Prepared by MERRILL CORPORATION




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Exhibit 4.1  


 
 

COMMON STOCK PURCHASE AGREEMENT    
  


        This
Common Stock Purchase Agreement (this "Agreement") is made and effective as of February 8, 2002 by and among EarthShell
Corporation, a Delaware corporation (the "Company"), and the Purchasers identified in the signature pages attached hereto (each a
"Purchaser" and, collectively, the "Purchasers"). 



        WHEREAS,
subject to the terms and conditions set forth in this Agreement, the Company desires to sell to the Purchasers and the Purchasers severally desire to purchase from the Company
certain shares of the Company's common stock, $0.01 par value per share (the "Common Stock"), as more fully set forth in this Agreement. 


        NOW,
THEREFORE, in consideration of the mutual covenants contained in this Agreement and for other good and valuable consideration the receipt and adequacy of which are hereby
acknowledged, the Company and the Purchasers agree as follows: 


        1.    Closing.    


        (a)  The
closing of the sale of the securities contemplated hereby (the "Closing") shall take place at the offices of
Proskauer Rose LLP ("Purchaser Counsel"), 1585 Broadway, New York, New York 10036, on February 8, 2002 or on such date or location as the parties
shall otherwise agree. The date of the Closing is hereinafter referred to as the "Closing Date." At the Closing: (x) the Company shall issue and
deliver to each Purchaser (i) a stock certificate, registered in the name of such Purchaser and free of all restrictive legends, representing the number of shares of Common Stock (the shares of
Common Stock issued and sold to the Purchasers hereunder are collectively, the "Shares") equal to the quotient obtained by dividing (a) the
purchase price set forth below such Purchaser's signature to this Agreement by (b) $1.1175, or, for Purchasers who provide the necessary account information to the Company, the
Company shall issue and deliver such Shares in a balance account with The Depository Trust Company through its Deposit Withdrawal Agent Commission System, (ii) a prospectus supplement with
respect to the Registration Statement (as defined in Section 2(e)) reflecting the sale of the Shares (the "Supplement"), and (iii) the
legal opinion of the Company's outside counsel in the form of Exhibit A; and (y) each Purchaser shall deliver to the Company the purchase
price set forth below such Purchaser's signature to this Agreement, in immediately available funds by wire transfer to an account designated in writing by the Company for such purpose. 


        (b)  The
obligation of the Purchasers to purchase and acquire Shares under this Agreement is subject to the fulfillment (or waiver by such Purchaser) of each of the following
conditions: 



          (i)  The
Company shall have filed the Supplement with the Securities and Exchange Commission (the "Commission"). 



        (ii)  The
Registration Statement (as defined in Section 2(g) below) shall be effective on the Closing Date as to all Shares, not subject to any threatened or actual
stop order and will not on the Closing Date contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein
not misleading. 


        (iii)  The
Company shall have provided a certificate from a duly authorized officer certifying on behalf of the Company that each of the conditions set forth in this
Section 1(b) shall have been satisfied. 




        2.    Representations and Warranties of the Company.    The Company
hereby makes the following representations and warranties to each of the Purchasers: 


        (a)    Subsidiaries.    The Company does not directly or indirectly
control or own any interest in any other corporation, partnership, joint venture or other business association or entity (a "Subsidiary"), other than
those listed in Schedule 2(a). Except as disclosed in Schedule 2(a), the Company owns, 





 




directly or indirectly, all of the capital stock of each Subsidiary free and clear of any lien, charge, claim, security interest, encumbrance, right of first refusal or other restriction
(collectively, "Liens"), and all the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights. 


        (b)    Organization and Qualification.    Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with
the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to do business
and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be, could not, individually or in the aggregate, (i) adversely affect the legality, validity or enforceability of this
Agreement, (ii) have or result in a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a
whole, or (iii) adversely impair the Company's ability to perform fully on a timely basis its obligations under this Agreement (any of (i), (ii) or (iii), a
"Material Adverse Effect"). 


        (c)    Authorization; Enforcement.    The Company has the requisite
corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this
Agreement by the Company and the consummation by it of the transactions contemplated hereunder have been duly authorized by all necessary action on the part of the Company and no further consent or
action is required by the Company, its Board of Directors or its stockholders. This Agreement has been (or upon delivery will be) duly executed by the Company and, when delivered in accordance with
the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms. 


        (d)    No Conflicts.    The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby do not and will not (i) conflict with or violate any provision of the Company's or any
Subsidiary's certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) subject to obtaining the Required Approvals (as defined below), conflict
with, or constitute a default (or an event that 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
(with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations)
and the rules and regulations of any self-regulatory organization to which the Company or its securities are subject, or by which any property or asset of the Company or a Subsidiary is
bound or affected; except in the case of each of clauses (ii) and (iii), such as could not, individually or in the aggregate, have or result in a Material Adverse Effect. 


        (e)    Filings, Consents and Approvals.    Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution, delivery and performance by the Company of this Agreement, other than (i) the
required filing of the Supplement, (ii) applicable Blue Sky filings, and (iii) in all other cases where the failure to obtain such consent, waiver, authorization or order, or to give
such 


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notice or make such filing or registration could not have or result in, individually or in the aggregate, a Material Adverse Effect (collectively, the "Required Approvals"). 


        (f)    Issuance of the Shares.    The Shares are duly authorized and,
when issued and paid for in accordance with the terms hereof, will be duly and validly issued, fully paid and nonassessable, free and clear of all liens, encumbrances and rights of first refusal. The
Company has reserved a sufficient number of duly authorized shares of Common Stock to issue all of the Shares. At the Closing, the Shares shall have been listed for trading on the Nasdaq National
Market (the "Trading Market"). 


        (g)    Registration Statement.    The Company's Registration Statement
on Form S-3 (No. 333-76092) (the "Registration Statement") was declared effective by the Commission on
January 7, 2002. The Registration Statement is effective on the date hereof and the Company has not received notice that the Commission has issued or intends to issue a stop order with respect
to the Registration Statement or that the Commission otherwise has suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, or intends or has
threatened in writing to do so. The Registration Statement (including the information or documents incorporated by reference therein), as of the time it was declared effective, and any amendments or
supplements thereto, each as of the time of filing, did not contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the
statements therein not misleading. The issuance of the Shares to the Purchasers is registered by the Registration Statement. 



        (h)    Listing and Maintenance Requirements    Except as specified in
the SEC Reports, the Company has not, in the two years preceding the date hereof, received notice from the Trading Market to the effect that the Company is not in compliance with the listing or
maintenance requirements thereof. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with the listing and maintenance requirements
for continued trading of the Common Stock on the Trading Market. 


        (i)    Certain Fees.    Except for listing fees to be paid by the
Company to the Trading Market and the placement fee payable to Olympus Securities, LLC in connection with the transactions contemplated by this Agreement, no fees or commissions will be payable by the
Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. The Purchasers
shall have no obligation with respect to any fees incurred by the Company or any other Person (other than the Purchasers, if the Purchasers have agreed in writing to pay such fees) or with respect to
any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement. The Company shall
indemnify and hold harmless the Purchasers, their employees, officers, directors, agents, and partners, and their affiliates, from and against all claims, losses, damages, costs (including the
reasonable costs of preparation and reasonable attorney's fees) and expenses suffered in respect of any such claimed or existing fees incurred by the Company or any other Person (other than the
Purchasers, if the Purchasers have agreed in writing to
pay such fees), as such fees and expenses are incurred. "Person" means any court or other federal, state, local or other governmental authority or other
individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind. 


        (j)    Disclosure.    The Company confirms that neither it nor any
other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that constitutes or might constitute material, nonpublic information. The Company
understands and confirms that each of the Purchasers will rely on the foregoing representations in effecting transactions in securities of the Company. All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated hereby, including the Schedules to this Agreement, the Registration 


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Statement and the Supplement, furnished by or on behalf of the Company are true and correct and do not contain any untrue statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or information exists with respect to the
Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company's reports filed under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") are being incorporated into an effective registration statement filed by the Company under the Securities Act of 1933, as amended
(the "Securities Act")). The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in Section 3. 


        (k)    No Violation.    The issuance and sale of the Shares hereunder
does not conflict with or violate any rules or regulations of the Trading Market. 


        (l)    SEC Reports; Financial Statements.    The Company has filed all
reports required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing materials being collectively referred to herein as the "SEC Reports" and, together
with this Agreement and the Schedules to this Agreement, the "Disclosure Materials") on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such extension. The Company has delivered to the Purchasers a copy of all SEC Reports filed within the 20 days preceding
the date hereof. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply
in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have
been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved ("GAAP"), except as
may be otherwise specified in such financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. All material agreements to which the Company or any Subsidiary is a party or to which the
property or assets of the Company or any Subsidiary are subject are included as part of or specifically identified in the SEC Reports. 


        (m)    Capitalization.    The number of shares and type of all
authorized, issued and outstanding capital stock, options and other securities of the Company (whether or not presently convertible or exchangeable for shares of capital stock of the Company) is set
forth in Schedule 2(m). All outstanding shares of capital stock are duly authorized, validly issued, fully paid and nonassessable and have been issued in compliance with all applicable
securities laws. Except as disclosed in Schedule 2(m), there are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to,
or securities, rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares
of Common Stock. Except as disclosed in Schedule 2(m), there are no 


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anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) and the issue and sale of the
Shares will not obligate the Company to issue shares of Common Stock or other securities to any Person and will not result in a right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under such securities. To the knowledge of the Company, except as specifically disclosed in Schedule 2(m), no Person or group of related Persons beneficially
owns (as determined pursuant to Rule 13d-3 under the Exchange Act), or has the right to acquire, by agreement with or by obligation binding upon the Company, beneficial ownership of
in excess of 5% of the outstanding Common Stock, ignoring for such purposes any limitation on the number of shares of Common Stock that may be owned at any single time. 


        (n)    Material Changes.    Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically disclosed in the SEC Reports, (i) there has been no event, occurrence or development that has had or that could
result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company's financial statements pursuant to GAAP or required to be disclosed in
filings made with the Commission, (iii) the Company has not altered its method of accounting or the identity of its auditors, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, and (v) the Company has not
issued any equity securities to any officer, director or affiliate, except pursuant to existing Company stock option plans. 


        (o)    Litigation.    There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an "Action")
which
(i) adversely affects or challenges the legality, validity or enforceability of this Agreement or the Shares or (ii) could, if there were an unfavorable decision, individually or in the
aggregate, have or result in a Material Adverse Effect. Schedule 2(m) of the Disclosure Schedule contains a complete list and summary description of any pending or, to the knowledge of the
Company, threatened proceeding against or affecting the Company or any of its Subsidiaries, without regard to whether it would have a Material Adverse Effect. Neither the Company nor any Subsidiary,
nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary
duty. The Company does not have pending before the Commission any request for confidential treatment of information. There has not been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act. No strike, work stoppage, slow down or other material
labor problem exists or, to the knowledge of the Company, is threatened or imminent with respect to any of the employees of the Company or the Subsidiaries. 


        (p)    Compliance.    Neither the Company nor any Subsidiary
(i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of
any court, arbitrator or governmental body, or (iii) is or has been in 


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violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection,
occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not, individually or in the aggregate, have or result in a Material Adverse
Effect. 


        (q)    Regulatory Permits.    The Company and the Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC
Reports, except where the failure to possess such permits could not, individually or in the aggregate, have or result in a Material Adverse Effect ("Material
Permits"), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit. 


        (r)    Title to Assets.    The Company and the Subsidiaries have good
and marketable title in fee simple to all real property owned by them that is material to the business of the Company and the Subsidiaries and good and marketable title in all personal property owned
by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens as do not materially affect the value of such property and do
not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries. Any real property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable leases of which the Company and the Subsidiaries are in compliance. 


        (s)    Patents and Trademarks.    The Company and the Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and other similar rights that are necessary or
material for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have could have a Material Adverse Effect (collectively, the
"Intellectual Property Rights"). Neither the Company nor any Subsidiary has received a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any Person. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights. 


        (t)    Insurance.    The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged.
Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a significant increase in cost. 



        (u)    Transactions With Affiliates and Employees.    Except as set
forth in SEC Reports filed at least ten days prior to the date hereof, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is
presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. 


        (v)    Internal Accounting Controls.    The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability 


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for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. 


        (w)    Solvency.    Based on the financial condition of the Company as
of the Closing Date, (i) the Company's fair saleable value of its assets exceeds the amount that will be required to be paid on or in respect of the Company's existing debts and other
liabilities (including known contingent liabilities) as they mature; and (ii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate
all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its debt when such amounts are required to
be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). 



        (x)    Acknowledgment Regarding Purchasers' Purchase of Shares.    The
Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm's length purchaser with respect to this Agreement and the transactions contemplated hereby. The
Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely
incidental to the Purchasers' purchase of the Shares. The Company further represents to each Purchaser that the Company's decision to enter into this Agreement has been based solely on the independent
evaluation of the Company and its representatives. 


        3.    Representations and Warranties of the Purchasers.    Each
Purchaser hereby for itself and for no other Purchaser, represents, warrants and covenants to the Company as follows: 


        (a)    Organization; Authorization.    Each such Purchaser that is an entity is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation. Such Purchaser has full right, power, authority and capacity to enter into this Agreement and to consummate the transactions
contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of this Agreement. Upon the execution and delivery of this Agreement and assuming the valid
execution hereof by the Company, this Agreement shall constitute the valid and binding obligation of such Purchaser enforceable in accordance with its terms. 


        (b)    Experience of Such Purchaser.    Such Purchaser, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Shares, and has so evaluated the
merits and risks of such investment. 


        The
Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those
specifically set forth in this Section 3. 


        4.    Other Agreements of the Parties.    



        4.1    Subsequent Placements.    


        (a)  Until
90 Business Days following the Closing Date, the Company will not, directly or indirectly, effect any, offer, sell, grant any option to purchase, or otherwise
dispose of (or announce any offer, sale, grant or any option to purchase or other disposition of) any of its or the Subsidiaries' equity or equity equivalent securities, including, without limitation,
any debt, preferred stock or other instrument or security that is, at any time during its life and under any circumstances, convertible into or exchangeable for Common Stock (any such offer, sale,
grant, disposition or announcement being 


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referred to as a "Subsequent Placement") unless the Company shall have first complied with this Section 4.1(a). 



          (i)  The
Company shall deliver to each Purchaser a written notice (the "Offer") of any proposed or intended issuance or sale
or exchange of the securities being offered (the "Offered Securities") in a Subsequent Placement, which Offer shall (w) identify and describe the
Offered Securities, (x) describe the price and other terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered Securities to be issued, sold or
exchanged, (y) identify the persons or entities (if known) to which or with which the Offered Securities are to be offered, issued, sold or exchanged and (z) offer to issue and sell to
or exchange with each Purchaser (A) a pro rata portion of fifty percent (50%) of the Offered Securities, based on such Purchaser's pro rata portion of the aggregate purchase price paid by the
Purchasers for all of the Shares purchased hereunder (the "Basic Amount"), and (B) with respect to each Purchaser that elects to purchase its
Basic Amount, any additional portion of the Offered Securities attributable to the Basic Amounts of other Purchasers as such Purchaser shall indicate it will purchase or acquire should the other
Purchasers subscribe for less than their Basic Amounts (the "Undersubscription Amount"). 


        (ii)  To
accept an Offer, in whole or in part, a Purchaser must deliver a written notice to the Company prior to the end of the five (5) Business Day period of the
Offer, setting forth the portion of the Purchaser's Basic Amount that such Purchaser elects to purchase and, if such Purchaser shall elect to purchase all of its Basic Amount, the Undersubscription
Amount, if any, that such Purchaser elects to purchase (in either case, the "Notice of Acceptance"). If the Basic Amounts subscribed for by all Purchasers are less than the total of all of the Basic
Amounts, then each Purchaser who has set forth an Undersubcription Amount in its Notice of Acceptance shall be entitled to purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided, however, that if the Undersubscription Amounts subscribed for exceed the difference between
the total of all the Basic Amounts and the Basic Amounts subscribed for (the "Available Undersubscription Amount"), each Purchaser who has subscribed
for any Undersubscription Amount shall be entitled to purchase on that portion of the Available Undersubscription Amount as the Basic Amount of such Purchaser bears to the total Basic Amounts of all
Purchasers that have subscribed for Undersubscription Amounts, subject to rounding by the Board of Directors to the extent its deems reasonably necessary. 



        (iii)  The
Company shall have five (5) days from the expiration of the period set forth in Section 4.1(a)(ii) above to issue, sell or exchange all or any
part of such Offered Securities as to which a Notice of Acceptance has not been given by the Purchasers (the "Refused Securities"), but only to the
offerees described in the Offer (if so described therein) and only upon terms and conditions (including, without limitation, unit prices and interest rates) that are not more favorable to the
acquiring person or persons or less favorable to the Company than those set forth in the Offer. 


        (iv)  In
the event the Company shall propose to sell less than all the Refused Securities (any such sale to be in the manner and on the terms specified in
Section 4.1(a)(iii) above), then each Purchaser may, at its sole option and in its sole discretion, reduce the number or amount of the Offered Securities specified in its Notice of
Acceptance to an amount that shall be not less than the number or amount of the Offered Securities that the Purchaser elected to purchase pursuant to Section 4.1(a)(ii) above multiplied
by a fraction, (i) the numerator of which shall be the number or amount of Offered Securities the Company actually proposes to issue, sell or exchange (including Offered Securities to be issued
or sold to Purchasers pursuant to Section 4.1(a)(ii) above prior to such reduction) and (ii) the denominator of which shall be the original amount of the Offered Securities. In
the event that any Purchaser so elects to reduce the number or amount of Offered Securities specified in its Notice of Acceptance, the Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such securities have again been offered to the Purchasers in accordance with Section 4.5(b)(i) above. 



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        (v)  Upon
the closing of the issuance, sale or exchange of all or less than all of the Refused Securities, the Purchasers shall acquire from the Company, and the Company
shall issue to the Purchasers, the number or amount of Offered Securities specified in the Notices of Acceptance, as reduced pursuant to Section 4.5(b)(iv) above if the Purchasers have
so elected, upon the terms and conditions specified in the Offer. The purchase by the Purchasers of any Offered Securities is subject in all cases to the preparation, execution and delivery by the
Company and the Purchasers of a purchase agreement relating to such Offered Securities reasonably satisfactory in form and substance to the Purchasers, the Company and their respective counsel. 


        (vi)  Any
Offered Securities not acquired by the Purchasers or other persons in accordance with Section 4.5(b)(iii) above may not be issued, sold or exchanged
until they are again offered to the Purchasers under the procedures specified in this Agreement. 




        (b)  The
restrictions contained in paragraph (a) of this Section shall not apply to (i) the granting of options to employees, officers and directors of the
Company pursuant to any stock option plan duly adopted by the Company or to the issuance of Common Stock upon exercise of such options, or (ii) strategic transactions not significantly for the
purpose of raising capital. 


        4.2    Disclosure of Material Non-Public Information.    The Company shall not and shall cause each of its
Affiliates (as defined in Rule 405 under the Securities Act) and other Persons acting on behalf of the Company not to divulge to any Purchaser any information that it believes to be material
non-public information unless such Purchaser has agreed in writing to receive such information prior to such divulgence. 



        4.3    Reservation and Listing of Shares.    The Company shall take such steps as may be required to cause and
maintain the listing of the Shares on the Trading Market and such other exchange, market or quotation facility on which the Common Stock is traded. 


        4.4    Indemnification    


        (a)  The
Company will indemnify and hold harmless each Purchaser and any of its affiliates or any officer, director, partner, controlling person, employee or agent of a
Purchaser or any of its affiliates (a "Related Person") for its reasonable legal and other expenses (including the costs of any investigation,
preparation and travel) and for any Losses incurred in connection with any action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such
as a disposition), whether commenced or threatened (each, a "Proceeding"), insofar as such Losses arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration Statement or the Supplement, or any amendment or supplement thereto, and all other documents filed as a part thereof, as
amended at the time of effectiveness of the Registration Statement, including any information deemed to be a part thereof as of the time of effectiveness pursuant to paragraph (b) of
Rule 430A, or pursuant to Rule 434, under the Securities Act, or arise out of or are based upon the omission or alleged omission to state in any of them a material fact required to be
stated therein or necessary to make the statements in any of them, in light of the circumstances under which they were made, not misleading, as such expenses or Losses are incurred. In addition, the
Company shall indemnify and hold harmless each Purchaser and Related Person from and against any and all Losses, as incurred, arising out of or relating to any breach by the Company of any of the
representations, warranties or covenants made by the Company in this Agreement, or any allegation by a third party that, if true, would constitute such a breach. The conduct of any Proceeding for
which indemnification is available under this paragraph shall be governed by Section 4.4(b). The indemnification obligations of the Company under this paragraph shall be in addition to any
liability that the Company may otherwise have and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Purchasers and any such Related
Persons. The Company also agrees that neither the Purchasers nor any Related Persons shall have any liability to the Company or any Person asserting claims on behalf of or in right of the 


9





 




Company in connection with or as a result of the transactions contemplated by this Agreement, except to the extent that any losses, claims, damages, liabilities or expenses incurred by the Company
result from the gross negligence or willful misconduct of the applicable Purchaser or Related Person in connection with such transactions. If the Company breaches its obligations under this Agreement,
then, in addition to any other liabilities the Company may have under this Agreement or applicable law, the Company shall pay or reimburse the Purchasers on demand for all costs of collection and
enforcement (including reasonable attorneys fees and expenses). Without limiting the generality of the foregoing, the Company specifically agrees to reimburse the Purchasers on demand for all costs of
enforcing the indemnification obligations in this paragraph. For the purposes of this Section 4.4, "Losses" shall mean any and all losses,
claims, damages, liabilities, settlement costs and expenses, including without limitation costs of preparation of legal action and reasonable attorneys' fees. 



        (b)    Conduct of Indemnification Proceedings.    If any Proceeding shall be brought or asserted against any Person
entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the
"Indemnifying Party") in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such
notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of
competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party. 


        An
Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be
at the expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (ii) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in
any such Proceeding; or (iii) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified
Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to
assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without
its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject
matter of such Proceeding. 


        All
fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a
manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten Business Days of written notice thereof to the Indemnifying Party (regardless of whether it
is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all
such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder). 


        5.    Miscellaneous    


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        (a)    Fees and Expenses.    At the Closing, the Company shall pay to Pine Ridge Financial Inc. an aggregate of
$25,000 for their legal fees and expenses incurred in connection with the preparation and negotiation of this Agreement. In lieu of the foregoing payment, to Pine Ridge Financial Inc. may
retain such amount at the Closing or require the Company to pay such amount directly to Purchaser Counsel. Except as expressly set forth in this Agreement to the contrary, each party shall pay the
fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with the issuance of the Shares. 



        (b)    Publicity.    Neither the Company nor the Purchasers shall issue any press release or make any other public
announcement relating to this Agreement unless (i) the content thereof is mutually agreed to by the Company and the Purchasers, or (ii) such party is advised by its counsel that such
press release or public announcement is required by law; except that no press release issued to disclose the issuance and sale of the Shares to the Purchasers will refer to the Purchasers by name. The
Company shall (i) within one Business Day following the Closing Date, issue a press release mutually agreed to by the
Company and the Purchasers, disclosing the transactions contemplated hereby and (ii) make such other filings and notices in the manner and time required by the Commission. 



        (c)    Entire Agreement; Amendments.    This Agreement contains the entire understanding of the parties with respect
to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into this Agreement
and its exhibits and schedules. This Agreement may not be modified or amended except pursuant to an instrument in writing signed by the Company and Purchasers then holding a majority of the Shares
purchased hereunder. The waiver by either party hereto of any right hereunder or the failure to perform or of a breach by the other party shall not be deemed a waiver of any other right hereunder or
of any other breach or failure by said other party whether of a similar nature or otherwise. 



        (d)    Notices.    Any and all notices or other communications or deliveries required or permitted to be provided
hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 6:30 p.m. (New York City time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in this Agreement later than 6:30 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York
City time) on such date, (iii) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to
whom such notice is required to be given. The address for such notices and communications shall be as follows: 



	If to the Company:	 	EarthShell Corporation

800 Miramonte Drive

Santa Barbara, California 93109

Attn: Chief Financial Officer
	

With a copy to:	
 	

Gibson, Dunn & Crutcher LLP.

2029 Century Park East

Los Angeles, California 90067

Facsimile No.: (310) 551-8741

Attn: Robert K. Montgomery, Esq.
	

If to the Purchasers:	
 	

To the address set forth under such Purchaser's name on the signature pages attached hereto.




11





 

        or
such other address as may be designated in writing hereafter, in the same manner, by such Person. "Business Day" shall mean any day
except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions in the State of New York are authorized or required by law or
other governmental action to close. 


        (e)    Governing Law.    All questions concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees
that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York, Borough of Manhattan. Each party
hereto hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of this Agreement), 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 improper. Each party hereto
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 via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in effect for 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. Each party hereto hereby irrevocably waives, to
the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If
either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its
reasonable attorneys fees and other reasonable costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. 



        (f)    Execution.    This Agreement may be executed in two or more counterparts, all of which when taken together
shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need
not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. 



        (g)    Independent Nature of Purchasers.    The obligations of each Purchaser under this Agreement are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under this Agreement. The decision of
each Purchaser to purchase Shares pursuant to this Agreement has been made by such Purchaser independently of any other Purchaser and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company or of the Subsidiary which
may have been made or given by any other Purchaser or by any agent or employee of any other Purchaser, and no Purchaser or any of its agents or employees shall have any liability to any other
Purchaser (or any other person) relating to or arising from any such information, materials, statements or opinions. Nothing contained herein, and no action taken by any Purchaser pursuant hereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert 


12





 




or as a group with respect to such obligations or the transactions contemplated by this Agreement. Each Purchaser shall be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. 


        (h)    Replacement of Shares.    If any certificate or instrument evidencing any Shares is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but
only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new certificate or
instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Shares. 


[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES FOLLOW] 


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        IN WITNESS WHEREOF, the parties hereto have caused this Common Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated
above. 



	 	 	EARTHSHELL CORPORATION
	

 	
 	

By:	
 	

/s/  SCOTT HOUSTON      
 Name: Scott Houston

Title: Chief Financial Officer




[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGE OF PURCHASERS FOLLOWS] 


14





 

        IN
WITNESS WHEREOF, the parties hereto have caused this Common Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated
above. 



	 	 	PINE RIDGE FINANCIAL INC.
	

 	
 	

By:	
 	

/s/  KENNETH L. HENDERSON      
 Name: Kenneth L. Henderson

Title: Attorney-in-Fact
	

 	
 	

Purchase Price: $3,499,999.94
	

 	
 	

Address for Notice:

c/o Cavallo Capital Corp.

600 Madison Avenue

New York, NY 10022

Telephone No.: (212) 651-9000

Facsimile No.: (212) 651-9010

Attn: Avi Vigder
	

With copies to:	
 	

Proskauer Rose LLP

1585 Broadway

New York, NY 10036-8299

Facsimile No.: (212) 969-2900

Attn: Adam J. Kansler, Esq.




15





 


	 	 	ZLP MASTER TECHNOLOGY FUND, LTD.
	

 	
 	

 	
 	

 
	

 	
 	

By:	
 	

/s/  STUART J. ZIMMER      
 Name: Stuart J. Zimmer

Title: Director
	

 	
 	

Purchase Price: $3,000,000.27
	

 	
 	

Address for Notice:

c/o Zimmer Lucas Partners, LLC

45 Broadway, 28th Floor

New York, NY 10006

Telephone No.:

Facsimile No.: (212) 440-0750

Attn: Rita Patel




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	 	 	CLEVELAND OVERSEAS LTD.
	

 	
 	

By:	
 	

/s/  BEAT KUNZ      
 Name: Beat Kunz

Title: Director
	

 	
 	

Purchase Price: $1,500,000.14
	

 	
 	

Address for Notice:

c/o Vertical Ventures, LLC

900 Third Avenue, 26th Floor

New York, NY 10022

Telephone No.: (212) 974-3070

Facsimile No.: (646) 274-1728

Attn: Joshua Silverman




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