Exhibit 10.65
SECURITIES PURCHASE AND
REGISTRATION RIGHTS AGREEMENT
Between
STAR SCIENTIFIC,
INC.,
as Issuer,
And
Delaware Charter Guarantee and
Trust Company, FBO Joseph L. Schwarz, IRA
as Investor
February 25, 2005
This SECURITIES PURCHASE AND
REGISTRATION RIGHTS AGREEMENT (this “ Agreement
”) is entered into effective as of February 25, 2005 between
Star Scientific, Inc., a Delaware corporation (the “
Company ”), and Delaware Charter Guarantee and Trust
Company, FBO Joseph L. Schwarz, IRA (“ Investor
”).
WHEREAS, the Company and Investor
desire that Investor will purchase from the Company and the Company
will issue and sell to Investor, upon the terms and conditions set
forth in this Agreement: (a) an aggregate of 1,000,000 shares (the
“ Shares ”) of the Company’s common stock,
par value $0.0001 per share (“ Common Stock ”),
for a per share purchase price of $5.00 per share; and (b) a
warrant (the “ Warrant ”) to purchase an
additional 1,000,000 shares (the “ Warrant Shares
”) of Common Stock at a per share price equal to $5.00 (the
“ Exercise Price ”); and
WHEREAS, 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 Investor, and 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 for Investor on the signature page
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 Investor shall agree), at the offices of the
Company’s counsel. At the Closing, the Company shall deliver
to Investor (a) one or more stock certificates, registered in
Investor’s name and address as set forth on the signature
page hereto, representing the Shares and (b) the Warrant issued in
the name of Investor. The Company’s obligation to issue the
Shares and the Warrant to Investor shall be subject to the
following conditions, any one or more of which may be waived by the
Company: (a) 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 purchase price for the
Shares and Warrant as set forth on the signature page hereto; and
(b) the accuracy, in all material respects, of the representations
and warranties made by Investor and the fulfillment, in all
material respects, of those undertakings of Investor to be
fulfilled prior to the Closing. 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 Investor
(provided that no such waiver shall be deemed given unless in
writing and executed by Investor): (a) receipt by Investor of a
counter-signed copy of this Agreement executed by the Company; (b)
receipt by Investor of one or more stock certificates representing
the Shares; (c) receipt by Investor of a copy of the Warrant and
(d) 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.
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3. Representations, Warranties
and Covenants of the Company . The Company hereby represents
and warrants to, and covenants with, 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, validly issued, fully paid and
non-assessable.
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 (A)
conflict with or constitute a violation of, or default (with or
without the giving of notice or the passage of time or both) under,
(i) 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, (ii) the charter, by-laws or other organizational
documents of the Company or any Subsidiary, or (iii) 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
(B) 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
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of this Agreement, the valid issuance and sale
of the Shares and Warrant pursuant to this Agreement, other than
such as have been made or obtained, and except for any securities
filings required to be made under federal or state securities
laws.
3.4 SEC Filings . Since
January 1, 2004, 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
“ SEC ” or “ Commission ”)
pursuant to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the “ 1934 Act ”)
(collectively, the “ SEC Documents ”). As of
their respective dates, the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were
filed with the SEC, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading.
3.5 Absence of Certain Change
. Except as disclosed in the SEC Documents filed at least thirty
(30) days prior to the date hereof, since September 30, 2004 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
the date hereof, the authorized capital stock of the Company
consists of (i) 100,000,000 shares of Common Stock, of which as of
the date hereof, 69,570,758 shares are issued and outstanding,
8,988,207 shares are issuable and reserved for issuance pursuant to
the Company’s stock option plans or securities exercisable or
exchangeable for, or convertible into, shares of Common Stock, and
(ii) 100,000 shares of preferred stock, of which as of the date
hereof no shares are issued. All of such outstanding shares have
been, or upon issuance will be, validly issued, fully paid and
nonassessable. Except as disclosed in the SEC Documents, 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, (iv)
there are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by the issuance or
exercise of the Shares and the Warrant and (v) 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 ”).
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4. Representations, Warranties
and Covenants of Investor .
4.1 Organization . Investor
is duly organized and validly existing in good standing under the
laws of the jurisdiction of its organization. Investor 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.
4.2 Due Authorization .
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).
4.3 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 (A) conflict with or constitute a
violation of, or default (with or without the giving of notice or
the passage of time or both) under, (i) 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, (ii) the charter, by-laws or other organizational
documents of Investor, as applicable, or (iii) any law,
administrative regulation, ordinance or order of any court or
governmental agency, arbitration panel or authority applicable to
Investor or its property, or (B) 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 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, 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
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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.
4.5 No Short Sales . Investor
represents, warrants and covenants that neither Investor nor any of
its affiliates has directly or indirectly sold, or will directly or
indirectly sell during the 30 day period following the Closing, any
shares of the Common Stock unless Investor owned or owns such
shares of the Common Stock at the time of such sale and promptly
delivered or will promptly deliver such shares of Common Stock
against such sale.
4.6 No Advice . Investor
understands that nothing in this Agreement or any other materials
presented to Investor in connection with the purchase and sale of
the Shares and the Warrant constitutes legal, tax or investment
advice. Investor has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the Shares and the
Warrant.
4.7 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.
4.8 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 it deems appropriate for purposes
of the investment contemplated hereby. Investor acknowledges that
the Company has not disclosed its results for the twelve month
period ending on, or its financial condition at, December 31, 2004,
and that the Company has no plans to do so until the completion of
its audit for such period and the filing of its annual report on
Form 10-K with the SEC, which may be delayed or extended in
accordance with the SEC rules. Investor acknowledges that the most
recent disclosure of the Company’s results is for the three
month period ending on, and the most recent disclosure of the
Company’s financial condition is at, September 30, 2004, as
reported on the Company’s quarterly report on Form 10-Q, and
that 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, the Warrant and if applicable the
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.
4.9 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
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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.
4.10 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 Shares or Warrant Shares pursuant
to the registration statement contemplated by Section 5 hereto, it
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 or have been
supplied to Investor.
4.11 Residence . Investor is
a resident of the State of Delaware.
4.12 No Market . Investor
understands 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 sale
of such Shares, Warrant or Warrant Shares are registered under the
Securities Act or subject to the terms and conditions of this
Agreement, an exemption from registration is available. Investor
has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act.
4.13 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.
4.14 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.
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
dist
