PROMISSORY NOTE
---------------
May 26, 2005
Jersey City, New Jersey $1,350,000
FOR VALUE RECEIVED, the undersigned, EARTHSHELL CORPORATION, a Delaware
corporation (the "Company"), promises to pay CORNELL CAPITAL PARTNERS, LP (the
"Lender") at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ or
other address as the Lender shall specify in writing, the principal sum of One
Million Three Hundred Fifty Thousand Dollars ($1,350,000) and interest at the
annual rate of twelve percent (12%) on the unpaid balance pursuant to the
following terms:
1. Principal and Interest. For value received, the Company hereby promises to
pay to the order of the Lender on the one year anniversary of the date hereof in
lawful money of the United States of America and in immediately available funds
the principal sum of One Million Three Hundred Fifty Thousand Dollars
($1,350,000), together with interest on the unpaid principal of this note at the
rate of twelve percent (12%) per year (computed on the basis of a 365-day year
and the actual days elapsed) from the three month anniversary of this Promissory
Note (the "Note") until paid.
2. Monthly Principal and Interest Payments. The Company shall make monthly
payments of principal and interest in accordance with the payment schedule
attached hereto as Exhibit A (the "Payment Schedule"). Each payment shall be due
and payable as of the Payment Due Date set forth on the Payment Schedule and all
payment amounts shall be first applied to interest and the balance to principal.
There shall be no prepayment fee or penalty.
3. Right of Prepayment. Notwithstanding the payments pursuant to Section 2, the
Company at its option shall have the right to prepay any additional amounts of
outstanding principal of the Note.
4. Waiver and Consent. To the fullest extent permitted by law and except as
otherwise provided herein, the Company waives demand, presentment, protest,
notice of dishonor, suit against or joinder of any other person, and all other
requirements necessary to charge or hold the Company liable with respect to this
Note.
5. Costs, Indemnities and Expenses. In the event of default as described herein,
the Company agrees to pay all reasonable fees and costs incurred by the Lender
in collecting or securing or attempting to collect or secure this Note,
including reasonable attorneys' fees and expenses, whether or not involving
litigation, collecting upon any judgments and/or appellate or bankruptcy
proceedings. The Company agrees to pay any documentary stamp taxes, intangible
taxes or other taxes which may now or hereafter apply to this Note or any
payment made in respect of this Note, and the Company agrees to indemnify and
hold the Lender harmless from and against any liability, costs, attorneys' fees,
penalties, interest or expenses relating to any such taxes, as and when the same
may be incurred.
6. Secured Nature of the Note. This Note is secured by the Security Agreement
dated March 23, 2005 between the Company and the Lender (the "Security
Agreement"), the Amended and Restated Pledge Agreement of even date hereof among
the Company, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, the Lender, and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq. (the
"Composite Pledge Agreement"), and the Pledge and Escrow Agreement among the
Company, the Lender, and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq. (the "EarthShell Pledge
Agreement").
7. Event of Default. An "Event of Default" shall be deemed to have occurred upon
the occurrence of any of the following: (i) the Company should fail for any
reason or for no reason to make any payment of the principal, interest, costs,
indemnities, or expenses pursuant to this Note within ten (10) days of the date
due as prescribed herein; (ii) failure by the Company for ten (10) days after
notice to it to satisfy any of its other obligations or requirements or comply
with any of its other agreements under this Note; (iii) any proceedings under
any bankruptcy laws of the United States of America or under any insolvency, not
disclosed to the Lender, reorganization, receivership, readjustment of debt,
dissolution, liquidation or any similar law or statute of any jurisdiction now
or hereinafter in effect (whether in law or at equity) is filed by or against
the Company or for all or any part of its property; or (iv) a breach by the
Company of any of its obligations, or a default or an event of default under the
Security Agreement, the EarthShell Pledge Agreement, the Composite Pledge
Agreement, or any other Transaction Document (as defined in the Security
Agreement), or any other contract or agreement between the Company and the
Lender which is not cured by the Company by any applicable cure period contained
therein. Upon an Event of Default (as defined above), the entire principal
balance and accrued interest outstanding under this Note, and all other
obligations of the Company under this Note, shall be immediately due and payable
without any action on the part of the Lender, interest shall accrue on the
unpaid principal balance at twenty four percent (24%) per year until collected
(whether before or after the entry of a court order) or the highest rate
permitted by applicable law, if lower and the Lender shall be entitled to seek
and institute any and all remedies available to it.
8. Maximum Interest Rate. In no event shall any agreed to or actual interest
charged, reserved or taken by the Lender as consideration for this Note exceed
the limits imposed by New Jersey law. In the event that the interest provisions
of this Note shall result at any time or for any reason in an effective rate of
interest that exceeds the maximum interest rate permitted by applicable law,
then without further agreement or notice the obligation to be fulfilled shall be
automatically reduced to such limit and all sums received by the Lender in
excess of those lawfully collectible as interest shall be applied against the
principal of this Note immediately upon the Lender's receipt thereof, with the
same force and effect as though the Company had specifically designated such
extra sums to be so applied to principal and the Lender had agreed to accept
such extra payment(s) as a premium-free prepayment or prepayments.
9. Issuance of Capital Stock. So long as any portion of this Note is
outstanding, the Company shall not, without the prior written consent of the
Lender, (i) issue or sell shares of common stock or preferred stock without
consideration or for a consideration per share less than the bid price of the
common stock determined immediately prior to its issuance, (ii) issue any
warrant, option, right, contract, call, or other security instrument granting
the holder thereof, the right to acquire common stock without consideration or
for a consideration less than such common stock's bid price value determined
immediately prior to it's issuance, (iii) enter into any security instrument
granting the holder a security interest in any and all assets of the Company
except for purchase money indebtedness or other indebtedness not to exceed
$50,000 without the prior written consent of the Lender which shall not be
unreasonably withheld, or (iv) file any registration statement on Form S-8.
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10. Cancellation of Note. Upon the repayment by the Company of all of its
obligations hereunder to the Lender, including, without limitation, the
principal amount of this Note, plus accrued but unpaid interest, the
indebtedness evidenced hereby shall be deemed canceled and paid in full. Except
as otherwise required by law or by the provisions of this Note, payments
received by the Lender hereunder shall be applied first against expenses and
indemnities, next against interest accrued on this Note, and next in reduction
of the outstanding principal balance of this Note.
11. Severability. If any provision of this Note is, for any reason, invalid or
unenforceable, the remaining provisions of this Note will nevertheless be valid
and enforceable and will remain in full force and effect. Any provision of this
Note that is held invalid or unenforceable by a court of competent jurisdiction
will be deemed modified to the extent necessary to make it valid and enforceable
and as so modified will remain in full force and effect.
12. Amendment and Waiver. This Note may be amended, or any provision of this
Note may be waived, provided that any such amendment or waiver will be binding
on a party hereto only if such amendment or waiver is set forth in a writing
executed by the parties hereto. The waiver by any such party hereto of a breach
of any provision of this Note shall not operate or be construed as a waiver of
any other breach.
13. Successors. Except as otherwise provided herein, this Note shall bind and
inure to the benefit of and be enforceable by the parties hereto and their
permitted successors and assigns.
14. Assignment. This Note shall not be directly or indirectly assignable or
delegable by the Company. The Lender may assign this Note as long as such
assignment complies with the Securities Act of 1933, as amended.
15. No Strict Construction. The language used in this Note will be deemed to be
the language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction will be applied against any party.
16. Further Assurances. Each party hereto will execute all documents and take
such other actions as the other party may reasonably request in order to
consummate the transactions provided for herein and to accomplish the purposes
of this Note.
17. Notices, Consents, etc. Any notices, consents, waivers or other
communications required or permitted to be given under the terms hereof must be
in writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) trading day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
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If to Company: EarthShell Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Chief Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a Copy to: ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Lender: Cornell Capital Partners, LP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) trading days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service, shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
18. Remedies, Other Obligations, Breaches and Injunctive Relief. The Lender's
remedies provided in this Note shall be cumulative and in addition to all other
remedies available to the Lender under this Note, at law or in equity (including
a decree of specific performance and/or other injunctive relief), no remedy of
the Lender contained herein shall be deemed a waiver of compliance with the
provisions giving rise to such remedy and nothing herein shall limit the
Lender's right to pursue actual damages for any failure by the Company to comply
with the terms of this Note. No remedy conferred under this Note upon the Lender
is intended to be exclusive of any other remedy available to the Lender,
pursuant to the terms of this Note or otherwise. No single or partial exercise
by the Lender of any right, power or remedy hereunder shall preclude any other
or further exercise thereof. The failure of the Lender to exercise any right or
remedy under this Note or otherwise, or delay in exercising such right or
remedy, shall not operate as a waiver thereof. Every right and remedy of the
Lender under any document executed in connection with this transaction may be
exercised from time to time and as often as may be deemed expedient by the
Lender. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Lender and that the remedy at law
for any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the Lender shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach, and specific performance without the necessity of showing economic loss
and without any bond or other security being required.
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19. Governing Law; Jurisdiction. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New Jersey, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of New
Jersey or any other jurisdictions) that would cause the application of the laws
of any jurisdictions other than the State of New Jersey. Each party hereby
irrevocably submits to the exclusive jurisdiction of the Superior Court of the
State of New Jersey sitting in ▇▇▇▇▇▇ County, New Jersey and the United States
Federal District Court for the District of New Jersey sitting in Newark, New
Jersey, for the adjudication of any dispute hereunder or in connection herewith
or therewith, or with any transaction contemplated hereby or discussed herein,
and hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
20. No Inconsistent Agreements. None of the parties hereto will hereafter enter
into any agreement, which is inconsistent with the rights granted to the parties
in this Note.
21. Third Parties. Nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person or entity, other than the parties
to this Note and their respective permitted successor and assigns, any rights or
remedies under or by reason of this Note.
22. Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR THE LENDER TO LOAN TO THE
COMPANY THE MONIES HEREUNDER, THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND
ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION.
23. Entire Agreement. This Note (including any recitals hereto) set forth the
entire understanding of the parties with respect to the subject matter hereof,
and shall not be modified or affected by any offer, proposal, statement or
representation, oral or written, made by or for any party in connection with the
negotiation of the terms hereof, and may be modified only by instruments signed
by all of the parties hereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Promissory Note is executed by the undersigned as
of the date hereof.
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Its: Portfolio Manager
EARTHSHELL CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Financial Officer
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SCHEDULE A
PAYMENT SCHEDULE
----------------
Principal $1,350,000
Interest 12%
Closing Date: May 26, 2005
---------------------------------------------------------------------------------------------------------------------------
Payment
Payment Calculation Payment Due Outstanding
Date Date Interest Principal Total Payment Due Principal
---------------------------------------------------------------------------------------------------------------------------
1 6/26/2005 6/23/2005 $0.00 $0.00 $0.00 $1,350,000
2 7/26/2005 7/23/2005 $0.00 $0.00 $0.00 $1,350,000
3 8/26/2005 8/23/2005 $0.00 $0.00 $0.00 $1,350,000
4 9/26/2005 9/23/2005 $13,500.00 $150,000.00 $163,500.00 $1,200,000
5 10/26/2005 10/23/2005 $12,000.00 $150,000.00 $162,000.00 $1,050,000
6 11/26/2005 11/23/2005 $10,500.00 $150,000.00 $160,500.00 $900,000
7 12/26/2005 12/23/2005 $9,000.00 $150,000.00 $159,000.00 $750,000
8 1/26/2006 1/23/2006 $7,500.00 $150,000.00 $157,500.00 $600,000
9 2/26/2006 2/23/2006 $6,000.00 $150,000.00 $156,000.00 $450,000
10 3/26/2006 3/23/2006 $4,500.00 $150,000.00 $154,500.00 $300,000
11 4/26/2006 4/23/2006 $3,000.00 $150,000.00 $153,000.00 $150,000
12 5/26/2006 5/23/2006 $1,500.00 $150,000.00 $151,500.00 $0
---------------------------------------------------------------------------------------------------------------------------
$1,350,000.00
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