CORNELL CAPITAL PARTNERS, LP
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
September 29, 2006
EarthShell Corporation
0000 Xxxx Xxxx, Xxxxx 000
Xxxxxxxxxxx, XX 20193
Attention: Xxxxx Xxxxxxx
Dear Xx. Xxxxxxx
This agreement (the "Agreement") will confirm our understanding regarding
the obligations of EARTHSHELL CORPORATION, a Delaware corporation (the
"Company") owed to CORNELL CAPITAL PARTNERS, LP ("Cornell"). The Company hereby
acknowledges, confirms and agrees that as of the close of business on September
29, 2006 the Company is indebted to Cornell pursuant to the Secured Convertible
Debenture dated December 30, 2005 (the "Convertible Debenture") in an amount of
$4,500,000 plus accrued and unpaid interest of $409,500.
The Company and Cornell are each a party to that certain Investor
Registration Rights Agreement, dated December 30, 2005 (the "Registration Rights
Agreement"), entered into in connection with the Company's issuance of the
Convertible Debenture, pursuant to which the Company filed a registration
statement (the "Registration Statement") with the U.S. Securities and Exchange
Commission (the "Commission") to register the shares of the Company's common
stock, par value $0.001 per shares (the "Common Stock"), underlying the
Convertible Debentures on February 14, 2006. Pursuant to the Registration Rights
Agreement, the Company was obligated to obtain the effectiveness of the
Registration Statement by May 31, 2006 (the "Scheduled Effective Deadline").
Further, failure to obtain the effectiveness of the Registration Statement by
the Scheduled Effective Deadline shall result in the imposition of liquidated
damages ("Liquidated Damages") equal to one percent (1%) of the liquidated value
of the Convertible Debenture for each thirty (30) day period after the Scheduled
Effective Deadline and in addition to Liquidated Damages, the failure to obtain
the effectiveness of the Registration Statement by June 30, 2006 constituted an
event of default.
On July 12, 2006 the Company and Cornell entered into a forbearance
agreement pursuant to which, among other things, Cornell agreed to forbear from
calling a default from the date thereof through September 30, 2006 as a result
of the Registration Statement not being declared effectiveness and Cornell
waived any Liquidated Damages through September 30, 2006. The Company
acknowledges that the Registration Statement will not be declared effective by
September 30, 2006 and that after such date, an event of default under the
Convertible Debentures shall have occurred as a result of the Registration
Statement not being declared effective with the Commission (the "Existing
Default").
Our agreement is as follows:
1. In consideration of the accommodations made by Cornell to the Company set
forth herein,
a. Within two business days of the date hereof, the Company shall issue
to Cornell 187,500 shares of Common Stock (the "Shares"). The Shares
and shall have "piggy back" registration rights and shall be
included on any registration statement filed subsequent to the
Registration Statement. Cornell shall also have the right to demand
the registration of the Shares by providing the Company with 30
day's advance written notice of such request. In the event the
Registration Statement is declared effective prior to November 1,
2006, Cornell shall return 125,000 of the Shares to the Company. In
the event the Registration Statement is declared effective after
November 1, 2006 and before December 1, 2006, Cornell shall return
62,500 of the Shares to the Company. In the event that the
Registration Statement is declared effective after December 1, 2006,
Cornell shall not return any of the Shares.
x. Xxxxxxx shall waive any Liquidated Damages that may accrue from and
after the date hereof through December 31, 2006.
c. The Company shall continue to work with the SEC to obtain the
effectiveness of the Registration Statement and obtain such
effectiveness by December 31, 2006.
d. In accordance with the terms of Section 3(c)(ii) of the Debenture,
the Company agrees to waive the conversion restriction set forth in
Section 3(c)(ii) of the Debenture with respect to conversions made
at the option of Cornell.
e. All amounts owed, together with interest accrued and accruing
thereon, and fees, costs, expenses and other charges (collectively,
the "Obligations") now or hereafter payable by the Company to
Cornell (including, without limitation, the amounts referenced in
the table above) under the Convertible Debentures and all other
agreements, contracts, instruments or other items delivered in
connection therewith (collectively, along with this letter agreement
shall be referenced herein as the "Transaction Documents") are
unconditionally owing by the Company to Cornell, without offset,
setoff, defense or counterclaim of any kind, nature or description
whatsoever. All terms of the Transaction Documents not modified by
this Agreement shall remain in full force and effect. An event of
default on any Transaction Document shall constitute an Event of
Default on all other Transaction Documents.
f. The Company hereby acknowledges, confirms and agrees that Cornell
has and shall continue to have valid, enforceable and perfected
first-priority liens upon and security interests in the Pledged
Property (as defined in the Transaction Documents) heretofore
granted pursuant to any and all security agreements or otherwise
granted to or held by Cornell.
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g. In reliance upon the representations, warranties and covenants of
the Company contained in this Agreement, and subject to the terms
and conditions set forth herein, Cornell hereby waives on a one-time
basis only the Existing Defaults and further agree to forbear from
exercising its rights and remedies under the Transaction Documents
or applicable law in respect of or arising out of the Existing
Defaults, subject to the conditions, amendments and modifications
contained herein for the period (the "Forbearance Period")
commencing on the date hereof and continuing for so long as the
following conditions are met: (i) the Company strictly complies with
the terms of this Agreement (including the covenant of the Company
set forth in Section 2.d. hereof), and (ii) there is no occurrence
or existence of any event of default, other than the Existing
Default under the Transaction Documents or any other agreement that
the Company has entered into with Cornell.
h. Upon the termination or expiration of the Forbearance Period, the
agreement of Cornell to forbear shall automatically and without
further action terminate and be of no force and effect, it being
expressly agreed that the effect of such termination will be to
permit Cornell to exercise such rights and remedies immediately,
including, but not limited to, the acceleration of all of the
Obligations without any further notice, passage of time or
forbearance of any kind. This Agreement shall be deemed to satisfy
any and all requirements by Cornell to notify the Company of the
occurrence of the Existing Default and satisfies any obligation by
Cornell to give the Company an opportunity to cure each Existing
Default.
i. The Company hereto acknowledges, confirms and agrees that: (a) each
of the Transaction Documents to which it is a party has been duly
executed and delivered to Cornell by the Company, and each is in
full force and effect as of the date hereof, (b) the agreements and
obligations of the Company contained in such documents and in this
Agreement constitute the legal, valid and binding obligations of the
Company, enforceable against it in accordance with their respective
terms, and the Company has no valid defense to the enforcement of
such obligations, and (c) Cornell is and shall be entitled to the
rights, remedies and benefits provided for in the Transaction
Documents and applicable law, without offset, setoff, defense or
counterclaim of any kind, nature or descriptions whatsoever.
j. This letter may be executed in any number of counterparts, each of
which shall be deemed an original, and all of which shall constitute
one and the same instrument. This letter shall be accepted,
effective and binding, for all purposes, when the parties shall have
signed and transmitted to each other, by telecopier or otherwise,
copies of this letter. The terms of this letter supersede the terms
of any other verbal or written agreement existing prior to the date
hereof. In the event of any litigation arising hereunder, the
prevailing party or parties shall be entitled to recover its or
their reasonable attorneys' fees and court costs from the other
party or parties, including the costs of bringing such litigation
and collecting upon any judgments. This letter shall be binding upon
and shall inure to the benefit of the parties hereto and their
respective heirs, executors, legal representatives, trustees,
successors and assigns. Except for the amounts expressly set forth
herein, none of the parties hereto shall be liable to any other
party for any amounts whatsoever.
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2. Payoff. Subject to the terms and conditions of the Section titled "Right
of Redemption" in the Convertible Debenture, the Company may repay all
outstanding amounts owed under the Convertible Debenture by paying to
Cornell the sum of (i) the outstanding principal and unpaid interest as
set forth in the first paragraph above, (ii) a per diem interest amount of
$1,500 per day from the date hereof through the date payment is received,
and (iii) the applicable Redemption Premium (as defined in the Convertible
Debentures), less any adjustment to be made as a result of any conversions
by Cornell (the "Payoff Amount"). Cornell hereby (i) acknowledges and
agrees that payment of the Payoff Amount will constitute payment in full
of all of the Company's obligations under the Convertible Debentures and
(ii) shall release, effective upon the receipt of the Payoff Amount, all
security interests and liens which the Company may have granted to the
Cornell.
REMAINDER OF XXXX INTENTIONALLY LEFT BLANK
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If the foregoing correctly sets forth the terms of our agreement, please
sign this letter on the line provided below, whereupon it will constitute a
binding agreement among us.
Sincerely,
CORNELL EQUITY PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/ Xxxx Xxxxx
-------------------------------------
Name: Xxxx Xxxxx
Title: Managing Director
ACCEPTED AND AGREED:
EARTHSHELL CORPORATION
By: /s/ Xxxx Xxxxx
---------------------------
Name: Xxxx Xxxxx
Title: Principal Accounting Officer
Acknowledged by:
/s/ Xxxxxx Xxxxxxxx
------------------------------
Xxxxxx Xxxxxxxx
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