IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
December 30, 2005
U.S. Stock Transfer Corporation
0000 Xxxxxxx Xxx.
Glendale, CA 91204-2991
Attention: Xxxx Xxxxxxxx
RE: EARTHSHELL
Ladies and Gentlemen:
Reference is made to that certain Securities Purchase Agreement (the
"Securities Purchase Agreement") of even date herewith by and between
EarthShell, a Delaware corporation (the "Company"), and the Buyers set forth on
Schedule I attached thereto (collectively the "Buyers"). Pursuant to the
Securities Purchase Agreement, the Company shall sell to the Buyers, an the
Buyers shall purchase from the Company, convertible debentures (collectively,
the "Debentures") in the aggregate principal amount of Four Million Five Hundred
Thousand Dollars ($4,500,000), plus accrued interest, which are convertible into
shares of the Company's common stock, par value $.01 per share (the "Common
Stock"), at the Buyers discretion. The Company has also issued to the Buyers
warrants to purchase up to 1,025,000 shares of Common Stock, at the Buyer's
discretion (the "Warrant"). These instructions relate to the following stock or
proposed stock issuances or transfers:
1. Shares of Common Stock to be issued to the Buyers upon conversion of
the Debentures ("Conversion Shares") plus the shares of Common Stock
to be issued to the Buyers upon conversion of accrued interest and
liquidated damages into Common Stock (the "Interest Shares").
2. Up to 1,025,000 shares of Common Stock to be issued to the Buyers
upon exercise of the Warrant (the "Warrant Shares").
This letter shall serve as our irrevocable authorization and direction to
U.S. Stock Transfer Corporation (the "Transfer Agent") to do the following:
1. Conversion Shares and Warrant Shares.
a. Instructions Applicable to Transfer Agent. With respect to the
Conversion Shares, Warrant Shares and the Interest Shares, the
Transfer Agent shall issue the Conversion Shares, Warrant
Shares and the Interest Shares to the Buyers from time to time
upon delivery to the Transfer Agent of a properly completed
and duly executed Conversion Notice (the "Conversion Notice")
in the form attached as Exhibit A to the Debentures (a copy of
which is also attached hereto as Exhibit III), or a properly
completed and duly executed Exercise Notice (the "Exercise
Notice") in the form attached as Exhibit A to the Warrant (a
copy of which is attached hereto as Exhibit IV), delivered to
the Transfer Agent by Xxxxx Xxxxxxxx, Esq., as escrow agent
(the "Escrow Agent") on behalf of the Company. Upon receipt of
a Conversion Notice or an Exercise Notice, the Transfer Agent
shall within three (3) Trading Days thereafter (i) issue and
surrender to a common carrier for overnight delivery to the
address as specified in the Conversion Notice or the Exercise
Notice, a certificate, registered in the name of the Buyer or
its designees, for the number of shares of Common Stock to
which the Buyer shall be entitled as set forth in the
Conversion Notice or Exercise Notice or (ii) provided the
Transfer Agent is participating in The Depository Trust
Company ("DTC") Fast Automated Securities Transfer Program,
upon the request of the Buyers, credit such aggregate number
of shares of Common Stock to which the Buyers shall be
entitled to the Buyer's or their designees' balance account
with DTC through its Deposit Withdrawal At Custodian ("DWAC")
system provided the Buyer causes its bank or broker to
initiate the DWAC transaction. For purposes hereof "Trading
Day" shall mean any day on which the Nasdaq Market is open for
customary trading.
b. The Company hereby confirms to the Transfer Agent and the
Buyer that certificates representing the Conversion Shares and
the Warrant Shares shall not bear any legend restricting
transfer and should not be subject to any stop-transfer
restrictions and shall otherwise be freely transferable on the
books and records of the Company; provided that counsel to the
Company delivers (i) the Notice of Effectiveness set forth in
Exhibit I attached hereto and (ii) an opinion of counsel in
the form set forth in Exhibit II attached hereto, and that if
the Conversion Shares, Warrant Shares and the Interest Shares
are not registered for sale under the Securities Act of 1933,
as amended, then the certificates for the Conversion Shares,
Warrant Shares and Interest Shares shall bear the following
legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS,
OR AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO
THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT."
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c. In the event that counsel to the Company fails or refuses to
render an opinion as required to issue the Conversion Shares
or the Warrant Shares in accordance with the preceding
paragraph (either with or without restrictive legends, as
applicable), then the Company irrevocably and expressly
authorizes counsel to the Buyer to render such opinion. The
Transfer Agent shall accept and be entitled to rely on such
opinion for the purposes of issuing the Conversion Shares.
d. Instructions Applicable to Escrow Agent. Upon the Escrow
Agent's receipt of a properly completed Conversion Notice or
Exercise Notice and the Aggregate Exercise Price (as defined
in the Warrant), the Escrow Agent shall, within one (1)
Trading Day thereafter, send to the Transfer Agent the
Conversion Notice or Exercise Notice as the case may be, which
shall constitute an irrevocable instruction to the Transfer
Agent to process such Conversion Notice or Exercise Notice in
accordance with the terms of these instructions.
2. All Shares.
a. The Transfer Agent shall reserve for issuance to the Buyers a
minimum of 6,700,000 Conversion Shares and 1,025,000 Warrant
Shares. All such shares shall remain in reserve with the
Transfer Agent until the Buyers provides the Transfer Agent
instructions that the shares or any part of them shall be
taken out of reserve and shall no longer be subject to the
terms of these instructions.
b. The Company hereby irrevocably appoints the Xxxxx Xxxxxxxx,
Esq. as a duly authorized agent of the Company for the
purposes of authorizing the Transfer Agent to process
issuances and transfers specifically contemplated herein.
c. The Transfer Agent shall rely exclusively on the Conversion
Notice or the Exercise Notice and shall have no liability for
relying on such instructions. Any Conversion Notice or
Exercise Notice delivered hereunder shall constitute an
irrevocable instruction to the Transfer Agent to process such
notice or notices in accordance with the terms thereof. Such
notice or notices may be transmitted to the Transfer Agent by
facsimile or any commercially reasonable method.
d. The Company hereby confirms to the Transfer Agent and the
Buyers that no instructions other than as contemplated herein
will be given to Transfer Agent by the Company with respect to
the matters referenced herein. The Company hereby authorizes
the Transfer Agent, and the Transfer Agent shall be obligated,
to disregard any contrary instructions received by or on
behalf of the Company.
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Certain Notice Regarding the Escrow Agent. The Company and the Transfer
Agent hereby acknowledge that the Escrow Agent is general counsel to the Buyers,
a partner of the general partner of the Buyers and counsel to the Buyers in
connection with the transactions contemplated and referred herein. The Company
and the Transfer Agent agree that in the event of any dispute arising in
connection with this Agreement or otherwise in connection with any transaction
or agreement contemplated and referred herein, the Escrow Agent shall be
permitted to continue to represent the Buyers and neither the Company nor the
Transfer Agent will seek to disqualify such counsel.
The Company hereby agrees that it shall not replace the Transfer Agent as
the Company's transfer agent without the prior written consent of the Buyers,
which shall not be unreasonably withheld, provided that a suitable replacement
has agreed to serve as transfer agent and be bound by the terms and conditions
of these Irrevocable Transfer Agent Instructions.
The Transfer Agent shall provide the Buyer with twenty (20) days' advance
notice prior to resigning as the Company's transfer agent. Such notice shall be
in writing and shall be delivered in person or by overnight courier service, or
mailed by certified mail, return receipt requested and addressed to: Cornell
Capital Partners, 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, Xxx Xxxxxx 00000,
Attention: Xxxx X. Xxxxxx. The Company and the Transfer Agent hereby acknowledge
and confirm that complying with the terms of this Agreement does not and shall
not prohibit the Transfer Agent from satisfying any and all fiduciary
responsibilities and duties it may owe to the Company.
Any attempt by Transfer Agent to resign as the Company's transfer agent
hereunder shall not be effective until such time as the Company provides to the
Transfer Agent written notice that a suitable replacement has agreed to serve as
transfer agent and to be bound by the terms and conditions of these Irrevocable
Transfer Agent Instructions.
The Company and the Transfer Agent acknowledge that the Buyers is relying
on the representations and covenants made by the Company and the Transfer Agent
hereunder and are a material inducement to the Buyers purchasing convertible
debentures under the Securities Purchase Agreement. The Company and the Transfer
Agent further acknowledge that without such representations and covenants of the
Company and the Transfer Agent made hereunder, the Buyers would not purchase the
Debentures.
The Company specifically acknowledges and agrees that in the event of a
breach or threatened breach by a party hereto of any provision hereof, the
Buyers will be irreparably damaged and that damages at law would be an
inadequate remedy if these Irrevocable Transfer Agent Instructions were not
specifically enforced. Therefore, in the event of a breach or threatened breach
by a party hereto, including, without limitation, the attempted termination of
the agency relationship created by this instrument, the Buyers shall be
entitled, in addition to all other rights or remedies, to an injunction
restraining such breach, without being required to show any actual damage or to
post any bond or other security, and/or to a decree for specific performance of
the provisions of these Irrevocable Transfer Agent Instructions.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this letter agreement
regarding Irrevocable Transfer Agent Instructions to be duly executed and
delivered as of the date first written above.
COMPANY:
EARTHSHELL
By: /s/ Xxxxx Xxxxxxx
-----------------------------------
Name: Xxxxx Xxxxxxx
Title: Chief Executive Officer
/s/ Xxxxx Xxxxxxxx
--------------------------------------
Xxxxx Xxxxxxxx, Esq.
U.S. STOCK TRANSFER CORPORATION
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Vice President
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SCHEDULE I
SCHEDULE OF BUYERS
Address/Facsimile
Name Signature Number of Buyers
------------------- ----------------------------- -------------------
Cornell Capital By: Yorkville Advisors, LLC 000 Xxxxxx Xxxxxx -
Partners, LP Its: General Partner Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Facsimile: (000)000-0000
By:
--------------------
Name: Xxxx Xxxxxx
Its: Portfolio Manager
SCHEDULE I-1
EXHIBIT I
TO IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
_________, 2005
_________
Attention:
RE: EARTHSHELL
Ladies and Gentlemen:
We are counsel to EarthShell, (the "Company"), and have represented the
Company in connection with that certain Securities Purchase Agreement, dated as
of December __, 2005 (the "Securities Purchase Agreement"), entered into by and
among the Company and the Buyers set forth on Schedule I attached thereto
(collectively the "Buyers") pursuant to which the Company has agreed to sell to
the Buyers up to $4,500,000 of secured convertible debentures, which shall be
convertible into shares (the "Conversion Shares") of the Company's common stock,
par value $.01 per share (the "Common Stock"), in accordance with the terms of
the Securities Purchase Agreement. Pursuant to the Securities Purchase
Agreement, the Company also has entered into a Registration Rights Agreement,
dated as of December ___, 2005, with the Buyers (the "Investor Registration
Rights Agreement") pursuant to which the Company agreed, among other things, to
register the Conversion Shares under the Securities Act of 1933, as amended (the
"1933 Act"). In connection with the Company's obligations under the Securities
Purchase Agreement and the Registration Rights Agreement, on _______, 2005, the
Company filed a Registration Statement (File No. ___-_________) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the sale of the Conversion Shares.
In connection with the foregoing, we advise the Transfer Agent that a
member of the SEC's staff has advised us by telephone that the SEC has entered
an order declaring the Registration Statement effective under the 1933 Act at
____ P.M. on __________, 2005 and we have no knowledge, after telephonic inquiry
of a member of the SEC's staff, that any stop order suspending its effectiveness
has been issued or that any proceedings for that purpose are pending before, or
threatened by, the SEC and the Conversion Shares are available for sale under
the 1933 Act pursuant to the Registration Statement.
EXHIBIT I-1
The Buyers has confirmed it shall comply with all securities laws and
regulations applicable to it including applicable prospectus delivery
requirements upon sale of the Conversion Shares.
Very truly yours,
By:
---------------------------------
EXHIBIT I-2
EXHIBIT II
TO IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FORM OF OPINION
________________ 2005
VIA FACSIMILE AND REGULAR MAIL
_________
Attention:
RE: EARTHSHELL
Ladies and Gentlemen:
We have acted as special counsel to EarthShell (the "Company"), in
connection with the registration of ___________shares (the "Shares") of its
common stock with the Securities and Exchange Commission (the "SEC"). We have
not acted as your counsel. This opinion is given at the request and with the
consent of the Company.
In rendering this opinion we have relied on the accuracy of the Company's
Registration Statement on Form SB-2, as amended (the "Registration Statement"),
filed by the Company with the SEC on _________ ___, 2005. The Company filed the
Registration Statement on behalf of certain selling stockholders (the "Selling
Stockholders"). This opinion relates solely to the Selling Shareholders listed
on Exhibit "A" hereto and number of Shares set forth opposite such Selling
Stockholders' names. The SEC declared the Registration Statement effective on
__________ ___, 2005.
We understand that the Selling Stockholders acquired the Shares in a
private offering exempt from registration under the Securities Act of 1933, as
amended. Information regarding the Shares to be sold by the Selling Shareholders
is contained under the heading "Selling Stockholders" in the Registration
Statement, which information is incorporated herein by reference. This opinion
does not relate to the issuance of the Shares to the Selling Stockholders. The
opinions set forth herein relate solely to the sale or transfer by the Selling
Stockholders pursuant to the Registration Statement under the Federal laws of
the United States of America. We do not express any opinion concerning any law
of any state or other jurisdiction.
In rendering this opinion we have relied upon the accuracy of the
foregoing statements.
EXHIBIT II-1
Based on the foregoing, it is our opinion that the Shares have been
registered with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, and that ________ may remove the restrictive legends
contained on the Shares. This opinion relates solely to the number of Shares set
forth opposite the Selling Stockholders listed on Exhibit "A" hereto.
This opinion is furnished to Transfer Agent specifically in connection
with the sale or transfer of the Shares, and solely for your information and
benefit. This letter may not be relied upon by Transfer Agent in any other
connection, and it may not be relied upon by any other person or entity for any
purpose without our prior written consent. This opinion may not be assigned,
quoted or used without our prior written consent. The opinions set forth herein
are rendered as of the date hereof and we will not supplement this opinion with
respect to changes in the law or factual matters subsequent to the date hereof.
Very truly yours,
By:
---------------------------------
EXHIBIT II-2
EXHIBIT III
TO IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FORM OF CONVERSION NOTICE
(To be executed by the Holder in order to convert the Debenture)
TO:
The undersigned hereby irrevocably elects to convert $______ of the
principal amount of the above Debenture into Shares of Common Stock of
EarthShell Corporation, according to the conditions stated therein, as of the
Conversion Date written below.
Conversion Date:
------------------------------------------------
Applicable Conversion Price:
------------------------------------------------
Signature:
------------------------------------------------
Name:
------------------------------------------------
Address:
------------------------------------------------
Amount to be converted: $
------------------------------------------------
Amount of Debenture
unconverted: $
------------------------------------------------
Conversion Price per share: $
------------------------------------------------
Number of shares of Common
Stock to be issued:
------------------------------------------------
Please issue the shares of
Common Stock in the
following name and to the
following address:
------------------------------------------------
Issue to:
------------------------------------------------
Authorized Signature:
------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
Phone Number:
------------------------------------------------
Broker DTC Participant Code:
------------------------------------------------
Account Number:
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EXHIBIT III-1
EXHIBIT IV
TO IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FORM OF EXERCISE NOTICE
EARTHSHELL CORPORATION
The undersigned holder hereby exercises the right to purchase
______________ of the shares of Common Stock ("Warrant Shares") of EarthShell
Corporation, a Delaware corporation (the "Company"), evidenced by the attached
Warrant (the "Warrant"). Capitalized terms used herein and not otherwise defined
shall have the respective meanings set forth in the Warrant.
Specify Method of exercise by check mark:
1. ___ Cash Exercise
(a) Payment of Warrant Exercise Price. The holder shall pay the
Aggregate Exercise Price of $______________ to the Company in
accordance with the terms of the Warrant.
(b) Delivery of Warrant Shares. The Company shall deliver to the
holder _________ Warrant Shares in accordance with the terms of the
Warrant.
2. ___ Cashless Exercise
(a) Payment of Warrant Exercise Price. In lieu of making payment
of the Aggregate Exercise Price, the holder elects to receive
upon such exercise the Net Number of shares of Common Stock
determined in accordance with the terms of the Warrant.
(b) Delivery of Warrant Shares. The Company shall deliver to the
holder _________ Warrant Shares in accordance with the terms
of the Warrant.
Date: _______________ __, ______
Name of Registered Holder
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
EXHIBIT IV
EXHIBIT A
(LIST OF SELLING STOCKHOLDERS)
Name: No. of Shares:
---------------------------------------------------- --------------------------
EXHIBIT A
