Exhibit 4.1


 


THIS PROMISSORY
NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”), OR UNDER THE SECURITIES LAWS OF APPLICABLE STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY
AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT
TO REGISTRATION UNDER SUCH LAWS OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE
AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN
COMPLIANCE WITH THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS.


 


PROMISSORY NOTE


 


	US $[Amount of Advance]	[Draw Date]


 


FOR
VALUE RECEIVED, Star Scientific, Inc., a Delaware corporation (the “Company” or “Borrower”),
hereby unconditionally promises to pay to John Joseph McKeon an individual with an address at 15A Golf Village, Key Largo,
FL 33037 or his permitted assignee (the “Lender”) the principal sum of ________________ MILLION DOLLARS ($_,000,000),
together with accrued interest, in lawful money of the United States of America (the “Note”). Interest and principal
shall be payable at such address or by wire transfer to such account as the Lender shall specify by written notice or in the absence
of such notice at 15A Golf Village, Key Largo, FL 33037.


 


		1.	Due
                                         Date; Prepayment. Subject to Section 3 below, this Note shall be due and payable
                                         on the second anniversary of this Note (“Due Date”). Prior to the
                                         Due Date, the Company may at any time, and from time to time, repay, without penalty
                                         or premium, any or all amounts due under this Note, provided, however, that the Company
                                         shall provide Lender with no less than twenty (20) calendar days written notice of the
                                         Company’s intention to prepay during which period Lender may exercise conversion
                                         rights under this Note and the Loan Agreement. Notwithstanding the foregoing, the Company
                                         may not pay such portion of this Note before the Due Date to the extent that Lender is
                                         for any reason not permitted to convert such portion of this Note into the Units including
                                         due to the Ownership Cap or provisions of Section 16 of the Securities Act. Any repayment
                                         or prepayment shall first be applied to interest and then to principal.



 


		2.	Interest.
                                         Interest shall accrue on the unpaid principal amount of this Note at the lesser of:
                                         (i) three (3) percent per annum and (ii) the maximum rate permitted by applicable law,
                                         computed on the basis of the number of revolving days elapsed from the date of the advance
                                         and a year of 365 days. Accrued interest on any unpaid principal amount will be paid
                                         in cash in arrears by the Company on a calendar quarterly basis on the first day of April,
                                         July, October and January of each calendar year (or if such day does not fall on a business
                                         day, the next business day) or at the time of repayment of this Note, whichever occurs
                                         earlier.



 




    	 



    	 



    

 


		3.	Conversion;
                                         Units. Lender may in accordance with the Loan Agreement convert (the “Conversion”)
                                         all or a portion of this Note (including after notice by the Company of prepayment of
                                         this Note) (the “Converted Amount”) into investment units in the Company.
                                         Each such investment unit shall consist of one share of the Company’s common stock,
                                         par value $0.0001 per share (the “Common Stock”) and one warrant to
                                         purchase one share of Common Stock at an exercise price of $1.00 for a term of seven
                                         years commencing six months from the date hereof (the “Warrants”)
                                         (collectively, the Common Stock and Warrants are referred to as the “Units”).
                                         The Converted Amount will convert into such number of shares of Common Stock and such
                                         number of Warrants that equals the Converted Amount divided by $1.00 with any partial
                                         share and Warrant to purchase a partial share that would result from such conversion
                                         calculation rounded up to a whole share of Common Stock. Once any Converted Amount is
                                         converted, the Converted Amount will be deemed to be extinguished, abated and repaid
                                         in full as of the date of the delivery of the Units. NOTWITHSTANDING THE FORGOING,
                                         THIS NOTE MAY NOT BE CONVERTED INTO THE UNITS TO THE EXTENT THAT THE COMBINATION OF SHARES
                                         AND WARRANTS RECEIVED IN THE CONVERSION WOULD RESULT IN LENDER’S BENEFICIAL OWNERSHIP
                                         IN STAR SCIENTIFIC, INC. EXCEEDING 9.99% OF THE COMPANY’S OUTSTANDING COMMON STOCK
                                         (THE “OWNERSHIP CAP”). FOR CLARIFICATION, WARRANTS SHALL NOT CONSTITUTE BENEFICIAL
                                         OWNERSHIP TO THE EXTENT SUCH WARRANTS CONTAIN A PROHIBITION ON EXERCISE IF SUCH EXERCISE
                                         WOULD CAUSE LENDER’S BENEFICIAL OWNERSHIP TO EXCEED THE OWNERSHIP CAP.



 


		4.	Loan Agreement.
                                         This Note has been executed and delivered pursuant to that certain Loan Agreement, dated
                                         March 12, 2014, by and between Lender and Company (the “Loan Agreement”),
                                         and this Note is one of the “Notes” referred to in the Loan Agreement. Unless
                                         otherwise defined herein, capitalized terms used in this Note shall have the meaning
                                         ascribed to them in the Loan Agreement. This Note evidences an Advance made under the
                                         Loan Agreement, and the holder of this Note shall be entitled to the benefits, and is
                                         subject to the restrictions, set forth in the Loan Agreement. This Note and the Units
                                         that may be acquired upon conversion of this Note are subject to registration rights
                                         as more fully provided in the Loan Agreement.



 


		5.	Assignment.
                                         This Note may be assigned by Lender only upon the written consent of the Company
                                         (such consent to be in the sole discretion of the Company), provided that such assignment
                                         does not violate federal securities laws or require the Company to seek the approval
                                         of its shareholders with respect to the assignment, conversion of the Note or otherwise.
                                         The assignee shall be deemed to be the holder of this Note entitled to all rights hereunder
                                         including conversion rights set forth herein and in the Loan Agreement.



 


		6.	Event of Default/Remedies.
                                         Each of the following shall constitute an event of default (“Event of Default”)
                                         under this Note: (i) Borrower fails to make any payment when due under this Note, (ii)
                                         or (iii) Borrower files for bankruptcy or bankruptcy proceedings are instituted against
                                         it, or a general assignment is made by the Company for the benefit of its creditors.
                                         Borrower fails to timely deliver the Units upon conversion. Upon the occurrence of an
                                         Event of Default that is not cured for twenty (20) days following written notice, this
                                         Note shall be due and payable in full and Lender shall be entitled to pursue all available
                                         remedies and damages resulting from such Event of Default in the event the Company is
                                         not able to repay this Note in full.



 


		7.	Costs.
                                         The Company shall pay Lender’s reasonable costs incurred for enforcement of
                                         Lender’s rights and remedies, including reasonable attorneys’ fees and legal
                                         expenses, in connection with a Company Event of Default pursuant to Section 6 of this
                                         Note.



 




    	 



    	 



    

 


		8.	Miscellaneous.
                                         Presentment or other demand for payment, notice of dishonor and protest are expressly
                                         waived by the Company. This Note shall be governed by and construed in accordance with
                                         the laws of the State of Florida. If there is a lawsuit, Borrower agrees upon Lender’s
                                         request to submit to the jurisdiction of the courts of Sarasota County, State of Florida.
                                         The terms of this Note shall be binding upon and inure to the benefit of the parties
                                         and their respective permitted successors and assigns; but neither this Note nor any
                                         of the rights, benefits or obligations hereunder shall be assigned, by operation of law
                                         or otherwise, by any party without the prior written consent of the other party (in the
                                         other party’s sole discretion). If any part of this Note cannot be enforced, this
                                         fact will not affect the rest of the Note. Lender may delay or forgo enforcing any of
                                         its rights or remedies under this Note without losing them. Upon any change in the terms
                                         of this Note, and unless otherwise expressly stated in writing, no party who signs this
                                         Note shall be released from liability. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY,
                                         EXTEND CREDIT OR TO FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO
                                         EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE, REGARDLESS OF THE LEGAL THEORY UPON WHICH
                                         IT IS BASED THAT IS IN ANY WAY RELATED TO THE CREDIT AGREEMENT. TO PROTECT BORROWER AND
                                         LENDER FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS COVERING SUCH MATTERS
                                         ARE CONTAINED IN THIS WRITING OR THE LOAN AGREEMENT, WHICH IS THE COMPLETE AND EXCLUSIVE
                                         STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY
                                         IT.



 


IN
WITNESS WHEREOF, the Company has executed this instrument as of the date set forth above.


 


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