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
cop
