)if to Investor, at its address set
forth under its name on Schedule I hereto, or at such other address or addresses as may have been furnished to the Company
in writing.


 


9.Changes. This Agreement may
not be modified or amended by the Company or the Investor except pursuant to an instrument in writing signed by each of the Company
and the Investor.


 


10.Headings. The headings of
the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part
of this Agreement.


 


11.Severability. In case any
provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability
of the remaining provisions contained herein shall not in any way be affected or impaired thereby.


 






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12.Governing Law. This Agreement
shall be governed by, and construed in accordance with, the internal laws of the State of New York, without giving effect to the
principles of conflicts of law.


 


13.Entire Agreement. This Agreement
constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof, and any and all other written
or oral agreements relating to such subject matter are expressly cancelled.


 


14.Finders Fees. Neither the
Company nor Investor nor any affiliate thereof has incurred any obligation which will result in the obligation of the other party
to pay any finder’s fee or commission in connection with this transaction.


 


15.Counterparts. This Agreement
may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together,
shall constitute but one instrument, and shall become effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties.


 


16.Successors and Assigns. This
Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and Investor. Investor
shall not assign any rights or obligations under this Agreement other than, solely with respect to any Prior
Warrant Shares, Warrant or Warrant Shares transferred in accordance with this Agreement, including the legends described
herein, to any permitted transferee of such Prior Warrant Shares, Warrant or Warrant Shares,
provided, however, that no such assignment shall relieve Investor of its obligations under this Agreement.


 


17.Expenses. Each of the Company
and Investor shall bear its own expenses in connection with the preparation and negotiation of the Agreement.


 


18.Pronouns. All pronouns or
any variation thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the
person, persons, entity or entities may require.


 


[Signature pages follow.]


 






    	18



    	 



    
 


 


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


 





	 	STAR SCIENTIFIC, INC.
	 	 
	 	 
	 	By:	/s/ Paul L. Perito
	 	Name:	Paul L. Perito
	 	Title:	Chairman, President and
	 	 	Chief Operating Officer


 






    	 



    	 



    
 


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


 





	 	John McKeon
	 	 
	 	 
	 	 
	 	By: /s/ John McKeon


 






    	 



    	 



    
 





SCHEDULE I


 


SCHEDULE OF INVESTORS


 





	 	 	Prior	 	 	 	 	 	 	 	 	 	 	 	New	 
	 	 	Warrant	 	 	Prior	 	 	Aggregate	 	 	New	 	 	Exercise	 
	Name and Address:	 	Shares(1)	 	 	Exercise Price	 	 	Exercise Price	 	 	Warrants	 	 	Price	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	John McKeon	 	 	3,260,869	 	 	$	2.00	 	 	$	6,521,738.00	 	 	 	3,260,869	 	 	$	4.05	 
	 	 	 	1,754,385	 	 	$	1.50	 	 	$	2,631,577.50	 	 	 	1,754,385	 	 	$	4.05	 
	 	 	 	800,000	 	 	$	1.50	 	 	$	1,200,000.00	 	 	 	800,000	 	 	$	4.05	 
	 	 	 	5,815,254	 	 	 	 	 	 	$	10,353,315.50	 	 	 	5,815,254	 	 	$	4.05	 








  



		(1)	Prior Warrant for 800,000 Prior Warrant Shares issued to JMB LLC. The Investor represents and warrants that it has the power
and authority to exercise this Prior Warrant pursuant to the terms of this Agreement.



 






    	 



    	 



    
  


Exhibit A


 


THIS WARRANT AND THE SECURITIES REPRESENTED
BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY
NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, AND UPON DELIVERY OF
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT THE PROPOSED TRANSFER IS EXEMPT FROM THE SECURITIES ACT OR THAT THE PROSPECTUS
DELIVERY REQUIREMENTS HAVE BEEN MET.


 


COMMON STOCK PURCHASE WARRANT


 


To purchase common stock shares of common
stock, $0.0001 par value, of


 


Star Scientific, Inc.


 


THIS COMMON STOCK
PURCHASE WARRANT (the “Warrant”) certifies that, for value received, [INVESTOR]
(the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after February 28, 2012 (the “Initial Exercise Date”) and on or prior
to the close of business on February 28, 2017 (the “Termination Date”) but not thereafter (the “Exercise
Period”), to subscribe for and purchase from Star Scientific, Inc., a corporation incorporated in Delaware (the “Company”),
up to [●]1 shares (the “Warrant Shares”) of common stock, par value $0.0001 per share, of
the Company (the “Common Stock”). The purchase price of one share of Common Stock (the “Exercise Price”)
under this Warrant shall be $4.05, subject to adjustment hereunder. The Exercise Price and the number of Warrant Shares for which
the Warrant is exercisable shall be subject to adjustment as provided herein. The term “Holder” shall refer to the
Holder identified above or any subsequent transferee of this Warrant. Capitalized terms used but not otherwise defined herein
shall have the meanings set forth in the Securities Purchase and Registration Rights Agreement, dated February 28, 2012, between
the Company and Holder (the “Purchase Agreement”).


 


1.                  
Authorization of Warrant Shares. The Company represents and warrants that all Warrant Shares which may be issued
upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by
this Warrant, be duly authorized, validly issued, fully paid and nonassessable.


 


_________________


 


		1	Equal to the aggregate
number of shares set forth opposite the Holder’s name on Schedule I to the Purchase Agreement under the heading “New
Warrants” (represented by one or more Warrants).



 






    	1



    	 



    
 


2.                  
Exercise of Warrant.


 


(a)                
Except as provided in Section 3 herein, exercise of the purchase rights represented by this Warrant may be made at any time
or times on or after the Initial Exercise Date and before or on the Termination Date by (i) surrendering this Warrant, with the
Notice of Exercise Form annexed hereto completed and duly executed, to the offices of the Company (or such other office or agency
(including the transfer agent, if applicable) of the Company as it may designate by notice in writing to the registered Holder
at the address of such Holder appearing on the books of the Company) and (ii) delivering payment of the Exercise Price of the shares
thereby purchased by wire transfer of immediately available funds or cashier’s check drawn on a United States bank. The Holder
exercising his purchase rights in accordance with the preceding sentence shall be entitled to receive a certificate for the number
of Warrant Shares so purchased, which certificate will bear a legend substantially similar to the legend set forth on this Warrant.
Certificates for shares purchased hereunder shall be issued and delivered to the Holder within five (5) Trading Days (as defined
below) after the date on which this Warrant shall have been exercised as aforesaid. This Warrant shall be deemed to have been exercised
and such certificate or certificates shall be deemed to have been issued, and the Holder shall be deemed to no longer hold this
Warrant with respect to such shares and to have become a holder of record of such shares for all purposes, in each case as of the
date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder,
if any, pursuant to Section 4 prior to the issuance of such shares, have been paid.


 


(b)                
In the event that the Warrant is not exercised in full, the number of Warrant Shares shall be reduced by the number of such
Warrant Shares for which this Warrant is exercised and/or surrendered, and the Company, if requested by Holder and at his expense,
shall within ten (10) Trading Days issue and deliver to the Holder a new Warrant of like tenor in the name of the Holder or as
the Holder (upon payment by Holder of any applicable transfer taxes) may request, reflecting such adjusted Warrant Shares.


 


(c)                
Notwithstanding anything to the contrary contained in this Warrant, this Warrant shall not be exercisable by the Holder
hereof to the extent (but only to the extent) that the Holder or any of its affiliates would beneficially own in excess of 4.99%
(the “Maximum Percentage”) of the Common Stock. To the extent the above limitation applies, the determination
of whether this Warrant shall be exercisable (vis-à-vis other convertible, exercisable or exchangeable securities owned
by the Holder) and of which such securities shall be exercisable (as among all such securities owned by the Holder) shall, subject
to such Maximum Percentage limitation, be determined on the basis of the first submission to the Company for conversion, exercise
or exchange (as the case may be). No prior inability to exercise this Warrant pursuant to this paragraph shall have any effect
on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. For the
purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation, with respect
to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder. The provisions of this paragraph shall be implemented in
a manner otherwise than in strict conformity with the terms of this paragraph to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or
to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. Upon the written
or oral request of the Holder, the Company shall as soon as practicable confirm orally and in writing to the Holder the number
of shares of Common Stock then outstanding, including by virtue of any prior conversion or exercise of convertible or exercisable
securities into Common Stock.


 






    	2



    	 



    
 


 


“Trading Day”
shall mean a day on which there is trading on the Principal Market or such other market or exchange on which the Common Stock is
then principally traded.


 


3.                  
No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon
the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise,
the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the
Exercise Price.


 


4.                  
Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the Holder
for any issue tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall
be paid by the Company, and such certificates shall be issued in the name of the Holder; provided, however, that the Holder shall
pay any applicable transfer taxes.


 


5.                  
Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely
exercise of this Warrant, pursuant to the terms hereof.


 


6.                  
Division and Combination.


 


(a)                
This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the denominations in which new Warrants are to be issued, signed by the Holder or his
agent or attorney. The Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be
divided or combined in accordance with such notice


 


(b)                
The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants
under this Section 6.


 


7.                  
No Rights as Stockholder until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights
as a stockholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate
Exercise Price, the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such
shares as of the close of business on the later of the date of such surrender or payment and this Warrant shall no longer be issuable
with respect to such Warrant Shares.


 


8.                  
Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to
the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant
or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.


 


9.                  
Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of
any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right
may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.


 






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10.               
Adjustments of Exercise Price and Number of Warrant Shares. The number and kind of securities purchasable upon the
exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the
following. In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock
to holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares,
(iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares
of its capital stock in a reclassification of the Common Stock, then the number of Warrant Shares purchasable upon exercise of
this Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of
Warrant Shares or other securities of the Company which he would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company
which are purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Warrant Shares or other securities
resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price
in effect immediately prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to
such adjustment and dividing by the number of Warrant Shares or other securities of the Company purchasable pursuant hereto as
a result of such adjustment. An adjustment made pursuant to this paragraph shall become effective immediately after the effective
date of such event retroactive to the record date, if any, for such event.


 


11.               
Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. If, at any time while this Warrant
is outstanding (i) the Company effects any merger or consolidation of the Company with or into another individual or corporation,
partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company or
other entity of any kind (each a “Person”), in which the Company is not the survivor and the stockholders of
the Company immediately prior to such merger or consolidation do not own, directly or indirectly, at least fifty percent (50%)
of the voting securities of the surviving entity, (ii) the Company effects any sale of all or substantially all of its assets or
a majority of its Common Stock is acquired by a third party, in each case, in one or a series of related transactions, (iii) any
tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which all or substantially all
of the holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv)
the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock
is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination
of shares of Common Stock covered by Section 10 above) (in any such case, a “Fundamental Transaction”), then
the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash
or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately
prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant
without regard to any limitations on exercise contained herein (the “Alternate Consideration”). The Company
shall not effect any such Fundamental Transaction unless prior to or simultaneously with the consummation thereof, any successor
to the Company, surviving entity or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation
or entity shall assume the obligation to deliver to the Holder, such Alternate Consideration as, in accordance with the foregoing
provisions, the Holder may be entitled to purchase and/or receive (as the case may be), and the other obligations under this Warrant.
The foregoing provisions of this Section 11 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations,
spin-offs, or dispositions of assets.


 






    	4



    	 



    
 


 


12.               
Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other property purchasable
upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall give notice thereof
to the Holder, which notice shall state the number of Warrant Shares (and other securities or property) purchasable upon the exercise
of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such adjustment, setting
forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.


 


13.               
Notice of Corporate Action. If at any time:


 


(a)                
the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend
or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any
class or any other securities or property, or to receive any other right, or


 


(b)                
there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock
of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of all or substantially
all the property, assets or business of the Company to, another corporation, or


 


(c)                
there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in any one or more
of such cases, the Company shall give to Holder (i) at least five Business Days’ prior written notice of the date on which
a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such
reorganization, reclassification, merger, consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the
case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation
or winding up, at least five Business Days’ prior written notice of the date when the same shall take place. Such notice
in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend,
distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their Warrant Shares for securities
or other property deliverable upon such disposition, dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in
accordance with Section 16(d).


 


14.               
Authorized Shares. The Company covenants that during the period the Warrant is outstanding, it will reserve from
its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the
exercise of any purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure
that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation.


 






    	5



    	 



    
 


 


Except and to the extent
as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate
of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will
at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary
or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality
of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon
such exercise immediately prior to such increase in par value and (b) take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant.


 


15.               
Call. At any time and from time to time following the date the registration statement registering the resale of the
Warrant Shares issuable upon exercise of the Warrant is declared effective by the U.S. Securities and Exchange Commission, the
Company shall have the right, upon 20 Business Days’ prior written notice to the Holder (“Call Notice”),
to call (require Holder to exercise) all or any portion of this Warrant at the Exercise Price provided that (i) the Warrant Shares
are registered for resale pursuant to the Securities Act and have been for at least the 20-Trading Day period preceding the Call
Notice, (ii) the Prospectus has not been suspended at any time during the 20-Trading Day period preceding the Call Notice, (iii)
the Common Stock is currently listed (and is not suspended from trading) on the Principal Market as of the date the Call Notice
is delivered to the Holder through the effective date of such call, (iv) the Company is not in default (or taken any action or
failure to act which through the passage of time would result in a default) under the Purchase Agreement, (v) the VWAP of the Common
Stock on the Principal Market is equal to or greater than $6.00 (subject to adjustment to reflect forward or reverse stock splits,
stock dividends, recapitalizations and the like) (the “Threshold Price”) for at least 20 consecutive Trading
Days, and (vi) the Call Notice is delivered within 3 Business Days’ of the most recent day in the previous clause and that
the Common Stock reached the Threshold Price. At any time prior to the effective date of such call, the Holder shall have the right
to exercise this Warrant in accordance with its terms.


 


“VWAP”
shall mean for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on an the Principal Market or the New York Stock Exchange, the American Stock Exchange or the Nasdaq Small Cap
Market (each an “Approved Market”), the daily volume weighted average price of the Common Stock for such date
(or the nearest preceding date) on the primary Approved Market on which the Common Stock is then listed or quoted as reported by
Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. ET to 4:02 p.m. Eastern Time) using the HP function; (b) if the
Common Stock is not then listed or quoted on an Approved Market and if prices for the Common Stock are then quoted on the OTC Bulletin
Board, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin
Board; (c) if the Common Stock is not then listed or quoted on the OTC Bulletin Board and if prices for the Common Stock are then
reported in the “Pink Sheets” published by the National Quotation Bureau Incorporated (or a similar organization or
agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or
(d) in all other cases, the fair market value of a share of Common Stock as determined by the Company and Holder in good faith.


 






    	6



    	 



    
 


 


“Business
Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the City of New York
are authorized or required by law or executive order to remain closed.


 


16.               
Miscellaneous.


 


(a)                
Jurisdiction. This Warrant shall constitute a contract under the laws of the State of New York, without regard to
its conflict of law, principles or rules.


 


(b)                
Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant will have
restrictions upon resale imposed by state and federal securities laws and/or as set forth in the Purchase Agreement.


 


(c)                
Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part
of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, provided, however,
that all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision
of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of
appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of his rights,
powers or remedies hereunder.


 


(d)                
Notices. All notices, requests, consents and other communications provided for herein shall be in writing and shall
be effective upon delivery in person, when faxed and received, or five Business Days after being mailed by certified or registered
mail, return receipt requested, postage pre-paid, addressed as follows:


 


		(i)	If to the Holder:



 


John McKeon

Phone: (xxx) xxx-xxxx


 


or to the address of the Holder as shown on the books of the
Company; or


 






    	7



    	 



    
 


 


		(ii)	If to the Company:



 


Star Scientific, Inc.

4470 Cox Road

Glen Allen, Virginia 23060

Telephone: (804) 527-1970

Facsimile: (804) 527-1976

Attention: Chief Financial Officer


 


with a copy to:


 


Star Scientific, Inc.

7475 Wisconsin Avenue

Bethesda, MD 20814

Telephone: (301) 654-8300

Facsimile: (301) 654-9308

Attention: General Counsel


 


or at such other address as the Holder or the Company, as applicable,
may hereafter have advised the other in accordance with the provisions of this paragraph.


 


(e)                
Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to exercise this
Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability
of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.


 


(f)                 
Successors and Assigns; No Assignment. This Warrant and the rights and obligations evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company, provided that neither the Company (except pursuant to a transaction
subject to Section 11 herein) nor the Holder may assign this Warrant without the prior written consent of the other party.


 


(g)                
Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the
Company and the Holder.


 


(h)                
Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Warrant.


 


(i)                  
Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose,
be deemed a part of this Warrant.


 






    	8



    	 



    
 


 


IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.


 


Dated: February 28, 2012


 





	 	STAR SCIENTIFIC, INC.
	 	 
	 	 
	 	By:	
	 	Name:	Paul L. Perito
	 	Title:	Chairman, President and
	 	 	Chief Operating Officer


 


 


 





Signature Page to Warrant




 






    	 



    	 



    
 


 


NOTICE OF EXERCISE


 


To: Star Scientific, Inc.


 


(1)                
The undersigned hereby elects to purchase ________ Warrant Shares of Star Scientific, Inc. pursuant to the terms of the
attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.


 


(2)                
Payment shall take the form of in lawful money of the United States.


 


(3)                
Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned. The Warrant
Shares shall be delivered to the following:


 


______________________________


 


______________________________


 


______________________________


 


(4)                
Accredited Investor/Qualified Institutional Buyer. The undersigned is an “accredited investor” as defined in
Regulation D under the Securities Act of 1933, as amended.


 





	 	[PURCHASER]
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:
	 	Dated: