LOAN AND MUTUAL RELEASE AGREEMENT
This Loan and Mutual Release Agreement (the "Agreement") is entered into
on July 28, 2006 by and between EarthShell Corporation, a Delaware corporation
("EarthShell"), and E. Khashoggi Industries, LLC, a Delaware limited liability
company ("EKI" and, together with EarthShell, the "Parties" and individually, a
"Party"), with reference to the following facts:
RECITALS:
A. EKI and EarthShell have entered into various agreements and
intercompany arrangements, including, without limitation, the Amended and
Restated License Agreement (as amended, the "License Agreement"), the Amended
and Restated Agreement for the Allocation of Patent Costs (as amended, the
"Patent Cost Allocation Agreement"), the Amended and Restated Technical Services
and Sublease Agreement (the "Services Agreement"), the Second Amended and
Restated Technical Services Agreement (the "Amended Services Agreement"), and
the Debt Conversion and Mutual Release Agreement (the "Debt Conversion
Agreement") (collectively, the "Intercompany Agreements").
B. EarthShell desires to receive a loan from EKI in the amount of $350,000
and EKI is willing to make such loan, on the terms and conditions hereinafter
set forth (the "Loan").
C. EarthShell has agreed to have EKI pay to Xxxxxxx and Xxxxxxxx ("WN"),
for the account of, and as an advance to EarthShell, the sum of $150,000,
representing the fees and costs that WN has incurred in connection with the
European nationalization of the paper sheet patents owned by EKI and licensed to
EarthShell under the License Agreement (the "WN Advance"). EKI is willing to
make the WN Advance on the terms and conditions hereinafter set forth.
D. Certain issues have arisen between the Parties with respect to the
performance of the Parties' respective obligations under the Intercompany
Agreements, and the Parties wish to clarify their respective obligations.
E. EKI previously lent $1,000,000 to EarthShell pursuant to the terms of
that certain Promissory Note in the face amount of $1,000,000, issued by
EarthShell in favor of EKI, and dated October 11, 2005 (the "Existing Promissory
Note").
F. EarthShell is in the process of obtaining financing that will permit it
to repay to EKI the Existing Promissory Note, the WN Advance and the Loan in
accordance with their terms.
AGREEMENT:
In consideration for the mutual promises set forth herein and for other
good and valuable consideration, the receipt and legal sufficiency of which are
hereby acknowledged, the Parties hereby agree as follows:
1. EKI Loan.
(a) EKI agrees to loan to EarthShell the sum of $350,000 (the "EKI
Loan") by wire transfer of immediately available funds to EarthShell's account
concurrently with EarthShell's execution and delivery of this Agreement and the
execution and issuance in favor of EKI of the EKI Loan Note and the WN Advance
Note (as such terms are defined below).
(b) The obligation to pay the EKI Loan will be evidenced by a
promissory note in the form of Exhibit A hereto (the "EKI Loan Note") that will
be executed and delivered by EarthShell concurrently with the execution and
delivery of this Agreement. Interest and principal shall be paid by EarthShell
to EKI as provided in the EKI Loan Note. EarthShell agrees to pay, when due, all
amounts owing under the EKI Loan Note, without offset, counterclaim or other
deduction of any kind.
2. WN Advance. EKI has funded the WN Advance directly to WN for the
account of EarthShell. The obligation to repay the WN Advance shall be evidenced
by a promissory note in the form of Exhibit B hereto (the "WN Advance Note")
that will be executed and delivered by EarthShell concurrently with the
execution and delivery of this Agreement. Interest and principal shall be paid
by EarthShell to EKI as provided in the WN Advance Note. EarthShell agrees to
pay, when due, all amounts owing under the WN Advance Note, without offset,
counterclaim or other deduction of any kind. EarthShell agrees that it will
continue to pay, for the one year period following the date of this Agreement,
all patent and related costs due under the Patent Cost Allocation Agreement
(which costs have been estimated by EKI to be approximately $15,000), with
respect to maintenance of the paper sheet patents in the jurisdictions that they
are currently maintained.
3. EKI Assurances Regarding Intercompany Agreements. EKI agrees that it
will continue to provide, upon request by EarthShell, written assurances to
prospective sublicensees, lenders and investors as to the status and validity of
the License Agreement and as to the absence of EarthShell's current and existing
defaults which have continued beyond any applicable cure period under any of the
Intercompany Agreements. EKI shall also continue to provide such assurances as
any sublicensee of EarthShell may reasonably request concerning EKI's
willingness to recognize the continuing effectiveness of any sublicenses validly
granted under the License Agreement in the event the License Agreement is
terminated (such assurances to be similar in scope and content to the assurances
previously given by EKI to EarthShell's licensees).
4. Release.
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(a) Release by EarthShell. EarthShell hereby fully, finally, and
forever releases, quit claims, and discharges EKI and each of its officers,
directors, managers, members, agents, servants, employees, attorneys, affiliated
and subsidiary entities, successors, predecessors and assigns, past and present
(collectively, the "EKI Released Parties") from any and all claims, liabilities,
demands, debts, accounts, obligations, actions, and causes of action ("Claims"),
known or unknown, at law or in equity, of whatever character in any way that
EarthShell may have against EKI or any other of the EKI Released Parties,
through the date of this Agreement, that arise out of, relate to, or otherwise
concern the License Agreement (including any sublicense agreements entered into
by EarthShell thereunder), the Patent Cost Allocation Agreement, the Services
Agreement, the Amended Services Agreement, the Debt Conversion Agreement or any
other Intercompany Agreement or any other agreement or arrangement between the
Parties (whether exclusively or with other parties) relating to financing
transactions, licensing or sublicensing transactions, the provision of services
or any other commercial arrangement (collectively, the "EKI Released Matters"),
excluding, however, any and all Claims pursuant to this Agreement (the "Excluded
Matters"). The EKI Released Matters expressly include, but are not limited to,
any claims for indemnity, contribution, subrogation, or other similar principal
of recovery that EarthShell may have against EKI with regard to the EKI Released
Matters now or in the future, and they also include any matters arising from or
related to any allegation that an EKI Released Party who served both as an
officer, director or owner of EarthShell and EKI had a conflict in making
decisions under the Intercompany Agreements. EKI Released Matters shall not
include any claims which may be asserted by EarthShell as a counterclaim in any
action initiated by EKI or its assigns or any indemnity, contribution, or
reimbursement claim by EarthShell against EKI arising out a claim brought by a
third party against both EarthShell and EKI (provided that, to the extent any
such claim arises under or relates to an Intercompany Agreement, the terms of
such Intercompany Agreement shall govern EKI's and EarthShell's respective
rights and responsibilities with regard to the resolution of such claim).
Notwithstanding the foregoing, any counterclaim that EarthShell is permitted to
bring against EKI pursuant to the immediately preceding sentence may be asserted
by EarthShell only to the extent necessary to reduce or limit EarthShell's
liability to EKI with respect to the claims asserted by EKI in the relevant
action initiated by EKI and in no event shall EarthShell assert any such
counterclaim or enforce any judgment obtained in connection therewith in any
manner that, directly or indirectly, results in EKI incurring a liability that
EKI is required to pay or satisfy. For purposes of this Section 4(a), a third
party claim would not include claims asserted by an officer, director, employee
or shareholder of EarthShell in their capacity as such. The release given by
EarthShell pursuant to this Section 4(a) supplements and shall not in any way
limit the release previously given by EarthShell to EKI pursuant to the terms of
the Debt Conversion Agreement.
(b) Release by EKI. EKI hereby fully, finally, and forever releases,
quit claims, and discharges EarthShell and each of its officers, directors,
agents, servants, employees, attorneys, affiliated and subsidiary entities,
successors, predecessors and assigns, past and present (collectively, the
"EarthShell Released Parties") from any and all Claims, known or unknown, at law
or in equity, of whatever character in any way that EarthShell may have against
EarthShell or any other of the EarthShell Released Parties, through the date of
this Agreement, that arise out of, relate to, or otherwise concern the License
Agreement (including any sublicense agreements entered into by EarthShell
thereunder), the Patent Cost Allocation Agreement, the Services Agreement, the
Amended Services Agreement, the Debt Conversion Agreement or any other
Intercompany Agreement or any other agreement or arrangement between the Parties
(whether exclusively or with other parties) relating to financing transactions,
licensing or sublicensing transactions, the provision of services or any other
commercial arrangement, including any Claims against any EarthShell Released
Party that arise out of, relate to, or otherwise concern actions taken or
omitted to be taken by any EarthShell Released Party in such EarthShell Released
Party's capacity as an officer or director of EKI (collectively, the "EarthShell
Released Matters"), excluding, however, the Excluded Matters. The EarthShell
Released Matters expressly include, but are not limited to, any claims for
indemnity, contribution, subrogation, or other similar principal of recovery
that EKI may have against EarthShell with regard to the EarthShell Released
Matters now or in the future. EarthShell Released Matters shall not include any
claims which may be asserted by EKI as a counterclaim in any action initiated by
EarthShell or its assigns or any indemnity, contribution, or reimbursement claim
by EKI against EarthShell arising out a claim brought by a third party against
both EarthShell and EKI (provided that, to the extent any such claim arises
under or relates to an Intercompany Agreement, the terms of such Intercompany
Agreement shall govern EKI's and EarthShell's respective rights and
responsibilities with regard to the resolution of such claim). Notwithstanding
the foregoing, any counterclaim that EKI is permitted to bring against
EarthShell pursuant to the immediately preceding sentence may be asserted by EKI
only to the extent necessary to reduce or limit EKI's liability to EarthShell
with respect to the claims asserted by EarthShell in the relevant action
initiated by EarthShell, and in no event shall EKI assert any such counterclaim
or enforce any judgment obtained in connection therewith in any manner that,
directly or indirectly, results in EarthShell incurring a liability that
EarthShell is required to pay or satisfy. For purposes of this Section 4(b), a
third party claim would not include claims asserted by an officer, director,
manager, employee or member of EKI in their capacity as such. For the avoidance
of doubt, the EarthShell Released Matters shall not include amounts that are or
become due and payable under the Existing Promissory Note, the WN Advance Note
or the EKI Loan Note.
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(c) Release of Unknown Claims. Except for the Excluded Matters, the
Parties acknowledge and agree that the releases given pursuant to Sections 4(a)
and (b) extend to all Claims relating to the EKI Released Matters (in the case
of the release given by EarthShell pursuant to Section 4(a)) and the EarthShell
Released Matters (in the case of the release given by EKI pursuant to Section
4(b)), of every nature and kind whatsoever, known or unknown, suspected or
unsuspected, that exist as of the date of this Agreement. Each Party expressly
intends that this Agreement shall be effective as a full and final accord and
satisfaction, and release, of each and every of the EKI Released Matters and the
EarthShell Released Matters. The Parties acknowledge that they are familiar with
Section 1542 of the California Civil Code, which provides as follows:
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing this
release, which if known by him must have materially affected his
settlement with debtor.
The Parties waive and relinquish every right or benefit that they have
or may have under Section 1542 of the California Civil Code or any similar
provision in any jurisdiction, to the full extent that lawfully it may waive
such a right or benefit. The Parties acknowledge that they may later discover
facts in addition to, or different from, those which they now know or believe to
be true, but that it is their intention to fully, finally, and forever settle
and release all of the EKI Released Matters and EarthShell Released Matters,
whether known or unknown, suspected or unsuspected, which now exist, may exist
in the future, or have previously existed, against the persons or entities to
which EarthShell and EKI are hereby granting a release.
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(d) Covenant Not to Xxx. Except with respect to counterclaims,
EarthShell shall not initiate, file, institute, maintain or proceed upon, or
encourage, advise or voluntarily assist any other person or entity to initiate,
institute, maintain or proceed upon, any claim against EKI or the other EKI
Released Parties with regard to any of the EKI Released Matters. Except with
respect to counterclaims, EKI shall not initiate, file, institute, maintain or
proceed upon, or encourage, advise or voluntarily assist any other person or
entity to initiate, institute, maintain or proceed upon, any claim against
EarthShell or the other EarthShell Released Parties with regard to any of the
EarthShell Released Matters.
(e) Third Party Beneficiaries. EarthShell expressly agrees that the
release granted pursuant to Section 4(a) shall inure to the benefit of EKI and
the other EKI Released Parties. EKI expressly agrees that the release granted
pursuant to Section 4(b) shall inure to the benefit of EarthShell and the other
EarthShell Released Parties,.
(f) No Admissions. The Parties acknowledge and agree that the releases
are entered into as a compromise of doubtful and disputed claims, and is not to
be construed as an admission of liability on the part of any Party, by each of
whom all liability is expressly denied.
(g) No Assignments. EarthShell represents and warrants that it has not
heretofore assigned or transferred, or purported to have assigned or
transferred, to any corporation, partnership, limited liability company, other
legal entity or person whatsoever any claim, debt, liability, demand,
obligation, cost, expense, action or cause of action released pursuant to
Section 4(a) and agrees to indemnify and hold harmless EKI and the other EKI
Released Parties against any claim, debt, liability, demand, obligation, cost,
expense, action or cause of action based on, arising out of or in connection
with any such transfer or assignment or purported transfer or assignment. EKI
represents and warrants that it has not heretofore assigned or transferred, or
purported to have assigned or transferred, to any corporation, partnership,
limited liability company, other legal entity or person whatsoever any claim,
debt, liability, demand, obligation, cost, expense, action or cause of action
released pursuant to Section 4(b) and agrees to indemnify and hold harmless
EarthShell and the other EarthShell Released Parties against any claim, debt,
liability, demand, obligation, cost, expense, action or cause of action based
on, arising out of or in connection with any such transfer or assignment or
purported transfer or assignment.
5. Representations and Warranties of EKI. As a material inducement to
EarthShell to enter into this Agreement, and in addition to the representations
and warranties contained in Section 4(g), EKI represents and warrants to
EarthShell as follows, which representations and warranties shall be effective
as of the date of this Agreement:
(a) Organization, Standing and Power. EKI is duly organized and validly
existing under the laws of the State of Delaware, and is in good standing in
such jurisdiction, and it has the requisite power and authority to own its
property and to carry on its business as now being conducted.
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(b) Authority; Enforceability. EKI has the requisite power and
authority to enter into this Agreement and it shall at all times have the
requisite power and authority to perform its obligations hereunder. The
execution and delivery by EKI of this Agreement, and the consummation by EKI of
the transactions contemplated hereby, have been duly authorized by all necessary
action on the part of EKI. This Agreement has been duly executed and delivered
by EKI , and this Agreement constitutes a legal, valid and binding obligation of
EKI, enforceable in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, moratorium or other laws affecting creditors'
rights generally, or equitable principles, whether applied in a proceeding in
equity or law.
(c) No Violation. The execution and delivery by EKI of this Agreement
do not, and the consummation by EKI of the transactions contemplated hereby by
EKI, and the compliance with the terms hereof, shall not: (i) violate any law,
judgment, order, decree, statute, ordinance, rule or regulation applicable to
EKI; (ii) violate or conflict with any provision of the organizational documents
of EKI; (iii) violate or conflict with any provision of, or result in a default
under, any agreement or other instrument to which EKI is a party or by which it
or any of its property or assets is bound; or (iv) require any consent,
approval, order or authorization of, or the registration, declaration or filing
with, any governmental entity or any other person.
(d) Litigation; Decrees. There is no suit, action, investigation or
proceeding which is pending or, to the knowledge of EKI, threatened against or
affecting EKI relating to or which could in any material respect adversely
affect the transactions contemplated by this Agreement.
(e) Signature Authority. Each person signing this Agreement on behalf
of EKI represents and warrants that he has the proper authority to bind EKI.
6. Representations and Warranties of EarthShell. As a material inducement
to EKI to enter into this Agreement and to make the EKI Loan and the WN Advance,
and in addition to the representations and warranties contained in Section 4(g),
EarthShell represents and warrants to EKI as follows, which representations and
warranties shall be effective as of the date of this Agreement:
(a) Organization, Standing and Power. EarthShell is duly organized and
validly existing under the laws of the State of Delaware, and is in good
standing in such jurisdiction, and it has the requisite power and authority to
own its property and to carry on its business as now being conducted.
(b) Authority; Enforceability. EarthShell has the requisite power and
authority to enter into this Agreement and it shall at all times have the
requisite power and authority to perform its obligations hereunder and under the
EKI Loan Note and the WN Advance Note. The execution and delivery by EarthShell
of this Agreement, the EKI Loan Note and the WN Advance Note and the
consummation by EarthShell of the transactions contemplated hereby and thereby,
have been duly authorized by all necessary action on the part of EarthShell.
This Agreement, the EKI Loan Note and the WN Advance Note have been duly
executed and delivered by EarthShell, and this Agreement, the EKI Loan Note and
the WN Advance Note constitute the legal, valid and binding obligation of
EarthShell, enforceable in accordance with their terms, except as enforcement
may be limited by securities, bankruptcy, insolvency, moratorium or other laws
affecting creditors' rights generally, or equitable principles, whether applied
in a proceeding in equity or law.
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(c) No Violation. The execution and delivery by EarthShell of this
Agreement, the EKI Loan Note and the WN Advance Note do not, and the
consummation by EarthShell of the transactions contemplated hereby and thereby,
and the compliance by EarthShell with the terms hereof and thereof, shall not:
(i) violate any law, judgment, order, decree, statute, ordinance, rule or
regulation applicable to EarthShell; (ii) violate or conflict with any provision
of the organizational documents of EarthShell; (iii) violate or conflict with
any provision of, or result in a default under, any agreement or other
instrument to which EarthShell is a party or by which it or any of its property
or assets is bound; or (iv) require any consent, approval, order or
authorization of, or the registration, declaration or filing with, any
governmental entity or any other person.
(d) Litigation; Decrees. There is no suit, action, investigation or
proceeding which is pending or, to the knowledge of EarthShell, threatened
against or affecting EarthShell relating to or which could in any material
respect adversely affect the transactions contemplated by this Agreement, the
EKI Loan Note and the WN Advance Note.
(e) Signature Authority. Each person signing this Agreement, the EKI
Loan Note and the WN Advance Note on behalf of EarthShell represents and
warrants that he has the proper authority to bind EarthShell.
7. Miscellaneous.
(a) Construction. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of California, without
regard to the conflicts of law provisions thereof.
(b) Entire Agreement. This Agreement, the WN Advance Note and the EKI
Loan Note contain the entire understanding of the Parties and supersedes all
prior agreements and understandings relating to the subject matter hereof.
(c) Invalid Provisions. In the event that any provision of this
Agreement or any word, phrase, clause, sentence or other portion thereof should
be held to be unenforceable or invalid for any reason, such provision or portion
thereof shall be modified or deleted in such a manner so as to make this
Agreement, as modified, legal and enforceable to the fullest extent permitted
under applicable laws.
(d) Counterparts. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
(e) Successors and Assigns. Subject to the following sentence, this
Agreement will be binding upon, and will inure to the benefit of, the
successors, assigns, heirs, executors and estates of the parties hereto.
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(f) Opportunity to Consult Counsel and Other Advisors. Each of the
Parties hereto acknowledges and understands that such Party has had an
opportunity to consult with the legal, tax, business and other advisors of such
Party's choice regarding this Agreement and the transactions contemplated hereby
and that such Party has read this Agreement carefully and fully understands all
of the terms and provisions contained herein and their significance.
(g) Further Assurances. Each Party hereto shall execute and deliver
such further instruments, and take such other actions, as any other party hereto
may reasonably request in order to carry out this Agreement, the WN Advance Note
and the EKI Loan Note, and to fully consummate the transactions contemplated
hereby.
(h) Arbitration and Litigation. Any controversy, claim or dispute
arising out of or relating to this Agreement or the breach, termination,
enforcement, interpretation or validity thereof, including the determination of
the scope or applicability of this agreement to arbitrate, shall be determined
by arbitration in Santa Barbara, California, before a sole arbitrator, in
accordance with the laws of the State of California for agreements made in and
to be performed in California. The arbitration shall be administered by the
Judicial Arbitration and Mediation Services ("JAMS"). Judgment on the award may
be entered in any court having jurisdiction. Either Party may, without
inconsistency with this Agreement, seek from a court any interim or provisional
relief that is necessary to protect the rights or property of that party,
pending the appointment of the arbitrator. The exclusive forum for such
application shall be the state courts in the County of Santa Xxxxxxx or the
United States District Court for the Central District of California. Upon the
request of any party, a mediation shall be conducted prior to the arbitration
pursuant to the Mediation Rules of JAMS. In the event of any dispute under this
Agreement, the prevailing party as determined by the arbitrator shall be
entitled to recover its reasonable attorneys fees and expenses and arbitration
costs.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
EARTHSHELL CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. xxxxxx
Title: Chairman and CEO
E. KHASHOGGI INDUSTRIES, LLC
By: /s/ Xxxxx Xxxxxxxxx
-------------------
Name: Xxxxx Xxxxxxxxx
Title: Chairman of the Board
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EXHIBIT A
PROMISSORY NOTE
$350,000.00 July 28, 2006
FOR VALUE RECEIVED, the undersigned, EarthShell Corporation, a Delaware
corporation ("Maker"), located at 0000 Xxxx Xxxx, Xxxxx 000, Xxxxxxxxxxx, XX.
00000, unconditionally promises to pay to the order of E. Khashoggi Industries,
LLC, a Delaware limited liability company ("Holder"), at 0000 Xxxxx Xxxxxx,
Xxxxx 000, Xxxxx Xxxxxxx, Xxxxxxxxxx 00000 , or at such other place as Holder
may designate in writing, the principal sum of THREE HUNDRED FIFTY THOUSAND
DOLLARS ($350,000.00), or such lesser amount as is advanced from Holder to Maker
from time to time. The principal sum shall be advanced by Holder to Maker in
accordance with Section 1(b) of that certain Loan and Mutual Release Agreement,
entered into concurrently herewith, between Maker and Holder (the "Loan
Agreement"). In the event of any inconsistency between the Loan Agreement and
this Promissory Note (this "Note"), the terms of this Note shall control.
This Note evidences Maker's obligation to pay to Holder the sums advanced
by Holder to Maker pursuant to the terms of this Note. All sums owing hereunder
are payable in lawful money of the United States of America, in immediately
available funds, pursuant to the following terms:
1. Definitions. Terms which are used in this Note and not otherwise
defined herein shall have the meanings set forth in this Paragraph.
"Applicable Rate" means a variable per annum rate, as of any date of
determination, equal to the rate from time to time published in the "Money
Rates" section of The Wall Street Journal as being the "Prime Rate" (or, if more
than one rate is published as the Prime Rate, the highest of such rates),
compounded monthly. The Prime Rate will change as of the date of publication in
The Wall Street Journal of a Prime Rate that is different from that published on
the preceding business day. In the event that The Wall Street Journal shall, for
any reason, fail or cease to publish the Prime Rate, Holder and Maker shall
choose a mutually agreeable comparable index or source to use as a basis for the
Prime Rate.
"Concurrent Note" means that certain Promissory Note, dated
concurrently herewith, in the principal amount of $150,000 and issued by Maker
in favor of Holder.
"Default Rate" means a rate of interest equal to 10.0% per annum,
compounded monthly.
"Existing Note" means that certain Promissory Note, dated October 11,
2005, in the principal amount of $1,000,000 and issued by Maker in favor of
Holder.
"Event of Default" means the occurrence or happening, at any time and
from time to time, of any one or more of the following:
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a. Payment of Indebtedness. If Maker fails to pay any portion of the
indebtedness evidenced by this Note within ten (10) days -----------------------
following the date the same shall become due and payable, whether at the due
date stipulated in this Note or at a date fixed for acceleration or otherwise
and such failure continues for a period of five (5) days following written
notice of such failure by Holder to Maker.
b. Defaults under Other Notes. If Maker commits an Event of Default
under the Existing Note or the Concurrent Note (as the term Event of Default is
defined under the Existing Note or the Concurrent Note, as applicable).
c. Voluntary Bankruptcy. If Maker shall (i) seek entry of any order for
relief as a debtor in a proceeding under the bankruptcy laws of any competent
jurisdiction; (ii) file a petition seeking relief under the bankruptcy,
arrangement, reorganization or other debtor relief laws of any other competent
jurisdiction; (iii) call a meeting of its creditors or any one of them for the
purpose of requesting a rearrangement or restructuring of its debts or any
concessions with respect to such debt; (iv) make a general assignment for the
benefit of its creditors; or (v) admit in writing its inability to pay its debts
as they mature.
d .Involuntary Bankruptcy. If a petition is filed against Maker seeking
relief under the bankruptcy, arrangement, reorganization or other debtor relief
laws of any competent jurisdiction and such petition is not dismissed within
ninety (90) days following the date of its filing.
e. Appointment of a Receiver. If a court of competent jurisdiction
enters an order, judgment or decree appointing, without the consent of Maker, a
receiver for it, or for all or any material part of its property, and such
order, judgment or decree shall not be and remain vacated, reversed or stayed or
such receiver shall not otherwise be removed within a period of thirty (30) days
following entry of such order.
f. Use of Proceeds. If Maker fails to use the proceeds of the loan
evidenced by this Note for its immediate operating purposes.
2. Interest Accrual; Payments of Principal and Interest; Prepayments.
a. Interest Accrual. Interest shall accrue on the unpaid principal
balance of this Note at the Applicable Rate from the date of this Note shown
above until the same is paid to Holder. Notwithstanding the foregoing, interest
shall accrue on the unpaid balance of this Note at the Default Rate following an
Event of Default until the same is paid to Holder.
b. Payments of Principal and Interest. All accrued but unpaid interest
and all outstanding principal shall be due and payable on the earliest to occur
of the following: (i) the second anniversary of the date of this Note, (ii) five
(5) days following the date Maker has received $3,000,000 or more in aggregate
net cash proceeds from all financing transactions, equity contributions, and
transactions relating to the sale, licensing, sublicensing or disposition of
assets or the provision of services (including advance royalty payments,
proceeds from the sale of Maker's common stock and fees for technological
services rendered to third parties), measured from the date of this Note and not
taking into account the proceeds advanced under this Note, the Concurrent Note
or the Existing Note, and (iii) the occurrence of an Event of Default.
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c. Application of Payments. All payments hereunder shall be first
applied to Holder's costs and expenses which are reimbursable to Holder pursuant
to Section 4 below, then to any unpaid interest and finally to the outstanding
principal balance. If any payment due date falls on a Saturday, Sunday or a
holiday generally observed by banks in the City of Santa Xxxxxxx, the due date
of the payment shall automatically be extended to the next following business
day.
d. Computation of Interest. All interest on this Note shall be computed
on the basis of the actual number of days elapsed divided by a year assumed to
consist of 360 days.
e. Prepayment. Maker may prepay this Note in whole or in part at any
time without penalty or premium.
3. Default; Remedies. If an Event of Default occurs, the entire
outstanding principal balance of this Note and all accrued but unpaid interest
shall become due and payable.
4. Holder's Costs. Maker shall reimburse Holder for all costs and expenses
incurred in collecting any sums due and payable under this Note, including
reasonable attorneys fees and court costs. All such expenses and costs shall be
paid by Maker within ten (10) days after demand made by Holder. Any amounts not
timely paid shall constitute an Event of Default hereunder and shall bear
interest at the Default Rate thereafter.
5. Applicable Law. This Note shall be governed by construed in accordance
with the internal laws of the State of California without regard to the
principles of conflicts of law.
6. No Waiver by Holder. No delay on the part of Holder in the exercise of
any power or right under this Note shall operate as a waiver thereof, nor shall
a single or partial exercise of any power or right preclude other or further
exercise thereof or exercise of any other power or right.
7. Successors and Assigns. The terms "Holder" and "Maker" as used in this
Note shall include not only the Holder and Maker named herein but also all of
Holder's and Maker's successors and assigns to whom the benefits and burdens of
this Note shall inure.
8. Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing and sent or delivered to
personally, by facsimile transmission so long as receipt is confirmed or by
deposit with a reputable overnight courier and addressed to Maker or Holder at
their respective principal business offices located at the addresses set forth
in the first paragraph of this Note.
9. Usury. It is the intent of Maker that all provisions of this Note which
call for the payment of interest comply in all respects with all applicable
usury statutes and regulations. In the event that the terms of this Note would
require the payment of interest in excess of the amount permitted by any
applicable law or regulation, the terms of the Note shall be deemed to be
modified to comply with all such applicable laws or regulations without any
action by either party. In the event that Holder has received interest in excess
of the amount permitted by any applicable law or regulation, the excess portion
of the interest received shall be deemed to have been a prepayment of principal,
without premium, as of the date received.
12
10. Waiver. Maker waives presentment, demand, presentment for payment,
notice of protest or nonpayment, notice of dishonor, notice of default or
delinquency, notice of acceleration, and diligence in bringing suit against any
party hereto or collecting any sums hereunder.
11. Miscellaneous.
a. This Note shall be binding on and shall inure to the benefit of
Maker, Holder, and their respective successors and assigns.
b. Headings are inserted into this Note for convenience only and shall
not be considered in construing any provision.
c. The terms of this Note may not be changed, nor any of its provisions
waived, without the written consent of Maker and Holder.
d. Time shall be of the essence with respect to every provision of this
Note, but no delay in enforcing any right or remedy under this Note shall be
construed to be a waiver of that or any other right or remedy.
e. The provisions of this Note are severable, and the invalidity or
illegality of any provision shall not be a bar to the enforcement of any other
provision.
f. This Note is negotiable and fully recourse to Maker.
g. The person executing this Note on behalf of Maker represents and
warrants that he has the full authority and power to execute and deliver this
Note on behalf of Maker, and such execution and delivery has been authorized by
all appropriate action.
12. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW, MAKER
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE.
13
13. Submission to Forum and Jurisdiction. Any legal action or proceeding
with respect to this Note must be brought in the federal or state courts located
in the County of Santa Xxxxxxx, State of California, and by execution and
delivery of this Note, Maker hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts having proper venue. Maker hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of any of
the aforesaid actions or proceedings arising out of or in connection with this
Note brought in the aforesaid Santa Xxxxxxx courts and irrevocably waives and
agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient forum,
and also consents to the service of process by any means authorized by the State
of California.
EARTHSHELL CORPORATION,
a Delaware corporation
By:/s/ Xxxxxxx X. Xxxxxx
---------------------
Its: Chairman and CEO
14
EXHIBIT B
PROMISSORY NOTE
$150,000.00 July 28, 2006
FOR VALUE RECEIVED, the undersigned, EarthShell Corporation, a Delaware
corporation ("Maker"), located at 0000 Xxxx Xxxx, Xxxxx 000, Xxxxxxxxxxx, XX
00000, unconditionally promises to pay to the order of E. Khashoggi Industries,
LLC, a Delaware limited liability company ("Holder"), at 0000 Xxxxx Xxxxxx,
Xxxxx 000, Xxxxx Xxxxxxx, Xxxxxxxxxx, 00000, or at such other place as Holder
may designate in writing, the principal sum of ONE HUNDRED FIFTY THOUSAND
DOLLARS ($150,000.00), or such lesser amount as is paid by Holder to Xxxxxxx and
Xxxxxxxx ("WN"), for the account of Maker, in connection with the fees and costs
WN has incurred in connection with the European nationalization of the paper
sheet patents owned by Holder and licensed to Maker, all as described in that
certain Loan and Mutual Release Agreement, entered into concurrently herewith,
between Maker and Holder (the "Loan Agreement"). In the event of any
inconsistency between the Loan Agreement and this Promissory Note (this "Note"),
the terms of this Note shall control.
This Note evidences Maker's obligation to pay to Holder the sums advanced
by Holder to Maker pursuant to the terms of this Note. All sums owing hereunder
are payable in lawful money of the United States of America, in immediately
available funds, pursuant to the following terms:
1. Definitions. Terms which are used in this Note and not otherwise
defined herein shall have the meanings set forth in this Paragraph.
"Concurrent Note" means that certain Promissory Note, dated
concurrently herewith, in the principal amount of $350,000 and issued by Maker
in favor of Holder.
"Default Rate" means a rate of interest equal to 10.0% per annum,
compounded monthly.
"Existing Note" means that certain Promissory Note, dated October 11,
2005, in the principal amount of $1,000,000 and issued by Maker in favor of
Holder.
"Event of Default" means the occurrence or happening, at any time and
from time to time, of any one or more of the following:
a. Payment of Indebtedness. If Maker fails to pay any portion of the
indebtedness evidenced by this Note within ten (10) days following the date the
same shall become due and payable, whether at the due date stipulated in this
Note or at a date fixed for acceleration or otherwise and such failure continues
for a period of five (5) days following written notice of such failure by Holder
to Maker.
15
b. Defaults under Other Notes. If Maker commits an Event of Default
under the Existing Note or the Concurrent Note (as the term Event of Default is
defined under the Existing Note or the Concurrent Note, as applicable).
c. Voluntary Bankruptcy. If Maker shall (i) seek entry of any order for
relief as a debtor in a proceeding under the bankruptcy laws of any competent
jurisdiction; (ii) file a petition seeking relief under the bankruptcy,
arrangement, reorganization or other debtor relief laws of any other competent
jurisdiction; (iii) call a meeting of its creditors or any one of them for the
purpose of requesting a rearrangement or restructuring of its debts or any
concessions with respect to such debt; (iv) make a general assignment for the
benefit of its creditors; or (v) admit in writing its inability to pay its debts
as they mature.
d. Involuntary Bankruptcy. If a petition is filed against Maker seeking
relief under the bankruptcy, arrangement, reorganization or other debtor relief
laws of any competent jurisdiction and such petition is not dismissed within
ninety (90) days following the date of its filing.
e. Appointment of a Receiver. If a court of competent jurisdiction
enters an order, judgment or decree appointing, without the consent of Maker, a
receiver for it, or for all or any material part of its property, and such
order, judgment or decree shall not be and remain vacated, reversed or stayed or
such receiver shall not otherwise be removed within a period of thirty (30) days
following entry of such order.
2. Interest Accrual; Payments of Principal and Interest; Prepayments.
a. Interest Accrual. No interest shall accrue on the unpaid principal
balance of this Note until an Event of Default has occurred and the outstanding
principal amount of this Note is not paid within ten (10) days of the occurrence
of such Event of Default. If the outstanding principal amount of this Note is
not paid in full within ten (10) days of the occurrence of an Event of Default,
interest shall accrue on the unpaid balance of this Note at the Default Rate,
commencing on the occurrence of the Event of Default until all amounts due under
this Note have been paid to Holder. Any such interest shall be payable on
demand.
b. Payments of Principal. All outstanding principal shall be due and
payable on the earliest to occur of the following: (i) the second anniversary of
the date of this Note, (ii) five (5) days following the date Maker has received
$3,000,000 or more in aggregate net cash proceeds from all financing
transactions, equity contributions, and transactions relating to the sale,
licensing, sublicensing or disposition of assets or the provision of services
(including advance royalty payments, proceeds from the sale of Maker's common
stock and fees for technological services rendered to third parties), measured
from the date of this Note and not taking into account the proceeds advanced
under this Note, the Concurrent Note or the Existing Note, and (iii) the
occurrence of an Event of Default.
c. Application of Payments. All payments hereunder shall be first
applied to Holder's costs and expenses which are reimbursable to Holder pursuant
to Section 4 below, then to any unpaid interest and finally to the outstanding
principal balance. If any payment due date falls on a Saturday, Sunday or a
holiday generally observed by banks in the City of Santa Xxxxxxx, the due date
of the payment shall automatically be extended to the next following business
day.
16
d. Computation of Interest. All interest on this Note shall be computed
on the basis of the actual number of days elapsed divided by a year assumed to
consist of 360 days.
e. Prepayment. Maker may prepay this Note in whole or in part at any
time without penalty or premium.
3. Default; Remedies. If an Event of Default occurs, the entire
outstanding principal balance of this Note shall become due and payable.
4. Holder's Costs. Maker shall reimburse Holder for all costs and expenses
incurred in collecting any sums due and payable under this Note, including
reasonable attorneys fees and court costs. All such expenses and costs shall be
paid by Maker within ten (10) days after demand made by Holder. Any amounts not
timely paid shall constitute an Event of Default hereunder and shall bear
interest at the Default Rate thereafter.
5. Applicable Law. This Note shall be governed by construed in accordance
with the internal laws of the State of California without regard to the
principles of conflicts of law.
6. No Waiver by Holder. No delay on the part of Holder in the exercise of
any power or right under this Note shall operate as a waiver thereof, nor shall
a single or partial exercise of any power or right preclude other or further
exercise thereof or exercise of any other power or right.
7. Successors and Assigns. The terms "Holder" and "Maker" as used in this
Note shall include not only the Holder and Maker named herein but also all of
Holder's and Maker's successors and assigns to whom the benefits and burdens of
this Note shall inure.
8. Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing and sent or delivered to
personally, by facsimile transmission so long as receipt is confirmed or by
deposit with a reputable overnight courier and addressed to Maker or Holder at
their respective principal business offices located at the addresses set forth
in the first paragraph of this Note.
9. Usury. It is the intent of Maker that all provisions of this Note which
call for the payment of interest comply in all respects with all applicable
usury statutes and regulations. In the event that the terms of this Note would
require the payment of interest in excess of the amount permitted by any
applicable law or regulation, the terms of the Note shall be deemed to be
modified to comply with all such applicable laws or regulations without any
action by either party. In the event that Holder has received interest in excess
of the amount permitted by any applicable law or regulation, the excess portion
of the interest received shall be deemed to have been a prepayment of principal,
without premium, as of the date received.
10. Waiver. Maker waives presentment, demand, presentment for payment,
notice of protest or nonpayment, notice of dishonor, notice of default or
delinquency, notice of acceleration, and diligence in bringing suit against any
party hereto or collecting any sums hereunder.
17
11. Miscellaneous.
a. This Note shall be binding on and shall inure to the benefit of
Maker, Holder, and their respective successors and assigns.
b. Headings are inserted into this Note for convenience only and shall
not be considered in construing any provision.
c. The terms of this Note may not be changed, nor any of its provisions
waived, without the written consent of both Maker and Holder.
d. Time shall be of the essence with respect to every provision of this
Note, but no delay in enforcing any right or remedy under this Note shall be
construed to be a waiver of that or any other right or remedy.
e. The provisions of this Note are severable, and the invalidity or
illegality of any provision shall not be a bar to the enforcement of any other
provision.
f. This Note is negotiable and fully recourse to Maker.
g. The person executing this Note on behalf of Maker represents and
warrants that he has the full authority and power to execute and deliver this
Note on behalf of Maker, and such execution and delivery has been authorized by
all appropriate action.
12. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW, MAKER
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE.
18
13. Submission to Forum and Jurisdiction. Any legal action or proceeding
with respect to this Note must be brought in the federal or state courts located
in the County of Santa Xxxxxxx, State of California, and by execution and
delivery of this Note, Maker hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts having proper venue. Maker hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of any of
the aforesaid actions or proceedings arising out of or in connection with this
Note brought in the aforesaid Santa Xxxxxxx courts and irrevocably waives and
agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient forum,
and also consents to the service of process by any means authorized by the State
of California.
EARTHSHELL CORPORATION,
a Delaware corporation
By:/s/ Xxxxxxx X. Xxxxxx
---------------------
Its: Chairman and CEO
