UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ______)*
EarthShell Corporation
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(Name of Issuer
Common Stock, Par Value $.01 Per Share
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(Title of Class of Securities)
27032B209
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(CUSIP Number)
With a copy to:
James A. Cooper Roger R. Wilen
100 South Brentwood Boulevard Schiff Hardin LLP
Suite 200 6600 Sears Tower
St. Louis, Missouri 63105-1691 Chicago, IL 60606
(314) 727-2232 (312) 258-5810
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
June 17, 2005
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition that is the subject of this Schedule13D,
and is filing this schedule because of Sections 240.13d-1(e),
240.13d-1(f) or 240.13d-1(g), check the following box.
NOTE: Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. See Section
240.13d-7 for other parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class
of securities, and for any subsequent amendment containing information
which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities
of that section of the Act but shall be subject to all other provisions
of the Act (however, see the Notes).
PERSONS WHO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS
THE FORM DISPLAYS A CURRENTLY VALID OMB CONTROL NUMBER.
CUSIP No. 27032B209
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1. Names of Reporting Persons. ReNewable Products LLC
I.R.S. Identification Nos. of above persons (entities only)
20-2042611
2. Check the Appropriate Box if a Member of a Group (See
Instructions)
(a) / /
(b) /X/
3. SEC Use Only
4. Source of Funds (See Instructions) OO
5. Check if Disclosure of Legal Proceedings Is Required
Pursuant to Items 2(d) or 2(e) / /
6. Citizenship or Place of Organization Delaware
Number of 7. Sole Voting Power 0
Shares 8. Shared Voting Power 8,000,000
Beneficially 9. Sole Dispositive Power 0
Owned by each 10. Shared Dispositive Power 8,000,000
Reporting
Person With
11. Aggregate Amount Beneficially Owned by Each
Reporting Person 8,000,000
12. Check if the Aggregate Amount in Row (11) Excludes Certain
Shares (See Instructions) /X/
13. Percent of Class Represented by Amount in Row (11) 30.5
24. Type of Reporting Person (See Instructions)
OO
CUSIP No. 27032B209
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1. Names of Reporting Persons. TSCP Machinery & Processing Group,
LLC
I.R.S. Identification Nos. of above persons (entities only)
2. Check the Appropriate Box if a Member of a Group (See
Instructions)
(a) / /
(b) /X/
3. SEC Use Only
4. Source of Funds (See Instructions) OO
5. Check if Disclosure of Legal Proceedings Is Required
Pursuant to Items 2(d) or 2(e) / /
6. Citizenship or Place of Organization Delaware
Number of 7. Sole Voting Power 0
Shares 8. Shared Voting Power 8,000,000
Beneficially 9. Sole Dispositive Power 0
Owned by each 10. Shared Dispositive Power 8,000,000
Reporting
Person With
11. Aggregate Amount Beneficially Owned by Each
Reporting Person 8,000,000
12. Check if the Aggregate Amount in Row (11) Excludes Certain
Shares (See Instructions) /X/
13. Percent of Class Represented by Amount in Row (11) 30.5
14. Type of Reporting Person (See Instructions)
OO
CUSIP No. 27032B209
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1. Names of Reporting Persons. Thompson Street Capital Partners,
L.P.
I.R.S. Identification Nos. of above persons (entities only)
11-3568473
2. Check the Appropriate Box if a Member of a Group
(See Instructions)
(a) / /
(b) /X/
3. SEC Use Only
4. Source of Funds (See Instructions) OO
5. Check if Disclosure of Legal Proceedings Is Required
Pursuant to Items 2(d) or 2(e) / /
6. Citizenship or Place of Organization Delaware
Number of 7. Sole Voting Power 0
Shares 8. Shared Voting Power 8,000,0000
Beneficially 9. Sole Dispositive Power 0
Owned by each 10. Shared Dispositive Power 8,000,000
Reporting
Person With
11. Aggregate Amount Beneficially Owned by
Each Reporting Person 8,000,000
12. Check if the Aggregate Amount in Row (11) Excludes
Certain Shares (See Instructions) /X/
13. Percent of Class Represented by Amount in Row (11) 30.5
14. Type of Reporting Person (See Instructions)
PN
CUSIP No. 27032B209
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1. Names of Reporting Persons. Thompson Street Capital GP LLC
I.R.S. Identification Nos. of above persons (entities only)
11-3568478
2. Check the Appropriate Box if a Member of a Group
(See Instructions)
(a) / /
(b) /X/
3. SEC Use Only
4. Source of Funds (See Instructions) OO
5. Check if Disclosure of Legal Proceedings Is Required
Pursuant to Items 2(d) or 2(e) / /
6. Citizenship or Place of Organization Delaware
Number of 7. Sole Voting Power 0
Shares 8. Shared Voting Power 8,000,000
Beneficially 9. Sole Dispositive Power 0
Owned by each 10. Shared Dispositive Power 8,000,000
Reporting
Person With
11. Aggregate Amount Beneficially Owned by
Each Reporting Person 8,000,000
12. Check if the Aggregate Amount in Row (11)
Excludes Certain Shares (See Instructions) X
13. Percent of Class Represented by Amount in Row (11) 30.5
14. Type of Reporting Person (See Instructions)
OO
CUSIP No. 27032B209
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1. Names of Reporting Persons. James A. Cooper
I.R.S. Identification Nos. of above persons (entities only)
N/A
2. Check the Appropriate Box if a Member of a Group (See
Instructions)
(a) / /
(b) /X/
3. SEC Use Only
4. Source of Funds (See Instructions) OO, PF
5. Check if Disclosure of Legal Proceedings Is Required
Pursuant to Items 2(d) or 2(e) / /
6. Citizenship or Place of Organization United States
Number of 7. Sole Voting Power 13,200
Shares 8. Shared Voting Power 8,235,157
Beneficially 9. Sole Dispositive Power 13,200
Owned by each 10. Shared Dispositive Power 8,235,157
Reporting
Person With
11. Aggregate Amount Beneficially Owned by
Each Reporting Person 8,248,357
12. Check if the Aggregate Amount in Row (11) Excludes
Certain Shares (See Instructions) /X/
13. Percent of Class Represented by Amount in Row (11) 31.4%
14. Type of Reporting Person (See Instructions)
IN
CUSIP No. 27032B209
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1. Names of Reporting Persons. Peter S. Finley
I.R.S. Identification Nos. of above persons (entities only)
2. Check the Appropriate Box if a Member of a Group (See
Instructions)
(a) / /
(b) /X/
3. SEC Use Only
4. Source of Funds (See Instructions) OO, PF
5. Check id Disclosure of Legal Proceedings Is Required
Pursuant to Items 2(d) or 2(e) / /
6. Citizenship or Place of Organization United States
Number of 7. Sole Voting Power 0
Shares 8. Shared Voting Power 8,027,000
Beneficially 9. Sole Dispositive Power 0
Owned by each 10. Shared Dispositive Power 8,027,000
Reporting
Person With
11. Aggregate Amount Beneficially Owned by
Each Reporting Person 8,027,000
12. Check if the Aggregate Amount in Row (11) Excludes
Certain Shares (See Instructions) X
13. Percent of Class Represented by Amount in Row (11) 30.6%
14. Type of Reporting Person (See Instructions)
IN
ITEM 1. SECURITY AND ISSUER
This Schedule 13D relates to the Common Stock, $.01 par value
(the "Common Stock"), of EarthShell Corporation, a Delaware
corporation (the "Company"), whose principal executive offices are
located at 3916 State Street, Suite 110, Santa Barbara, California
93105.
ITEM 2. IDENTITY AND BACKGROUND
This Schedule 13D is being filed jointly by ReNewable Products
LLC, a Delaware limited liability company (the "Stockholder"), TSCP
Machinery & Processing Group, LLC, a Delaware limited liability
company (the "Holding Company"), Thompson Street Capital Partners,
L.P., a Delaware limited partnership (the "Fund"), Thompson Street
Capital GP LLC, a Delaware limited liability company (the "General
Partner"), James A. Cooper, individually ("Mr. Cooper"), and Peter S.
Finley, individually ("Mr. Finley"). The Stockholder, the Holding
Company, the Fund, the General Partner, Mr. Cooper, and Mr. Finley are
referred to together as the "Reporting Persons".
During the last five years, none of the Reporting Persons (i) has
been convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors) or (ii) was a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction and as a
result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or
finding any violation with respect to such laws. Additional
information with respect to each of the Reporting Persons follows.
The Stockholder's principal business is to serve as a holding
company for ReNewable Products, Inc., a Delaware corporation (the
"Target"). The Stockholder's principal office is located at 100 South
Brentwood Boulevard, Suite 200, St. Louis, Missouri 63105-1691. Its
executive officers are its President, Mr. Finley, and its Vice
President, Treasurer, and Secretary, Mr. Cooper. Its managers and
controlling persons are Mr. Cooper, Richard F. Glennon ("Mr.
Glennon"), and Harry Holiday ("Mr. Holiday"). The persons ultimately
in control of the Stockholder are Mr. Cooper and Mr. Finley.
The Holding Company's principal business is to serve as a holding
company. Its principal office is located at 100 South Brentwood
Boulevard, Suite 200, St. Louis, Missouri 63105-1691. Its executive
officers are its President, Mr. Finley, and its Vice President,
Treasurer, and Secretary, Mr. Cooper. Its managers and controlling
persons are Mr. Cooper, Mr. Finley, and Mr. Holiday. The persons
ultimately in control of the Holding Company are Mr. Cooper and Mr.
Finley.
The Fund's principal business is to operate a private equity
fund. Its principal office is located at 100 South Brentwood
Boulevard, Suite 200, St. Louis, Missouri 63105-1691. Its general
partner is the General Partner. The persons controlling the General
Partner are set forth below.
The General Partner's principal business is to manage the Fund.
Its principal office is located at 100 South Brentwood Boulevard,
Suite 200, St. Louis, Missouri 63105-1691. Its managing members and
controlling persons are Mr. Cooper and Mr. Finley.
Mr. Cooper's business address is 100 South Brentwood Boulevard,
Suite 200, St. Louis, Missouri 63105-1691. His principal occupation
is Managing Member of the General Partner. He is a citizen of the
United States.
Mr. Finley's business address is 100 South Brentwood Boulevard,
Suite 200, St. Louis, Missouri 63105-1691. His principal occupation
is Managing Member of the General Partner. He is a citizen of the
United States.
No information is provided herein with respect to Mr. Glennon
because it is not currently available to the Reporting Persons, who
will cause this Schedule 13D to be amended to include that informa-
tion after it becomes available.
Mr. Holiday's business address is 100 South Brentwood Boulevard,
Suite 200, St. Louis, Missouri 63105-1691. His principal occupation
is Chief Operating Officer of the General Partner. During the last
five years, Mr. Holiday (i) has not been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) and
(ii) was not a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws. Mr. Holiday is a citizen of the United
States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Upon closing of the Merger Agreement, the Company will acquire
ownership of the Target and the Stockholder will acquire an aggregate
of 8,000,000 shares of a new series of the Company's preferred stock,
designated Series C Convertible Preferred Stock (the "Convertible
Preferred Stock") that is convertible into the Common Stock on a
share-for-share basis (subject to adjustment). The Reporting Persons
have committed $12,000,000 of capital to the Stockholder, of which
$6,000,000 had been invested in the Target, and an additional
$6,000,000 will be invested in the Target within 30 days of the date
of the Merger Agreement. The source of this $12,000,000 is capital
provided by limited partners of the Fund pursuant to capital calls.
ITEM 4. PURPOSE OF TRANSACTION
Upon closing of the Merger Agreement, the Target will merge with
a wholly-owned subsidiary of the Company (as a result of which the
Target will become a wholly-owned subsidiary of the Company) and the
Stockholder will receive an aggregate of 8,000,000 shares of the
Convertible Preferred Stock. The Convertible Preferred Stock will
then represent the right to acquire not less than 24.6 percent of the
shares of the Common Stock outstanding on a fully-diluted basis.
As described in Item 6, under the terms of the Merger Agreement,
the Stockholder's ability to complete the Merger is subject to various
conditions. Even after those conditions have been met (or waived),
the closing will not occur unless the Reporting Persons cause the
Target to give a required notice, which they have no contractual
obligation to do. Also, the Target can terminate the Merger Agreement
at any time prior to closing for any reason. Although the Reporting
Persons currently do not intend to terminate the Merger Agreement and
expect that they will give the notice of closing if the conditions are
met, the Reporting Persons expressly reserve their contractual rights
to terminate, or otherwise not complete, the Merger Agreement.
Following completion of the Merger, the Stockholder will have
Board observer rights while it holds Convertible Preferred Stock.
After all the Convertible Preferred Stock is converted (and so long
as the Stockholder holds at least 25 percent (as adjusted) of the
shares issuable upon conversion at the Merger Agreement closing), the
Stockholder will have the right to nominate one candidate for election
as a director of the Company, and the Company will use its best
efforts to have that candidate elected as a Company director. Also,
while the Stockholder owns any shares of Convertible Preferred Stock
or Common Stock, the Stockholder will be entitled to consult with and
advise management of the Company and its subsidiaries on significant
business issues and to have access to management, books and records
and facilities.
Except as described above or as otherwise described in Items 3, 5
and 6, the Reporting Persons currently have no specific plans or
proposals that relate to or would result in the events described in
paragraphs (a) through (j) of Item 4 of the instructions to Schedule
13D, although the Reporting Persons reserve the right to develop such
plans or proposals.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
As described in Item 6, under the terms of the Merger Agreement,
the Stockholder's ability to complete the Merger is subject to various
conditions. As a result of these conditions, the Reporting Persons do
not currently have a right to acquire the Convertible Preferred Stock.
Despite these conditions, however, the Reporting Persons may be deemed
to have a right to acquire, within 60 days, beneficial ownership of
the Common Stock into which the Convertible Preferred Stock will be
convertible.
The share ownership percentages described in this Item 5 are
based on the Company's representation in the Merger Agreement that
18,234,615 shares of Common Stock were outstanding as of June 17,
2005. The Company's Annual Report on Form 10-K/A, Amendment No. 3,
for the fiscal year ended December 31, 2004, filed with the Securities
and Exchange Commission on June 9, 2005, reported that 18,435,452
shares of Common Stock were outstanding as of June 8, 2005.
(a) The aggregate number and percentage of Common Stock that may
be beneficially owned by each of the persons identified in Item 2 of
this Schedule 13D are provided in the following table:
Name Aggregate Number Percentage
---- ---------------- ----------
The Stockholder 8,000,000 30.5%
The Holding Company 8,000,000 30.5%
The Fund 8,000,000 30.5%
The General Partner 8,000,000 30.5%
Mr. Cooper(1) 8,248,357 31.4%
Mr. Finley(2) 8,027,000 30.6%
Mr. Holiday 0 0
As described in Item 6, the Reporting Persons may be deemed to be
members of a group with the Khashoggi Holders. Based solely on the
information reported by the Company in its Annual Report on Form 10-
K/A, Amendment No. 3, for the fiscal year ended December 31, 2004,
filed with the Securities and Exchange Commission on June 9, 2005,
under the caption "Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters," the Reporting Persons
understand that the Khashoggi Holders were the beneficial owners, as
of June 2, 2005, of 7,664,449 shares of Common Stock, which is
reported as representing 39.25 percent of the Common Stock then
outstanding.
(b) The number of shares of Common Stock as to which each person
identified in Item 2 of this Schedule 13D may have the sole power to
vote or to direct the vote, shared power to vote or direct the vote,
____________________
1 Includes (i) 235,157 shares of Common Stock held by Mr. Cooper's
spouse; (ii) 9,700 shares of Common Stock held by Mr. Cooper as
custodian for his children, and (iii) 3,500 shares of Common Stock
held by Mr. Cooper in his IRA.
2 Includes (i) 12,000 shares of Common Stock held by Mr. Finley
as custodian of UGMA accounts for his three children, (ii) 5,000 shares
of Common Stock held jointly with Mr. Finley's spouse, and (iii) 10,000
shares of Common Stock held as co-trustee, along with Ms. Finley, of
the Peter S. Finley Living Trust of 4/12/02.
sole power to dispose or to direct the disposition, or shared power to
dispose or to direct the disposition is provided in the following
table:
Shared
Name Sole Power Shared Power Sole Power Power
---- to Vote to Vote to Dispose to Dispose
---------- ------------ ---------- ----------
The Stockholder 0 8,000,000 0 8,000,000
The Holding Company 0 8,000,000 0 8,000,000
The Fund 0 8,000,000 0 8,000,000
The General Partner 0 8,000,000 0 8,000,000
Mr. Cooper 13,200(3) 8,235,157(4) 13,200(3) 8,235,157(4)
Mr. Finley 0 8,027,000(5) 0 8,027,000(5)
Mr. Holiday 0 0 0 0
Mr. Cooper's spouse's name is Stacy Cooper ("Ms. Cooper"). Ms.
Cooper's address is 26 Dromara Road, St. Louis, Missouri 63124. She
is not employed. During the last five years, Ms. Cooper (i) has not
been convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors) and (ii) was not a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws.
Ms. Cooper is a citizen of the United States.
Mr. Finley's spouse's name is Macon P. Finley ("Ms. Finley").
Ms. Finley's address is 12 Carrswold Drive, St. Louis, Missouri 63105.
Her principal occupation is a schoolteacher. During the last five
years, Ms. Finley (i) has not been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) and (ii) was
not a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction and as a result of such proceeding was or is
subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect
to such laws. Ms. Finley is a citizen of the United States.
____________________
3 Includes (i) 9,700 shares of Common Stock held by Mr. Cooper as
custodian of UMOUTMA for his children and (ii) 3,500 shares of Common
Stock held by Mr. Cooper in his IRA.
4 Includes 235,157 shares of Common Stock held by Mr. Cooper's spouse.
5 Includes (i) 5,000 shares of Common Stock held jointly by Mr. Finley
and Ms. Finley, (ii) 10,000 shares of Common Stock held by Mr. Finley
and Ms. Finley as trustees of the Peter S. Finley Living Trust of
4/12/02, and (iii) 12,000 shares of Common Stock held by Mr. Finley as
custodian of UGMA accounts for his children.
(c) In the past 60 days, Ms. Cooper has effected the following
purchases of shares of Common Stock through a broker:
Date Number of Shares Price Per Share
---- ---------------- ---------------
June 17, 2005 2000 $2.00
June 17, 2005 3000 $2.05
June 17, 2005 1000 $2.11
June 17, 2005 21,000 $2.20
June 17, 2005 5,000 $2.30
June 24, 2005 2,000 $2.80
In the past 60 days, Mr. Finley has effected the following purchases
of shares of Common Stock through a broker:
Date Number of Shares Price Per Share
---- ---------------- ---------------
June 17, 2005 1,000 $2.30
June 17, 2005 3,000 $2.35
June 17, 2005 4,000 $2.35
June 17, 2005 4,000 $2.35
Other than the transactions described in this part (c) of Item 5
of this Schedule 13D, none of the persons listed in part (a) of Item 5
of this Schedule 13D has effected any transactions in the Common Stock
during the past 60 days. The Reporting Persons have no information as
to any transactions by the Khashoggi Holders.
(d) No person, other than (i) those identified in Item 2 of this
Schedule 13D, (ii) Ms. Cooper, and (iii) Ms. Finley is known to have
the right to receive or the power to direct the receipt of dividends
from, or the proceeds from the sale of, the shares of Common Stock
beneficially owned by the persons identified in Item 2 of this
Schedule 13D.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO SECURITIES OF THE ISSUER
The Company, EarthShell Triangle, Inc., which is a wholly-owned
subsidiary of the Company, the Target, which is a wholly-owned
subsidiary of the Stockholder, and the Stockholder entered into an
Agreement and Plan of Merger, dated as of June 17, 2005 (the "Merger
Agreement"). Upon closing of the Merger Agreement, the Company would
acquire the Target through the merger of EarthShell Triangle, Inc.
into the Target, and the Stockholder would receive, in exchange for
all of the outstanding shares of the Target, an aggregate of 8,000,000
shares of the Convertible Preferred Stock. Prior to closing, the
Merger Agreement may be terminated (i) at any time by the Target for
any reason and (ii) after March 31, 2006, by either the Company or the
Target if the terminating party was not the cause of the failure to
close.
Under the terms of the Merger Agreement, in addition to the
$12,000,000 investment referred to under Item 3 of this Schedule 13D,
the Company's obligation, and thus the Stockholder's ability, to
complete the Merger are subject to various conditions. Those
conditions include the Target's making payment under a purchase order
for certain equipment placed with an affiliate of Stockholder that is
an EarthShell equipment supplier, installing support systems for the
equipment, obtaining certain financing, operating the equipment at
agreed-to levels of effectiveness, generating royalty income for the
Company pursuant to a sublicense agreement between the Company and the
Target, and demonstrating that the Target's equity and debt financing
are adequate to operate the equipment without additional funding by
the Company.
As a result of these conditions, the Reporting Persons do not
currently have a right to acquire the Convertible Preferred Stock.
Despite these conditions, however, the Reporting Persons may be deemed
to have a right to acquire, within 60 days, beneficial ownership of
the Common Stock into which the Convertible Preferred Stock will be
convertible.
Even after all the conditions to the obligations of the various
parties to the Merger Agreement have been met (or waived), the closing
will not occur until and unless the Target, which will then still be
owned and controlled by the Reporting Persons, gives a written notice
to the Company of its intent to consummate the transactions
contemplated by the Merger Agreement. The Target has no contractual
obligation to give notice.
As provided in the Certificate of Designation of the Series C
Convertible Preferred Stock, the Convertible Preferred Stock will be
convertible at any time at the election of the holder into Common
Stock on a share-for-share basis (subject to certain adjustments). At
any time after the second anniversary of the closing under the Merger
Agreement, the Company can, on due notice, cause all of the
Convertible Preferred Stock to be converted into Common Stock. In
addition to various customary anti-dilution adjustments, if the number
of shares of Common Stock outstanding on a fully-diluted basis as of
the closing of the Merger Agreement is more than 24,556,184, then the
conversion rate will be adjusted so that the Common Stock issuable on
conversion of the Convertible Preferred Stock would represent 24.6
percent of the Common Stock then outstanding, on a fully-diluted
basis, including after conversion of the Convertible Preferred Stock.
The Convertible Preferred Stock will be entitled to one vote per
share and to vote generally with the Common Stock as one class. So
long as at least 4,000,000 shares of Convertible Preferred Stock
remain outstanding, the Company will be precluded, without the
approval of the holders of the Convertible Preferred Stock, voting as
a single class, from taking a number of potentially significant
actions, including certain issuances of capital stock at less than
fair market value (as defined), repurchasing capital stock, mergers,
sales of certain assets or capital stock of subsidiaries, transactions
with affiliates (with certain exceptions), amending material
agreements (with certain exceptions), making certain investments,
certain acts of insolvency and certain litigation settlements. The
holders of Convertible Preferred Stock will also have certain board
observer rights.
In connection with entering into the Merger Agreement, the
Company and the Stockholder signed a letter agreement with Essam
Khashoggi, the Company's principal stockholder, acting on behalf of
himself and his family and entities he owns or controls that hold
shares or rights to acquire Common Stock (together, the "Khashoggi
Holders"). The letter agreement (the "Khashoggi Lock-up Agreement"),
which is included as Exhibit 4 to this Schedule 13D and is
incorporated herein by reference, includes certain agreements relating
to possible sales of Common Stock by the Stockholder and by the
Khashoggi Holders. The agreements include (i) coordination designed
to reduce the adverse effect of sales of Common Stock (together with
certain other transactions that the Company views as likely) on the
Company's net operating loss carryforward; (ii) commitments relating
to sales that may affect the other party's exercise of registration
rights granted by the Company; and (iii) for two years after the
closing under the Merger Agreement, restrictions on certain
unregistered sales of Common Stock.
By virtue of the Khashoggi Lock-up Agreement, the Reporting
Persons and the Khashoggi Holders may be deemed to be members of a
group who have agreed, to the extent set forth in the Khashoggi Lock-
up Agreement, to act together with respect to the disposition of
Common Stock.
The descriptions contained in Items 3, 4, 5 and 6 of the terms of
the Merger Agreement, the Certificate of Designation of the Series C
Convertible Preferred Stock, the Registration and Investor Rights
Agreement and the form of Khashoggi Lock-up Agreement are qualified in
their entirety by reference to the full text of the Merger Agreement,
the Certificate of Designation of the Series C Convertible Preferred
Stock, the Registration and Investor Rights Agreement and the form of
Khashoggi Lock-up Agreement, copies of which are attached to this
Schedule 13D as Exhibits 1, 2 , 3 and 4, respectively, and
incorporated herein by reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Following is a list of the materials attached to this Schedule
13D:
Exhibit 1 Agreement and Plan of Merger, dated as of
June 17, 2005, among EarthShell Corporation,
EarthShell Triangle, Inc., ReNewable
Products, Inc., and ReNewable Products, LLC
Exhibit 2 Certificate of Designation of the Series C
Convertible Preferred Stock of EarthShell
Corporation
Exhibit 3 Registration and Investor Rights Agreement
Exhibit 4 Khashoggi Lock-up Agreement
Exhibit 5 Joint Filing Agreement
EXHIBIT 1
---------
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
among
EARTHSHELL CORPORATION,
EARTHSHELL TRIANGLE, INC.,
RENEWABLE PRODUCTS, INC.
and
RENEWABLE PRODUCTS LLC
Dated as of June 17, 2005
TABLE OF CONTENTS
1. THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) EFFECT OF MERGER . . . . . . . . . . . . . . . . . . . . 2
(c) CONSUMMATION OF THE MERGER . . . . . . . . . . . . . . . 2
(d) CERTIFICATE OF INCORPORATION . . . . . . . . . . . . . . 2
(e) BY-LAWS . . . . . . . . . . . . . . . . . . . . . . . . . 2
(f) DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . 2
2. CONVERSION OF SECURITIES . . . . . . . . . . . . . . . . . . . 2
(a) MERGERCO COMMON STOCK . . . . . . . . . . . . . . . . . . 3
(b) TARGET COMMON STOCK . . . . . . . . . . . . . . . . . . . 3
3. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) TIME AND PLACE OF CLOSING . . . . . . . . . . . . . . . . 3
(b) CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . 3
4. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER . . . . . . . . 3
(a) CORPORATE ORGANIZATION, QUALIFICATION . . . . . . . . . . 3
(b) POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . 4
(c) CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . 4
(d) CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . 5
(e) CONSTITUENT DOCUMENTS; DIRECTORS AND OFFICERS . . . . . . 5
(f) FINANCIAL . . . . . . . . . . . . . . . . . . . . . . . . 5
(g) TITLE TO ASSETS . . . . . . . . . . . . . . . . . . . . . 6
(h) RELATED PARTY TRANSACTIONS . . . . . . . . . . . . . . . 6
(i) CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . 7
(j) MATERIAL ADVERSE CHANGES . . . . . . . . . . . . . . . . 7
(k) CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . 7
(l) PERMITS . . . . . . . . . . . . . . . . . . . . . . . . . 8
(m) EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . . 8
(n) EMPLOYEE RELATIONS . . . . . . . . . . . . . . . . . . . 8
(o) TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(p) LITIGATION . . . . . . . . . . . . . . . . . . . . . . . 9
(q) LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(r) ENVIRONMENTAL . . . . . . . . . . . . . . . . . . . . . . 10
(s) REAL ESTATE . . . . . . . . . . . . . . . . . . . . . . . 10
(t) INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . 11
(u) CAPITAL COMMITMENTS . . . . . . . . . . . . . . . . . . . 11
5. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGERCO . . . . 11
(a) CORPORATE ORGANIZATION, QUALIFICATION . . . . . . . . . . 11
(b) POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . 12
(c) CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . 12
(d) CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . 12
(e) CONSTITUENT DOCUMENTS . . . . . . . . . . . . . . . . . . 13
(f) SEC REPORTS AND FINANCIAL . . . . . . . . . . . . . . . . 14
(g) LITIGATION . . . . . . . . . . . . . . . . . . . . . . . 15
(h) CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . 15
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(i) INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . 15
(j) ENVIRONMENTAL . . . . . . . . . . . . . . . . . . . . . . 16
(k) EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . . 16
(l) LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(m) CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . 16
(n) TITLE TO ASSETS . . . . . . . . . . . . . . . . . . . . . 17
(o) RELATED PARTY TRANSACTIONS . . . . . . . . . . . . . . . 17
(p) PERMITS . . . . . . . . . . . . . . . . . . . . . . . . . 18
(q) MATERIAL ADVERSE CHANGES . . . . . . . . . . . . . . . . 18
(r) TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(s) EMPLOYEE RELATIONS . . . . . . . . . . . . . . . . . . . 18
6. CONDUCT PRIOR TO THE CLOSING . . . . . . . . . . . . . . . . . 19
(a) ACCESS . . . . . . . . . . . . . . . . . . . . . . . . . 19
(b) PROVISION OF INFORMATION BY PARENT TO TARGET . . . . . . 19
(c) CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . 19
(d) CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . 19
(e) NO INTENTIONAL ACTS . . . . . . . . . . . . . . . . . . . 21
(f) CERTIFICATE OF DESIGNATION . . . . . . . . . . . . . . . 21
7. CONDITIONS TO TARGET'S OBLIGATIONS . . . . . . . . . . . . . . 21
8. CONDITIONS TO PARENT'S OBLIGATIONS . . . . . . . . . . . . . . 22
9. RIGHT TO TERMINATE . . . . . . . . . . . . . . . . . . . . . . 23
10. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
11. POST CLOSING AGREEMENTS . . . . . . . . . . . . . . . . . . . 23
(a) FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . 23
(b) MANAGEMENT OF SURVIVING CORPORATION . . . . . . . . . . . 24
(c) NET OPERATING LOSSES . . . . . . . . . . . . . . . . . . 24
12. DISCLOSURE OF CONFIDENTIAL INFORMATION . . . . . . . . . . . . 24
(a) OBLIGATION TO MAINTAIN CONFIDENTIALITY . . . . . . . . . 24
(b) INJUNCTIVE RELIEF . . . . . . . . . . . . . . . . . . . . 25
13. INDEMNIFICATION OBLIGATIONS OF PARENT . . . . . . . . . . . . 25
14. INDEMNIFICATION OBLIGATIONS OF STOCKHOLDER . . . . . . . . . . 26
15. ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . 26
16. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) PUBLICITY . . . . . . . . . . . . . . . . . . . . . . . . 27
(b) NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . 27
(c) FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . 28
(d) ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . 28
(e) SURVIVAL; NON-WAIVER . . . . . . . . . . . . . . . . . . 28
(f) APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . 28
(g) CONSENT TO JURISDICTION . . . . . . . . . . . . . . . . . 28
(h) BINDING EFFECT . . . . . . . . . . . . . . . . . . . . . 29
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(i) ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . 29
(j) AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . 29
(k) HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . 29
(l) SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . 29
(m) COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . 29
(n) NO STRICT CONSTRUCTION . . . . . . . . . . . . . . . . . 29
(o) GENDER . . . . . . . . . . . . . . . . . . . . . . . . . 29
(p) INTERPRETATION . . . . . . . . . . . . . . . . . . . . . 29
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INDEX OF TERMS
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . 2
Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Confidential . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Confidential Information . . . . . . . . . . . . . . . . . . . . . 24
Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Constituent Corporations . . . . . . . . . . . . . . . . . . . . . 2
Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . 10
Environmental Permits . . . . . . . . . . . . . . . . . . . . . . . 10
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . 8
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Mergerco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Parent Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 12
Parent Financial Statements . . . . . . . . . . . . . . . . . . . . 14
Parent Interim Financial Statements . . . . . . . . . . . . . . . . 14
Parent Series B Preferred Stock . . . . . . . . . . . . . . . . . . 13
Parent Series C Preferred Stock . . . . . . . . . . . . . . . . . . 13
Parent Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Parent's and Mergerco's Ancillary Documents . . . . . . . . . . . . 12
Per Share Merger Consideration . . . . . . . . . . . . . . . . . . 3
Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ReNewable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . 1
Target . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Target Leased Premises . . . . . . . . . . . . . . . . . . . . . . 10
Target Share . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Target's Ancillary Documents . . . . . . . . . . . . . . . . . . . 4
Target's Interim Financial Statements . . . . . . . . . . . . . . . 6
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
-iv-
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made as of
June 17, 2005, by and among EarthShell Corporation, a Delaware
corporation ("Parent"), EarthShell Triangle, Inc., a Delaware
corporation and a wholly-owned subsidiary of Parent ("Mergerco"),
ReNewable Products, Inc., a Delaware corporation ("Target"), and
ReNewable Products LLC, a Delaware limited liability company and sole
stockholder of Target ("Stockholder").
R E C I T A L S
---------------
A. Target is engaged in the business of manufacturing,
marketing and distributing biodegradable plates and bowls (the
"Business").
B. The Board of Directors of Parent deems it advisable and in
the best interests of Parent and its stockholders for Parent to enter
the Business through the acquisition of Target.
C. The Board of Directors of each of Parent, Mergerco and
Target has approved, and deems it advisable and in the best interests
of its respective stockholders to consummate, Parent's acquisition of
Target by means of a reverse merger of Mergerco with and into Target,
upon the terms and subject to the conditions set forth herein;
D. In furtherance thereof, the respective Boards of Directors
of Mergerco and Target have approved this Agreement in accordance with
the Delaware General Corporation Law, as amended ("DGCL"); and
E. The parties hereto intend that the Merger (as defined
herein) shall qualify for U.S. federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the U.S.
Internal Revenue Code of 1986, as amended (together with the rules and
regulations promulgated thereunder, the "Code").
A G R E E M E N T S
-------------------
Therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. THE MERGER.
(a) GENERAL. Upon the terms and subject to the conditions
contained in this Agreement, at the Effective Time (as herein
defined) and in accordance with the DGCL, Mergerco shall be
merged with and into Target (the "Merger"), the separate
corporate existence of Mergerco shall cease and Target shall
continue as the surviving corporation under the corporate name
"ReNewable Products, Inc." (the "Surviving Corporation").
Mergerco and Target are sometimes referred to in this Agreement
as the "Constituent Corporations".
(b) EFFECT OF MERGER. Immediately following the Merger,
the Surviving Corporation shall (i) possess all rights,
privileges, immunities and franchises, both public and private,
of the Constituent Corporations, (ii) be vested with all
property, whether real, personal or mixed, and all debts due on
whatever account, and all other causes of action, and all and
every other interest belonging to or due to each of the
Constituent Corporations, and (iii) be responsible and liable for
all the obligations and liabilities of each of the Constituent
Corporations, all with the effect set forth in the DGCL.
(c) CONSUMMATION OF THE MERGER. At the Closing (as herein
defined), the parties shall cause to be filed with the Secretary
of State of the State of Delaware a certificate of merger and
other appropriate documents (such certificates and other
documents being hereinafter collectively referred to as the
"Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and shall make all other filings,
recordings or publications required by the DGCL in connection
with the Merger. The Merger shall become effective (i) at the
time at which the Certificate of Merger is duly filed with the
Secretary of State of the State of Delaware or (ii) at such other
time specified in the Certificate of Merger (the "Effective
Time").
(d) CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of Target, as in effect immediately prior to the
Effective Time, shall be, from and after the Effective Time, the
Certificate of Incorporation of the Surviving Corporation, until
thereafter altered, amended or repealed in accordance with
applicable law.
(e) BY-LAWS. The By-Laws of Target, as in effect
immediately prior to the Effective Time, shall be, from and after
the Effective Time, the By-Laws of the Surviving Corporation,
until thereafter altered, amended or repealed as provided therein
and in accordance with applicable law.
(f) DIRECTORS AND OFFICERS. The directors and officers of
Target in office immediately prior to the Effective Time shall
be, from and after the Effective Time, the directors and
officers, respectively, of the Surviving Corporation until the
earlier of their death, resignation or removal or until their
respective successors are duly elected or appointed or qualified,
as the case may be.
2. CONVERSION OF SECURITIES. As of the Effective Time, by
virtue of the Merger and without any action on the part of Target or
Mergerco or their respective stockholders:
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(a) MERGERCO COMMON STOCK. Each issued and outstanding
share of capital stock of Mergerco shall be converted into and
become one fully paid and non-assessable share of common stock,
par value $0.01 per share, of the Surviving Corporation.
(b) TARGET COMMON STOCK. Each share of capital stock of
Target (a "Target Share") issued and outstanding immediately
prior to the Effective Time (other than any such shares owned by
Target, which shall be cancelled) shall be converted into such
number of fully paid and non-assessable shares of Series C
Convertible Preferred Stock of Parent, par value $0.01 per share,
as is equal to the quotient obtained by dividing 8,000,000 by the
aggregate number of shares of capital stock of Target outstanding
at the Effective Time (the "Per Share Merger Consideration").
From and after the Effective Time, all of the certificates
representing the outstanding Target Shares shall be deemed to be
no longer outstanding, not be transferable on the books of the
Surviving Corporation, and shall represent solely the Per Share
Merger Consideration.
3. CLOSING.
(a) TIME AND PLACE OF CLOSING. The transaction
contemplated by this Agreement shall be consummated (the
"Closing") at 10:00 a.m., prevailing business time, at the
offices of Schiff Hardin LLP, 6600 Sears Tower, Chicago,
Illinois, 60606, within three business days of the later to occur
of (i) the satisfaction of all conditions to closing as set forth
in Sections 7 and 8 hereto (other than those conditions to be
satisfied at Closing) or (ii) the delivery by Target to Parent of
a written notice of Target's intent to effect the Merger and
consummate the transactions contemplated by this Agreement, or on
such other date, or at such other place, as shall be agreed upon
by Target and Parent. The date on which the Closing shall occur
in accordance with the preceding sentence is referred to in this
Agreement as the "Closing Date."
(b) CLOSING DELIVERIES. At the Closing, the parties shall
execute and deliver closing certificates, good standing
certificates, third party consents, and other documents and
instruments as are reasonably required in order to effectuate the
consummation of the transaction contemplated hereby, including
the documents and instruments set forth on EXHIBIT A attached
hereto.
4. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER. Stockholder
represents and warrants to Parent and Mergerco that:
(a) CORPORATE ORGANIZATION, QUALIFICATION. Target is a
corporation duly organized, existing and in good standing, under
the laws of the State of Delaware. Target has all necessary
corporate power and authority to conduct its business as its
-3-
business is now being conducted. Target has qualified as a
foreign corporation, and is in good standing, under the laws of
all jurisdictions where the nature of its business or the nature
or location of its assets requires such qualification, except
where the failure to be so qualified could not reasonably be
expected to, individually or in the aggregate, have a Material
Adverse Effect on Target. For purposes of this Agreement,
"Material Adverse Effect" means a material adverse effect (i) on
the condition (financial or otherwise), business, assets,
liabilities, properties or results of operations of Parent,
Target, Mergerco or Stockholder, as applicable, taken as a whole,
that is not a result of general changes in the economy or the
industries in which such entities operate, or (ii) on the ability
of Parent, Target, Mergerco or Stockholder, as applicable, to
perform any obligations hereunder or under the transactions
contemplated hereby such that the conditions set forth in
Sections 8 or 9 would not be satisfied.
(b) POWER AND AUTHORITY. This Agreement has been approved
by the boards of directors, or managers, as applicable, of Target
and Stockholder and, upon execution and delivery hereof, by the
Stockholder as the sole stockholder of Target. No other action
or approval is required by Target to authorize and approve this
Agreement and the Merger, and Target has and will have full
corporate power and authority to execute deliver and perform this
Agreement and all documents and instruments to be executed by
Target pursuant to this Agreement (collectively, the "Target's
Ancillary Documents"). This Agreement and Target's Ancillary
Documents have been duly executed and delivered by duly
authorized officers of Target. Neither the execution and
delivery of this Agreement and Target's Ancillary Documents by
Target, nor the consummation by Target of the transaction
contemplated hereby, will conflict with or result in a breach of
any of the terms, conditions or provisions of Target's
Certificate of Incorporation or By laws, or of any order, writ,
injunction, judgment or decree of any court or any governmental
authority or of any arbitration award binding on Target. The
execution, delivery and performance of this Agreement and the
Target Ancillary Documents by the Target and the consummation by
Target of the transactions contemplated thereby will not conflict
with or constitute a default (or an event which with notice or
lapse of time or both would become a default) under or give to
others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which
Target is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree applicable to Target or by
which any property or asset of Target is bound or affected.
(c) CONSENTS. No consent, authorization, order or approval
of, or filing or registration with, any governmental authority or
other person is required for the execution and delivery by Target
of this Agreement and Target's Ancillary Documents and the
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consummation by Target of the transactions contemplated by this
Agreement and Target's Ancillary Documents.
(d) CAPITALIZATION. The authorized capital stock of Target
prior to the Merger consists of 1,000 shares of common stock,
$0.01 par value per share, of which 100 shares are issued and
outstanding and owned of record and beneficially by Stockholder.
All of the issued and outstanding Target Shares have been validly
issued, are fully-paid and non-assessable. All of the issued and
outstanding Target Shares are free and clear of all claims,
actions, causes of action, suits, proceedings, debts, demands or
liabilities of any kind (collectively, "Claims"). There are no
outstanding subscriptions, options, warrants, rights (including
preemptive rights), calls, convertible securities or other
agreements or commitments of any character relating to the issued
or unissued capital stock or other securities of Target
obligating Target to issue any securities of any kind. The
issued and outstanding Target Shares were issued in compliance
with all applicable federal and state securities laws. There are
no stock appreciation rights, phantom stock or similar rights in
existence with respect to Target. Target has no subsidiaries.
(e) CONSTITUENT DOCUMENTS; DIRECTORS AND OFFICERS.
(i) True and complete copies of the Certificate of
Incorporation and all amendments thereto, the By-laws as
amended and currently in force, all stock records, and all
corporate minute books and records of Target have been
furnished for inspection by Parent. Said stock records
accurately reflect all share transactions and the current
stock ownership of Target. The corporate minute books and
records of Target contain true and complete copies of all
resolutions adopted by the stockholder or the board of
directors of Target, and any other action formally taken by
Target. Target is not in violation of its Certificate of
Incorporation or By-laws.
(ii) Section 4(e) of the Disclosure Schedule lists the
directors and officers of Target.
(f) FINANCIAL.
(i) Target's books, accounts and records are, and have
been, maintained in Target's usual, regular and ordinary
manner, in accordance with generally accepted accounting
practices, and all material transactions to which Target has
been a party are properly reflected therein.
(ii) Complete and accurate copies of the unaudited
consolidated balance sheet of Target as of April 30, 2005,
and the unaudited consolidated statement of income of the
Company and the Subsidiaries for the four month period then
-5-
ended are included in Section 4(f) of the Disclosure
Schedule ("Target's Interim Financial Statements").
Target's Interim Financial Statements present accurately and
completely the financial position of Target as of the
respective dates thereof, and the results of operations and
cash flows of Target for the respective periods covered
thereby, in accordance with generally accepted accounting
principles ("GAAP"), consistently applied, except for the
omission of normal footnote disclosures required by GAAP and
subject to customary year end adjustments in the ordinary
course of business.
(iii) Target has no obligation or liability of any
nature whatsoever (direct or indirect, matured or unmatured,
absolute, accrued, contingent or otherwise), whether or not
required by GAAP to be provided or reserved against on a
balance sheet (all the foregoing herein collectively being
referred to as the "Liabilities") that would have a Material
Adverse Effect except for liabilities provided for or
reserved against in Target's Interim Financial Statements or
incurred in the ordinary course of business since the date
of Target's Interim Financial Statements.
(g) TITLE TO ASSETS. Target owns or leases all tangible
assets necessary for the conduct of its business as presently
conducted, and at the Closing Date Target will own or lease all
tangible assets necessary for the conduct of the business as
proposed to be conducted as of the Closing Date. Target has good
title to its assets, free and clear of any Claims. No unreleased
mortgage, trust deed, chattel mortgage, security agreement,
financing statement or other instrument encumbering any of
Target's assets has been recorded, filed, executed or delivered.
(h) RELATED PARTY TRANSACTIONS. Except as set forth on
Section 4(h) of the Disclosure Schedule, no Affiliate (as herein
defined) of Target: (i) owns or leases any property or right,
whether tangible or intangible, which is used by Target; (ii) has
any claim or cause of action against Target; (iii) owes any money
to Target or is owed money by Target; except future amounts owed
under agreements set forth on Section 4(h) of the Disclosure
Schedule; (iv) is a party to any contract or other arrangement,
written or oral, with Target; or (v) provides services or
resources to Target or is dependent on services or resources
provided by Target. Section 4(h) of the Disclosure Schedule sets
forth every business relationship (other than normal employment
relationships) between Target, on the one hand, and Target's
present or former officers, directors, employees or shareholders
or members of their families (or any entity in which any of them
has a material financial interest, directly or indirectly), on
the other hand, and attaches copies of all written agreements
relating to such relationships. Parent and Mergerco acknowledge
receipt of these agreements and their acceptance of the terms of
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each such agreement. No Affiliate of Target is engaged in any
business which competes with the Business. As used herein,
"Affiliate" means any person, association or organization that
directly or indirectly, through one or more intermediaries,
controls or is controlled by or is under common control with
another person, association or organization, and the term
"control" means the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies
of a person, association or organization, whether through the
ownership of voting securities or equity interests, by contract
or otherwise.
(i) CONDUCT OF BUSINESS. Except in connection with the
capitalization of Target as contemplated by Section 8(e) hereof,
since the date of Target's Interim Financial Statements, Target
has not: (i) sold or in any way transferred or otherwise disposed
of any of its assets or property, except for cash applied in
payment of liabilities in the usual and ordinary course of
business; (ii) suffered any casualty, damage, destruction or
loss, or any material interruption in use, of any material assets
or property (whether or not covered by insurance), on account of
fire, flood, riot, strike or other hazard or act of God;
(iii) made or suffered any material change in the conduct or
nature of any aspect of its business; (iv) waived any right or
canceled or compromised any debt or claim, other than in the
ordinary course of business; (v) increased the compensation
payable to any salaried employee except in the ordinary course of
business consistent with past practices; (vi) paid, declared or
set aside any dividend or other distribution on its securities of
any class or purchased, exchanged or redeemed any of its
securities of any class; (vii) made any change in accounting
methods, principles or practices; or (viii) without limitation by
the enumeration of any of the foregoing, except for the execution
of this Agreement, entered into any transaction other than in the
usual and ordinary course of business.
(j) MATERIAL ADVERSE CHANGES. Since the date of Target's
Interim Financial Statements, Target has not suffered or, to
Target's knowledge been threatened with any material adverse
change in the business, operations, assets, liabilities,
financial condition or prospects, including, without limiting the
generality of the foregoing, the existence or threat of any labor
dispute, or any material adverse change in, or material loss of,
any relationship between Target, on the one hand, and any of its
customers, suppliers, advisors, or key employees, on the other
hand.
(k) CONTRACTS. Except as set forth on Section 4(h) of the
Disclosure Schedule, Target is a not party to or bound by: (i)
any agreement relating to the incurrence of indebtedness
(including sale leaseback and capitalized lease transactions and
similar financing transactions) proving for payment or repayment
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in excess of $100,000; (ii) any "material contract" (as such term
is defined in Item 601(b)(10) of Regulation S-K) or (iii) any
non-competition agreement which purports to limit in any material
respect the manner in which or the localities in which all or any
portion of its business is or would be conducted (collectively,
"Material Contracts"). All Material Contracts and all other
contracts or instruments to which Target is a party or is bound
are in full force and binding upon the parties thereto. No
default by Target has occurred thereunder, Target has performed
all of its obligations thereunder on a timely basis, and, to
Target's knowledge, no default by the other contracting parties
has occurred thereunder. To Target's knowledge, no event,
occurrence or condition exists which, with the lapse of time, the
giving of notice, or both, or the happening of any further event
or condition, would become a default by Target thereunder.
Complete and accurate copies of all Material Contracts (including
any amendments or supplements thereto) have previously been made
available to Parent.
(l) PERMITS. Target possesses all material certificates,
authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct its
business ("Permits"), and Target has not received any notice of
proceedings relating to revocation or modification of any such
certificate, authorization or permit.
(m) EMPLOYEE BENEFITS.
(i) Section 4(m)(i) of the Disclosure Schedule lists
all Benefit Plans that cover any employee of Target.
(ii) Each Benefit Plan of Target subject to the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), complies in all material respects and has been
administered in compliance in all material respects with
(A) the provisions of ERISA; (B) all provisions of the Code,
applicable to secure the intended tax consequences; (C) all
applicable state and federal securities laws; and (D) all
other applicable laws, rules and regulations.
(iii) "BENEFIT PLANS" shall mean each incentive
compensation, stock purchase, stock option, and other equity
compensation plan, program or arrangement, each severance or
termination pay, medical, surgical, hospitalization, life
and other "welfare" plan, fund or program within the meaning
of Section 3(1) of ERISA.
(n) EMPLOYEE RELATIONS. Target is not involved in any
labor dispute nor, to the knowledge of Target, is any such
dispute threatened. None of Target's employees is a member of a
union.
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(o) TAXES. Target has filed all Returns (as herein
defined) required to be filed with respect to Taxes (as herein
defined) and financial results of Target. All such Returns were
correct and complete in all material respects. All Taxes payable
by Target, whether or not shown on any Return, have been paid in
full, and Target has fully complied with all applicable tax laws
and agreements. The liabilities for Taxes reflected on the
Target Interim Financial Statements are in accordance with GAAP
and are sufficient for payment of all Taxes of Target that are
accrued through the date of such financial statements and not yet
due and payable. Target has and will have no accrued liability
for Taxes in respect of taxable periods or portions thereof
following the date of the Target Interim Financial Statements and
ending on or before the Closing Date other than Taxes incurred in
the ordinary course of business consistent with past practice as
reflected on their Returns. Target has withheld and paid all
Taxes or other amounts required to have been withheld and paid in
connection with amounts paid or owing to any employee. Target
has no subsidiaries, is not a party to any Tax allocation or Tax
sharing or Tax indemnification agreement, has never been a member
of any affiliated group within the meaning of Section 1504(a) of
the Code, or any similar provision of state, local or foreign
law. No claim has ever been made by an authority in a
jurisdiction where Target does not file Returns that Target is or
may be subject to taxation by that jurisdiction. There is no
dispute or claim concerning any liability for Taxes of Target
claimed or raised by any taxing authority, and, there is no
pending or, to Target's knowledge, threatened or anticipated
audits or other investigations in respect of Taxes of Target.
During the five-year period ending on the date of this Agreement,
Target was not a distributing corporation or a controlled
corporation in a transaction intended to be governed by Section
355 of the Code. The transaction contemplated herein is not
subject to the tax withholding provisions of section 3406 of the
Code, or of Subchapter A of Chapter 3 of the Code, or of any
other provision of law. For purposes of this Agreement, "Taxes"
(and, with correlative meanings, "Tax" and "Taxable") means all
Federal, state, local, foreign and other net income, gross
income, gross receipts, sales, estimated, use, ad valorem,
transfer, franchise, profits, license, lease, service, service
use, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property (including personal property),
windfall profits, customs, duties or other taxes, fees,
assessments or charges of any kind whatever, together with any
interest and any penalties, additions to tax or additional
amounts with respect thereto, and "Returns" shall mean all
returns, declarations, reports, statements and other documents
required to be filed in respect of Taxes.
(p) LITIGATION. There is no (i) litigation or proceeding,
in law or in equity; (ii) proceedings or governmental
investigations before any commission or other administrative
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authority; or (iii) claim made by any person or entity, in any
case described in clauses (i), (ii) and (iii) above, pending, or,
to Target's knowledge, threatened, against Target, its directors
or officers, or with respect to or affecting Target's operations,
business, products, sales practices or financial condition or
related to the consummation of the transaction contemplated
hereby.
(q) LAWS. Target is not a party to, or bound by, any
decree, order or arbitration award (or agreement entered into in
any administrative, judicial or arbitration proceeding with any
governmental authority) with respect to its properties, assets,
personnel or business activities. Target is not in material
violation of, in material noncompliance with, or materially
delinquent in respect to, any decree, order or arbitration award
or law or statute, or regulation of or agreement with, any
Federal, state or local governmental authority (or to which its
properties, assets, personnel, business activities or real estate
are subject or to which it, itself, is subject), including laws,
statutes and regulations relating to equal employment
opportunities, fair employment practices, unfair labor practices,
terms of employment, occupational health and safety, wages and
hours and discrimination, and zoning ordinances and building
codes.
(r) ENVIRONMENTAL. To the knowledge of Target, Target:
(i) is in material compliance with any and all applicable
foreign, federal, state and local laws and regulations relating
to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) has received all
permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct the Business
("Environmental Permits") and (iii) is in compliance with all
terms and conditions of such Environmental Laws and Environmental
Permits.
(s) REAL ESTATE.
(i) Target does not own any real property.
(ii) Target does not lease any real property other than
the premises identified on Section 4(h) of the Disclosure
Schedule as being so leased (the "Target Leased Premises").
The Target Leased Premises are leased to Target pursuant to
a written lease, complete copies of which, including all
amendments thereto, have been delivered to Parent. The
lease for the Target Leased Premises is in full force and
effect and all rentals, royalties or other payments accruing
and due and to be paid thereunder prior to the date hereof
have been fully paid. To Target's knowledge, no event,
occurrence or condition exists which, with the lapse of
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time, the giving of notice, or both, or the happening of any
further event or condition, would become a default
thereunder.
(t) INTELLECTUAL PROPERTY. Subject to the last sentence of
this Section 4(t), Target owns or possesses adequate rights or
licenses to use all trademarks, trade names, service marks,
service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct the
Business as now conducted. Subject to the last sentence of this
Section 4(t), Target does not have any knowledge of any
infringement by Target of trademark, tradename rights, patents,
patent rights, copyrights, inventions, licenses, service names,
service marks, service mark registrations, trade secret or other
similar rights of others, and to the knowledge of Target, there
is no claim, action or proceeding being made or brought against,
or to the knowledge of Target, threatened against Target
regarding trademark, tradename, patents, patent rights,
invention, copyright, license, service names, service marks,
service mark registrations, trade secret or other infringement,
and Target and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
Notwithstanding the foregoing, neither Target nor Stockholder
makes any representation or warranty relating to any intellectual
property or rights licensed to Target by Parent or any of its
Affiliates.
(u) CAPITAL COMMITMENTS. Stockholder's investors have
committed at least Twelve Million Dollars ($12,000,000) of
capital to Stockholder. As of the date of this Agreement,
Stockholder has received from its investors, and invested in
Target, Six Million Dollars ($6,000,000) of capital. Target will
receive, and will invest in Target, the balance of its investors'
capital commitments within thirty (30) days of the date hereof.
5. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGERCO.
Parent and Mergerco jointly and severally represent and warrant to
Target and Stockholder as follows:
(a) CORPORATE ORGANIZATION, QUALIFICATION. Parent and
Mergerco are each corporations duly organized, existing and in
good standing, under the laws of the State of Delaware. Each of
Parent and Mergerco has all necessary power and authority to
conduct its business as its business is now being conducted.
Each of Parent and Mergerco has qualified as a foreign
corporation, and is in good standing, under the laws of all
jurisdictions where the nature of the Business or the nature or
location of its assets requires such qualification, except where
the failure to be so qualified could not reasonably be expected
to, individually or in the aggregate, have a Material Adverse
Effect on Parent. Except as set forth in the SEC Documents,
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Parent neither owns nor controls, directly or indirectly, any
interest in any corporation, limited liability company,
partnership or other entity.
(b) POWER AND AUTHORITY. This Agreement has been approved
by Parent's and Mergerco's board of directors and by Parent as
sole stockholder of Mergerco. No other action or approval,
including approval by Parent's stockholders, is required by
Parent to authorize and approve this Agreement and the Merger,
and each of Parent and Mergerco has and will have full corporate
power and authority to execute deliver and perform this Agreement
and all documents and instruments to be executed by Parent or
Mergerco pursuant to this Agreement (collectively, the "Parent's
and Mergerco's Ancillary Documents"). This Agreement and
Parent's and Mergerco's Ancillary Documents have been duly
executed and delivered by duly authorized officers of Parent or
Mergerco, as applicable. Neither the execution and delivery of
this Agreement and Parent's and Mergerco's Ancillary Documents by
Parent and Mergerco, respectively, nor the consummation by Parent
and Mergerco of the transaction contemplated hereby, will
conflict with or result in a breach of any of the terms,
conditions or provisions of Parent's or Mergerco's Certificate of
Incorporation or By laws, or of any order, writ, injunction,
judgment or decree of any court or any governmental authority or
of any arbitration award binding on Parent or Mergerco. The
execution, delivery and performance of this Agreement and
Parent's or Mergerco's Ancillary Documents by Parent and Mergerco
and the consummation by Parent and Mergerco of the transactions
contemplated thereby will not conflict with or constitute a
default (or an event which with notice or lapse of time or both
would become a default) under or give to others any rights of
termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which Parent or any of its
subsidiaries is a party, or result in a violation of any law,
rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations of The National
Association of Securities Dealers Inc.'s OTC Bulletin Board on
which the Parent Common Stock is quoted) applicable to Parent or
any of its subsidiaries or by which any property or asset of
Parent or Mergerco is bound or affected.
(c) CONSENTS. No consent, authorization, order or approval
of, or filing or registration with, any governmental authority or
other person is required for the execution and delivery by Parent
or Mergerco of this Agreement and Parent's and Mergerco's
Ancillary Documents and the consummation by Parent and Mergerco
of the transaction contemplated by this Agreement and Parent's
and Mergerco's Ancillary Documents.
(d) CAPITALIZATION. The authorized capital stock of Parent
consists of (i) 40,000,000 shares of common stock, $0.01 par
value per share ("Parent Common Stock"), of which 18,234,615
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shares are issued and outstanding, and (ii) 10,000,000 shares of
Preferred Stock, of which 100 shares are designated Series B
Convertible Preferred Stock (the "Parent Series B Preferred
Stock") and 8,000,000 shares will, upon filing of the Certificate
of Designation attached hereto as EXHIBIT G (the "Certificate of
Designation"), be designated Series C Convertible Preferred Stock
(the "Parent Series C Preferred Stock"). One hundred shares of
Parent Series B Preferred Stock and no shares of Parent Series C
Preferred Stock are issued and outstanding. The Parent Common
Stock, Parent Series B Preferred Stock and Parent Series C
Preferred Stock shall be referred to collectively herein as the
"Parent Stock". All of the issued and outstanding shares of
Parent Stock (or shares which will be issued and outstanding as
of the Effective Time) have been validly issued, are fully-paid
and non-assessable. Section 5(d) of the Disclosure Schedule sets
forth a complete and accurate list (including the number of
shares of Parent Stock issuable thereunder) of all outstanding
oral or written subscriptions, options, warrants, rights
(including preemptive rights), calls, convertible securities or
other agreements or commitments of any character relating to the
issued or unissued capital stock or other securities of Parent
obligating Parent to issue any securities of any kind, including
Parent Stock. The issued and outstanding shares of Parent Common
Stock were issued in compliance with all applicable federal and
state securities laws. Except as set forth on Section 5(d) of
the Disclosure Schedule, there are no stock appreciation rights,
phantom stock or similar rights in existence with respect to
Parent. Except as set forth on Section 5(d) of the Disclosure
Schedule, (x) there are no outstanding debt securities of Parent,
(y) there are no agreements or arrangements under which Parent is
obligated to register for sale any of their securities under the
Securities Act, and (z) there are no outstanding registration
statements and there are no outstanding comment letters from the
Securities Exchange Commission or other regulatory agency.
Section 5(d) of the Disclosure Schedule sets forth a complete and
accurate list of any (1) written or oral agreement, security or
instrument containing anti-dilution or similar provisions or
rights that prohibit the issuance of Parent Common Stock (or
securities convertible or exchangeable into Parent Common Stock)
or that prohibit such issuances at less than a certain price or
that result in the right to receive additional shares of Parent
Common Stock as a result of such issuances and (2) such
agreements, securities or instruments that have resulted, or upon
consummation of the transactions contemplated by this Agreement
will result, in an increase in the number of outstanding
securities of Parent pursuant to such provisions, and sets forth
any increases in the outstanding securities of Parent that have
or will result therefrom.
(e) CONSTITUENT DOCUMENTS. True and complete copies of the
Certificates of Incorporation and all amendments thereto, the By-
laws as amended and currently in force, all stock records, and
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all corporate minute books and records of Parent and Mergerco
have been furnished for inspection by Target. Said records of
Parent Stock (or securities convertible or exchangeable into
Parent Stock) and Mergerco accurately reflect all share
transactions and the current ownership of Parent Stock (or
securities convertible or exchangeable into Parent Stock) and
Mergerco. The corporate minute books and records of Parent and
Mergerco contain true and complete copies of all resolutions
adopted by the stockholder or the board of directors of Parent,
and any other action formally taken by Parent.
(f) SEC REPORTS AND FINANCIAL.
(i) Except as set forth on Schedule 5(f) of the
Disclosure Schedule, since January 1, 2002, Parent has
timely filed, all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC
under Securities Exchange Act of 1934, as amended (the
"Exchange Act")(all such documents to be referred to
collectively as "SEC Documents").
(ii) As of their respective dates, the SEC Documents
did not contain any untrue statement of material fact or
omit to state a material fact required to be stated therein
necessary to make the statements made therein, in light of
the circumstances under which they were made.
(iii) Parent's books, accounts and records are, and
have been, maintained in Parent's usual, regular and
ordinary manner, in accordance with generally accepted
accounting practices, and all material transactions to which
Parent has been a party are properly reflected therein.
(iv) Complete and accurate copies of the audited
consolidated balance sheet and statement of income, retained
earnings, and cash flows, and notes to financial statements
(together with any supplementary information thereto) of
Parent, all as of and for the year ended December 31, 2004,
are included in the SEC Documents (the "Parent Financial
Statements"). Complete and accurate copies of the unaudited
consolidated balance sheet of Parent as of March 31, 2005,
and the unaudited consolidated statement of income of the
Company and the Subsidiaries for the three month period then
ended have also been provided to Target (the "Parent Interim
Financial Statements"). The Parent Financial Statements and
Parent Interim Financial Statements, have been prepared
from, and are in accordance with, the books and records of
Parent and its consolidated subsidiaries, have been prepared
in accordance with GAAP, consistently applied during the
period involved (except as may be stated in the notes
thereto) and fairly present in all material respects the
consolidated financial position and the consolidated results
-14-
of operations and cash flows (and changes in financial
position, if any) of Parent and its consolidated
subsidiaries as of the times and for the periods referred to
therein.
(v) Parent has no Liabilities that would have a
Material Adverse Effect except for liabilities provided for
or reserved against in the Parent Interim Financial
Statements.
(g) LITIGATION. Except as set forth on Section 5(g) of the
Disclosure Schedule or as disclosed in the SEC Documents, there
is no (i) litigation or proceeding, in law or in equity;
(ii) proceedings or governmental investigations before any
commission or other administrative authority; or (iii) claim made
by any person or entity, in any case described in clauses (i),
(ii) and (iii) above, pending, or, to Parent's knowledge,
threatened, against Parent, Parent's directors or officers, or
with respect to or affecting Parent's operations, business,
products, sales practices or financial condition or related to
the consummation of the transaction contemplated hereby.
(h) CONTRACTS. Except as set forth in Section 5(h) of the
Disclosure Schedule, or as disclosed in the SEC Documents, Parent
is a not party to or bound by any Material Contract. All
Material Contracts and all other contracts or instruments to
which Parent is a party or is bound are in full force and binding
upon the parties thereto. No default by Parent has occurred
thereunder, Parent has performed all of its obligations
thereunder on a timely basis, and, to Parent's knowledge, no
default by the other contracting parties has occurred thereunder.
To Parent's knowledge, no event, occurrence or condition exists
which, with the lapse of time, the giving of notice, or both, or
the happening of any further event or condition, would become a
default by Parent thereunder. Complete and accurate copies of
all Material Contracts (including any amendments or supplements
thereto) have previously been delivered to Target. Parent is not
a party to or otherwise bound by any registration rights or
similar agreements that would conflict with or otherwise affect,
limit or cut-back the terms and rights granted to Stockholder
under the Registration Rights Agreement to be entered into as of
the Effective Time by Stockholder and Parent.
(i) INTELLECTUAL PROPERTY. Parent owns or possesses
adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names,
patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and rights
necessary to conduct their respective businesses as now
conducted. Parent does not have any knowledge of any
infringement by Parent of trademark, tradename rights, patents,
patent rights, copyrights, inventions, licenses, service names,
-15-
service marks, service mark registrations, trade secret or other
similar rights of others, and to the knowledge of Parent, there
is no claim, action or proceeding being made or brought against,
or to the knowledge of Parent, threatened against Parent
regarding trademark, tradename, patents, patent rights,
invention, copyright, license, service names, service marks,
service mark registrations, trade secret or other infringement,
and Parent is unaware of any facts or circumstances which might
give rise to any of the foregoing.
(j) ENVIRONMENTAL. To the knowledge of Parent, Parent
(i) is in material compliance with any and all Environmental Laws
(ii) has received all Environmental Permits and (iii) is in
compliance with all terms and conditions of such Environmental
Laws and Environmental Permits.
(k) EMPLOYEE BENEFITS. Except as set forth on Section 5(k)
of the Disclosure Schedule, all Benefit Plans that cover any
employee of Parent have been fully disclosed in the SEC
Documents. Each Benefit Plan of Parent subject to ERISA complies
in all material respects and has been administered in compliance
in all material respects with (A) the provisions of ERISA (B) all
provisions of the Code, applicable to secure the intended tax
consequences (C) all applicable state and federal securities laws
and (D) all other applicable laws, rules and regulations.
(l) LAWS. Parent is not a party to, or bound by, any
decree, order or arbitration award (or agreement entered into in
any administrative, judicial or arbitration proceeding with any
governmental authority) with respect to its properties, assets,
personnel or business activities. Parent is not in material
violation of, in material noncompliance with, or materially
delinquent in respect to, any decree, order or arbitration award
or law or statute, or regulation of or agreement with, any
Federal, state or local governmental authority (or to which its
properties, assets, personnel, business activities or real estate
are subject or to which it, itself, is subject), including laws,
statutes and regulations relating to equal employment
opportunities, fair employment practices, unfair labor practices,
terms of employment, occupational health and safety, wages and
hours and discrimination, zoning ordinances and building codes
and food and drug safety.
(m) CONDUCT OF BUSINESS. Except as set forth on Section
5(m) of the Disclosure Schedule, since the date of Parent's
Interim Financial Statements, Parent has not (i) sold or in any
way transferred or otherwise disposed of any of its assets or
property, except for cash applied in payment of liabilities in
the usual and ordinary course of business; (ii) suffered any
casualty, damage, destruction or loss, or any material
interruption in use, of any material assets or property (whether
or not covered by insurance), on account of fire, flood, riot,
-16-
strike or other hazard or act of God; (iii) made or suffered any
material change in the conduct or nature of any aspect of its
business; (iv) waived any right or canceled or compromised any
debt or claim, other than in the ordinary course of business;
(v) made (or committed to make) capital expenditures in an amount
which exceeds $50,000 for any item or $250,000 in the aggregate;
(vi) increased the compensation payable to any salaried employee
except in the ordinary course of business consistent with past
practices; (vii) hired or terminated any employee who has an
annual salary in excess of $50,000; (viii) borrowed any money or
issued any bonds, debentures, notes or other corporate securities
evidencing money borrowed; (ix) paid, declared or set aside any
dividend or other distribution on its securities of any class or
purchased, exchanged or redeemed any of its securities of any
class; (x) made any change in accounting methods, principles or
practices; (xi) purchased any asset (whether or not in the
ordinary course of business) for a cost in excess of $50,000; or
(xii) without limitation by the enumeration of any of the
foregoing, except for the execution of this Agreement, entered
into any transaction other than in the usual and ordinary course
of business.
(n) TITLE TO ASSETS. Parent owns or leases all tangible
assets necessary for the conduct of its business as presently
conducted and as proposed to be conducted as of the Closing Date.
Parent has good title to its assets, free and clear of any
Claims, except as set forth on Section 5(n) of the Disclosure
Schedule. No unreleased mortgage, trust deed, chattel mortgage,
security agreement, financing statement or other instrument
encumbering any of Parent's assets has been recorded, filed,
executed or delivered.
(o) RELATED PARTY TRANSACTIONS. Except as set forth on
Section 5(o) of the Disclosure Schedule or as disclosed in the
SEC Documents, no Affiliate of Parent: (i) owns any property or
right, whether tangible or intangible, which is used by Parent,
(ii) has any claim or cause of action against Parent; (iii) owes
any money to Parent or is owed money by Parent; (iv) is a party
to any contract or other arrangement, written or oral, with
Parent; or (v) provides services or resources to Parent or is
dependent on services or resources provided by Parent. Section
5(o) of the Disclosure Schedule sets forth every business
relationship (other than normal employment relationships) between
Parent, on the one hand, and Parent's (or any subsidiary of
Parent's) present or former officers, directors, employees or
shareholders or members of their families (or any entity in which
any of them has a material financial interest, directly or
indirectly), on the other hand, including any agreement or
arrangement between Parent and E. Khashoggi Industries LLC
("EKI") and Affiliates of EKI.
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(p) PERMITS. Parent possess all material certificates,
authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct
their respective businesses and Parent has not received any
notice of proceedings relating to revocation or modification of
any such certificate, authorization or permit.
(q) MATERIAL ADVERSE CHANGES. Since December 31, 2004,
Parent has not suffered or, to Parent's knowledge, been
threatened with any material adverse change in the business,
operations, assets, liabilities, financial condition or
prospects, including, without limiting the generality of the
foregoing, the existence or threat of any labor dispute, or any
material adverse change in, or material loss of, any relationship
between Parent, on the one hand, and any of its (or its
licensee's) customers, suppliers, licensors, licensees, advisors,
or key employees, on the other hand.
(r) TAXES. Except as set forth in the SEC Documents or as
set forth on Section 5(r) of the Disclosure Schedule, Parent has
filed all Returns required to be filed with respect to Taxes and
financial results of Parent. All such Returns were correct and
complete in all material respects. All Taxes payable by Parent,
whether or not shown on any Return, have been paid in full, and
Parent has fully complied with all applicable tax laws and
agreements. No claim has ever been made by an authority in a
jurisdiction where Parent does not file Returns that Parent is or
may be subject to taxation by that jurisdiction. Parent has
withheld and paid all Taxes or other amounts required to have
been withheld and paid in connection with amounts paid or owing
to any employee. There is no dispute or claim concerning any
liability for Taxes of Parent claimed or raised by any taxing
authority, and, there is no pending or, to Parent's knowledge,
threatened or anticipated audits or other investigations in
respect of Taxes of Parent. The transaction contemplated herein
is not subject to the tax withholding provisions of section 3406
of the Code, or of Subchapter A of Chapter 3 of the Code, or of
any other provision of law. As of December 31, 2003, Parent's
consolidated net operating loss carryforward for U.S. income tax
purposes and for each state to which Parent is obligated to file
tax returns is set forth in Section 5(r) of the Disclosure
Schedule. Since such date, there has been no material reduction
to such net operating loss carry forwards. The transactions
contemplated by this Agreement will not result in any reduction
in Parent's consolidated Federal net operating loss carryover
under Code section 382 or under any applicable state income tax
law.
(s) EMPLOYEE RELATIONS. Parent is not involved in any
labor dispute nor, to the knowledge of Parent, is any such
dispute threatened. None of Parent's employees is a member of a
union.
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6. CONDUCT PRIOR TO THE CLOSING. Between the date hereof and
the Closing Date:
(a) ACCESS. Each party to this Agreement shall and shall
cause (as applicable) its subsidiaries to give to the officers,
employees, agents, attorneys, consultants, accountants and
lenders of the other parties hereto reasonable access during
normal business hours to all of the properties, books, contracts,
documents, records and personnel of each such party and shall
furnish to the other parties hereto and such persons as such
other parties shall designate such information as such persons
may at any time and from time to time reasonably request in order
to permit each such party to complete its respective due
diligence investigation pertaining to the transactions
contemplated by this Agreement. All such information shall be
subject to the confidentiality provisions set forth in Section 12
hereof.
(b) PROVISION OF INFORMATION BY PARENT TO TARGET. In
addition to the covenants set forth in Section 6(a) above, Parent
shall also provide to Target:
(i) All financial information pertaining to Parent as
is provided to the Board of Directors and other members of
management of Parent, including monthly financial reports,
budgets, and financial projections; and
(ii) Any information regarding EKI and the financial,
business and other agreements and arrangements in place by
and between Parent and EKI, or its Affiliates, as Target may
request.
(c) CONSENTS. Each party hereto shall use its best efforts
and make every good faith attempt and shall cooperate with each
other to obtain all consents to the consummation of the
transaction contemplated hereby under or with respect to, any
contract, lease, agreement, purchase order, sales order or other
instrument, or Permit, where the consummation of the transaction
contemplated hereby would be prohibited or constitute an event of
default, or grounds for acceleration or termination, in the
absence of such consent (the "Consents").
(d) CONDUCT OF BUSINESS. Each party hereto shall carry on
its business in the usual and ordinary course, consistent with
past practices and shall use its best efforts to preserve its
business and the goodwill of its customers, suppliers and others
with which each such party has business relations and to retain
its business organizational capability. Without limiting the
foregoing, without the prior written consent of the other parties
hereto, and without limiting the generality of any other
provision of this Agreement, no party hereto shall: (i) amend its
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Certificate of Incorporation or By-laws (except, in the case of
Parent, in connection with the Certificate of Designation and the
decrease or increase in the number of directors); (ii) make any
change in its authorized shares of stock, (iii) issue any shares
of stock of any class, or issue or become a party to any
subscriptions, warrants, rights, options, convertible securities
or other agreements or commitments of any character relating to
the issued or unissued capital stock of any party hereto or any
subsidiary thereof, or to other equity securities of any such
party, or grant any stock appreciation or similar rights, except,
in the case of Parent, upon the exercise or conversion of
options, warrants or other convertible securities outstanding as
of the date hereof; (iv) make distributions of any kind to EKI
other than those expressly disclosed to Target prior to the
Closing; (v) incur, assume or guarantee any long-term or short-
term indebtedness; (vi) directly or indirectly, enter into,
assume or amend any contract, agreement, obligation, lease,
license or commitment other than in the usual and ordinary course
of business in accordance with past practices; (vii) make any
change to its accounting methods or principles, or make any Tax
elections; and (viii) pay, declare, accrue or set aside any
dividends or any other distributions, in cash, property or
otherwise, on its securities of any class or purchase, exchange
or redeem any of its securities of any class. Notwithstanding
the foregoing, nothing in this Section 6(d) shall prohibit (A)
Target from taking such action and entering into such agreements
and other transactions, including incurring indebtedness, as are
necessary or advisable in connection with the fit-up of the
Lebanon facility, the acquisition of 16 plate making machines and
the commercial operation of such machines and the sale of
products, or negotiating, finalizing and entering into employment
agreements with certain key employees of Target, which may
include the terms set forth on Section 6(d)(A) of the Disclosure
Schedule or (B) Parent from (x) issuing additional shares of
Parent Common Stock to Cornell Capital Partners, LP pursuant to
the Standby Equity Distribution Agreement dated as of March 23,
2005 between Parent and Cornell Capital Partners, LP, as in
effect on the date of this Agreement, or (y) issuing additional
shares of Parent Common Stock to Defined Portfolio Management,
LLC in a "PIPE" transaction having the following terms: (1)
Parent may issue up to 4,000,000 shares of Parent Common Stock at
$4.00 per share or the then market price, but in no event less
than $3.00 per share; (2) in connection with such issuance,
Parent may issue a warrant exercisable for not more than three
years for up to 500,000 shares of Parent Common Stock at an
exercise price of at least $5.00 per share; (3) the proceeds of
any such transaction shall be used to discharge indebtedness of
Target (including indebtedness that is convertible into Parent
Common Stock) or to redeem other securities of Parent that are
convertible into Parent Common Stock; (4) such PIPE transaction
shall not contain any terms or conditions requiring the consent
of Defined Portfolio Management, LLC or any other party to the
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transactions contemplated by this Agreement; and (5) any such
PIPE transaction shall not be reasonably likely to interfere with
the consummation of the transactions contemplated by this
Agreement. Parent shall provide Stockholder with copies of all
documentation relating to any proposed PIPE transaction at least
fifteen (15) days prior to entering into any definitive
agreements regarding such transaction.
(e) NO INTENTIONAL ACTS. No party shall intentionally
perform any act which, if performed, or omit to perform any act
which, if omitted to be performed, would prevent or excuse the
performance of this Agreement by any party hereto or which would
result in any representation or warranty herein contained of said
party being untrue in any material respect as if originally made
on and as of the Closing Date.
(f) CERTIFICATE OF DESIGNATION. Parent will file the
Certificate of Designation with the Secretary of State of the
State of Delaware.
7. CONDITIONS TO TARGET'S OBLIGATIONS. The obligation of
Target to close the transactions contemplated hereby is subject to the
satisfaction or waiver of all of the following conditions on or prior
to the Closing Date:
(a) Each and every representation and warranty made by
Parent and Mergerco shall have been true and correct in all
material respects when made and shall be true and correct in all
material respects as if originally made on and as of the Closing
Date, except for changes resulting from actions permitted under
Section 6 hereof or as agreed to by Stockholder.
(b) All obligations of Parent and Mergerco to be performed
hereunder through, and including on, the Closing Date (including
all obligations which Parent and would be required to perform at
the Closing if the transaction contemplated hereby was
consummated) shall have been performed.
(c) No suit, proceeding or investigation shall have been
commenced or threatened by any governmental authority or private
person on any grounds to restrain, enjoin or hinder, or to seek
material damages on account of, the consummation of the
transaction contemplated hereby.
(d) Parent shall have delivered to Target the written
opinion of Gibson Dunn & Crutcher LLP, counsel for Parent, dated
as of the Closing Date, in substantially the form of EXHIBIT B
attached hereto.
(e) All of the Consents listed on EXHIBIT C shall have been
obtained and delivered to Target.
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8. CONDITIONS TO PARENT'S OBLIGATIONS. The obligation of
Parent and Mergerco to close the transaction contemplated hereby is
subject to the fulfillment of all of the following conditions on or
prior to the Closing Date:
(a) Each and every representation and warranty made by
Stockholder shall have been true and correct in all material
respects when made and shall be true and correct in all material
respects as if originally made on and as of the Closing Date
except for changes resulting from actions permitted under Section
6 hereof or as agreed to by Parent.
(b) All obligations of Target to be performed hereunder
through, and including on, the Closing Date (including all
obligations which Target would be required to perform at the
Closing if the transaction contemplated hereby was consummated)
shall have been performed.
(c) All of the Consents listed on EXHIBIT D shall have been
obtained and delivered to Parent.
(d) No suit, proceeding or investigation shall have been
commenced or threatened by any governmental authority or private
person on any grounds to restrain, enjoin or hinder, or to seek
material damages on account of, the consummation of the
transaction contemplated hereby.
(e) Target shall have provided evidence of (i) its payment
under Purchase Order Number CE-00001, which provides Target with
16 ATW/DTE Modules installed and operational with full support
equipment including but not limited to mixing equipment to
support at least 16 Modules, conveyors and stackers for at least
9" plates and 12 oz bowls; (ii) installed electrical, air and
water systems in the Lebanon, Missouri facility for operational
support of such machines; (iii) financing in an amount equal to
$1,000,000 plus or minus any amount due or owed under the
Purchase Order for start-up costs, closing costs, initial
operating losses and working capital, plus amounts available
under one or more credit facilities, if needed, to provide
additional funding to support ongoing working capital needs; and
(iv) compliance with Section 4(u) hereof. Target shall also
provide (A) confirmation that (1) the 16 plate making machines
have passed such completion tests as are set forth in the
Purchase Order and (2) royalties have been accrued or paid to
Parent pursuant to the Sublicense Agreement by and between Parent
and Target, and (B) a pro forma balance sheet as of the Closing
demonstrating that Target's equity and debt financing are
adequate to operate the 16 modules without additional funding
being required from Parent.
(f) Target shall have delivered to Parent the written
opinion of Schiff Hardin LLP, counsel to Target, dated as of the
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Closing Date, in substantially the form of EXHIBIT E attached
hereto.
(g) To the extent the directors and officers of Target
shall no longer be the persons identified on Section 4(e) of the
Disclosure Schedule, such successor directors and officers shall
be reasonably acceptable to Parent.
9. RIGHT TO TERMINATE. Anything to the contrary herein
notwithstanding, this Agreement and the transaction contemplated
hereby may be terminated at any time prior to the Closing by prompt
notice given in accordance with Section 15(b):
(a) By mutual consent;
(b) by Target at any time prior to the Closing for any
reason; and
(c) by either Target or Parent if the Closing shall not
have occurred at or before 11:59 p.m., on March 31, 2006;
provided, however, that the right to terminate this Agreement
under this Section 9(c) shall not be available to any party whose
failure to fulfill any material obligation under this Agreement
has been the cause of or resulted in the failure of the Closing
to occur on or prior to the aforesaid date.
10. REMEDIES. In the event of a breach of this Agreement before
Closing, the non-breaching party shall not be limited to the remedy of
termination of this Agreement, but shall be entitled to pursue all
available legal and equitable rights and remedies, and shall be
entitled to recover all of its reasonable costs and expenses incurred
in pursuing them (including reasonable attorneys' fees).
11. POST CLOSING AGREEMENTS. From and after the Closing:
(a) FURTHER ASSURANCES. The parties shall execute such
further documents, and perform such further acts, as may be
necessary to consummate the transactions contemplated hereby, on
the terms herein contained, and to otherwise comply with the
terms of this Agreement. In furtherance of the foregoing, if, at
any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any deeds, bills of sale,
assignments or assurances or any other acts or things are
reasonably necessary, desirable or proper (i) to vest, perfect or
confirm, of record or otherwise, in the Surviving Corporation its
right, title and interest in, to or under any of the rights,
privileges, powers, permits, licenses, franchises, properties or
assets of either of Parent or Target, or (ii) otherwise to carry
out the purposes of this Agreement, the Surviving Corporation and
its proper officers and directors or their designees shall be
authorized to execute and deliver, in the name and on behalf of
either Parent or Target, all such deeds, bills of sale,
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assignments and assurances and do, in the name and on behalf of
such corporations, all such other acts and things as may be
necessary, desirable or proper to vest, perfect or confirm the
Surviving Corporation's right, title and interest in, to and
under any of the rights, privileges, powers, permits, franchises,
properties or assets of such corporations and otherwise to carry
out the purposes of this Agreement.
(b) MANAGEMENT OF SURVIVING CORPORATION. Surviving
Corporation shall operate as an independent subsidiary of Parent,
operating as an independent licensee of Parent subject to the
terms and conditions of the Sublicense Agreement between Parent
and Target, but shall report to the Board of Directors of Parent
for budgetary and strategic approval.
(c) NET OPERATING LOSSES. Following the Closing, Parent
will make commercially reasonable efforts not to take any action
that will result in a change of control that will trigger the
limitations set forth in Section 382 of the Code.
12. DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) OBLIGATION TO MAINTAIN CONFIDENTIALITY. Parent,
Mergerco, Target and Stockholder each agree that for the longest
period permitted by law following the date of this Agreement,
such party shall, and shall cause such party's Affiliates to,
maintain all Confidential Information of the other parties in
confidence and shall not disclose any such Confidential
Information to anyone outside of the parties hereto, and such
party shall, and shall cause such party's Affiliates to, not use
any Confidential Information for its own benefit or the benefit
of any third party. Nothing in this Agreement, however, shall
prohibit such party from using or disclosing Confidential
Information to the extent required by law. If such party is
required by applicable law to disclose any Confidential
Information, such party shall (1) provide the applicable party
hereto with prompt notice before such disclosure in order that
such party may attempt to obtain a protective order or other
assurance that confidential treatment will be accorded such
information and (2) cooperate with the applicable party hereto in
attempting to obtain such order or assurance. "Confidential
Information" means information regarding Parent, its
subsidiaries, Target, Stockholder or the Business to the extent
it is Confidential, including the following: (1) information
regarding Parent's or Target's or the Business' operations,
assets, liabilities or financial condition; (2) information
regarding Parent's, Target's or the Business' pricing, sales,
merchandising, marketing, capital expenditures, costs, joint
ventures, business alliances, purchasing or manufacturing;
(3) information regarding Parent's, Target's or the Business'
other employees or sales representatives, including their
identities, responsibilities, competence and compensation;
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(4) customer lists or other information regarding Parent's,
Target's or the Business' current or prospective customers,
including information regarding their identities, contact persons
and purchasing patterns; (5) information regarding Parent's,
Target's or the Business'' current or prospective vendors,
suppliers, distributors or other business partners;
(6) forecasts, projections, budgets and business plans regarding
Parent, Target or the Business; (7) information regarding
Parent's, Target's or the Business' planned or pending
acquisitions, divestitures or other business combinations;
(8) Parent's, Target's or the Business' trade secrets and
proprietary information; (9) technical information, patent
disclosures and applications, copyright, applications, sketches,
drawings, blueprints, models, know-how, discoveries, inventions,
improvements, techniques, processes, business methods, equipment,
algorithms, software programs, software source documents and
formulae, in each case regarding Parent's, Target's or the
Business' current, future or proposed products or services
(including information concerning Target's research, experiment
work, development, design details and specifications, and
engineering); and (10) Parent's, Target's or the Business'
website designs, website content, proposed domain names, and data
bases. "Confidential" means not generally available to the
public. Information shall not be considered to be generally
available to the public if it is made public in violation of this
Agreement or by a third party who has no lawful right to disclose
the information or who does so in violation of any contractual,
legal or fiduciary obligation to Target.
(b) INJUNCTIVE RELIEF. Parent, Mergerco, Target and
Stockholder each specifically recognizes that any breach of
Section 12 hereof will cause irreparable injury to the other
parties and that actual damages may be difficult to ascertain,
and in any event, may be inadequate. Accordingly (and without
limiting the availability of legal or equitable, including
injunctive, remedies under any other provisions of this
Agreement), the parties agree that in the event of any such
breach, the party alleging damage by such breach shall be
entitled to seek injunctive relief in addition to such other
legal and equitable remedies that may be available. Parent,
Mergerco, Target and Stockholder each recognize that the
territorial, time and scope limitations in Section 12 hereof are
reasonable and properly required for the protection of Parent,
Mergerco, Target and Stockholder and in the event that any of
such limitation or the absence of such time limitation, is deemed
to be unreasonable by a court of competent jurisdiction, each
such party agrees and submits to the imposition of such a
limitation as said court shall deem reasonable.
13. INDEMNIFICATION OBLIGATIONS OF PARENT. From and after the
Closing, Parent shall defend, indemnify, save and keep harmless
Stockholder and its officers, directors, shareholders, managers,
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members, successors and permitted assigns against and from all Damages
(as herein defined) sustained or incurred by any of them resulting
from or arising out of or by virtue of: (a) any inaccuracy in or
breach of any representation and warranty made by Parent or Mergerco
in this Agreement or in any closing document delivered to Target or
Stockholder in connection with this Agreement, for as long as such
representation and warranty survives; or (b) any breach by Parent or
failure by Parent to comply with, any of its covenants or obligations
under this Agreement. As used in this Agreement, the term "Damages"
shall mean all liabilities, demands, claims, actions or causes of
action, regulatory, legislative or judicial proceedings or
investigations, assessments, levies, losses, fines, penalties,
damages, costs and expenses, including reasonable attorneys',
accountants', investigators', and experts' fees and expenses,
sustained or incurred in connection with the defense or investigation
of any claim.
14. INDEMNIFICATION OBLIGATIONS OF STOCKHOLDER. From and after
the Closing, Stockholder shall defend, indemnify, save and keep
harmless Parent from all Damages sustained or incurred by Parent
resulting from or arising out of or by virtue of: (a) any inaccuracy
in or breach of any representation and warranty made by Stockholder in
this Agreement or in any closing document delivered to Parent by
Stockholder in connection with this Agreement, for as long as such
representation and warranty survives; or (b) any breach by Target of,
or failure by Target to comply with, any of its covenants or
obligations under this Agreement. For a period of two (2) years
following the Closing, prior to making any distribution of shares of
Series C Convertible Preferred Stock of Parent or Parent Common Stock
to any of its members (other than a distribution in exchange for fair
consideration), Stockholder shall obtain such member's agreement to
assume a pro rata share of Stockholder's indemnification obligations
under the preceding sentence, based on the number of shares
distributed to such member.
15. ARBITRATION. In the event that following the Closing there
is any dispute with respect to any claim made by a party seeking
indemnification hereunder, the parties shall negotiate in good faith
to resolve such dispute within fifteen (15) days of notice thereof.
In the event that the parties cannot settle such dispute within such
time, either party may submit such dispute to binding arbitration by
notifying the other party, in writing, of such submission. Each party
shall have the right to be represented by counsel and shall have the
right to discovery to the full extent permitted by the rules governing
civil litigation in the state of Delaware. Such party submitting a
dispute for binding arbitration shall submit a demand which shall set
forth a statement of the nature of the dispute, the amount involved
and the remedies sought. The arbitration shall be conducted by
JAMS/Endispute in either Chicago, Illinois or New York, New York,
under the arbitration rules and procedures of JAMS/Endispute, and any
judgment on the award rendered by the arbitrator(s) shall be final and
binding may be entered in any court having jurisdiction thereof. Any
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such arbitration shall be conducted by a panel of three (3) neutral
and impartial arbitrators, as selected and administered by
JAMS/Endispute. The arbitrators designated hereunder shall not now or
in the three years preceding such arbitration, be an employee,
consultant, officer, director or shareholder of any party or have now
or in the three (3) years preceding such arbitration, have any
business relationship with any party. Within ten (10) calendar days
after the arbitrators are appointed, the arbitrators shall schedule
the arbitration for a hearing to commence on a the earliest mutually
convenient date, but not later than fifteen (15) days after the time
the hearing is scheduled. The hearing shall commence reasonably
promptly after the arbitrator is appointed and shall continue from day
to day until completed. The decision of the arbitrator shall be final
and binding on the parties and not subject to appeal in any court of
law.
16. MISCELLANEOUS.
(a) PUBLICITY. Except as otherwise required by law, the
parties hereto shall refrain from, and shall cause their
representatives to refrain from, directly or indirectly, making
any press release or other public disclosure or otherwise
informing any customer, supplier or other person with which
Parent or Target has a business relationship, with respect to the
transactions contemplated by this Agreement, without giving the
other party twenty-four hours prior written notice of the content
of such proposed release or disclosure.
(b) NOTICES. All notices required or permitted to be given
hereunder shall be in writing and may be delivered by hand, by
facsimile, by nationally recognized private courier, or by United
States mail. Notices delivered by mail shall be deemed given
three (3) business days after being deposited in the United
States mail, postage prepaid, registered or certified mail.
Notices delivered by hand, by facsimile, or by nationally
recognized private carrier shall be deemed given on the first
business day following receipt; provided, however, that a notice
delivered by facsimile shall only be effective if such notice is
also delivered by hand, or deposited in the United States mail,
postage prepaid, registered or certified mail, on or before two
(2) business days following its delivery by facsimile. All
notices shall be addressed as follows: (1) if to Parent,
addressed to EarthShell Corporation, 3916 State Street, Santa
Barbara, California 93110, attention Simon K. Hodson,
telecopier: (805) 563-7954, with a copy to Gibson Dunn &
Crutcher LLP, 2029 Century Park East, Los Angeles, California
90067-3026 attention Robert K. Montgomery, Esq., telecopier:
(310) 552-7021; and (2) if to Target or Stockholder, addressed to
ReNewable Products, LLC, 100 South Brentwood Blvd., St. Louis, MO
63105, telecopier: (314) 727-2118, attention: James A. Cooper
with a copy to Schiff Hardin LLP, 6600 Sears Tower, Chicago,
Illinois, 60606, telecopier: (312) 258-5600, attention: Roger R.
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Wilen, Esq.; and/or (3) to such other respective addresses and/or
addressees as may be designated by notice given in accordance
with the provisions of this Section 15(b).
(c) FEES AND EXPENSES. Each party hereto shall bear all
fees and expenses incurred by such party in connection with,
relating to or arising out of the execution, delivery and
performance of this Agreement and the consummation of the
transaction contemplated hereby, including attorneys',
accountants' and other professional fees and expenses.
(d) ENTIRE AGREEMENT. This Agreement and the instruments
to be delivered by the parties pursuant to the provisions hereof
constitute the entire agreement between the parties. Each
exhibit, and the Disclosure Schedule, shall be considered
incorporated into this Agreement.
(e) SURVIVAL; NON-WAIVER. All representations and
warranties shall survive the Closing for a period of two (2)
years, regardless of any investigation or lack of investigation
by any of the parties hereto. For purposes of the Closing, the
parties shall be deemed to have remade their respective
representations and warranties as of the Closing, except for
those representations and warranties that speak as of a
particular date. The failure in any one or more instances of a
party to insist upon performance of any of the terms, covenants
or conditions of this Agreement, to exercise any right or
privilege in this Agreement conferred, or the waiver by said
party of any breach of any of the terms, covenants or conditions
of this Agreement, shall not be construed as a subsequent waiver
of any such terms, covenants, conditions, right or privileges,
but the same shall continue and remain in full force and effect
as if no such forbearance or waiver had occurred. No waiver
shall be effective unless it is in writing and signed by an
authorized representative of the waiving party.
(f) APPLICABLE LAW. This Agreement shall be governed and
controlled as to validity, enforcement, interpretation,
construction, effect and in all other respects by the internal
laws of the State of Delaware applicable to contracts made in
that State, without regard to any conflict of law principles of
the State of Delaware.
(g) CONSENT TO JURISDICTION. The parties hereto
irrevocably consent and submit to the exclusive jurisdiction of
any local, state or federal court within the County of New Castle
in the State of Delaware for enforcement of this Agreement. The
parties hereto irrevocably waive any objection they may have to
venue in the defense of an inconvenient forum to the maintenance
of such actions or proceedings to enforce this Agreement.
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(h) BINDING EFFECT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, and their
successors and permitted assigns. Nothing in this Agreement,
express or implied, is intended to confer on any person other
than the parties hereto, and their respective successors and
permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
(i) ASSIGNMENT. This Agreement shall not be assignable by
any party without the prior written consent of all parties.
(j) AMENDMENTS. This Agreement shall not be modified or
amended except pursuant to an instrument in writing executed and
delivered on behalf of each of the parties hereto.
(k) HEADINGS. The headings contained in this Agreement are
for convenience of reference only and shall not affect the
meaning or interpretation of this Agreement.
(l) SEVERABILITY. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of
this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction,
such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, and this Agreement
shall be reformed, construed and enforced in such jurisdiction so
as to best give effect to the intent of the parties under this
Agreement.
(m) COUNTERPARTS. This Agreement may be executed in
separate counterparts, each of which is deemed to be an original
and all of which taken together constitute one and the same
agreement.
(n) NO STRICT CONSTRUCTION. The parties hereto jointly
participated in the negotiation and drafting of this Agreement.
The language used in this Agreement shall be deemed to be the
language chosen by the parties hereto to express their collective
mutual intent, this Agreement shall be construed as if drafted
jointly by the parties hereto, and no rule of strict construction
shall be applied against any Person.
(o) GENDER. As used in this Agreement, the masculine,
feminine or neuter gender shall be deemed to include the others
whenever the context so indicates or requires.
(p) INTERPRETATION. Whenever the term "include" or
"including" is used in this Agreement, it shall mean "including,
without limitation," (whether or not such language is
specifically set forth) and shall not be deemed to limit the
range of possibilities to those items specifically enumerated.
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The words "hereof", "herein" and "hereunder" and words of similar
import refer to this Agreement as a whole and not to any
particular provision. "Knowledge" of Parent, or other words of
similar import such as "to Parent's knowledge," shall mean the
actual conscious knowledge of Simon Hodson, Vince Truant and
Scott Houston after reasonable investigation. Terms defined in
the singular have a comparable meaning when used in the plural
and vice versa.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement on
the date first above written.
EARTHSHELL CORPORATION
By: Simon K. Hodson
________________________________
Name: Simon K. Hodson
Its: CEO
By: Scott Houston
________________________________
Name: Scott Houston
Its: CFO
EARTHSHELL TRIANGLE, INC.
By: Simon K. Hodson
________________________________
Name: Simon K. Hodson
Its: CEO
RENEWABLE PRODUCTS, INC.
By: James A. Cooper
________________________________
Name: James A. Cooper
Its: VP
RENEWABLE PRODUCTS LLC
By: James A. Cooper
________________________________
Name: James A. Cooper
Its: VP
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EXHIBIT A
CLOSING DELIVERIES
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1. Target's Deliveries
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(a) Registration and Investor Rights Agreement, by and among
Parent and Stockholder
(b) Copies of Certificate of Incorporation and By-laws,
certified by the Secretary of State of the State of Delaware
and the Secretary of Target
(c) Merger Certificate
(d) Certificate of Good Standing issued by the State of Delaware
and Missouri
(e) Closing Certificate including incumbency
2. Parent's Deliveries
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(a) Registration and Investor Rights Agreement by and among
Parent and Stockholder
(b) EKI Lock-up Agreement in the form attached hereto as Exhibit
F
(c) Copies of Certificate of Incorporation and By-laws for
Parent and Mergerco, certified by the Secretary of State of
the State of Delaware and the Secretary of Parent and
Mergerco, as applicable and the Secretary of Mergerco
(d) Merger Certificate
(e) Certificate of Good Standing issued by the State of Delaware
and the State of California for Parent and Mergerco
(f) Certificates representing Parent Series C Preferred Stock
A-1
EXHIBIT B
FORM OF PARENT'S LEGAL OPINION
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SEE ATTACHED
B-1
EXHIBIT C
MATERIAL CONSENTS TO BE OBTAINED BY PARENT
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1. Consent of Cornell Capital Partners, LP
C-1
EXHIBIT D
MATERIAL CONSENTS TO BE OBTAINED BY TARGET
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None.
D-1
EXHIBIT E
FORM OF TARGET'S LEGAL OPINION
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SEE ATTACHED
E-1
EXHIBIT F
EKI LOCK-UP AGREEMENT
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SEE ATTACHED
F-1
EXHIBIT G
CERTIFICATE OF DESIGNATION
--------------------------
SEE ATTACHED
G-1
EXHIBIT 2
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EXHIBIT G
CERTIFICATE OF DESIGNATION
OF
SERIES C CONVERTIBLE PREFERRED STOCK
OF
EARTHSHELL CORPORATION
(Pursuant to Section 151 of the General Corporation
Law of the State of Delaware)
EarthShell Corporation, a corporation organized and existing
under the General Corporation Law of the State of Delaware (the
"Corporation"), hereby certifies that the following resolution was
adopted by the Board of Directors of the Corporation (the "Board of
Directors"), pursuant to the authority conferred upon the Board of
Directors by Article V, Section 3, of the Certificate of Incorporation
of the Corporation (the "Certificate of Incorporation") and the
provisions of Section 151 of the Delaware General Corporation Law, at
a meeting duly called and held on May 12, 2005 at which there was at
all times present and acting a quorum of the Board of Directors:
RESOLVED, that there hereby be created, out of the 10,000,000
shares of Preferred Stock, par value $0.01 per share, of the
Corporation authorized in Article V of the Certificate of
Incorporation (the "Preferred Stock"), a series of Preferred Stock,
which series shall have the following designations, powers and
preferences, and relative, participating, optional and other special
rights, and qualifications, limitations and restrictions (in addition
to the designations, powers, and preferences and relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions set forth in the Certificate of
Incorporation that are applicable to the Preferred Stock):
1. DESIGNATION AND NUMBER OF SHARES. The series of Preferred
Stock shall be designated the "Series C Convertible Preferred Stock"
(the "Series C Preferred Stock"). The number of shares constituting
the Series C Preferred Stock shall be fixed at 8,000,000 and may be
increased or decreased as provided in Section 151(g) of the General
Corporation Law of Delaware (but not below the number of shares then
outstanding).
2. RANK. The Series C Preferred Stock shall rank, with respect
to rights on liquidation, (a) junior to, or on a parity with, as the
case may be, any other series of the Preferred Stock established by
the Board of Directors, the terms of which shall specifically provide
that such series shall rank senior to or on a parity with, as the case
may be, the Series C Preferred Stock with respect to rights on
liquidation; and (b) senior to the Common Stock, par value $.01 per
share, of the Corporation (the "Common Stock").
3. DIVIDENDS. The holders of the Series C Preferred Stock
shall be entitled to receive, when, as and if declared by the Board of
Directors, to the extent permitted under the Delaware General
Corporation Law, dividends or distributions equal in amount, on a per
share basis, to those declared, if any, with respect to the Common
Stock; provided that if, at the time any dividend is declared on the
Common Stock, the number of shares of Common Stock into which each
share of Series C Preferred Stock is convertible shall have been
adjusted pursuant to Section 8(e), then the dividend payable with
respect to each share of Series C Preferred Stock shall be equal to
the dividend payable on the number of shares of Common Stock into
which such share of Series C Preferred Stock could be converted at the
time of declaration. Such dividends, if any, shall be payable at such
time or times as dividends are paid on the Common Stock.
4. LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution or winding up of the affairs of the Corporation, whether
voluntary or involuntary (a "Liquidation"), the holders of shares of
Series C Preferred Stock shall be entitled (a) to receive, out of the
assets of the Corporation available for distribution to its
stockholders, in cash, the amount of $0.000125 per share and (b)
thereafter, to share ratably with the holders of the Common Stock in
the assets remaining for distribution to the holders of Common Stock,
based on the number of shares of Common Stock into which each share of
Series C Preferred Stock could be converted at the time of such
Liquidation.
5. VOTING RIGHTS.
(a) DEFINITIONS. For purposes of this Section 5 and
elsewhere in this Agreement, the following terms shall have the
meanings set forth below:
"Affiliate" shall mean with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under
direct or indirect common control with, such first Person. A Person
shall be deemed to control a corporation or other entity if such
Person possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of such corporation or
entity, whether through the ownership of voting securities, by
contract or otherwise.
"Closing Date" shall have the meaning given such term in the
Merger Agreement.
"Contractual Obligation" of any Person shall mean any
indenture, note, lease, loan agreement, security, deed of trust,
mortgage, security agreement, guaranty, instrument, contract,
agreement, license agreement or other form of contractual obligation
or undertaking to which such Person is a party or by which such Person
or any of its property is bound.
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"Fair Market Value" shall mean, when used with respect to
the Common Stock as of any determination date, an amount per share
equal to (i) the average of the last sale prices of shares of Common
Stock on the 20 consecutive trading days ending on such date or, if no
such sales take place on one or more dates within such period, the
average of the closing bid and asked prices thereof on such dates
within such period, in each case as officially reported on the
principal national securities exchange on which the Common Stock is
then listed or admitted to trading, or (ii) if no shares of Common
Stock are then listed or admitted to trading on any national
securities exchange, the average of the last sale prices of shares of
Common Stock on the 20 consecutive trading days ending on such date,
or, if no such sales take place on one or more days within such
period, the average of the reported closing bid and asked prices
thereof on such dates within such period, as quoted on the Nasdaq
National Market or the Nasdaq SmallCap Market, or (iii) if no shares
of Common Stock are then quoted on the Nasdaq National Market or
Nasdaq SmallCap Market, the average of the last sale prices of shares
of Common Stock on the 20 consecutive trading days ending on such
date, or, if no such sales take place on one or more days within such
period, the average of the reported closing bid and asked prices
thereof on such dates during such period, as quoted on the OTC
Bulletin Board or any similar successor organization. Notwithstanding
the foregoing, in the event that, on the date of their issuance,
shares of Common Stock shall be offered for sale to the public in
connection with an underwritten public offering registered under the
Securities Act of 1933, as amended, the Fair Market Value on such date
of issuance shall be deemed to be the price at which such shares are
initially sold to the public.
"Guaranty Obligation" shall mean any direct or indirect
liability of the Corporation or any of its Subsidiaries with respect
to any Indebtedness, lease, dividend, letter of credit or other
obligation (the "primary obligations") of another Person (the "primary
obligor"), including any obligation of that Person, whether or not
contingent, (a) to purchase, repurchase or otherwise acquire such
primary obligations or any property constituting direct or indirect
security therefor, (b) to advance or provide funds (i) for the payment
or discharge of any such primary obligation or (ii) to maintain
working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency or any balance sheet item, level
of income or financial condition of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of
assuring the beneficiary of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation, or
(d) otherwise to assure or hold harmless the holder of any such
primary obligation against loss in respect thereof. The amount of any
Guaranty Obligation shall be deemed equal to the stated or
determinable amount of the primary obligation in respect of which such
Guaranty Obligation is made or, if not stated or if indeterminable,
the maximum liability in respect of such obligation.
G-3
"Indebtedness" shall mean, without duplication, obligations
of the Corporation or any of its Subsidiaries (a) evidenced by notes,
bonds, debentures or other similar instruments and other obligations
of the Corporation or its Subsidiaries for borrowed money, (b) for the
deferred purchase price of property or services (including obligations
under letters of credit and other credit facilities which secure or
finance such purchase price), (c) under conditional sale or other
title retention agreements with respect to property acquired by the
Corporation or its Subsidiaries (to the extent of the value of such
property if the rights and remedies of the seller or the lender under
such agreement in the event of default are limited solely to
repossession or sale of such property), (d) as lessee under or with
respect to capital leases, (e) under letters of credit (including
standby and commercial letters of credit), banker's acceptances, bank
guaranties, surety bonds and similar instruments, and (f) under any
swap, cap, collar, hedge forward, future or derivative transaction or
option or similar agreement; Indebtedness shall also include any
Guaranty Obligations with respect to the obligations of other Persons
of the types described in clauses (a) - (f) of this definition.
"Investment" means (a) any loan or advance of funds by the
Corporation or any of its Subsidiaries to any other Person (other than
advances to employees of the Corporation or such Subsidiary for moving
and travel expenses and similar expenses in the ordinary course of
business), or (b) any purchase or other acquisition of equity
securities or indebtedness of such Person or capital contribution or
other investment in such Person.
"Manufacturing Subsidiary" shall mean ReNewable Products,
Inc., a Delaware corporation and, as of the Closing Date, a wholly-
owned subsidiary of the Corporation.
"Merger Agreement" shall mean the Agreement and Plan of
Merger, dated as of June 17, 2005, among the Corporation, EarthShell
Triangle, Inc., a Delaware corporation and wholly-owned subsidiary of
the Corporation, the Manufacturing Subsidiary, and ReNewable Products
LLC, a Delaware limited liability company and sole stockholder of the
Manufacturing Subsidiary.
"Person" shall mean an individual, partnership, joint
venture, corporation, trust, limited liability company, unincorporated
organization or any similar entity.
"Subsidiary" shall mean (a) any corporation of which more
than 50% of the issued and outstanding equity securities having
ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether at the time capital stock of
any other class or classes of such corporation shall or might have
voting power upon the occurrence of any contingency) is at the time
directly or indirectly owned or controlled by the Corporation, (b) any
partnership, joint venture, limited liability company or other
association of which at least 50% of the equity interest having the
G-4
power to vote, direct or control the management of such partnership,
joint venture or other association is at the time owned and controlled
by the Corporation, or (c) any other Person included in the financial
statements of the Corporation on a consolidated basis.
(b) RIGHT TO VOTE WITH THE COMMON STOCK. Except as set
forth herein or as otherwise required by law (including, without
limitation, the provisions of Section 242(b)(2) of the Delaware
General Corporation Law), the holders of record of the outstanding
shares of Series C Preferred Stock (i) shall be entitled to vote as
one class with the holders of the Common Stock on all matters brought
before the stockholders of the Corporation, including but not limited
to the election of directors, and (ii) shall have, in voting on such
matters, for each share of Series C Preferred Stock one vote for each
share of Common Stock into which such share of Series C Preferred
Stock could then be converted. Each holder of Series C Preferred
Stock shall be entitled to receive written notice of all meetings of
the holders of the Common Stock and copies of all materials furnished
to such holders in connection with such meetings.
(c) RIGHT TO VOTE AS A SEPARATE CLASS. So long as at least
four million (4,000,000) shares of Series C Preferred Stock remain
outstanding, the Corporation shall not take any of the following
actions without the prior approval of the holders of a majority of the
then outstanding shares of Series C Preferred Stock, voting as a
single class.
(i) issue, or permit any of its Subsidiaries to issue,
any additional shares of capital stock or other equity interests
at less than Fair Market Value (in the case of Common Stock) or
their fair market value (in the case of other classes of capital
stock or other equity interests) on the date of issuance,
provided that the approval of the holders of the Series C
Preferred Stock shall not be required for the issuance by the
Corporation of shares of Common Stock (A) pursuant to the Standby
Equity Distribution Agreement dated as of March 23, 2005 between
Cornell Capital Partners, LP and the Corporation (the "Cornell
Agreement"), notwithstanding that the price at which such shares
are issued, as determined under the Cornell Agreement, may be
less than Fair Market Value, or (B) upon exercise of stock
options, warrants or other convertible securities disclosed in
Section 5(d) of the Disclosure Schedule delivered pursuant to the
Merger Agreement, as in effect as of the date of the Merger
Agreement.;
(ii) redeem or repurchase, or permit any of its
Subsidiaries to redeem or repurchase, any shares of capital stock
of the Corporation or any of its Subsidiaries;
(iii) merge or consolidate with, or permit any of its
Subsidiaries (other than the Manufacturing Subsidiary) to merge
or consolidate with, any other Person other than the Corporation
G-5
or another wholly-owned direct or indirect Subsidiary of the
Corporation, or permit the Manufacturing Subsidiary to merge or
consolidate with any other Person;
(iv) sell, lease or otherwise dispose of more than 5%
of the consolidated assets of the Corporation (computed either on
the basis of book value, as determined in accordance with
generally accepted accounting principles consistently applied, or
fair market value) in any transaction or series of related
transactions outside of the ordinary course of the Corporation's
business consistent with past practice;
(v) sell, pledge, or otherwise transfer to any Person
any of the outstanding capital stock of, or equity interests in,
any Subsidiary, including but not limited to the Manufacturing
Subsidiary, or sell, pledge, lease or dispose of any of the
assets of the Manufacturing Subsidiary other than in the ordinary
course of the Manufacturing Subsidiary's business;
(vi) engage, either directly or through any Subsidiary,
in any business other than the business in which the Corporation
and its Subsidiaries are engaged on the Closing Date or a
business reasonably related thereto or modify, in any material
respect, the business model adopted by the Corporation for
engaging in such business, as described in the Corporation's most
recent Annual Report on Form 10-K filed with the Securities and
Exchange Commission prior to the Closing Date;
(vii) enter into, or permit any of its Subsidiaries to
enter into, any Contractual Obligation with an Affiliate (other
than the Corporation or another wholly-owned direct or indirect
Subsidiary of the Corporation) or engage, or permit any of its
Subsidiaries to engage, in any other transaction with an
Affiliate (other than the Corporation or another wholly-owned
direct or indirect Subsidiary of the Corporation) except for the
following:
Amended and Restated License Agreement by and between
the Corporation and E. Khashoggi Industries LLC ("EKI"), dated
July 29, 2002 (the "License Agreement");
License & Information Transfer Agreement by and among
bio-tec Biologische Naturverpackungen GmbH & Co. KG and bio-tec
Biologische Naturverpackungen Forschungs und Entwicklungs GmbH, a
wholly owned subsidiary of EKI, dated July 29, 2002 (the "Biotec
Agreement")
Loan Conversion Agreement by and among the Corporation,
EKI and Essam Khashoggi, dated as of July 16, 2004.
G-6
Agreement by and between the Corporation and EKI for
the sale of non-essential office furniture and machine shop
equipment, dated as of May, 2004.
Agreement by and between the Corporation and EKI to
share support services of an executive assistant, dated as of
September, 2004.
Unwritten Sublease Agreement by and between the
Corporation and EKI for the sublet of office space by the
Company, as of November, 2004.
Agreements by and between the Corporation and various
officers of the Company for short-term unsecured interest bearing
loans, various dates.
Conversion Agreement by and between the Company and
EKI, dated as of May, 2005.
Amended and Restated Patent Agreement for the
Allocation of Patent Costs by and between the Corporation and
EKI, dated as of October 1, 1997, as amended;
(viii) amend, or permit any of its Subsidiaries to
amend, the terms of any Contractual Obligation between the
Corporation and any of its Affiliates (other than another wholly-
owned direct or indirect Subsidiary of the Corporation) or
between such Subsidiary and any of its Affiliates (other than the
Corporation or another wholly-owned direct or indirect Subsidiary
of the Corporation) as in effect on the Closing Date;
(ix) create, issue incur, borrow, assume, or permit to
exist Indebtedness, or in any other manner become liable with
respect to any Indebtedness in an aggregate amount that exceeds,
at any time, $500,000;
(x) amend the Certificate of Incorporation or the by-
laws of the Corporation or of the Manufacturing Subsidiary,
except to increase or decrease the number of directors;
(xi) enter into or amend, or permit any Subsidiary to
enter into or amend, any material contract with any other Person,
other than (A) license agreements entered into in the ordinary
course of the Corporation's business, and (B) customer, supply
and services agreements entered into in the ordinary course of
the Manufacturing Subsidiary's proposed business, provided that
the approval of the holders of the Series C Preferred Stock shall
not be required for the amendment of any existing agreement
between the Corporation and Cornell Capital Partners, LP relating
to Indebtedness of the Corporation, as long as such amendment
does not result in an increase in the amount of Indebtedness for
which the Corporation or any Subsidiary is liable;
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(xii) make, or permit any Subsidiary to make, any
Investment in any Person, other than a Person that is a wholly-
owned direct or indirect Subsidiary of the Corporation
immediately prior to such Investment;
(xiii) make any assignment for the benefit of the
creditors of the Corporation or any of its Subsidiaries; admit in
writing the inability of the Corporation or any of its
Subsidiaries to pay its debts generally as they become due;
petition or apply to any tribunal for the appointment of a
custodian, trustee, receiver or liquidator of the Corporation or
any of its Subsidiaries of any substantial part of their assets;
commence any proceeding relating to the Corporation or any of its
Subsidiaries under any bankruptcy reorganization, insolvency,
readjustment of debt, dissolution or liquidation law of any
jurisdiction or, if such petition or application is filed, or any
such proceeding is commenced, against the Corporation or any of
its Subsidiaries, or take any action to indicate its approval of,
consent to, or acquiescence in such petition, application or
proceeding; or
(xiv) settle any litigation or other proceeding against
the Corporation or any of its Subsidiaries for cash or property
with an aggregate fair market value that exceeds $1,200,000, with
no single lawsuit settlement amount to exceed $500,000, provided
that the approval of the holders of the Series C Preferred Stock
shall not be required for the settlement of litigation or any
other proceeding that may arise under any existing agreement
between the Corporation and Cornell Capital Partners, LP.
6. FUTURE STOCK ISSUANCES. At least ten days prior to issuing
any additional shares of capital stock of, or other equity interests
in, the Corporation, the Corporation shall notify each holder of
Series C Preferred Stock in writing of the number or amount of
securities proposed to be issued, the consideration proposed to be
received for such securities and the proposed date of issuance, and
shall furnish each such holder with copies of all relevant agreements,
securities and other documentation relating to the proposed issuance.
The provisions of this Section 6 shall not apply to the issuance of
shares of Common Stock pursuant to the Cornell Agreement or upon
exercise of stock options, warrants or other convertible securities
disclosed in Section 5(d) of the Disclosure Schedule delivered
pursuant to the Merger Agreement, as long as such issuance is in
accordance with the terms and conditions of the Cornell Agreement or
such stock options, warrants or other convertible securities, as the
case may be, as in effect as of the date of the Merger Agreement.
7. BOARD OBSERVER RIGHTS. The Corporation shall (a) permit a
single representative designated by the holders of a majority of the
Series C Preferred Stock (the "Board Observer") to attend all meetings
(including meetings by telephone or video conference) of the board of
directors of the Corporation and its Subsidiaries and each committee
G-8
of the board of directors of the Corporation and its Subsidiaries in a
non-voting observer capacity, (b) provide the Board Observer with
notice of all such meetings at the same time and in the same manner as
notice is given to the members of such board of directors, and (c)
furnish the Board Observer with copies of all notices, minutes,
consents and other materials that the Corporation or its Subsidiary
provides to its directors at or prior to such meetings. The holders
of a majority of the Series C Preferred Stock shall provide the
Corporation with written notice of the name and address of, and other
contact information for, the Person so designated to serve as the
Board Observer and may change such Person, or substitute another
Person for such Person, from time to time, upon written notice to the
Corporation.
8. CONVERSION.
(a) RIGHT TO CONVERT. Each share of Series C Preferred
Stock shall be convertible into one share of fully paid and
nonassessable Common Stock, subject to adjustment from time to time in
accordance with Section 8(e), (i) at the option of the holder thereof,
at any time after the date of issuance, and (ii) at the option of the
Corporation, at any time after the second anniversary of the Closing
Date, upon written notice to the holders thereof of mandatory
conversion of such shares, in each case in accordance with Section
8(b). The number of shares of Common Stock into which each share of
Series C Preferred Stock may be converted, as so adjusted, is referred
to in this Section 8 as the "Conversion Rate."
(b) CONVERSION PROCEDURES.
(i) CONVERSION BY THE HOLDER. Any holder of shares of
Series C Preferred Stock electing to convert such shares into
Common Stock shall give five days notice to the Corporation, and
shall surrender the certificate or certificates therefor at the
principal office of the Corporation or its transfer agent (or, if
such conversion shall be in connection with an underwritten
public offering of shares of Common Stock, at the location at
which the underwriters shall have agreed to accept delivery
thereof), accompanied by such form of notice of conversion as may
be prescribed by the Corporation or its transfer agent. The
Corporation shall (or shall cause its transfer agent to) as soon
as practicable thereafter issue and deliver at such office to
such holder of shares of Series C Preferred Stock, or to the
nominee or nominees of such holder, a certificate or certificates
for the number of shares of Common Stock to which such holder
shall be entitled. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of
such surrender of the certificate or certificates evidencing the
shares of Series C Preferred Stock to be converted. The Person
or Persons entitled to receive the shares of Common Stock and/or
other securities or assets, as applicable, issuable upon such
conversion shall be treated for all purposes as the record holder
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or holders of such shares of Common Stock and/or other securities
or assets as of such date. Notwithstanding the foregoing, if the
conversion of all or any portion of a holder's shares of Series C
Preferred Stock is being made in connection with (i) a proposed
public offering of any Common Stock, (ii) a proposed Transaction
(as defined in Section 10), or (iii) a proposed sale or transfer
of outstanding shares of Common Stock or any other securities of
the Corporation (including a sale or transfer of Common Stock
issuable upon the conversion of shares of Series C Preferred
Stock), then, at the election of any holder of such shares, such
conversion may be conditioned upon the consummation of such
public offering, Transaction, sale or transfer, in which case
such conversion shall be effective concurrently with the
consummation of such public offering, Transaction, sale or
transfer.
(ii) MANDATORY CONVERSION UPON WRITTEN NOTICE BY THE
CORPORATION. If, at any time following the second anniversary of
the Closing Date, the Corporation desires to effect a mandatory
conversion of all, but not less than all, of the outstanding
Series C Preferred Stock, the Corporation shall give at least
five days prior written notice to each holder of record of Series
C Preferred Stock at such holder's post-office address as shown
on the records of the Corporation, notifying such holder of the
mandatory conversion of such shares into shares of Common Stock
of the Corporation. Such notice will specify the date fixed for
such conversion (the "Mandatory Conversion Date"), the number of
shares of Series C Preferred Stock to be converted into shares of
Common Stock and the number of shares of Common Stock to be
issued for each share of Series C Preferred Stock so converted,
and shall instruct the holder to surrender to the principal
office of the Corporation or its transfer agent, on the Mandatory
Conversion Date, a certificate or certificates representing the
shares of Series C Preferred Stock specified in such notice. The
Corporation will, as soon as practicable thereafter, deliver to
each surrendering holder of Series C Preferred Stock, at his
address as shown on the records of the Corporation, or to his
written order, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled.
From and after the close of business on the Mandatory Conversion
Date, the Series C Preferred Stock shall be deemed to be no
longer outstanding, and the holders of such shares of Series C
Preferred Stock shall be deemed to be the record holders of the
number of shares of Common Stock into which such shares of Series
C Preferred Stock have been converted.
(c) FRACTIONAL SHARES. No fractional shares or scrip
representing fractional shares of Common Stock shall be issued upon
the conversion of the Series C Preferred Stock. If more than one
share of Series C Preferred Stock shall be surrendered for conversion
at one time by the same holder, the number of full shares of Common
Stock issuable upon the conversion thereof shall be computed on the
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basis of the aggregate number of shares of Series C Preferred Stock
surrendered. In lieu of any fractional shares of Common Stock to
which a holder would otherwise be entitled, the Corporation shall pay
cash equal to such fraction multiplied by the Fair Market Value per
share of Common Stock on the date of conversion.
(d) RESERVATION OF COMMON STOCK; STATUS OF ISSUED SHARES OF
COMMON STOCK. The Corporation shall reserve, and shall at all times
have reserved, out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the
Series C Preferred Stock, enough shares of Common Stock to permit the
conversion of the then outstanding shares of Series C Preferred Stock
and shall list on, and keep such shares listed on, each securities
exchange, if any, on which the Common Stock is listed. All shares of
Common Stock issued upon conversion of the Series C Preferred Stock
will be, upon issuance, duly issued, fully paid and nonassessable and
free from all taxes, liens, and charges with respect to the issuance
thereof.
(e) ADJUSTMENTS OF THE CONVERSION RATE. The Conversion
Rate shall be subject to adjustment from time to time as follows:
(i) Subject to the Corporation's compliance with the
provisions of Section 5(c), in case the Corporation shall
(A) issue Common Stock as a dividend or distribution on any class
of the capital stock of the Corporation, (B) split or otherwise
subdivide its outstanding Common Stock, (C) combine the
outstanding Common Stock into a smaller number of shares, or
(D) issue by reclassification of its Common Stock (except in the
case of a Transaction) any shares of the capital stock of the
Corporation, the Conversion Rate shall be adjusted so that the
holder of each share of the Series C Preferred Stock shall
thereafter be entitled to receive, upon the conversion of such
share, the number of shares of Common Stock or other capital
stock that it would have been entitled to receive immediately
after the happening of any of the events listed in the preceding
clauses (A), (B), (C) and (D), had such shares of the Series C
Preferred Stock been converted immediately prior to the close of
business on the record date or effective date of such event, as
applicable. The adjustments herein provided shall become
effective immediately following the record date for any such
stock dividend or the effective date of any such other events.
(ii) Subject to the Corporation's compliance with the
provisions of Section 5(c), in case of any reclassification or
similar change of outstanding shares of Common Stock of the
Corporation, or in case of the consolidation or merger of the
Corporation with another corporation, or the conveyance of all or
substantially all of the assets of the Corporation in a
transaction in which holders of the Common Stock receive shares
of stock or other property, including cash, each share of Series
C Preferred Stock shall, after such event and subject to the
other rights of the Series C Preferred Stock as set forth
G-11
elsewhere herein, be convertible only into the number of shares
of stock or other securities or property, including cash, to
which a holder of the number of shares of Common Stock of the
Corporation deliverable upon conversion of such shares of the
Series C Preferred Stock would have been entitled upon such
reclassification, change, consolidation, merger or conveyance,
had such shares of Series C Preferred Stock been converted
immediately prior to the effective date of such event.
(iii) In case any shares of Common Stock of the
Corporation shall be issued upon conversion of shares of the
Corporation's Series B Preferred Stock, the Conversion Rate shall
be adjusted, with retroactive effect to the Closing Date, by
multiplying the Conversion Rate in effect immediately prior to
such issuance by a fraction, the numerator of which shall be the
number of shares of Common Stock of the Corporation outstanding
immediately following such issuance, and the denominator of which
shall be the number of shares of Common Stock of the Corporation
outstanding immediately prior to such issuance. Such adjustment
shall be made successively each time any event described in this
Section 8(e)(iii) shall occur.
(iv) In the event that, notwithstanding the
Corporation's representations, warranties and covenants in the
Merger Agreement, the number of shares of outstanding Common
Stock, on a fully diluted basis (assuming the exercise of all
outstanding options, warrants and other rights, regardless of
exercise price, and conversion of all convertible securities), as
of the Closing Date exceeded 24,556,184 shares, the Conversion
Rate shall be adjusted, with retroactive effect to the Closing
Date, so that the aggregate number of shares of Common Stock
issuable upon the conversion of all of the Series C Preferred
Stock issued on the Closing Date shall equal 24.6% of the number
of shares of Common Stock outstanding, on a fully diluted basis,
on the Closing Date (after giving effect to the conversion of all
of the shares of Series C Preferred Stock issued and outstanding
as of the Closing Date).
(iv) The holders of a majority of the outstanding
Series C Preferred Stock shall have the right to require the
Corporation to adjust the Conversion Rate, as a condition to
their approval of any matter subject to their prior approval
under Section 5(c), in which event such adjustment (other than an
adjustment of the kind provided for in Section 8(e)(i), (ii),
(iii) and (iv)) shall be reflected as an amendment to this
Certificate of Designation.
(v) After each adjustment of the Conversion Rate under
Section 8(e)(i),(ii), (iii) and (iv), the Corporation shall
promptly prepare a certificate signed by its Chief Executive
Officer and a Secretary or Assistant Secretary of the
Corporation, setting forth the Conversion Rate as so adjusted,
G-12
the number of shares of Common Stock or other securities into
which the Series C Preferred Stock shall be convertible, and a
statement of the facts upon which such adjustment is based, and
the Corporation shall cause a copy of such statement to be sent
to each holder of record of Series C Preferred Stock at such
holder's post-office address as shown on the records of the
Corporation.
(f) NO AVOIDANCE. The Corporation shall not, by amendment
of its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger,
dissolution, issuance or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation,
but will at all times in good faith assist in the carrying out of all
the provisions of this Section 8 and in the taking of all such action
as may be necessary or appropriate in order to protect the conversion
rights of the holders of the Series C Preferred Stock against
impairment, whether or not such action has been approved by the
holders of the Series C Preferred Stock pursuant to Section 5(c).
9. STATUS OF CONVERTED OR REACQUIRED SHARES. Shares of Series
C Preferred Stock that are converted into Common Stock or repurchased
or otherwise acquired by the Corporation shall be retired and may not
be reissued as shares of Series C Preferred Stock but shall thereafter
have the status of authorized but unissued shares of Preferred Stock,
without designation as to series, until such shares are once more
designated as part of a particular series of Preferred Stock.
10. MERGER, CONSOLIDATION, ETC. Subject to the provisions of
Section 5(c), in case of any (i) consolidation or merger of the
Corporation with or into another corporation (other than a merger with
a Subsidiary in which the Corporation is the continuing or surviving
corporation and that does not result in any reclassification, capital
reorganization or other change of the outstanding shares of Common
Stock issuable upon conversion of the Series C Preferred Stock), (ii)
sale, lease or conveyance of all or substantially all of the
consolidated assets of the Corporation, (iii) tender offer for the
Common Stock, (iv) voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, or (v) other transaction effected in
such a way that holders of Common Stock shall be entitled to receive
stock, securities or assets (including cash) upon conversion of or in
exchange for Common Stock (each of the foregoing transactions
described in clauses (i) through (v) being referred to herein as a
"Transaction"), then the Corporation shall, as a condition precedent
to such Transaction, cause effective provisions to be made so that (A)
each holder of shares of Series C Preferred Stock shall have the right
thereafter to receive the consideration, including the kind and amount
of shares of stock and other securities and property receivable in
such Transaction, which such holder would have received upon
consummation of such Transaction had such holder converted its shares
of Series C Preferred Stock immediately prior to the effective time of
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such Transaction, and (B) the successor or acquiring entity shall
expressly assume the due and punctual observance and performance of
each covenant and condition of this Certificate of Designation to be
performed and observed by the Corporation and all obligations and
liabilities hereunder. Any such provision shall include provision for
adjustments which shall be as nearly equivalent as possible to the
adjustments provided for in Section 8(e). The foregoing provisions of
this Section 10 shall similarly apply to successive Transactions.
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IN WITNESS WHEREOF, EarthShell Corporation has caused this
certificate to be executed and attested by the undersigned this 17th
day of June, 2005.
/s/ Simon K. Hodson
_________________________________
Name: Simon K. Hodson
Title: CEO
/s/ Scott Houston
_________________________________
Name: Scott Houston
Title: CFO
ATTEST:
/s/ Jessica Stovall
_____________________________
Name: Jessica Stovall
Title: Admin
G-15
EXHIBIT 3
---------
EXECUTION COPY
EARTHSHELL CORPORATION
Common Stock
---------------
REGISTRATION AND INVESTOR RIGHTS AGREEMENT
---------------
Dated as of June 17, 2005
TABLE OF CONTENTS
Page
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 4
2. DEMAND REGISTRATIONS . . . . . . . . . . . . . . . . . . . . 6
3. PIGGYBACK REGISTRATIONS . . . . . . . . . . . . . . . . . . 8
(a) RIGHT TO PIGGYBACK REGISTRATIONS . . . . . . . . . . . 8
(b) PRIORITY ON PRIMARY REGISTRATIONS . . . . . . . . . . . 8
(c) PRIORITY ON SECONDARY REGISTRATIONS . . . . . . . . . . 8
(d) SELECTION OF UNDERWRITERS . . . . . . . . . . . . . . . 9
(e) OTHER REGISTRATIONS . . . . . . . . . . . . . . . . . . 9
(f) DECISION NOT TO FILE PIGGYBACK REGISTRATION STATEMENT . 9
4. HOLD-BACK AGREEMENTS . . . . . . . . . . . . . . . . . . . . 9
(a) RESTRICTIONS ON PUBLIC SALE BY HOLDER OF REGISTRABLE
SECURITIES . . . . . . . . . . . . . . . . . . . . . . 9
(b) REGISTRABLE SECURITIES ONLY . . . . . . . . . . . . . . 9
(c) RESTRICTIONS ON SALE OF EQUITY SECURITIES BY THE
COMPANY . . . . . . . . . . . . . . . . . . . . . . . . 10
5. REGISTRATION PROCEDURES . . . . . . . . . . . . . . . . . . 10
6. REGISTRATION EXPENSES . . . . . . . . . . . . . . . . . . . 14
(a) COMPANY EXPENSES . . . . . . . . . . . . . . . . . . . 14
(b) SELLING STOCKHOLDERS' COUNSEL . . . . . . . . . . . . . 14
(c) OTHER EXPENSES OF SELLING STOCKHOLDERS . . . . . . . . 15
7. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 15
(a) INDEMNIFICATION BY COMPANY . . . . . . . . . . . . . . 15
(b) INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES . 15
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS . . . . . . . . 16
(d) CONTRIBUTION . . . . . . . . . . . . . . . . . . . . . 16
(e) SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . 17
8. RULE 144 . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS . . . . . . . . 18
10. FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . 18
(a) ANNUAL REPORTS . . . . . . . . . . . . . . . . . . . . 18
(b) QUARTERLY REPORTS . . . . . . . . . . . . . . . . . . . 18
(c) MONTHLY REPORTS . . . . . . . . . . . . . . . . . . . . 19
(d) BUDGETS . . . . . . . . . . . . . . . . . . . . . . . . 19
(e) REQUESTED INFORMATION . . . . . . . . . . . . . . . . . 19
11. BOARD REPRESENTATION . . . . . . . . . . . . . . . . . . . . 19
12. CONSULTATION AND EXAMINATION . . . . . . . . . . . . . . . . 19
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13. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 20
(a) NO INCONSISTENT AGREEMENTS . . . . . . . . . . . . . . 20
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES . . . . . 20
(c) REMEDIES . . . . . . . . . . . . . . . . . . . . . . . 20
(d) AMENDMENTS AND WAIVERS . . . . . . . . . . . . . . . . 20
(e) NOTICES . . . . . . . . . . . . . . . . . . . . . . . . 20
(f) SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . 21
(g) COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . 21
(h) HEADINGS . . . . . . . . . . . . . . . . . . . . . . . 21
(i) GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . 21
(j) SEVERABILITY . . . . . . . . . . . . . . . . . . . . . 21
(k) ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . 21
(l) ATTORNEYS' FEES . . . . . . . . . . . . . . . . . . . . 21
-ii-
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into as of June 17, 2005, by and among EarthShell Corporation,
a Delaware corporation (the "Company"), and ReNewable Products LLC, a
Delaware limited liability company ("Stockholder").
This Agreement is being entered into in connection with the
Agreement and Plan of Merger among the Company, EarthShell Triangle,
Inc., a Delaware corporation and a wholly-owned subsidiary of the
Company ("Mergerco"), ReNewable Products, Inc., a Delaware corporation
and a wholly-owned subsidiary of Stockholder ("Target"), and
Stockholder (the "Merger Agreement"). In order to induce Stockholder
to enter into the Merger Agreement, the Company has agreed, among
other things, to provide the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a
condition to the closing under the Merger Agreement.
The parties hereto, intending to be legally bound, agree as
follows:
1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall
have the following meanings:
"Common Stock" means the Company's common stock, par value $.01
per share.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Financial Statements" means with respect to any accounting
period for the Company and its subsidiaries, statements of income,
retained earnings, shareholders' equity or partners' capital and cash
flows of the Company and its subsidiaries for such period, and a
balance sheet of the Company and its subsidiaries as of the end of
such period, setting forth in each case in comparative form figures
for the corresponding period in the preceding fiscal year if such
period is less than a full fiscal year or, if such period is a full
fiscal year, corresponding figures from the preceding annual audited
financial statements, all prepared in reasonable detail and in
accordance with U.S. generally accepted accounting principles,
consistently applied.
"NASD" means the National Association of Securities Dealers, Inc.
"Person" means an individual, partnership, corporation, trust,
unincorporated organization, limited liability company or other
business entity, or a government or agency or political subdivision
thereof.
"Preferred Stock" means the Company's Series C Convertible
Preferred Stock, par value $.01 per share.
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement
with respect to the terms of the offering of any portion of the
Registrable Securities covered by such Registration Statement and by
all other amendments and supplements to the prospectus, including
post-effective amendments and all material incorporated by reference
in such prospectus.
"Public Offering" means any offering by the Company or selling
security holders of the Company's equity securities to the public
pursuant to an effective registration statement under the Securities
Act or any comparable statement under any comparable federal statute
then in effect.
"Registrable Securities" means the shares of Common Stock
issuable from time to time upon conversion of the shares of Preferred
Stock issued to Stockholder in the merger of Mergerco into Target
(whether such shares are issued to Stockholder or a transferee of the
Preferred Stock), including any Common Stock issued or issuable with
respect to the Registrable Securities by reason of any stock dividend
or stock split or in connection with any combination of shares,
recapitalization, merger, consolidation or other reorganization;
provided that a security ceases to be a Registrable Security when it
is no longer a Restricted Security.
"Registration Expenses" has the meaning set forth in Section 6.
"Registration Statement" means any registration statement of the
Company which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement, including post-effective
amendments, all exhibits and all material incorporated by reference in
such registration statement.
"Restricted Security" means any Registrable Securities upon
original issuance thereof, and with respect to any particular such
security, so long as such security was acquired by the holder thereof
other than pursuant to an effective registration under Section 5 of
the Securities Act or pursuant to Rule 144 promulgated under the
Securities Act; provided that a security that has ceased to be a
Restricted Security cannot thereafter become a Restricted Security.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
"Underwritten Registration" or "Underwritten Offering" mean a
registration in which securities of the Company are sold to an
underwriter or underwriters on a firm commitment or best efforts basis
for reoffering to the public.
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2. DEMAND REGISTRATIONS
(a) RIGHT TO DEMAND REGISTRATIONS. The holders of at least 25%
of the Registrable Securities shall have the rights to request or
participate in registration under the Securities Act of Registrable
Securities (a "Demand Registration") as set forth below. Each request
for a Demand Registration shall specify the approximate number of
Registrable Securities requested to be registered and the anticipated
per share price range for such offering. Within ten (10) days after
receipt of any such request, the Company shall give written notice of
such requested registration to all other holders of Registrable
Securities and shall include in such registration all Registrable
Securities with respect to which the Company has received written
requests for inclusion therein within fifteen (15) days after the
receipt of the Company's notice by such other holders of Registrable
Securities, subject to Section 2(b). Demand Registrations may be made
on Form S-1 or any similar long- form registration ("Long-Form
Registrations"), but shall be made on Form S-2 or S-3 or any similar
short-form registration ("Short-Form Registrations") whenever the
Company is permitted to use any applicable short form. The Company
shall use its best efforts to make Short-Form Registrations on Form S-
3 available for the sale of Registrable Securities.
(b) LONG- AND SHORT-FORM REGISTRATIONS. At any time following
the six (6) month anniversary of the closing under the Merger
Agreement, the holders of at least 25% of the Registrable Securities
may request registration under the Securities Act of all or any
portion of the Registrable Securities, subject to the following:
(i) LONG-FORM REGISTRATIONS. The holders of Registrable
Securities shall be entitled to request (A) up to two (2) Long-Form
Registrations in which the Company shall pay all Registration Expenses
("COMPANY PAID LONG-FORM REGISTRATIONS") and (B) an unlimited number
of Long Form Registrations in which the holders of Registrable
Securities register and sell an aggregate of at least 1,000,000 shares
of Common Stock and in which the holders of Registrable Securities
shall pay their share of the Registration Expenses as set forth in
Section 6. A registration shall not count as one of the permitted
Company-paid Long-Form Registrations until it has become effective and
the holders of Registrable Securities are able to sell at least ninety
percent (90%) of the Registrable Securities requested to be included
in such registration; provided that in any event the Company shall pay
all Registration Expenses in connection with any registration
initiated as a Company paid Long-Form Registration, whether or not it
becomes effective or ultimately counts as one of the permitted Company
paid Long Form Registrations.
(ii) SHORT-FORM REGISTRATIONS. In addition to the Long-Form
Registrations provided pursuant to Section 1(b)(i), the holders of at
least 25% of the Registrable Securities shall be entitled to request
up to two (2) Short-Form Registrations in which the Company shall pay
all Registration Expenses, provided that the aggregate number of
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Company paid Long-Form Registrations and Short-Form Registrations
shall not exceed three (3).
(iii) PARTICIPATION. The Company shall promptly give
written notice to all holders of Registrable Securities upon receipt
of a request for a Demand Registration pursuant to Section 2(a)(i)
above. The Company shall include in such Demand Registration such
Registrable Securities for which it has received written requests to
register within fifteen (15) days after such written notice has been
given.
(c) PRIORITY ON DEMAND REGISTRATIONS. The Company shall not
include in any Demand Registration any securities that are not
Registrable Securities without the prior written consent of the
holders of a majority of the Registrable Securities included in such
registration. If a Demand Registration is an underwritten offering
and the managing underwriters advise the Company in writing that in
their opinion the number of Registrable Securities and, if permitted
hereunder, other securities requested to be included in such offering
exceeds the number of Registrable Securities and other securities, if
any, which can be sold in an orderly manner in such offering within a
price range acceptable to the holders of a majority of the Registrable
Securities to be included in such registration, without adversely
affecting the marketability or valuation of the offering, the Company
shall include in such registration the maximum number that the
managing underwriters advise, in the following priority: (i) first,
the Registrable Securities of the holders exercising one of their
rights to a Demand Registration, (ii) second, the number of
Registrable Securities owned by holders other than those exercising a
right to Demand Registration requested to be included in such
registration which in the opinion of such underwriters can be sold
without adverse effect, pro rata among the holders of such securities
on the basis of the number of such securities owned by each such
holder and (iii) third, securities other than Registrable Securities
requested to be included in such registration which in the opinion of
such underwriters can be sold without adverse effect, pro rata among
the holders of such securities on the basis of the number of such
securities owned by each such holder. Without the consent of the
Company and the holders of a majority of the Registrable Securities
included in such registration, any Persons other than holders of
Registrable Securities who participate in Demand Registrations which
are not at the Company's expense must pay their share of the
Registration Expenses as provided in Section 6.
(d) SELECTION OF UNDERWRITERS. The holders of a majority of the
Registrable Securities included in any Demand Registration shall have
the right to select the investment banker(s) and manager(s) to
administer the offering. The Company shall have the right to require
that any Demand Registration be an Underwritten Registration if it
determines that an underwriter is necessary to maintain an orderly
market for the Common Stock.
4
(e) OTHER REGISTRATION RIGHTS. Except as provided in this
Agreement, the Company shall not grant to any Persons the right to
request the Company to register any equity securities of the Company,
or any securities convertible or exchangeable into or exercisable for
such securities, without the prior written consent of the holders of a
majority of the then outstanding Registrable Securities.
3. PIGGYBACK REGISTRATIONS
(a) RIGHT TO PIGGYBACK REGISTRATIONS. Whenever the Company
proposes to register any of its securities under the Securities Act
(other than pursuant to a Demand Registration hereunder) and the
registration form to be used may be used for the registration of
Registrable Securities (a "PIGGYBACK REGISTRATION"), the Company shall
give prompt written notice (in any event within three business days
after its receipt of notice of any exercise of demand registration
rights other than under this Agreement) to all holders of Registrable
Securities of its intention to effect such a registration and, subject
to the priorities set forth in Sections 3(b) and 3(c), shall include
in such registration all Registrable Securities with respect to which
the Company has received written requests for inclusion therein within
fifteen (15) days after the receipt of the Company's notice by such
holders of Registrable Securities.
(b) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback
Registration is an underwritten primary registration on behalf of the
Company and the managing underwriters advise the Company in writing
that in their opinion the number of securities requested to be
included in such registration exceeds the number which can be sold in
an orderly manner in such offering within a price range acceptable to
the Company, the Company shall include in such registration the
maximum number that the managing underwriters advise, in the following
priority: (i) first, the securities the Company proposes to sell,
(ii) second, the Registrable Securities requested to be included in
such registration, pro rata among the holders of such Registrable
Securities on the basis of the number of Registrable Securities owned
by each such holder, and (iii) third, securities other than
Registrable Securities requested to be included in such registration
which in the opinion of such underwriters can be sold without adverse
effect, pro rata among the holders of such securities on the basis of
the number of such securities owned by each such holder.
(c) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback
Registration is an underwritten secondary registration on behalf of
holders of the Company's securities (other than a Demand Registration
requested by the holders of Registrable Securities pursuant to Section
2), and the managing underwriters advise the Company in writing that
in their opinion the number of securities requested to be included in
such registration exceeds the number which can be sold in an orderly
manner in such offering within a price range acceptable to the holders
of a majority of the Registrable Securities to be included in such
registration, the Company shall include in such registration the
5
maximum number that the managing underwriters advise, in the following
priority: (i) first, the securities requested to be included therein
by the holders requesting such registration, (ii) second, the
Registrable Securities requested to be included in such registration,
pro rata among the holders of such Registrable Securities on the basis
of the number of Registrable Securities owned by each such holder, and
(iii) third, securities other than Registrable Securities requested to
be included in such registration which in the opinion of such
underwriters can be sold without adverse effect, pro rata among the
holders of such securities on the basis of the number of such
securities owned by each such holder.
(d) SELECTION OF UNDERWRITERS. In connection with any
underwritten Piggyback Registration, the Company shall have the right
to select the managing underwriters.
(e) OTHER REGISTRATIONS. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant
to Section 2 or pursuant to this Section 3, and if such previous
registration has not been withdrawn or abandoned, the Company shall
not file or cause to be effected any other registration of any of its
equity securities or securities convertible or exchangeable into or
exercisable for its equity securities under the Securities Act (except
on Form S-8 or any successor form), whether on its own behalf or at
the request of any holder or holders of such securities, until a
period of at least one hundred eighty (180) days has elapsed from the
effective date of such previous registration.
(f) DECISION NOT TO FILE PIGGYBACK REGISTRATION STATEMENT. If,
after proposing to file a Piggyback Registration Statement in
connection with a primary offering, the Company decides not to file
the Piggyback Registration Statement, then the holders of Registrable
Securities requesting inclusion of their shares pursuant to Section
3(a)(i) will not be entitled to have their Registrable Securities
registered at such time, unless they elect to convert such
registration into a Demand Registration pursuant to Section 2(a).
4. HOLD-BACK AGREEMENTS
(a) RESTRICTIONS ON PUBLIC SALE BY HOLDER OF REGISTRABLE
SECURITIES. Subject to the terms of Section 4(b), each holder of
Registrable Securities shall not effect any public sale or
distribution (including sales pursuant to Rule 144 under the
Securities Act) of equity securities of the Company, or any securities
convertible into or exchangeable or exercisable for such securities,
during the seven (7) days prior to and the subsequent ninety (90) day
period beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration in which
Registrable Securities are included (except sales or distributions
made as part of such underwritten registration), unless the
underwriters managing the Public Offering otherwise agree.
6
(b) REGISTRABLE SECURITIES ONLY. Anything contained in this
Agreement, including without limitation Section 4(a), to the contrary
notwithstanding, nothing herein contained shall be deemed or construed
to require any holder which owns securities of the Company acquired
other than by reason of the holding of Preferred Stock or the exercise
thereof, in whole or in part, to withhold such securities from sale
during any such period of time.
(c) RESTRICTIONS ON SALE OF EQUITY SECURITIES BY THE COMPANY.
The Company (i) shall not effect any public sale or distribution of
its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven (7)
days prior to and during the subsequent one hundred eighty (180) day
period beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration (except as
part of such underwritten registration or pursuant to registrations on
Form S-8 or any successor form), unless the underwriters managing the
Public Offering otherwise agree, and (ii) shall cause each holder of
its Common Stock, or any securities convertible into or exchangeable
or exercisable for Common Stock, purchased from the Company at any
time after the date of this Agreement (other than in a Public
Offering) to agree not to effect any public sale or distribution
(including sales pursuant to Rule 144) of any such securities during
such period (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the Public
Offering otherwise agree.
5. REGISTRATION PROCEDURES
Whenever the holders of Registrable Securities have requested
that any Registrable Securities be registered pursuant to this
Agreement, the Company will use its best efforts to effect such
registration to permit the sale of such Registrable Securities in
accordance with the intended method or methods of distribution
thereof, and pursuant thereto the Company will as expeditiously as
possible:
(a) prepare and file with the SEC a Registration Statement or
Registration Statements on any appropriate form under the Securities
Act, which form shall be available for the sale of the Registrable
Securities in accordance with the intended method or methods of
distribution thereof and shall include all financial statements
required by the SEC to be filed therewith, cooperate and assist in any
filings required to be made with the NASD, and use its best efforts to
cause such Registration Statement to become effective; provided that
before filing a Registration Statement or Prospectus or any amendments
or supplements thereto, the Company will furnish to the holders of the
Registrable Securities covered by such Registration Statement and the
underwriters, if any, copies of all such documents proposed to be
filed, which documents will be subject to the reasonable review of
such holders and underwriters, and the Company will not file any
Registration Statement or amendment thereto or any Prospectus or any
7
supplement thereto to which the holders of a majority of shares of the
Registrable Securities covered by such Registration Statement or the
underwriters, if any, shall reasonably object;
(b) prepare and file with the SEC such amendments and post-
effective amendments to the Registration Statement as may be necessary
to keep the Registration Statement effective for the applicable
period, or such shorter period that will terminate when all
Registrable Securities covered by such Registration Statement have
been sold; cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act; and comply with the provisions of
the Securities Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement
to the Prospectus; the Company shall not be deemed to have used its
best efforts to keep a Registration Statement effective during the
applicable period if it voluntarily takes any action that would result
in the selling holders of the Registrable Securities covered thereby
not being able to sell such Registrable Securities during that period
unless such action is required under applicable law, provided that the
foregoing shall not apply to actions taken by the Company in good
faith and for valid business reasons, including without limitation the
acquisition or divestiture of assets, so long as the Company promptly
thereafter complies with the requirements of Section 5(k), if
applicable;
(c) notify the selling holders of Registrable Securities and the
managing underwriters, if any, promptly, and (if requested by any such
Person) confirm such advice in writing, (1) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and,
with respect to the Registration Statement or any post-effective
amendment, when the same has become effective, (2) of any request by
the SEC for amendments or supplements to the Registration Statement or
the Prospectus or for additional information, (3) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that
purpose, (4) if at any time the representations and warranties of the
Company contemplated by paragraph (n) below cease to be true and
correct in any material respect, (5) of the receipt by the Company of
any notification with respect to the suspension of the qualification
of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose and (6)
of the happening of any event which makes any statement made in the
Registration Statement, the Prospectus or any document incorporated
therein by reference untrue in any material respect or which requires
the making of any changes in the Registration Statement, the
Prospectus or any document incorporated therein by reference in order
to make the statements therein not misleading;
8
(d) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at
the earliest possible time;
(e) if requested by the managing underwriter or underwriters or
a holder of Registrable Securities being sold in connection with an
Underwritten Offering, promptly incorporate in a Prospectus supplement
or post-effective amendment such information as the managing
underwriters and the holders of a majority of shares of the
Registrable Securities being sold reasonably agree should be included
therein relating to the plan of distribution with respect to such
Registrable Securities, including, without limitation, information
with respect to the principal amount of Registrable Securities being
sold to such underwriters, the purchase price being paid therefor by
such underwriters and with respect to any other terms of the
Underwritten Offering of the Registrable Securities to be sold in such
offering; and make all required filings of such Prospectus supplement
or post-effective amendment as soon as notified of the matters to be
incorporated in such Prospectus supplement or post-effective
amendment;
(f) furnish to each selling holder of Registrable Securities and
each managing underwriter, without charge, at least one signed copy of
the Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those
incorporated by reference);
(g) deliver to each selling holder of Registrable Securities and
the underwriters, if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment
or supplement thereto as such Persons may reasonably request; the
Company consents to the use of the Prospectus or any amendment or
supplement thereto by each of the selling holders of Registrable
Securities and the underwriters, if any, in connection with the
offering and sale of the Registrable Securities covered by the
Prospectus or any amendment or supplement thereto;
(h) prior to any public offering of Registrable Securities,
register or qualify or cooperate with the selling holders of
Registrable Securities, the underwriters, if any, and their respective
counsel in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or blue
sky laws of such jurisdictions as any seller or underwriter reasonably
requests in writing and do any and all other acts or things necessary
or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the Registration Statement; provided
that the Company will not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to
take any action which would subject it to general service of process
in any such jurisdiction where it is not then so subject;
9
(i) cooperate with the selling holders of Registrable Securities
and the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any restrictive legends; and
enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriters may request at
least two business days prior to any sale of Registrable Securities to
the underwriters;
(j) use its best efforts to cause the Registrable Securities
covered by the applicable Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may
be necessary to enable the seller or sellers thereof or the
underwriters, if any, to consummate the disposition of such
Registrable Securities;
(k) upon the occurrence of any event contemplated by paragraph
(c)(6) above, prepare a supplement or posteffective amendment to the
Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable
Securities, the Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(l) cause all Registrable Securities covered by the Registration
Statement to be listed, to the degree the Common Stock is so listed,
on each securities exchange on which the Common Stock is then listed
if requested by the holders of a majority of shares of such
Registrable Securities or the managing underwriters, if any;
(m) not later than the effective date of the applicable
Registration Statement, provide a CUSIP number for all Registrable
Securities and provide the applicable transfer agents with printed
certificates for the Registrable Securities which are in a form
eligible for deposit with The Depository Trust Company;
(n) enter into such agreements (including an underwriting
agreement) and take all such other actions in connection therewith in
order to expedite or facilitate the disposition of such Registrable
Securities and in such connection, whether or not an underwriting
agreement is entered into and whether or not the registration is an
Underwritten Registration (1) make such representations and warranties
to the holders of such Registrable Securities and the underwriters, if
any, in form, substance and scope as are customarily made by issuers
to underwriters in primary Underwritten Offerings; (2) obtain opinions
of counsel to the Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters, if any, and the holders of
a majority of shares of the Registrable Securities being sold)
addressed to each selling holder and the underwriters, if any,
covering the matters customarily covered in opinions requested in
10
Underwritten Offerings; (3) obtain "cold comfort" letters and updates
thereof from the Company's independent registered public accountants
addressed to the selling holders of Registrable Securities and the
underwriters, if any, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort"
letters to underwriters in connection with primary Underwritten
Offerings; and (4) deliver such documents and certificates as may be
requested by the holders of a majority of the Registrable Securities
being sold and the managing underwriters, if any, to evidence
compliance with clause (k) above and with any customary conditions
contained in the underwriting agreement or other agreement entered
into by the Company. The above shall be done at each closing under
such underwriting or similar agreement or as and to the extent
required thereunder;
(o) make available for inspection by a representative of the
holders of a majority of shares of the Registrable Securities, any
underwriter participating in any disposition pursuant to such
Registration Statement, and any attorney or accountant retained by the
selling holders or underwriters, all financial and other records,
pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all
information reasonably requested by any such representative,
underwriter, attorney or accountant in connection with such
Registration Statement; provided that any records, information or
documents that are designated by the Company in writing as
confidential shall be kept confidential by such Persons unless
disclosure of such records, information or documents is required by
court or administrative order; and
(p) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make generally available to its
security holders, earnings statements satisfying the provisions of
Section 11(a) of the Securities Act, no later than forty-five (45)
days after the end of any 12-month period (or ninety (90) days, if
such period is a fiscal year) (1) commencing at the end of any fiscal
quarter in which Registrable Securities are sold to underwriters in an
Underwritten Offering, or (2) if not sold to underwriters in such an
offering, beginning with the first month of the Company's first fiscal
quarter commencing after the effective date of the Registration
Statement, which statements shall cover said 12-month periods.
6. REGISTRATION EXPENSES
(a) COMPANY EXPENSES. All expenses incident to the Company's
performance of or compliance with this Agreement, including without
limitation all registration and filing fees, fees and expenses of
compliance with securities or blue sky laws, printing expenses,
messenger and delivery expenses, fees and disbursements of custodians,
costs in connection with "road shows", and fees and disbursements of
counsel for the Company and all independent certified public
accountants, underwriters (excluding discounts and commissions) and
11
other Persons retained by the Company (all such expenses being herein
called "Registration Expenses"), shall be borne by the Company unless
otherwise specifically provided in this Agreement, except that the
Company shall, in any event, pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any
annual audit or quarterly review, the expense of any liability
insurance and the expenses and fees for listing the securities to be
registered on each securities exchange on which similar securities
issued by the Company are then listed or on the NASD automated
quotation system, if the Company's securities are then NASDAQ-listed.
(b) SELLING STOCKHOLDERS' COUNSEL. In connection with each
Demand Registration and each Piggyback Registration, the Company shall
reimburse the holders of Registrable Securities included in such
registration for the reasonable fees and disbursements of one counsel
chosen by the holders of a majority of the Registrable Securities
included in such registration.
(c) OTHER EXPENSES OF SELLING STOCKHOLDERS. To the extent
Registration Expenses are not required to be paid by the Company, each
holder of securities included in any registration hereunder shall pay
those Registration Expenses, including without limitation all
underwriting discounts and commissions, allocable to the registration
of such holder's securities so included, and any Registration Expenses
not so allocable shall be borne by all sellers of securities included
in such registration in proportion to the aggregate selling price of
the securities to be so registered.
7. INDEMNIFICATION
(a) INDEMNIFICATION BY COMPANY. The Company agrees to indemnify
and hold harmless, to the full extent permitted by law, each holder of
Registrable Securities, such holder's officers, directors, members and
partners and each Person who controls such holder (within the meaning
of the Securities Act) against all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation
and legal expenses) caused by or in any way relating to or arising out
of any untrue or alleged untrue statement of a material fact contained
in any Registration Statement, Prospectus or preliminary Prospectus or
any amendment thereof or supplement thereto or any omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder
expressly for use therein or by such holder's failure to deliver a
copy of the Registration Statement or Prospectus or any amendments or
supplements thereto after the Company has furnished such holder with a
sufficient number of copies of the same. In connection with an
underwritten offering, the Company shall indemnify such underwriters,
their officers and directors and each Person who controls such
underwriters (within the meaning of the Securities Act) to the same
12
extent as provided above with respect to the indemnification of the
holders of Registrable Securities. The payments required by this
Section 6(a) will be made periodically during the course of the
investigation or defense, as and when bills are received or expenses
incurred.
(b) INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. Each
holder of Registrable Securities participating in any Registration
Statement shall furnish to the Company in writing such information and
affidavits as the Company reasonably requests for use in connection
with such Registration Statement or any related Prospectus or
preliminary Prospectus and, to the extent permitted by law, shall
indemnify the Company, its directors and officers and each Person who
controls the Company (within the meaning of the Securities Act)
against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged untrue statement of material fact
contained in such Registration Statement, Prospectus or preliminary
Prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading,
but only to the extent that such untrue statement or omission is
contained in any information or affidavit so furnished in writing by
such holder; provided that the obligation to indemnify shall be
individual, not joint and several, for each holder and shall be
limited to the net amount of proceeds received by such holder from the
sale of Registrable Securities pursuant to such Registration
Statement.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled
to indemnification hereunder shall (i) give prompt written notice to
the indemnifying party of any claim with respect to which it seeks
indemnification (provided that the failure to give prompt notice shall
not impair any Person's right to indemnification hereunder to the
extent such failure has not materially prejudiced the indemnifying
party) and (ii) unless in such indemnified party's reasonable judgment
a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying
party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any
settlement made by the indemnified party without its consent (but such
consent shall not be unreasonably withheld). An indemnifying party
who is not entitled to, or elects not to, assume the defense of a
claim shall nevertheless pay the fees and expenses of counsel for the
indemnified party, provided that the indemnifying party shall not be
obligated to pay the fees and expenses of more than one counsel for
all indemnified parties with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest
may exist between such indemnified party and any other of such
indemnified parties with respect to such claim. No indemnifying party
shall, without the consent of the indemnified party, consent to the
entry of any judgment or enter into any settlement which cannot be
13
settled in all respects by the payment of money (and such money is so
paid by the indemnifying party pursuant to the terms of such
settlement) or which settlement does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such
claim or litigation.
(d) CONTRIBUTION. If the indemnification provided for in this
Section 7 from the indemnifying party is unavailable to an indemnified
party hereunder in respect of any losses, claims, damages, liabilities
or expenses to which such indemnified party would be otherwise
entitled under Section 7, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities or expenses in such proportion as
is appropriate to reflect the relative fault of the indemnifying party
and indemnified parties in connection with the actions which resulted
in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative fault of
such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact, has been made
by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above
shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation
or proceeding. In no event shall any holder of Registrable Securities
be required to contribute an amount greater than the dollar amount of
the proceeds received by such holder with respect to the sale of any
Registrable Securities.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 7(d) were determined by pro
rata allocation or by any other method of allocation which does not
take account of the equitable considerations referred to in the
immediately preceding paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The contribution
provided for in this Section 7(d) shall remain in full force and
effect regardless of any investigation made by or on behalf of any
indemnified party.
(e) SURVIVAL. The indemnification provided for under this
Agreement shall remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any
officer, director or controlling Person of such indemnified party and
shall survive the transfer of securities. The Company also agrees to
14
make such provisions, as are reasonably requested by any indemnified
party, for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
8. RULE 144
With a view to making available to the holders of Registrable
Securities the benefits of Rule 144 promulgated under the Securities
Act or any similar rule or regulation of the SEC that may at any time
permit such holders to sell securities of the Company to the public
without registration, the Company agrees to: (a) make and keep public
information available, as those terms are understood and defined in
Rule 144 under the Securities Act; (b) file with the SEC in a timely
manner all reports and other documents required to be filed by the
Company under the Securities Act and the Exchange Act (or, if the
Company is not required to file such reports, it will, upon the
request of the holders of a majority of the Registrable Securities
make publicly available other information as long as necessary to
permit sales pursuant to Rule 144 under the Securities Act); and (c)
furnish to the holders of Registrable Securities, promptly upon
request, (i) a written statement by the Company that it has complied
with the reporting requirements of the Securities Act and the Exchange
Act, as set forth in Rule 144 under the Securities Act, (ii) a copy of
the most recent annual or quarterly report of the Company and such
other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested to permit such
holders to sell Registrable Securities pursuant to Rule 144 without
registration.
9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Person may participate in any registration hereunder which is
underwritten unless such Person (a) agrees to sell such Person's
securities on the basis provided in any underwriting arrangements
approved by the Person or Persons entitled hereunder to approve such
arrangements; (b) completes and executes all customary questionnaires,
powers of attorney, customary indemnities, underwriting agreements and
other documents required under the terms of such underwriting
arrangements; provided that no holder of Registrable Securities
included in any underwritten registration shall be required to make
any representations or warranties to the Company or the underwriters
(other than representations and warranties regarding such holder, such
holder's ownership and title to the Registrable Securities, such
holder's intended method of distribution, and such other
representations and warranties are commonly given by selling
shareholders in underwritten offerings) or to undertake any
indemnification obligations to the Company or the underwriters with
respect thereto, except as otherwise provided in Section 7 hereof; (c)
provides all customary information reasonably requested by the Company
or underwriter in connection with such registration, including copies
of customary documents, instruments and agreements; and (d) complies
15
with all applicable federal and state securities laws in connection
with such registration.
10. FINANCIAL INFORMATION
So long as any shares of Preferred Stock remain outstanding, the
Company shall deliver the following to each holder of record of shares
of Preferred Stock:
(a) ANNUAL REPORTS. As soon as practicable and in no event
later than the earlier of (i) ninety (90) days after the close of each
fiscal year of the Company or (ii) the date on which the Financial
Statements referred to in this clause (a) are delivered to the
Company's board of directors, copies of the audited consolidated
Financial Statements of the Company and its subsidiaries, as audited
by the Company's independent registered public accountants, together
with copies of such accountant's opinions thereon and, to the extent
delivered, management letters delivered by such accountants in
connection with all such Financial Statements;
(b) QUARTERLY REPORTS. As soon as practicable and in no event
later than the earlier of (i) sixty (60) days after the last day of
each of the first three fiscal quarters of each fiscal year of the
Company or (ii) the date on which the Financial Statements referred to
in this clause (b) are delivered to the Company's board of directors,
a copy of the Financial Statements of the Company and its subsidiaries
(prepared on a consolidated basis) for such quarter and for the fiscal
year to date;
(c) MONTHLY REPORTS. As soon as possible, and in any event not
later than thirty (30) days after the end of each month, consolidated
balance sheets, statements of cash flow and statements of income of
the Company and its subsidiaries reflecting the most recently
completed month, setting forth, in each case, in comparative form
figures for the corresponding period in the previous fiscal year;
(d) BUDGETS. As soon as available, and in any event not later
than forty-five (45) days after the end of each fiscal year of the
Company, projected consolidated financial statements of the Company
and its subsidiaries for the next fiscal year, including budgets for
each month in such fiscal year; and
(e) REQUESTED INFORMATION. Such other instruments, agreements,
certificates, opinions, statements, documents and information relating
to the operations or condition (financial or otherwise) of the Company
and its subsidiaries as any holder of shares of Preferred Stock may
from time to time reasonably request.
11. BOARD REPRESENTATION
At any time from and after such time as all of the shares of
Preferred Stock owned by Stockholder have been converted into shares
16
of Common Stock, Stockholder shall have the right, at Stockholder's
election, to propose one candidate for nomination as a director of the
Company, and the board of directors of the Company (and any committee
of the board to which the responsibility for nominating directors may
be delegated in the future) shall nominate such candidate and use its
best efforts to cause such candidate to be elected as a director of
the Company. Stockholder shall have the right to direct the board of
directors to remove such director with or without cause. In the event
the candidate proposed by Stockholder ceases to be a director by
reason of resignation, removal, death or disability, Stockholder shall
have the right to propose his or her replacement, and the board of
directors of the Company use its best efforts to cause such
replacement to be elected as a director of the Company. Upon
expiration of the term of any director proposed by Stockholder,
Stockholder shall again have the right to propose a candidate for
nomination and election. Stockholder's rights pursuant to this
Section 10 shall terminate at such time as Stockholder owns less than
25% of the shares of Common Stock issuable upon conversion of the
Preferred Stock as of the date of the closing under the Merger
Agreement, as adjusted for any stock splits, combinations,
reclassifications or similar changes.
12. CONSULTATION AND EXAMINATION
For as long as Stockholder owns any shares of Preferred Stock or
Common Stock, (a) Stockholder shall be entitled to consult with and
advise management of the Company and its subsidiaries on significant
business issues, including the Company's and such subsidiaries'
management's proposed operating plans; (ii) the management of the
Company and each of such subsidiaries shall meet with Stockholder
regularly for such consultation and advice and to review progress in
achieving said plans; and (iii) the Company and each such subsidiary
shall permit Stockholder to examine the books and records of the
Company and such subsidiary and inspect its facilities at such times
as Stockholder shall determine. The foregoing shall not be deemed to
constitute an exhaustive list of the management services that
Stockholder may provide to the Company and its subsidiaries.
13. MISCELLANEOUS
(a) NO INCONSISTENT AGREEMENTS. The Company shall not hereafter
enter into any agreement with respect to its securities that is
inconsistent with or violates the rights granted to the holders of
Registrable Securities in this Agreement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company
shall not take any action, or permit any change to occur, with respect
to its securities which would adversely affect the ability of the
holders of Registrable Securities to include such Registrable
Securities in a registration undertaken pursuant to this Agreement or
which would adversely affect the marketability or valuation of such
17
Registrable Securities in any such registration (including, without
limitation, effecting a stock split or a combination of shares).
(c) REMEDIES. Each holder of Registrable Securities, in
addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company agrees
that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given unless the Company has obtained
the written consent of holders of at least a majority of the
Registrable Securities; provided that no such amendment or action
which adversely and disproportionately affects a holder of Registrable
Securities vis-a-vis the other holders of Registrable Securities shall
be effective against such holder of Registrable Securities without the
prior written consent of such holder.
(e) NOTICES. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery,
registered first- class mail, telex, telecopier, or air courier
guaranteeing overnight delivery:
(i) if to Stockholder, initially at 200 South Brentwood
Boulevard, Suite 200, St. Louis, Missouri 63105, Attention: James A.
Cooper, and thereafter at such other address, notice of which is given
in accordance with the provisions of this Section 13(e), with a copy
to Schiff Hardin LLP, 6600 Sears Tower, Chicago, Illinois 60606,
Attention: Roger R. Wilen, Esq.; and
(ii) if to the Company, initially at EarthShell Corporation,
3916 State Street, Santa Barbara, California 93110, attention Simon
K. Hodson, and thereafter at such other address, notice of which is
given in accordance with the provisions of this Section 13(e), with a
copy to, Gibson, Dunn & Crutcher, 2029 Century Park East, Los Angeles,
California 90067, Attention: Robert K. Montgomery, Esq.
All such notices and communications shall be deemed to have been
duly given at the time delivered by hand, if personally delivered;
five business days after being deposited in the mail, postage prepaid,
if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and on the next business day if timely delivered to an
air courier guaranteeing overnight delivery.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of
18
the parties, including without limitation and without the need for an
express assignment, subsequent holders of Registrable Securities.
(g) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and
all of which taken together shall constitute one and the same
agreement.
(h) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(i) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of
Delaware.
(j) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be
affected or impaired thereby.
(k) ENTIRE AGREEMENT. This Agreement is intended by the parties
as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein.
There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein with respect to the
registration rights granted by the Company hereunder. This Agreement
supersedes all prior agreements and understandings whether written or
oral and all contemporaneous oral agreements and understandings among
the parties with respect to such subject matter.
(l) ATTORNEYS' FEES. In any action or proceeding brought to
enforce any provision of this Agreement, the successful party shall be
entitled to recover reasonable attorneys' fees in addition to its
costs and expenses and any other available remedy.
19
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
EARTHSHELL CORPORATION
By: Simon K. Hodson
____________________________
Name: Simon K. Hodson
Title: CEO
By: Scott Houston
____________________________
Name: Scott Houston
Title: CFO
RENEWABLE PRODUCTS LLC
By: James A. Cooper
____________________________
Name: James A. Cooper
Title: VP
20
EXHIBIT 4
---------
EXHIBIT F
MR. ESSAM KHASHOGGI
c/o E. Khashoggi Industries LLC
3916 State Street, Suite 110
Santa Barbara, California 93105
June 17, 2005
ReNewable Products LLC
100 South Brentwood Boulevard, Suite 200
St. Louis, MO 63105
Attention: James A. Cooper
EarthShell Corporation
3916 State Street, Suite 110
Santa Barbara, CA 93105
Re: EarthShell Corporation ("EarthShell")
-------------------------------------
Gentlemen:
Reference is made to the Agreement and Plan of Merger dated as of
June 17, 2005 (the "Merger Agreement") among (i) EarthShell, (ii)
EarthShell Triangle, Inc., a newly-formed, wholly-owned subsidiary of
EarthShell ("Mergerco"), (iii) ReNewable Products, Inc. ("Target"), a
wholly-owned subsidiary of ReNewable Products LLC ("Stockholder"), and
(iv) Stockholder, pursuant to which EarthShell would acquire Target
through the merger of Mergerco with and into Target, and Stockholder
would receive, in exchange for all of the outstanding shares of
Target, an aggregate of 8,000,000 shares of a new series of EarthShell
preferred stock, designated Series C Convertible Preferred Stock. The
Series C Convertible Preferred Stock would be convertible into common
stock, par value $.01 per share, of EarthShell ("EarthShell Common
Stock") on a share-for-share basis (subject to certain adjustments).
In connection with the closing under the Merger Agreement, EarthShell
and Stockholder would enter into a Registration and Investor Rights
Agreement in substantially the form previously provided to the
undersigned.
I, together with members of my family and entities I own or
control (each of us, individually, a "Khashoggi Holder" and,
collectively, the "Khashoggi Holders") currently own collectively
approximately 6,526,838 shares of EarthShell Common Stock, as well as
certain other securities of EarthShell, and one or more of the
Khashoggi Holders are a party to various agreements with EarthShell
relating to such securities, including a Registration Rights Agreement
dated as of February 28, 1995, as amended. The purpose of this letter
is to set forth the agreements between us with respect to the possible
disposition of our shares of EarthShell Common Stock. For purposes of
this letter, any securities convertible into, or exchangeable or
exercisable for, shares of EarthShell Common Stock (including the
Series C Convertible Preferred Stock) shall be treated as if they were
the number of shares of EarthShell Common Stock into or for which they
are convertible, exchangeable or exercisable.
Stockholder agrees not to sell, distribute or otherwise dispose of
("Transfer") any shares of EarthShell Common Stock except (subject in
all cases provided in clauses (i)-(vii) below to compliance with
paragraph 4) (i) in a public offering registered under the Securities
Act of 1933, as amended (the "Securities Act"), (ii) in a sale
pursuant to Rule 144 under the Securities Act, (iii) to an affiliate
of the Khashoggi Holders or Stockholder, as the case may be, who
agrees in writing to be subject to the terms and conditions of this
letter applicable to the transferor, (iv) in a private sale or sales
involving in the aggregate fewer than 10% of the total number of
shares of EarthShell Common Stock owned by the Khashoggi Holders (as a
group) or Stockholder, as the case may be, as of the date of this
letter, (v) in connection with a pledge of shares to secure a bona
fide loan, (vi) upon the exercise of stock options or other rights
outstanding as of the date of this letter or (vii) with the consent of
the other party. The restrictions in this paragraph 1 shall remain in
effect from the date of this letter agreement until the earlier of (x)
termination of the Merger Agreement and (y) the second anniversary of
the closing under the Merger Agreement. For purposes of this
paragraph, "affiliate" shall have the meaning given such term in Rule
405 under the Securities Act.
2. "CUT-BACK" RIGHTS IN REGISTERED OFFERINGS. Notwithstanding
the language of any registration rights agreement, or any other
agreement between any Khashoggi Holder or Stockholder and EarthShell,
if the managing underwriter or underwriters of any proposed
underwritten offering in which any Khashoggi Holder and Stockholder
request to include shares of EarthShell Common Stock advise that the
number of shares sought to be included in the offering would exceed
the number of shares of EarthShell Common Stock that could be sold
without having an adverse effect on such offering, the number of
shares requested to be included by any such Khashoggi Holder and
Stockholder shall be reduced pro rata, based on the number of shares
of EarthShell Common Stock that each party has requested to be
included, regardless of whether either party demanded such
registration or the relationship of the number of shares requested to
be included by Stockholder to the number requested to be included by
any Khashoggi Holder.
3. HOLD-BACK AGREEMENT. Each Khashoggi Holder and Stockholder
agrees not to effect any public sale or distribution (including sales
pursuant to Rule 144 under the Securities Act) of EarthShell Common
Stock, during the seven days prior to and the subsequent 120-day
period beginning on the effective date of any registration statement
in which shares of EarthShell Common Stock offered by the other are
included (except sales or distributions made as part of such
registration), unless both the other and the underwriters managing the
offering otherwise agree.
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4. PRESERVATION OF NET OPERATING LOSS CARRYFORWARD. Prior to
making any Transfer of shares of EarthShell Common Stock, each
transferring Khashoggi Holder and Stockholder agrees to coordinate
with the other, EarthShell and their respective professional tax
advisors regarding the effect that such Transfer, together with all
past transactions and any future transactions that, in EarthShell's
reasonable judgment, are likely to occur ("Foreseeable Transactions")
involving EarthShell Common Stock, will have under Section 382 of the
Internal Revenue Code of 1986, as amended, with respect to any net
operating loss carryforward of EarthShell. If there is a material
risk that the proposed Transfer, together with all such past
transactions and Foreseeable Transactions, would result in the
disallowance of, or a material limitation on the availability of,
EarthShell's net operating loss carryforward, then each such Khashoggi
Holder and Stockholder agrees to reduce the number of shares of
EarthShell Common Stock to be Transferred (pro rata based on the
number of shares of EarthShell Common Stock proposed to be
Transferred, or on such other basis as such Khashoggi Holder and
Stockholder may agree) as reasonably necessary to avoid such risk.
(Shares of EarthShell Common Stock not Transferred because of a
reduction described in the preceding sentence are referred to as
"Delayed Transfer Shares.") EarthShell agrees to furnish accurate and
complete information to the Khashoggi Holders, Stockholder and their
respective professional tax advisors, as well as to EarthShell's own
professional tax advisors, to allow them to assess such risk.
5. DELAYED TRANSFER SHARES. In the event that a Khashoggi
Holder or Stockholder is required, pursuant to paragraph 4, to reduce
the number of shares of EarthShell Common Stock to be Transferred,
then EarthShell shall use commercially reasonable efforts not to
engage in any subsequent transaction involving EarthShell Common Stock
(other than a Foreseeable Transaction taken into account in
determining such reduction) that would have the effect of further
postponing the date on which the Delayed Transfer Shares may be
Transferred, until the Delayed Transfer Shares have been Transferred
or are no longer proposed to be Transferred.
6. MISCELLANEOUS.
(a) REMEDIES. Each Khashoggi Holder and Stockholder, in
addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performance of its rights under this letter. Each party agrees
that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of
this letter. Each of Stockholder, on the one hand, and the
Khashoggi Holders, on the other hand, shall indemnify and hold
harmless the other for any costs or damages (including reasonable
attorneys' fees) resulting from a breach of any of the terms of
this agreement by such party. Each Khashoggi Holder and
Stockholder shall be entitled to rely on any written advice or
information provided by EarthShell or its professional tax
F-3
advisors in determining whether a Transfer of EarthShell Common
Stock may be made pursuant to the terms of this letter.
(b) AMENDMENTS. This letter shall not be modified or
amended except by an instrument in writing signed by EarthShell,
Essam Khashoggi and Stockholder (or their successors or permitted
assigns).
(c) NOTICES. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand-
delivery, registered first-class mail, telex, telecopier, or air
courier guaranteeing overnight delivery to the parties at their
addresses at the top of this letter. All such notices and
communications shall be deemed to have been duly given when
received by the addressee.
(d) SUCCESSORS AND ASSIGNS. This letter shall inure to the
benefit of and be binding upon the successors and permitted
assigns of each of the parties and, in the case of the Khashoggi
Holders, each Khashoggi Holder. The undersigned shall cause each
other Khashoggi Holder under his control to abide by the terms of
this Agreement and shall be liable for any damages resulting from
any breach of this Agreement by such other Khashoggi Holders, and
Stockholder shall cause each affiliate to which shares of
EarthShell Common Stock or Series C Convertible Preferred Stock
may be transferred pursuant to clause (iii) of paragraph 1 to
abide by the terms of this Agreement and shall be liable for any
damages resulting from any breach of this Agreement by such
affiliate.
(e) COUNTERPARTS. This letter may be executed in any
number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute
one and the same agreement.
(f) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of
Delaware.
(g) ENTIRE AGREEMENT. This letter is intended by the
parties as a final expression of their agreement and intended to
be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject
matter contained herein. This letter supersedes all prior
agreements and understandings whether written or oral and all
contemporaneous oral agreements and understandings among the
parties with respect to such subject matter.
F-4
If you agree that this letter accurately reflects the agreement
between us, please so indicate by signing a copy of this letter and
returning it to my attention.
Sincerely,
ESSAM KHASHOGGI
/s/ Essam Khashoggi
___________________________
Essam Khashoggi
Agreed and accepted as of the 17th
day of June, 2005
RENEWABLE PRODUCTS LLC
By: James A. Cooper
__________________________
Name: James A. Cooper
Title: Vice President
EARTHSHELL CORPORATION
By: Scott Houston
__________________________
Name: Scott Houston
Title: CFO
By: __________________________
Name:
Title:
F-5
EXHIBIT 5
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JOINT FILING AGREEMENT
The undersigned hereby agree that statements on Schedules 13D and
Forms 3, 4 and 5 with respect to the shares of common stock of
EarthShell Corporation and any amendments thereto signed by each of
the undersigned shall be filed on behalf of each of the undersigned
pursuant to and in accordance with the provisions of Rule 13d-1(k)
promulgated under the Securities Exchange Act of 1934, as amended.
The undersigned hereby further agree that this Joint Filing Agreement
may be included as an exhibit to such statements or amendments. This
Joint Filing Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one and the same
instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE FOLLOWS.]
Signatures
After reasonable inquiry and to the best of each of the
undersigned's knowledge and belief, each of the undersigned certifies
that the information set forth in the statement is true, complete and
correct.
RENEWABLE PRODUCTS LLC
By its manager, TSCP Machinery & Processing
Group, LLC
By Thompson Street Capital Partners,
L.P.
By Thompson Street Capital GP LLC
By: /s/ James A. Cooper
------------------------
James A. Cooper
Managing Member
TSCP MACHINERY & PROCESSING GROUP, LLC
By Thompson Street Capital Partners, L.P.
By Thompson Street Capital GP LLC
By: /s/ James A. Cooper
-----------------------------
James A. Cooper
Managing Member
THOMPSON STREET CAPITAL PARTNERS, L.P.
By Thompson Street Capital GP LLC
By: /s/ James A. Cooper
----------------------------------
James A. Cooper
Managing Member
THOMPSON STREET CAPITAL GP LLC
By: /s/ James A. Cooper
---------------------------------------
James A. Cooper
Managing Member
/s/ James A. Cooper
---------------------------------------
JAMES A. COOPER, individually
/s/ Peter S. Finley
---------------------------------------
PETER S. FINLEY, individually