Document:

EXECUTION VERSION

 

 

 

MANAGEMENT
STOCKHOLDERS AGREEMENT

 

OF

 

STERLING HOLDCO
INC.

 

Dated as of February 9, 2012

 

    	 

    	 

    

 

Table of Contents

 

	Section 1.	Restrictions on Transfer	1
	 	 	 	 
	(a)	 	Restrictions on Transfer	1
	 	 	 	 
	Section 2.	Other Provisions Relating to Transfer 2	2
	 	 	 	 
	(a)	 	Legends; Securities Law Compliance	2
	(b)	 	Transfers in Violation of Agreement	2
	 	 	 	 
	Section 3.	Voting Proxy	3
	 	 	 	 
	Section 4.	Right of the Company and the Providence Shareholders to Purchase from Management Stockholders ("Call Right")	3
	 	 	 	3
	(a)	 	Right to Purchase	3
	(b)	 	Notice	4
	(c)	 	Available Shares	4
	(d)	 	Closing	5
	 	 	 	 
	Section 5.	Purchase Price	5
	 	 	 	 
	(a)	 	Fair Market Value	5
	(b)	 	Initial Value	6
	 	 	 	 
	Section 6.	Prohibited Purchases	6
	 	 	 	 
	Section 7.	Drag-Along Rights	7
	 	 	 
	(a)	 	Participation	7
	(b)	 	Sale Notice	8
	(c)	 	Shares to be Sold	8
	(d)	 	Other Transactions	8
	(e)	 	Cooperation	8
	(f)	 	Notice	8
	 	 	 	 
	Section 8.	Tag-Along Rights	8
	 	 	 	 
	(a)	 	Participation	8
	(b)	 	Sale Notice	9
	(c)	 	Participation Notice; Shares to be Sold	9
	(d)	 	Cooperation	9
	(e)	 	Nonparticipation; Deadline for Completion of Sale	10

 

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	Section  9. 	Registration Rights	10
	 	 	 	 
	(a)	 	Piggyback Rights	10
	(b)	 	Registration Expenses	11
	(c)	 	Restrictions on Public Sale by Stockholders Following a Qualified Public Offering	11
	 	 	 	 
	Section 10.	Representations and Warranties	12
	 	 	 	 
	(a)	 	Power and Authority	12
	(b)	 	Execution and Delivery	12
	(c)	 	No Conflict	12
	(d)	 	No Other Agreements	12
	 	 	 	 
	Section 11.	Further Assurances, etc	12
	 	 	 	 
	Section 12.	Notices	12
	 	 	 	 
	Section 13.	Governing Law, etc	13
	 	 	 	 
	(a)	 	Governing Law	13
	(b)	 	Waiver of Jury Trial	14
	(c)	 	Severability	14
	(d)	 	Remedies	14
	 	 	 	 
	Section 14.	Entire Agreement; Amendment and Waiver	14
	 	 	 	 
	(a)	 	Entire Agreement	14
	(b)	 	Amendment and Waiver	15
	 	 	 	 
	Section 15.	Successors and Assigns; No Third-Party Beneficiaries	15
	 	 	 	 
	(a)	 	Successors and Assigns Generally	15
	(b)	 	No Third-Party Beneficiaries	15
	 	 	 	 
	Section 16.	Termination	15
	 	 	 	 
	(a)	 	Ceasing Ownership	15
	(b)	 	Qualified Public Offerings	15
	 	 	 	 
	Section 17.	Headings	15
	 	 	 	 
	Section 18.	Counterparts and Facsimile Signatures	15
	 	 	 	 
	Section 19.	Definitions	16

 

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This MANAGEMENT STOCKHOLDERS AGREEMENT,
dated as of February 9, 2012 (this "Agreement"), is entered into by and among Sterling
Holdco Inc., a Delaware corporation (the "Company"), Providence
Equity Partners VI L.P. and Providence Equity
Partners VI-A, L.P., each a Delaware limited partnership (together, "Providence"),
and the current and former employees of the Company and its Subsidiaries who hereafter acquire or are otherwise issued Shares
and become parties to this Agreement (collectively, the "Management Stockholders"). Capitalized terms used herein
without definition are as defined in Section 19 below.

 

RECITALS:

 

WHEREAS, the Company's
direct wholly owned subsidiary, Sterling Parent Inc.,a
Delaware corporation ("Parent"), and Sterling Merger Inc., a Delaware corporation and direct wholly owned subsidiary
of Parent ("Merger Sub"), previously entered
into an Agreement
and Plan of Merger, dated as of March 31, 2011 (the "Merger
Agreement"), with SRA International, Inc., a
Delaware corporation ("SRA"), pursuant to which, at the effective
time of the merger (which occurred on July 20, 2011), Merger
Sub merged with and into SRA, with SRA
continuing as the surviving corporation (the "Acquisition");

 

WHEREAS,
following the consummation of the transactions contemplated
by the Merger Agreement, the Company adopted the Sterling Holdco
Inc. Stock Incentive Plan (the "Plan") under
which certain employees of the Company and its Subsidiaries would be issued options to purchase shares
of common stock of
the Company, par value $0.01 per share ("Shares");
and

 

WHEREAS,
the Company, Providence, and each Management Stockholder
who joins this Agreement intend hereby to establish their
rights and obligations in respect of the Management Stockholder's acquisition, holding, and disposition of Shares.

 

NOW,
THEREFORE, in consideration of the mutual covenants and
obligations set forth in this Agreement, the parties hereto
agree as follows:

 

Section 1.          Restrictions
on Transfer.

 

(a)          Restrictions
on Transfer. Each Management Stockholder hereby agrees
that such Management Stockholder shall
not, without the prior written approval of the Company, transfer, sell, assign,
option, pledge, hypothecate, or otherwise dispose of or
encumber (each of the foregoing, a "Transfer")
any of his or her Shares at
any time other than (i) Transfers of Shares to
Permitted Transferees, (ii) following a Qualified Public Offering (subject to applicable
and customary underwriter restrictions),
Transfers  pursuant to Section
9 (Registration Rights) hereof, or (iii) as
required pursuant to Section 7 (Drag-Along
Rights) hereof and permitted pursuant to Section 8
(Tag-Along Rights)

hereof.

 

    	 

    	 

    

 

Section 2.          Other
Provisions Relating to Transfer.

 

(a)           Legends;
Securities Law
Compliance. Each certificate
representing  Shares owned by any
Management Stockholder
shall bear the following legends:

 

		(i)	THE
SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF UNLESS () (A) SUCH DISPOSITION
IS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, (B) THE HOLDER HEREOF SHALL
HAVE DELIVERED TO THE COMPANY
AN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL SHALL
BE REASONABLY SATISFACTORY TO
THE COMPANY, TO THE EFFECT
THAT SUCH DISPOSITION
IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF SUCH
ACT OR  (C) A
NO-ACTION LETTER FROM THE SECURITIES
AND EXCHANGE COMMISSION, REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY,
SHALL HAVE BEEN OBTAINED WITH RESPECT TO
SUCH DISPOSITION AND (y) SUCH
DISPOSITION IS PURSUANT TO REGISTRATION UNDER ANY APPLICABLE STATE SECURITIES LAWS
OR AN EXEMPTION THEREFROM.

 

		(ii)	THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
TRANSFER, VOTING AND OTHER RESTRICTIONS SET
FORTH IN A MANAGEMENT STOCKHOLDERS AGREEMENT, DATED
AS OF FEBRUARY 9,
2012, AMONG THE COMPANY AND OTHER PARTIES THERETO, A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE COMPANY.

 

In
addition, certificates representing Shares
shall bear any legends
required by applicable state
law. Each Management
Stockholder agrees that, in addition
to complying with the
restrictions on Transfer set forth elsewhere in this
Agreement, such Management
Stockholder will not
Transfer any Shares
(or solicit any offers
to buy, purchase, or otherwise acquire or take a
pledge of any Shares) in
violation of the Securities Act, applicable state securities
or "blue sky" laws,
or any rules or regulations thereunder, and such
Management Stockholder
will not Transfer any Shares unless
the conditions set forth in the legend required by clause
(i) of this Section 2(a)
are satisfied.

 

(b)          Transfers
in Violation of Agreement.
Any Transfer or attempted Transfer
of any Shares in violation
of this Agreement shall be
void, no such Transfer
shall be recorded on the Company's books and the purported transferor
shall instead continue to be treated as the owner of such Shares
for all purposes hereof.

 

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Section 3.          Voting
Proxy. By entering into this Agreement, the Management
Stockholder hereby irrevocably grants to and appoints Providence
(to act by unanimous consent) as such Management
Stockholder's proxy and attorney-in-fact (with full power of substitution), for
and in the name, place, and stead of such Management Stockholder,
to vote or act by unanimous written consent with respect to such Management
Stockholder's Shares. The Management Stockholder hereby affirms that the irrevocable proxy
set forth in this Section 3 shall be valid until the consummation
of a Public Offering and is given to secure the performance
of the obligations of such Management Stockholder under this Agreement.
The Management Stockholder further affirms that
the proxy hereby granted shall be irrevocable and shall
be deemed coupled with an interest and shall extend for
the term of this Agreement, or, if earlier, until the last date permitted by law. Except as
expressly contemplated by this Section 3, the Management Stockholder has
not granted a proxy to any Person to exercise the
rights of such Management Stockholder under this Agreement or
any other agreement relating to the Shares to which such Management
Stockholder is a party.

 

Section
4.          Right of the Company and
the Providence Shareholders to Purchase from Management Stockholders ("Call Right'').

 

(a)          Right
to Purchase. Subject to all subsections of this Section
4, the Company shall have the right
to purchase from each Management Stockholder, and each
such Management Stockholder shall have the obligation
to sell to the Company, any or
all Shares held by such Management Stockholder and
any or all Shares held by Permitted Transferees
of such Management Stockholder (it being understood that
any such Management Stockholder's Permitted Transferees
shall comply with all applicable provisions of this Section
4) upon such Management Stockholder's termination
of employment with the Company or any Subsidiary:

 

(i)          at
the Fair Market Value (as defined in Section 5) of such Shares if such Management
Stockholder's employment with the Company and any Subsidiary that
employs such individual terminates as a result of (A)
the termination by the Company and any such Subsidiary (or
by the Company on behalf of any such Subsidiary) of such
Management Stockholder's employment without Cause; (B)
the death or Disability of such Management Stockholder;
or (C) the voluntary resignation of such Management Stockholder
(including for Good Reason); or

 

(ii)         at
the lesser of the Fair Market Value and the Initial Value (as
defined in Section 5) of such Shares if
such Management Stockholder's employment with the Company
and any Subsidiary that employs such individual is
terminated by the Company and any such Subsidiary (or by
the Company on behalf of such Subsidiary) for Cause
at any time.

 

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(b)          Notice.
If the Company desires to purchase any or all of the
Shares from a Management Stockholder, and, as applicable, such Management Stockholder's Permitted
Transferee(s), it shall deliver a written notice (the "Call
Notice") to such Management Stockholder
and, as applicable, any Permitted Transferees of such Management Stockholder,
within six months and five business days after the
date of termination of employment
(including by reason of voluntary resignation, death or Disability) of such
Management Stockholder (the date of such termination, the "Termination
Date"). The Call Notice shall set
forth the number of Shares to be acquired from such
Management Stockholder and, as applicable, any Permitted Transferees
of such Management Stockholder, the aggregate
consideration to be paid for such Shares and the time and
place for the closing of the repurchase transaction.
Notwithstanding the foregoing, with respect to the Company's
purchase of Shares acquired at any time by such Management Stockholder
pursuant to an exercise of any stock options or other equity
award, the Call Notice required by this Section 4(b) shall
be given by the Company not earlier than six months
and one day nor later than eight months after the date
on which such Management Stockholder acquired such Shares, in
which case such time period shall be used in lieu of the
six months and five business days referred to in the
first sentence of this Section 4(b).

 

(c)          Available
Shares.

 

(i)          If
for any reason the Company does not elect
to purchase all of the Shares pursuant to and within the
applicable timeframes set forth in Section
4(a), Providence shall be entitled, in the manner set forth
in this Section 4, to purchase the Shares
that the Company has not elected to purchase (the "Available Shares").
As soon as practicable, but in any
event within 30 days after the Company determines
that there will be Available Shares, the Company shall deliver
written notice ("Availability Notice") to
Providence setting forth the number of Available Shares and the price for each
such Available Share.

 

(ii)         Providence
may purchase any or all of the Available
Shares by delivering written notice to the Company within 20 days after
the receipt of the Availability Notice from the
Company (such 20-day period, the "Election Period").

 

(iii)        As
soon as practicable, but in any event within 5 business days after the
expiration of the Election Period, the Company will, if
necessary, notify the appropriate Management Stockholders and, as applicable, any Permitted
Transferees of such Management Stockholder, as to the
number of Shares being purchased from such Management Stockholders
and, as applicable, any Permitted Transferees of such Management Stockholder, by Providence (the "Supplemental
Call Notice"). The Supplemental Call Notice will set forth the number of Shares the Company and Providence, as applicable,
will acquire from such Management Stockholder and, as applicable, any Permitted Transferees of such Management Stockholder, the
aggregate consideration to be paid for such Shares, and the time and place of the closing of the repurchase transaction.

 

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(d)          Closing.
Subject to Section 6, the closing of any repurchase transaction contemplated by this Section 4 will take place on the date
designated by the Company in the Call Notice or the Supplemental Call Notice, as the case may be, which date will not be more
than 90 days after the delivery of such notice. Subject to Section 6, the Company and Providence, as the case may be, will pay
for the Shares to be purchased pursuant to this Section 4 by delivery of a check payable to the appropriate Management Stockholder
and, as applicable, any Permitted Transferees of such Management Stockholder, or by wire transfer of immediately available funds
to an account designated by such Management Stockholder in the aggregate amount of the purchase price for such Shares.The Company
and Providence, as the case may be, will receive customary representations and warranties from each seller regarding the sale
of the Shares, including but not limited to the representation that such seller has good and marketable title to the Shares to
be transferred free and clear of all liens, claims, and other encumbrances.

 

Section 5.          Purchase
Price.

 

(a)          Fair
Market Value.

 

(i)          If
no Public Offering has occurred, the "Fair Market Value" of any Share shall be equal to the value most recently
established by the Board, adjusted, if deemed necessary or advisable by the Board, for significant developments occurring since
the date such value was established by the Board. Following a Public Offering, the Fair Market Value, on any date of determination
shall mean the closing price for a Share as reported on a national exchange for or a nationally recognized system of price quotation
for such date or, if there is no such closing price for such date, for the most recent date with respect to which such closing
price is available. In the event that there are no Share transactions reported on such exchange or system on such date, Fair Market
Value shall mean the closing price on the immediately preceding date on which Share transactions were so reported.

 

(ii)         The
Fair Market Value of any Share to be purchased pursuant to Section 4(a) shall be determined as of the Termination Date (including
by reason of voluntary resignation, death, or Disability); provided that the Fair Market Value of any Share acquired by
a Management Stockholder pursuant to the exercise of any stock options shall be determined as of the date that is six months and
one day after the acquisition of such Shares if such
date is later than the date specified in the immediately
preceding clause; and provided, further, that in no event
will such date be later than the date
of the closing of any repurchase determined pursuant
to Section 4(d). In all events, the Fair
Market Value shall be determined in a manner consistent
with Section 409A of the Code.

 

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(b)          Initial
Value. The "Initial Value" of any Share
actually purchased (including, without limitation, purchased
upon the exercise of a stock option) shall
equal the price paid by the relevant Management Stockholder
for any such Share, less the amount of dividends
and other distributions paid in respect of such Share after
the Closing. Unless determined otherwise by the Board, the "Initial
Value" of any Share granted to a Management Stockholder
without payment of consideration shall be zero.

 

Section
6.          Prohibited Purchases. Notwithstanding anything
to the contrary herein, the Company shall
not be permitted to purchase any Shares of Common Stock
from a Management Stockholder hereunder to the extent (a) the Company is prohibited
from purchasing such Shares by applicable law or by any
debt instruments or agreements, including any amendment,
renewal, extension, substitution, refinancing, replacement, or other modification thereof,
which have been entered into or which may be entered
into by the Company or any of its Subsidiaries,
including those to finance the acquisition of the Company
on the Closing Date, and any future acquisitions by the
Company or recapitalizations of the Company (the "Financing
Documents"); (b) an event of default has occurred (or, with
notice or the lapse of time or both, would occur) under any Financing Document and
is (or would be) continuing; or (c) the
purchase of such Shares would or, in the view of the Board (excluding such
Management Stockholder), might result in the occurrence of an
event of default under any Financing Document or create
a condition that would or might, with notice or
lapse of time or both, result in such an event of default. If Shares
that the Company has the right to purchase on any
date exceed the total amount permitted to be purchased
on such date pursuant to the preceding sentence (the "Maximum
Amount"), the Company shall purchase on such
date only that number of Shares up to the Maximum
Amount (if any) (and shall
not be required to purchase more than the Maximum Amount) in such
amounts as the Board shall in good faith determine,
applying the following order of priority:

 

(i)          First,
the Shares of all Management Stockholders whose Shares
are being purchased by the Company by reason
of termination of employment due to death or Disability and,
to the extent that the number of Shares that
the Company is obligated to purchase from such Management
Stockholders (but for this Section 6) exceeds
the Maximum Amount, such Shares pro rata among such Management
Stockholders on the basis of the number of Shares held
by each of such Management Stockholders
that the Company has the right to
purchase;

 

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(ii)         Second,
to the extent that the Maximum Amount is in excess of the amount the Company purchases pursuant to clause (a) above,
the Shares of all Management Stockholders whose Shares are being purchased by the Company by reason of termination of employment
without Cause or due to resignation for Good Reason up to the Maximum Amount (as reduced by shares described in clause (a)
to be purchased) and, to the extent that the number of Shares that the Company is obligated to
purchase from such Management Stockholders (but for this Section 6) exceeds the Maximum Amount (as reduced by shares described
in clause (a) to be purchased), such Shares pro rata among such Management Stockholders
on the basis of the number of Shares held by each of such Management Stockholders that the Company has the right to purchase; and

 

(iii)        Third,
to the extent the Maximum Amount is in excess of the amounts the Company purchases pursuant to clauses (a) and (b)
above, the Shares of all other Management Stockholders whose Shares are being purchased by the
Company up to the Maximum Amount (as reduced by Shares described in clauses (a) and (b) to
be purchased) and, to the extent that the number of Shares that the Company is obligated to purchase from such Management Stockholders
(but for this Section 6) exceeds the Maximum Amount (as reduced by Shares described in clauses (a) and
(b) to be purchased), the Shares of such Management Stockholders in such order of priority and in such amounts as the Board
(excluding such Management Stockholders and other members of the Board who are designees of the Management Stockholders) in its
sole discretion shall in good faith determine to be appropriate under the circumstances.

 

Notwithstanding
anything to the contrary contained in this Agreement, if the Company is unable to make any payment when due to any Management Stockholder
under this Agreement by reason of this Section 6, the Company shall have the option to either (i) make such payment at the
earliest practicable date permitted under this Section 6 or (ii) pay the purchase
price for such Shares with a subordinated note that is fully subordinated in right of payment and exercise of remedies to the lenders'
rights under the Financing Documents.

 

Section 7.          Drag-Along
Rights.

 

(a)          Participation.
If at any time Providence proposes to Transfer Shares in a transaction or series of related transactions (including, without
limitation, by way of stock sale, merger, consolidation, or otherwise) and such transaction would result in a Change in Control,
then Providence may require the participation of the Management Stockholders in such sale in the manner set forth in this Section
7.

 

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(b)          Sale
Notice. Providence shall exercise its respective rights pursuant to this Section 7 by delivering
to the Company and the Management Stockholders a written notice of the proposed sale no later than 15 days prior to the proposed
closing thereof. Such notice shall make reference to the Management Stockholders' obligations hereunder and shall describe in
reasonable detail: (i) the number of Shares to be Transferred by Providence; (ii) the
Person or entity to whom such Shares are proposed to be Transferred; (iii) the
terms and conditions of the Transfer, including the consideration to be paid; and (iv) the proposed date, time, and location
of the closing of the Transfer.

 

(c)          Shares
to be Sold. Each Management Stockholder shall be required to sell in any sale subject to this Section 7 that number of Shares
equal to the product of (i) the number of Shares then held by such Management Stockholder
and (ii) a fraction, the numerator of which shall be the number of Shares Providence proposes to Transfer in such sale pursuant
to this Section 7 and the denominator of which shall be the number of Shares then held by Providence; it being understood and agreed
that the Management Stockholders shall sell such Shares pro rata in satisfaction of their obligations under this Section 7(c).

 

(d)          Other
Transactions. If Providence approves a merger, consolidation, recapitalization, sale of all or substantially all the assets
of the Company, or any transaction that results in a Change in Control, the Management Stockholders shall consent to and cooperate
fully with respect thereto and, without limiting the generality of the foregoing, shall not in any way object to, or exercise any
appraisal rights in connection with, such merger, consolidation, recapitalization, sale of assets, or other Change in Control transaction.

 

(e)          Cooperation.
The Management Stockholders shall fully cooperate with Providence and shall take all reasonably necessary actions to effectuate
any Transfer of Shares, merger, consolidation, recapitalization, sale of assets, or other Change in Control transaction described
in this Section 7, including, without limitation, entering into agreements and delivering certificates and instruments, all consistent
with agreements being entered into and certificates and instruments being delivered by Providence, except with respect to representations,
warranties, covenants, and indemnities that are customarily made on an individual basis.

 

(f)          Notice.
Promptly after completion of any sale or other transaction pursuant to this Section 7, Providence shall notify the Management
Stockholders of such completion and shall furnish evidence of such sale or other transaction (including time of completion) and
the terms thereof as the Management Stockholders may reasonably request.

 

Section 8.          Tag-Along
Rights.

 

(a)          Participation.
Except as required by Section 7(a), if at any time Providence proposes to sell Shares to any Person, including, without limitation,
by way of stock sale, merger, consolidation, or otherwise, and such transaction would result in a Change in Control, then the Management
Stockholders shall be permitted to participate in such sale in accordance with this Section 8.

 

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(b)          Sale
Notice. Providence shall deliver to the Company and each other Stockholder a written notice (a "Sale Notice")
of a proposed sale (a "Proposed Sale") subject to this Section 8, no later than 30 days prior to the proposed
closing thereof. Such notice shall make reference to the Management Stockholder's rights hereunder and shall describe in reasonable
detail: (i) the number of Shares to be sold (the "Tag-Along Shares"); (ii) the
Person to whom such Shares are proposed to be sold; (iii) the terms and conditions of the Proposed Sale, including the consideration
to be paid; and (iv) the proposed date, time, and location of the closing of the Proposed Sale.

 

(c)          Participation
Notice; Shares to be Sold. Each Management Stockholder shall exercise his or her right to participate in the Proposed Sale
by delivering to Providence a written notice (a "Participation Notice") stating his or her election to do so
and specifying the number of Shares to be sold by him or her no later than 10 days after receipt of the Sale Notice. The maximum
number of Shares that the Management Stockholder will be permitted to include in a Proposed Sale will be the product of (i)
the number of Shares then held by each Management Stockholder and (ii) a fraction, the numerator of which shall be
the number of Tag-Along Shares and the denominator of which shall be the number of Shares then held by Providence and all other
Stockholders; it being understood and agreed that each Management Stockholder shall sell such Shares for the same consideration,
pursuant to the same sale agreement as applies to the Shares to be sold by Providence and all other Stockholders.

 

(d)          Cooperation.
Upon delivering a Participation Notice, each Management Stockholder will, if requested by Providence, execute and deliver a
custody agreement and power of attorney in form and substance reasonably satisfactory to Providence (a "Custody Agreement
and Power of Attorney") with respect to the Shares which are to be included in the Proposed Sale pursuant to this Section
8. The Custody Agreement and Power of Attorney will provide, among other things, that the Management Stockholder executing it will
deliver to and deposit in custody with the custodian and attorney-in-fact named therein a certificate or certificates representing
such Shares (duly endorsed in blank by the registered owner or owners thereof or accompanied by duly executed stock powers in blank)
and irrevocably appoint said custodian and attorney-in-fact as the Management Stockholder's agent and attorney-in-fact with full
power and authority to act under a custody agreement and power of attorney on behalf of the Management Stockholder with respect
to the matters specified therein. The Management Stockholder participating in a sale pursuant to this Section 8 shall fully cooperate
with Providence and shall take all reasonably necessary actions to effectuate such sale, including, without limitation, entering
into agreements and delivering certificates and instruments, all consistent with agreements being entered into and certificates
and instruments being delivered by Providence, except with respect
to individual representations, warranties, covenants, and indemnities customarily made
on an individual basis. Without limiting the generality of
and subject to the exception set forth in the foregoing,
the Management Stockholders participating in a sale pursuant
to this Section 8 shall make or agree to
the same representations, covenants, indemnities, and
agreements as Providence; provided that the liabilities
thereunder (including under any general indemnity) shall be borne on a pro rata basis based
on the consideration to be received by each Stockholder.

 

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(e)          Nonparticipation; Deadline for
Completion of Sale. Failure by any Management Stockholder to
provide a Participation Notice within 15 days after receipt
of a Sale Notice shall be deemed to constitute an election by such Management Stockholder
not to exercise his or her rights pursuant to this Section 8, and Providence shall have
180 days following the expiration of such 15-day
period in which to sell not more than the number of Shares described
in the Sale Notice, on terms not more favorable to
Providence than those set forth in the Sale Notice. If at the
end of such 180-day period, Providence has not completed
such Proposed Sale, Providence may not then effect a sale of Shares pursuant to this Section 8(e)
without again fully complying with the provisions of this Section 8. Such 180-day
period may be extended to the extent reasonably
necessary to comply with any regulatory requirements applicable to the Proposed Sale.

 

Section 9.          Registration
Rights.

 

(a)          Piggyback
Rights. If the Company, at any time following an underwritten
public offering by the Company, proposes to register Shares under the Securities Act
or any other applicable securities laws
(together with the Securities Act, the "Securities Laws")
for its own account (including,
but not limited to, a Shelf Registration
Statement, but other than pursuant to (i)
a registration on Form S-4 or
S-8 or any successor form or (ii) a
registration of securities that are a combination of debt
and equity), then the Company shall give prompt written notice
to the Management Stockholders regarding such proposed registration.
Upon the written request of any Management
Stockholder made within 15 days after the receipt of any such notice (which
request shall specify the number of Shares intended to
be disposed of by such Management Stockholder and the
intended method or methods of disposition thereof),
the Company shall use its best efforts to effect the registration
under the Securities Act of all Shares that such Management
Stockholder has so requested to be registered, in accordance
with such intended method or methods of disposition; provided
that:

 

(i)          the
Company shall not include any Shares in such proposed registration
to the extent that the Board shall have determined,
after consultation with the managing underwriter for such offering, that their inclusion would
materially and adversely affect the offering
price, provided that in the event of any such
determination, the Company shall give the affected Management
Stockholders notice of such determination in lieu of the notice otherwise required by the first sentence of this Section
9(a);

 

    	10

    	 

    

 

(ii)         if,
at any time after giving written notice (pursuant to this Section 9(a)) of its intention to register Shares and prior to the effective
date of the registration statement filed in connection with such registration, the Company shall determine, for any reason, not
to register such Shares, the Company may, at its election, give written notice of such determination to each Management Stockholder
and, thereupon, shall not be obligated to register any Shares in connection with such registration (but shall nevertheless pay
the Registration Expenses in connection therewith); and

 

(ii)         if,
in connection with a registration pursuant to this Section 9(a),
the managing underwriter of such registration (or, in the case of an offering that is not underwritten, a nationally recognized
investment banking firm) shall advise the Company in writing (with a copy
to any Management Stockholder requesting registration of Shares) that the number of Shares requested and otherwise proposed to
be included in such registration exceeds the number that can be sold in such offering without materially and adversely affecting
the offering price of the Shares being sold in such registration, then, in the case of any registration pursuant to this Section
9(a), the Company shall include in such registration the number of shares that the Company is so advised can be sold in such offering
without such material adverse effect, first, of the Shares, if any, being sold by the Company, and second, of the Shares of the
Management Stockholders, on a pro rata basis (based on the number of Shares owned by each such Management Stockholder).

 

(b)          Registration
Expenses. The Company will pay all Registration Expenses in connection with each registration of Shares requested pursuant
to this Section 9.

 

(c)          Restrictions
on Public Sale by Stockholders Following a Qualified Public Offering. Following the consummation of any underwritten Qualified
Public Offering, for so long as the number of Shares held by Providence and its Affiliates, on the one hand, or the Management
Stockholders, on the other hand, in the aggregate represents more than 5% of the outstanding Shares, each such Stockholder agrees
to enter into a customary letter agreement with underwriters providing such Stockholder will not effect any public sale or distribution
of Shares during the 180 calendar day period beginning on the date of a prospectus or prospectus supplement filed with the Securities
and Exchange Commission with respect to the pricing of such underwritten offering; provided that (i) the duration
of the foregoing restrictions shall be no longer than the duration of the shortest restriction generally imposed by the underwriters
on the Company or the officers, directors, or any other stockholder of the Company on whom a restriction is imposed, and (ii)
the restrictions set forth in this Section 9(c) shall not apply to any shares that are included
in such underwritten offering by such Stockholder.

 

    	11

    	 

    

 

Section 10.         Representations
and Warranties. Each Management Stockholder represents and warrants to the Company and each other Management Stockholder that,
as of the date hereof:

 

(a)          Power
and Authority. Such Management Stockholder has the power, authority, and capacity to execute, deliver, and perform this Agreement.

 

(b)          Execution
and Delivery. This Agreement has been duly and validly executed and delivered by such Management Stockholder and constitutes
a valid and legally binding obligation of such Management Stockholder.

 

(c)          No
Conflict. The execution, delivery, and performance of this Agreement by such Management Stockholder do not and will not conflict
with, violate the terms of, or result in the acceleration of any obligation under any material contract, commitment, or other material
instrument to which such Management Stockholder is a party or by which such Management Stockholder is bound.

 

(d)          No
Other Agreements. Except for this Agreement, such Management Stockholder has not entered into or agreed to be bound by any
other agreements or arrangements of any kind with any other party with respect to the Shares, including, but not limited to, agreements
or arrangements with respect to the acquisition or disposition of Shares or any interest therein or the voting of the Shares (whether
or not such agreements and arrangements are with the Company or other Management Stockholders). In the event of any  inconsistency
between any provision of any such agreement and the provisions of this Agreement, the provisions of this Agreement shall be given
full effect to the exclusion of any such inconsistent provision.

 

Section 11.         Further
Assurances, etc. Each party hereto shall do and perform or cause to be done and performed all such further acts and things,
including, without limitation, voting its Shares, and shall execute and deliver all such other agreements, certificates, instruments,
and documents as any other party hereto may reasonably request in order to carry out the intent and purposes of this Agreement.

 

Section
12.         Notices. All notices, requests, demands, waivers, and other communications
required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if (a)
personally delivered, (b) sent by reputable next-day or overnight mail courier service
(charges prepaid), or (c) sent by facsimile, to the address or facsimile number below, or to such other address or facsimile
number as the party entitled to notice shall hereafter designate in accordance with the terms hereof:

 

    	12

    	 

    

 

	(A)	If to the Company:
	 	 
	 	Sterling Holdco, Inc.
	 	c/o Providence Equity Partners L.L.C.
	 	50 Kennedy Plaza
	 	18th Floor
	 	Providence, Rhode Island 02903
	 	Fax: +1 (401) 751-1790
	 	Attention: Christopher C. Ragona
	 	 
	with a copy to:
	 	 
	 	SRA International, Inc.
	 	4300 Fair Lakes Court
	 	Fairfax, Virginia 22033
	 	Fax: +1 (703) 803-1509
	 	Attention: General Counsel

 

	(B)	If to Providence:
	 	 
	 	Providence Equity Partners L.L.C.
	 	50 Kennedy Plaza
	 	18th Floor
	 	Providence, Rhode Island 02903
	 	Fax: +1 (401) 751-1790
	 	Attention: Christopher C. Ragona
	 	 
	with a copy to:
	 	 
	 	Debevoise & Plimpton LLP
	 	919 Third Avenue
	 	New York, New York 10022
	 	Attention: Jonathan F. Lewis
	 	Telephone: +1 (212) 909-6000
	 	Facsimile: +1 (212) 909-6836

 

Section 13.         Governing
Law, etc.

 

(a)          Governing
Law. This Agreement and the rights and obligations of the parties hereunder and the Persons subject hereto shall be governed
by and construed and interpreted in accordance with the laws of the State of Delaware without giving effect to conflicts of laws
rules that would require the application of the laws of another jurisdiction.

 

    	13

    	 

    

 

(b)          Waiver
of Jury Trial. EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES
AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH SUCH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS
OF THIS WAIVER, (C)
EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
IN THIS SECTION 13.

 

(c)          Severability.
If any provision
of this Agreement is
held by a court of competent jurisdiction to
be invalid or unenforceable in any jurisdiction,
such holding shall not affect
the validity or enforceability of the remainder of this Agreement in such jurisdiction or the validity or enforceability of this
Agreement, including such provision, in any other jurisdiction, and
such provision shall be interpreted, revised, or applied in a manner that renders it valid
and enforceable to the fullest extent possible.

 

(d)          Remedies.
The Company and the Management Stockholders agree that
money damages or other remedy at law would not be a
sufficient or adequate remedy for any breach or violation of, or a default under,
this Agreement by them and that, in addition to all other
remedies available to them, each of them shall be entitled
to an injunction restraining such breach, violation, or
default or threatened breach, violation, or default and
to any other equitable relief, including, without limitation, specific performance, without bond
or other security being required.

 

Section 14.         Entire
Agreement; Amendment and Waiver.

 

(a)          Entire
Agreement. This Agreement constitutes the entire agreement
and understanding of the parties hereto with respect to the matters referred to herein and supersedes all prior agreements, understandings,
or representations, written or oral, among the parties with respect to such matters.

 

    	14

    	 

    

 

(b)          Amendment
and Waiver. Except as otherwise provided herein, no
amendment, alteration, or modification of this Agreement or waiver of any provision of
this Agreement shall
be effective against the
Company or the Management Stockholders
unless such amendment, alteration, modification, or waiver
is approved in writing
by (i) the Company, and (ii) Providence;
provided that no amendment,
alteration, or modification shall uniquely and adversely
affect the rights or obligations of (a)
a particular Management Stockholder on
a discriminatory basis without such
Management Stockholder's consent or (b)
the Management Stockholders as a class
under this Agreement
without the consent of a majority in interest
of the Management Stockholders. The failure of any
party to enforce any provision
of this Agreement shall
not be construed as a waiver of such provision
and shall not affect the right
of such party thereafter to
enforce each provision of this Agreement
in accordance with its
terms.

 

Section 15.         Successors
and Assigns; No Third-Party Beneficiaries.

 

(a)          Successors
and Assigns Generally. This Agreement shall be
binding upon and inure to the benefit of the successors and permitted assigns of the
parties hereto.

 

(b)          No
Third-Party Beneficiaries. Nothing in this Agreement
is intended to or shall confer any rights or benefits
upon any Person other than the parties
hereto.

 

Section 16.         Termination.

 

(a)          Ceasing
Ownership. Any Management Stockholder who ceases to own any Shares or any interest therein, shall cease to be a party to this
Agreement and thereafter shall have
no rights or obligations hereunder; provided, however, that a Transfer
of Shares not explicitly permitted under this Agreement shall not relieve a Management
Stockholder of any of its obligations.

 

(b)          Qualified
Public Offerings. All rights and obligations
hereunder shall terminate
upon the earlier of
(i) the consummation of a
Qualified Public Offering, except that the provisions
regarding registration rights in
Section 9 shall continue to apply following a termination pursuant to this clause (i)
and (ii) a Change in
Control of the Company.

 

Section
17.         Headings. The headings of
this Agreement are inserted for convenience only and do
not constitute a part of this Agreement.

 

Section
18.         Counterparts and Facsimile Signatures. This Agreement may be
executed in one or
more counterparts and each of such counterparts shall be deemed
to be an original for all purposes, and all of such counterparts shall together constitute
one and the same document. Any signature required for the
execution of this Agreement may be in the form of either an original signature or a facsimile transmission
bearing the signature of any party to
this Agreement. No objection shall be raised as to the authenticity of any signature due solely
to the fact that said
signature was transmitted via facsimile.

 

    	15

    	 

    

 

Section
19.         Definitions. For purposes of this Agreement, the
following terms have the indicated meanings:

 

"Acquisition"
is defined in the recitals to
this Agreement.

 

"Affiliate"
means, with respect to any Person, any other Person directly or indirectly controlling,
controlled by, or under
common control with, such first Person. As
used in this definition
of the term "Affiliate,"
"control" (including the terms "controlled
by" and "under common control with") means
the possession, directly or
indirectly, of the power to direct or cause
the direction of the management policies of a Person
by reason of ownership of voting securities, by contract,
or otherwise.

 

"Agreement"
is defined in the preamble to this Agreement. 

 

"Availability
Notice" is defined
in Section 4(c)(i). 

 

"Available
Shares" is defined in Section 4(c)(i).

 

"Board' means the Board
of Directors of the Company.

 

"Call Right"
is defined in Section 4.

 

"Call Notice"
is defined in Section
4(b).

 

"Cause"
means (i) the refusal
or neglect of the Management Stockholder to perform substantially
his or her employment-related duties;
(ii) the Management Stockholder's personal dishonesty,
incompetence, willful misconduct, or breach of fiduciary duty;
(iii) the Management Stockholder's conviction of
or entering a plea of guilty
or nolo contendere (or any applicable equivalent thereof)
to a crime constituting a felony (or a crime or offense
of equivalent magnitude in any jurisdiction) or his or her willful violation of any other
law, rule, or regulation (other than a traffic violation or
other offense or violation outside of the course of employment
that in no way adversely affects the
Company or any Subsidiary or its reputation or the ability
of the Management Stockholder to perform his or her
employment related duties or to represent
the Company or any
Subsidiary); or (iv)
the material breach by
the Management Stockholder of any covenant
or agreement with
the Company or any Subsidiary, or any written policy
of the Company or
any Subsidiary, not to
disclose any information
pertaining to the Company or
any Subsidiary or not to compete or interfere with the Company or any Subsidiary; provided
that with respect to any Management Stockholder
who is party to an employment agreement with
the Company or any Subsidiary, "Cause" shall have the
meaning specified in such
Management Stockholder's employment agreement.

 

"Closing"
means the date on which the transactions contemplated
by the Merger Agreement were
consummated.

 

    	16

    	 

    

 

"Change in
Control" means a transaction or series of transactions (other than a Public Offering): (i) involving the
sale, transfer, or other disposition by Providence to one or more persons or entities that are not, immediately prior to such
sale, affiliates of the Company or the Providence Entities, of all or substantially all of the Shares beneficially owned by
Providence as of the date of such transaction; or (ii) involving the sale, transfer, or other disposition of all or
substantially all of the assets of the Company and the Subsidiaries, taken as a whole, to one or more persons or entities
that are not, immediately prior to such sale, transfer, or other disposition, affiliates of the Company or Providence.

 

"Code" means the Internal Revenue
Code of 1986, as amended.

 

"Company" is defined in the preamble
to this Agreement.

 

"Custody Agreement and Power of Attorney"
is defined in Section 8(d).

 

"Disability" means
a physical or mental impairment that renders a Management Stockholder unable to perform the essential functions of the Management
Stockholder's position even with reasonable accommodation (that does not impose an undue hardship on the Company), and which has
lasted at least 60 consecutive days; provided that with respect to any Management Stockholder who is party to an employment
agreement with the Company or any Subsidiary, "Disability" shall have the meaning specified in such Management Stockholder's
employment agreement. A physician selected by the Company or its insurers shall make the determination of the existence of a Disability.

 

"Election Period' is defined in Section
4(c)(ii).

 

"Financing Documents" is defined
in Section 6.

 

"Good
Reason" means, with respect to any Management Stockholder who is party to an employment agreement with the Company or
any Subsidiary, the meaning specified in such Management Stockholder's employment agreement.

 

"Management Stockholder" is defined
in the preamble to this Agreement.

 

"Maximum Amount" is defined in Section
6.

 

"Merger Agreement"
is defined in the recitals to this Agreement.

 

"Merger Sub" is
defined in the recitals to this Agreement.

 

"Participation Notice"
is defined in Section 8(c).

 

"Parent" is defined in the recitals
to this Agreement.

 

    	17

    	 

    

 

"Permitted Transferee"
means with respect to a Management Stockholder, such Management
Stockholder's spouse or any lineal ancestor or descendant of such
Management Stockholder.

 

"Person"
means any individual, corporation, partnership,
firm, joint venture, association, limited liability company, joint-stock
company, trust, estate, unincorporated organization, governmental
or regulatory body or other legal entity.

 

"Proposed Sale"
is defined in Section 8(b).

 

"Providence" is defined in the
preamble to this Agreement.

 

"Public Offering"
means a public offering pursuant to an effective registration
statement filed with the Securities
and Exchange Commission that covers Shares that,
after the closing of such public offering, will be
traded on the New York Stock Exchange, the American
Stock Exchange, or the National Association of Securities
Dealers Automated Quotation System or any
comparable non-U.S. exchange or system.

 

"Qualified Public
Offering" means a Public Offering of Shares either (a) where the Company
has received net proceeds of at least $200 million (measured
as of the time of issuance); or (b) which constitutes at
least 15% of the Company's outstanding Shares (measured
as of the date of determination) after giving effect to
such offering (including the underwriters' exercise of
any over-allotment option).

 

"Registration
Expenses" means any and all fees and expenses
incident to the performance by the Company of its obligations
under Section 9, including without limitation (i)
all Securities and Exchange Commission, Financial Industry Regulatory
Authority, Inc., or other registration and filing
fees, or the registration and filing fees of any other
U.S. or non-U.S. stock exchange; (ii) all
fees and expenses of complying with securities or
blue sky laws (including reasonable fees and disbursements of counsel
for the underwriters in connection with blue sky qualifications
of the Shares); (iii) all
printing, messenger, and delivery expenses; (iv)
all fees and expenses
incurred in connection with the listing of the Shares on
any securities exchange and all rating agency fees; (v)
the fees and disbursements of counsel for the Company and
of its independent public accountants, including the expenses of any special audits and/or
"cold comfort" letters required by or incident to such performance and compliance;
(vi) any fees and disbursements of underwriters customarily paid by the issuers or sellers
of securities, including liability insurance if the Company so
desires or if the underwriters so require, and the
reasonable fees and expenses of any special experts retained
in connection with the requested registration, but
excluding underwriting discounts and commissions and transfer
taxes, if any; and (vii) the costs and expenses
of the Company relating to analyst and investor
presentations or any "road show" undertaken in connection
with any registration and/or marketing of the Shares.

 

    	18

    	 

    

 

"Sale Notice" is
defined in Section 8(b).

 

"Securities Act"
means the Securities Act of 1933, as
amended, or any successor federal statute, and the rules
and regulations thereunder which shall be in effect
at the time. Any reference to a particular section thereof
shall include a reference to the corresponding section, if any,
of any such successor federal statute, and the rules and
regulations thereunder.

 

"Securities Laws" is defined
in Section 9(a).

 

"Shares" is
defined in the recitals to this Agreement.

 

"Shelf Registration
Statement" means a registration statement to permit
the Company to sell Shares on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act (or
any similar rule that may be adopted
by the Securities and Exchange Commission) in accordance with
the intended method or methods of disposition by the
Company.

 

"SRA" is defined in the recitals
to this Agreement.

 

"Stockholders"
means Providence, the Management Stockholders, and the "Rollover
Stockholders" and "Investor Stockholders," as such terms are defined in
the Amended and Restated Stockholders Agreement, dated
as of October 17, 2011, among Providence and various
other parties thereto.

 

"Subsidiary"
means, as to any Person (i) any corporation of which a majority of
the securities entitled to vote generally in the election of
directors thereof, at the time as of which any determination
is being made, are owned by such Person, either directly or indirectly, and (ii)
any joint venture, general or limited partnership, limited liability
company or other legal entity in which such Person
is the record or beneficial owner, directly or indirectly,
of a majority of the voting interests or the general
partner.

 

"Supplemental Call Notice" is
defined in Section 4(c)(iii).

 

"Tag-Along Shares" is
defined in Section 8(b).

 

"Termination Date" is defined in
Section 4(b).

 

"Transfer" is
defined in Section 1(a).

 

[Signature
Page Follows]

 

    	19

    	 

    

 

IN
WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.

 

	 	STERLING HOLDCO INC.
	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:
	 	 
	 	PROVIDENCE EQUITY PARTNERS VI L.P.
	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:
	 	 
	 	PROVIDENCE EQUITY PARTNERS VI-
    A L.P.
	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

 

[Signature Page
to Sterling Holdco Management Stockholders
Agreement]Exhibit
10.1

 

SECURITIES PURCHASE AND REGISTRATION
RIGHTS AGREEMENT

 

Between

 

STAR SCIENTIFIC, INC.,

 

as Issuer,

 

And

 

The Investors Set Forth on Schedule I
hereto

 

February 28, 2012

 

 

 

 

    	 

    	 

    
    

This SECURITIES PURCHASE AND REGISTRATION
RIGHTS AGREEMENT (this “Agreement”) is entered into and effective as of February 28, 2012, between Star Scientific,
Inc., a Delaware corporation (the “Company”), and the 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 $4.05 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. 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; (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.

 

    	1

    	 

    
 

 

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

 

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.

 

    	2

    	 

    
 

 

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

 

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

 

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

 

    	3

    	 

    
 

 

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.

 

    	4

    	 

    
 

 

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 became aware of the transactions contemplated hereby. For the purposes of this Section 4.4, “Short Sales”
include, without limitation, all “short sales” as defined in Rule 200 of Regulation SHO adopted under the Exchange
Act and all types of direct and indirect stock pledges, forward sales contracts, options, puts, calls, short sales and other transaction
through non-US broker-dealers or foreign regulated brokers having the effect of hedging the securities of the Company or the investment
contemplated under this Agreement. 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.

 

    	5

    	 

    
 

 

4.6             
Accredited Investor. Investor is an “accredited investor” as that term is defined in Rule 501(a)
of Regulation D under the Securities Act and is able to bear the risk of its investment in the 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.

 

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, 2011, as reported on the Company’s quarterly report on Form 10-Q, filed with the Commission on November 9, 2011, and
that, except as disclosed in the SEC documents, no information more recent than such date has been provided to Investor as to the
Company’s results, operations, financial condition, business or prospects. Investor understands that its purchase of the
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 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 the 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.

 

    	6

    	 

    
 

 

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

 

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.

 

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.

 

    	7

    	 

    
 

 

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

 

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

 

5.2             
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:

 

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

 

(i)                
But in any event within 60 days of the Closing, prepare and file a registration statement with the Commission pursuant
to Rule 415 under the Securities Act on Form S-3 under the Securities Act (or in the event that the Company is ineligible to use
such form, such other form as the Company is eligible to use under the Securities Act provided that such other form shall be converted
into a Form S-3 promptly after Form S-3 becomes available to the Company) covering resales by the Holders as selling stockholders
(not underwriters) of the 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 120 days (or, if the Commission elects to review the Registration
Statement, 180 days) following the Closing.

 

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

 

    	8

    	 

    
 

 

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

 

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

 

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

 

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

 

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

 

(viii)        
Upon request, permit counsel to the Holders to review the Registration Statement and all amendments and supplements
thereto within a reasonable period of time (but not less than two (2) full days on which there is trading on the 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)(viii) if compliance would
cause the Company to fail to comply with any other provisions hereunder.

 

    	9

    	 

    
 

 

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

 

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

 

(c)               
If 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.

 

(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.

 

    	10

    	 

    
 

 

(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.

 

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

 

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

 

    	11

    	 

    
 

 

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).

 

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 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).

 

    	12

    	 

    
 

 

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

 

(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.

 

    	13

    	 

    
 

 

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.

 

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.

 

    	14

    	 

    
 

 

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.

 

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.

 

    	15

    	 

    
 

 

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

 

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

 

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

 

The Company agrees to issue the 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:

 

    	16

    	 

    
 

 

(a)               
if to the Company, to:

 

Star Scientific, Inc.

4470 Cox Road

Glen Allen, Virginia 23060

Telephone: (804) 527-1970

Facsimile: (804) 527-1976

Attention: Chief Financial Officer

 

with copies to:

 

Star Scientific, Inc.

7475 Wisconsin Ave.

Bethesda, MD 20814

Attn: Robert E. Pokusa

General Counsel

Phone: (301) 654-8300

Telecopy: (301) 654-9308; and

 

Latham & Watkins LLP

555 Eleventh Street, N.W.

Suite 1000

Washington, DC 20004

Attn: William P. O’Neill

Phone: (202) 637-2200

Telecopy: (202) 637-2201.

 

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

 

9.                 
Changes. This Agreement may not be modified or amended by the Company or 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.

 

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.

 

    	17

    	 

    
 

 

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.

 

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

 

[Signature
pages follow.]

 

    	18

    	 

    
  

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

 

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

 

    	 

    	 

    
   

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

 

	 	John McKeon
	 	 
	 	 
	 	 
	 	By: /s/ John McKeon

 

    	 

    	 

    
 

 

SCHEDULE I

SCHEDULE OF INVESTORS

 

	Name and Address:	 	Shares	 	 	Warrants	 	 	Purchase Price 

Per Unit	 	 	Aggregate Purchase Price	 
	John McKeon	 	 	410,000	 	 	 	410,000	 	 	$	4.05	 	 	$	1,660,500	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total:	 	 	410,000	 	 	 	410,000	 	 	 	 	 	 	$	1,660,500	 

 

    	 

    	 

    
  

Exhibit A

 

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

 

COMMON STOCK PURCHASE WARRANT

 

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

 

Star Scientific, Inc.

 

THIS COMMON STOCK PURCHASE
WARRANT (the “Warrant”) certifies that, for value received, John McKeon (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 August 28, 2012 (the “Initial Exercise Date”) and on or prior to the close of business on August 28, 2017
(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 410,000 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 $4.05, subject to adjustment
hereunder. The Exercise Price and the number of Warrant Shares for which the Warrant is exercisable shall be subject to adjustment
as provided herein. The term “Holder” shall refer to the Holder identified above or any subsequent transferee of this
Warrant. Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Securities Purchase and
Registration Rights Agreement, dated February 28, 2012, between the Company and Holder (the “Purchase Agreement”).

 

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

 

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.

 

    	1

    	 

    
 

 

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

 

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

 

“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.

 

    	2

    	 

    
  

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

 

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

 

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

 

6.                  
Division and Combination.

 

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

 

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

 

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

 

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

 

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

 

    	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).

 

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

 

    	5

    	 

    
  

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

 

15.               
Call. At any time and from time to time following August 28, 2012, the Company shall have the right, upon 20 Business
Days’ prior written notice to the Holder (“Call Notice”), to call (require Holder to exercise) all or
any portion of this Warrant at the Exercise Price provided that (i) the Warrant Shares are registered for resale pursuant to the
Securities Act and have been for at least the 20-Trading Day period preceding the Call Notice, (ii) the Prospectus has not been
suspended at any time during the 20-Trading Day period preceding the Call Notice, (iii) the Common Stock is currently listed (and
is not suspended from trading) on the Principal Market as of the date the Call Notice is delivered to the Holder through the effective
date of such call, (iv) the Company is not in default (or taken any action or failure to act which through the passage of time
would result in a default) under the Purchase Agreement, (v) the VWAP of the Common Stock on the Principal Market is equal to or
greater than $6.00 (subject to adjustment to reflect forward or reverse stock splits, stock dividends, recapitalizations and the
like) (the “Threshold Price”) for at least 20 consecutive Trading Days, and (vi) the Call Notice is delivered
within 3 Business Days’ of the most recent day in the previous clause and that the Common Stock reached the Threshold Price.
At any time prior to the effective date of such call, the Holder shall have the right to exercise this Warrant in accordance with
its terms.

 

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

 

    	6

    	 

    
 

 

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

 

16.               
Miscellaneous.

 

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

 

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

 

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

 

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

 

		(i)	If to the Holder:

 

John McKeon

Phone: (xxx) xxx-xxxx

 

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

 

		(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

 

    	7

    	 

    
 

 

with a copy to:

 

Star Scientific, Inc.

7475 Wisconsin Avenue

Bethesda, MD 20814

Telephone: (301) 654-8300

Facsimile: (301) 654-9308

Attention: General Counsel

 

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

 

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

 

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

 

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

 

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

 

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

 

    	8

    	 

    
  

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

 

Dated: February 28, 2012

 

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

 

Signature Page to Warrant

 

    	 

    	 

    

 

NOTICE OF EXERCISE

 

To: Star Scientific, Inc.

 

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

 

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

 

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

 

____________________________

 

____________________________

 

____________________________

 

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

 

	 	[PURCHASER]
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:
	 	Dated:

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