Document:

Exhibit 4.1

                             INSIGNIA SYSTEMS, INC.
                                 1990 STOCK PLAN
                                                                      AS AMENDED
                                                                 THROUGH 5/22/02
         SECTION 1.  General Purpose of Plan; Definitions.
                     ------------------------------------

         The name of this Plan is The Insignia Systems, Inc. 1990 Stock Plan
(the "Plan"). The purpose of the Plan is to enable Insignia Systems, Inc. (the
"Company") and its Subsidiaries to retain and attract executives and other key
employees and consultants who contribute to the Company's success by their
ability, ingenuity and industry, and to enable such individuals to participate
in the long-term success and growth of the Company by giving them a proprietary
interest in the Company.

         For purposes of the Plan, the following terms shall be defined as set
forth below:

         a.       "Board" means the Board of Directors of the Company.

         b.       "Cause" means a felony conviction of a participant or the
                  failure of a participant to contest prosecution for a felony,
                  or a participant's willful misconduct or dishonesty, any of
                  which is directly and materially harmful to the business or
                  reputation of the Company.

         c.       "Code" means the Internal Revenue Code of 1986, as amended.

         d.       "Committee" means the Committee referred to in Section 2 of
                  the Plan. If at any time no Committee shall be in office, then
                  the functions of the Committee specified in the Plan shall be
                  exercised by the Board.

         e.       "Company" means Insignia Systems, Inc., a corporation
                  organized under the laws of the State of Minnesota (or any
                  successor corporation).

         f.       "Disability" means permanent and total disability as
                  determined by the Committee.

         g.       "Disinterested Person" shall have the meaning set forth in
                  Rule 16b-3(d)(3) as promulgated by the Securities and Exchange
                  Commission under the Securities Exchange Act of 1934, or any
                  successor definition adopted by the Commission.

         h.       "Early Retirement" means retirement, with consent of the
                  Committee at the time of retirement, from active employment
                  with the Company and any Subsidiary or Parent Corporation of
                  the Company.

<PAGE>

         i.       "Fair Market Value" means the value of the Stock on a given
                  date as determined by the Committee in accordance with the
                  applicable Treasury Department regulations under Section 422A
                  of the Code with respect to "incentive stock options."

         j.       "Incentive Stock Option" means any Stock Option intended to be
                  and designated as an "Incentive Stock Option" within the
                  meaning of Section 422A of the Code.

         k.       "Non-Qualified Stock Option" means any Stock Option that is
                  not an Incentive Stock Option, and is intended to be and is
                  designated as a "Non-Qualified Stock Option."

         l.       "Normal Retirement" means retirement from active employment
                  with the Company and any Subsidiary or Parent Corporation of
                  the Company on or after age 60.

         m.       "Parent Corporation" means any corporation (other than the
                  Company) in an unbroken chain of corporations ending with the
                  Company if each of the corporations (other than the Company)
                  owns stock possessing 50% or more of the total combined voting
                  power of all classes of stock in one of the other corporations
                  in the chain.

         n.       "Restricted Stock" means an award of shares of Stock that are
                  subject to restrictions under Section 6 below.

         o.       "Retirement" means Normal Retirement or Early Retirement.

         p.       "Stock" means the Common Stock, $.01 par value per share, of
                  the Company.

         q.       "Stock Option" means any option to purchase shares of Stock
                  granted pursuant to Section 5 below.

         r.       "Subsidiary" means any corporation (other than the Company) in
                  an unbroken chain of corporations beginning with the Company
                  if each of the corporations (other than the last corporation
                  in the unbroken chain) owns stock possessing 50% or more of
                  the total combined voting power of all classes of stock in one
                  of the other corporations in the chain.

         SECTION 2.  Administration.
                     --------------

         The Plan shall be administered by the Board of Directors or by a
Committee of not less than three Disinterested Persons, who shall be appointed
by the Board of Directors of the Company and who shall serve at the pleasure of
the Board.

                                       2
<PAGE>

         The Committee shall have the power and authority to grant to eligible
employees and consultants of the Company (which consultants shall serve pursuant
to a written agreement with the Company), pursuant to the terms of the Plan: (i)
Stock Options, or (ii) Restricted Stock.

         In particular, the Committee shall have the authority:

         (i)      to select the officers and other key employees of the Company
                  and its Subsidiaries and consultants to whom Stock Options
                  and/or Restricted Stock awards may from time to time be
                  granted hereunder;

         (ii)     to determine whether and to what extent Incentive Stock
                  Options, Non-Qualified Stock Options or Restricted Stock
                  awards, or a combination of the foregoing, are to be granted
                  hereunder;

         (iii)    to determine the number of shares to be covered by each such
                  award granted hereunder;

         (iv)     to determine the terms and conditions, not inconsistent with
                  the terms of the Plan, of any award granted hereunder
                  (including, but not limited to, any restriction on any Stock
                  Option or other award and/or the shares of Stock relating
                  thereto); and

         (v)      to determine whether, to what extent and under what
                  circumstances Stock and other amounts payable with respect to
                  an award under this Plan shall be deferred either
                  automatically or at the election of the participant.

         The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan. The Committee may
delegate its authority to officers of the Company for the purpose of selecting
employees who are not officers of the Company for purposes of (i) above.

         All decisions made by the Committee pursuant to the provisions of the
Plan shall be final and binding on all persons, including the Company and Plan
participants.

         SECTION 3.  Stock Subject to Plan.
                     ---------------------

         The total number of shares of Stock reserved and available for
distribution under the Plan shall be 2,720,000. Such shares may consist, in
whole or in part, of authorized and unissued shares.

         If any shares that have been optioned ceased to be subject to Options,
or if any shares subject to any Restricted Stock award granted hereunder are
forfeited or such award otherwise terminates without a payment being made to the
participant, such shares shall again be available for distribution in connection
with future awards under the Plan.

                                       3
<PAGE>

         In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, other change in corporate structure affecting
the Stock, or spin-off or other distribution of assets to shareholders, such
substitution or adjustment shall be made in the aggregate number of shares
reserved for issuance under the Plan, in the number and option price of shares
subject to outstanding options granted under the Plan, and in the number of
shares subject to Restricted Stock awards granted under the Plan as may be
determined to be appropriate by the Committee, in its sole discretion, provided
that the number of shares subject to any award shall always be a whole number.

         SECTION 4.  Eligibility.
                     -----------

         Officers, consultants (which consultants shall serve pursuant to a
written agreement with the Company) and other key employees of the Company and
Subsidiaries who are responsible for or contribute to the management, growth
and/or profitability of the business of the Company and its Subsidiaries are
eligible to be granted Stock Options or Restricted Stock awards under the Plan.
The optionees and participants under the Plan shall be selected from time to
time by the Committee, in its sole discretion, from among those eligible, and
the Committee shall determine, in its sole discretion, the number of shares
covered by each award.

         SECTION 5.  Stock Options.
                     -------------

         Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.

         The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options. No Incentive Stock
Options shall be granted under the Plan more than ten years after the Plan is
adopted.

         The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options, or both types of options. To the
extent that any option does not qualify as an Incentive Stock Option, it shall
constitute a separate Non-Qualified Stock Option.

         Anything in the Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify either the Plan or any Incentive Stock Option
under Section 422A of the Code. The preceding sentence shall not preclude any
modification or amendment to an outstanding Incentive Stock Option, whether or
not such modification or amendment results in disqualification of such Option as
an Incentive Stock Option, provided the optionee consents in writing to the
modification or amendment.

         Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.

                                       4
<PAGE>

         (a) Option Price. The option price per share of Stock purchasable under
a Stock Option shall be determined by the Committee at the time of grant and
may, except as provided in this paragraph, be less than the Fair Market Value of
the Stock on the date of the grant of the Option. In no event shall the option
price per share of Stock purchasable under an Incentive Stock Option be less
than 100% of the Fair Market Value of the Stock on the date of the grant of the
option. If an employee owns or is deemed to own (by reason of the attribution
rules applicable under Section 425(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company or any Parent Corporation or
Subsidiary and an Incentive Stock Option is granted to such employee, the option
price shall be no less than 110% of the Fair Market Value of the Stock on the
date the option is granted. No Non-Qualified Stock Option shall have an option
price less than 85% of the Fair Market Value of the Stock on the date of grant.

         (b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is deemed to
own (by reason of the attribution rules of Section 425(d) of the Code) more than
10% of the combined voting power of all classes of stock of the Company or any
Parent Corporation or Subsidiary and an Incentive Stock Option is granted to
such employee, the term of such option shall be no more than five years from the
date of grant.

         (c) Exercisability. Stock Options shall be exercisable at such time or
times as determined by the Committee at or after grant. If the Committee
provides, in its discretion, that any option is exercisable only in
installments, the Committee may waive such installment exercise provisions at
any time.

         (d) Method of Exercise. Stock Options may be exercised in whole or in
part at any time during the option period by giving written notice of exercise
to the Company specifying the number of shares to be purchased. Such notice
shall be accompanied by payment in full of the purchase price, either by
certified or bank check, or by any other form of legal consideration deemed
sufficient by the Committee and consistent with the Plan's purpose and
applicable law, including promissory notes or a properly executed exercise
notice together with irrevocable instructions to a broker acceptable to the
Company to promptly deliver to the Company the amount of sale or loan proceeds
to pay the exercise price. As determined by the Committee, in its sole
discretion, payment in full or in part may also be made in the form of
unrestricted Stock already owned by the optionee or, in the case of the exercise
of a Non-Qualified Stock Option or Restricted Stock subject to an award
hereunder (based, in each case, on the Fair Market Value of the Stock on the
date the option is exercised, as determined by the Committee); provided,
however, that, in the case of an Incentive Stock Option, the right to make a
payment in the form of already owned shares may be authorized only at the time
the option is granted, and provided further that in the event payment is made in
the form of shares of Restricted Stock, the optionee will receive a portion of
the option shares in the form of, and in an amount equal to, the Restricted
Stock award tendered as payment by the optionee. If the terms of an option so
permit, an optionee may elect to pay all or part of the option exercise price by
having the Company withhold from the shares of Stock that would otherwise be
issued upon exercise that number of shares of Stock having a Fair Market Value
equal to the aggregate option exercise price for the shares with respect to
which such election is made. No shares of Stock shall be issued until full
payment therefor has been made. An optionee shall generally have the rights to
dividends and

                                       5
<PAGE>

other rights of a shareholder with respect to shares subject to the option when
the optionee has given written notice of exercise, has paid in full for such
shares, and, if requested, has given the representation described in paragraph
(a) of Section 10.

         (e) Non-transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.

         (f) Termination by Death. If an optionee's employment by the Company
and any Subsidiary or Parent Corporation terminates by reason of death, the
Stock Option may thereafter be immediately exercised, to the extent then
exercisable (or on such accelerated basis as the Committee shall determine at or
after grant), by the legal representative of the estate or by the legatee of the
optionee under the will of the optionee, for a period of three years (or such
shorter period as the Committee shall specify at grant) from the date of such
death or until the expiration of the stated term of the option, whichever period
is shorter.

         (g) Termination by Reason of Disability. If an optionee's employment by
the Company and any Subsidiary or Parent Corporation terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable at the time of termination due to Disability
(or on such accelerated basis as the Committee shall determine at or after
grant), but may not be exercised after three years (or such shorter period as
the Committee shall specify at grant) from the date of such termination of
employment or the expiration of the stated term of the option, whichever period
is the shorter. In the event of termination of employment by reason of
Disability, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422A of the Code, the
option will thereafter be treated as a Non-Qualified Stock Option.

         (h) Termination by Reason of Retirement. If an optionee's employment by
the Company and any Subsidiary or Parent Corporation terminates by reason of
Retirement, any Stock Option held by such optionee may thereafter be exercised
to the extent it was exercisable at the time of such Retirement, but may not be
exercised after three years (or such shorter period as Committee shall specify
at grant) from the date of such termination of employment or the expiration of
the stated term of the option, whichever period is the shorter. In the event of
termination of employment by reason of Retirement, if an Incentive Stock Option
is exercised after the expiration of the exercise periods that apply for
purposes of Section 422A of the Code, the option will thereafter be treated as a
Non-Qualified Stock Option.

         (i) Other Termination. Unless otherwise determined by the Committee, if
an optionee's employment by the Company and any Subsidiary or Parent Corporation
terminates for any reason other than death, Disability or Retirement, the Stock
Option shall thereupon terminate, except that the option may be exercised to the
extent it was exercisable at such termination for the lesser of three months or
the balance of the option's term if the optionee is involuntarily terminated
without Cause by the Company and any Subsidiary or Parent Corporation.

                                       6
<PAGE>

         (j) Annual Limit on Incentive Stock Options. The aggregate Fair Market
Value (determined as of the time the Option is granted) of the Common Stock with
respect to which an Incentive Stock Option under this Plan or any other plan of
the Company and any Subsidiary or Parent Corporation is exercisable for the
first time by an optionee during any calendar year shall not exceed $100,000.

         (k) Automatic Grant to Non-Employee Directors. Each individual who is
serving as a member of the Board and who is not an employee of the Company, any
Parent Corporation or any Subsidiary (a "Non-Employee Director") shall be
automatically awarded, on the date this paragraph is adopted by the Board as a
part of the Plan, a Non-Qualified Stock Option, which shall be fully vested, to
purchase 5,000 shares of the Company's Common Stock at an exercise price equal
to 100% of the Fair Market Value of the Common Stock on such date and which
expires five years after the date of grant. An individual who is first elected
or appointed or who is re-elected as a Non-Employee Director at any time
thereafter shall receive a similar automatic grant, at the time of election or
appointment or re-election to the Board, of a Non-Qualified Stock Option, which
shall be fully vested, to purchase 5,000 shares of the Company's Common Stock at
an exercise price equal to 100% of the Fair Market Value of the Common Stock on
such date and which expires five years after the date of grant.

         SECTION 6.  Restricted Stock.
                     ----------------

         (a) Administration. Shares of Restricted Stock may be issued either
alone or in addition to other awards granted under the Plan. The Committee shall
determine the officers and key employees of the Company and Subsidiaries to
whom, and the time or times at which, grants of Restricted Stock will be made,
the number of shares to be awarded, the time or times within which such awards
may be subject to forfeiture, and all other conditions of the awards. The
Committee may also condition the grant of Restricted Stock upon the attainment
of specified performance goals. The provisions of Restricted Stock awards need
not be the same with respect to each recipient.

         (b) Awards and Certificates. The prospective recipient of an award of
shares of Restricted Stock shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the then applicable terms and conditions.

                  (i) Each participant shall be issued a stock certificate in
         respect of shares of Restricted Stock awarded under the Plan. Such
         certificate shall be registered in the name of the participant, and
         shall bear an appropriate legend referring to the terms, conditions,
         and restrictions applicable to such award, substantially in the
         following form:

                  "The transferability of this certificate and the shares of
                  stock represented hereby are subject to the terms and
                  conditions (including forfeiture) of The Insignia Systems,
                  Inc. 1990 Stock Plan and an Agreement entered into between the
                  registered owner

                                       7
<PAGE>

                  and the Company. Copies of such Plan and Agreement are on file
                  in the offices of the Company."

                  (ii) The Committee shall require that the stock certificates
         evidencing such shares be held in custody by the Company until the
         restrictions thereon shall have lapsed, and that, as a condition of any
         Restricted Stock award, the participant shall have delivered a stock
         power, endorsed in blank, relating to the Stock covered by such award.

         (c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to the Plan shall be subject to the following restrictions and
conditions:

                  (i) Subject to the provisions of this Plan and the award
         agreement, during a period set by the Committee commencing with the
         date of such award (the "Restriction Period"), the participant shall
         not be permitted to sell, transfer, pledge or assign shares of
         Restricted Stock awarded under the Plan. Within these limits, the
         Committee may provide for the lapse of such restrictions in
         installments where deemed appropriate.

                  (ii) Except as provided in paragraph (c)(i) of this Section 6,
         the participant shall have, with respect to the shares of Restricted
         Stock, all of the rights of a shareholder of the Company, including the
         right to vote the shares and the right to receive any cash dividends.
         The Committee, in its sole discretion, may permit or require the
         payment of cash dividends to be deferred and, if the Committee so
         determines, reinvested in additional shares of Restricted Stock (to the
         extent shares are available under Section 3 and subject to paragraph
         (f) of Section 10). Certificates for shares of unrestricted Stock shall
         be delivered to the grantee promptly after, and only after, the period
         of forfeiture shall have expired without forfeiture in respect of such
         shares of Restricted Stock.

                  (iii) Subject to the provisions of the award agreement and
         paragraph (c)(iv) of this Section 6, upon termination of employment for
         any reason during the Restriction Period, all shares still subject to
         restriction shall be forfeited by the participant.

                  (iv) In the event of special hardship circumstances of a
         participant whose employment is terminated (other than for Cause),
         including death, Disability or Retirement, or in the event of an
         unforeseeable emergency of a participant still in service, the
         Committee may, in its sole discretion, when it finds that a waiver
         would be in the best interest of the Company, waive in whole or in part
         any or all remaining restrictions with respect to such participant's
         shares of Restricted Stock.

         SECTION 7.  Transfer, Leave of Absence, etc.
                     -------------------------------

         For purposes of the Plan, the following events shall not be deemed a
termination of employment:

         (a) a transfer of an employee from the Company to a Parent Corporation
or Subsidiary, or from a Parent Corporation or Subsidiary to the Company, or
from one Subsidiary to another;

                                       8
<PAGE>

         (b) a leave of absence, approved in writing by the Committee, for
military service or sickness, or for any other purpose approved by the Company
if the period of such leave does not exceed ninety (90) days (or such longer
period as the Committee may approve, in its sole discretion); and

         (c) a leave of absence in excess of ninety (90) days, approved in
writing by the Committee, but only if the employee's right to reemployment is
guaranteed either by a statute or by contract, and provided that, in the case of
any leave of absence, the employee returns to work within 30 days after the end
of such leave.

         SECTION 8.  Amendments and Termination.
                     --------------------------

         The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made (i) which would impair the rights
of an optionee or participant under a Stock Option, Restricted Stock or other
Stock-based award theretofore granted, without the optionee's or participant's
consent, or (ii) which without the approval of the stockholders of the Company
would cause the Plan to no longer comply with Rule 16b-3 under the Securities
Exchange Act of 1934, Section 422A of the Code or any other regulatory
requirements.

         The Committee may amend the terms of any award or option theretofore
granted, prospectively or retroactively, but, subject to Section 3 above, no
such amendment shall impair the rights of any holder without his consent.
Without limiting the generality of the foregoing, the Committee (or if there is
no Committee, then the Board) shall have the authority to accelerate the vesting
of any or all outstanding options or awards in the event of any actual or
threatened change in control of the Company. The Committee may also substitute
new Stock Options for previously granted options, including previously granted
options having higher option prices.

         SECTION 9. Unfunded Status of Plan.
                    -----------------------

         The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder, provided, however, that the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.

         SECTION 10.  General Provisions.
                      ------------------

         (a) The Committee may require each person purchasing shares pursuant to
a Stock Option under the Plan to represent to and agree with the Company in
writing that the optionee is acquiring the shares without a view to distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.

                                       9
<PAGE>

         All certificates for shares of Stock delivered under the Plan pursuant
to any Restricted Stock or other Stock-based awards shall be subject to such
stock-transfer orders and other restrictions as the Committee may deem advisable
under the rules, regulations, and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Stock is then listed, and
any applicable Federal or state securities laws, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.

         (b) Subject to paragraph (d) below, recipients of Restricted Stock and
other Stock-based awards under the Plan (other than Stock Options) are not
required to make any payment or provide consideration other than the rendering
of services.

         (c) Nothing contained in this Plan shall prevent the Board of Directors
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases. The adoption
of the Plan shall not confer upon any employee of the Company or any Subsidiary
any right to continued employment with the Company or a Subsidiary, as the case
may be, nor shall it interfere in any way with the right of the Company or a
Subsidiary to terminate the employment of any of its employees at any time.

         (d) Each participant shall, no later than the date as of which any part
of the value of an award first becomes includible as compensation in the gross
income of the participant for Federal income tax purposes, pay to the Company,
or make arrangements satisfactory to the Committee regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements and the Company and Subsidiaries
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the participant. With respect to
any award under the Plan, if the terms of such award so permit, a participant
may elect by written notice to the Company to satisfy part or all of the
withholding tax requirements associated with the award by (i) authorizing the
Company to retain from the number of shares of Stock that would otherwise be
deliverable to the participant, or (ii) delivering to the Company from shares of
Stock already owned by the participant, that number of shares having an
aggregate Fair Market Value equal to part or all of the tax payable by the
participant under this Section 10(d). Any such election shall be in accordance
with, and subject to, applicable tax and securities laws, regulations and
rulings.

         (e) At the time of grant, the Committee may provide in connection with
any grant made under this Plan that the shares of Stock received as a result of
such grant shall be subject to a repurchase right in favor of the Company,
pursuant to which the participant shall be required to offer to the Company upon
termination of employment for any reason any shares that the participant
acquired under the Plan, with the price being the then Fair Market Value of the
Stock or, in the case of a termination for Cause, an amount equal to the cash
consideration paid for the Stock, subject to such other terms and conditions as
the Committee may specify at the time of grant. The Committee may, at the time
of the grant of an award under the Plan, provide the Company with the right to
repurchase, or require the forfeiture of, shares of Stock acquired pursuant to
the Plan by any participant who, at any time within one year after termination
of

                                       10
<PAGE>

employment with the Company, directly or indirectly competes with, or is
employed by a competitor of, the Company.

         (f) The reinvestment of dividends in additional Restricted Stock at the
time of any dividend payment shall only be permissible if the Committee (or the
Company's chief financial officer) certifies in writing that under Section 3
sufficient shares are available for such reinvestment (taking into account then
outstanding Stock Options and other Plan awards).

         SECTION 11.  Effective Date of Plan.
                      ----------------------

         The Plan shall be effective on the date it is approved by a vote of the
holders of a majority of the Stock present and entitled to vote at a meeting of
the Company's shareholders.QuickLinks
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Exhibit 4.1  

EXECUTION COPY  

 
 

COMMON STOCK PURCHASE AGREEMENT    
  

        This Common Stock Purchase Agreement (this "Agreement") is made and effective as of July 30, 2002 by and
among EarthShell Corporation, a Delaware corporation (the "Company"), and the Purchaser identified in the signature pages attached hereto (the
"Purchaser"). 

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

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

        1.    Closing.    

        (a)  The
first closing of the sale of the securities contemplated hereby (the "First Closing") shall take place at the offices
of Proskauer Rose LLP ("Purchaser Counsel"), 1585 Broadway, New York, New York 10036, on July 30, 2002 or on such other date or at such other
location as the parties shall otherwise agree. The date of the First Closing is hereinafter referred to as the "First Closing Date." At the First
Closing: (x) the Company shall issue and deliver to the Purchaser (i) a stock certificate, registered in the name of the Purchaser and free of all restrictive legends, representing the
number of
shares of Common Stock (the shares of Common Stock issued and sold to the Purchaser at the First Closing are collectively, the "Initial Shares") equal
to the quotient obtained by dividing (a) the purchase price set forth below the Purchaser's signature to this Agreement by (b) $0.79 (the "Maximum
Price"), or, if Purchaser provides the necessary account information to the Company, the Company shall issue and deliver such Initial Shares in a balance account with The
Depository Trust Company through its Deposit Withdrawal Agent Commission System, (ii) a prospectus supplement with respect to the Registration Statement (as defined in Section 2(e))
reflecting the sale of the Initial Shares and Additional Shares (the "Supplement"), and (iii) the legal opinion of the Company's outside counsel
in the form of Exhibit A; and (y) the Purchaser shall deliver to the Company the purchase price set forth below the Purchaser's signature
to this Agreement, in immediately available funds by wire transfer to an account designated in writing by the Company for such purpose. 

        (b)  In
the event that the product of (i) the average of the VWAP for the five Trading Days commencing on July 31, 2002 and ending on August 6, 2002, and
(ii) 0.85 (such product, the "Adjustment Price") is less than the Maximum Price, then there shall be a second closing as provided herein. The
second closing of the sale of the securities contemplated hereby (the "Second Closing", and together with the First Closing, each a
"Closing") shall take place at the offices of the Purchaser Counsel on August 7, 2002 or on such date or at such other location as the parties
shall otherwise agree (the "Second Closing Date", and together with the First Closing Date, each a "Closing
Date"). In consideration of the purchase price paid by the Purchaser at the First Closing and no additional consideration, at the Second Closing the Company shall issue and
deliver to the Purchaser a stock certificate, registered in the name of the Purchaser and free of all restrictive legends, representing the number of shares of Common Stock (the shares of Common Stock
issued and sold to the Purchaser at the Second Closing are collectively, the "Additional Shares", and together with the Initial Shares are collectively,
the "Shares") equal to the difference between (i) quotient obtained by dividing (a) the purchase price set forth below the Purchaser's
signature to this Agreement by (b) the Adjustment Price, and (ii) the Initial Shares, or, if Purchaser provides the necessary account information to the Company, the Company shall issue
and deliver such Additional Shares in a balance account with The Depository Trust Company through its Deposit Withdrawal Agent Commission System. 

 

        (c)  The
obligation of the Purchaser to purchase and acquire the Initial Shares at the First Closing is subject to the fulfillment (or waiver by the Purchaser) of each of the
following conditions: 

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

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

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

        (d)  For
the purposes of this Agreement, the following definitions shall apply: 

        "Eligible Market"    means any of the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market or the
Nasdaq Small Cap Market. 

        "Person"    means any court or other federal, state, local or other governmental authority or other individual or corporation,
partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any
kind. 

        "Trading Day"    means (a) any day on which the Common Stock is listed or quoted and traded on the Nasdaq National
Market, (b) if the Common Stock is not then listed or quoted and traded on any Eligible Market, then a day on which trading occurs on the Nasdaq National Market (or any successor thereto), or
(c) if trading does not occur on the Nasdaq National Market (or any successor thereto), any business day. 

        "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.    Representations and Warranties of the Company.    The Company hereby makes the following representations and
warranties to the Purchaser: 

        (a)  Subsidiaries.    The Company does not directly or indirectly control or own any interest in any other
corporation, partnership, joint venture or other business association or entity (a "Subsidiary"), other than those listed in Schedule 2(a).
Except as disclosed in Schedule 2(a), the Company owns, directly or indirectly, all of the capital stock of each Subsidiary free and clear of any lien, charge, claim, security interest,
encumbrance, right of first refusal or other restriction (collectively, "Liens"), and all the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights. 

        (b)  Organization and Qualification.    Each of the Company and the Subsidiaries is an entity duly incorporated or
otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and
use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate or
articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified
or in good standing, as 

2

 

the case may be, could not, individually or in the aggregate, (i) adversely affect the legality, validity or enforceability of this Agreement, (ii) have or result in a material adverse
effect on the results of operations, assets, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) adversely impair the Company's
ability to perform fully on a timely basis its obligations under this Agreement (any of (i), (ii) or (iii), a "Material Adverse Effect"). 

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

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

        (e)  Filings, Consents and Approvals.    Neither the Company nor any Subsidiary is required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection
with the execution, delivery and performance by the Company of this Agreement, other than (i) the required filing of the Supplement, (ii) applicable Blue Sky filings, and (iii) in
all other cases where the failure to obtain such consent, waiver, authorization or order, or to give such notice or make such filing or registration could not have or result in, individually or in the
aggregate, a Material Adverse Effect (collectively, the "Required Approvals"). 

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

        (g)  Registration Statement.    The Company's Registration Statement on Form S-3
(No. 333-76092) (the "Registration Statement") was declared effective by the Commission on January 7, 2002. The Registration
Statement is effective on the date hereof and the Company has not received notice that the Commission has issued or intends to issue a stop order with respect to the 

3

 

Registration Statement or that the Commission otherwise has suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, or intends or has threatened in
writing to do so. The Registration Statement (including the information or documents incorporated by reference therein), as of the time it was declared effective, and any amendments or supplements
thereto, each as of the time of filing, did not contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements
therein not misleading. The issuance of the Shares to the Purchaser is registered by the Registration Statement. 

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

        (i)    Certain Fees.    Except for listing fees to be paid by the Company to the Trading Market and the placement fee
payable to Olympus Securities, LLC in connection with the transactions contemplated by this Agreement, no fees or commissions will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. The Purchaser shall have no obligation with respect to any
fees incurred by the Company or any other Person (other than the Purchaser, if the Purchaser has agreed in writing to pay such fees) or with respect to any claims made by or on behalf of other Persons
for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement. The Company shall indemnify and hold harmless the
Purchaser, its employees, officers, directors, agents, and partners, and its affiliates, from and against all claims, losses, damages, costs (including the reasonable costs of preparation and
reasonable attorney's fees) and expenses suffered in respect of any such claimed or existing fees incurred by the Company or any other Person (other than the Purchaser, if the Purchaser has agreed in
writing to pay such fees), as such fees and expenses are incurred. 

        (j)    Disclosure.    The Company confirms that neither it nor any other Person acting on its behalf has provided the
Purchaser or its agents or counsel with any information that constitutes or might constitute material, nonpublic information. The Company understands and confirms that the Purchaser will rely on the
foregoing representations in effecting transactions in securities of the Company. All disclosure provided to the Purchaser regarding the Company, its business and the transactions contemplated hereby,
including the Schedules to this Agreement, the Registration Statement and the Supplement, furnished by or on behalf of the Company are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company's
reports filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act") are being incorporated into an effective registration statement
filed by the Company under the Securities Act of 1933, as amended (the "Securities Act")). The Company acknowledges and agrees that the Purchaser does
not make or has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3. 

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

4

 

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

        (m)  Capitalization.    The number of shares and type of all authorized, issued and outstanding capital stock,
options and other securities of the Company (whether or not presently convertible or exchangeable for shares of capital stock of the Company) is set forth in Schedule 2(m). All outstanding
shares of capital stock are duly authorized, validly issued, fully paid and nonassessable and have been issued in compliance with all applicable securities laws. Except as disclosed in
Schedule 2(m), there are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations
convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. Except as disclosed in
Schedule 2(m), there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders)
and the issue and sale of the Shares will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchaser) and will not result in a right of any
holder of Company securities to adjust the exercise, conversion, exchange or reset price under such securities. To the knowledge of the Company, except as specifically disclosed in
Schedule 2(m), no Person or group of related Persons beneficially owns (as determined pursuant to Rule 13d-3 under the Exchange Act), or has the right to acquire, by
agreement with or by obligation binding upon the Company, beneficial ownership of in excess of 5% of the outstanding Common Stock, ignoring for such purposes any limitation on the number of shares of
Common Stock that may be owned at any single time. 

        (n)  Material Changes.    Since the date of the latest audited financial statements included within the SEC Reports,
except as specifically disclosed in the SEC Reports, (i) there has been no event, occurrence or development that has had or that could result in a Material Adverse Effect, (ii) the
Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice
and 

5

 

(B) liabilities not required to be reflected in the Company's financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company
has not altered its method of accounting or the identity of its auditors, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, and (v) the Company has not issued any equity securities to any officer, director or affiliate,
except pursuant to existing Company stock option plans. 

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

        (p)  Compliance.    Neither the Company nor any Subsidiary (i) is in default under or in violation of (and no
event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it
or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is
or has been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not, individually or in the aggregate, have or result in a
Material Adverse Effect. 

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

        (r)  Title to Assets.    The Company and the Subsidiaries have good and marketable title in fee simple to all real
property owned by them that is material to the business of the Company and the Subsidiaries and good and marketable title in all personal property owned by them that is material to the business of the
Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens as do not materially affect the value of such property and do not materially interfere with the use 

6

 

made and proposed to be made of such property by the Company and the Subsidiaries. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the Subsidiaries are in compliance. 

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

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

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

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

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

        (x)  Acknowledgment Regarding Purchaser's Purchase of Shares.    The Company acknowledges and agrees that the
Purchaser is acting solely in the capacity of an arm's length purchaser with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that Purchaser is not
acting as a financial advisor or fiduciary of the Company (or in any similar capacity) 

7

 

with respect to this Agreement and the transactions contemplated hereby and any advice given by the Purchaser or any of its representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to the Purchaser's purchase of the Shares. The Company further represents to the Purchaser that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation of the Company and its representatives. 

        3.    Representations and Warranties of the Purchaser.    The Purchaser hereby represents, warrants and covenants to
the Company that the Purchaser is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. The Purchaser has full right, power,
authority and capacity to enter into this Agreement and to consummate the transactions contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of
this Agreement. Upon the execution and delivery of this Agreement and assuming the valid execution hereof by the Company, this Agreement shall constitute the valid and binding obligation of the
Purchaser enforceable in accordance with its terms. 

        The
Company acknowledges and agrees that the Purchaser does not make or has not made any representations or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in this Section 3. 

        4.    Other Agreements of the Parties.    

        4.1  Acknowledgment of Dilution.    The Company acknowledges that the issuance of the Shares will result in dilution
of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligations under this Agreement, including
without limitation its obligation to issue the Shares, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such
dilution or any claim that the Company may have against any Purchaser. 

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

        4.3  Reservation and Listing of Shares.    The Company shall maintain a reserve from its duly authorized shares of
Common Stock for issuance of the Shares pursuant to this Agreement in such amount as may be required to fulfill its obligations in full under this Agreement. The Company shall take such steps as may
be required to cause and maintain the listing of the Shares on the Trading Market and such other exchange, market or quotation facility on which the Common Stock is traded. 

        4.4  Indemnification

        (a)  The
Company will indemnify and hold harmless the Purchaser and any of its affiliates or any officer, director, partner, controlling person, employee or agent of the
Purchaser or any of its affiliates (a "Related Person") for its reasonable legal and other expenses (including the costs of any investigation,
preparation and travel) and for any Losses incurred in connection with any action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such
as a disposition), whether commenced or threatened (each, a "Proceeding"), insofar as such Losses arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration Statement or the Supplement, or any amendment or supplement thereto, and all other documents filed as a part thereof, as
amended at the time of effectiveness of the Registration Statement, including any information deemed to be a part thereof as of the time of effectiveness pursuant to paragraph (b) of
Rule 430A, or pursuant to Rule 434, under the Securities Act, or arise out of or are based upon the omission or alleged omission to state in any of them a material fact required to be
stated therein or necessary to make the statements in any of them, in light of the circumstances under which they were made, not misleading, as such expenses or Losses are 

8

 

incurred. In addition, the Company shall indemnify and hold harmless the Purchaser and Related Person from and against any and all Losses, as incurred, arising out of or relating to any breach by the
Company of any of the representations, warranties or covenants made by the Company in this Agreement, or any allegation by a third party that, if true, would constitute such a breach. The conduct of
any Proceeding for which indemnification is available under this paragraph shall be governed by Section 4.4(b). The indemnification obligations of the Company under this paragraph shall be in
addition to any liability that the Company may otherwise have and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Purchaser and any
such Related Persons. The Company also agrees that neither the Purchaser nor any Related Persons shall have any liability to the Company or any Person asserting claims on behalf of or in right of the
Company in connection with or as a result of the transactions contemplated by this Agreement, except to the extent that any losses, claims, damages, liabilities or expenses incurred by the Company
result from the gross negligence or willful misconduct of the Purchaser or Related Person in connection with such transactions. If the Company breaches its obligations under this Agreement, then, in
addition to any other liabilities the Company may have under this Agreement or applicable law, the Company shall pay or reimburse the Purchaser on demand for all costs of collection and enforcement
(including reasonable attorneys fees and expenses). Without limiting the generality of the foregoing, the Company specifically agrees to reimburse the Purchaser on demand for all costs of enforcing
the indemnification obligations in this paragraph. For the purposes of this Section 4.4, "Losses" shall mean any and all
losses, claims, damages, liabilities, settlement costs and expenses, including without limitation costs of preparation of legal action and reasonable attorneys' fees. 

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

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

9

 

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

        4.5  Use of Proceeds.    The Company shall use the net proceeds from the sale of the Shares hereunder for working
capital purposes and not for the satisfaction of any portion of the Company's debt (other than payment of trade payables and accrued expenses in the ordinary course of the Company's business and prior
practices), to redeem any Company equity or equity-equivalent securities or to settle any outstanding litigation. 

        4.6  Shareholders Rights Plan.    No claim will be made or enforced by the Company that any Purchaser is an
"Acquiring Person" under any shareholders rights plan or similar plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of
any such plan or arrangement, by virtue of receiving Shares under the Transaction Documents or under any other agreement between the Company and the Purchasers. 

        4.7  Limitation on Additional Shares.    Notwithstanding anything to the contrary contained herein, the number of
Additional Shares of Common Stock that may be acquired by the Purchaser at the Second Closing (or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such
Closing, the total number of shares of Common Stock then beneficially owned by the Purchaser and its affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated
with the Purchaser's for purposes of Section 13(d) of the Exchange Act, does not exceed 9.999% (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. 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 Purchaser may waive the provisions of this Section or increase or decrease the Maximum Percentage to any other percentage
specified in such notice, but any such waiver or increase will not be effective until the 61st day after such notice is delivered to the Company. 

        4.8  Delivery of Certificates.    In addition to any other rights available to the Purchaser, if the Company fails
to deliver to such Purchaser a certificate representing Common Stock by the third Trading Day after the date on which delivery of such certificate is required by this Agreement, and if after such
third Trading Day the Purchaser purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Purchaser of the shares that the Purchaser
anticipated receiving from the Company (a "Buy-In"), then, in the Purchaser's sole discretion, the Company shall, within three Trading Days
after the Purchaser's request, either (i) pay cash to the Purchaser in an amount equal to the 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 the Purchaser a certificate or certificates representing such Common Stock and pay cash to the 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. 

10

 

        5.    Miscellaneous    

        (a)  Fees and Expenses.    At the First Closing, the Company shall pay to Vertical Ventures Investments, LLC an
aggregate of $7,000 for their legal fees and expenses incurred in connection with the preparation and negotiation of this Agreement. In lieu of the foregoing payment, Vertical Ventures Investments,
LLC may retain such amount at the First Closing or require the Company to pay such amount directly to Purchaser Counsel. Except as expressly set forth in this Agreement to the contrary, each party
shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with the issuance of the Shares. 

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

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

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

11

 

the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: 

	If to the Company:	 	EarthShell Corporation

800 Miramonte Drive

Santa Barbara, California 93109

Facsimile No.: (805) 899-3517

Attn: Chief Financial Officer
	

With a copy to:	
 	

Gibson, Dunn & Crutcher LLP.

2029 Century Park East

Los Angeles, California 90067

Facsimile No.: (310) 551-8741

Attn: Robert K. Montgomery, Esq.
	

If to the Purchaser:	
 	

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

        or
such other address as may be designated in writing hereafter, in the same manner, by such Person. 

        (e)  Governing Law.    All questions concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees
that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York, Borough of Manhattan. Each party
hereto hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of this Agreement), and hereby irrevocably waives, and agrees
not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper. Each party hereto
hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service
of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to
the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If
either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its
reasonable attorneys fees and other reasonable costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. 

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

12

 

(or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. 

        (g)  Successors and Assigns.    This Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser. The Purchaser may assign
its rights under this Agreement to any Person. 

        (h)  Adjustments in Share Numbers and Prices.    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 Agreement to a number of shares or a price per share shall be amended to appropriately account for
such event. 

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

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOLLOW] 

13

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

	 	 	EARTHSHELL CORPORATION
	

 	
 	

By:	
 	

/s/  SCOTT HOUSTON      
 Name: Scott Houston

Title: Chief Financial Officer

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE OF PURCHASER FOLLOWS] 

14

 

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

	 	 	VERTICAL VENTURES INVESTMENTS, LLC	 	 	 
	

 	
 	

By:	
 	

/s/  JOSH SILVERMAN      
 Name: Josh Silverman

Title: Partner	
 	
 	

 
	

 	
 	

Purchase Price:	
 	
$	

1,500,000
	

 	
 	

Number of Initial Shares to be acquired at First Closing:	
 	
 	

1,898,735
	

 	
 	

Address for Notice:

Vertical Ventures Investments, LLC

900 Third Avenue, 26th Floor

New York, NY 10022

Telephone No.: (212) 974-3070

Facsimile No.: (646) 274-1728

Attn: Joshua Silverman	
 	
 	

 

15

QuickLinks

COMMON STOCK PURCHASE AGREEMENT

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