Exhibit 10.5


 


Execution
Version


 


	 


 


SECURITIES
PURCHASE AND REGISTRATION RIGHTS AGREEMENT 


 


Between 


 


STAR SCIENTIFIC,
INC., 


 


as Issuer,



 


And 


 


The Investors
Set Forth on Schedule I hereto


 


March 12,
2014


 


	 


 




    	 



    	 



    

 


This
SECURITIES PURCHASE AND REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is entered into and effective as of
March 12, 2014, between Star Scientific, Inc., a Delaware corporation (the “Company”), and the several investors
set forth on Schedule I hereto (each an “Investor” and collectively, the “Investors”).



 


WHEREAS,
the Company and each Investor desire that Investor will purchase from the Company and the Company will issue and sell to each
Investor (or an individual retirement account behalf of the Investor), upon the terms and conditions set forth in this Agreement:
(a) the aggregate amount of shares of the Company's common stock, par value $0.0001 per share (“Common Stock”),
set forth opposite to each Investor's name under the heading “Shares” on Schedule I hereto (in each case, the
“Shares”); and (b) a warrant 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 “Warrants”
on Schedule I hereto (in each case, the “Warrant Shares”), having an exercise price of $1.00 per Warrant
Share (the “Exercise Price”) (a Share and Warrant Share purchasable under a Warrant, collectively a “Unit”);


 


WHEREAS,
the purchase price paid by an Investor for each Unit shall be the price set forth opposite such Investor's name under the heading
“Purchase Price Per Unit” on Schedule I hereto, and


 


WHEREAS,
each Investor will have registration rights with respect to the Shares, 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 Shares and Warrant. At the Closing (as defined in Section 2), the Company will sell to each
Investor, and each Investor will purchase from the Company, upon the terms and subject to the conditions hereinafter set forth,
the Shares and the Warrant for the aggregate purchase price set forth opposite each Investor's name under the heading “Aggregate
Purchase Price” on Schedule I hereto.


 


2.          Delivery
of the Shares and Warrant at Closing; Future Equity Participation.


 


(a)
The completion of the purchase, sale and issuance of the 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 each Investor
shall agree), at the offices of the Company's counsel. At the Closing, the Company shall issue to each 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 Shares and (ii) the Warrant issued in the name of the Investor. The Company's obligation to issue the
Shares and the Warrant to each 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 Shares and Warrant that the Investor
is hereby agreeing to purchase set forth opposite the name of such Investor under the heading “Aggregate Purchase Price”
on Schedule I hereto; and (ii) 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. Each
Investor's obligation to purchase the Shares and Warrant 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; and (iii) 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.


 




    	 



    	 



    

 


(b)  The
Company shall not issue to Investor any Shares or Warrant Shares under this Agreement until such time when such shares proposed
to be issued, when aggregated with all other shares then owned beneficially (as calculated pursuant to (i) Section 13(d) of the
Securities Exchange Act of 1934 and Rule 13d-3 promulgated thereunder and (ii) the rules and regulations of the NASDAQ Global
Market) by the Investor would not result in the beneficial ownership by the Investor of more than 9.99% of the then issued and
outstanding shares of Common Stock (the “Ownership Cap”), without the prior written consent of Investor. The Ownership
Cap shall be appropriately adjusted for any stock dividend, stock split, reverse stock split or similar transaction.


 


(c)  (i)
For a period of two (2) years following the date hereof, Investor shall have the option and right (but not the obligation) to
participate in any Equity Issuance at the same price and the same terms and conditions as offered to other investors in the Equity
Issuance (other than any Equity Issuance pursuant to the Concurrent Financing) that results in net proceeds to the Company, provided
that the Investor's right to participation in any such Equity Issuance shall not exceed the Pro Rata Portion. The Company agrees
to use its reasonable best efforts to take any and all action, or to cause such action to be taken, as is necessary or appropriate
to allow the Investor to fully participate in any Equity Issuance in accordance with the provisions of this Agreement. “Equity
Issuance” means any issuance, sale or placement of stock of the Company, and any issuance, sale or placement of any other
securities of the Company that are convertible or exchangeable into stock of the Company. However, the following issuances will
not be considered an Equity Issuance: (1) any issuance of stock pursuant to an exercise of an award under the Company's equity
incentive plans, (2) any issuance of stock pursuant to current or future compensation arrangements, (3) any issuance as consideration
for an acquisition, or (4) any issuance of shares upon the conversion of warrants outstanding on the date hereof. “Pro Rata
Portion” means with respect to Investor at a given time and with respect to a given Equity Issuance, the aggregate dollar
value of shares of common stock, other capital stock or other securities to be issued, sold or placed in the Equity Issuance equal
to the product of (I) the dollar amount resulting from the product of (a) the aggregate dollar value of shares of common stock,
other capital stock or other securities proposed to be issued, sold or placed in the Equity Issuance, multiplied by (b) fifty
percent (50%) and (II) sixteen percent (16)% (such sixteen percent (16%) being referred to as the “Execution Date Multiplier”).
In the event that, on the date that definitive documents are executed with respect to any Equity Issuance, there are outstanding
Notes representing Advances (in each case, as defined in that certain Loan Agreement, dated March 12, 2014, between the Company
and lender thereto (the “Loan Agreement”)) under the Loan Agreement, then the Execution Date Multiplier shall
be reduced to reflect Investor's participation in the Concurrent Financing as if such Advances were outstanding on the date hereof.
The “Concurrent Financing” means the various third party financing arrangements the Company is executing pursuant
to the agreements described on Schedule 2.1(c)(i) (the “Concurrent Financing”) separate and apart from
the transactions contemplated by this Agreement.


 




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(ii)         In
the event the Company proposes to undertake an Equity Issuance, the Company shall promptly give the Investor prior written notice
of its intention, describing the type of equity interests, the price at which such securities are proposed to be issued (or, in
the case of an underwritten or privately placed offering in which the price is not known at the time the notice is given, the
method of determining the price and an estimate thereof), the timing of such proposed Equity Issuance and the general terms and
conditions upon which the Company proposes to effect the Equity Issuance. The Investor shall have five (5) Business Days (or,
if the Company expects that the proposed Equity Issuance will be effected in less than five (5) business days, such shorter period,
that shall be as long as practicable, as may be required in order for the Investor to participate in such proposed Equity Issuance)
from the date the Investor receives notice of the proposed Equity Issuance to elect to purchase up to his Pro Rata Portion of
such Equity Issuance for the consideration and upon the terms specified in the notice provided by the Company pursuant to this
Section 2.1(c) by giving written notice to the Company and stating therein the quantity of equity interests to be purchased.
Any such notice shall be irrevocable; provided, however, that if the Equity Issuance does not occur within thirty (30) business
days following such notice and the terms of the Equity Issuance are materially modified, then the Investor will be provided the
opportunity to similarly participate on such modified terms (or decline to participate in such Equity Issuance on such modified
terms). Any purchase of Equity Interests by the Investor pursuant to this Section 2.1(c) shall occur contemporaneously
with, and be subject to the same terms and conditions as, the closing of the sale of the Equity Interests by the Company to the
other parties.


 


(iii)        Notwithstanding
the foregoing, unless the Company consents, Investor shall not be permitted to participate in any Equity Issuance at any level
that would require the Company to seek shareholder approval with respect to Investor's participation in the Equity Issuance or
otherwise violate any rules and regulations of the NASDAQ Global Market (and any participation by Investor, if any, shall reasonably
attempt to be structured so as not to require shareholder approval or otherwise violate any rules or regulation of the NASDAQ
Global Market).


 


(iv)        In
the event that the Investor does not exercise the right set forth in this Section 2.1(c) within the applicable period as
set forth above, the Company shall be permitted to sell the equity interests in respect of which such rights were not exercised;
provided, however, that if Investor does not exercise such right and the Company materially modifies the terms and conditions
of the Equity Issuance, the Company shall use its commercially reasonable efforts to permit Investor to participate in such Equity
Issuance as specified in this Section 2.1(c) (it being understood Investor's participation shall not be a condition precedent
to the Company's ability to consummate such financing).


 


(v)         The
Company shall have the right, in its sole discretion, at all times prior to consummation of any proposed Equity Issuance giving
rise to the rights granted by this Section 2.1(c), to abandon, withdraw or otherwise terminate such proposed Equity Issuance,
without any liability to the Investor.


 


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


 




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3.1           Organization.
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”).


 


3.2           Due
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
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, the 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.


 


3.3           Non-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 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 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.


 




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3.4           SEC
Filings. Since January 1, 2013, 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 or furnished SEC Documents.


 


3.5           Absence
of Certain Change. Except as disclosed in the SEC Documents or otherwise publicly disclosed by the Company, since January
1, 2014, 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.


 


3.6           Capitalization.
As of February 15, 2014, the authorized capital stock of the Company consists of (i) 274,800,000 shares of Common Stock, of which
172,607,230 shares are issued and outstanding and 36,094,832 shares are 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 are 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 or in connection with
the Concurrent Financing, 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”).


 


3.7           No
Material Non-public Information. The Company has not provided any material non-public information to Investor.


 




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3.8           Certain
Proceedings. The Company is not the subject of a voluntary bankruptcy or solvency action, and has not made a general assignment
for the benefit of creditors, and has not taken any corporate action to authorize any of the foregoing.


 


4.          Representations,
Warranties and Covenants of Investor. Each Investor severally for itself, and not jointly with the other Investors, represents
and warrants to, and covenants with the Company, as follows:


 


4.1           Due
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 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.


 


4.2           Non-Contravention.
The execution and delivery of this Agreement, the purchase of the 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 Shares and the Warrant by Investor, other than such as have
been made or obtained.


 




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4.3           Private
Placement. Investor represents and warrants to, and covenants with, the Company that Investor is acquiring the Shares and
the Warrant for its own account for investment only and with no present intention of distributing any of the 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 Shares, Warrant or Warrant Shares. Investor has been advised and understands that neither the
Shares, 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 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.


 


4.4           Certain
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 was presented with draft
documentation relating to the transactions proposed 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. Such 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.


 


4.5           No
Advice. Investor understands that nothing in this Agreement or any other materials presented to Investor in connection with
the purchase and sale of the 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 Shares and the Warrant.


 


4.6           Accredited
Investor; Big Boy. 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 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 Shares, Warrant and Warrant Shares. Investor acknowledges that it does not have any material non-public information relating
to the Company. Investor further acknowledge that the Company and its respective agents, officers, directors and affiliates possess
material nonpublic information not known to you regarding or relating to the Company or the Units, including, but not limited
to, information concerning the business, financial condition, results of operations, legal matters associated with ongoing or
past litigation matters, investigations, the Company's corporate transition matters (including transactions related to the corporate
transition matters and amounts that become payable by the Company), prospects and other plans of the Company. Investor acknowledges
that any material nonpublic information may be indicative of a value of the Units that is substantially less than the Adjusted
Purchase Price set forth on Schedule I for such Units, or may be otherwise adverse to Investor, and such material nonpublic information,
if known to Investor, could be material to your decision to acquire the Units. Accordingly Investor understands and accepts that
there is an information disparity between Investor and the Company, confirm that the Company is not obligated to disclose, and
consistent with Investor's instructions, has not disclosed material, non-public information to Investor, and has no liability
arising from such non-disclosure. Investor acknowledges that neither the Company nor any of its agents, officers or directors
or affiliates have delivered any information or made any representation to Investor, except as expressly set forth herein.


 




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4.7           Limited
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
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, 2013, as reported on the Company's
quarterly report on Form 10-Q, filed with the Commission on November 12, 2013, and that, except as disclosed in the SEC documents,
no information more recent than such date has been provided to or requested by Investor as to the Company's results, operations,
financial condition, business or prospects. Investor understands that its purchase of the Shares, Warrant and, if applicable,
Warrant Shares involves a high degree of risk and that Investor may lose its entire investment in the 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, nor has any, information provided by the Company and its Subsidiaries, except to the extent provided
in Section 3 herein.


 


4.8           No
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 Shares, Warrant or Warrant Shares or the fairness or suitability
of an investment in the Shares, Warrant or Warrant Shares nor have such authorities passed upon or endorsed the merits thereof.


 


4.9           Restrictive
Legend. The Company shall issue the Warrant and certificates for the 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 Shares or
Warrant Shares pursuant to the 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 statement are available to Investor.


 


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


 


4.11         No
Market. Investor understands that the Shares 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 Shares,
Warrant and Warrant Shares must be held indefinitely unless and until the resale of such Shares, 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.


 




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4.12         No
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.


 


4.13         Transactional
Exemption. Investor understands that the 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 Shares, Warrant and Warrant
Shares.


 


4.14.
Investor Undertaking. The Investor understands that (i) neither the Warrants nor the Warrant Shares may be offered for
sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) the Investor shall have delivered to the
Company (if requested by the Company) an opinion of counsel to such Investor, in a form reasonably acceptable to the Company,
to the effect that such Warrants or Warrant Shares, as applicable, to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) the Investor provides the Company with reasonable assurance
that such Warrants or Warrant Shares, as applicable, can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated
under the Securities Act (or a successor rule thereto) (collectively, “Rule 144”); and (ii) any sale of the
such Warrants or Warrant Shares, as applicable, made in reliance on Rule 144 may be made only in accordance with the terms of
Rule 144, and further, if Rule 144 is not applicable, any resale of such Warrants or Warrant Shares, as applicable, under circumstances
in which the seller (or the Person (as defined below) through whom the sale is made) may be deemed to be an underwriter (as that
term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules
and regulations of the Commission promulgated thereunder.


 


4.15
Disclosure of Transactions. On or before 5:30 p.m., New York time, on the 4th Business Day following the date of this Agreement,
the Company shall file a Current Report on Form 8-K (or other form permitted under the federal securities law) disclosing the
material terms and conditions of the transactions contemplated by this Agreement, the Warrant and the Concurrent Financing, in
compliance with the requirements of Form 8-K (or such other form).


 


5.          Registration
Rights.


 


5.1           Certain
Definitions


 


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


 




    	9



    	 



    

 


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) the Shares and 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 Shares or 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 Shares, 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, 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) (provided, that such amount of any reimbursement of the reasonable
fees and expenses of counsel to Holders not to exceed $5,000 in the aggregate or, if the Registration Expenses relate to a registration
statement other than on Form S-3, $7,500 in the aggregate) 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.”


 


5.2           Registration
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:


 




    	10



    	 



    

 


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


 


(i)          But
in any event within 75 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 sum of (A) the Shares and (B) Warrant Shares issuable upon full exercise of the Warrants (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 135 days (or, if the Commission elects to review the Registration
Statement, 195 days) following the Closing. The Company, in its sole discretion, may elect to include for offer and sale securities
in additional to the Registrable Securities in the Registration Statement. By 5:30 p.m. (New York time) on the Business Day immediately
following the effective date of the Registration Statement, the Company shall file with the Commission in accordance with Rule
424(b) under the Securities Act the final prospectus to be used in connection with sales pursuant to the applicable Registration
Statement (whether or not such a prospectus is technically required by such rule).


 


(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.


 


(iv)        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.


 


(v)         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.


 


(vi)        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.


 




    	11



    	 



    

 


(vii)       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.


 


(viii)      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.


 


(ix)         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 NASDAQ Global Market (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)(ix) if compliance would cause the Company to fail
to comply with any other provisions hereunder.


 


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


 




    	12



    	 



    

 


(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.


 




    	13



    	 



    

 


(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)(vii) or 5.2(a)(viii), 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.


 


5.3           Expenses
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.


 


5.4           Registration
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.


 


5.5           Registration
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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5.6 Indemnification.





 


(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 material breach of this Agreement (including any representation herein) or 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 material breach of this Agreement by Holder (including any representation herein) or 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.


 


5.7           Contribution.
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.


 




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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.


 


5.8           Survival.
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.


 


5.9           Information
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.


 


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


 




    	17



    	 



    

 


Any
certificate representing Share or 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 MARCH 12, 2014 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 Shares or Warrant Shares, issued upon exercise of the Warrant without the legends set forth above
at such time as the Holder thereof is (i) permitted to transfer such 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 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 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:


 




    	18



    	 



    

 


(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.


1255 23rd Street,
NW, Suite 875


Washington, DC 20037


Attn: Robert E. Pokusa


General Counsel


Phone: (202) 887-5104


Telecopy: (301) 654-8300;
and


 


K&L Gates LLP


1601 K Street, NW


Washington, DC 20006


Attn: Alan J. Berkeley


Phone: (202) 778-9050


Telecopy: (202) 778-9100


 


K&L Gates LLP


1601 K Street, NW


Washington, DC 20006


Attn: Robert K. Smith


Phone: (202) 778-9376


Telecopy: (202) 778-9100


 


(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 any Investor except pursuant to an instrument in writing signed
by the Company and such 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.


 




    	19



    	 



    

 


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.


 


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 Shares or Warrant Shares transferred in accordance with this Agreement, including the legends described herein, to any
permitted transferee of such Shares 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,
provided, however, that the Company shall pay the reasonable out of pocket legal expenses of Investor subject to a maximum amount
equal to the reasonable out of pocket legal expenses of the Company incurred in connection with the preparation, negotiation and
execution of this Agreement (such expense to be paid out of the proceeds from the Concurrent Financing).


 


18.         Independent
Nature of Investors' Obligations and Rights. The obligations of each Investor under this Agreement are several and not joint
with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations
of any other Investor under this Agreement. Nothing contained herein, and no action taken by any Investor pursuant hereto, shall
be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create
a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions
contemplated by this Agreement and the Company acknowledges that the Investors are not acting in concert or as a group with respect
to such obligations or the transactions contemplated by this Agreement. Each Investor confirms that it has independently participated
in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. Each Investor shall
be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement,
and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose.


 




    	20



    	 



    

 


19.         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.


 


20.         Press
Release. The Company shall not use the Investor's name in any press release issued by the Company related to this Agreement
or the transactions contemplated hereby, without the consent of Investor.


 


[Signature
pages follow.]


 




    	21



    	 



    

 


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/ Michae1 J. Mullan 
	 	Name: 	Michae1 J. Mullan
	 	Title:  	Chairman and CEO


  


Signature
Page to Securities Purchase and Registration Rights Agreement


 




    	 



    	 



    

 


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


 


	 	Rachel J. Williams
	 	 	 
	 	By:	/s/ Rachel J. Williams 


 


Signature
Page to Securities Purchase and Registration Rights Agreement


 




    	 



    	 



    

 


Schedule
2.1(c)(i)


 


Concurrent Financing


 


The Concurrent
Financing is comprised of the various financing transactions effected pursuant to various financing-related agreements, all executed
March 12, 2014, among the Company and various investors and lenders.


 




    	 



    	 



    

 


SCHEDULE
I


 


SCHEDULE
OF INVESTORS


 


	Name and Address:	 	Shares	 	 	Warrants	 	 	Purchase Price
 Per Unit	 	 	Aggregate Purchase Price	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Rachel J. Williams 
7250 Franklin Ave #1203 
Los Angeles, CA 90046 	 	 	1,500,000	 	 	 	1,500,000	 	 	$	1.00	 	 	$	1,500,000	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total:	 	 	1,500,000	 	 	 	1,500,000	 	 	 	 	 	 	$	1,500,000	 



 




    	 



    	 



    

 


Exhibit
A


 


Form of Warrant


 




    	 



    	 



    

 


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, Rachel J. Williams (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 September 12, 2014 (the “Initial Exercise Date”) and on or prior to the close of business on September
12, 2021 (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 1,500,000 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 $1.00, 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 12, 2014, 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.


 


(c)          Notwithstanding
the foregoing, this Warrant shall not be exercisable, and the Company shall not issue to Lender any shares of Common Stock underlying
this Warrant, until such time when such shares (including shares issuable upon exercise of the Warrants) proposed to be issued,
when aggregated with all other shares then owned beneficially (as calculated pursuant to (i) Section 13(d) of the Securities Exchange
Act of 1934 and Rule 13d-3 promulgated thereunder and (ii) the rules and regulations of the NASDAQ Stock Market) by the Lender
would not result in the beneficial ownership by the Lender of more than 9.99% of the then issued and outstanding shares of Common
Stock (the “Ownership Cap”), without the prior written consent of Investor. The Ownership Cap shall be appropriately
adjusted for any stock dividend, stock split, reverse stock split or similar transaction.


 


“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.


 


“Principal
Market” means the Nasdaq Global Market.


 


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.


 




    	2



    	 



    

 


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.


 




    	3



    	 



    

 


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).


 




    	5



    	 



    

 


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.


 


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.         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.


 




    	6



    	 



    

 


(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:


 


Rachel J. Williams


7250 Franklin Ave #1203


Los Angeles, CA 90046


 


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


 


(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.


1255 23rd Street,
NW, Suite 875


Washington, DC 20037


Attn: Robert E. Pokusa


General Counsel


Phone: (202) 887-5104


Telecopy: (301) 654-8300


 


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.


 




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(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: March 12, 2014


 


	 	STAR SCIENTIFIC, INC.
	 	 
	 	By:	 
	 	 	Name: Michael J. Mullan 
	 	 	Title: Chairman and CEO


 


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: