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Exhibit 10.1
EXECUTION VERSION
NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT (this " Agreement ") dated
as of January 19, 2007 by and among LC Capital Master
Fund, Ltd., a Cayman Islands exempt company, (the "
Purchaser "), Castlerigg Master Investments Ltd., a British
Virgin Islands company (the " Seller "), and DayStar
Technologies, Inc., a Delaware corporation (the "
Issuer ").
WHEREAS, the Seller and the Issuer entered into the Securities
Purchase Agreement dated as of May 25, 2006 (the "
Securities Purchase Agreement "), pursuant to which the
Seller purchased, upon the terms and conditions thereto (i) a
senior convertible note in the original principal amount of
$15,000,000 (the " Note "), which may be converted into
shares of common stock, par value $0.01 per share, of the Issuer
(the " Common Stock ") pursuant to the terms of the
Note (as converted, collectively, the " Conversion
Shares ") and (ii) Class A Warrants and Class B Warrants
(the " Class B Warrants ", and together with the
Class Warrants, the " Warrants "), to acquire that
number of shares of Common Stock (as exercised, collectively,
the " Warrant Shares ") as set forth in the
Warrants;
WHEREAS, in accordance with Section 15(e) of the Note, the
Issuer, the Seller and KeyBank National Association (the "
Escrow Agent ") entered into the Escrow Agreement dated as
of May 25, 2006 (the " Escrow Agreement "),
pursuant to which as of the date hereof $2,575,061.70 is deposited
in accordance with the terms thereof (the " Escrowed
Funds ");
WHEREAS, in connection with and as an inducement to execute and
deliver the Securities Purchase Agreement, the Issuer agreed to
provide certain registration rights under the Securities Act
of 1933, as amended, and the rules and regulations thereunder,
or any similar successor statute (collectively, the " 1933
Act "), and applicable state securities laws, pursuant to the
Registration Rights Agreement dated as of May 25, 2006
between the Issuer and the Seller (the " Registration
Rights Agreement ");
WHEREAS, simultaneously on the Closing Date and as an inducement
to execute and deliver this Agreement, the Issuer (i) is
entering into a Securities Purchase Agreement with the investors
listed on Exhibit A thereto (collectively, the "
Co-Investors "), dated the date hereof (the "
Co-Investment Agreement "), pursuant to which, among other
things, the Co-Investors will purchase, upon the terms and
conditions set forth therein, 2,500,000 shares of Common
Stock, (ii) is entering into the First Amendment to Securities
Purchase Agreement with the Seller dated the date hereof
(the " First Amendment "), pursuant to which the
parties thereto will agree to, among other things, amend and waive
certain provisions of the Securities Purchase Agreement,
(iii) is entering into the Note Terms Agreement with the
Purchaser dated the date hereof (the " Note Terms
Agreement "), pursuant to which the Issuer will exchange the
note issued to the Purchaser
pursuant to Section 19(d) of the Note for
such number of shares of Common Stock in accordance with the terms
and subject to the conditions of the Note Terms Agreement (as
converted, collectively, the " Purchaser Conversion
Shares "), (iv) has agreed to provide certain registration
rights under the 1933 Act and applicable state securities laws
to the Purchaser to cover the resale of the Purchaser Conversion
Shares pursuant to the Registration Rights Agreement dated the date
hereof between the Issuer and the Purchaser (the " 2007
Registration Rights Agreement "; for the avoidance of doubt, it
being understood that the Warrant Shares issuable upon exercise of
the Class B Warrant shall be covered by the Registration Rights
Agreement); (v) is entering into a Mutual Release with the
Seller, in the form attached hereto as Exhibit C ,
pursuant to which the Issuer and the Seller will release each other
from certain claims (the " Mutual Release ");
(vi) is issuing to the Seller (A) a new Class A
Warrant, in the same form as the existing Class A Warrant,
with an exercise price equal to the exercise price as of the date
hereof in the existing Class A Warrant, initially exercisable
for 317,394 shares of Common Stock (the " New
Class A Warrant ") and (B) 825,181 registered, freely
tradable shares of Common Stock (the " Additional Stock
"), as set forth in Schedule 1 attached hereto; and
(vii) has agreed to provide certain registration rights under
the 1933 Act and applicable state securities laws to the
Seller to cover the resale of the shares of Common Stock issued or
issuable upon exercise of the New Class A Warrant pursuant to
the Registration Rights Agreement dated the date hereof between the
Issuer and the Seller (the " Warrant Shares Registration
Rights Agreement ");
WHEREAS, pursuant to the terms and subject to the conditions of
this Agreement, the Purchaser wishes to purchase from the Seller,
and the Seller wishes to transfer, assign and sell to the
Purchaser, the Assigned Interest (as defined below);
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Purchase and Sale; Closing; Issuer Covenants .
1.1 Purchase and Sale .
(a) The Seller agrees to sell, transfer, assign and convey to
the Purchaser, and the Purchaser agrees to purchase from the
Seller, all of the right, title and interest of the Seller in and
to the Assigned Interest at the Closing on the terms and subject to
the conditions set forth in this Agreement.
(b) The Purchaser assumes no obligations other than the Assumed
Obligations. Effective as of the Closing, the Purchaser hereby
assumes the Assumed Obligations.
(c) For the purposes of this Section, the following terms have
the following meanings:
(i) " Assigned Interest " shall mean the
Note and the Class B Warrant, any and all rights, claims and
causes of action of the Seller (and their successors and assigns)
against the Issuer or any of its affiliates (collectively,
the " Issuer Parties ") and any other person that
directly arise under, from, in, to or in connection with the Note
or Class B Warrant and, to the extent the Transaction
Documents relate thereto, the Transaction Documents, in each case
to the extent permitted to be assigned under applicable law,
including, without limitation, (A) all rights as a Buyer under
the Securities Purchase Agreement to the extent related to the
Note, the Conversion Shares, the Interest Shares (as defined in the
Securities Purchase Agreement, the " Interest Shares ")
or the Warrant Shares (solely with respect to the exercise of the
Class B Warrant) issued or to be issued after the Closing Date
and (B) all rights as an Investor (as defined in the
Registration Rights Agreement) to the extent related to the
Registrable Securities (as defined in the Registration Rights
Agreement) issued or issuable after the Closing Date with respect
to the Note or the Class B Warrant. For the avoidance of
doubt, " Assigned Interest " shall not include the
(i) Class A Warrants, Warrant Shares issued upon exercise of
the Class A Warrants or any other cash, securities or other
property issued or otherwise paid to the Seller solely in respect
of the Class A Warrants or the New Class A Warrant, or
(ii) Interest Shares, any cash interest payments, any payments
of Installment Amounts (in cash or shares) and any other cash,
securities or other property paid to the Seller solely in respect
of the Note, in the case of clause (ii), issued or otherwise
paid prior to the Closing Date.
(ii) " Assumed Obligations " shall mean all obligations
and liabilities of the Seller or otherwise as a holder of the Note
or Class B Warrant with respect to, or in connection with, the
Assigned Interest resulting from facts, events or circumstances
arising or occurring on or after the Closing Date and any
obligations for a breach or other violation of its representations,
warranties or covenants hereunder.
(iii) " Transaction Documents " shall mean the Note, the
Securities Purchase Agreement, the Registration Rights Agreement,
the Escrow Agreement and all other documents and agreements under
which the Assigned Interest or any part thereof has been created
and all material documents and agreements relating thereto, and all
amendments, waivers and consents thereto.
(d) From and after the Closing Date, other than pursuant to the
Escrow Letter, the Seller shall not assert any right or take any
action with respect to the Escrow Agreement.
1.2 Purchase Price; Deliveries on the Closing Date .
(a) Subject to the conditions set forth in this Agreement, on
the Closing Date, the Purchaser will pay the purchase price for the
Assigned Interests, which purchase price shall equal $7,564,267
(the " Purchase Price "), by wire transfer of
immediately available U.S. funds in accordance with the
Seller’s written wire instructions.
(b) Simultaneously, on the Closing
Date:
(i) in furtherance of the foregoing, the Sellers will, upon such
receipt of the Purchase Price, (A) without the necessity of
any further action, assign and transfer to the Purchaser all of its
right, title and interest in and to the Assigned Interest,
(B) deliver to the Purchaser the Note, duly assigned and
endorsed for transfer to the Purchaser in accordance with
Section 19 of the Note and (C) surrender the Class B
Warrant to the Issuer in accordance with Section 7(a) of the
Class B Warrant;
(ii) The Issuer will register the transfer of the Note and
Class B Warrant by the Seller to the Purchaser pursuant to
Section 5(a) of the Securities Purchase Agreement and the
Issuer shall issue (A) a new note registered in the name of
the Purchaser pursuant to Section 19(d) of the Note and
(B) a new Class B Warrant in the name of the Purchaser
pursuant to Sections 7(a) and (d) of the Class B
Warrant;
(iii) the Seller and the Issuer shall have executed (A) a
joint instruction letter addressed to the Escrow Agent in the form
attached hereto as Exhibit A (the " Escrow
Letter "), pursuant to which such parties shall instruct the
Escrow Agent to disburse the Escrow Fund as provided for in the
Escrow Letter and (B) a request for the consent to the
assignment of the Escrow Agreement to the Purchaser in the form
attached hereto as Exhibit B ;
(iv) the Issuer and the Co-Investors shall have executed the
Co-Investment Agreement;
(v) the Seller and the Issuer shall have executed the First
Amendment;
(vi) the Purchaser and the Issuer shall have executed the Note
Terms Agreement;
(vii) the Issuer and the Purchaser shall have executed
2007 Registration Rights Agreement;
(viii) the Issuer and the Seller shall have executed and
delivered the Mutual Release;
(ix) the Issuer and the Seller shall have executed and delivered
the Warrant Shares Registration Rights Agreement;
(x) the Issuer shall have executed and delivered to the Seller
stock certificates representing the Additional Stock registered in
the name of the Seller (without any Securities Act or other legends
thereon); and
(xi) the Issuer shall have paid to the Seller all
of the Seller’s costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby and
the negotiations in connection herewith and past negotiations
between the Seller and the Issuer.
1.3 Closing . The closing (the " Closing ") of the
transactions contemplated by this Agreement shall be consummated on
January 19, 2007, or such later date as the parties
hereto shall mutually agree (the " Closing Date "). The
Closing shall take place at 10:00 a.m. on the Closing Date at
the offices of Milbank, Tweed, Hadley & M
C Cloy LLP, 1 Chase Manhattan Plaza, New York, NY
10005.
2. Representations and Warranties of the Seller . The
Seller hereby represents and warrants to the Purchaser as
follows:
2.1 Ownership of the Assigned Interests, etc. The Seller
will have at the Closing good and marketable title to the Note and
has good and valid title to the balance of the Assigned Interests,
free and clear of any liens, claims, security interests, mortgages,
encumbrances, pledges, equities and charges of any kind and will
have transferred to the Purchaser, upon the consummation of the
transactions contemplated hereby, and the Purchaser will have
acquired, good and valid title to the Note and to the balance of
the Assigned Interests, free and clear of all liens, claims and
encumbrances. The Seller is the sole owner, beneficially and of
record, of the Note and the Seller has owned the Note since
issuance on May 25, 2006.
2.2 Organization; Authorization, etc . The Seller is duly
organized, validly existing and in good standing under the laws of
its jurisdiction of organization and has full organizational power
and authority to execute and deliver this Agreement and to perform
its obligations hereunder and to consummate the transactions
contemplated hereby including without limitation to own, hold, sell
and transfer (pursuant to this Agreement) the Note and the other
Assigned Interests. The Seller has full power and authority to
execute and deliver this Agreement and to carry out the
transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Seller. This Agreement constitutes a
valid and binding agreement of the Seller, assuming the due
execution of the Agreement by the Purchaser and the Issuer,
enforceable against the Seller in accordance with its terms, except
that (i) such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors’ rights generally
and (ii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any
proceeding therefor may be brought.
2.3 No Conflict . The execution and delivery of this
Agreement by the Seller and the consummation by the Seller of the
transactions contemplated hereby will not (i) violate any law
applicable to the Seller or (ii) conflict with, violate or
constitute a breach or default under any material agreements as to
which Seller is a party.
2.4 No Consents . Except for any consent
or waiver of the Issuer under the Transaction Documents or
stockholder approval for the issuance of Purchaser Conversion
Shares, no consents, notices, filings, approvals or authorizations
are required to be made to or with or received from any person,
entity, or governmental body (nor are any of the foregoing required
under any Transaction Documents) for the sale by the Seller
hereunder and consummation by the Seller of the transactions
contemplated by this Agreement.
2.5 No Proceedings . To the Seller’s knowledge, no
proceedings are pending against the Seller or threatened against
the Seller before any court, arbitrator or administrative or
governmental body which relate to the Seller’s capacity as
holder of the Assigned Interests or which, individually or in the
aggregate, would materially and adversely affect any action taken
by the Seller under this Agreement.
2.6 Adequate Information . The Seller is a sophisticated
person with respect to the sale of the Assigned Interest, the
Seller has adequate information concerning the business and
financial condition of the Issuer to make an informed decision
regarding the sale of the Note, the Class B Warrant and other
Assigned Interests and has independently and without reliance upon
the Purchaser or its agents made its own analysis and decision to
sell the Note, the Class B Warrant and the other Assigned
Interests. The Seller has relied solely upon this Agreement and
independent investigations made by it or its representatives with
respect to the Note, the Class B Warrant and the other
Assigned Interests.
2.7 No Fraudulent Transfer, etc . To the knowledge of the
Seller, it has not received any written notice that (i) any
payment or other transfer made to or for the account of the Seller
from or on account of the Issuer or other obligor with respect to
the Assigned Interest is or may be void or voidable as an actual or
constructive fraudulent transfer or as a preferential transfer,
(ii) the Assigned Interest, or any portion thereof, is void,
voidable unenforceable or subject to any impairment, or
(iii) any suits, claims or otherwise liabilities exist or have
been asserted by any person in any way relating to the Assigned
Interest or the ownership thereof.
2.8 Compliance with Transaction Documents . The Seller
has complied with and performed in all material respects with all
of its obligations required to be complied with or performed by it
under the Transaction Documents, and the Seller has not breached in
any material respect any of its representations, warranties,
obligations or covenants under any of the Transaction
Documents.
2.9 Further Action . The Seller agrees to take, or cause
to be taken, from and after the Closing Date, such further actions
to execute, deliver and file, or cause to be executed, delivered
and filed, such further documents and instruments as may be
reasonably necessary in order to fully effectuate the purposes,
terms and conditions of this Agreement and the transactions
contemplated hereby.
2.10 1933 Act . To the knowledge of the
Seller, the Seller is not currently and has not been an "affiliate"
(as defined in Rule 144 promulgated under the 1933 Act)
of the Issuer and neither the Seller nor anyone acting on the
Seller’s behalf has taken any action which would subject the
sale of the Assigned Interests to the registration provisions of
Section 5 of the 1933 Act.
3. Representations and Warranties of the Issuer . The
Issuer hereby represents and warrants to the Purchaser and the
Seller as follows:
3.1 Organization; Authorization, etc . The Issuer is duly
organized, validly existing and in good standing under the laws of
its jurisdiction of organization and has full organizational power
and authority to execute and deliver this Agreement and to perform
its obligations hereunder and to consummate the transactions
contemplated hereby, including without limitation to execute and
deliver the Mutual Release and to issue the Additional Stock and
the Class A Warrant and other agreements and documents to be
provided to the Seller in connection herewith (collectively,
the " Seller Documents "). The Issuer has full power
and authority to execute and deliver this Agreement and the Seller
Documents and to carry out the transactions contemplated hereby and
thereby. This Agreement and the Seller Documents have been duly
executed and delivered by the Issuer. This Agreement and each
Seller Document constitutes a valid and binding agreement of the
Issuer, assuming the due execution of the Agreement by the
Purchaser and the Seller (as applicable), enforceable against the
Issuer in accordance with its terms, except that (i) such
enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter
in effect relating to creditors’ rights generally and
(ii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any
proceeding therefor may be brought.
3.2 No Conflict . The execution and delivery of this
Agreement and each Seller Document by the Issuer and the
consummation by the Issuer of the transactions contemplated hereby
and thereby will not (i) violate any law applicable to the
Issuer or (ii) conflict with, violate or constitute a breach
or default under any material agreements as to which the Issuer is
a party.
3.3 No Consents . Except for stockholder approval for the
issuance of Purchaser Conversion Shares, no consents, notices,
filings, approvals or authorizations are required to be made to or
with or received from any person, entity, or governmental body (nor
are any of the foregoing required under any Transaction Documents)
for the sale of the Note or Class B Warrant hereunder and
consummation by the Issuer of the transactions contemplated by this
Agreement and the Seller Documents.
3.4 No Proceedings . To the Issuer’s knowledge, no
proceedings are pending against the Issuer or threatened against
the Issuer before any court, arbitrator or administrative or
governmental body which relate to the Issuer or the Assigned
Interests or which, individually or in the aggregate, would
materially and adversely affect any action taken by the Issuer
under this Agreement or any Seller Document.
3.5 Transaction Documents . The Issuer has
provided to the Purchaser complete and accurate copies of the
Transaction Documents, and the Issuer and the Seller are not a
party to any other documents or agreements which could materially
and adversely affect the Assigned Interest.
3.6 1933 Act . The Seller is not currently and has not
been an "affiliate" (as defined in Rule 144 promulgated under the
1933 Act) of the Issuer. The offer and sale of the Assigned
Interests has not been registered under the 1933 Act and the
Assigned Interests are being sold to the Purchaser pursuant to an
exemption from registration under the provisions of the
1933 Act and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
3.7 No F
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