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Exhibit
10.91
ESCROW
RELEASES
PURCHASE
AGREEMENT
BY AND
BETWEEN
QVT Associates
LP
Whitebox Hedged High Yield
Partners, LP
Star Scientific,
Inc.
Star Tobacco,
Inc.
TABLE OF
CONTENTS
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| 1. |
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Definitions. |
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| 2. |
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Basic
Transaction . |
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| 3. |
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Representations and Warranties of the
Sellers . The Sellers represent and warrant to the
Purchasers that the statements contained in this Section 3 are
true, correct and complete as of the Effective Date and as of the
2006 Payment Effective Date.
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| 4. |
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Representations and Warranties of the
Purchasers . The Purchasers represent and warrant to the
Sellers the that the statements contained in this Section 4
are true, correct and complete as of the Closing Date.
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| 5. |
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Other
Covenants . |
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| 6. |
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Miscellaneous . |
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EXHIBITS
Exhibit A Escrow
Accounts
Exhibit B Form of
Acknowledgement
Exhibit C Form of Opinion
from Sellers’ Counsel
ESCROW RELEASES PURCHASE
AGREEMENT
This Escrow Releases Purchase
Agreement is entered into on March 14, 2007 (the “
Effective Date ”), by and between QVT Associates LP, a
limited partnership formed under the laws of the State of Delaware
and Whitebox Hedged High Yield Partners, LP, a limited partnership
formed under the laws of the British Virgin Islands (collectively,
the “ Purchasers ”) and Star Scientific, Inc., a
Delaware corporation (“ STSI ”) and Star
Tobacco, Inc., a Virginia corporation (“ STI ”)
(collectively, the “ Sellers ”). The Purchasers
and the Sellers are referred to collectively herein as the “
Parties .”
This Agreement contemplates a
transaction in which the Purchasers will purchase all
Sellers’ right, title and interest in and to all income from
and reversionary interests in the escrow accounts identified on
Exhibit A, which were established by the Sellers on behalf of STI
as a non-participating manufacturer under state statutes adopted
substantially in the form of the Model Statute set forth on Exhibit
T to the Master Settlement Agreement between the major tobacco
companies and each state in the United States and the District of
Columbia, other than the states of Virginia, Texas, Louisiana and
Minnesota (the “ Escrow ”).
Now, therefore, in
consideration of the premises and the mutual promises herein made,
and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as
follows.
1. Definitions.
(a) “
Acknowledgement ” has the meaning set forth in
Section 2(c)(i) below.
(b) “ Assigned
Interests ” means all of the right, title, and interest
in and to (a) the Principal and the 2006 Payments; and
(b) the interest in all income generated by and other
appreciation of the Principal and, upon the deposit thereof, the
2006 Payments.
(c) “ Closing
” has the meaning set forth in Section 2(c)
below.
(d) “ Closing
Date ” has the meaning set forth in Section 2(c)
below.
(e) “ Escrow
” has the meaning set forth in the preamble above.
(f) “ Escrow
Agent ” means Branch Banking & Trust
Company.
(g) “ Escrow
Agreement ” means the agreements between the Sellers and
the Escrow Agent under which the escrow accounts identified on
Exhibit A were established and as of the Closing Date are
maintained.
(h) “ Escrow
Claims ” has the meaning set forth in Section 5(c)
below.
(i) “ Knowledge
” means actual knowledge after reasonable inquiry.
(j) “ Law
” means a law, order, ruling, rule, regulation, writ,
assessment, injunction, judgment or decree.
(k) “ Material
Adverse Effect ” means the ability of a Party to
consummate the transactions contemplated by this Agreement or a
material adverse change in the value of the Escrow.
(l) “ Notice of
Election ” has the meaning set forth in
Section 5(c)(ii) below.
(m) “ Party
” has the meaning set forth in the preamble above.
(n) “ Person
” means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
(o) “ Principal
” means the reversionary interest in all amounts deposited in
the Escrow prior to March 13, 2007.
(p) “ Purchase
Price ” has the meaning set forth in Section 2(b)
below.
(q) “ Purchasers
” has the meaning set forth in the preamble above.
(r) “ SEC
Documents ” means Sellers’ Annual Report on Form
10-K/A for the fiscal year ended December 31, 2005,
Sellers’ Quarterly Reports on Form 10-Q for the periods ended
March 31, 2006, June 30, 2006, and
September 30, 2006, and each current report on Form 8-K filed
by Sellers since January 1, 2005.
(s) “ Sellers
” has the meaning set forth in the preamble above.
(t) “ 2006
Payments ” mean the Sellers’ deposits to be made
into Escrow on or about April 15, 2007 pursuant to state
statutes adopted substantially in the form of the Model Statute set
forth on Exhibit T to the Master Settlement Agreement between the
major tobacco companies and each state in the United States other
than Virginia, Texas, Louisiana and Minnesota; provided, however,
that the 2006 Payments shall not exceed $700,000.
2. Basic Transaction
.
(a) Purchase and Sale
. On and subject to the terms and conditions of this
Agreement, the Purchasers hereby purchase from the Sellers, and the
Sellers hereby sell, transfer, convey, and deliver to the
Purchasers, all of Sellers’ right, title and interest in and
to the Assigned Interests free and clear of all liens, pledges,
charges, or encumbrances of any kind or nature against delivery of
the consideration specified in Section 2(b)(i), and when the
2006 Payments are deposited, Section 2(b)(ii).
(b) Purchase Price
. The Purchasers agree to pay Sellers an amount equal to:
(i) the product of thirty cents ($.30) and the Principal as of
the Closing Date; plus (ii) the product of thirty cents ($.30)
and the amount of the 2006 Payments when deposited into the
Escrow.
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(c) The Closing
. The closing of the purchase and sale provided for herein
(the “ Closing ” ) occurred
simultaneously with the execution of this Agreement (the date of
such execution and Closing, the “ Closing Date
” ) at Latham & Watkins, LLP, 555 11
th Street, N.W., Suite 1000, Washington, D.C.
20004 and shall be effective as of 4.30 p.m. Eastern Time on the
Closing Date. At the Closing:
(i) the Sellers delivered to
Purchasers the notice, instruction, acknowledgement and Account
Control Agreement (the “ Acknowledgement ”) in
the form of Exhibit B hereto executed by Sellers and the Escrow
Agent;
(ii) the Sellers provided the
Purchasers an opinion from outside counsel that was acceptable to
the Purchasers in the form of Exhibit C hereto;
(iii) the Purchasers
delivered to the Sellers the consideration specified in clause
(i) of Section 2(b) above by wire transfer in same day
funds into an account designated in writing by Sellers;
and
(iv) the Sellers shall
deliver, or cause to be delivered, to the Purchaser an executed
affidavit, dated not more than thirty (30) days prior to the
Closing Date, in accordance with Code Section 1445(b)(2) and
Treasury Regulation Section 1.1445-2(b), which statement
certifies that such Person is not a foreign person and sets forth
such Person’s name, taxpayer identification number and
address.
(d) 2006 Payments
.
(i) Sellers shall deposit the
2006 Payments into the applicable Escrow Accounts no later than
April 16, 2007.
(ii) Purchasers shall deliver
to the Sellers the consideration specified in Section 2(b)(ii)
above into an account designated in writing by Sellers upon written
confirmation from the Escrow Agent that the 2006 payments have been
deposited into the applicable Escrow Accounts (the date of such
confirmation being the “2006 Payment Effective
Date”).
(iii) For purposes of
clarity, nothing in this Agreement provides Purchasers the right to
2006 Payments in excess of $700,000 or obligate the Purchasers to
pay a Purchase Price based on 2006 Payments of more than
$700,000.
3. Representations and
Warranties of the Sellers . The Sellers represent and
warrant to the Purchasers that the statements contained in this
Section 3 are true, correct and complete as of the Effective
Date and as of the 2006 Payment Effective Date.
(a) Incorporation
. STSI is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Delaware and STI is
a corporation duly organized, validly existing, and in good
standing under the laws of the State of Virginia. The Sellers have
not received a written notification that any proceeding has been
instituted in any such jurisdiction, revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and
authority or qualification, and to the Sellers’ Knowledge, no
proceeding has been instituted in any such jurisdiction, revoking,
limiting or curtailing, or seeking to revoke, limit or curtail,
such power and authority or qualification. The Sellers are not in
violation of their charter or bylaws.
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(b) Authorization of
Transaction . The Sellers have full power and authority to
execute and deliver this Agreement and to perform their obligations
hereunder. Without limiting the generality of the foregoing, the
respective Boards of Directors of each of the Sellers have duly
authorized the execution, delivery, and performance of this
Agreement by the Sellers. This Agreement constitutes the valid and
legally binding obligation of the Sellers, enforceable in
accordance with its terms and conditions.
(c) Noncontravention .
To the Knowledge of the Sellers, the consummation of the
transactions contemplated herein will not result in: (i) any
violation of the certificate of incorporation or bylaws of the
Sellers; (ii) a breach or violation of any of the terms and
provisions of, or constitute a default under any contract,
agreement, license, understanding, indenture, mortgage, deed of
trust, loan agreement, joint venture, lease (including without
limitation any sale and leaseback arrangement) or bond, debenture,
note or other evidence of indebtedness, to which a Seller is a
party or by or to which it or the Assigned Interests are or may be
bound or subject; or (iii) a breach or violation of any Law of
any government or governmental court, agency or body having
jurisdiction over the Sellers or the Assigned Interests. For
purposes of clarity and not qualification of the representation and
warranty contained in this Section 3(c), Sellers shall remain
as parties to the Escrow Agreement as required by the Model Statue
but upon the Closing, shall have no right, title or interest in or
to the Assigned Interests; upon the Closing, Purchasers shall own
and control the Assigned Interests free and clear of all liens,
claims, pledges and encumbrances of any kind or nature, and the
Sellers shall have no further rights, interests or liens in the
Assigned Interests.
(d) Ownership . Except
as set forth in the SEC Documents, the Sellers have good and valid
title to the Assigned Interests, free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest,
whether imposed by agreement, contract, understanding, law, equity
or otherwise, except to the extent otherwise set forth in the
Escrow Agreements. Upon delivery of the full consideration as set
forth in Section 2(b), Purchasers will have good and valid
title to all of Sellers’ rights, title and interest in and to
the Assigned Interests and no further act nor thing need occur to
transfer such rights, title and interest to the
Purchasers.
(e) SEC Documents .
STSI has filed in a timely manner all documents that STSI was
required to file under the Securities and Exchange Act of 1934
during the 12 months period ending on the Closing Date. As of their
respective filing dates, the SEC Documents complied or, when filed
will comply in all material respects with the requirements of the
Securities and Exchange Act of 1934 or the Securities Act of 1933,
as applicable, and none of the SEC Documents contained or, when
filed, will contain any untrue statement of a material fact or
omitted or, when filed, will omit to state a material fact
requir
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