EXHIBIT 10.1
EarthShell Asia, Limited
00 Xxxx Xxx Xxxxxxx Xxxxx Xxxx. Xxxxx 0X
Xxxxxxxx, XX 00000
December 9, 2005
Xxxxxxx X. Xxxxxx
Chief Executive Officer
EarthShell Corporation
0000 Xxxx Xxxx, Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxx 00000
Re: Stock Purchase
Dear Xxxxx:
On August 22, 2005 EarthShell Asia, Limited ("EA"), and EarthShell
Corporation ("EARTHSHELL") entered into a letter agreement and a Stock Purchase
Agreement ("STOCK PURCHASE AGREEMENT") pursuant to which EarthShell agreed to
sell and EA agreed to purchase 300,000 shares of EarthShell common stock at a
price of $3.00 per share for total consideration of $900,000 and to enter into
certain sublicenses. The parties hereby agree to amend and restate the August
22, 2005 letter agreement in its entirety and to amend the Stock Purchase
Agreement, as set forth below.
1. The Stock Purchase Agreement is subject to and modified by the terms
and conditions set forth in this letter agreement. In the event of any
inconsistency, conflict or incongruity between the August 22, 2005 letter
agreement, the Stock Purchase Agreement or the five sublicense agreements
described in paragraphs 3 and 4 below, on the one hand, and this letter
agreement, on the other hand, the terms and conditions of this letter agreement
shall govern and control. The aggregate number of shares of EarthShell common
stock to be purchased by EA shall be 266,667 ("EA SHARES"), consisting of
166,667 shares which have previously been paid for (as described in paragraph
2(a)) and 100,000 shares (the purchase of which is described in paragraph 2(b)).
2. The purchase price for the EA Shares shall be paid and the EA Shares
issued as follows:
(a) EA previously paid in full to EarthShell the sum of One Hundred
Thousand Dollars ($100,000) on August 17, 2005, the sum of Two Hundred Fifty
Thousand Dollars ($250,000) on August 24, 2005 and the sum of One Hundred Fifty
Thousand Dollars ($150,000) on August 26, 2005 to purchase an aggregate of
166,667 shares. Concurrently with the execution and delivery of this letter
agreement, EarthShell is delivering such shares in the names and in the amounts
set forth on Schedule 1, subject to such persons executing an "Investor
Representation" in the form attached hereto as Exhibit E.
(b) Concurrently with the execution and delivery of this letter
agreement, EA is paying to EarthShell the sum of Three Hundred Thousand Dollars
($300,000) to purchase 100,000 EA Shares. The payment of the aforementioned
amount as well as payment for the EA Warrant Agreements (as defined and
described in paragraph 6) to EarthShell by EA shall be a condition precedent to
the effectiveness of this letter agreement.
3. On August 22, 2005, EarthShell executed and delivered to EA four
Sublicense Agreements pursuant to which EarthShell granted to EA the exclusive
right to use Technology (as defined in such Sublicense Agreements) in
conjunction with specified equipment to make and sell specified Food Service
Disposables to Customers (as each such term is defined in such Sublicense
Agreements) in China, Taiwan and certain other specified ASEAN countries (each
of the foregoing being collectively referred to herein as the "ASIAN SUBLICENSE
AGREEMENTS"). The validity of the Asian Sublicense Agreements is not affected by
this letter agreement. EarthShell shall (a) credit EA with an amount equal to
the aggregate sum of (i) $900,000 plus (ii) the total of all Technology Fees (as
defined in the applicable Asian Sublicense Agreements) EA pays to EarthShell
pursuant to paragraph 5 below (up to a maximum of Two Million Six Hundred
Thousand Dollars ($2,600,000)) and (b) offset such credits against royalties
otherwise due under the Asian Sublicense Agreements at the rate of $0.50 per
dollar of otherwise payable royalties until such credits are fully utilized. EA
may apply all such credits/offsets to such one or more of the Five Sublicenses
as it determines. In the event of an EarthShell default on any obligation of
EarthShell to a third party which could reasonably result in the termination of
or interference with EA's rights under the Five Sublicenses, as defined in
paragraph 4 below, EA may make such payments as are reasonably necessary to cure
EarthShell's default or otherwise protect EA's rights, and may recoup all
amounts so paid by offsetting such amounts against all royalties and Technology
Fees otherwise payable under the Five Sublicenses, as defined in paragraph 4
below.
4. On August 22, 2005, EarthShell executed and delivered to EA a
Sublicense Agreement pursuant to which EarthShell granted to EA the exclusive
right to use Technology (as defined in such Sublicense Agreement) to make and
sell specified raw materials Products to Customers (as each such term is defined
in such Sublicense Agreement) in China, Taiwan and certain other specified ASEAN
countries and the non-exclusive right to use Technology to make and sell
specified raw materials Products to Customers in the United States ("RAW
MATERIALS SUBLICENSE"). The validity of the Raw Materials Sublicense is not
affected by this letter agreement. The Asian Sublicense Agreements and the Raw
Materials Sublicense are collectively referred to herein as the "FIVE
SUBLICENSES".
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5. Within ten business days after EarthShell has demonstrated that
converter Products incorporating the Technology sublicensed under a specific
Asian Sublicense Agreement can be manufactured from raw materials in pelletized
or bead form in commercial quantities using CPPC Public Company Limited ("CPPC")
as the converter and utilizing the licensed process, EA shall pay EarthShell
Four Hundred Twenty-Five Thousand Dollars ($425,000) as the Technology Fee for
that Asian Sublicense Agreement. EA agrees to make the first $425,000 payment
due in such separate amounts as EarthShell may designate.
6. Concurrently with the execution and delivery of this letter
agreement, EarthShell shall execute and deliver to EA warrant agreements in the
form attached as Exhibit A (the "EA WARRANT AGREEMENTS") to acquire an aggregate
of One Million Thirty-Three Thousand Three Hundred Thirty-Three (1,033,333)
shares of the common stock of EarthShell ("WARRANT SHARES") at an exercise price
of $3.90 per share, exercisable at any time and from time to time for five years
from the date of issuance. The warrants for One Million Shares shall terminate
if all of the sublicenses referenced above are terminated, pro rata among all
the warrant holders listed below. Concurrently with the execution of this letter
agreement, EA is paying EarthShell One Hundred Thousand Dollars ($100,000.00) as
the purchase price of the warrants reflected by the EA Warrant Agreements. If
the Registration Statement (as defined below) described in paragraph 7 is not
filed by January 31, 2006, the warrant price set forth in the EA Warrant
Agreements will automatically be reduced to $3.00 per share and the EA Warrant
Agreements shall be deemed so amended by this provision. The warrants shall be
granted 664,867 to Xxxx Xxxxxxx, 363,466 to Xxxxxx X. Xxxxxxxxx, as trustee of
the Xxxxxx X. Xxxxxxxxx Trust and 5,000 to Xxxxx Xxxxx, subject to each such
holder executing an "Investor Representation" in the form attached hereto as
Exhibit E.
7. EarthShell shall file a registration statement on Form S-1 (the
"REGISTRATION STATEMENT") to register all EA Shares on or before January 31,
2006, and diligently pursue the effectiveness of such registration thereafter
until the registration statement becomes effective for the offer and sale of all
the EA Shares. For a maximum period of 12 months from the date hereof, no
royalties otherwise due or payable by EA under any of the Five Sublicenses prior
to the date that the registration statement becomes effective shall be payable
and all such royalties shall be automatically waived. All Technology Fees
otherwise due or payable prior to the date that the registration statement
becomes effective shall be payable upon the earlier of (i) the date such
registration statement becomes effective, or (ii) the one year anniversary of
the date of this letter agreement. Such damages shall constitute liquidated
damages for the failure of EarthShell to comply with its obligations under this
paragraph 7 and shall be subject to the provisions of paragraph 13 and 19 below.
8. Concurrently with the execution of this letter agreement, E.
Khashoggi Industries, LLC ("EKI") shall execute and deliver to EA a letter
agreement in the form attached as Exhibit B, pursuant to which EKI will provide
certain assurances to EA as described in such letter agreement.
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9. EA intends to enter into a joint venture with CPPC or its affiliate,
which joint venture intends to manufacture raw materials and to convert such raw
materials into products that constitute Food Service Disposables which are
covered by the Raw Materials Sublicense, as well as products that do not
constitute Food Service Disposables and thus are beyond the scope of the Raw
Materials Sublicense. The parties agree that it would be more efficient and
economical for CPPC and EA to deal with a single licensing entity in connection
with the sublicensing of the technology relating to the production of raw
materials, rather than separately with EarthShell and EKI. Therefore, EarthShell
agrees to negotiate with EKI an agreement pursuant to which one entity will have
sole authority to deal on all matters with EA regarding all rights regarding the
production of raw materials, including but not limited to those under the
Amended and Restated License Agreement, dated February 28, 1995, as amended,
(the "EKI LICENSE AGREEMENT"), between EKI and EarthShell, to manufacture and
sell raw materials in pelletized or bead form that incorporate technology
licensed to EarthShell from EKI, such agreement to be entered into within thirty
days of the date of this letter agreement. No royalties otherwise due or payable
by EA under any of the Five Sublicenses prior to the date that such an agreement
is entered into up to an aggregate amount of Eight Million Dollars shall be
payable and all such royalties up to an aggregate amount of Eight Million
Dollars shall be automatically waived. All technology fees otherwise due or
payable prior to the date that such an agreement is entered into shall be
payable upon the date such an agreement is entered into. The royalty waiver up
to an aggregate amount of Eight Million Dollars and the technology fee payment
postponement shall be referred to in this paragraph as the "FEE DAMAGES". By
initialing below, EarthShell and EA agree that (a) should EarthShell default as
described above, EA's actual damages would be difficult and impractical to
ascertain and (b) the Fee Damages are a reasonable estimate of actual damages
should such a default occur and (c) EA shall be entitled to such forfeiture as
liquidated damages, as EA's sole and exclusive remedy..
/s/ GH; /s/ SG /s/ VJT; /s/ SH
------------------ ------------------
EA EarthShell
10. EarthShell (a) represents and warrants to EA that, subject to EKI's
rights under the EKI License Agreement and the rights granted to other
sublicensees by EarthShell, it has the exclusive right to manufacture Food
Service Disposables (as such term is defined in the EKI License Agreement) using
the technology licensed to EarthShell under the EKI License Agreement, and (b)
acknowledges that, under the terms of the EKI License Agreement, any and all
technology licensed thereunder shall immediately and automatically be
transferred back to EKI in the event EarthShell becomes insolvent or files a
petition under the bankruptcy laws.
11. Subject to any applicable bankruptcy laws, in the event of
insolvency or bankruptcy of EarthShell, EA will automatically be entitled to
receive a $3 credit/offset, equitably adjusted for any stock splits, reverse
stock splits, recapitalizations or similar transactions, against all amounts
otherwise due EarthShell by EA for each share purchased from EarthShell and
returned to EarthShell by EA, Xxxx Xxxxxxx, Xxxxx Xxxxxxxxx or affiliated
parties, not including any Warrant Shares, up to a maximum of $2.7 million and
EA may apply all such credits/offsets against royalties due under such one or
more of the Five Sublicenses as it determines.
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12. Concurrently with the execution and delivery of this letter
agreement, EarthShell is delivering stock certificates for the 100,000 EA Shares
purchased pursuant to paragraph 2(b) in the names and amounts set forth on the
attached Schedule 1, subject to such persons executing an "Investor
Representation" in the form attached hereto as Exhibit E. EarthShell hereby
acknowledges and agrees that (a) it shall not oppose any sale by Xxxxx Xxxxxxxxx
pursuant to Rule 144 under the Securities Act of 1933 ("RULE 144") of the
300,000 shares purchased from EarthShell in 2004 by Xxxxx Xxxxxxxxx (the
"GALVANONI SHARES") and agrees to cooperate as reasonably necessary to
facilitate any such sale, to the extent such sale is in compliance with Rule 144
and (b) shall not oppose the sale by the holders listed on Schedule 1 of the EA
Shares or Warrant Shares pursuant to Rule 144 one year after the EA Shares or
the EA Warrants are delivered and agrees to cooperate as reasonably necessary to
facilitate such sale, to the extent such sale is in compliance with Rule 144.
For purposes of the foregoing, EarthShell may rely on any reasonably acceptable
opinion of legal counsel for Xx. Xxxxxxxxx or the holders listed on Schedule 1
of the EA Shares or EA Warrants, as applicable, to the effect that the sale of
the GALVANONI SHARES or the EA Shares or the EA Warrants by the holders listed
on Schedule 1, as applicable, is compliant with the requirements of Rule 144. No
royalties otherwise due or payable by EA under any of the aforementioned
sublicenses during the period EarthShell is obligated pursuant to this paragraph
to cooperate to facilitate a stock sale pursuant to Rule 144 up to an aggregate
amount of Eight Million Dollars shall be payable and all such royalties up to an
aggregate amount of Eight Million Dollars shall be automatically waived during
any period EarthShell is obligated pursuant to this paragraph to cooperate to
facilitate a stock sale pursuant to Rule 144 but fails to do so. All technology
fees otherwise due or payable during a period EarthShell is obligated to
cooperate pursuant to this paragraph to facilitate a stock sale pursuant to Rule
144 but fails to do so, shall be payable at such time as EarthShell cooperates
pursuant to this paragraph to facilitate such stock sale pursuant to Rule 144.
The royalty waiver up to an aggregate amount of Eight Million Dollars and the
technology fee payment postponement shall be referred to in this paragraph as
the "FEE DAMAGES"). By initialing below, EarthShell and EA agree that (a) should
EarthShell default as described above, EA's actual damages would be difficult
and impractical to ascertain and (b) the Fee Damages are a reasonable estimate
of actual damages should such a default occur and (c) EA shall be entitled to
such forfeiture as liquidated damages, as EA's sole and exclusive remedy..
/s/ GH; /s/ SG /s/ VJT; /s/ SH
------------------ ------------------
EA EarthShell
13. In the event of a material default by EarthShell under the terms of
this letter agreement set forth in paragraph 7 regarding the obligation of
EarthShell to file a registration statement: (a) all royalties otherwise due or
payable by EA under the Five Sublicenses during the period of default shall
automatically be waived for a period ending on the earlier of (i) the date the
default is cured, or (ii) the 12 month anniversary of the date of the default;
provided, however, that any waiver of royalties caused by a failure to have the
Registration Statement be declared effective shall be limited to the extent
provided for in paragraph 7 and (b) no technology fees otherwise due or payable
during the period of default shall be payable until the earlier of (i) the date
EarthShell cures the default or (ii) the 12 month anniversary of the date of the
default (the royalty waiver and the technology fee payment postponement shall be
referred to in this paragraph as the "FEE DAMAGES"). By initialing below,
EarthShell and EA agree that (a) should EarthShell default as described above,
EA's actual damages would be difficult and impractical to ascertain and (b) the
Fee Damages are a reasonable estimate of actual damages should such a default
occur and (c) EA shall be entitled to such forfeiture as liquidated damages, as
EA's sole and exclusive remedy.
/s/ GH; /s/ SG /s/ VJT; /s/ SH
------------------ ------------------
EA EarthShell
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14. EarthShell agrees that only EA will negotiate with CPPC with
respect to the sublicensing of the technology described in paragraph 9, and
EarthShell will not negotiate with CPPC or any affiliate thereof (other than
EA), without the prior consent of EA, prior to or during the existence of the
joint venture between EA and CPPC, or any affiliate thereof, to avoid confusion
or conflicting communications and that any and all future business
opportunities, agreements and business with CPPC or any affiliate thereof shall
only be through EA; provided, however, that if all of the Five Sublicenses are
terminated, EarthShell shall be able to communicate and negotiate with CPPC or
any affiliate thereof without restriction. EarthShell shall be liable for all
actual damages proven by EA for any breach by EarthShell of its obligations
under this paragraph 14. An authorized representative of EA shall provide
briefings to an authorized representative of EarthShell on the status of the
joint venture negotiations as often as reasonably necessary to execute under the
sublicenses, but not less often than monthly.
15. Concurrently with the execution of this letter agreement,
EarthShell shall execute and deliver to each of the purchasers of EA Shares
listed on Schedule 1, and such purchasers shall execute and deliver to
EarthShell, an Investor Rights Agreement in the form attached as Exhibit D.
16. In consideration of the terms and provisions of this letter
agreement, EA, for itself and on behalf of its directors, managers, officers,
employees, beneficial owners, successors and assigns, shall and hereby does
forever relieve, release, waive and discharge EarthShell and its past and
present affiliates and other related entities (including EKI), and their
respective directors, officers, employees, agents, heirs, assigns attorneys and
representatives (the "EARTHSHELL PARTIES") of any defaults, claims, debts,
liabilities, demands, obligations, promises, agreements, costs, expenses,
damages, actions, causes of action or otherwise relating to or arising out of
EarthShell's failure to file or have declared effective the registration
statement required to be filed pursuant to Section 3 of the Stock Purchase
Agreement and (b) EA shall indemnify, defend and hold harmless the EarthShell
Parties against any losses, claims, damages, or liabilities (joint or several)
("CLAIMS") to which they may become subject insofar as such Claims or actions in
respect thereof arise out of or are based upon the fact that EarthShell has
issued or delivered the EA Shares, the EA Warrant Agreements or the Warrant
Shares to the individuals set forth on Schedule 1 instead of issuing and
delivering the EA Shares, the EA Warrant Agreements or the Warrant Shares to EA
directly.
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17. Each person executing this letter agreement represents and warrants
that he is duly authorized and has legal capacity to execute and deliver this
letter agreement and each of the documents to be executed and delivered pursuant
to this letter agreement on behalf of the entity for which he is signing. Each
party represents and warrants to the other that the execution and delivery of
this letter agreement and the performance of such party's obligations hereunder
have been duly authorized and that the letter agreement and each of the
documents to be executed and delivered pursuant to this letter agreement are
binding on such party and enforceable in accordance with its terms, subject to
the applicable bankruptcy laws of any jurisdiction.
18. In order for EA to be certain that EA's rights under the Five
Sublicenses are not subject to or subordinate to the rights of any third party,
EarthShell agrees, subsequent to the execution of this letter agreement, to
provide EA assurances that the Five Sublicenses are free and clear of any rights
or encumbrances of third parties which might result in termination of or
interference with the rights granted to EA under the Five Sublicenses. To
provide such assurances, EarthShell agrees to negotiate after the execution of
this letter with all parties which may arguably have such possibly intervening
rights or encumbrances written agreements pursuant to which such parties
subordinate their rights to the rights of EA or agree to recognize and not
disturb the rights of EA under the Five Sublicenses, all such agreements to be
entered into within thirty days of the date of this letter agreement. No
royalties or Technology Fees otherwise due or payable by EA under any of the
Five Sublicenses prior to the date that such agreements are entered into shall
be payable and all such royalties and Technology Fees shall be placed in an
interest bearing escrow account and shall either (a) be released to EarthShell
on the date that such agreements are entered into by EarthShell or (b) used by
EA to cure EarthShell's default or otherwise protect EA's rights pursuant to
paragraph 3 above, as applicable.
/s/ GH; /s/ SG /s/ VJT; /s/ SH
------------------ ------------------
EA EarthShell
19. Notwithstanding any provision to the contrary in this letter
agreement or the agreements and letters to be delivered pursuant to the terms of
this letter agreement, if EarthShell defaults under the terms of this letter
agreement and/or the agreements and letters to be delivered pursuant to the
terms of this letter agreement, EA, each of the signatories to the agreements
delivered hereby, and each of holders of the EA Shares or EA Warrants,
individually and collectively, shall under no circumstances be entitled to
recover or collect directly from EarthShell, whether by Fee Damages or judgment
for damages or otherwise, an aggregate amount for any and all EarthShell
defaults which exceeds the total of (i) $900,000, plus (ii) the total of all
Technology Fees paid by EA to EarthShell under the terms of the Asian Sublicense
Agreements, plus (iii) the total of all royalties paid by EA to EarthShell under
the terms of the Five Sublicenses prior to the date of such collection or
recovery. To the extent one or more judgments is not satisfied in full directly
from EarthShell because of the foregoing limitation on EarthShell's direct
liability, the balance or balances may be withheld by EA from future Technology
Fee or royalty payments otherwise due from EA to EarthShell under the terms of
the Five Sublicenses and applied by EA to such balance or balances, whether the
balance or balances are owed to EA, a signatory to the agreements delivered
hereby, or to a holder of EA Shares or EA Warrants.
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EARTHSHELL ASIA, LIMITED,
a Hong Kong limited liability company
By: /s/ Xxxx X. Xxxxxxx
---------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Managing Director
By: /s/ Xxxxx Xxxxxxxxx
---------------------------------------
Name: Xxxxx Xxxxxxxxx
Title:
Agreed to and accepted:
EARTHSHELL CORPORATION,
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
By: /s/ Xxxxx Xxxxxxx
-----------------------------------
Name: Xxxxx Xxxxxxx
Title: Chief Financial Officer
cc: Xxxxx Xxxxxxxxx
Xxxxxx X. Xxxxx
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SCHEDULE 1
SCHEDULE OF INVESTORS
166,667 PREVIOUSLY PURCHASED EA SHARES
--------------------------------------
NAME NUMBER OF SHARES
----------------------------------------------------------- -----------------
Xxxx Xxxx 83,333
----------------------------------------------------------- -----------------
Xxxxx Xxxxx 33,333
----------------------------------------------------------- -----------------
Xxxxxx X. Xxxxxxxxx, 33,333
as trustee of the Xxxxxx X. Xxxxxxxxx Trust
----------------------------------------------------------- -----------------
Xxxx Xxxxxxx 16,668
----------------------------------------------------------- -----------------
TOTAL 166,667
----------------------------------------------------------- -----------------
100,000 ADDITIONAL EA SHARES
----------------------------
NAME NUMBER OF SHARES
----------------------------------------------------------- -----------------
Xxxxxx X. Xxxxxxxxx, 50,000
as trustee of the Xxxxxx X. Xxxxxxxxx Trust
----------------------------------------------------------- -----------------
Xxxx Xxxxxxx 50,000
----------------------------------------------------------- -----------------
TOTAL 100,000
----------------------------------------------------------- -----------------
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