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Exhibit 4.2    
  

	No. [    ]	 	$[    ]
	Date: August 12, 2002	 	 

 
 

EARTHSHELL CORPORATION
  SECURED CONVERTIBLE DEBENTURE DUE AUGUST 12, 2007    
  

        THIS DEBENTURE is one of a series of duly authorized and issued debentures of EarthShell Corporation, a Delaware corporation (the
"Company"), designated as its Secured Convertible Debentures due August 12, 2007, in the aggregate principal amount of
$[    ] (the "Debentures"). 

        FOR
VALUE RECEIVED, the Company promises to pay to the order of [Holder] or its registered assigns (the "Holder"),
the principal sum of [    ] ($), on August 12, 2007 (the "Maturity Date"), or such earlier date as the
Debentures are required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture in
accordance with the provisions hereof. The principal amount of this Debenture may be increased as set forth in Section 3(c) below. All holders of
the Debentures are referred to collectively, as the "Holders". This Debenture is subject to the following additional provisions. 

        1.    Definitions.    In addition to the terms defined elsewhere in this Debenture, (a) capitalized terms that
are not otherwise defined herein have the meanings given to such terms in the Securities Purchase Agreement, dated as of August 12, 2002, among the Company and the Purchasers identified therein
(the "Purchase Agreement"), and (b) the following terms have the meanings indicated: 

        "Adjustment Date" means the fifth Trading Day following the applicable Delivery Date. 

        "Adjustment Notice" means a written notice delivered by the Company to a Holder pursuant to Section 6(c), indicating the Company's
intent to adjust the Conversion Price pursuant to Section 6(c). 

        "Bank" means Wachovia Bank, National Association. 

        Company Conversion Date" means the date set forth on the Company Conversion Notice, which date must be not earlier than the tenth
(10th) Trading Day immediately following, or later than the fifteenth (15th) Trading Day immediately following, the date a Company Conversion Notice together with the
Conversion Schedule is delivered to the Holder pursuant to Section 6(b). 

        "Company Conversion Notice" means a written notice in the form attached hereto as  Exhibit B. 

        "Company Prepayment Price" for any Debentures which shall be subject to prepayment pursuant to Section 8(a), shall equal the sum
of: (i) 104% of the principal amount of Debentures to be prepaid, plus all accrued and unpaid interest thereon, and (ii) all other amounts, costs, expenses and liquidated damages due in
respect of such Debentures. 

        "Conversion Date" means either a Holder Conversion Date, a Company Conversion Date or an Adjustment Date. 

        "Conversion Notice" means either a Holder Conversion Notice or a Company Conversion Notice. 

        "Conversion Price" means the Initial Conversion Price, subject to adjustment from time to time pursuant to Sections 6(c) (solely
with respect to conversions pursuant to Section 6(c)) and Section 13. 

        "Delivery Date" means the date an Adjustment Notice is delivered to the Holder pursuant to Section 6(c). 

 

        "Equity Conditions" means, with respect to a specified issuance of Common Stock, that each of the following conditions is satisfied:
(i) the number of authorized but unissued and otherwise unreserved shares of Common Stock is sufficient for such issuance; (ii) the Common Stock is listed or quoted (and is not suspended
from trading) on an Eligible Market and such shares of Common Stock are approved for listing on such Eligible Market upon issuance; (iv) such issuance would be permitted in full without
violating Section 6(d) hereof or the rules or regulations of the Eligible Market on which such shares are listed or quoted; (v) no Event of Default nor any event that with the passage of
time and without being cured would constitute a Event of Default has occurred and not been cured, and (vii) no public announcement of a pending or proposed Change of Control transaction has
occurred that has not been consummated. 

        "Event of Default" shall have the meaning set forth in Section 10. 

        "Holder Conversion Date" means the date a Holder Conversion Notice together with the Conversion Schedule is delivered to the Company
pursuant to Section 6(a). 

        "Holder Conversion Notice" means a written notice in the form attached hereto as  Exhibit A. 

        "Holder Prepayment Price" for any Debentures required to be prepaid pursuant to Section 8(b) shall equal the sum of: (i) the
principal amount of Debentures to be prepaid, plus all accrued and unpaid interest thereon and (ii) all other amounts, costs, expenses and liquidated damages due in respect of such Debentures. 

        "Initial Conversion Price" shall equal $1.30. 

        "Mandatory Conversion Amount" means $500,000, as may be adjusted for any particular Adjustment Date pursuant to Section 6(c). 

        "Original Issue Date" means the date of the first issuance of any Debentures, regardless of the number of transfers of any particular
Debenture. 

        "VWAP" means on any particular Trading Day or for any particular period, the volume weighted average trading price per share of Common
Stock on such date or for such period on an Eligible Market as reported by Bloomberg L.P., or any successor performing similar functions. 

        2.    Letter of Credit.    

        (a)  This
Debenture is the debenture referred to in an irrevocable Letter of Credit issued by the Bank in favor of the Holder in an original amount of
$[    ], a copy of which is annexed hereto as Annex A. The Company hereby acknowledges that the Holder and any
subsequent Holder shall be entitled to the benefits of the Letter of Credit and covenants and agrees that it will not impair the Holder's rights under the Letter of Credit and (except to the extent
provided in Section 2(b)) shall maintain the Letter of Credit in full force and effect. 

        (b)  The
Holder agrees that the face amount of the Letter of Credit shall be reduced from time to time pursuant to the terms set forth below: 

          (i)  subsequent
to each Conversion Date, the face amount of the Letter of Credit shall be reduced on the date on which the Holder receives the Underlying Shares it is
entitled to receive subsequent to such Conversion Date pursuant to Section 7, by an amount equal to the principal aggregate amount of Debentures converted on such Conversion Date; 

        (ii)  an
amount equal to the Holder Prepayment Price or the Company Prepayment Price indefeasibly paid by the Company pursuant to the delivery of a Holder Prepayment Notice
or Company Prepayment Notice, as applicable, as set forth in Section 8, upon receipt by the Holder of such payment; and 

2

 

        (iii)  upon
an election by the Holder to reduce the principal amount of the Debenture by the Refund Amount pursuant to Section 6(c)(iv). 

        (c)  The
Holder shall, within five Trading Days, or in the case of a conversion pursuant to Section 6(c)(ii), within one Trading Day, of the occurrence of any of the
events giving rise to a
reduction in the face amount of the Letter of Credit under Section 2(b), provide the Bank with Exhibit C attached to the Letter of Credit indicating the occurrence of such event. 

        (d)  Upon
the failure of the Company to timely pay to the Holder any amount which is then due and payable to the Holder under this Debenture, whether pursuant to
Section 8, Section 9 or any other applicable Section herein, the Holder shall be entitled to draw on the Letter of Credit to the extent of any such payment or payments so due to the
Holder is not timely paid by the Company. 

        (e)  Any
amounts received by the Holder pursuant to a draw on the Letter of Credit shall be applied against all unsatisfied obligations of the Company under this Debenture in
the order in which such obligations arose. 

        3.    Interest.    

        (a)  The
Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture (including any interest added to such
principal in accordance with this Section 3) at the rate of 1.5% per annum, payable quarterly in arrears on each January 31, April 30, July 31 and October 31, except
if such date is not a Trading Day, in which case such interest shall be payable on the next succeeding Trading Day (each, an "Interest Payment Date").
Interest shall be calculated on the basis of a 360-day year and shall accrue daily commencing on the Original Issue Date. 

        (b)  Subject
to the conditions and limitations set forth below, the Company may pay interest on this Debenture (i) in cash or (ii) in Common Stock. The Company
must deliver written notice to the Holder indicating the manner in which it intends to pay interest at least ten Trading Days prior to each Interest Payment Date, but the Company may indicate in any
such notice that the election contained therein shall continue for subsequent Interest Payment Dates until revised. Failure to timely provide such written notice shall be deemed an election by the
Company to pay the interest in Common Stock, unless payment of interest in such manner is not permitted at the time of any such payment, in which case such interest shall be payable in cash. All
interest payable on the Debentures on any Interest Payment Date must be paid in the same manner. Interest paid in Common Stock shall be paid by the Company delivering to the Holder that number of
shares of Common Stock equal to the amount of Interest then due divided by the Closing Price on the Interest Payment Date, rounded up to the nearest whole share. 

        (c)  Notwithstanding
the foregoing, the Company may not pay the interest in Common Stock unless, at such time, the Equity Conditions are satisfied with respect to such Common
Stock and all of the Underlying Shares then issuable upon conversion in full of all outstanding Debentures. If the Company is required to pay interest in cash on any Interest Payment Date, the Holder
may (but shall not be required to) treat such interest as if it had been added to the principal amount of this Debenture as of such Interest Payment Date. 

        (d)  So
long as any Debentures are outstanding, (i) neither the Company nor any Subsidiary shall, directly or indirectly, redeem, purchase or otherwise acquire any
capital stock or set aside any monies for such a redemption, purchase or other acquisition, and (ii) the Company shall not pay or declare any dividend or make any distribution on any capital
stock, except stock dividends on the Common Stock payable in additional shares of Common Stock. 

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        4.    Registration of Debentures.    The Company shall register the Debentures upon records to be maintained by the
Company for that purpose (the "Debenture Register") in the name of each record holder thereof from time to time. The Company may deem and treat the
registered Holder of this Debenture as the absolute owner hereof for the purpose of any conversion hereof or any payment of interest hereon, and for all other purposes, absent actual notice to the
contrary. 

        5.    Registration of Transfers and Exchanges.    The Company shall register the transfer of any portion of this
Debenture in the Debenture Register upon surrender of this Debenture to the Company at its address for notice set forth herein. Upon any such registration or transfer, a new debenture, in
substantially the form of this Debenture (any such new debenture, a "New Debenture"), evidencing the portion of this Debenture so transferred shall be
issued to the transferee and a New Debenture evidencing the remaining portion of this Debenture not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New
Debenture by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder of a Debenture. This Debenture is exchangeable for an equal
aggregate principal amount of Debentures of different authorized denominations, as requested by the Holder surrendering the same. No service charge or other fee will be imposed in connection with any
such registration of transfer or exchange. 

        6.    Conversion    

        (a)    At the Option of the Holder.    All or any portion of the principal amount of this Debenture then outstanding
shall be convertible into shares of Common Stock at the Conversion Price (subject to limitations set forth in Section 6(d)), at the option of the Holder, at any time and from time to time from
and after the Original Issue Date. The Holder shall effect conversions under this Section 6(a), by delivering to the Company a Holder Conversion Notice together with a schedule in the form of  Schedule 1
attached hereto (the "Conversion Schedule"). The number of Underlying Shares issuable
upon any conversion under this Section 6(a) shall (subject to limitations set forth in Section 6(d)) equal the outstanding principal amount of this Debenture to be converted (including
any interest payments accreted to principal pursuant to the terms hereof) divided by the Conversion Price. If the Holder is converting less than all of the principal amount represented by this
Debenture, or if a conversion hereunder may not be effected in full due to the application of Section 6(d), the Company shall honor such conversion to the extent permissible hereunder and shall
promptly deliver to the Holder a Conversion Schedule indicating the principal amount which has not been converted. 

        (b)    At the Option of the Company.    Subject to the conditions set forth in this Section 6(b) and
Section 6(d), at any time after the first year anniversary of the Original Issue Date, the Company may require a conversion, on the Company Conversion Date, of all or a portion of the
outstanding principal amount of this Debenture if: (i) the Closing Prices during any 30 consecutive Trading Days following the first year anniversary of the Original Issue Date is equal to or
greater than 125% of the Conversion Price, and (ii) all of the Equity Conditions are satisfied as of the Company Conversion Date with respect to the Underlying Shares potentially issuable in
connection with such proposed conversion. The Company may only exercise its right to require conversions hereunder by delivering to the Holder a Company Conversion Notice together with a Conversion
Schedule within 20 Trading Days of the satisfaction of the condition set forth in clause (i) of the immediately preceding sentence. Notwithstanding anything herein to the contrary, if the
Closing Price on the Company Conversion Date is less than 125% of the Conversion Price or any of the conditions set forth in clause (ii) above shall cease to be satisfied during the period from
the date of the delivery of the Company Conversion Notice through and including the Company Conversion Date, then the Holder subject to such conversion may elect, by written notice to the Company
given at any time after any such conditions shall cease to be in effect, to invalidate ab initio such conversion. The number of Underlying Shares
issuable upon any conversion under this Section 6(b) shall (subject to limitations set forth in Section 6(d)) equal the outstanding principal 

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amount of this Debenture to be converted (including any interest payments accreted to principal pursuant to the terms hereof) divided by the Conversion Price. The conversion subject to each Company
Conversion Notice, once given, shall be irrevocable as to the Company. If the conversion of a principal amount of Debentures indicated in a Company Conversion Notice would result in the issuance to
the Holder of Underlying Shares in excess of the amount permitted pursuant to Section 6(d), the Holder shall notify the Company in writing of this fact and the Company shall: (x) honor
the conversion for the maximum principal amount of Debentures permitted pursuant to Section 6(d) to be converted on such Company Conversion Date and (y) cancel the Company Conversion
Notice with respect to the portion of the principal amount of Debentures the conversion of which would violate Section 6(d). 

        (c)    Company's Option to Adjust Conversion Price and Force Conversion.    

          (i)  At
any time and from time to time, subject to Section 6(b), Section 6(d) and Section 6(c)(v), the Company shall have the option, upon the delivery
of an Adjustment Notice to the Holder and on the terms set forth in this Section 6(c), to require a conversion of a principal amount of Debentures equal to the Mandatory Conversion Amount;
provided, however, that with the mutual consent of the Company and all of the Holders, the Mandatory Conversion Amount may be increased to $1,500,000 for any particular Adjustment Date. In each
Adjustment Notice, the Company shall set forth a floor price (the "Floor Market Price"), but in no event shall the Floor Market Price be less than $0.25
or greater than the lesser of (i) $0.75 and (ii) the product of 0.85 and the VWAP on the Trading Day immediately preceding the Delivery Date. 

        (ii)  On
the Trading Day following the Delivery Date, the Mandatory Conversion Amount shall be converted into Underlying Shares (the "Initial
Shares") at a Conversion Price (the "Threshold Conversion Price") equal to the lesser of (i) the Conversion Price then in
effect, and (ii) the VWAP on the Trading Day immediately preceding the Delivery Date. Notwithstanding anything herein to the
contrary, the Company shall not be entitled to deliver an Adjustment Notice on or prior to the fifth Trading Day immediately following the immediately preceding Delivery Date. If a conversion of a
Mandatory Conversion Amount would result in the issuance to the Holder of Underlying Shares in excess of the amount permitted pursuant to Section 6(d), the Holder shall notify the Company in
writing of this fact and the Company shall: (x) honor the conversion for the maximum principal amount of Debentures permitted pursuant to Section 6(d) to be converted on the applicable
Adjustment Date and (y) cancel the portion of the Mandatory Conversion Amount the conversion of which would violate Section 6(d). 

        (iii)  Subject
to Section 6(c)(v), on the Adjustment Date, if the product of (x) the average of the VWAP for the five Trading Days immediately prior to the
Adjustment Date (the "Conversion Market Price") and (y) 0.85 (the product of (x) and (y), the "Adjusted Conversion
Price"), is less than the Threshold Conversion Price, then the Company shall issue and deliver to the Holder a stock certificate, registered in the name of the Holder and free
of all restrictive legends, representing the number of shares of Common Stock (the "Additional Shares") equal to the difference between (A) the
quotient obtained by dividing the Mandatory Conversion Amount by the Adjusted Conversion Price, and (B) the Initial Shares. If the Holder provides the necessary account information to the
Company, the Company shall deliver the Additional Shares in a balance account with The Deposit Trust Company through its Deposit Withdrawal Commission System. If the issuance of Additional Shares
would result in the issuance to the Holder of Underlying Shares in excess of the amount permitted pursuant to Section 6(d), the Holder shall notify the Company in writing of this fact and the
Company shall within 5 Trading Days following the Adjustment Date, in lieu of issuing the Additional Shares, pay to the Holder in cash the portion of the Additional Shares the issuance 

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of which would violate Section 6(d). Notwithstanding anything to the contrary, if all of the Equity Conditions are not satisfied as of the Adjustment Date, the Holder shall have the option to
either receive the Additional Shares or receive the cash value of the Additional Shares. For the purposes of calculating any cash payment under this Section 6(c)(iii), the Additional Shares
shall have a price per share equal to the Conversion Market Price. 

        (iv)  If
the lesser of (x) the Conversion Price then in effect (without taking into account any adjustment pursuant to Section 6(c)(ii)), and (y) the
Adjusted Conversion Price (the lesser of (x) and (y), the "Adjusted II Conversion Price"), is greater than the Threshold Conversion Price, then
the Holder, at its option, shall either (i) pay to the Company within 5 Trading Days following the Adjustment Date, an amount (the "Refund
Amount") equal to the product of (A) the Initial Shares and (B) the difference between (1) the Adjusted II Conversion Price and (2) the
Threshold Conversion Price, or (ii) reduce the principal amount of the Debenture by the Refund Amount. 

        (v)  If
the Conversion Market Price is less than the Floor Market Price, then unless the Holder elects to have the Conversion Market Price equal the Floor Market Price or the
Company and the Holder otherwise mutually agree in writing, no Additional Shares shall be issued under Section 6(c)(iii) and the Company shall pay to the Holder within 5 Trading Days following
the Adjustment Date, an amount equal to the Mandatory Conversion Amount. Immediately upon receipt of the cash payment, the Holder shall deliver the Initial Shares to the Company in accordance with
prior written delivery instructions by the Company to the Holder relating to the Initial Shares. In addition, delivery of an Adjustment Notice and conversion pursuant to Section 6(c)(i) may
occur only if all of the Equity
Conditions are satisfied as of the Delivery Date with respect to the Underlying Shares potentially issuable in connection with such proposed conversion. 

        (d)    Certain Conversion Restrictions.    

          (i)  Notwithstanding
anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the Holder upon any conversion of this Debenture
(or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such conversion (or other issuance), the total number of shares of Common Stock then beneficially
owned by such Holder and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder's for purposes of Section 13(d) of the Exchange Act,
does not exceed 4.999% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such conversion) (the
"Maximum Percentage") of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock
issuable upon such conversion). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. Each delivery of a Conversion Notice by the Holder will constitute a representation by the Holder that it has evaluated the limitation set forth in this paragraph and determined that
issuance of the full number of Underlying Shares requested in such Conversion Notice is permitted under this paragraph. Subject to Section 6(d)(ii), by written notice to the Company, the Holder
may waive the provisions of this Section or increase or decrease the Maximum Percentage to any other percentage specified in such notice, but (i) any such waiver or increase will not be
effective until the 61st day after such notice is delivered to the Company, and (ii) any such waiver or increase or decrease will apply only to the Holder and not to any other holder of
Debentures. 

        (ii)  Notwithstanding
anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by a Holder upon any conversion of Debentures (or 

6

 

otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such conversion (or other issuance), the total number of shares of Common Stock then beneficially owned
by such Holder and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with such Holder's for purposes of Section 13(d) of the Exchange Act, does
not exceed 9.999% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such conversion). For such purposes,
beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Each delivery of a Holder Conversion Notice
hereunder will constitute a representation by the applicable Holder that it has evaluated the limitation set forth in this paragraph and determined that issuance of the full number of Underlying
Shares issuable in respect of such Conversion Notice does not violate the restriction contained in this paragraph. This provision shall not restrict the number of shares of Common Stock which a Holder
may receive or beneficially own in order to determine the amount of securities or other consideration that such Holder may receive in the event of a merger, sale or other business combination or
reclassification involving the Company as contemplated herein. 

        (iii)  Notwithstanding
anything to the contrary herein, the Company may not request a conversion pursuant to Section 6(b) and Section 6(c) unless the Company
makes such request to all of the Holders on a pro rata basis, based on such Holders then outstanding principal amount of Debentures. 

        7.    Mechanics of Conversion.    

        (a)  The
number of Underlying Shares issuable upon any conversion hereunder shall equal (i) the outstanding principal amount of this Debenture to be converted, divided
by the Conversion Price on the Conversion Date, plus (ii) the amount of any accrued but unpaid interest on this Debenture through the Conversion Date, divided by the Conversion Price on the
Conversion Date. 

        (b)  Upon
conversion of this Debenture, the Company shall promptly (but in no event later than three Trading Days after the Holder Conversion Notice, and in no event later
than one Trading Day after the Company Conversion Date or the Adjustment Date) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or
names as the Holder may designate a certificate for the Underlying Shares issuable upon such conversion, free of restrictive legends. The Holder, or any Person so designated by the Holder to receive
Underlying Shares, shall be deemed to have become holder of record of such Underlying Shares as of the Conversion Date. The Company shall, upon request of the Holder, use its best efforts to deliver
Underlying Shares hereunder electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions. 

        (c)  The
Holder shall not be required to deliver the original Debenture in order to effect a conversion hereunder. Execution and delivery of the Conversion Notice shall have
the same effect as cancellation of the original Debenture and issuance of a New Debenture representing the remaining outstanding principal amount. Upon surrender of this Debenture following one or
more partial conversions, the Company shall promptly deliver to the Holder a New Debenture representing the remaining outstanding principal amount. 

        (d)  The
Company's obligations to issue and deliver Underlying Shares upon conversion of this Debenture in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to
enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other Person, and irrespective of any other 

7

 

circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Underlying Shares. 

        (e)  If
by the third Trading Day after a Conversion Date the Company fails to deliver to the Holder such Underlying Shares in such amounts and in the manner required pursuant
to Section 7, then the Holder will have the right to rescind such conversion by giving written notice to the Company. 

        (f)    If
by the third Trading Day after a Conversion Date the Company fails to deliver to the Holder such Underlying Shares in such amounts and in the manner required pursuant
to Section 7, and if after such third Trading Day the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Holder of
the Underlying Shares which the Holder anticipated receiving upon such conversion (a "Buy-In"), then the Company shall either (i) pay
cash to such Purchaser in an amount equal to such Purchaser's total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the
"Buy-In Price"), at which point the Company's obligation to deliver such certificate (and to issue such Common Stock) shall terminate, or
(ii) promptly honor its obligation to deliver to such Purchaser a certificate or certificates representing such Common Stock and pay cash to such Purchaser in an amount equal to the excess (if
any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the Closing Price on the date of the event giving rise to the Company's
obligation to deliver such certificate. 

        8.    Prepayments    

        (a)    Prepayment at the Option of the Company.    

          (i)  At
any time following the Original Issue Date and prior to the Maturity Date, upon delivery of a written notice to the Holder (a "Company
Prepayment Notice" and the date such notice is delivered by the Company, the "Company Notice Date"), the Company shall be
entitled to prepay a principal amount of Debentures equal to the lesser of (x) the aggregate outstanding principal amount of Debentures then held by the Holder and (y) the principal
amount of Debentures which may be converted without violation of Section 6(d), in either case, for an amount in cash equal to the Company Prepayment Price. Notwithstanding anything herein to
the contrary, the Company shall only be entitled to deliver a Company Prepayment Notice pursuant to the terms hereof if the Equity Conditions are satisfied with respect to all shares of Common Stock
issuable upon a Company Notice Date. If any of the Equity Conditions shall cease to be in effect during the period between the Company Notice Date and the date the Company Prepayment Price is paid in
full, then the Holder subject to such prepayment may elect, by written notice to the Company given at any time after any of the Equity Conditions shall cease to be in effect, to invalidate  ab initio such optional prepayment, notwithstanding anything herein contained to the contrary. The Holder may convert any portion of the
outstanding principal amount of the Debentures subject to a Company Prepayment Notice prior to the date that the Company Prepayment Price is due and paid in full. Once delivered, the Company shall not
be entitled to rescind a Company Prepayment Notice. 

        (ii)  The
Company Prepayment Price shall be due on the 20th Trading Day immediately following the Company Notice Date. Any such prepayment shall be free of any
claim of subordination. If any portion of the Company Prepayment Price shall not be timely paid by the Company, interest shall accrue thereon at the rate of 12% per annum (or the maximum rate
permitted by applicable law, whichever is
less) until the Company Prepayment Price plus all such interest is paid in full, which payment shall constitute liquidated damages and not a penalty. In addition, if any portion of the Company
Prepayment Price remains unpaid after such date, the Holder subject to such prepayment may elect by written notice to the Company 

8

 

to invalidate ab initio such Company Prepayment Notice with respect to the unpaid amount, notwithstanding anything herein contained to the
contrary. If the Holder makes such an election, this Debenture shall be reinstated with respect to such unpaid amount and the Company shall no longer have any prepayment rights under this
Section 8. 

        (iii)  Notwithstanding
anything to the contrary herein, the Company may not elect a prepayment pursuant to Section 8(a)(i) unless the Company makes such prepayment
election to all of the Holders on a pro rata basis, based on such Holders then outstanding principal amount of Debentures. 

        (b)    Prepayment at the Option of the Holder.    

          (i)  Subject
to the following sentence at any time following the Original Issue Date and prior to the Maturity Date, the Holder shall have the right, exercisable at the sole
option of the Holder, and by delivery of a written notice (a "Holder Prepayment Notice" and the date such notice is delivered by the Holder, the
"Holder Notice Date") to the Company, to require the Company to prepay all or a portion of the Debentures then held by the Holder for an amount in cash,
equal to the Holder Prepayment Price which shall be due and payable on the 20th Trading Day following the delivery of the Holder Prepayment Notice by the Holder. Notwithstanding anything
herein to the contrary, the Holder shall only be entitled to deliver a Holder Prepayment Notice pursuant to the terms hereof if: (x) during any consecutive 90 day period following the
Original Issue Date, the Holders of the Debentures or the Company have not converted more than an aggregate of $3,000,000 of the original principal amount of Debentures issued to all Holders on the
Original Issue Date or, (y) on the one year anniversary of the Original Issue Date, the Holders of the Debentures or the Company have not converted more than an aggregate of $7,500,000 of the
original principal amount of Debentures issued to all Holders on the Original Issue Date. 

        (ii)  Any
obligation to pay any Holder Prepayment Price shall be free of any claim of subordination. If any portion of the Holder Prepayment Price shall not be timely paid by
the Company, interest shall accrue thereon at the rate of 12% per annum (or the maximum rate permitted by applicable law, whichever is less) until the Holder Prepayment Price plus all such interest is
paid in full, which payment shall constitute liquidated damages and not a penalty. In addition, if any portion of the Holder Prepayment Price remains unpaid after such date, the Holder subject to such
prepayment may elect by written notice to the Company to invalidate ab initio such Holder Prepayment Notice with respect to the unpaid amount,
notwithstanding anything herein contained to the contrary. If the Holder makes such an election, this Debenture shall be reinstated with respect to such unpaid amount. For purposes of this
Section 8, principal amount of Debentures shall remain outstanding until such date as the Holder shall have received Underlying Shares upon a conversion (or attempted conversion) thereof that
meets the requirements hereof. The Holder may convert any portion of the outstanding principal
amount of the Debentures subject to a prepayment hereunder prior to the date that the Holder Prepayment Price is due and paid in full. 

        9.    Events of Default.    

        (a)  "Event of Default" means any one of the following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body): 

          (i)  any
default in the payment (free of any claim of subordination) of principal, interest or liquidated damages in respect of any Debentures, as and when the same becomes
due and 

9

 

payable (whether on a Conversion Date or the Maturity Date or by acceleration or prepayment or otherwise); 

        (ii)  the
Company or any Subsidiary defaults in any of its obligations under any other debenture or any mortgage, credit agreement or other facility, indenture agreement,
factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money or money due under any long term leasing or
factoring arrangement of the Company or any Subsidiary in an amount exceeding $500,000, whether such indebtedness now exists or is hereafter created, and such default results in such indebtedness
becoming or being declared due and payable prior to the date on which it would otherwise become due and payable; 

        (iii)  the
occurrence of a Triggering Event; 

        (iv)  the
occurrence of a Change of Control transaction; 

        (v)  the
Company defaults in the timely performance of any other obligation under the Transaction Documents and such default continues uncured for a period of five Trading
Days after the date on which written notice of such default is first given to the Company by the Holder (it being understood that no prior notice need be given in the case of a default that cannot
reasonably be cured within five Trading Days); or 

        (vi)  either:
(A) the Letter of Credit shall be revoked, withdrawn, terminated or disaffirmed by the Bank or (B) the Holder shall have received notification
from the Bank pursuant to the Letter of Credit that
the Letter of Credit shall not be renewed and 30 days shall have elapsed since the delivery of such notification. 

        (b)  At
any time or times following the occurrence of an Event of Default, the Holder shall have the option to elect, by notice to the Company (an
"Event Notice"), to require the Company to repurchase all or any portion of the outstanding principal amount of this Debenture, at a repurchase price
equal to the greater of (A) 115% of such outstanding principal amount, plus all accrued but unpaid interest thereon through the date of payment, or (B) the Event Equity Value of the
Underlying Shares issuable upon conversion of such principal amount and all such accrued but unpaid interest thereon. The aggregate amount payable pursuant to the preceding sentence is referred to as
the "Event Price." The Company shall pay the aggregate Event Price to the Holder no later than the third Trading Day following the date of delivery of
the Event Notice, and upon receipt thereof the Holder shall deliver the original Debenture and original certificates evidencing any Underlying Shares so repurchased to the Company (to the extent such
documents have been delivered to the Holder). 

        (c)  Upon
the occurrence of any Bankruptcy Event, all outstanding principal and accrued but unpaid interest on this Debenture shall immediately become due and payable in full
in cash, without any further action by the Holder, and the Company shall immediately be obligated to repurchase this Debenture and all such Underlying Shares at the Event Price pursuant to the
preceding paragraph as if the Holder had delivered an Event Notice immediately prior to the occurrence of such Bankruptcy Event. 

        (d)  In
connection with any Event of Default, the Holder need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind, and the
Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Any such
declaration may be rescinded and annulled by the Holder at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right
consequent thereto. 

10

   
        10.    Ranking.    This Debenture ranks pari passu with all other Debentures now or hereafter issued pursuant to
the
Transaction Documents. No indebtedness of the Company is senior to this Debenture in right of payment, whether with respect of interest, damages or upon liquidation or dissolution or otherwise. The
Company will not, and will not permit any Subsidiary to, directly or indirectly, enter into, create, incur, assume or suffer to exist any indebtedness of any kind, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom, that is senior in any respect to the Company's obligations under the Debentures. 

        11.    Charges, Taxes and Expenses.    Issuance of certificates for Underlying Shares upon conversion of (or otherwise
in respect of) this Debenture shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the
issuance of such certificate, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the registration of any certificates for Underlying Shares or Debentures in a name other than that of the Holder. The Holder shall be responsible for all other tax liability
that may arise as a result of holding or transferring this Debenture or receiving Underlying Shares in respect hereof. 

        12.    Reservation of Underlying Shares.    The Company covenants that it will at all times reserve and keep available
out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Underlying Shares as required hereunder, the number of
Underlying Shares which are then issuable and deliverable upon the conversion of (and otherwise in respect of) this entire Debenture (taking into account the adjustments of  Section 13), free from
preemptive rights or any other contingent purchase rights of persons other than the Holder. The Company covenants that all
Underlying Shares so issuable and deliverable shall, upon issuance in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. The Company covenants
that it shall keep the Registration Statement continuously effective until the Maturity Date. 

        13.    Certain Adjustments.    The Conversion Price is subject to adjustment from time to time as set forth in this  Section 13. 

        (a)    Stock Dividends and Splits.    If the Company, at any time while this Debenture is outstanding, (i) pays
a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common
Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number
of shares, then in each such case the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event
and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become
effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this
paragraph shall become effective immediately after the effective date of such subdivision or combination. 

        (b)    Pro Rata Distributions.    If the Company, at any time while this Debenture is outstanding, distributes to all
holders of Common Stock (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or
warrants to subscribe for or purchase any security, or (iv) any other asset (in each case, "Distributed Property"), then, at the request of the
Holder delivered before the 90th day after the record date fixed for determination of stockholders entitled to receive such distribution, the Company will deliver to the Holder, within five Trading
Days after such request (or, if later, on the effective date of such distribution), the Distributed Property that the Holder would have been 

11

 

entitled to receive in respect of the Underlying Shares for which this Debenture could have been converted immediately prior to such record date. If such Distributed Property is not delivered to the
Holder pursuant to the preceding sentence, then upon any conversion of this Debenture that occurs after such record date, the Holder shall be entitled to receive, in addition to the Underlying Shares
otherwise issuable upon such conversion, the Distributed Property that the Holder would have been entitled to receive in respect of such number of Underlying Shares had the Holder been the record
holder of such Underlying Shares immediately prior to such record date. 

        (c)    Fundamental Transactions.    If, at any time while this Debenture is outstanding, (i) the Company
effects any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related
transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange
their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stock covered by Section 13(a) above)
(in any such case, a "Fundamental Transaction"), then upon any subsequent conversion of this Debenture, the Holder shall have the right to receive, for
each Underlying Share that would have been issuable upon such conversion absent such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to
receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the
"Alternate Consideration"). For purposes of any such conversion, the Company shall apportion the Conversion Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Debenture following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new debenture
consistent with the foregoing provisions and evidencing the Holder's right to
convert such debenture into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving
entity to comply with the provisions of this paragraph (c) and insuring that this Debenture (or any such replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction. 

        (d)    Subsequent Equity Sales.    

          (i)  If,
at any time while this Debenture is outstanding, the Company or any Subsidiary issues additional shares of Common Stock or rights, warrants, options or other
securities or debt convertible, exercisable or exchangeable for shares of Common Stock or otherwise entitling any Person to acquire shares of Common Stock (collectively,
"Common Stock Equivalents") at an effective net price to the Company per share of Common Stock (the "Effective
Price") less than the Conversion Price (as adjusted hereunder to such date), then the Conversion Price shall be reduced to equal the Effective Price. For purposes of this
paragraph, in connection with any issuance of any Common Stock Equivalents, (A) the maximum number of shares of Common Stock potentially issuable at any time upon conversion, exercise or
exchange of such Common Stock Equivalents (the "Deemed Number") shall be deemed to be outstanding upon issuance of such Common Stock Equivalents,
(B) the Effective Price applicable to such Common Stock shall equal the minimum dollar value of 

12

 

consideration payable to the Company to purchase such Common Stock Equivalents and to convert, exercise or exchange them into Common Stock (net of any discounts, fees, commissions and other
expenses), divided by the Deemed Number, and (C) no further adjustment shall be made to the Conversion Price upon the actual issuance of Common Stock upon conversion, exercise or exchange of
such Common Stock Equivalents. 

        (ii)  If,
at any time while this Debenture is outstanding, the Company or any Subsidiary issues Common Stock Equivalents with an Effective Price or a number of underlying
shares that floats or resets or otherwise varies or is subject to adjustment based (directly or indirectly) on market prices of the Common Stock (a "Floating Price
Security"), then for purposes of applying the preceding paragraph in connection with any subsequent conversion, the Effective Price will be determined separately on each
Conversion Date and will be deemed to equal the lowest Effective Price at which any holder of such Floating Price Security is entitled to acquire Common Stock on such Conversion Date (regardless of
whether any such holder actually acquires any shares on such date). 

        (iii)  Notwithstanding
the foregoing, no adjustment will be made under this paragraph (d) in respect of (A) the issuance of Common Stock upon exercise or
conversion of any Common Stock Equivalents described in Schedule 3.1(m) to the Purchase Agreement (provided that such exercise or conversion
occurs in accordance with the terms thereof, without amendment or modification, and that the applicable exercise or conversion price or ratio is described in such schedule), (B) any grant of
options to employees, officers or directors of the Company pursuant to any stock option plan duly adopted by the Company's board of directors or in respect of the issuance of Common Stock upon
exercise of any such options, (C) issuances of Common Stock or Common Stock Equivalents in connection with strategic transactions not significantly for the purpose of raising capital,
(D) issuances of Common Stock
Equivalents upon the conversion of any Warrant, Debenture or other Common Stock Equivalent outstanding on the date hereof, (E) any Common Stock or Common Stock Equivalents issued to pay all or
a portion of any investment banking, finders or similar fee or commission, which entitles the.holders thereof to acquire shares of Common Stock at a price not less than the market price of the Common
Stock on the date of such issuance and which is not subject to any adjustments other than on account of stock splits and reverse stock splits, or (F) any conversion or adjustment to the
Conversion Price pursuant to Section 6(c). 

        (e)    Reclassifications; Share Exchanges.    In case of any reclassification of the Common Stock, or any compulsory
share exchange pursuant to which the Common Stock is converted into other securities, cash or property (other than compulsory share exchanges which constitute Change of Control transactions), the
Holders of the Debentures then outstanding shall have the right thereafter to convert such shares only into the shares of stock and other securities, cash and property receivable upon or deemed to be
held by holders of Common Stock following such reclassification or share exchange, and the Holders shall be entitled upon such event to receive such amount of securities, cash or property as a holder
of the number of shares of Common Stock of the Company into which such shares of Debentures could have been converted immediately prior to such reclassification or share exchange would have been
entitled. This provision shall similarly apply to successive reclassifications or share exchanges. 

        (f)    Calculations.    All calculations under this Section 13  shall be made to the nearest cent or the nearest 1/100th of a
share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock. 

        (g)    Notice of Adjustments.    Upon the occurrence of each adjustment pursuant to this  Section 13, the Company at its
expense will promptly compute such adjustment in accordance with 

13

 

the terms hereof and prepare a certificate describing in reasonable detail such adjustment and the transactions giving rise thereto, including all facts upon which such adjustment is based. Upon
written request, the Company will promptly deliver a copy of each such certificate to the Holder. 

        (h)    Notice of Corporate Events.    If the Company (i) declares a dividend or any other distribution of cash,
securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any
Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary
dissolution, liquidation or winding up of the affairs of the Company, then the Company shall deliver to the Holder a notice describing the material terms and conditions of such transaction, at least
20 calendar days prior to the applicable record or effective date on which a Person would need to hold Common Stock in order to participate in or vote with respect to such transaction, and the Company
will take all steps reasonably necessary in order to insure that the Holder is given the practical opportunity to convert this Debenture prior to such time so as to participate in or vote with respect
to such transaction; provided, however, that the
failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice. 

        14.    Fractional Shares.    The Company shall not be required to issue or cause to be issued fractional Underlying
Shares on conversion of this Debenture. If any fraction of an Underlying Share would, except for the provisions of this Section, be issuable upon conversion of this Debenture, the number of Underlying
Shares to be issued will be rounded up to the nearest whole share. 

        15.    Notices.    Any and all notices or other communications or deliveries hereunder (including without limitation
any Conversion Notice) 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 Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day,
(iii) the Trading 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 addresses for such communications shall be: (i) if to the Company, to 800 Miramonte Drive, Santa Barbara, California 93109, facsimile: (805) 899-3517,
attention Chief Financial Officer, or (ii) if to the Holder, to the address or facsimile number appearing on the Company's stockholder records or such other address or facsimile number as the
Holder may provide to the Company in accordance with this Section. 

        16.    Miscellaneous.    

        (a)  This
Debenture shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. This Debenture may be amended only in
writing signed by the Company and the Holder and their successors and assigns. 

        (b)  Subject
to Section 16(a), above, nothing in this Debenture shall be construed to give to any person or corporation
other than the Company and the Holder any legal or equitable right, remedy or cause under this Debenture. This Debenture shall inure to the sole and exclusive benefit of the Company and the Holder. 

        (c)    GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL.    THE CORPORATE LAWS OF THE STATE OF
DELAWARE SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS
DEBENTURE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW 

14

 

YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH PARTY 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 THE TRANSACTION DOCUMENTS), 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 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. THE COMPANY HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.

        (d)  The
headings herein are for convenience only, do not constitute a part of this Debenture and shall not be deemed to limit or affect any of the provisions hereof. 

        (e)  In
case any one or more of the provisions of this Debenture shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and
provisions of this Debenture shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Debenture. 

        (f)    In
the event of any stock split, subdivision, dividend or distribution payable in shares of Common Stock (or other securities or rights convertible into, or entitling
the holder thereof to receive directly or indirectly shares of Common Stock), combination or other similar recapitalization or event occurring after the date hereof, each reference in this Debenture
to a price shall be amended to appropriately account for such event. 

        (g)  No
provision of this Debenture may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and the Holder or, or, in the
case of a waiver, by the Holder. No waiver of any default with respect to any provision, condition or requirement of this Debenture shall be deemed to be a continuing waiver in the future or a waiver
of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the
exercise of any such right. 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOLLOWS] 

15

 

        IN
WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by a duly authorized officer as of the date first above indicated. 

	 	 	EARTHSHELL CORPORATION
	

 	
 	

By:	

    

	 	 	 	Name:	 
	 	 	 	Title:	 

16

 
 

EXHIBIT A    
    
    HOLDER CONVERSION NOTICE    
  

(To
be Executed by the Registered Holder

in order to convert Debentures) 

        The
undersigned hereby elects to convert the principal amount of Debenture indicated below, into shares of Common Stock of EarthShell Corporation, as of the date written below. If shares
are to be issued in the name of a Person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be charged to the Holder for any conversion, except for such transfer taxes, if any. All terms used in this notice shall have
the meanings set forth in the Debenture. 

	Conversion calculations:	 	    
 Date to Effect Conversion
	

 	
 	

    
 Principal amount of Debenture owned prior to conversion
	

 	
 	

    
 Principal amount of Debenture to be Converted

(including                        of interest added under Section 3(c) of the Debenture)
	

 	
 	

    
 Principal amount of Debenture remaining after Conversion
	

 	
 	

    
 Number of shares of Common Stock to be Issued
	

 	
 	

    
 Applicable Conversion Price
	

 	
 	

    
 Name of Holder
	

 	
 	

By:	

    
 Name:

Title:

	

o	

By the delivery of this Conversion Notice the Holder represents and warrants to the Company that its ownership of the Common Stock does not exceed the restrictions set forth in Section 6(d) of the Debenture.

 
 
 

EXHIBIT B    
    
    COMPANY CONVERSION NOTICE    
  

(To
be executed by the Company

in order to convert the Debenture) 

        The
undersigned in the name and on behalf of EarthShell Corporation, hereby elects to convert the principal amount of Debenture indicated below, into shares of Common Stock of EarthShell
Corporation, as of the date written below. If shares are to be issued in the name of a Person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the Holder for any conversion, except for such transfer
taxes, if any. All terms used in this notice shall have the meanings set forth in the Debenture. 

	Conversion calculations:	 	    
 Date to Effect Conversion
	

 	
 	

    
 Principal amount of Debenture owned prior to conversion
	

 	
 	

    
 Principal amount of Debenture to be Converted

(including                        of interest added under Section 3(b) of the Debenture)
	

 	
 	

    
 Principal amount of Debenture remaining after Conversion
	

 	
 	

    
 Number of shares of Common Stock to be Issued
	

 	
 	

    
 Applicable Conversion Price
	

 	
 	

    
 Name of Holder
	

 	
 	

By:	

    
 Name:

Title:
	

 	
 	

EARTHSHELL CORPORATION
	

 	
 	

By:	

    
 Name:

Title:

2

 
 
 

Schedule 1    
    
    CONVERSION SCHEDULE    
  

        Secured Convertible Debentures due on the five year anniversary of the Original Issue Date in the aggregate principal amount of
$[    ] issued by EarthShell Corporation This Conversion Schedule reflects conversions made under the above referenced Debentures. 

Dated:

	Date of Conversion
 
	 	Amount of Conversion
	 	Aggregate Principal

Amount Remaining

Subsequent to

Conversion
	 	Applicable Conversion Price

	    	 	 	 	 	 	 
	    	 	 	 	 	 	 
	    	 	 	 	 	 	 
	    	 	 	 	 	 	 
	    	 	 	 	 	 	 
	    	 	 	 	 	 	 
	    	 	 	 	 	 	 
	    	 	 	 	 	 	 
	    	 	 	 	 	 	 
	    	 	 	 	 	 	 
	    	 	 	 	 	 	 
	    	 	 	 	 	 	 
	    	 	 	 	 	 	 
	    	 	 	 	 	 	 
	    	 	 	 	 	 	 

3

QuickLinks

Exhibit 4.2

EARTHSHELL CORPORATION SECURED CONVERTIBLE DEBENTURE DUE AUGUST 12, 2007

EXHIBIT A HOLDER CONVERSION NOTICE

EXHIBIT B COMPANY CONVERSION NOTICE

Schedule 1 CONVERSION SCHEDULEQuickLinks
 -- Click here to rapidly navigate through this document

 
 

Exhibit 4.3    
  

 
 

EARTHSHELL CORPORATION    
    
    WARRANT    
  

	Warrant No. [    ]	 	Dated: August 12, 2002

        EarthShell
Corporation, a Delaware corporation (the "Company"), hereby certifies that, for value received, [Name of
Holder] or its registered assigns (the "Holder"), is entitled to purchase from the Company up to a total of
[            ](1) shares of common stock, $0.01 par value per share (the "Common Stock"), of the Company (each such share, a
"Warrant Share" and all such shares, the "Warrant Shares") at an exercise price equal to $1.20 per share
(as adjusted from time to time as provided in Section 9, the "Exercise Price"), at any time and
from time to time from and after the date hereof and through and including the date that is five years from the date of issuance hereof (the "Expiration
Date"), and subject to the following terms and conditions. This Warrant (this "Warrant") is one of a series of similar warrants
issued pursuant to that certain Securities Purchase Agreement, dated as of
the date hereof, by and among the Company and the Purchasers identified therein (the "Purchase Agreement"). All such warrants are referred to herein,
collectively, as the "Warrants." 

	(1)
	Equal
to 25% (aggregate) warrant coverage 

        1.    Definitions.    In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not
otherwise defined herein have the meanings given to such terms in the Purchase Agreement. 

        2.    Registration of Warrant.    The Company shall register this Warrant, upon records to be maintained by the
Company for that purpose (the "Warrant Register"), in the name of the record Holder hereof from time to time. The Company may deem and treat the
registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the
contrary. 

        3.    Registration of Transfers.    The Company shall register the transfer of any portion of this Warrant in the
Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Transfer Agent or to the Company at its address specified herein. Upon
any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a "New
Warrant"), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so
transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and
obligations of a holder of a Warrant. 

        4.    Exercise and Duration of Warrant.    

        (a)  This
Warrant shall be exercisable by the registered Holder at any time and from time to time on or after the date hereof to and including the Expiration Date; provided,
however, that the Expiration Date shall be extended for each day (i) the Registration Statement is not effective, or (ii) the Company fails to have a sufficient number of authorized but
unissued and otherwise unreserved shares of Common Stock available to issue Warrant Shares upon exercise of the Warrant. At 6:30 P.M., New York City time on the Expiration Date, the portion of
this Warrant not exercised prior thereto shall be and become void and of no value. 

        (b)  A
Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in the form attached hereto (the "Exercise
Notice"), appropriately completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised
(which may take the form of a "cashless exercise" if so indicated in the Exercise Notice and if a "cashless
exercise" may occur at such time pursuant to Section 10 below), and the date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an
"Exercise Date." The Holder shall not be required to deliver the original 

 

Warrant in order to effect an exercise hereunder. Execution and delivery of the Exercise Notice shall have the same effect as cancellation of the original Warrant and issuance of a New Warrant
evidencing the right to purchase the remaining number of Warrant Shares. 

        (c)  The
Company shall (i) keep the Registration Statement continuously effective until the Expiration Date (including such day), and (ii) have a sufficient
number of authorized but unissued and otherwise unreserved shares of Common Stock available to issue Warrant Shares upon exercise of the Warrant. 

        5.    Delivery of Warrant Shares.    

        (a)  Upon
exercise of this Warrant, the Company shall promptly (but in no event later than three Trading Days after the Exercise Date) issue or cause to be issued and cause
to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate for the Warrant Shares issuable upon such exercise, free of restrictive
legends. If the Holder provides or previously provided the necessary account information to the Company, the Company shall issue and deliver such Warrant Shares in a balance account of the Holder with
the Depository Trust Company through its Deposit Withdrawal Agent Commission System. The Holder, or any Person so designated by the Holder to receive Warrant Shares, shall be deemed to have become
holder of record of such Warrant Shares as of the Exercise Date. The Company shall, upon request of the Holder, use commercially reasonable efforts to deliver Warrant Shares hereunder electronically
through the Depository Trust Corporation or another established clearing corporation performing similar functions. 

        (b)  This
Warrant is exercisable, either in its entirety or, from time to time, for a portion of the number of Warrant Shares. Upon surrender of this Warrant following one or
more partial exercises, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares. 

        (c)  In
addition to any other rights available to the Holder, if the Company fails to deliver to the Holder a certificate representing Warrant Shares by the third Trading Day
after the date on which delivery of such certificate is required by this Warrant, and if after such third Trading Day the Holder purchases (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares that the Holder anticipated receiving from the Company (a
"Buy-In"), then the Company shall, within three Trading Days after the Holder's request and in the Holder's discretion, either
(i) pay cash to the Holder in an amount equal to the Holder's total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased less the Exercise Price
(the "Buy-In Price"), at which point the Company's obligation to deliver such certificate (and to issue such Common Stock) shall terminate,
or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Common Stock and pay cash to the Holder in an amount equal to the excess (if any)
of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the Closing Price on the date of the event giving rise to the Company's
obligation to deliver such certificate. 

        (d)  The
Company's obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction
by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by
the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares.
Nothing herein shall limit the Holder's right to pursue any other remedies available to it 

2

 

hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company's failure to timely deliver certificates
representing shares of Common Stock upon exercise of this Warrant as required pursuant to the terms hereof. 

        6.    Charges, Taxes and Expenses.    Issuance and delivery of certificates for shares of Common Stock upon exercise
of this Warrant shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer
involved in the registration of any certificates for Warrant Shares or Warrant in a name other than that of the Holder or an Affiliate thereof. The Holder shall be responsible for all other tax
liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof. 

        7.    Replacement of Warrant.    If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. Applicants for a New Warrant under such circumstances shall also comply with such
other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. 

        8.    Reservation of Warrant Shares.    The Company covenants that it will at all times reserve and keep available out
of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein
provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons
other than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares so
issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and
nonassessable. The Company will take all such action as may be necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of any securities exchange or automated quotation system upon which the Common Stock may be listed. 

        9.    Certain Adjustments.    The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant
are subject to adjustment from time to time as set forth in this Section 9. 

        (a)    Stock Dividends and Splits.    If the Company, at any time while this Warrant is outstanding, (i) pays a
stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock
into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders
entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such
subdivision or combination. 

        (b)    Pro Rata Distributions.    If the Company, at any time while this Warrant is outstanding, distributes to
holders of Common Stock (i) evidences of its indebtedness, (ii) any security (other 

3

 

than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each case,
"Distributed Property"), then in each such case the Exercise Price in effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution (and the Exercise Price thereafter applicable) shall be adjusted (effective on and after such record date) to equal the product of such Exercise
Price times a fraction of which the denominator shall be the average of the Closing Prices for the five Trading Days immediately prior to (but not including) such record date and of which the
numerator shall be such average less the then fair market value of the Distributed Property distributed in respect of one outstanding share of Common Stock, as determined by the Company's independent
certified public accountants that regularly examine the financial statements of the Company (an "Appraiser"). In such event, the Holder, after receipt
of the determination by the Appraiser, shall have the right to select an additional appraiser (which shall be a nationally recognized accounting firm), in which case such fair market value shall be
deemed to equal the average of the values determined by each of the Appraiser and such appraiser. As an alternative to the foregoing adjustment to the Exercise Price, at the request of the Holder
delivered before the 90th day after such record date, the Company will deliver to the Holder, within five Trading Days after such request (or, if later, on the effective date of such distribution),
the Distributed Property that the Holder would have been entitled to receive in
respect of the Warrant Shares for which this Warrant could have been exercised immediately prior to such record date. If such Distributed Property is not delivered to a Holder pursuant to the
preceding sentence, then upon expiration of or any exercise of the Warrant that occurs after such record date, such Holder shall remain entitled to receive, in addition to the Warrant Shares otherwise
issuable upon such exercise (if applicable), such Distributed Property. 

        (c)    Fundamental Transactions.    If, at any time while this Warrant is outstanding, (i) the Company effects
any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions,
(iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stock covered by Section 9(a) above) (in any such
case, a "Fundamental Transaction"), then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind
of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the
holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant (the "Alternate Consideration"). The aggregate Exercise Price
for this Warrant will not be affected by any such Fundamental Transaction, but the Company shall apportion such aggregate Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a
Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. At the
Holder's request, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the
Holder's right to purchase the Alternate Consideration for the aggregate Exercise Price upon exercise thereof. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall
include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (c) and insuring that the Warrant (or any such replacement security) will be
similarly adjusted upon any 

4

 

subsequent transaction analogous to a Fundamental Transaction. If any Fundamental Transaction constitutes or results in a Change of Control, then at the request of the Holder delivered before the
90th day after such Fundamental Transaction, the Company (or any such successor or surviving entity) will purchase the Warrant from the Holder for a purchase price, payable in cash within five Trading
Days after such request (or, if later, on the effective date of the Fundamental Transaction), equal to the Black Scholes value of the remaining unexercised portion of this Warrant on the date of such
request. 

        (d)    Subsequent Equity Sales.    

          (i)  If,
at any time while this Warrant is outstanding, the Company or any Subsidiary issues additional shares of Common Stock or rights, warrants, options or other
securities or debt convertible, exercisable or exchangeable for shares of Common Stock or otherwise entitling any Person to acquire shares of
Common Stock (collectively, "Common Stock Equivalents") at an effective net price to the Company per share of Common Stock (the
"Effective Price") less than the Exercise Price (as adjusted hereunder to such date), then the Exercise Price shall be reduced to equal the Effective
Price. For purposes of this paragraph, in connection with any issuance of any Common Stock Equivalents, (A) the maximum number of shares of Common Stock potentially issuable at any time upon
conversion, exercise or exchange of such Common Stock Equivalents (the "Deemed Number") shall be deemed to be outstanding upon issuance of such Common
Stock Equivalents, (B) the Effective Price applicable to such Common Stock shall equal the minimum dollar value of consideration payable to the Company to purchase such Common Stock Equivalents
and to convert, exercise or exchange them into Common Stock (net of any discounts, fees, commissions and other expenses), divided by the Deemed Number, and (C) no further adjustment shall be
made to the Exercise Price upon the actual issuance of Common Stock upon conversion, exercise or exchange of such Common Stock Equivalents. 

        (ii)  If,
at any time while this Warrant is outstanding, the Company or any Subsidiary issues Common Stock Equivalents with an Effective Price or a number of underlying
shares that floats or resets or otherwise varies or is subject to adjustment based (directly or indirectly) on market prices of the Common Stock (a "Floating Price
Security"), then for purposes of applying the preceding paragraph in connection with any subsequent exercise, the Effective Price will be determined separately on each Exercise
Date and will be deemed to equal the lowest Effective Price at which any holder of such Floating Price Security is entitled to acquire Common Stock on such Exercise Date (regardless of whether any
such holder actually acquires any shares on such date). 

        (iii)  Notwithstanding
the foregoing, no adjustment will be made under this paragraph (d) in respect of (A) the issuance of Common Stock upon exercise or
conversion of any Common Stock Equivalents described in Schedule 3.1(m) to the Purchase Agreement (provided that such exercise or conversion
occurs in accordance with the terms thereof, without amendment or modification, and that the applicable exercise or conversion price or ratio is described in such schedule), (B) any grant of
options to employees, officers or directors of the Company pursuant to any stock option plan duly adopted by the Company's board of directors or in respect of the issuance of Common Stock upon
exercise of any such options, or (C) strategic transactions not significantly for the purpose of raising capital. 

        (e)    Reclassifications; Share Exchanges.    In case of any reclassification of the Common Stock, or any compulsory
share exchange pursuant to which the Common Stock is converted into other securities, cash or property (other than compulsory share exchanges which constitute Change of Control transactions), the
Holder of this Warrant then outstanding shall have the right thereafter to exercise such Warrant Shares only into the shares of stock and other securities, cash and 

5

 

property receivable upon or deemed to be held by holders of Common Stock following such reclassification or share exchange, and the Holders shall be entitled upon such event to receive such amount of
securities, cash or property as a holder of the number of shares of Common Stock of the Company into which such Warrant Shares could have been exercised immediately prior to such reclassification or
share exchange would have been entitled. This provision shall similarly apply to successive reclassifications or share exchanges. 

        (f)    Number of Warrant Shares.    Simultaneously with any adjustment to the Exercise Price pursuant to
paragraphs (a), (b) or (d) of this Section, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such
adjustment the aggregate Exercise Price payable hereunder for the increased or decreased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such
adjustment. 

        (g)    Calculations.    All calculations under this Section 9  shall be made to the nearest cent or the nearest 1/100th of a
share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock. 

        (h)    Notice of Adjustments.    Upon the occurrence of each adjustment pursuant to this  Section 9, the Company at its expense
will promptly compute such adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant
(as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly
deliver a copy of each such certificate to the Holder and to the Company's Transfer Agent. 

        (i)    Notice of Corporate Events.    If the Company (i) declares a dividend or any other distribution of cash,
securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any
Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary
dissolution, liquidation or winding up of the affairs of the Company, then the Company shall deliver to the Holder a notice describing the material terms and conditions of such transaction, at least
20 calendar days prior to the applicable record or effective date on which a Person would need to hold Common Stock in order to participate in or vote with respect to such transaction, and the Company
will take all steps reasonably necessary in order to insure that the Holder is given the practical opportunity to exercise this Warrant prior to such time so as to participate in or vote with respect
to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice. 

        10.    Payment of Exercise Price.    The Holder shall pay the Exercise Price in immediately available funds; provided,
however, if the Registration Statement is not continuously effective through the Expiration Date, the Holder may satisfy its obligation to pay the Exercise Price through a "cashless 

6

 

exercise," in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows: 

	 	 	X = Y [(A-B)/A]
	where:	 	 
	 	 	X = the number of Warrant Shares to be issued to the Holder.
	

 	
 	

Y = the number of Warrant Shares with respect to which this Warrant is being exercised.
	

 	
 	

A = the average of the Closing Prices for the five Trading Days immediately prior to (but not including) the Exercise Date.
	

 	
 	

B = the Exercise Price.

        For
purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall
be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued pursuant to the Purchase
Agreement. 

        11.    Call Right.    

        (a)  Subject
to the provisions of this Section 11, if after the date hereof the VWAP of the Company's Common Stock on the Nasdaq National Market is equal to or greater
than $1.50 (as adjusted for any stock splits, stock combinations, stock dividends and other similar events) (the "Threshold I Price") for any
twenty (20) consecutive Trading Days, then the Company shall have the right, but not the obligation (the "Call Right"), on five
(5) Trading Days prior written notice to the Holder, to cancel any unexercised portion of this Warrant for which an Exercise Notice has not yet been delivered (the "Call
Amount"). 

        (b)  To
exercise this Call Right, the Company shall deliver to the Holder an irrevocable written notice (a "Call Notice"),
indicating the Call Amount. The date that the Company delivers the Call Notice to the Holder shall be referred to as the "Call Date." Within five
(5) Trading Days of receipt of the Call Notice, and provided that the Holder is permitted to exercise this Warrant pursuant to Section 4(a) above, the Holder may exercise this Warrant in
whole or in part in accordance with Section 4(b) above. Any portion of the Call Amount that is not exercised by 6:30 p.m. (New York City time) on the fifth (5th) day
following the date of receipt of the Call Notice (the "Cancellation Date") shall be cancelled. Any unexercised portion of this Warrant to which the Call
Notice does not pertain (the "Remaining Portion") will be unaffected by such Call Notice. The Company covenants and agrees that it will honor any
Exercise Notice with respect to the Call Amount that is tendered to the Company from the time of delivery of the Call Notice through and including 6:30 p.m. (New York City time) on the
Cancellation Date. 

        (c)  Notwithstanding
anything to the contrary set forth in this Warrant, the Company may not deliver a Call Notice or require the cancellation of any unexercised Call Amount
(and any Call Notice will be void), unless from the beginning of the twenty (20) consecutive Trading Days used to determine whether the Common Stock has achieved the Threshold I Price through
the date on which the Holder exercises the Call Amount (the "Call Period") (i) the Company shall have honored in accordance with the terms of
this Warrant any Exercise Notice delivered by 6:30 p.m. (New York City time) on the Cancellation Date, (ii) the Equity Conditions shall be satisfied with respect to all shares of Common
Stock, and (iii) Section 15 would not at such time limit the ability of the Holder to exercise this Warrant in full. 

7

  

        (d)  Notwithstanding
anything to the contrary herein, the Company may not exercise its Call Right pursuant to Section 11(a) unless the Company exercises such Call
Right to all of the Holders on a pro rata basis, based on such Holders then unexercised portion of Warrants. 

        (e)  Upon
the earlier of (i) the exercise of the Warrant pursuant to the Call Notice in Section 11(b) or (ii) the Cancellation Date, the Company shall
issue and deliver to the Holder an Exchange Warrant (the "Exchange Warrant") entitling the Holder to purchase up to such number of shares of Common
Stock equal to the Call Amount and containing the same terms and conditions as this Warrant except that the "Exercise Price" for the Exchange Warrant shall equal 120% of the Closing Price of the
Company's Common Stock on the Call Date. If the Company fails to deliver an Exchange Warrant when due under this Section 11(e), the Call Notice issued pursuant to the Company's right under
Section 11(b) shall be void and of no effect. 

        12.    Cancellation Right.    

        (a)  Subject
to the provisions of this Section 12, at any time prior to the Expiration Date, upon delivery of a written notice to the Holder (a
"Company Cancellation Notice" and the date such notice is delivered by the Company, the "Company Cancellation
Date"), the Company shall be entitled to purchase from the Holder any unexercised portion of this Warrant for an amount in cash equal to the Company Cancellation Price (as
defined below). Notwithstanding anything herein to the contrary, the Company shall only be entitled to deliver a Company Cancellation Notice pursuant to the terms hereof if the Equity Conditions are
satisfied with respect to all shares of Common Stock and Section 15 would not at such time limit the ability of the Holder to exercise this Warrant in full. If any of the Equity Conditions
shall cease to be in effect during the period between the Company Cancellation Date and the date the Company Cancellation Price is paid in full, then the Holder subject to such cancellation may elect,
by written notice to the Company given at any time after any of the Equity Conditions shall cease to be in effect, to invalidate ab initio such
cancellation, notwithstanding anything herein contained to the contrary. The Holder may convert any unexercised portion of this Warrant subject to a Company Cancellation Notice prior to the date that
the Company Cancellation Price is due and paid in full. Once delivered, the Company shall not be entitled to rescind a Company Cancellation Notice. 

        (b)  The
Company Cancellation Price shall be due on the 20th Trading Day immediately following the Company Cancellation Date. Any such cancellation payment
shall be free of any claim of subordination. If any portion of the Company Cancellation Price shall not be timely paid by the Company, interest shall accrue thereon at the rate of 12% per annum (or
the maximum rate permitted by applicable law, whichever is less) until the Company Cancellation Price plus all such interest is paid
in full, which payment shall constitute liquidated damages and not a penalty. In addition, if any portion of the Company Cancellation Price remains unpaid after such date, the Holder subject to such
cancellation may elect by written notice to the Company to invalidate ab initio such Company Cancellation Notice with respect to the unpaid
amount, notwithstanding anything herein contained to the contrary. If the Holder makes such an election, this Warrant shall be reinstated with respect to such unpaid amount and the Company shall no
longer have any cancellation rights under this Section 12. 

        (c)  Notwithstanding
anything to the contrary herein, the Company may not elect a cancellation pursuant to Section 12(a)(i) unless the Company delivers the applicable
cancellation request to all of the Holders on a pro rata basis, based on such Holders then unexercised portion of Warrants. 

        (d)  For
the purposes of this Section 12, "Company Cancellation Price" shall mean the closing price of the Black
Scholes value on the date of the Company Cancellation Notice as calculated and reported by Bloomberg L.P., or a successor performing similar functions, using the warrant option valuation
function and computed on a 365 day volatility. 

8

 

        13.    Automatic Cancellation.    

        (a)  Subject
to the provisions of this Section 13, if, at any time prior to January 31, 2003, the Company has delivered one or more Company Prepayment Notices
(as defined in the Debenture) with respect to an aggregate of $5,000,000 or more of the original principal amount of Debentures issued to all Holders on the Original Issue Date (as defined in the
Debenture), then the Company shall be entitled to cancel the Holder's right to purchase under this Warrant the lesser of (i) the number of Warrant Shares then issuable upon exercise of this
Warrant, and (ii)     Warrant Shares(2). The Company shall deliver to the Holder advance written notice in no event less than 20 Trading Days prior to its election to exercise its
cancellation right under this Section 13(a). The Holder may convert any unexercised portion of this Warrant prior to the effective date of the cancellation. 

	(2)
	20%
of initial Warrant Shares 

        (b)  Notwithstanding
anything to the contrary herein, the Company may not elect a cancellation pursuant to Section 13(a) unless the Company delivers such cancellation
request to all of the Holders. In addition, the Company shall only be entitled to deliver a cancellation notice pursuant to Section 13(a) if the Equity Conditions are satisfied with respect to
all shares of Common Stock and Section 15 would not at such time limit the ability of the Holder to exercise this Warrant in full. If any of the Equity Conditions shall cease to be in effect
during the period between the Company cancellation notice and
the effective date of the cancellation, then the Holder subject to such cancellation may elect, by written notice to the Company given at any time after any of the Equity Conditions shall cease to be
in effect, to invalidate ab initio such cancellation, notwithstanding anything herein contained to the contrary. 

        14.    Forced Exercise Right.    

        (a)  Subject
to the provisions of this Section 14, if at any time prior to the Expiration Date, the VWAP of the Company's Common Stock is equal to or greater than 350%
of the Exercise Price, but in no event less than $4.20 (as adjusted for any stock splits, stock combinations, stock dividends and other similar events) (the "Threshold II
Price"), for any thirty (30) consecutive Trading Days, then the Company shall have the right, but not the obligation (the "Forced Exercise
Right"), on five (5) Trading Days prior written notice to the Holder, to cancel any unexercised portion of this Warrant for which an Exercise Notice has not yet been
delivered (the "Forced Exercise Amount"). 

        (b)  To
exercise this Forced Exercise Right, the Company shall deliver to the Holder an irrevocable written notice (a "Forced Exercise
Notice"), indicating the Forced Exercise Amount. The date that the Company delivers the Forced Exercise Notice to the Holder shall be referred to as the
"Forced Exercise Date." Within five (5) Trading Days of receipt of the Forced Exercise Notice, and provided that the Holder is permitted to
exercise this Warrant pursuant to Section 4(a) above, the Holder may exercise this Warrant in whole or in part in accordance with Section 4(b) above. Any portion of the Forced Exercise
Amount that is not exercised by 6:30 p.m. (New York City time) on the fifth (5th) Trading Day following the date of receipt of the Forced Exercise Notice (the
"Forced Cancellation Date") shall be cancelled. Any unexercised portion of this Warrant to which the Forced Exercise Notice does not pertain (the
"Remaining Portion") will be unaffected by such Forced Exercise Notice. The Company covenants and agrees that it will honor any Exercise Notice with
respect to the Forced Exercise Amount that is tendered to the Company from the time of delivery of the Forced Exercise Notice through and including 6:30 p.m. (New York City time) on the Forced
Cancellation Date. 

        (c)  Notwithstanding
anything to the contrary set forth in this Warrant, the Company may not deliver a Forced Exercise Notice or require the cancellation of any unexercised
Forced Exercise 

9

 

Amount (and any Forced Exercise Notice will be void), unless from the beginning of the thirty (30) consecutive Trading Days used to determine whether the Common Stock has achieved the
Threshold II Price through the date on which the Holder exercises the Forced Exercise Amount (the "Forced Exercise Period") (i) the
Company shall have honored in accordance with the terms of this Warrant any Exercise Notice delivered by 6:30 p.m. (New York City time) on the Forced Cancellation Date, (ii) the Equity
Conditions with respect to all Common Stock shall be satisfied, and (iii) Section 15 would not at such time limit the ability of the Holder to exercise this Warrant in full 

        15.    Limitation on Exercise.    Notwithstanding anything to the contrary contained herein, the number of shares of
Common Stock that may be acquired by the Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such
exercise (or other issuance), the total number of shares of Common Stock then beneficially owned by the Holder and its Affiliates and any other Persons whose beneficial ownership of Common Stock would
be aggregated with the Holder's for purposes of Section 13(d) of the Exchange Act, does not exceed 4.999% (the "Maximum Percentage") of the total
number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise). For such purposes, beneficial ownership shall be determined
in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Each delivery of an Exercise Notice hereunder will constitute a representation by the
Holder that it has evaluated the limitation set forth in this paragraph and determined that issuance of the full number of Warrant Shares requested in such Exercise Notice is permitted under this
paragraph. The Company's obligation to issue shares of Common Stock in excess of the limitation referred to in this Section shall be suspended (and shall not terminate or expire notwithstanding any
contrary provisions hereof) until such time, if any, as such shares of Common Stock may be issued in compliance with such limitation. By written notice to the Company, the Holder may waive the
provisions of this Section or increase or decrease the Maximum Percentage to any other percentage specified in such notice, but (i) any such waiver or increase will not be effective until the
61st day after such notice is delivered to the Company, and (ii) any such waiver or increase or decrease will apply only to the Holder and not to any other holder of Warrants. Notwithstanding
anything to the contrary contained in this Warrant, nothing in this Warrant shall prevent the Company from taking any action which would reduce the number of shares of the Company outstanding whether
through repurchase programs or otherwise. 

        (b)  Notwithstanding
anything to the contrary contained herein, if the Trading Market is the Nasdaq National Market or any other market or exchange with similar applicable
rules, then the maximum number of shares of Common Stock that the Company may issue pursuant to the Transaction Documents at an effective purchase price less than the Closing Price on the Trading Day
immediately preceding the Closing Date equals 27,429,883 shares (the "Issuable Maximum"), unless the Company obtains shareholder approval in accordance
with the rules and regulations of such Trading Market. If, at the time any Holder requests an exercise of any of the Warrants, the Actual Minimum (excluding any shares issued or issuable at an
effective purchase price in excess of the Closing Price on the Trading Day immediately preceding the Closing Date) exceeds the Issuable Maximum (and if the Company has not previously obtained the
required shareholder approval), then the Company shall issue to the Holder requesting such exercise a number of shares of Common Stock not exceeding such Holder's pro-rata portion of the
Issuable Maximum (based on such Holder's share (vis-à-vis other Holders) of the aggregate purchase price paid under the Purchase Agreement and taking into
account any Warrant Shares previously issued to such Holder), and the remainder of the Warrant Shares issuable in connection with such exercise or conversion (if any) shall constitute "Excess Shares"
pursuant to Section 15(c) below. For the purposes hereof, "Actual Minimum" shall mean, as of any date, the maximum aggregate number of shares of
Common Stock then issued or potentially issuable in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon exercise in full of all 

10

 

Warrants, ignoring any limits on the number of shares of Common Stock that may be owned by a Holder at any one time. 

        (c)  In
the event that any Holder's receipt of shares of Common Stock upon exercise of this Warrant is restricted based on the Issuable Maximum, the Company shall either:
(i) use commercially reasonable efforts to obtain the required shareholder approval necessary to permit the issuance of such Excess Shares as soon as is reasonably possible, but in any event
not later than the 60th day after the event
giving rise to such Excess Shares, or (ii) within five Trading Days after such event, pay cash to such Holder, as liquidated damages and not as a penalty, in an amount equal to the Black
Scholes value of this Warrant with respect to the portion of this Warrant which is unexercisable due to the Issuable Maximum after giving effect to the limitations in Section 15(b), measured as
of the date of such event or, if greater, the date of payment (such difference, the "Cash Amount"). If the Company elects the first option under the
preceding sentence and the Company fails to obtain the required shareholder approval on or prior to the 60th day after such event, then within three Trading Days after such
60th day, the Company shall pay the Cash Amount to such Holder, as liquidated damages and not as a penalty. The portion of this Warrant in respect of which the Cash Amount has been paid
shall be cancelled and retired and the Company shall have no further obligation with respect thereto. 

        16.    Fractional Shares.    The Company shall not be required to issue or cause to be issued fractional Warrant
Shares on the exercise of this Warrant. If any fraction of a Warrant Share would, except for the provisions of this Section, be issuable upon exercise of this Warrant, the number of Warrant Shares to
be issued will be rounded up to the nearest whole share. 

        17.    Notices.    Any and all notices or other communications or deliveries hereunder (including without limitation
any Exercise Notice) 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 Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day,
(iii) the Trading 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 or communications shall be as set forth in the Purchase Agreement. 

        18.    Warrant Agent.    The Company shall serve as warrant agent under this Warrant. Upon 30 days' notice to
the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the
Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business
shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first
class mail, postage prepaid) to the Holder at the Holder's last address as shown on the Warrant Register. 

        19.    Miscellaneous.    

        (a)  Subject
to the restrictions on transfer set forth on the first page hereof, this Warrant may be assigned by the Holder. This Warrant may not be assigned by the Company,
except to a successor in the event of a Fundamental Transaction. This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to
the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this 

11

 

Warrant. This Warrant may be amended only in writing signed by the Company and the Holder and their successors and assigns. 

        (b)  The
Company will not, by amendment of its governing documents or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment. Without limiting the generality of the
foregoing, the Company (i) will not increase the par value of any Warrant Shares above the amount payable therefor on such exercise, (ii) will take all such action as may be reasonably
necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares on the exercise of this Warrant, and (iii) will not close its
shareholder books or records in any manner which interferes with the timely exercise of this Warrant. 

        (c)    Governing Law; Venue; Waiver Of Jury Trail.    THE CORPORATE LAWS OF THE STATE OF DELAWARE SHALL GOVERN ALL
ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS AND ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT. THE COMPANY 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 BROUGHT BY ANY PURCHASER
HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY
IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY ANY PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH
SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PURCHASER HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN DELAWARE, FOR THE ADJUDICATION OF ANY DISPUTE
BROUGHT BY THE COMPANY HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION
DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY
SUCH COURT OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY MAILING A COPY THEREOF 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. THE COMPANY HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY. 

        (d)  The
headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof. 

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        (e)  In
the event of any stock split, subdivision, dividend or distribution payable in shares of Common Stock (or other securities or rights convertible into, or entitling
the holder thereof to receive directly or indirectly shares of Common Stock), combination or other similar recapitalization or event occurring after the date hereof, each reference in this Warrant to
a number of shares or a price per share shall be amended to appropriately account for such event. 

        (f)    In
case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and
provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially
reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant. 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK,

SIGNATURE PAGE FOLLOWS] 

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        IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above. 

	 	 	EARTHSHELL CORPORATION
	

 	
 	

By:	

    

	 	 	Name:	    

	 	 	Title:	    

14

 
 

FORM OF EXERCISE NOTICE    
  

        (To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant) 

To:
EarthShell Corporation 

        The
undersigned is the Holder of Warrant No.            (the "Warrant") issued by EarthShell Corporation, a Delaware corporation (the
"Company"). Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Warrant. 

	1.
	The
Warrant is currently exercisable to purchase a total of                        Warrant Shares.

	2.
	The
undersigned Holder hereby exercises its right to purchase                        Warrant Shares pursuant to the Warrant.

	3.
	The
Holder intends that payment of the Exercise Price shall be made as (check one): 

	 	 	o	 	"Cash Exercise" under Section 10
	 	 	o	 	"Cashless Exercise" under Section 10 (if permitted)

	4.
	If
the holder has elected a Cash Exercise, the holder shall pay the sum of $                        to the Company in accordance with
the terms of the Warrant.

	5.
	Pursuant
to this exercise, the Company shall deliver to the holder                        Warrant Shares in accordance with the terms of
the Warrant.

	6.
	Following
this exercise, the Warrant shall be exercisable to purchase a total of                        Warrant Shares. 

	Dated:                        ,	 	Name of Holder:
	

 	
 	

(Print)	

    

	

 	
 	

By:	

    

	 	 	Name:	    

	 	 	Title:	    

	 	 	(Signature must conform in all respects to name of holder as specified on the face of the Warrant)

 
 

FORM OF ASSIGNMENT    
  

        [To be completed and signed only upon transfer of Warrant] 

        FOR
VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto                        the right represented by the
within Warrant to purchase                        shares of Common
Stock of EarthShell Corporation to which the within Warrant relates and appoints                        attorney to transfer said
right on the books of EarthShell Corporation with full power of substitution
in the premises. 

	Dated:                        ,	 	 
	 	 	    
 (Signature must conform in all respects to name of holder as specified on the face of the Warrant)
	

 	
 	

    
 Address of Transferee
	

 	
 	

    

	

 	
 	

    

	

In the presence of:	
 	

 
	

    
	
 	

 

QuickLinks

Exhibit 4.3

EARTHSHELL CORPORATION WARRANT

FORM OF EXERCISE NOTICE

FORM OF ASSIGNMENT

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