Exhibit 10.2





Exhibit 10.2




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 AMENDED COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value
received, Iroquois Master Fund Ltd (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
March 2, 2009 (the “Initial Exercise Date”) and on or prior to the close of business on
March 2, 2014 (the “Termination Date”) but not thereafter (the “Exercise Period”),
to subscribe for and purchase from Star Scientific, Inc., a Delaware corporation (the
“Company”), up to 2,649,007 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 $1.50, 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 March 2, 2009, 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.


 


 









 






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.



“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.


 


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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.



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.


 


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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.



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.


 


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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.


 


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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 September 2, 2009, 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) exercise
of the Warrant in whole will not cause the Holder to exceed the Section 3(c) limitations, (vi) the
VWAP of the Common Stock on the Principal Market is equal to or greater than $10.00 (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 (vii) 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.


 


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“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:







Iroquois Master Fund Ltd

641 Lexington Avenue

26th Floor

New York, NY 10022

Phone: (212) 974-3070

Fax: (212) 207-3452

Attn: Joshua Silverman



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




 


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	 	(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.




 


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



Dated: March 5, 2010




	 	 	 	 	 
	 	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: