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<ACCESSION-NUMBER>0001144204-05-009049
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<ITEMS>1.01
<ITEMS>3.02
<ITEMS>9.01
<FILING-DATE>20050329
<DATE-OF-FILING-DATE-CHANGE>20050329
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<CONFORMED-NAME>EARTHSHELL CORP
<CIK>0000911801
<ASSIGNED-SIC>2650
<IRS-NUMBER>770322379
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
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<STREET1>9020 JUNCTION DRIVE
<STREET2>SUITE D
<CITY>ANNAPOLIS JUNCTION
<STATE>MD
<ZIP>20701-1146
<PHONE>3019571330
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<STATE>MD
<ZIP>20701-1146
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<FORMER-CONFORMED-NAME>EARTHSHELL CONTAINER CORP
<DATE-CHANGED>19960521
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<TYPE>8-K
<SEQUENCE>1
<FILENAME>v015142_8-k.txt
<TEXT>
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                               ------------------

                                    FORM 8-K

                                 CURRENT REPORT

                     PURSUANT TO SECTION 13 OR 15(d) of the
                         SECURITIES EXCHANGE ACT OF 1934

                                 March 23, 2005

                             EARTHSHELL CORPORATION
               (Exact Name of Registrant as Specified in Charter)

          Delaware                      333-13287                77-0322379
(State or other jurisdiction           (Commission              (IRS Employer
      of incorporation)               File Number)           Identification No.)


3916 State St. #110, Santa Barbara, California                     93105
   (Address of principal executive offices)                      (Zip code)

Registrant's telephone number, including area code:            (805) 563-7590

                                 Not Applicable
          (Former Name or Former Address, If Changed Since Last Report)

Check  the  appropriate  box  below  if the  Form  8-K  filing  is  intended  to
simultaneously  satisfy the filing obligation of the registrant under any of the
following provisions:

|_|   Written communications pursuant to Rule 425 under the Securities Act
      (17 CFR 230.425)

|_|   Soliciting material pursuant to Rule 14a-12 under the Exchange Act
      (17 CFR 240.14a-12)

|_|   Pre-commencement communications pursuant to Rule 14d-2(b) under the
      Exchange Act (17 CFR 240.14d-2(b))

|_|   Pre-commencement communications pursuant to Rule 13e-4(c) under the
      Exchange Act (17 CFR 240.13e-4(c))


<PAGE>


Item 1.01. Entry into a Material Definitive Agreement.

      On March 23, 2005, Earthshell Corporation (the "Company"),  entered into a
Standby  Equity  Distribution  Agreement  with  Cornell  Capital  Partners,  LP.
Pursuant to the Standby Equity Distribution  Agreement,  the Company may, at its
discretion,  periodically sell to Cornell Capital Partners,  LP shares of common
stock  for a total  purchase  price of up to $10.0  million.  For each  share of
common stock purchased under the Standby Equity Distribution Agreement,  Cornell
Capital  Partners  LP will pay the  Company  98% of the lowest  volume  weighted
average  price of the Company's  common stock as quoted by Bloomberg,  LP on the
Over-the-Counter Bulletin Board or other principal market on which the Company's
common stock is traded for the 5 days immediately following the notice date. The
price paid by Cornell  Capital  Partners,  LP for the  Company's  stock shall be
determined  as of the date of each  individual  request for an advance under the
Standby Equity Distribution  Agreement.  Cornell Capital Partners,  LP will also
retain 5% of each  advance  under the  Standby  Equity  Distribution  Agreement.
Cornell Capital Partner's  obligation to purchase shares of the Company's common
stock  under the Standby  Equity  Distribution  Agreement  is subject to certain
conditions,  including the Company obtaining an effective registration statement
for shares of common stock sold under the Standby Equity Distribution  Agreement
and is limited to $500,000 per weekly advance.

      On March 23,  2005,  the Company  entered into a Security  Agreement  with
Cornell Capital Partners,  LP. Pursuant to the Security  Agreement,  the Company
shall issue  promissory  notes to Cornell Capital  Partners,  LP in the original
principal  amount of $2,500,000.  The  $2,500,000  will be disbursed as follows:
$1,150,000,  within three days of the closing of all the  transaction  documents
with Cornell Capital Partners, LP and $1,350,000,  within two days of the filing
of a registration  statement related to Standby Equity  Distribution  Agreement.
The  promissory  notes are  secured by the assets of the  Company  and shares of
stock of another entity  pledged by an affiliate of that entity.  The promissory
notes have a one-year term and accrue  interest at 12% per year beginning on the
three-month anniversary of the promissory notes.

Item 3.02. Unregistered Sales of Equity Securities.

      Cornell Capital Partners, LP shall receive 143,500 shares of the Company's
common  stock as a one-time  commitment  under the Standby  Equity  Distribution
Agreement.

      The Company shall issue to Sloan  Securities  Corporation  6,540 shares of
the Company's  common stock under a placement  agent  agreement  relating to the
Standby Equity Distribution Agreement.

Item 9.01. Financial Statements and Exhibits.

            (a)   Not applicable

            (b)   Not applicable

            (c)   Exhibit No. Description


Exhibit        Description                                     Location
-------        -----------                                     --------

Exhibit 99.1   Standby Equity Distribution  Agreement dated
               as of March 23, 2005 between the Company and
               Cornell Capital Partners, LP                    Provided herewith

Exhibit 99.2   Registration  Rights  Agreement  dated as of
               March  23,  2005  between  the  Company  and
               Cornell Capital Partners, LP                    Provided herewith

Exhibit 99.3   Placement  Agent Agreement dated as of March
               23, 2005 by and among the  Company,  Cornell
               Capital  Partners,  LP and Sloan  Securities
               Corporation                                     Provided herewith


                                        2

<PAGE>

Exhibit        Description                                     Location
-------        -----------                                     --------

Exhibit 99.4   Security Agreement dated as of March 23,
               2005 between the Company and Cornell Capital
               Partners, LP                                    Provided herewith

Exhibit 99.5   Promissory Note dated as of March 23, 2005
               issued to Cornell Capital Partners, LP          Provided herewith


                                       3

<PAGE>


                                   SIGNATURES

      Pursuant to the  requirements of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.

Date: March 29, 2005                      EARTHSHELL CORPORATION


                                          By:    /s/ D. Scott Houston
                                                 -----------------------
                                          Name:  D. Scott Houston
                                          Title: Chief Financial Officer


                                       4
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>v015142_ex99-1.txt
<TEXT>

                                                                    Exhibit 99.1

                      STANDBY EQUITY DISTRIBUTION AGREEMENT

      THIS  AGREEMENT  dated as of March  23,  2005  (the  "Agreement")  between
CORNELL CAPITAL PARTNERS,  LP, a Delaware limited  partnership (the "Investor"),
and EARTHSHELL CORPORATION,  a corporation organized and existing under the laws
of the State of Delaware (the "Company").

      WHEREAS,  the  parties  desire  that,  upon the terms and  subject  to the
conditions  contained herein,  the Company shall issue and sell to the Investor,
from time to time as provided  herein,  and the Investor shall purchase from the
Company up to Ten Million Dollars  ($10,000,000)  of the Company's common stock,
par value $0.01 per share (the "Common Stock");

      WHEREAS,  such investments will be made in reliance upon the provisions of
Regulation D ("Regulation D") of the Securities Act of 1933, as amended, and the
regulations  promulgated  thereunder (the  "Securities  Act"),  and or upon such
other exemption from the registration  requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder;
and

      WHEREAS,  the Company has engaged Sloan  Securities  Corp. (the "Placement
Agent"),  to act as the Company's  exclusive  placement agent in connection with
the sale of the Company's Common Stock to the Investor hereunder pursuant to the
Placement Agent  Agreement  dated the date hereof by and among the Company,  the
Placement Agent and the Investor (the "Placement Agent Agreement").

      NOW, THEREFORE, the parties hereto agree as follows:


                                   ARTICLE I.
                               Certain Definitions

      Section 1.1.  "Advance"  shall mean the portion of the  Commitment  Amount
requested by the Company in the Advance Notice.

      Section  1.2.  "Advance  Date"  shall  mean the date  the  David  Gonzalez
Attorney  Trust  Account is in receipt of the funds from the  Investor and David
Gonzalez,  Esq., is in  possession  of free trading  shares from the Company and
therefore  an  Advance  by the  Investor  to the  Company  can be made and David
Gonzalez,  Esq. can release the free trading shares to the Investor. The Advance
Date shall be the first (1st)  Trading Day after  expiration  of the  applicable
Pricing Period for each Advance.

      Section 1.3.  "Advance Notice" shall mean a written notice to the Investor
setting forth the Advance amount that the Company requests from the Investor and
the Advance Date.

      Section  1.4.  "Advance  Notice  Date"  shall  mean each date the  Company
delivers to the  Investor an Advance  Notice  requiring  the Investor to advance
funds to the Company,  subject to the terms of this Agreement. No Advance Notice
Date shall be less than five (5)  Trading  Days after the prior  Advance  Notice
Date.

<PAGE>

      Section 1.5.  "Bid Price" shall mean,  on any date,  the closing bid price
(as reported by Bloomberg  L.P.) of the Common Stock on the Principal  Market or
if the Common Stock is not traded on a Principal  Market,  the highest  reported
bid price for the Common  Stock,  as furnished by the  National  Association  of
Securities Dealers, Inc.

      Section  1.6.  "Closing"  shall mean one of the closings of a purchase and
sale of Common Stock pursuant to Section 2.3.

      Section 1.7.  "Commitment Amount" shall mean the aggregate amount of up to
Ten Million Dollars  ($10,000,000),  which the Investor has agreed to provide to
the Company in order to purchase  the  Company's  Common  Stock  pursuant to the
terms and conditions of this Agreement.

      Section 1.8.  "Commitment  Period" shall mean the period commencing on the
earlier to occur of (i) the  Effective  Date,  or (ii) such  earlier date as the
Company and the  Investor  may  mutually  agree in writing,  and expiring on the
earliest to occur of (x) the date on which the Investor  shall have made payment
of Advances  pursuant to this  Agreement in the aggregate  amount of Ten Million
Dollars  ($10,000,000),  (y) the date this  Agreement is terminated  pursuant to
Section  2.4,  or (z) the date  occurring  twenty-four  (24)  months  after  the
Effective Date.

      Section 1.9.  "Common  Stock" shall mean the Company's  common stock,  par
value $0.01 per share.

      Section  1.10.  "Condition  Satisfaction  Date" shall have the meaning set
forth in Section 7.2.

      Section 1.11.  "Damages" shall mean any loss,  claim,  damage,  liability,
costs and expenses (including,  without limitation,  reasonable  attorney's fees
and disbursements and costs and expenses of expert witnesses and investigation).

      Section 1.12.  "Effective Date" shall mean the date on which the SEC first
declares  effective  a  Registration  Statement  registering  the  resale of the
Registrable Securities as set forth in Section 7.2(a).

      Section 1.13. "Escrow Agreement" shall mean the escrow agreement among the
Company, the Investor, and David Gonzalez, Esq., dated the date hereof.

      Section 1.14.  "Exchange  Act" shall mean the  Securities  Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.

      Section  1.15.   "Material  Adverse  Effect"  shall  mean  any  condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to enter into and perform any of its obligations
under this  Agreement  or the  Registration  Rights  Agreement  in any  material
respect.

                                       2
<PAGE>

      Section  1.16.  "Market  Price"  shall mean the lowest  VWAP of the Common
Stock during the Pricing Period.

      Section 1.17.  "Maximum  Advance  Amount"  shall be Five Hundred  Thousand
Dollars ($500,000) per Advance Notice.

      Section  1.18.  "NASD" shall mean the National  Association  of Securities
Dealers, Inc.

      Section  1.19.  "Person"  shall  mean  an  individual,  a  corporation,  a
partnership, an association, a trust or other entity or organization,  including
a government or political subdivision or an agency or instrumentality thereof.

      Section  1.20.  "Placement  Agent" shall mean Sloan  Securities  Corp.,  a
registered broker-dealer.

      Section 1.21. "Pricing Period" shall mean the five (5) consecutive Trading
Days after the Advance Notice Date.

      Section 1.22.  "Principal  Market" shall mean the Nasdaq National  Market,
the Nasdaq SmallCap Market, the American Stock Exchange,  the OTC Bulletin Board
or the New York Stock Exchange,  whichever is at the time the principal  trading
exchange or market for the Common Stock.

      Section 1.23.  "Purchase Price" shall be set at ninety eight percent (98%)
of the Market Price during the Pricing Period.

      Section  1.24.  "Registrable  Securities"  shall mean the shares of Common
Stock to be issued hereunder (i) in respect of which the Registration  Statement
has not been declared  effective by the SEC, (ii) which have not been sold under
circumstances  meeting  all of the  applicable  conditions  of Rule  144 (or any
similar  provision then in force) under the Securities Act ("Rule 144") or (iii)
which have not been otherwise  transferred to a holder who may trade such shares
without  restriction  under the Securities  Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend.

      Section 1.25.  "Registration Rights Agreement" shall mean the Registration
Rights Agreement dated the date hereof, regarding the filing of the Registration
Statement for the resale of the Registrable Securities, entered into between the
Company and the Investor.

      Section 1.26. "Registration Statement" shall mean a registration statement
on Form  S-1 or  SB-2  (if use of such  form is then  available  to the  Company
pursuant to the rules of the SEC and, if not, on such other form  promulgated by
the SEC for which the Company then  qualifies  and which counsel for the Company
shall deem appropriate,  and which form shall be available for the resale of the
Registrable  Securities  to be  registered  thereunder  in  accordance  with the
provisions  of this  Agreement and the  Registration  Rights  Agreement,  and in
accordance with the intended method of distribution of such securities), for the
registration of the resale by the Investor of the Registrable  Securities  under
the Securities Act.

                                       3
<PAGE>

      Section  1.27.  "Regulation  D" shall  have the  meaning  set forth in the
recitals of this Agreement.

      Section 1.28. "SEC" shall mean the Securities and Exchange Commission.

      Section  1.29.  "Securities  Act" shall have the  meaning set forth in the
recitals of this Agreement.

      Section 1.30.  "SEC  Documents"  shall mean Annual Reports on Form 10-KSB,
Quarterly  Reports  on  Form  10-QSB,  Current  Reports  on Form  8-K and  Proxy
Statements  of the  Company as  supplemented  to the date  hereof,  filed by the
Company for a period of at least twelve (12) months  immediately  preceding  the
date  hereof or the  Advance  Date,  as the case may be,  until such time as the
Company  no  longer  has  an  obligation  to  maintain  the  effectiveness  of a
Registration Statement as set forth in the Registration Rights Agreement.

      Section  1.31.  "Trading Day" shall mean any day during which the New York
Stock Exchange shall be open for business.

      Section 1.32.  "VWAP" shall mean the volume weighted  average price of the
Company's Common Stock as quoted by Bloomberg, LP.


                                   ARTICLE II.
                                    Advances

      Section 2.1.      Investments.

            (a)  Advances.  Upon the  terms  and  conditions  set  forth  herein
(including,  without  limitation,  the provisions of Article VII hereof), on any
Advance  Notice Date the  Company may request an Advance by the  Investor by the
delivery  of an Advance  Notice.  The number of shares of Common  Stock that the
Investor  shall  receive for each Advance  shall be  determined  by dividing the
amount of the Advance by the  Purchase  Price.  No  fractional  shares  shall be
issued.  Fractional  shares  shall be rounded to the next higher whole number of
shares.  The aggregate maximum amount of all Advances that the Investor shall be
obligated to make under this Agreement shall not exceed the Commitment Amount.

      Section 2.2.      Mechanics.

            (a) Advance Notice.  At any time during the Commitment  Period,  the
Company may deliver an Advance Notice to the Investor, subject to the conditions
set forth in Section  7.2;  provided,  however,  the amount for each  Advance as
designated by the Company in the applicable  Advance  Notice,  shall not be more
than the Maximum Advance Amount.  The aggregate amount of the Advances  pursuant
to  this  Agreement  shall  not  exceed  the  Commitment   Amount.  The  Company
acknowledges  that the  Investor may sell shares of the  Company's  Common Stock
corresponding  with a particular Advance Notice on the day the Advance Notice is
received by the  Investor.  There  shall be a minimum of five (5)  Trading  Days
between each Advance Notice Date.

                                       4
<PAGE>

            (b) Date of Delivery of Advance  Notice.  An Advance Notice shall be
deemed delivered on (i) the Trading Day it is received by facsimile or otherwise
by the Investor if such notice is received  prior to 12:00 noon Eastern Time, or
(ii) the  immediately  succeeding  Trading Day if it is received by facsimile or
otherwise after 12:00 noon Eastern Time on a Trading Day or at any time on a day
which is not a Trading Day. No Advance  Notice may be deemed  delivered on a day
that is not a Trading Day.

      Section  2.3.  Closings.  On each Advance  Date,  which shall be the first
(1st) Trading Day after  expiration of the  applicable  Pricing  Period for each
Advance,  (i) the Company  shall  deliver to David  Gonzalez,  Esq. (the "Escrow
Agent")  shares of the Company's  Common Stock,  representing  the amount of the
Advance by the Investor  pursuant to Section 2.1 herein,  registered in the name
of the  Investor  which shall be  delivered  to the  Investor,  or  otherwise in
accordance  with the Escrow  Agreement  and (ii) the Investor  shall  deliver to
Escrow Agent the amount of the Advance  specified in the Advance  Notice by wire
transfer of immediately available funds which shall be delivered to the Company,
or otherwise in accordance with the Escrow Agreement.  In addition,  on or prior
to the Advance Date,  each of the Company and the Investor  shall deliver to the
other through the Investor's  counsel,  all documents,  instruments and writings
required to be delivered by either of them  pursuant to this  Agreement in order
to implement and effect the transactions  contemplated herein.  Payment of funds
to the Company and delivery of the Company's  Common Stock to the Investor shall
occur in accordance  with the conditions set forth above and those  contained in
the Escrow Agreement;  provided, however, that to the extent the Company has not
paid the fees,  expenses,  and  disbursements  of the Investor,  the  Investor's
counsel, or the Company's counsel in accordance with Section 12.4, the amount of
such fees,  expenses,  and  disbursements  may be deducted by the Investor  (and
shall be paid to the  relevant  party)  from the amount of the  Advance  with no
reduction in the amount of shares of the Company's  Common Stock to be delivered
on such Advance Date.

      Section 2.4. Termination of Investment.  The obligation of the Investor to
make an  Advance to the  Company  pursuant  to this  Agreement  shall  terminate
permanently  (including  with  respect  to an  Advance  Date  that  has  not yet
occurred)  in the event that (i) there shall occur any stop order or  suspension
of the  effectiveness  of the  Registration  Statement for an aggregate of fifty
(50)  Trading  Days,  other  than due to the acts of the  Investor,  during  the
Commitment  Period,  and (ii) the Company  shall at any time fail  materially to
comply with the  requirements of Article VI and such failure is not cured within
thirty (30) days after receipt of written  notice from the  Investor,  provided,
however,  that  this  termination  provision  shall  not  apply  to  any  period
commencing upon the filing of a  post-effective  amendment to such  Registration
Statement  and ending upon the date on which such post  effective  amendment  is
declared effective by the SEC.

      Section 2.5.  Agreement to Advance Funds.  The Investor  agrees to advance
the amount  specified in the Advance  Notice to the Company after the completion
of each of the following  conditions and the other  conditions set forth in this
Agreement:

             (a) the execution and delivery by the Company, and the Investor, of
this Agreement and the Exhibits hereto;

                                       5
<PAGE>

             (b) The Escrow Agent shall have received the shares of Common Stock
applicable to the Advance in  accordance  with Section 2.3. Such shares shall be
free of restrictive legends.

             (c) the Company's Registration Statement with respect to the resale
of the Registrable  Securities in accordance with the terms of the  Registration
Rights Agreement shall have been declared effective by the SEC;

             (d) the  Company  shall have  obtained  all  material  permits  and
qualifications  required by any  applicable  state for the offer and sale of the
Registrable Securities,  or shall have the availability of exemptions therefrom.
The sale and issuance of the Registrable  Securities shall be legally  permitted
by all laws and regulations to which the Company is subject;

             (e) the Company  shall have filed with the  Commission  in a timely
manner  all  reports,  notices  and other  documents  required  of a  "reporting
company" under the Exchange Act and applicable Commission regulations;

             (f) the fees as set forth in  Section  12.4  below  shall have been
paid or can be withheld as provided in Section 2.3; and

             (g) the  conditions  set  forth in  Section  7.2  shall  have  been
satisfied.

             (h)  the  Company   shall  have   provided   to  the   Investor  an
acknowledgement,  from  Farber & Hass,  LLP as to its  ability  to  provide  all
consents  required in order to file a registration  statement in connection with
this transaction;

             (i) The Company's transfer agent shall be DWAC eligible.

      Section 2.6. Lock Up Period. On the date hereof,  the Company shall obtain
from each officer and director a lock-up  agreement,  as defined  below,  in the
form annexed hereto as Schedule 2.6 agreeing to only sell in compliance with the
volume limitation of Rule 144.

      Section  2.7.  Hardship.  In the event the  Investor  sells  shares of the
Company's  Common Stock after receipt of an Advance Notice and the Company fails
to perform its  obligations  as mandated in Section  2.3, and  specifically  the
Company  fails to deliver to the Escrow  Agent on the Advance Date the shares of
Common Stock corresponding to the applicable Advance,  the Company  acknowledges
that the Investor shall suffer financial  hardship and therefore shall be liable
for any and all losses,  commissions,  fees, or financial hardship caused to the
Investor.


                                  ARTICLE III.
                  Representations and Warranties of Investor

      Investor  hereby  represents and warrants to, and agrees with, the Company
that the  following  are true and as of the date  hereof and as of each  Advance
Date:

                                       6
<PAGE>

      Section  3.1.  Organization  and  Authorization.   The  Investor  is  duly
incorporated  or  organized  and  validly  existing in the  jurisdiction  of its
incorporation  or  organization  and has all  requisite  power and  authority to
purchase and hold the securities issuable hereunder.  The decision to invest and
the execution and delivery of this Agreement by such Investor,  the  performance
by such  Investor of its  obligations  hereunder  and the  consummation  by such
Investor of the transactions  contemplated  hereby have been duly authorized and
requires no other  proceedings on the part of the Investor.  The undersigned has
the right,  power and  authority to execute and deliver this  Agreement  and all
other  instruments  (including,  without  limitations,  the Registration  Rights
Agreement), on behalf of the Investor. This Agreement has been duly executed and
delivered by the Investor and,  assuming the  execution and delivery  hereof and
acceptance thereof by the Company,  will constitute the legal, valid and binding
obligations of the Investor, enforceable against the Investor in accordance with
its terms.

      Section 3.2.  Evaluation  of Risks.  The Investor has such  knowledge  and
experience in financial tax and business  matters as to be capable of evaluating
the  merits  and risks of,  and  bearing  the  economic  risks  entailed  by, an
investment  in the Company and of protecting  its  interests in connection  with
this  transaction.  It recognizes that its investment in the Company  involves a
high degree of risk.

      Section 3.3. No Legal Advice From the Company.  The Investor  acknowledges
that it had the  opportunity  to  review  this  Agreement  and the  transactions
contemplated  by this Agreement with his or its own legal counsel and investment
and tax  advisors.  The Investor is relying  solely on such counsel and advisors
and  not on any  statements  or  representations  of the  Company  or any of its
representatives  or agents for legal,  tax or investment  advice with respect to
this  investment,  the  transactions  contemplated  by  this  Agreement  or  the
securities laws of any jurisdiction.

      Section 3.4. Investment Purpose. The securities are being purchased by the
Investor  for its own  account,  for  investment  and  without  any  view to the
distribution, assignment or resale to others or fractionalization in whole or in
part.  The Investor  agrees not to assign or in any way transfer the  Investor's
rights to the  securities  or any  interest  therein and  acknowledges  that the
Company  will not  recognize  any  purported  assignment  or transfer  except in
accordance with applicable  Federal and state  securities  laws. No other person
has or will have a direct or indirect beneficial interest in the securities. The
Investor  agrees not to sell,  hypothecate or otherwise  transfer the Investor's
securities  unless the securities  are  registered  under Federal and applicable
state securities laws or unless,  in the opinion of counsel  satisfactory to the
Company, an exemption from such laws is available.

      Section 3.5. Accredited Investor. The Investor is an "Accredited Investor"
as that term is defined in Rule 501(a)(3) of Regulation D of the Securities Act.

      Section 3.6. Information. The Investor and its advisors (and its counsel),
if any,  have  been  furnished  with all  materials  relating  to the  business,
finances and  operations of the Company and  information  it deemed  material to
making an informed investment decision.  The Investor and its advisors,  if any,
have been  afforded  the  opportunity  to ask  questions  of the Company and its
management.  Neither such  inquiries nor any other due diligence  investigations
conducted by such Investor or its advisors, if any, or its representatives shall
modify,  amend  or  affect  the  Investor's  right  to  rely  on  the  Company's
representations  and  warranties  contained  in  this  Agreement.  The  Investor
understands that its investment  involves a high degree of risk. The Investor is
in a position  regarding  the  Company,  which,  based upon  employment,  family
relationship or economic bargaining power,  enabled and enables such Investor to
obtain information from the Company in order to evaluate the merits and risks of
this investment. The Investor has sought such accounting,  legal and tax advice,
as it has  considered  necessary to make an informed  investment  decision  with
respect to this transaction.

                                       7
<PAGE>

      Section  3.7.  Receipt of  Documents.  The  Investor  and its counsel have
received and read in their entirety: (i) this Agreement and the Exhibits annexed
hereto;  (ii) all due  diligence and other  information  necessary to verify the
accuracy and  completeness  of such  representations,  warranties and covenants;
(iii) the  Company's  Form 10-KSB for the year ended  December 31, 2003 and Form
10-Q for the period ended  September 30, 2004; and (iv) answers to all questions
the Investor  submitted to the Company  regarding an  investment in the Company;
and the Investor  has relied on the  information  contained  therein and has not
been furnished any other documents, literature, memorandum or prospectus.

      Section 3.8.  Registration  Rights  Agreement  and Escrow  Agreement.  The
parties have  entered  into the  Registration  Rights  Agreement  and the Escrow
Agreement, each dated the date hereof.

      Section 3.9. No General Solicitation.  Neither the Company, nor any of its
affiliates,  nor any person  acting on its or their  behalf,  has engaged in any
form of general  solicitation  or general  advertising  (within  the  meaning of
Regulation D under the Securities  Act) in connection  with the offer or sale of
the shares of Common Stock offered hereby.

      Section 3.10. Not an Affiliate.  The Investor is not an officer,  director
or a person that  directly,  or indirectly  through one or more  intermediaries,
controls or is controlled by, or is under common control with the Company or any
"Affiliate"  of the  Company  (as  that  term  is  defined  in  Rule  405 of the
Securities Act).

      Section 3.11. Trading  Activities.  The Investor's trading activities with
respect to the Company's Common Stock shall be in compliance with all applicable
federal  and state  securities  laws,  rules and  regulations  and the rules and
regulations  of the  Principal  Market on which the  Company's  Common  Stock is
listed or traded.  Neither the  Investor  nor its  affiliates  has an open short
position in the Common Stock of the Company,  the Investor  agrees that it shall
not, and that it will cause its  affiliates not to, engage in any short sales of
or hedging  transactions  with respect to the Common  Stock,  provided  that the
Company  acknowledges  and agrees  that upon  receipt  of an Advance  Notice the
Investor is permitted  to sell the shares to be issued to the Investor  pursuant
to the Advance Notice during the applicable Pricing Period.


                                   ARTICLE IV.
                Representations and Warranties of the Company

      Except as stated below, on the disclosure  schedules attached hereto or in
the SEC  Documents  (as defined  herein),  the  Company  hereby  represents  and
warrants to, and  covenants  with,  the Investor that the following are true and
correct as of the date hereof:

                                       8
<PAGE>

      Section  4.1.   Organization  and  Qualification.   The  Company  is  duly
incorporated  or  organized  and  validly  existing in the  jurisdiction  of its
incorporation  or  organization  and  has  all  requisite  power  and  authority
corporate  power to own its properties and to carry on its business as now being
conducted.  Each of the  Company and its  subsidiaries  is duly  qualified  as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the  business  conducted  by it makes such  qualification
necessary,  except to the extent  that the failure to be so  qualified  or be in
good standing  would not have a Material  Adverse  Effect on the Company and its
subsidiaries taken as a whole.

      Section   4.2.   Authorization,   Enforcement,   Compliance   with   Other
Instruments.  (i) The Company has the requisite corporate power and authority to
enter into and perform this Agreement,  the Registration  Rights Agreement,  the
Escrow Agreement,  the Placement Agent Agreement and any related agreements,  in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement,  the Registration  Rights Agreement,  the Escrow Agreement,  the
Placement  Agent  Agreement  and any related  agreements  by the Company and the
consummation by it of the  transactions  contemplated  hereby and thereby,  have
been duly  authorized by the Company's Board of Directors and no further consent
or  authorization  is required by the  Company,  its Board of  Directors  or its
stockholders,  (iii) this Agreement,  the  Registration  Rights  Agreement,  the
Escrow Agreement,  the Placement Agent Agreement and any related agreements have
been duly  executed  and  delivered  by the Company,  (iv) this  Agreement,  the
Registration  Rights  Agreement,  the  Escrow  Agreement,  the  Placement  Agent
Agreement and assuming the execution and delivery  thereof and acceptance by the
Investor and any related agreements constitute the valid and binding obligations
of the Company  enforceable  against the Company in accordance with their terms,
except as such  enforceability may be limited by general principles of equity or
applicable bankruptcy,  insolvency,  reorganization,  moratorium, liquidation or
similar laws relating to, or affecting generally,  the enforcement of creditors'
rights and remedies.

      Section 4.3. Capitalization. As of the date hereof, the authorized capital
stock of the Company  consists of 40,000,000  shares of Common Stock,  par value
$0.01 per share,  and 10,000,000  shares of Preferred Stock, of which 18,243,615
shares of Common  Stock are  issued  and  outstanding.  All of such  outstanding
shares have been validly issued and are fully paid and nonassessable.  Except as
disclosed  in the SEC  Documents,  no  shares of Common  Stock  are  subject  to
preemptive  rights or any  other  similar  rights  or any liens or  encumbrances
suffered or permitted by the Company.  Except as disclosed in the SEC Documents,
as of the date hereof, (i) there are no outstanding  options,  warrants,  scrip,
rights  to  subscribe  to,  calls or  commitments  of any  character  whatsoever
relating to, or securities  or rights  convertible  into,  any shares of capital
stock of the  Company or any of its  subsidiaries,  or  contracts,  commitments,
understandings  or arrangements by which the Company or any of its  subsidiaries
is or may  become  bound to issue  additional  shares  of  capital  stock of the
Company  or any of its  subsidiaries  or  options,  warrants,  scrip,  rights to
subscribe to, calls or commitments of any character  whatsoever  relating to, or
securities  or rights  convertible  into,  any  shares of  capital  stock of the
Company  or  any  of its  subsidiaries,  (ii)  there  are  no  outstanding  debt
securities (iii) there are no outstanding  registration statements other than on
Form S-8 and (iv)  there  are no  agreements  or  arrangements  under  which the
Company or any of its  subsidiaries  is obligated to register the sale of any of
their  securities  under the Securities Act (except pursuant to the Registration
Rights   Agreement).   There  are  no  securities  or   instruments   containing
anti-dilution or similar  provisions that will be triggered by this Agreement or
any related  agreement or the consummation of the transactions  described herein
or therein. The Company has furnished to the Investor true and correct copies of
the Company's  Certificate of Incorporation,  as amended and as in effect on the
date hereof (the "Certificate of Incorporation"),  and the Company's By-laws, as
in effect on the date hereof (the  "By-laws"),  and the terms of all  securities
convertible  into or exercisable for Common Stock and the material rights of the
holders thereof in respect thereto.

                                       9
<PAGE>

      Section 4.4. No Conflict. The execution,  delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated  hereby will not (i) result in a violation  of the  Certificate  of
Incorporation,  any certificate of  designations  of any  outstanding  series of
preferred  stock of the Company or By-laws or (ii) conflict with or constitute a
default (or an event  which 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 of, any agreement, indenture or instrument to which
the Company or any of its  subsidiaries  is a party, or result in a violation of
any law, rule,  regulation,  order,  judgment or decree  (including  federal and
state  securities  laws and  regulations  and the rules and  regulations  of the
Principal Market on which the Common Stock is quoted)  applicable to the Company
or any of its  subsidiaries  or by which any  material  property or asset of the
Company or any of its  subsidiaries is bound or affected and which would cause a
Material Adverse Effect.  Except as disclosed in the SEC Documents,  neither the
Company nor its  subsidiaries is in violation of any term of or in default under
its  Articles of  Incorporation  or By-laws or their  organizational  charter or
by-laws,   respectively,   or  any  material  contract,   agreement,   mortgage,
indebtedness,  indenture,  instrument, judgment, decree or order or any statute,
rule or regulation  applicable to the Company or its subsidiaries.  The business
of the Company and its  subsidiaries  is not being conducted in violation of any
material  law,  ordinance,  regulation  of any  governmental  entity.  Except as
specifically contemplated by this Agreement and as required under the Securities
Act and any  applicable  state  securities  laws, the Company is not required to
obtain  any  consent,   authorization  or  order  of,  or  make  any  filing  or
registration with, any court or governmental  agency in order for it to execute,
deliver  or  perform  any of its  obligations  under  or  contemplated  by  this
Agreement or the  Registration  Rights  Agreement in  accordance  with the terms
hereof  or  thereof.   All  consents,   authorizations,   orders,   filings  and
registrations  which the Company is required to obtain pursuant to the preceding
sentence  have been  obtained or effected  on or prior to the date  hereof.  The
Company and its subsidiaries are unaware of any fact or circumstance which might
give rise to any of the foregoing.

      Section 4.5. SEC Documents;  Financial Statements.  Since January 1, 2003,
the  Company  has filed all  reports,  schedules,  forms,  statements  and other
documents required to be filed by it with the SEC under of the Exchange Act. The
Company has delivered to the Investor or its representatives,  or made available
through the SEC's website at http://www.sec.gov, true and complete copies of the
SEC Documents.  As of their respective  dates,  the financial  statements of the
Company disclosed in the SEC Documents (the "Financial  Statements") complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto.  Such financial
statements have been prepared in accordance with generally  accepted  accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise  indicated in such financial  statements or the notes  thereto,  or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary  statements) and, fairly present in all
material respects the financial  position of the Company as of the dates thereof
and the  results of its  operations  and cash flows for the  periods  then ended
(subject,  in the  case  of  unaudited  statements,  to  normal  year-end  audit
adjustments).  No other  information  provided by or on behalf of the Company to
the  Investor  which is not  included in the SEC  Documents  contains any untrue
statement of a material  fact or omits to state any material  fact  necessary in
order to make the statements  therein,  in the light of the circumstances  under
which they were made, not misleading.

                                       10
<PAGE>

      Section 4.6. 10b-5. The SEC Documents do not include any untrue statements
of material  fact,  nor do they omit to state any material  fact  required to be
stated  therein  necessary  to  make  the  statements  made,  in  light  of  the
circumstances under which they were made, not misleading.

      Section 4.7. No Default. Except as disclosed in the SEC Documents and with
respect to certain registration rights to register approximately 1,500,000 shars
of the Company's  Common Stock, the Company is not in default in the performance
or  observance  of any  material  obligation,  agreement,  covenant or condition
contained in any indenture, mortgage, deed of trust or other material instrument
or  agreement  to which it is a party or by which it is or its property is bound
and neither the execution,  nor the delivery by the Company, nor the performance
by the Company of its obligations under this Agreement or any of the exhibits or
attachments  hereto will  conflict  with or result in the breach or violation of
any of the terms or  provisions  of, or  constitute  a default  or result in the
creation or  imposition of any lien or charge on any assets or properties of the
Company under its Certificate of Incorporation, By-Laws, any material indenture,
mortgage, deed of trust or other material agreement applicable to the Company or
instrument  to which  the  Company  is a party or by which it is  bound,  or any
statute,  or any decree,  judgment,  order,  rules or regulation of any court or
governmental  agency  or  body  having  jurisdiction  over  the  Company  or its
properties,  in each  case  which  default,  lien or charge is likely to cause a
Material Adverse Effect on the Company's business or financial condition.

      Section 4.8. Absence of Events of Default. Except for matters described in
the SEC Documents and/or this Agreement,  no Event of Default, as defined in the
respective  agreement to which the Company is a party, and no event which,  with
the giving of notice or the  passage of time or both,  would  become an Event of
Default (as so  defined),  has occurred  and is  continuing,  which would have a
Material  Adverse  Effect  on the  Company's  business,  properties,  prospects,
financial condition or results of operations.

      Section  4.9.   Intellectual   Property   Rights.   The  Company  and  its
subsidiaries  own or possess  adequate  rights or licenses  to use all  material
trademarks,  trade names,  service marks,  service mark  registrations,  service
names, patents,  patent rights,  copyrights,  inventions,  licenses,  approvals,
governmental authorizations, trade secrets and rights necessary to conduct their
respective businesses as now conducted.  The Company and its subsidiaries do not
have any knowledge of any  infringement  by the Company or its  subsidiaries  of
trademark,  trade name rights, patents, patent rights,  copyrights,  inventions,
licenses, service names, service marks, service mark registrations, trade secret
or other similar rights of others,  and, to the knowledge of the Company,  there
is no claim,  action or  proceeding  being  made or brought  against,  or to the
Company's  knowledge,  being threatened against, the Company or its subsidiaries
regarding trademark,  trade name, patents, patent rights, invention,  copyright,
license, service names, service marks, service mark registrations,  trade secret
or other  infringement;  and the Company and its subsidiaries are unaware of any
facts or circumstances which might give rise to any of the foregoing.

                                       11
<PAGE>

      Section  4.10.  Employee  Relations.  Neither  the  Company nor any of its
subsidiaries  is involved in any labor  dispute  nor,  to the  knowledge  of the
Company or any of its subsidiaries,  is any such dispute threatened. None of the
Company's or its subsidiaries'  employees is a member of a union and the Company
and its subsidiaries believe that their relations with their employees are good.

      Section 4.11. Environmental Laws. The Company and its subsidiaries are (i)
in compliance with any and all applicable material foreign,  federal,  state and
local  laws and  regulations  relating  to the  protection  of human  health and
safety,  the environment or hazardous or toxic substances or wastes,  pollutants
or contaminants ("Environmental Laws"), (ii) have received all permits, licenses
or other  approvals  required  of them under  applicable  Environmental  Laws to
conduct their  respective  businesses and (iii) are in compliance with all terms
and conditions of any such permit, license or approval.

      Section 4.12. Title. Except as set forth in the SEC Documents, the Company
has good and marketable title to its properties and material assets owned by it,
free and clear of any pledge,  lien,  security interest,  encumbrance,  claim or
equitable  interest  other than such as are not  material to the business of the
Company.  Any real property and  facilities  held under lease by the Company and
its subsidiaries are held by them under valid, subsisting and enforceable leases
with such  exceptions as are not material and do not interfere with the use made
and proposed to be made of such  property  and  buildings by the Company and its
subsidiaries.

      Section  4.13.  Insurance.  The Company and each of its  subsidiaries  are
insured by insurers of recognized financial  responsibility  against such losses
and risks and in such  amounts  as  management  of the  Company  believes  to be
prudent  and  customary  in  the   businesses  in  which  the  Company  and  its
subsidiaries  are engaged.  Neither the Company nor any such subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such  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 at a cost that would not materially and adversely affect the condition,
financial or otherwise,  or the earnings,  business or operations of the Company
and its subsidiaries, taken as a whole.

      Section 4.14. Regulatory Permits. The Company and its subsidiaries possess
all material certificates,  authorizations and permits issued by the appropriate
federal,  state or foreign  regulatory  authorities  necessary to conduct  their
respective  businesses,  and neither the  Company  nor any such  subsidiary  has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.

      Section 4.15.  Internal Accounting  Controls.  The Company and each of its
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.

                                       12
<PAGE>

      Section 4.16. No Material  Adverse  Breaches,  etc. Except as set forth in
the SEC Documents, neither the Company nor any of its subsidiaries is subject to
any charter,  corporate or other legal  restriction,  or any  judgment,  decree,
order, rule or regulation which in the judgment of the Company's officers has or
is expected  in the future to have a Material  Adverse  Effect on the  business,
properties,  operations, financial condition, results of operations or prospects
of the Company or its  subsidiaries.  Except as set forth in the SEC  Documents,
neither the Company nor any of its  subsidiaries is in breach of any contract or
agreement  which breach,  in the judgment of the Company's  officers,  has or is
expected  to  have  a  Material  Adverse  Effect  on the  business,  properties,
operations,  financial  condition,  results of  operations  or  prospects of the
Company or its subsidiaries.

      Section  4.17.  Absence  of  Litigation.  Except  as set  forth in the SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency,  self-regulatory  organization
or body pending against or affecting the Company, the Common Stock or any of the
Company's subsidiaries, wherein an unfavorable decision, ruling or finding would
(i) have a Material Adverse Effect on the transactions  contemplated hereby (ii)
adversely affect the validity or enforceability  of, or the authority or ability
of the Company to perform its  obligations  under,  this Agreement or any of the
documents contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents,  have  a  Material  Adverse  Effect  on  the  business,   operations,
properties,  financial  condition or results of operation of the Company and its
subsidiaries taken as a whole.

      Section 4.18. Subsidiaries.  Except as disclosed in the SEC Documents, the
Company does not presently own or control, directly or indirectly,  any interest
in any other corporation, partnership, association or other business entity.

      Section 4.19. Tax Status.  Except as disclosed in the SEC  Documents,  the
Company  and each of its  subsidiaries  has made or filed all  federal and state
income and all other tax  returns,  reports  and  declarations  required  by any
jurisdiction  to which it is subject and (unless and only to the extent that the
Company  and each of its  subsidiaries  has set  aside on its  books  provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has paid
all taxes and other  governmental  assessments  and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except  those  being  contested  in good  faith  and has set  aside on its books
provision  reasonably  adequate  for  the  payment  of  all  taxes  for  periods
subsequent to the periods to which such returns,  reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction,  and the officers of the Company know of no basis
for any such claim.

      Section  4.20.  Certain  Transactions.  Except  as set  forth  in the  SEC
Documents  none of the  officers,  directors,  or  employees  of the  Company is
presently a party to any  transaction  with the Company (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 corporation, partnership, trust or other entity in which any
officer,  director,  or any such  employee has a  substantial  interest or is an
officer, director, trustee or partner.

                                       13
<PAGE>

      Section  4.21.  Fees and  Rights  of First  Refusal.  The  Company  is not
obligated to offer the securities  offered hereunder on a right of first refusal
basis or otherwise to any third parties  including,  but not limited to, current
or former shareholders of the Company,  underwriters,  brokers,  agents or other
third parties.

      Section 4.22. Use of Proceeds. The Company shall use the net proceeds from
this offering for general corporate purposes, including, without limitation, the
payment of loans incurred by the Company. However, in no event shall the Company
use the net  proceeds  from this  offering  for the payment (or loan to any such
person for the payment) of any  judgment,  or other  liability,  incurred by any
executive officer,  officer, director or employee of the Company, except for any
liability owed to such person for services rendered, or if any judgment or other
liability is incurred by such person  originating from services  rendered to the
Company, or the Company has indemnified such person from liability.

      Section 4.23. Further Representation and Warranties of the Company. For so
long  as  any  securities   issuable  hereunder  held  by  the  Investor  remain
outstanding, the Company acknowledges,  represents,  warrants and agrees that it
will maintain the listing of its Common Stock on the Principal Market.

      Section 4.24. Opinion of Counsel. Investor shall receive an opinion letter
from counsel to the Company on the date hereof.

      Section  4.25.  Opinion  of  Counsel.  The  Company  will  obtain  for the
Investor, at the Company's expense, any and all opinions of counsel which may be
reasonably  required in order to sell the securities  issuable hereunder without
restriction.

      Section  4.26.  Dilution.  The  Company  is aware  and  acknowledges  that
issuance  of shares of the  Company's  Common  Stock  could  cause  dilution  to
existing shareholders and could significantly increase the outstanding number of
shares of Common Stock.


                                   ARTICLE V.
                                 Indemnification

      The Investor and the Company  represent  to the other the  following  with
respect to itself:

      Section 5.1.      Indemnification.

            (a) In  consideration  of the  Investor's  execution and delivery of
this Agreement,  and in addition to all of the Company's other obligations under
this Agreement,  the Company shall defend, protect,  indemnify and hold harmless
the Investor, and all of its officers, directors, partners, employees and agents
(including,   without   limitation,   those  retained  in  connection  with  the
transactions  contemplated  by  this  Agreement)  (collectively,  the  "Investor
Indemnitees")  from and against any and all  actions,  causes of action,  suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith  (irrespective of whether any such Investor Indemnitee is a
party  to the  action  for  which  indemnification  hereunder  is  sought),  and
including  reasonable   attorneys'  fees  and  disbursements  (the  "Indemnified
Liabilities"),  incurred by the Investor  Indemnitees or any of them as a result
of, or arising out of, or relating to (a) any misrepresentation or breach of any
representation  or  warranty  made  by the  Company  in  this  Agreement  or the
Registration  Rights Agreement or any other certificate,  instrument or document
contemplated  hereby or thereby,  (b) any breach of any  covenant,  agreement or
obligation of the Company contained in this Agreement or the Registration Rights
Agreement or any other certificate,  instrument or document  contemplated hereby
or thereby,  or (c) any cause of action,  suit or claim  brought or made against
such  Investor  Indemnitee  not  arising  out of any  action or  inaction  of an
Investor  Indemnitee,  and  arising  out of or  resulting  from  the  execution,
delivery,  performance or enforcement of this Agreement or any other instrument,
document  or  agreement   executed  pursuant  hereto  by  any  of  the  Investor
Indemnitees.  To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and  satisfaction of each of the Indemnified  Liabilities,  which is
permissible under applicable law.

                                       14
<PAGE>

            (b) In consideration of the Company's execution and delivery of this
Agreement, and in addition to all of the Investor's other obligations under this
Agreement,  the Investor shall defend, protect,  indemnify and hold harmless the
Company and all of its officers, directors,  shareholders,  employees and agents
(including,   without   limitation,   those  retained  in  connection  with  the
transactions  contemplated  by  this  Agreement)  (collectively,   the  "Company
Indemnitees") from and against any and all Indemnified  Liabilities  incurred by
the  Company  Indemnitees  or any of them as a result of, or arising  out of, or
relating  to (a)  any  misrepresentation  or  breach  of any  representation  or
warranty  made  by the  Investor  in this  Agreement,  the  Registration  Rights
Agreement, or any instrument or document contemplated hereby or thereby executed
by the Investor, (b) any breach of any covenant,  agreement or obligation of the
Investor(s)  contained in this Agreement,  the Registration  Rights Agreement or
any other  certificate,  instrument or document  contemplated  hereby or thereby
executed by the Investor,  or (c) any cause of action,  suit or claim brought or
made against such Company  Indemnitee  based on  misrepresentations  or due to a
breach by the  Investor  and arising  out of or  resulting  from the  execution,
delivery,  performance or enforcement of this Agreement or any other instrument,
document  or  agreement   executed   pursuant  hereto  by  any  of  the  Company
Indemnitees. To the extent that the foregoing undertaking by the Investor may be
unenforceable for any reason,  the Investor shall make the maximum  contribution
to the payment and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.

                  (c)  The  obligations  of the  parties  to  indemnify  or make
contribution under this Section 5.1 shall survive termination.


                                   ARTICLE VI.
                            Covenants of the Company

      Section 6.1. Registration Rights. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all material respects with the terms thereof.

                                       15
<PAGE>

      Section  6.2.  Listing of Common  Stock.  The Company  shall  maintain the
Common  Stock's  authorization  for  quotation  on the National  Association  of
Securities Dealers Inc.'s Over the Counter Bulletin Board.

      Section 6.3. Exchange Act Registration.  The Company will cause its Common
Stock to continue to be registered under Section 12(g) of the Exchange Act, will
file in a timely  manner all  reports  and other  documents  required of it as a
reporting  company  under the  Exchange Act and will not take any action or file
any document  (whether or not permitted by Exchange Act or the rules thereunder)
to  terminate  or suspend  such  registration  or to  terminate  or suspend  its
reporting and filing obligations under said Exchange Act.

      Section  6.4.  Transfer  Agent  Instructions.  Upon  effectiveness  of the
Registration  Statement the Company shall deliver  instructions  to its transfer
agent to issue  shares  of  Common  Stock to the  Investor  free of  restrictive
legends on or before each Advance Date

      Section  6.5.  Corporate  Existence.  The  Company  will  take  all  steps
necessary to preserve and continue the corporate existence of the Company.

      Section 6.6. Notice of Certain Events Affecting  Registration;  Suspension
of Right to Make an Advance.  The Company will  immediately  notify the Investor
upon its becoming  aware of the  occurrence  of any of the  following  events in
respect  of a  registration  statement  or  related  prospectus  relating  to an
offering of  Registrable  Securities:  (i) receipt of any request for additional
information  by the SEC or any other  Federal  or state  governmental  authority
during the period of effectiveness of the Registration  Statement for amendments
or supplements to the  registration  statement or related  prospectus;  (ii) the
issuance by the SEC or any other Federal or state governmental  authority of any
stop order suspending the  effectiveness  of the  Registration  Statement or the
initiation  of  any  proceedings   for  that  purpose;   (iii)  receipt  of  any
notification  with respect to the suspension of the  qualification  or exemption
from  qualification  of  any of  the  Registrable  Securities  for  sale  in any
jurisdiction  or the  initiation  or  threatening  of any  proceeding  for  such
purpose;  (iv) the happening of any event that makes any  statement  made in the
Registration  Statement or related  prospectus of any document  incorporated  or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration  Statement,  related
prospectus or documents so that, in the case of the Registration  Statement,  it
will not contain any untrue  statement  of a material  fact or omit to state any
material fact required to be stated  therein or necessary to make the statements
therein not misleading,  and that in the case of the related prospectus, it will
not  contain  any  untrue  statement  of a  material  fact or omit to state  any
material fact required to be stated  therein or necessary to make the statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading; and (v) the Company's reasonable determination that a post-effective
amendment to the  Registration  Statement would be appropriate;  and the Company
will promptly make available to the Investor any such supplement or amendment to
the related  prospectus.  The  Company  shall not  deliver to the  Investor  any
Advance Notice during the continuation of any of the foregoing events.

      Section 6.7.  Restriction on Sale of Capital Stock.  During the Commitment
Period,  the  Company  shall  not,  without  the prior  written  consent  of the
Investor,  (i)  issue  or sell  any  Common  Stock or  Preferred  Stock  without
consideration  or for a  consideration  per share less than the bid price of the
Common Stock determined  immediately  prior to its issuance,  (ii) issue or sell
any Preferred Stock warrant, option, right, contract, call, or other security or
instrument granting the holder thereof the right to acquire Common Stock without
consideration or for a consideration per share less than such Common Stock's Bid
Price  determined   immediately  prior  to  its  issuance,  or  (iii)  file  any
registration statement on Form S-8.

                                       16
<PAGE>

      Section 6.8.  Consolidation;  Merger.  The Company  shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into,  or a transfer  of all or  substantially  all the assets of the Company to
another  entity (a  "Consolidation  Event")  unless the  resulting  successor or
acquiring  entity  (if  not the  Company)  assumes  by  written  instrument  the
obligation to deliver to the Investor such shares of stock and/or  securities as
the Investor is entitled to receive pursuant to this Agreement.

      Section  6.9.  Issuance of the  Company's  Common  Stock.  The sale of the
shares of Common  Stock  shall be made in  accordance  with the  provisions  and
requirements of Regulation D and any applicable state securities law.


                                  ARTICLE VII.
               Conditions for Advance and Conditions to Closing

      Section 7.1. Conditions  Precedent to the Obligations of the Company.  The
obligation hereunder of the Company to issue and sell the shares of Common Stock
to the  Investor  incident to each  Closing is subject to the  satisfaction,  or
waiver by the Company, at or before each such Closing, of each of the conditions
set forth below.

            (a) Accuracy of the Investor's  Representations and Warranties.  The
representations  and warranties of the Investor shall be true and correct in all
material respects.

            (b) Performance by the Investor.  The Investor shall have performed,
satisfied  and  complied in all  respects  with all  covenants,  agreements  and
conditions  required by this Agreement and the Registration  Rights Agreement to
be  performed,  satisfied  or complied  with by the Investor at or prior to such
Closing.

      Section 7.2.  Conditions  Precedent to the Right of the Company to Deliver
an Advance  Notice and the  Obligation  of the  Investor to  Purchase  Shares of
Common  Stock.  The right of the  Company to  deliver an Advance  Notice and the
obligation  of the  Investor  hereunder  to  acquire  and pay for  shares of the
Company's  Common Stock  incident to a Closing is subject to the  fulfillment by
the  Company,  on (i) the date of delivery of such  Advance  Notice and (ii) the
applicable Advance Date (each a "Condition  Satisfaction  Date"), of each of the
following conditions:

            (a) Registration of the Common Stock with the SEC. The Company shall
have filed with the SEC a  Registration  Statement with respect to the resale of
the  Registrable  Securities  in accordance  with the terms of the  Registration
Rights  Agreement.  As set  forth  in the  Registration  Rights  Agreement,  the
Registration  Statement shall have previously  become effective and shall remain
effective on each  Condition  Satisfaction  Date and (i) neither the Company nor
the Investor  shall have  received  notice that the SEC has issued or intends to
issue a stop order with  respect to the  Registration  Statement or that the SEC
otherwise  has  suspended or withdrawn  the  effectiveness  of the  Registration
Statement, either temporarily or permanently, or intends or has threatened to do
so (unless the SEC's concerns have been addressed and the Investor is reasonably
satisfied that the SEC no longer is considering or intends to take such action),
and (ii) no other  suspension of the use or withdrawal of the  effectiveness  of
the Registration  Statement or related  prospectus shall exist. The Registration
Statement  must  have  been  declared  effective  by the SEC  prior to the first
Advance Notice Date.

                                       17
<PAGE>

            (b)  Authority.  The  Company  shall have  obtained  all permits and
qualifications   required  by  any  applicable  state  in  accordance  with  the
Registration  Rights  Agreement  for the offer and sale of the  shares of Common
Stock,  or shall have the  availability  of exemptions  therefrom.  The sale and
issuance of the shares of Common  Stock shall be legally  permitted  by all laws
and regulations to which the Company is subject.

            (c)  Fundamental  Changes.  There  shall not  exist any  fundamental
changes to the information set forth in the  Registration  Statement which would
require  the  Company to file a  post-effective  amendment  to the  Registration
Statement.

            (d)  Performance by the Company.  The Company shall have  performed,
satisfied and complied in all material  respects with all covenants,  agreements
and conditions required by this Agreement  (including,  without limitation,  the
conditions  specified  in  Section  2.5  hereof)  and  the  Registration  Rights
Agreement to be performed, satisfied or complied with by the Company at or prior
to each Condition Satisfaction Date.

            (e) No Injunction.  No statute, rule,  regulation,  executive order,
decree,  ruling or injunction shall have been enacted,  entered,  promulgated or
endorsed by any court or governmental  authority of competent  jurisdiction that
prohibits or directly and adversely affects any of the transactions contemplated
by this Agreement, and no proceeding shall have been commenced that may have the
effect  of   prohibiting  or  adversely   affecting  any  of  the   transactions
contemplated by this Agreement.

            (f) No Suspension  of Trading in or Delisting of Common  Stock.  The
trading of the Common Stock is not suspended by the SEC or the Principal  Market
(if the Common Stock is traded on a Principal Market). The issuance of shares of
Common Stock with respect to the applicable  Closing,  if any, shall not violate
the shareholder  approval  requirements  of the Principal  Market (if the Common
Stock is traded on a Principal Market).  The Company shall not have received any
notice  threatening  the continued  listing of the Common Stock on the Principal
Market (if the Common Stock is traded on a Principal Market).

            (g) Maximum  Advance Amount.  The amount of an Advance  requested by
the Company  shall not exceed the Maximum  Advance  Amount.  In addition,  in no
event shall the number of shares issuable to the Investor pursuant to an Advance
cause the aggregate number of shares of Common Stock  beneficially  owned by the
Investor and its  affiliates to exceed nine and 9/10 percent  (9.9%) of the then
outstanding  Common  Stock of the  Company.  For the  purposes  of this  section
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Exchange Act.

                                       18
<PAGE>

            (h) No  Knowledge.  The Company has no  knowledge of any event which
would be more  likely than not to have the effect of causing  such  Registration
Statement to be suspended or otherwise ineffective.

            (i) Other. On each Condition  Satisfaction  Date, the Investor shall
have received the certificate  executed by an officer of the Company in the form
of Exhibit A attached hereto.


                                  ARTICLE VIII.
        Due Diligence Review; Non-Disclosure of Non-Public Information

      Section 8.1. Due Diligence Review. Prior to the filing of the Registration
Statement the Company  shall make  available  for  inspection  and review by the
Investor, its advisors and representatives, and any underwriter participating in
any disposition of the Registrable Securities on behalf of the Investor pursuant
to the Registration  Statement,  any such registration statement or amendment or
supplement  thereto or any blue sky,  NASD or other  filing,  all  financial and
other  records,  all SEC Documents and other filings with the SEC, and all other
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company's officers,  directors and
employees to supply all such information reasonably requested by the Investor or
any  such  representative,  advisor  or  underwriter  in  connection  with  such
Registration  Statement  (including,  without  limitation,  in  response  to all
questions  and other  inquiries  reasonably  made or  submitted by any of them),
prior to and  from  time to time  after  the  filing  and  effectiveness  of the
Registration  Statement  for the sole  purpose of enabling the Investor and such
representatives,  advisors and underwriters and their respective accountants and
attorneys  to conduct  initial  and ongoing due  diligence  with  respect to the
Company and the accuracy of the Registration Statement.

      Section 8.2. Non-Disclosure of Non-Public Information.

            (a) The Company  shall not disclose  non-public  information  to the
Investor,  its advisors,  or its representatives,  unless prior to disclosure of
such  information the Company  identifies such  information as being  non-public
information and provides the Investor,  such advisors and  representatives  with
the  opportunity to accept or refuse to accept such  non-public  information for
review. The Company may, as a condition to disclosing any non-public information
hereunder,  require the Investor's  advisors and representatives to enter into a
confidentiality agreement in form reasonably satisfactory to the Company and the
Investor.

            (b) Nothing herein shall require the Company to disclose  non-public
information to the Investor or its advisors or representatives,  and the Company
represents that it does not disseminate  non-public information to any investors
who purchase stock in the Company in a public offering,  to money managers or to
securities analysts,  provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided,  immediately notify the
advisors and representatives of the Investor and, if any,  underwriters,  of any
event or the existence of any  circumstance  (without any obligation to disclose
the specific  event or  circumstance)  of which it becomes  aware,  constituting
non-public  information (whether or not requested of the Company specifically or
generally  during  the course of due  diligence  by such  persons or  entities),
which, if not disclosed in the prospectus included in the Registration Statement
would  cause such  prospectus  to include a material  misstatement  or to omit a
material  fact  required to be stated  therein in order to make the  statements,
therein,  in light of the circumstances in which they were made, not misleading.
Nothing  contained  in this  Section  8.2 shall be  construed  to mean that such
persons or entities other than the Investor  (without the written consent of the
Investor  prior to disclosure  of such  information)  may not obtain  non-public
information  in the course of conducting  due  diligence in accordance  with the
terms of this  Agreement  and nothing  herein shall  prevent any such persons or
entities  from  notifying  the Company of their  opinion  that based on such due
diligence by such persons or entities,  that the Registration Statement contains
an untrue  statement of material  fact or omits a material  fact  required to be
stated  in the  Registration  Statement  or  necessary  to make  the  statements
contained  therein,  in light of the  circumstances in which they were made, not
misleading.

                                       19
<PAGE>


                                   ARTICLE IX.
                           Choice of Law/Jurisdiction

      Section  9.1.  Governing  Law.  This  Agreement  shall be  governed by and
interpreted  in  accordance  with the laws of the  State of New  Jersey  without
regard to the principles of conflict of laws. The parties further agree that any
action between them shall be heard in Hudson County,  New Jersey,  and expressly
consent  to the  jurisdiction  and venue of the  Superior  Court of New  Jersey,
sitting in Hudson County, New Jersey and the United States District Court of New
Jersey,  sitting in Newark, New Jersey, for the adjudication of any civil action
asserted pursuant to this paragraph.


                                   ARTICLE X.
                             Assignment; Termination

      Section  10.1.  Assignment.  Neither this  Agreement nor any rights of the
Company hereunder may be assigned to any other Person.

      Section 10.2. Termination.

            (a) The  obligations  of the Investor to make Advances under Article
II hereof shall terminate twenty-four (24) months after the Effective Date.

            (b) The Company may terminate  this  Agreement upon thirty (30) days
written  notice  to the  Investor  provided  that  (i)  there  are  no  Advances
outstanding,  and (ii) The  Company has paid all  amounts  owed  pursuant to the
Notes issued to the  Investor,  as set forth in the  Security  Agreement of even
date herewith  between the Company and the  Investor.  Any  termination  of this
Agreement  pursuant to this Section 10.2(b) shall not terminate the Registration
Rights Agreement unless the Investor has disposed of all the Investor Shares (as
defined  below) and all shares issued to the Investor  pursuant to Advances,  or
all such shares are eligible for resale pursuant to Rule 144(k).


                                   ARTICLE XI.
                                     Notices

      Section  11.1.  Notices.   Any  notices,   consents,   waivers,  or  other
communications  required  or  permitted  to be  given  under  the  terms of this
Agreement  must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered  personally;  (ii) upon receipt, when sent by facsimile,
provided a copy is mailed by U.S.  certified  mail,  return  receipt  requested;
(iii) three (3) days after being sent by U.S.  certified  mail,  return  receipt
requested,  or (iv)  one (1) day  after  deposit  with a  nationally  recognized
overnight  delivery  service,  in each case  properly  addressed to the party to
receive the same.  The addresses and facsimile  numbers for such  communications
shall be:

                                       20
<PAGE>

If to the Company, to:        Earthshell Corporation
                              3916 State Street, #110
                              Santa Barbara, California 93105
                              Attention:  Scott Houston
                                          Chief Financial Officer
                              Telephone:  (805) 563-7590
                              Facsimile:  (805) 563-7954

With a copy to:               Kirkpatrick & Lockhart Nicholson Graham, LLP
                              201 South Biscayne Boulevard, Suite 2000
                              Miami, Florida 33131
                              Attention:  Clayton E. Parker, Esquire
                              Telephone:  (305) 539-3306
                              Facsimile:  (305) 358-7095

If to the Investor(s):        Cornell Capital Partners, LP
                              101 Hudson Street -Suite 3700
                              Jersey City, NJ 07302
                              Attention:  Mark Angelo
                                          Portfolio Manager
                              Telephone:  (201) 985-8300
                              Facsimile:  (201) 985-8266

With a Copy to:               Cornell Capital Partners, LP
                              101 Hudson Street - Suite 3700
                              Jersey City, NJ 07302
                              Telephone:  (201) 985-8300
                              Attention:  Troy J. Rillo, Esquire
                                          Senior Vice President, Capital Markets
                              Telephone:  (201) 985-8300
                              Facsimile:  (201) 985-8266

Each party shall provide five (5) days' prior written  notice to the other party
of any change in address or facsimile number.


                                  ARTICLE XII.
                                  Miscellaneous

      Section 12.1. Counterparts.  This Agreement may be executed in two or more
identical  counterparts,  all of  which  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.  In the event any  signature  page is
delivered  by  facsimile  transmission,  the party  using such means of delivery
shall  cause  four  (4)  additional  original  executed  signature  pages  to be
physically  delivered to the other party  within five (5) days of the  execution
and delivery hereof,  though failure to deliver such copies shall not affect the
validity of this Agreement.

                                       21
<PAGE>

      Section 12.2. Entire Agreement;  Amendments. This Agreement supersedes all
other prior oral or written agreements between the Investor,  the Company, their
affiliates  and  persons  acting on their  behalf  with  respect to the  matters
discussed  herein,  and this  Agreement and the  instruments  referenced  herein
contain  the entire  understanding  of the parties  with  respect to the matters
covered  herein and therein  and,  except as  specifically  set forth  herein or
therein,  neither  the  Company  nor  the  Investor  makes  any  representation,
warranty,  covenant or undertaking with respect to such matters. No provision of
this  Agreement  may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.

      Section 12.3.  Reporting Entity for the Common Stock. The reporting entity
relied upon for the  determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this  Agreement  shall
be Bloomberg,  L.P. or any successor thereto.  The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.

      Section  12.4.  Fees and  Expenses.  The Company  hereby agrees to pay the
following fees:

            (a) Structuring Fees. Each of the parties shall pay its own fees and
expenses (including the fees of any attorneys, accountants, appraisers or others
engaged by such party) in connection  with this  Agreement and the  transactions
contemplated  hereby,  except that the  Company  will pay a  structuring  fee of
Twenty Two Thousand Dollars  ($22,000) to Yorkville  Advisors  Management,  LLC,
which was previously paid by the Company. Subsequently on each advance date, the
Company will pay Yorkville  Advisors  Management,  LLC a structuring fee of Five
Hundred Dollars ($500) and any outstanding  fees of Kirkpatrick & Lockhart,  LLP
directly out the proceeds of any Advances hereunder.

            (b)  Due   Diligence   Fee.   Company   shall  pay  the  Investor  a
non-refundable  due diligence fee of Five Thousand  Dollars  ($5,000)  which was
previously paid by the Company.

            (c) Commitment Fees.

                  (i)  On  each  Advance  Date  the  Company  shall  pay  to the
Investor,  directly from the gross  proceeds held in escrow,  an amount equal to
five percent (5%) of the amount of each Advance.  The Company hereby agrees that
if such  payment,  as is  described  above,  is not made by the  Company  on the
Advance  Date,  such  payment  will be made at the  direction of the Investor as
outlined and mandated by Section 2.3 of this Agreement.

                  (ii) Upon the  execution of this  Agreement  the Company shall
issue  to the  Investor  143,550  shares  of the  Company's  Common  Stock  (the
"Investor's Shares").

                                       22
<PAGE>

                  (iii) Fully  Earned.  The  Investor's  Shares  shall be deemed
fully earned as of the date hereof.

                  (iv)  Registration  Rights.  The  Investor's  Shares will have
"piggy-back" registration rights.

      Section 12.5. Brokerage. Each of the parties hereto represents that it has
had no dealings in connection  with this  transaction  with any finder or broker
who will  demand  payment of any fee or  commission  from the other  party.  The
Company on the one hand, and the Investor, on the other hand, agree to indemnify
the other against and hold the other  harmless from any and all  liabilities  to
any  person  claiming  brokerage  commissions  or  finder's  fees on  account of
services  purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby.

      Section  12.6.  Confidentiality.   If  for  any  reason  the  transactions
contemplated by this Agreement are not  consummated,  each of the parties hereto
shall keep  confidential  any information  obtained from any other party (except
information  publicly  available  or in such  party's  domain  prior to the date
hereof,  and except as required by court order) and shall promptly return to the
other  parties  all  schedules,  documents,  instruments,  work  papers or other
written information without retaining copies thereof, previously furnished by it
as a result of this Agreement or in connection herein.

                 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       23
<PAGE>

      IN WITNESS  WHEREOF,  the parties  hereto have caused this Standby  Equity
Distribution  Agreement  to be  executed  by  the  undersigned,  thereunto  duly
authorized, as of the date first set forth above.

                                    COMPANY:
                                    EARTHSHELL CORPORATION

                                    By: /s/ Scott Houston
                                       ---------------------------
                                    Name:  Scott Houston
                                    Title: Chief Financial Officer


                                    INVESTOR:
                                    CORNELL CAPITAL PARTNERS, LP

                                    By:    Yorkville Advisors, LLC
                                    Its:   General Partner

                                    By: /s/ Mark Angelo
                                       ---------------------------
                                    Name:  Mark Angelo
                                    Title: Portfolio Manager


                                       24
<PAGE>

                                    EXHIBIT A


                      ADVANCE NOTICE/COMPLIANCE CERTIFICATE


                             EARTHSHELL CORPORATION


      The undersigned, _______________________ hereby certifies, with respect to
the sale of shares of Common Stock of EARTHSHELL  CORPORATION  (the  "Company"),
issuable in connection with this Advance Notice and Compliance Certificate dated
___________________  (the  "Notice"),  delivered  pursuant to the Standby Equity
Distribution Agreement (the "Agreement"), as follows:

      1. The undersigned is the duly elected ______________ of the Company.

      2. There are no fundamental  changes to the  information  set forth in the
Registration  Statement which would require the Company to file a post effective
amendment to the Registration Statement.

      3. The Company has  performed in all material  respects all  covenants and
agreements  to be  performed  by the  Company  on or prior to the  Advance  Date
related  to the  Notice  and has  complied  in all  material  respects  with all
obligations and conditions contained in the Agreement.

      4. The undersigned hereby  represents,  warrants and covenants that it has
made  all  filings  ("SEC  Filings")  required  to be  made  by it  pursuant  to
applicable securities laws (including,  without limitation, all filings required
under the Securities  Exchange Act of 1934, which include Forms 10-Q, 10-K, 8-K,
etc.  All  SEC  Filings  and  other  public  disclosures  made  by the  Company,
including,  without limitation, all press releases, analysts meetings and calls,
etc. (collectively,  the "Public Disclosures"),  have been reviewed and approved
for release by the Company's attorneys and, if containing financial information,
the Company's  independent  certified public accountants.  None of the Company's
Public  Disclosures  contain any untrue  statement of a material fact or omit to
state any material fact  required to be stated  therein or necessary to make the
statements  therein,  in the light of the  circumstances  under  which they were
made, not misleading.

      5. The Advance requested is _____________________.

      The undersigned has executed this Certificate this ___ day of ___________.

                                   EARTHSHELL CORPORATION


                                   By:
                                      ----------------------------------
                                   Name:
                                   Title:


                                       25
<PAGE>


                                  SCHEDULE 2.6


                             EARTHSHELL CORPORATION

      The  undersigned  hereby  agrees that for a period  commencing on the date
hereof and expiring on the  termination  of the Agreement  dated March ___, 2005
between  Earthshell  Corporation (the "Company"),  and Cornell Capital Partners,
LP, (the "Investor") (the "Lock-up Period"), he, she or it will not, directly or
indirectly,  without the prior written  consent of the Investor,  issue,  offer,
agree or offer to sell,  sell,  grant an  option  for the  purchase  or sale of,
transfer,  pledge,  assign,  hypothecate,  distribute  or otherwise  encumber or
dispose of except  pursuant  to Rule 144 of the  General  Rules and  Regulations
under the  Securities  Act of 1933,  any  securities  of the Company,  including
common  stock or  options,  rights,  warrants  or other  securities  underlying,
convertible  into,  exchangeable  or exercisable  for or evidencing any right to
purchase or subscribe for any common stock (whether or not beneficially owned by
the  undersigned),  or  any  beneficial  interest  therein  (collectively,   the
"Securities").

      In order to enable the aforesaid covenants to be enforced, the undersigned
hereby consents to the placing of legends and/or  stop-transfer  orders with the
transfer agent of the Company's securities with respect to any of the Securities
registered  in  the  name  of  the  undersigned  or  beneficially  owned  by the
undersigned, and the undersigned hereby confirms the undersigned's investment in
the Company.

Dated: _______________, 2005

                                    Signature


                                    ____________________________________________
                                    Name: ______________________________________
                                    Address:____________________________________
                                    City, State, Zip Code:______________________


                                    ____________________________________________
                                    Print Social Security Number
                                    or Taxpayer I.D. Number


                                       26

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>3
<FILENAME>v015142_ex99-2.txt
<TEXT>

                                                                    Exhibit 99.2

                          REGISTRATION RIGHTS AGREEMENT

      REGISTRATION  RIGHTS AGREEMENT (this  "Agreement"),  dated as of March 23,
2005  by  and  between  EARTHSHELL  CORPORATION,  a  Delaware  corporation  (the
"Company"),  and CORNELL CAPITAL  PARTNERS,  LP, a Delaware limited  partnership
(the "Investor").

      WHEREAS:

      A. In connection  with the Standby  Equity  Distribution  Agreement by and
between  the  parties  hereto  of  even  date  herewith  (the  "Standby   Equity
Distribution Agreement"),  the Company has agreed, upon the terms and subject to
the conditions of the Standby Equity Distribution  Agreement,  to issue and sell
to the Investor that number of shares of the Company's  common stock,  par value
$0.01 per share (the "Common  Stock"),  which can be  purchased  pursuant to the
terms of the Standby  Equity  Distribution  Agreement for an aggregate  purchase
price of up to Ten Million Dollars ($10,000,000).  Capitalized terms not defined
herein  shall  have  the  meaning   ascribed  to  them  in  the  Standby  Equity
Distribution Agreement.

      B. To induce the  Investor  to execute  and  deliver  the  Standby  Equity
Distribution  Agreement,  the Company has agreed to provide certain registration
rights  under  the  Securities  Act of  1933,  as  amended,  and the  rules  and
regulations  thereunder,  or any similar  successor statute  (collectively,  the
"Securities Act"), and applicable state securities laws.

      NOW, THEREFORE,  in consideration of the premises and the mutual covenants
contained  herein and other good and  valuable  consideration,  the  receipt and
sufficiency  of which are hereby  acknowledged,  the  Company  and the  Investor
hereby agree as follows:

      1.    DEFINITIONS.

      As used in this  Agreement,  the following  terms shall have the following
meanings:

            a. "Person" means a corporation,  a limited  liability  company,  an
association,  a partnership,  an  organization,  a business,  an  individual,  a
governmental or political subdivision thereof or a governmental agency.

            b.  "Register,"   "registered,"  and   "registration"   refer  to  a
registration   effected  by  preparing  and  filing  one  or  more  Registration
Statements (as defined below) in compliance with the Securities Act and pursuant
to Rule 415  under  the  Securities  Act or any  successor  rule  providing  for
offering  securities  on a continuous  or delayed  basis ("Rule  415"),  and the
declaration or ordering of  effectiveness of such  Registration  Statement(s) by
the United States Securities and Exchange Commission (the "SEC").

            c. "Registrable  Securities" means the Investor's Shares (as defined
in the  Standby  Equity  Distribution  Agreement)  and  shares of  Common  Stock
issuable to Investors pursuant to the Standby Equity Distribution Agreement.


<PAGE>


            d. "Registration Statement" means a registration statement under the
Securities Act which covers the Registrable Securities.

      2.    REGISTRATION.

            a. Mandatory  Registration.  The Company shall prepare and file with
the SEC a  Registration  Statement on Form S-1, SB-2 or on such other form as is
available.  The Company shall cause such  Registration  Statement to be declared
effective  by the SEC prior to the first sale to the  Investor of the  Company's
Common Stock pursuant to the Standby Equity Distribution Agreement.

            b. Sufficient Number of Shares  Registered.  In the event the number
of shares  available  under a Registration  Statement  filed pursuant to Section
2(a) is  insufficient  to cover  all of the  Registrable  Securities  which  the
Investor has purchased  pursuant to the Standby Equity  Distribution  Agreement,
the Company shall amend the Registration  Statement,  or file a new Registration
Statement (on the short form available therefore, if applicable), or both, so as
to cover all of such  Registrable  Securities  which the Investor has  purchased
pursuant to the Standby Equity  Distribution  Agreement as soon as  practicable,
but in any event not later than fifteen (15) days after the necessity  therefore
arises. The Company shall use it best efforts to cause such amendment and/or new
Registration  Statement to become effective as soon as practicable following the
filing thereof.  For purposes of the foregoing  provision,  the number of shares
available under a Registration  Statement shall be deemed "insufficient to cover
all of the  Registrable  Securities"  if at any time the  number of  Registrable
Securities  issuable  on an Advance  Notice  Date is greater  than the number of
shares available for resale under such Registration Statement.

      3.    RELATED OBLIGATIONS.

            a. The  Company  shall  keep the  Registration  Statement  effective
pursuant  to Rule 415 at all times  until the date on which the  Investor  shall
have sold all the Registrable  Securities covered by such Registration Statement
(the  "Registration  Period"),   which  Registration  Statement  (including  any
amendments or supplements thereto and prospectuses  contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein,  or necessary to make the statements  therein, in
light of the circumstances in which they were made, not misleading.

            b. The Company shall  prepare and file with the SEC such  amendments
(including   post-effective   amendments)  and  supplements  to  a  Registration
Statement  and  the  prospectus  used  in  connection  with  such   Registration
Statement,  which  prospectus  is to be filed  pursuant to Rule 424  promulgated
under  the  Securities  Act,  as may be  necessary  to  keep  such  Registration
Statement  effective at all times during the  Registration  Period,  and, during
such period,  comply with the  provisions of the  Securities Act with respect to
the  disposition of all  Registrable  Securities of the Company  covered by such
Registration  Statement  until such time as all of such  Registrable  Securities
shall  have  been  disposed  of in  accordance  with  the  intended  methods  of
disposition by the seller or sellers  thereof as set forth in such  Registration
Statement. In the case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement (including pursuant to
this Section  3(b)) by reason of the  Company's  filing a report on Form 10-KSB,


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<PAGE>


Form 10-QSB or Form 8-K or any analogous  report under the  Securities  Exchange
Act  of  1934,  as  amended  (the  "Exchange   Act"),  the  Company  shall  have
incorporated  such  report by  reference  into the  Registration  Statement,  if
applicable,  or shall file such  amendments or  supplements  with the SEC on the
same day on which the Exchange Act report is filed which created the requirement
for the Company to amend or supplement the Registration Statement.

            c. The Company shall furnish to the Investor without charge,  (i) at
least one copy of such Registration  Statement as declared  effective by the SEC
and any amendment(s) thereto,  including financial statements and schedules, all
documents  incorporated therein by reference,  all exhibits and each preliminary
prospectus,  (ii) ten (10)  copies  of the  final  prospectus  included  in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as such Investor may  reasonably  request) and (iii) such other
documents as such Investor may reasonably  request from time to time in order to
facilitate the disposition of the Registrable Securities owned by such Investor.

            d. The  Company  shall  use its best  efforts  to (i)  register  and
qualify the  Registrable  Securities  covered by a Registration  Statement under
such other  securities  or "blue sky" laws of such  jurisdictions  in the United
States as the  Investor  reasonably  requests,  (ii)  prepare  and file in those
jurisdictions,   such  amendments  (including  post-effective   amendments)  and
supplements  to such  registrations  and  qualifications  as may be necessary to
maintain the effectiveness  thereof during the Registration  Period,  (iii) take
such other  actions as may be  necessary  to  maintain  such  registrations  and
qualifications in effect at all times during the Registration  Period,  and (iv)
take all  other  actions  reasonably  necessary  or  advisable  to  qualify  the
Registrable Securities for sale in such jurisdictions;  provided,  however, that
the  Company  shall not be required in  connection  therewith  or as a condition
thereto to (w) make any change to its certificate of  incorporation  or by-laws,
(x) qualify to do business in any  jurisdiction  where it would not otherwise be
required to qualify but for this  Section  3(d),  (y) subject  itself to general
taxation in any such  jurisdiction,  or (z) file a general consent to service of
process in any such jurisdiction. The Company shall promptly notify the Investor
of the receipt by the Company of any notification with respect to the suspension
of the registration or  qualification  of any of the Registrable  Securities for
sale under the securities or "blue sky" laws of any  jurisdiction  in the United
States or its  receipt  of  actual  notice  of the  initiation  or threat of any
proceeding for such purpose.

            e. As promptly as practicable  after becoming aware of such event or
development,  the Company  shall notify the Investor in writing of the happening
of any event as a result  of which the  prospectus  included  in a  Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated  therein or necessary to
make the statements therein, in light of the circumstances under which they were
made,  not  misleading  (provided that in no event shall such notice contain any
material, nonpublic information), and promptly prepare a supplement or amendment
to such Registration Statement to correct such untrue statement or omission, and
deliver ten (10) copies of such  supplement or amendment to each  Investor.  The
Company shall also promptly notify the Investor in writing (i) when a prospectus
or any prospectus  supplement or  post-effective  amendment has been filed,  and
when  a  Registration  Statement  or any  post-effective  amendment  has  become
effective (notification of such effectiveness shall be delivered to the Investor


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<PAGE>


by facsimile on the same day of such effectiveness),  (ii) of any request by the
SEC for  amendments  or  supplements  to a  Registration  Statement  or  related
prospectus  or  related  information,  and  (iii)  of the  Company's  reasonable
determination that a post-effective  amendment to a Registration Statement would
be appropriate.

            f. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Registrable  Securities for
sale in any  jurisdiction  within the United  States of America  and, if such an
order or  suspension  is  issued,  to obtain  the  withdrawal  of such  order or
suspension  at the  earliest  possible  moment and to notify the Investor of the
issuance  of such  order and the  resolution  thereof  or its  receipt of actual
notice of the initiation or threat of any proceeding for such purpose.

            g. At the  reasonable  request of the  Investor,  the Company  shall
furnish to the Investor,  on the date of the  effectiveness  of the Registration
Statement  and  thereafter  from time to time on such dates as the  Investor may
reasonably request (i) a letter, dated such date, from the Company's independent
certified  public  accountants in form and substance as is customarily  given by
independent  certified  public  accountants to  underwriters  in an underwritten
public  offering,  and  (ii) an  opinion,  dated  as of such  date,  of  counsel
representing the Company for purposes of such Registration  Statement,  in form,
scope and substance as is customarily given in an underwritten  public offering,
addressed to the Investor.

            h. The  Company  shall  make  available  for  inspection  by (i) the
Investor  and (ii) one firm of  accountants  or  other  agents  retained  by the
Investor  (collectively,  the  "Inspectors")  all pertinent  financial and other
records,  and  pertinent  corporate  documents  and  properties  of the  Company
(collectively,  the "Records"),  as shall be reasonably deemed necessary by each
Inspector,  and cause the Company's officers,  directors and employees to supply
all information which any Inspector may reasonably request;  provided,  however,
that each Inspector  shall agree,  and the Investor  hereby  agrees,  to hold in
strict  confidence and shall not make any disclosure  (except to an Investor) or
use of any Record or other  information  which the  Company  determines  in good
faith to be  confidential,  and of which  determination  the  Inspectors  are so
notified,  unless (a) the  disclosure  of such  Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is otherwise
required  under the  Securities  Act, (b) the release of such Records is ordered
pursuant to a final, non-appealable subpoena or order from a court or government
body of competent jurisdiction,  or (c) the information in such Records has been
made generally  available to the public other than by disclosure in violation of
this or any  other  agreement  of  which  the  Inspector  and the  Investor  has
knowledge.  The Investor agrees that it shall,  upon learning that disclosure of
such  Records  is  sought  in or by a court or  governmental  body of  competent
jurisdiction or through other means, give prompt notice to the Company and allow
the  Company,  at its  expense,  to  undertake  appropriate  action  to  prevent
disclosure  of,  or to  obtain  a  protective  order  for,  the  Records  deemed
confidential.

            i. The Company shall hold in confidence  and not make any disclosure
of  information  concerning  the  Investor  provided to the  Company  unless (i)
disclosure  of such  information  is  necessary  to comply with federal or state
securities  laws, (ii) the disclosure of such  information is necessary to avoid
or correct a misstatement or omission in any Registration  Statement,  (iii) the


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<PAGE>


release of such  information  is ordered  pursuant to a subpoena or other final,
non-appealable   order  from  a  court  or   governmental   body  of   competent
jurisdiction,  or (iv) such information has been made generally available to the
public other than by  disclosure  in  violation  of this  Agreement or any other
agreement.  The Company agrees that it shall,  upon learning that  disclosure of
such  information  concerning  the  Investor  is  sought  in  or by a  court  or
governmental body of competent  jurisdiction or through other means, give prompt
written  notice  to the  Investor  and  allow the  Investor,  at the  Investor's
expense, to undertake  appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.

            j. The Company  shall use its best  efforts  either to cause all the
Registrable  Securities covered by a Registration  Statement (i) to be listed on
each securities  exchange on which securities of the same class or series issued
by the Company  are then  listed,  if any,  if the  listing of such  Registrable
Securities is then  permitted  under the rules of such exchange or to secure the
inclusion for quotation on the National Association of Securities Dealers,  Inc.
OTC Bulletin Board for such  Registrable  Securities.  The Company shall pay all
fees and  expenses in  connection  with  satisfying  its  obligation  under this
Section 3(j).

            k. The  Company  shall  cooperate  with the  Investor  to the extent
applicable,  to facilitate the timely  preparation  and delivery of certificates
(not bearing any restrictive legend) representing the Registrable  Securities to
be offered pursuant to a Registration  Statement and enable such certificates to
be in such  denominations  or amounts,  as the case may be, as the  Investor may
reasonably request and registered in such names as the Investor may request.

            l. The Company  shall use its best efforts to cause the  Registrable
Securities  covered by the  applicable  Registration  Statement to be registered
with or approved by such other  governmental  agencies or  authorities as may be
necessary to consummate the disposition of such Registrable Securities.

            m. The  Company  shall  make  generally  available  to its  security
holders  as soon as  practical,  but not later than  ninety  (90) days after the
close of the period covered  thereby,  an earnings  statement (in form complying
with  the  provisions  of  Rule  158  under  the  Securities   Act)  covering  a
twelve-month  period  beginning  not later  than the first day of the  Company's
fiscal quarter next following the effective date of the Registration Statement.

            n. The Company  shall  otherwise use its best efforts to comply with
all  applicable  rules  and  regulations  of the  SEC  in  connection  with  any
registration hereunder.

            o. Within two (2) business days after a Registration Statement which
covers Registrable Securities is ordered effective by the SEC, the Company shall
deliver,  and shall  cause legal  counsel  for the  Company to  deliver,  to the
transfer  agent for such  Registrable  Securities  (with copies to the Investor)
confirmation that such Registration Statement has been declared effective by the
SEC in the form attached hereto as Exhibit A.

            p. The Company shall take all other reasonable  actions necessary to
expedite and facilitate  disposition  by the Investor of Registrable  Securities
pursuant to a Registration Statement.


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<PAGE>


      4.    OBLIGATIONS OF THE INVESTOR.

      The Investor  agrees that,  upon receipt of any notice from the Company of
the  happening  of any event of the kind  described in Section 3(f) or the first
sentence of 3(e),  the Investor  will  immediately  discontinue  disposition  of
Registrable  Securities pursuant to any Registration  Statement(s) covering such
Registrable  Securities  until  the  Investor's  receipt  of the  copies  of the
supplemented  or amended  prospectus  contemplated by Section 3(e) or receipt of
notice that no supplement or amendment is required.  Notwithstanding anything to
the contrary,  the Company shall cause its transfer agent to deliver  unlegended
certificates  for shares of Common  Stock to a  transferee  of the  Investor  in
accordance  with the  terms of the  Standby  Equity  Distribution  Agreement  in
connection  with any sale of  Registrable  Securities  with respect to which the
Investor has entered into a contract for sale prior to the Investor's receipt of
a notice from the Company of the happening of any event of the kind described in
Section  3(f) or the first  sentence of 3(e) and for which the  Investor has not
yet settled.

      5.    EXPENSES OF REGISTRATION.

      All  expenses  incurred  in  connection  with  registrations,  filings  or
qualifications pursuant to Sections 2 and 3, including,  without limitation, all
registration,  listing and qualifications fees,  printers,  legal and accounting
fees shall be paid by the Company.

      6.    INDEMNIFICATION.

      With  respect  to   Registrable   Securities   which  are  included  in  a
Registration Statement under this Agreement:

            a. To the fullest  extent  permitted by law, the Company  will,  and
hereby does,  indemnify,  hold harmless and defend the Investor,  the directors,
officers, partners,  employees, agents,  representatives of, and each Person, if
any, who controls the Investor  within the meaning of the  Securities Act or the
Exchange  Act (each,  an  "Indemnified  Person"),  against any  losses,  claims,
damages,  liabilities,  judgments, fines, penalties,  charges, costs, reasonable
attorneys'  fees,  amounts  paid in  settlement  or  expenses,  joint or several
(collectively,  "Claims") incurred in investigating,  preparing or defending any
action, claim, suit, inquiry, proceeding, investigation or appeal taken from the
foregoing  by or  before  any  court or  governmental,  administrative  or other
regulatory  agency,  body or the SEC, whether pending or threatened,  whether or
not an indemnified party is or may be a party thereto  ("Indemnified  Damages"),
to which any of them may become  subject  insofar as such  Claims (or actions or
proceedings,  whether commenced or threatened,  in respect thereof) arise out of
or are based upon:  (i) any untrue  statement or alleged  untrue  statement of a
material  fact  in a  Registration  Statement  or any  post-effective  amendment
thereto  or in any  filing  made in  connection  with the  qualification  of the
offering  under the securities or other "blue sky" laws of any  jurisdiction  in
which Registrable Securities are offered ("Blue Sky Filing"), or the omission or
alleged  omission  to state a material  fact  required  to be stated  therein or
necessary  to make the  statements  therein  not  misleading;  (ii)  any  untrue
statement or alleged untrue  statement of a material fact contained in any final
prospectus  (as  amended or  supplemented,  if the Company  files any  amendment
thereof or supplement  thereto with the SEC) or the omission or alleged omission
to state  therein  any  material  fact  necessary  to make the  statements  made
therein,  in light of the circumstances  under which the statements therein were


                                       6
<PAGE>


made, not misleading; or (iii) any violation or alleged violation by the Company
of the  Securities  Act, the Exchange  Act,  any other law,  including,  without
limitation,  any state  securities  law, or any rule or  regulation  there under
relating  to the  offer  or sale of the  Registrable  Securities  pursuant  to a
Registration  Statement (the matters in the foregoing  clauses (i) through (iii)
being, collectively, "Violations"). The Company shall reimburse the Investor and
each such controlling  person promptly as such expenses are incurred and are due
and payable,  for any legal fees or disbursements  or other reasonable  expenses
incurred by them in connection with  investigating  or defending any such Claim.
Notwithstanding  anything to the contrary contained herein, the  indemnification
agreement  contained in this Section 6(a):  (x) shall not apply to a Claim by an
Indemnified  Person  arising  out of or based upon a Violation  which  occurs in
reliance upon and in  conformity  with  information  furnished in writing to the
Company by such  Indemnified  Person  expressly for use in  connection  with the
preparation  of the  Registration  Statement  or any such  amendment  thereof or
supplement thereto; (y) shall not be available to the extent such Claim is based
on a  failure  of the  Investor  to  deliver  or to  cause to be  delivered  the
prospectus  made  available by the Company,  if such  prospectus was timely made
available by the Company  pursuant to Section  3(e);  and (z) shall not apply to
amounts paid in settlement of any Claim if such  settlement is effected  without
the  prior  written  consent  of  the  Company,   which  consent  shall  not  be
unreasonably  withheld.  Such  indemnity  shall  remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person.

            b. In connection with a Registration Statement,  the Investor agrees
to  indemnify,  hold  harmless  and  defend,  to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the  Registration  Statement and each Person,  if any,
who  controls  the  Company  within  the  meaning of the  Securities  Act or the
Exchange Act (each an  "Indemnified  Party"),  against any Claim or  Indemnified
Damages to which any of them may become  subject,  under the Securities Act, the
Exchange Act or otherwise,  insofar as such Claim or  Indemnified  Damages arise
out of or is based upon any Violation,  in each case to the extent,  and only to
the extent,  that such Violation  occurs in reliance upon and in conformity with
written  information  furnished to the Company by the Investor expressly for use
in connection with such  Registration  Statement;  and, subject to Section 6(d),
the Investor will reimburse any legal or other expenses  reasonably  incurred by
them in connection  with  investigating  or defending any such Claim;  provided,
however,  that the  indemnity  agreement  contained in this Section 6(b) and the
agreement with respect to contribution contained in Section 7 shall not apply to
amounts paid in settlement of any Claim if such  settlement is effected  without
the  prior  written  consent  of  the  Investor,  which  consent  shall  not  be
unreasonably withheld;  provided,  further,  however, that the Investor shall be
liable under this  Section  6(b) for only that amount of a Claim or  Indemnified
Damages as does not exceed the net  proceeds to the  Investor as a result of the
sale of Registrable  Securities  pursuant to such Registration  Statement.  Such
indemnity shall remain in full force and effect  regardless of any investigation
made by or on behalf of such Indemnified Party.  Notwithstanding anything to the
contrary  contained  herein,  the  indemnification  agreement  contained in this
Section  6(b) with respect to any  prospectus  shall not inure to the benefit of
any  Indemnified  Party if the untrue  statement  or omission  of material  fact
contained in the  prospectus was corrected and such new prospectus was delivered
to the Investor prior to the Investor's use of the prospectus to which the Claim
relates.


                                       7
<PAGE>


            c. Promptly  after receipt by an  Indemnified  Person or Indemnified
Party  under  this  Section  6 of notice of the  commencement  of any  action or
proceeding  (including any governmental action or proceeding) involving a Claim,
such  Indemnified  Person or  Indemnified  Party  shall,  if a Claim in  respect
thereof is to be made  against  any  indemnifying  party  under this  Section 6,
deliver to the indemnifying party a written notice of the commencement  thereof,
and the  indemnifying  party shall have the right to participate in, and, to the
extent the indemnifying  party so desires,  jointly with any other  indemnifying
party similarly  noticed,  to assume control of the defense thereof with counsel
mutually  satisfactory to the indemnifying  party and the Indemnified  Person or
the  Indemnified  Party,  as  the  case  may  be;  provided,  however,  that  an
Indemnified  Person or Indemnified  Party shall have the right to retain its own
counsel  with the fees  and  expenses  of not  more  than one  counsel  for such
Indemnified  Person or Indemnified  Party to be paid by the indemnifying  party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation  by such counsel of the Indemnified  Person or Indemnified  Party
and the  indemnifying  party would be  inappropriate  due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party  represented  by such counsel in such  proceeding.  The  Indemnified
Party or Indemnified Person shall cooperate fully with the indemnifying party in
connection  with any  negotiation  or defense of any such action or claim by the
indemnifying  party and shall furnish to the indemnifying  party all information
reasonably  available  to the  Indemnified  Party or  Indemnified  Person  which
relates  to such  action  or  claim.  The  indemnifying  party  shall  keep  the
Indemnified  Party or  Indemnified  Person fully apprised at all times as to the
status of the defense or any settlement  negotiations  with respect thereto.  No
indemnifying  party shall be liable for any  settlement of any action,  claim or
proceeding effected without its prior written consent,  provided,  however, that
the indemnifying party shall not unreasonably  withhold,  delay or condition its
consent.  No indemnifying party shall,  without the prior written consent of the
Indemnified  Party or  Indemnified  Person,  consent to entry of any judgment or
enter into any  settlement  or other  compromise  which  does not  include as an
unconditional  term  thereof  the giving by the  claimant or  plaintiff  to such
Indemnified  Party or  Indemnified  Person of a release  from all  liability  in
respect to such claim or litigation.  Following  indemnification as provided for
hereunder,  the  indemnifying  party  shall be  subrogated  to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations  relating to the matter for which indemnification has been made.
The  failure  to  deliver  written  notice to the  indemnifying  party  within a
reasonable  time of the  commencement  of any such action shall not relieve such
indemnifying  party of any liability to the  Indemnified  Person or  Indemnified
Party under this Section 6, except to the extent that the indemnifying  party is
prejudiced in its ability to defend such action.

            d. The  indemnification  required by this Section 6 shall be made by
periodic  payments of the amount thereof during the course of the  investigation
or defense, as and when bills are received or Indemnified Damages are incurred.

            e. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or Indemnified
Person against the  indemnifying  party or others,  and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.


                                       8
<PAGE>


      7.    CONTRIBUTION.

      To the extent any  indemnification  by an indemnifying party is prohibited
or  limited  by  law,  the  indemnifying   party  agrees  to  make  the  maximum
contribution  with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no seller of Registrable  Securities guilty of fraudulent  misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution  from any seller of  Registrable  Securities  who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds  received by
such seller from the sale of such Registrable Securities.

      8.    REPORTS UNDER THE EXCHANGE ACT.

      With a view to making  available  to the Investor the benefits of Rule 144
promulgated  under the  Securities  Act or any similar rule or regulation of the
SEC that may at any time permit the Investors to sell  securities of the Company
to the public without registration ("Rule 144") the Company agrees to:

            a. make and keep public  information  available,  as those terms are
understood and defined in Rule 144;

            b.  file  with the SEC in a timely  manner  all  reports  and  other
documents  required of the Company under the Securities Act and the Exchange Act
so long as the Company remains subject to such requirements (it being understood
that nothing herein shall limit the Company's  obligations  under Section 6.3 of
the Standby  Equity  Distribution  Agreement) and the filing of such reports and
other documents is required for the applicable provisions of Rule 144; and

            c. furnish to the Investor so long as the Investor owns  Registrable
Securities,  promptly upon request,  (i) a written statement by the Company that
it has complied with the reporting  requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly  report
of the Company and such other reports and documents so filed by the Company, and
(iii)  such  other  information  as may be  reasonably  requested  to permit the
Investor to sell such securities pursuant to Rule 144 without registration.


      9.    AMENDMENT OF REGISTRATION RIGHTS.

      Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or  prospectively),  only by a written  agreement  between  the  Company and the
Investor.  Any amendment or waiver  effected in  accordance  with this Section 9
shall be binding upon the Investor and the Company.  No  consideration  shall be
offered or paid to any Person to amend or consent to a waiver or modification of
any provision of any of this  Agreement  unless the same  consideration  also is
offered to all of the parties to this Agreement.


                                       9
<PAGE>


      10.   MISCELLANEOUS.

            a. A Person  is  deemed  to be a holder  of  Registrable  Securities
whenever  such  Person  owns or is  deemed  to own of  record  such  Registrable
Securities.  If  the  Company  receives  conflicting  instructions,  notices  or
elections  from  two or  more  Persons  with  respect  to the  same  Registrable
Securities,  the  Company  shall act upon the basis of  instructions,  notice or
election received from the registered owner of such Registrable Securities.

            b. Any notices,  consents,  waivers or other communications required
or  permitted to be given under the terms of this  Agreement  must be in writing
and will be deemed to have been  delivered:  (i) upon  receipt,  when  delivered
personally;  (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending  party);  or (iii) one  business  day after  deposit  with a  nationally
recognized  overnight  delivery service,  in each case properly addressed to the
party to  receive  the  same.  The  addresses  and  facsimile  numbers  for such
communications shall be:

If to the Company, to:   Earthshell Corporation
                         3916 State Street, #110
                         Santa Barbara, California 93117
                         Attention: Scott Houston
                                    Chief Financial Officer
                         Telephone: (805) 563-7590
                         Facsimile: (805) 563-7594

With a copy to:          Kirkpatrick & Lockhart Nicholson Graham, LLP
                         201 South Biscayne Boulevard, Suite 2000
                         Miami, Florida 33131
                         Attention: Clayton E. Parker, Esquire
                         Telephone: (305) 539-3306
                         Facsimile: (305) 358-7095

If to the Investor, to:  Cornell Capital Partners, LP
                         101 Hudson Street -Suite 3700
                         Jersey City, NJ 07302
                         Attention: Mark Angelo
                                    Portfolio Manager
                         Telephone: (201) 985-8300
                         Facsimile: (201) 985-8266

With a copy to:          Cornell Capital Partners, LP
                         101 Hudson Street - Suite 3700
                         Jersey City, NJ 07302
                         Telephone: (201) 985-8300
                         Attention: Troy J. Rillo, Esquire
                                    Senior Vice President, Capital Markets
                         Telephone: (201) 985-8300
                         Facsimile: (201) 985-8266

                                       10
<PAGE>


Any party may  change  its  address  by  providing  written  notice to the other
parties  hereto at least five days prior to the  effectiveness  of such  change.
Written  confirmation  of receipt  (A) given by the  recipient  of such  notice,
consent,  waiver or other  communication,  (B)  mechanically  or  electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile  number  and an image of the first  page of such  transmission  or (C)
provided by a courier or overnight courier service shall be rebuttable  evidence
of  personal  service,  receipt  by  facsimile  or  receipt  from  a  nationally
recognized  overnight  delivery  service in accordance  with clause (i), (ii) or
(iii) above, respectively.

            c.  Failure of any party to exercise  any right or remedy under this
Agreement or otherwise,  or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

            d. The  corporate  laws of the State of New Jersey  shall govern all
issues concerning the relative rights of the Company and the Investor. All other
questions concerning the construction,  validity, enforcement and interpretation
of this  Agreement  shall be governed by the  internal  laws of the State of New
Jersey,  without giving effect to any choice of law or conflict of law provision
or rule  (whether  of the State of New  Jersey or any other  jurisdiction)  that
would cause the application of the laws of any jurisdiction other than the State
of New  Jersey.  Each party  hereby  irrevocably  submits  to the  non-exclusive
jurisdiction  of the  Superior  Courts of the State of New  Jersey,  sitting  in
Hudson County, New Jersey and the Federal District Court for the District of New
Jersey  sitting in Newark,  New  Jersey,  for the  adjudication  of any  dispute
hereunder or in connection herewith or with any transaction  contemplated hereby
or discussed herein, 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
brought  in an  inconvenient  forum or that the  venue of 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 to such  party at the  address  for such
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. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction  or the  validity  or  enforceability  of  any  provision  of  this
Agreement in any other  jurisdiction.  EACH PARTY HEREBY  IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST,  A JURY TRIAL FOR THE ADJUDICATION
OF ANY  DISPUTE  HEREUNDER  OR IN  CONNECTION  HEREWITH  OR ARISING  OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

            e. This Agreement,  the Standby Equity Distribution  Agreement,  the
Escrow  Agreement,  and the  Placement  Agent  Agreement  constitute  the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions,  promises, warranties or undertakings, other
than those set forth or  referred to herein and  therein.  This  Agreement,  the
Standby Equity Distribution Agreement,  the Escrow Agreement,  and the Placement
Agent  Agreement  supersede all prior  agreements and  understandings  among the
parties hereto with respect to the subject matter hereof and thereof.


                                       11
<PAGE>


            f. This Agreement  shall inure to the benefit of and be binding upon
the permitted successors and assigns of each of the parties hereto.

            g. The headings in this  Agreement are for  convenience of reference
only and shall not limit or otherwise affect the meaning hereof.

            h. This Agreement may be executed in identical counterparts, each of
which shall be deemed an original but all of which shall  constitute one and the
same agreement.  This Agreement,  once executed by a party,  may be delivered to
the other party hereto by  facsimile  transmission  of a copy of this  Agreement
bearing the signature of the party so delivering this Agreement.

            i.  Each  party  shall  do and  perform,  or  cause  to be done  and
performed,  all such further acts and things,  and shall execute and deliver all
such other  agreements,  certificates,  instruments and documents,  as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

            j. The  language  used in this  Agreement  will be  deemed to be the
language  chosen by the parties to express  their mutual  intent and no rules of
strict construction will be applied against any party.

            k. This  Agreement is intended for the benefit of the parties hereto
and  their  respective  permitted  successors  and  assigns,  and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.



                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]





                                       12
<PAGE>





      IN WITNESS  WHEREOF,  the parties  have caused  this  Registration  Rights
Agreement to be duly executed as of day and year first above written.

                                           COMPANY:
                                           EARTHSHELL CORPORATION

                                           By: /s/ Scott Houston
                                               ---------------------------------
                                           Name:  Scott Houston
                                           Title: Chief Financial Officer


                                           INVESTOR:
                                           CORNELL CAPITAL PARTNERS, LP

                                           BY:  YORKVILLE ADVISORS, LLC
                                           ITS: GENERAL PARTNER

                                           By: /s/ Mark Angelo
                                               ---------------------------------
                                           Name:  Mark Angelo
                                           Title: Portfolio Manager







                                       13
<PAGE>


                                    EXHIBIT A
                         FORM OF NOTICE OF EFFECTIVENESS
                            OF REGISTRATION STATEMENT



Attention:

            Re: EARTHSHELL CORPORATION

Ladies and Gentlemen:

      We are  counsel  to  Earthshell  Corporation  (the  "Company"),  and  have
represented   the  Company  in  connection  with  that  certain  Standby  Equity
Distribution  Agreement (the "Standby Equity  Distribution  Agreement")  entered
into  by  and  between  the  Company  and  Cornell  Capital  Partners,  LP  (the
"Investor")  pursuant to which the Company issued to the Investor  shares of its
Common Stock,  par value $0.01 per share (the "Common  Stock").  Pursuant to the
Standby  Equity  Distribution  Agreement,  the Company  also has entered  into a
Registration  Rights  Agreement  with the  Investor  (the  "Registration  Rights
Agreement")  pursuant  to which the  Company  agreed,  among  other  things,  to
register  the  Registrable  Securities  (as defined in the  Registration  Rights
Agreement) under the Securities Act of 1933, as amended (the "Securities  Act").
In  connection  with the Company's  obligations  under the  Registration  Rights
Agreement,  on ____________ ____, the Company filed a Registration  Statement on
Form ________ (File No.  333-_____________) (the "Registration  Statement") with
the Securities and Exchange  Commission  (the "SEC") relating to the Registrable
Securities which names the Investor as a selling stockholder thereunder.

      In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by  telephone  that the SEC has entered an order  declaring
the Registration  Statement effective under the Securities Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,  after
telephonic  inquiry  of a  member  of the  SEC's  staff,  that  any  stop  order
suspending its  effectiveness  has been issued or that any  proceedings for that
purpose  are  pending  before,  or  threatened  by, the SEC and the  Registrable
Securities  are  available for resale under the  Securities  Act pursuant to the
Registration Statement.

                                       Very truly yours,



                                       By:
                                          --------------------------------------

cc:   CORNELL CAPITAL PARTNERS, LP


                                       14
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.3
<SEQUENCE>4
<FILENAME>v015142_ex99-3.txt
<TEXT>

                                                                    Exhibit 99.3

                            PLACEMENT AGENT AGREEMENT

                                                     Dated as of: March 23, 2005


Sloan Securities Corp.
444 Madison Avenue, 23rd Floor
New York, New York 10022


Ladies and Gentlemen:

      The  undersigned,  Earthshell  Corporation,  a Delaware  corporation  (the
"Company"),  hereby agrees with Sloan Securities  Corp. (the "Placement  Agent")
and  Cornell  Capital  Partners,   LP,  a  Delaware  Limited   Partnership  (the
"Investor"), as follows:

      1. Offering.  The Company hereby engages the Placement Agent to act as its
exclusive  placement  agent in connection  with the Standby Equity  Distribution
Agreement dated the date hereof (the "Standby Equity  Distribution  Agreement"),
pursuant to which the Company shall issue and sell to the Investor, from time to
time, and the Investor  shall  purchase from the Company (the  "Offering") up to
Ten Million Dollars ($10,000,000) of the Company's common stock (the "Commitment
Amount"),  par value $0.01 per share (the  "Common  Stock"),  at price per share
equal to the  Purchase  Price,  as that term is  defined in the  Standby  Equity
Distribution Agreement.  The Placement Agent services shall consist of reviewing
the terms of the Standby Equity Distribution  Agreement and advising the Company
with respect to those terms.

      All capitalized  terms used herein and not otherwise  defined herein shall
have the same  meaning  ascribed to them as in the Standby  Equity  Distribution
Agreement. The Investor will be granted certain registration rights with respect
to the Common Stock as more fully set forth in the Registration Rights Agreement
between the Company and the  Investor  dated the date hereof (the  "Registration
Rights  Agreement").  The  documents to be executed and  delivered in connection
with the Offering, including, but not limited, to the Company's latest Quarterly
Report on Form 10-QSB as filed with the United  States  Securities  and Exchange
Commission,  this  Agreement,  the Standby Equity  Distribution  Agreement,  the
Registration  Rights  Agreement,  and the Escrow Agreement dated the date hereof
(the "Escrow Agreement"),  are referred to sometimes hereinafter collectively as
the "Offering  Materials." The Company's  Common Stock purchased by the Investor
hereunder or to be issued in connection  with the  conversion of any  debentures
are sometimes  referred to hereinafter as the  "Securities." The Placement Agent
shall not be obligated to sell any Securities.

      2. Compensation.  Upon the execution of this Agreement,  the Company shall
issue to the  Placement  Agent or its designee Six Thousand  Four Hundred  Fifty
(6,450) shares of the Company's Common Stock (the "Placement  Agent's  Shares").
The Placement Agent shall be entitled to "piggy-back"  registration  rights with
respect  to  the  Placement  Agent's  Shares,  which  shall  be  triggered  upon


                                       1
<PAGE>


      3. Representations, Warranties and Covenants of the Placement Agent.

The Placement Agent represents, warrants and covenants as follows:

                  (i) The Placement  Agent has the necessary power to enter into
this Agreement and to consummate the transactions contemplated hereby.

                  (ii) The execution and delivery by the Placement Agent of this
Agreement and the consummation of the transactions  contemplated herein will not
result in any  violation  of, or be in conflict  with,  or  constitute a default
under, any agreement or instrument to which the Placement Agent is a party or by
which the Placement Agent or its properties are bound, or any judgment,  decree,
order or, to the Placement Agent's  knowledge,  any statute,  rule or regulation
applicable to the Placement Agent. This Agreement when executed and delivered by
the Placement Agent, will constitute the legal, valid and binding obligations of
the Placement  Agent,  enforceable in accordance  with their  respective  terms,
except  to the  extent  that (a) the  enforceability  hereof or  thereof  may be
limited by bankruptcy,  insolvency,  reorganization,  moratorium or similar laws
from time to time in effect and affecting the rights of creditors generally, (b)
the enforceability hereof or thereof is subject to general principles of equity,
or (c) the  indemnification  provisions  hereof or thereof  may be held to be in
violation of public policy.

                  (iii)  Upon  receipt  and  execution  of this  Agreement,  the
Placement Agent will promptly forward copies of this Agreement to the Company or
its counsel and the Investor or its counsel.

                  (iv)  The  Placement  Agent  will not  intentionally  take any
action  that it  reasonably  believes  would  cause the  Offering to violate the
provisions of the Securities Act of 1933, as amended (the "Securities Act"), the
Securities  Exchange Act of 1934 (the "Exchange  Act"), the respective rules and
regulations  promulgated  thereunder (the "Rules and Regulations") or applicable
"Blue Sky" laws of any state or jurisdiction.

                  (v)  The   Placement   Agent  is  a  member  of  the  National
Association of Securities  Dealers,  Inc., and is a broker-dealer  registered as
such under the Exchange Act and under the securities laws of the states in which
the  Securities  will be  offered  or  sold by the  Placement  Agent  unless  an
exemption for such state  registration is available to the Placement  Agent. The
Placement  Agent is in  material  compliance  with  the  rules  and  regulations
applicable to the  Placement  Agent  generally  and  applicable to the Placement
Agent's participation in the Offering.

      4. Representations and Warranties of the Company.

The Company represents and warrants as follows:

                  (i) The  execution,  delivery and  performance of each of this
Agreement,  the Standby Equity Distribution Agreement, the Escrow Agreement, and
the  Registration  Rights  Agreement  has  been  or will  be  duly  and  validly
authorized by the Company and is, or with respect to this Agreement, the Standby
Equity Distribution Agreement, the Escrow Agreement, and the Registration Rights


                                       2
<PAGE>


Agreement, will be a valid and binding agreement of the Company,  enforceable in
accordance  with  its  respective  terms,  except  to the  extent  that  (a) the
enforceability  hereof or  thereof  may be limited  by  bankruptcy,  insolvency,
reorganization,  moratorium  or  similar  laws from  time to time in effect  and
affecting the rights of creditors  generally,  (b) the enforceability  hereof or
thereof is subject to general  principles  of equity or (c) the  indemnification
provisions  hereof or thereof may be held to be in violation  of public  policy.
The Securities to be issued  pursuant to the  transactions  contemplated by this
Agreement  and  the  Standby  Equity  Distribution   Agreement  have  been  duly
authorized and, when issued and paid for in accordance with this Agreement,  the
Standby   Equity   Distribution   Agreement  and  the   certificates/instruments
representing  such  Securities,  will be valid and  binding  obligations  of the
Company,  enforceable in accordance with their respective  terms,  except to the
extent  that  (1) the  enforceability  thereof  may be  limited  by  bankruptcy,
insolvency,  reorganization,  moratorium  or  similar  laws from time to time in
effect  and   affecting  the  rights  of  creditors   generally,   and  (2)  the
enforceability thereof is subject to general principles of equity. All corporate
action  required  to be taken for the  authorization,  issuance  and sale of the
Securities has been duly and validly taken by the Company.

                  (ii) The Company has a duly authorized, issued and outstanding
capitalization  as set  forth  herein  and in the  Standby  Equity  Distribution
Agreement.  The Company is not a party to or bound by any instrument,  agreement
or other  arrangement  providing  for it to issue  any  capital  stock,  rights,
warrants, options or other securities, except for this Agreement, the agreements
described herein and as described in the Standby Equity Distribution  Agreement,
dated the date  hereof  and the  agreements  described  therein.  All issued and
outstanding  securities of the Company,  have been duly  authorized  and validly
issued and are fully paid and non-assessable; the holders thereof have no rights
of rescission or preemptive  rights with respect  thereto and are not subject to
personal liability solely by reason of being security holders;  and none of such
securities  were issued in violation of the preemptive  rights of any holders of
any security of the Company.

                  (iii) The Common  Stock to be issued in  accordance  with this
Agreement and the Standby Equity Distribution Agreement has been duly authorized
and, when issued and paid for in  accordance  with this  Agreement,  the Standby
Equity   Distribution   Agreement   and   the   Compensation   Debenture,    the
certificates/instruments  representing such Common Stock will be validly issued,
fully-paid  and  non-assessable;  the  holders  thereof  will not be  subject to
personal  liability solely by reason of being such holders;  such Securities are
not and will not be  subject  to the  preemptive  rights  of any  holder  of any
security of the Company.

                  (iv) The  Company has good and  marketable  title to, or valid
and enforceable  leasehold  estates in, all items of real and personal  property
necessary to conduct its business  (including,  without limitation,  any real or
personal property stated in the Offering  Materials to be owned or leased by the
Company), free and clear of all liens, encumbrances,  claims, security interests
and defects of any material nature whatsoever, other than those set forth in the
Offering Materials and liens for taxes not yet due and payable.


                                       3
<PAGE>


                  (v) There is no litigation or governmental  proceeding pending
or, to the best of the Company's knowledge, threatened against, or involving the
properties  or  business  of the  Company,  except as set forth in the  Offering
Materials.

                  (vi)  The  Company  has been  duly  organized  and is  validly
existing  as a  corporation  in good  standing  under  the laws of the  State of
Delaware.  Except as set forth in the Offering  Materials,  the Company does not
own or control,  directly or indirectly,  an interest in any other  corporation,
partnership,  trust, joint venture or other business entity. The Company is duly
qualified  or licensed  and in good  standing as a foreign  corporation  in each
jurisdiction   in  which  the   character  of  its   operations   requires  such
qualification or licensing and where failure to so qualify would have a material
adverse effect on the Company. The Company has all requisite corporate power and
authority,  and all material and necessary  authorizations,  approvals,  orders,
licenses,  certificates  and  permits  of and from all  governmental  regulatory
officials  and bodies  (domestic  and  foreign) to conduct its  businesses  (and
proposed  business) as described in the Offering  Materials.  Any disclosures in
the Offering  Materials  concerning the effects of foreign,  federal,  state and
local  regulation  on the  Company's  businesses  as currently  conducted and as
contemplated  are correct in all  material  respects  and do not omit to state a
material fact.  The Company has all corporate  power and authority to enter into
this Agreement,  the Standby Equity  Distribution  Agreement,  the  Registration
Rights  Agreement,  and the Escrow  Agreement,  to carry out the  provisions and
conditions hereof and thereof, and all consents,  authorizations,  approvals and
orders  required in connection  herewith and therewith  have been  obtained.  No
consent,  authorization  or order of, and no filing with, any court,  government
agency  or  other  body is  required  by the  Company  for the  issuance  of the
Securities  or  execution  and  delivery of the  Offering  Materials  except for
applicable federal and state securities laws. The Company,  since its inception,
has not incurred any liability  arising under or as a result of the  application
of any of the  provisions of the  Securities  Act, the Exchange Act or the Rules
and Regulations.

                  (vii)  There  has  been  no  material  adverse  change  in the
condition or prospects of the Company,  financial or otherwise,  from the latest
dates as of which such  condition or prospects,  respectively,  are set forth in
the Offering Materials,  and the outstanding debt, the property and the business
of the Company  conform in all  material  respects to the  descriptions  thereof
contained in the Offering Materials.

                  (viii)  Except as set  forth in the  Offering  Materials,  the
Company is not in breach of, or in default  under,  any term or provision of any
material indenture, mortgage, deed of trust, lease, note, loan or Standby Equity
Distribution  Agreement or any other material agreement or instrument evidencing
an obligation for borrowed money, or any other material  agreement or instrument
to which it is a party or by which it or any of its  properties  may be bound or
affected.  The Company is not in  violation  of any  provision of its charter or
by-laws or in violation of any franchise,  license, permit, judgment,  decree or
order, or in violation of any material statute, rule or regulation.  Neither the
execution  and delivery of the Offering  Materials  nor the issuance and sale or
delivery of the  Securities,  nor the  consummation  of any of the  transactions
contemplated  in the Offering  Materials nor the  compliance by the Company with
the terms and provisions hereof or thereof, has conflicted with or will conflict
with,  or has  resulted  in or will  result in a breach of, any of the terms and
provisions  of, or has  constituted or will  constitute a default under,  or has
resulted in or will result in the creation or imposition of  any lien, charge or


                                       4
<PAGE>


encumbrance  upon any property or assets of the Company or pursuant to the terms
of any indenture,  mortgage, deed of trust, note, loan or any other agreement or
instrument  evidencing an obligation for borrowed  money, or any other agreement
or  instrument to which the Company may be bound or to which any of the property
or assets of the Company is subject except (a) where such default,  lien, charge
or encumbrance  would not have a material  adverse effect on the Company and (b)
as  described  in the  Offering  Materials;  nor will such action  result in any
violation  of the  provisions  of the  charter or the by-laws of the Company or,
assuming  the  due  performance  by  the  Placement  Agent  of  its  obligations
hereunder,  any  material  statute or any  material  order,  rule or  regulation
applicable  to the  Company of any court or of any  foreign,  federal,  state or
other regulatory authority or other government body having jurisdiction over the
Company.

                  (ix) Subsequent to the dates as of which  information is given
in  the  Offering  Materials,  and  except  as may  otherwise  be  indicated  or
contemplated  herein or  therein  and the  securities  offered  pursuant  to the
Securities  Purchase  Agreement  dated the date hereof,  the Company has not (a)
issued any  securities  or  incurred  any  liability  or  obligation,  direct or
contingent,  for borrowed money, or (b) entered into any transaction  other than
in the ordinary course of business, or (c) declared or paid any dividend or made
any  other  distribution  on or in  respect  of its  capital  stock.  Except  as
described in the Offering Materials,  the Company has no outstanding obligations
to any officer or director of the Company.

                  (x)  There  are no  claims  for  services  in the  nature of a
finder's or origination  fee with respect to the sale of the Common Stock or any
other  arrangements,  agreements or understandings that may affect the Placement
Agent's  compensation,  as determined by the National  Association of Securities
Dealers, Inc.

                  (xi) The  Company  owns or  possesses,  free and  clear of all
liens or  encumbrances  and rights  thereto or  therein  by third  parties,  the
requisite  licenses  or  other  rights  to use all  trademarks,  service  marks,
copyrights,  service  names,  trade  names,  patents,  patent  applications  and
licenses necessary to conduct its business (including,  without limitation,  any
such  licenses or rights  described in the Offering  Materials as being owned or
possessed by the Company)  and,  except as set forth in the Offering  Materials,
there is no claim or action by any person pertaining to, or proceeding,  pending
or threatened, which challenges the exclusive rights of the Company with respect
to any  trademarks,  service  marks,  copyrights,  service  names,  trade names,
patents,  patent  applications and licenses used in the conduct of the Company's
businesses (including, without limitation, any such licenses or rights described
in the Offering Materials as being owned or possessed by the Company) except any
claim or action that would not have a material  adverse  effect on the  Company;
the Company's  current  products,  services or processes do not infringe or will
not infringe on the patents currently held by any third party.

                  (xii)  Except as  described  in the  Offering  Materials,  the
Company  is not  under  any  obligation  to pay  royalties  or fees of any  kind
whatsoever  to any third party with respect to any  trademarks,  service  marks,
copyrights,  service names, trade names, patents, patent applications,  licenses
or technology it has developed, uses, employs or intends to use or employ, other
than to their respective licensors.


                                       5
<PAGE>


                  (xiii) Subject to the  performance  by the Placement  Agent of
its  obligations  hereunder the offer and sale of the Securities  complies,  and
will continue to comply,  in all material respects with the requirements of Rule
506 of Regulation D promulgated  by the SEC pursuant to the  Securities  Act and
any other applicable  federal and state laws,  rules,  regulations and executive
orders.  Neither the Offering  Materials nor any amendment or supplement thereto
nor any documents  prepared by the Company in connection  with the Offering will
contain any untrue  statement  of a material  fact or omit to state any material
fact required to be stated therein or necessary to make the statements  therein,
in light of the  circumstances  under which they were made, not misleading.  All
statements of material  facts in the Offering  Materials are true and correct as
of the date of the Offering Materials.

                  (xiv) All  material  taxes which are due and payable  from the
Company  have been  paid in full or  adequate  provision  has been made for such
taxes on the books of the Company, except for those taxes disputed in good faith
by the Company

                  (xv) None of the Company nor any of its  officers,  directors,
employees or agents, nor any other person acting on behalf of the Company,  has,
directly  or  indirectly,  given or agreed to give any  money,  gift or  similar
benefit (other than legal price  concessions to customers in the ordinary course
of  business)  to any  customer,  supplier,  employee  or agent of a customer or
supplier,  or official or employee of any governmental agency or instrumentality
of any government  (domestic or foreign) or any political party or candidate for
office  (domestic  or foreign) or other person who is or may be in a position to
help or hinder the business of the Company (or assist it in connection  with any
actual or  proposed  transaction)  which (A) might  subject  the  Company to any
damage  or  penalty  in  any  civil,  criminal  or  governmental  litigation  or
proceeding, or (B) if not given in the past, might have had a materially adverse
effect on the assets,  business or operations of the Company as reflected in any
of the financial statements  contained in the Offering Materials,  or (C) if not
continued in the future, might adversely affect the assets, business, operations
or prospects of the Company in the future.

      5. Representations, Warranties and Covenants of the Investor.

The Investor represents, warrants and covenants as follows:

                  (i) The  Investor has the  necessary  power to enter into this
Agreement and to consummate the transactions contemplated hereby.

                  (ii)  The  execution  and  delivery  by the  Investor  of this
Agreement and the consummation of the transactions  contemplated herein will not
result in any  violation  of, or be in conflict  with,  or  constitute a default
under,  any agreement or instrument to which the Investor is a party or by which
the Investor or its properties are bound, or any judgment,  decree, order or, to
the  Investor's  knowledge,  any statute,  rule or regulation  applicable to the
Investor.  This  Agreement  when executed and  delivered by the  Investor,  will
constitute the legal, valid and binding obligations of the Investor, enforceable
in accordance  with their  respective  terms,  except to the extent that (a) the
enforceability  hereof or  thereof  may be limited  by  bankruptcy,  insolvency,
reorganization,  moratorium  or  similar  laws from  time to time in effect  and
affecting the rights of creditors  generally,  (b) the enforceability  hereof or
thereof is subject to general  principles of equity, or (c) the  indemnification
provisions hereof or thereof may be held to be in violation of public policy.


                                       6
<PAGE>


                  (iii) The Investor will promptly forward copies of any and all
due diligence questionnaires compiled by the Investor to the Placement Agent.

                  (iv) The Investor is an Accredited  Investor (as defined under
the Securities Act).

                  (v)  The  Investor  is  acquiring  the   Securities   for  the
Inventor's own account as principal,  not as a nominee or agent,  for investment
purposes  only,  and  not  with a view  to,  or  for,  resale,  distribution  or
fractionalization  thereof in whole or in part and no other  person has a direct
or indirect beneficial interest in such Securities.  Further,  the Investor does
not have any contract, undertaking,  agreement or arrangement with any person to
sell,  transfer or grant  participations  to such person or to any third person,
with respect to any of the Securities.

                  (vi) The Investor  acknowledges  the Investor's  understanding
that the  offering  and sale of the  Securities  is  intended  to be exempt from
registration  under  the  Securities  Act  by  virtue  of  Section  3(b)  of the
Securities  Act  and the  provisions  of  Regulation  D  promulgated  thereunder
("Regulation D"). In furtherance  thereof,  the Investor represents and warrants
as follows:

The  Investor  has the  financial  ability  to  bear  the  economic  risk of the
Investor's  investment,  has adequate  means for  providing  for the  Inventor's
current  needs and personal  contingencies  and has no need for  liquidity  with
respect to the Investor's investment in the Company; and

The Investor has such knowledge and experience in financial and business matters
as to be  capable  of  evaluating  the  merits  and  risks  of  the  prospective
investment.  The Inventor  also  represents  it has not been  organized  for the
purpose of acquiring the Securities.

                  (vii)  The  Investor  has been  given  the  opportunity  for a
reasonable  time  prior to the date  hereof to ask  questions  of,  and  receive
answers  from,  the  Company  or its  representatives  concerning  the terms and
conditions of the Offering, and other matters pertaining to this investment, and
has been given the opportunity for a reasonable time prior to the date hereof to
obtain such  additional  information in connection with the Company in order for
the Investor to evaluate the merits and risks of purchase of the Securities,  to
the extent the  Company  possesses  such  information  or can acquire it without
unreasonable  effort or expense.  The  Investor is not relying on the  Placement
Agent or any of its affiliates  with respect to the accuracy or  completeness of
the  Offering  Materials  or for any  economic  considerations  involved in this
investment.

      6. Certain Covenants and Agreements of the Company.

      The Company covenants and agrees at its expense and without any expense to
the Placement Agent as follows:

                  (i) To advise  the  Placement  Agent and the  Investor  of any
material  adverse  change in the  Company's  financial  condition,  prospects or
business or of any  development  materially  affecting  the Company or rendering
untrue or misleading any material statement in the Offering Materials  occurring
at any time as soon as the Company is either informed or becomes aware thereof.


                                       7
<PAGE>


                  (ii) To use its commercially  reasonable  efforts to cause the
Common  Stock  issuable  in  connection  with the  Standby  Equity  Distribution
Agreement to be qualified or registered for sale on terms  consistent with those
stated in the  Registration  Rights  Agreement and under the securities  laws of
such  jurisdictions  as the Placement  Agent and the Investor  shall  reasonably
request. Qualification,  registration and exemption charges and fees shall be at
the sole cost and expense of the Company.

                  (iii) Upon written request, to provide and continue to provide
the  Placement  Agent  and  the  Investor  copies  of  all  quarterly  financial
statements and audited annual financial  statements  prepared by or on behalf of
the Company,  other  reports  prepared by or on behalf of the Company for public
disclosure and all documents delivered to the Company's stockholders.

                  (iv) To deliver, during the registration period of the Standby
Equity  Distribution  Agreement,  to the Investor upon the  Investor's  request,
within forty five (45) days,  a statement of its income for each such  quarterly
period, and its balance sheet and a statement of changes in stockholders' equity
as of the end of such quarterly period, all in reasonable  detail,  certified by
its  principal  financial or  accounting  officer;  (ii) within ninety (90) days
after the close of each fiscal year,  its balance  sheet as of the close of such
fiscal  year,  together  with a statement  of income,  a statement of changes in
stockholders'  equity and a statement  of cash flow for such fiscal  year,  such
balance sheet, statement of income, statement of changes in stockholders' equity
and statement of cash flow to be in reasonable  detail and accompanied by a copy
of the  certificate  or  report  thereon  of  independent  auditors  if  audited
financial  statements are prepared;  and (iii) a copy of all documents,  reports
and information  furnished to its  stockholders at the time that such documents,
reports and information are furnished to its stockholders.

                  (v) To comply with the terms of the Offering Materials.

                  (vi) To  ensure  that any  transactions  between  or among the
Company,  or any of its  officers,  directors  and  affiliates  be on terms  and
conditions  that  are no less  favorable  to the  Company,  than the  terms  and
conditions  that would be available  in an "arm's  length"  transaction  with an
independent third party.

      7. Indemnification and Limitation of Liability.

                  (i) The Company  hereby agrees that it will indemnify and hold
the  Placement  Agent  and each  officer,  director,  shareholder,  employee  or
representative of the Placement Agent and each person controlling, controlled by
or under common  control with the Placement  Agent within the meaning of Section
15 of the  Securities  Act or Section 20 of the  Exchange Act or the SEC's Rules
and Regulations  promulgated thereunder (the "Rules and Regulations"),  harmless
from and against any and all loss,  claim,  damage,  liability,  cost or expense
whatsoever (including, but not limited to, any and all reasonable legal fees and
other  expenses and  disbursements  incurred in connection  with  investigating,


                                       8
<PAGE>


preparing to defend or defending any action,  suit or proceeding,  including any
inquiry or investigation, commenced or threatened, or any claim whatsoever or in
appearing  or  preparing  for  appearance  as a witness in any  action,  suit or
proceeding,  including any inquiry, investigation or pretrial proceeding such as
a deposition)  to which the Placement  Agent or such  indemnified  person of the
Placement  Agent may become subject under the Securities  Act, the Exchange Act,
the Rules and  Regulations,  or any other  federal  or state law or  regulation,
common law or otherwise,  arising out of or based upon (i) any untrue  statement
or alleged  untrue  statement of a material  fact  contained in (a) Section 4 of
this  Agreement,  (b) the Offering  Materials  (except those written  statements
relating to the  Placement  Agent  given by the  Placement  Agent for  inclusion
therein),  (c) any  application  or  other  document  or  written  communication
executed  by the  Company or based upon  written  information  furnished  by the
Company filed in any jurisdiction in order to qualify the Common Stock under the
securities laws thereof, or any state securities  commission or agency; (ii) the
omission or alleged omission from documents described in clauses (a), (b) or (c)
above of a material fact required to be stated  therein or necessary to make the
statements  therein not misleading;  or (iii) the breach of any  representation,
warranty,  covenant  or  agreement  made by the Company in this  Agreement.  The
Company further agrees that upon demand by an indemnified person, at any time or
from time to time, it will promptly  reimburse such  indemnified  person for any
loss, claim, damage,  liability, cost or expense actually and reasonably paid by
the  indemnified  person as to which the  Company  has  indemnified  such person
pursuant  hereto.  Notwithstanding  the foregoing  provisions of this  Paragraph
7(A),  any such  payment or  reimbursement  by the Company of fees,  expenses or
disbursements  incurred by an  indemnified  person in any  proceeding in which a
final  judgment by a court of competent  jurisdiction  (after all appeals or the
expiration  of time to appeal) is entered  against the  Placement  Agent or such
indemnified  person based upon specific finding of fact that the Placement Agent
or such  indemnified  person's gross  negligence or willful  misfeasance will be
promptly repaid to the Company.

                  (ii) The Placement  Agent hereby agrees that it will indemnify
and hold the  Company  and each  officer,  director,  shareholder,  employee  or
representative  of the Company,  and each person  controlling,  controlled by or
under common  control  with the Company  within the meaning of Section 15 of the
Securities  Act or Section 20 of the Exchange Act or the Rules and  Regulations,
harmless from and against any and all loss, claim,  damage,  liability,  cost or
expense whatsoever (including,  but not limited to, any and all reasonable legal
fees  and  other  expenses  and   disbursements   incurred  in  connection  with
investigating,  preparing to defend or defending any action, suit or proceeding,
including any inquiry or  investigation,  commenced or threatened,  or any claim
whatsoever  or in  appearing  or preparing  for  appearance  as a witness in any
action,  suit or proceeding,  including any inquiry,  investigation  or pretrial
proceeding such as a deposition) to which the Company or such indemnified person
of the Company may become  subject under the  Securities  Act, the Exchange Act,
the Rules and  Regulations,  or any other  federal  or state law or  regulation,
common law or otherwise, arising out of or based upon (i) the material breach of
any representation,  warranty, covenant or agreement made by the Placement Agent
in this Agreement,  or (ii) any false or misleading  information provided to the
Company  in  writing  by  one  of  the  Placement  Agent's  indemnified  persons
specifically for inclusion in the Offering Materials.


                                       9
<PAGE>


                  (iii) The Investor  hereby  agrees that it will  indemnify and
hold the Placement Agent and each officer,  director,  shareholder,  employee or
representative of the Placement Agent, and each person  controlling,  controlled
by or under  common  control  with the  Placement  Agent  within the  meaning of
Section 15 of the  Securities Act or Section 20 of the Exchange Act or the Rules
and  Regulations,  harmless  from and against any and all loss,  claim,  damage,
liability,  cost or expense whatsoever  (including,  but not limited to, any and
all  reasonable  legal fees and other  expenses  and  disbursements  incurred in
connection with investigating, preparing to defend or defending any action, suit
or proceeding, including any inquiry or investigation,  commenced or threatened,
or any claim whatsoever or in appearing or preparing for appearance as a witness
in any action,  suit or  proceeding,  including  any inquiry,  investigation  or
pretrial  proceeding  such as a deposition) to which the Placement Agent or such
indemnified  person  of  the  Placement  Agent  may  become  subject  under  the
Securities  Act,  the  Exchange  Act,  the Rules and  Regulations,  or any other
federal or state law or regulation,  common law or otherwise,  arising out of or
based  upon (i) the  conduct  of the  Investor  or its  officers,  employees  or
representatives  in its  acting  as the  Investor  for the  Offering,  (ii)  the
material breach of any representation,  warranty,  covenant or agreement made by
the  Investor  in the  Offering  Materials,  or (iii)  any  false or  misleading
information provided to the Placement Agent by one of the Investor's indemnified
persons.

                  (iv) The Placement  Agent hereby agrees that it will indemnify
and hold the  Investor  and each  officer,  director,  shareholder,  employee or
representative of the Investor,  and each person  controlling,  controlled by or
under common  control with the Investor  within the meaning of Section 15 of the
Securities  Act or Section 20 of the Exchange Act or the Rules and  Regulations,
harmless from and against any and all loss, claim,  damage,  liability,  cost or
expense whatsoever (including,  but not limited to, any and all reasonable legal
fees  and  other  expenses  and   disbursements   incurred  in  connection  with
investigating,  preparing to defend or defending any action, suit or proceeding,
including any inquiry or  investigation,  commenced or threatened,  or any claim
whatsoever  or in  appearing  or preparing  for  appearance  as a witness in any
action,  suit or proceeding,  including any inquiry,  investigation  or pretrial
proceeding  such as a  deposition)  to which the  Investor  or such  indemnified
person of the Investor may become subject under the Securities Act, the Exchange
Act, the Rules and Regulations, or any other federal or state law or regulation,
common law or otherwise, arising out of or based upon the material breach of any
representation,  warranty,  covenant or agreement made by the Placement Agent in
this Agreement.

                  (v) Promptly after receipt by an  indemnified  party of notice
of  commencement  of any action  covered by Section  7(A),  (B), (C) or (D), the
party to be  indemnified  shall,  within  five (5)  business  days,  notify  the
indemnifying  party  of the  commencement  thereof;  the  omission  by  one  (1)
indemnified  party to so notify the  indemnifying  party  shall not  relieve the
indemnifying  party of its obligation to indemnify any other  indemnified  party
that has given such notice and shall not relieve the  indemnifying  party of any
liability outside of this indemnification if not materially  prejudiced thereby.
In the event that any action is  brought  against  the  indemnified  party,  the
indemnifying party will be entitled to participate therein and, to the extent it
may desire,  to assume and control the defense thereof with counsel chosen by it
which is reasonably  acceptable to the indemnified  party. After notice from the
indemnifying  party to such  indemnified  party of its election to so assume the
defense thereof,  the indemnifying  party will not be liable to such indemnified
party under such Section 7(A),  (B),


                                       10
<PAGE>


(C),  or (D) for any  legal  or other  expenses  subsequently  incurred  by such
indemnified  party in connection with the defense  thereof,  but the indemnified
party may, at its own expense,  participate in such defense by counsel chosen by
it, without, however, impairing the indemnifying party's control of the defense.
Subject to the proviso of this sentence and  notwithstanding any other statement
to the contrary  contained  herein,  the indemnified party or parties shall have
the right to choose its or their own  counsel  and  control  the  defense of any
action,  all at the expense of the  indemnifying  party if (i) the employment of
such counsel shall have been authorized in writing by the indemnifying  party in
connection  with the defense of such  action at the expense of the  indemnifying
party, or (ii) the indemnifying party shall not have employed counsel reasonably
satisfactory  to such  indemnified  party to have  charge of the defense of such
action within a reasonable time after notice of  commencement of the action,  or
(iii) such  indemnified  party or parties shall have  reasonably  concluded that
there  may be  defenses  available  to it or them  which are  different  from or
additional  to those  available  to one or all of the  indemnifying  parties (in
which  case the  indemnifying  parties  shall not have the  right to direct  the
defense of such action on behalf of the indemnified party or parties), in any of
which events such fees and expenses of one additional  counsel shall be borne by
the indemnifying  party;  provided,  however,  that the indemnifying party shall
not, in connection with any one action or separate but substantially  similar or
related  actions  in the  same  jurisdiction  arising  out of the  same  general
allegations or  circumstance,  be liable for the reasonable fees and expenses of
more than one separate  firm of  attorneys at any time for all such  indemnified
parties.  No settlement of any action or proceeding against an indemnified party
shall be made without the consent of the indemnifying party.

                  (vi) In order to provide for just and  equitable  contribution
in  circumstances in which the  indemnification  provided for in Section 7(A) or
7(B) is due in  accordance  with its terms but is for any reason held by a court
to be  unavailable  on  grounds  of policy or  otherwise,  the  Company  and the
Placement Agent shall contribute to the aggregate  losses,  claims,  damages and
liabilities (including legal or other expenses reasonably incurred in connection
with the  investigation  or defense  of same)  which the other may incur in such
proportion so that the Placement  Agent shall be responsible for such percent of
the aggregate of such losses, claims, damages and liabilities as shall equal the
percentage of the gross  proceeds  paid to the  Placement  Agent and the Company
shall be responsible for the balance;  provided,  however, that no person guilty
of  fraudulent  misrepresentation  within the  meaning  of Section  11(f) of the
Securities  Act shall be  entitled to  contribution  from any person who was not
guilty of such fraudulent misrepresentation.  For purposes of this Section 7(F),
any person controlling, controlled by or under common control with the Placement
Agent, or any partner, director, officer, employee,  representative or any agent
of any  thereof,  shall have the same rights to  contribution  as the  Placement
Agent and each person  controlling,  controlled by or under common  control with
the Company within the meaning of Section 15 of the Securities Act or Section 20
of the  Exchange  Act and each  officer of the Company and each  director of the
Company  shall have the same rights to  contribution  as the Company.  Any party
entitled to contribution will,  promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a claim
for  contribution  may be made against the other party under this Section  7(D),
notify such party from whom  contribution may be sought,  but the omission to so
notify  such party shall not  relieve  the party from whom  contribution  may be
sought from any  obligation  they may have  hereunder  or otherwise if the party
from whom contribution may be sought is not materially prejudiced thereby.


                                       11
<PAGE>


                  (vii) The indemnity and contribution  agreements  contained in
this Section 7 shall remain operative and in full force and effect regardless of
any  investigation  made  by or on  behalf  of  any  indemnified  person  or any
termination of this Agreement.

                  (viii)  The  Company  hereby  waives,  to the  fullest  extent
permitted by law, any right to or claim of any punitive, exemplary,  incidental,
indirect,   special,   consequential  or  other  damages   (including,   without
limitation,  loss of profits)  against  the  Placement  Agent and each  officer,
director,  shareholder,  employee or  representative  of the placement agent and
each  person  controlling,  controlled  by or  under  common  control  with  the
Placement  Agent  within the  meaning of  Section  15 of the  Securities  Act or
Section 20 of the Exchange Act or the Rules and  Regulations  arising out of any
cause whatsoever  (whether such cause be based in contract,  negligence,  strict
liability,  other tort or otherwise).  Notwithstanding  anything to the contrary
contained  herein,  the  aggregate  liability  of the  Placement  Agent and each
officer,  director,  shareholder,  employee or  representative  of the Placement
Agent and each person  controlling,  controlled by or under common  control with
the Placement  Agent within the meaning of Section 15 of the  Securities  Act or
Section 20 of the Exchange Act or the Rules and Regulations shall not exceed the
compensation  received by the Placement Agent pursuant to Section 2 hereof. This
limitation of liability shall apply  regardless of the cause of action,  whether
contract, tort (including, without limitation,  negligence) or breach of statute
or any other legal or equitable obligation.

      8. Payment of Expenses.

      The Company  hereby agrees to bear all of the expenses in connection  with
the Offering, including, but not limited to the following: filing fees, printing
and duplicating costs, advertisements, postage and mailing expenses with respect
to the  transmission of Offering  Materials,  registrar and transfer agent fees,
escrow agent fees and expenses,  fees of the Company's  counsel and accountants,
issue and transfer taxes, if any.

      9. Conditions of Closing.

                  (i) The Closing  shall be held at the offices of the  Investor
or its counsel.  The  obligations  of the  Placement  Agent  hereunder  shall be
subject to the continuing  accuracy of the representations and warranties of the
Company  and the  Investor  herein as of the date  hereof  and as of the Date of
Closing (the "Closing Date") with respect to the Company or the Investor, as the
case may be, as if it had been made on and as of such Closing Date; the accuracy
on and as of the Closing Date of the  statements  of the officers of the Company
made pursuant to the provisions  hereof;  and the performance by the Company and
the  Investor on and as of the Closing  Date of its  covenants  and  obligations
hereunder and to the following further conditions:

                  (ii)  Upon  the  effectiveness  of  a  registration  statement
covering  the  Standby  Equity  Distribution  Agreement,  the  Investor  and the
Placement Agent shall receive the opinion of Counsel to the Company, dated as of
the date  thereof,  which  opinion  shall be in form  and  substance  reasonably
satisfactory to the Investor, their counsel and the Placement Agent.


                                       12
<PAGE>


                  (iii)  At or  prior  to the  Closing,  the  Investor  and  the
Placement  Agent shall have been  furnished  such  documents,  certificates  and
opinions as it may reasonably require for the purpose of enabling them to review
or pass  upon  the  matters  referred  to in  this  Agreement  and the  Offering
Materials, or in order to evidence the accuracy, completeness or satisfaction of
any of the representations, warranties or conditions herein contained.

                  (iv) At and prior to the Closing, (i) there shall have been no
material  adverse change nor development  involving a prospective  change in the
condition or prospects or the business  activities,  financial or otherwise,  of
the Company from the latest dates as of which such condition is set forth in the
Offering  Materials;  (ii)  there  shall  have been no  transaction,  not in the
ordinary course of business except the  transactions  pursuant to the Securities
Purchase  Agreement entered into by the Company on the date hereof which has not
been disclosed in the Offering  Materials or to the Placement  Agent in writing;
(iii) except as set forth in the Offering Materials, the Company shall not be in
default  under any  provision  of any  instrument  relating  to any  outstanding
indebtedness  for which a waiver or extension has not been  otherwise  received;
(iv) except as set forth in the Offering  Materials,  the Company shall not have
issued any securities (other than those to be issued as provided in the Offering
Materials)  or declared or paid any  dividend  or made any  distribution  of its
capital  stock of any  class and  there  shall  not have been any  change in the
indebtedness  (long or short term) or  liabilities or obligations of the Company
(contingent or otherwise) and trade payable debt; (v) no material  amount of the
assets of the Company shall have been pledged or mortgaged,  except as indicated
in the Offering Materials;  and (v) no action, suit or proceeding,  at law or in
equity,  against the Company or affecting  any of its  properties  or businesses
shall be  pending  or  threatened  before  or by any court or  federal  or state
commission,  board or other administrative agency, domestic or foreign,  wherein
an unfavorable decision, ruling or finding could materially adversely affect the
businesses, prospects or financial condition or income of the Company, except as
set forth in the Offering Materials.

                  (v) If requested  at Closing the  Investor  and the  Placement
Agent shall receive a certificate of the Company signed by an executive  officer
and chief financial officer,  dated as of the applicable  Closing, to the effect
that the conditions set forth in subparagraph  (C) above have been satisfied and
that, as of the applicable  closing,  the  representations and warranties of the
Company set forth herein are true and correct.

                  (vi) The  Placement  Agent shall have no  obligation to insure
that (x) any check,  note,  draft or other means of payment for the Common Stock
will be honored, paid or enforceable against the Investor in accordance with its
terms,  or (y) subject to the performance of the Placement  Agent's  obligations
and  the  accuracy  of the  Placement  Agent's  representations  and  warranties
hereunder, (1) the Offering is exempt from the registration  requirements of the
Securities Act or any applicable  state "Blue Sky" law or (2) the Investor is an
Accredited Investor.

      10. Termination.

      This  Agreement  shall be  co-terminus  with,  and terminate upon the same
terms and  conditions  as those set forth in, the  Standby  Equity  Distribution
Agreement.  The rights of the Investor and the  obligations of the Company under
the Registration Rights Agreement, and the rights of the Placement Agent and the
obligations  of the Company  shall  survive the  termination  of this  Agreement
unabridged.


                                       13
<PAGE>


      11. Miscellaneous.

                  (i)  This   Agreement   may  be  executed  in  any  number  of
counterparts,  each of which  shall be deemed to be an  original,  but all which
shall be deemed to be one and the same instrument.

                  (ii) Any notice  required or permitted  to be given  hereunder
shall be given in writing and shall be deemed  effective  when  deposited in the
United States mail, postage prepaid, or when received if personally delivered or
faxed (upon confirmation of receipt received by the sending party), addressed as
follows to such other address of which written notice is given to the others):

If to Placement Agent, to:  Sloan Securities Corp.
                            444 Madison Avenue, 23rd Floor
                            New York, New York 10022
                            Attention:
                            Telephone: (212) 308-2233
                            Facsimile: (212) 202-4022

If to the Company, to:      Earthshell Corporation
                            3916 State Street, #110
                            Santa Barbara, California 93105
                            Attention: Scott Houston
                                       Chief Financial Officer
                            Telephone: (805) 563-7590
                            Facsimile: (805) 563-7954

With a copy to:             Kirkpatrick & Lockhart Nicholson Graham, LLP
                            201 South Biscayne Boulevard, Suite 2000
                            Miami, Florida 33131
                            Attention: Clayton E. Parker, Esquire
                            Telephone: (305) 539-3306
                            Facsimile: (305) 358-7095

If to the Investor:         Cornell Capital Partners, LP
                            101 Hudson Street -Suite 3700
                            Jersey City, NJ 07302
                            Attention: Mark Angelo
                                       Portfolio Manager
                            Telephone: (201) 985-8300
                            Facsimile: (201) 985-8266


                                       14
<PAGE>


With copies to:             Cornell Capital Partners, LP
                            101 Hudson Street - Suite 3700
                            Jersey City, NJ 07302
                            Telephone: (201) 985-8300
                            Attention: Troy J. Rillo, Esquire
                                       Senior Vice President, Capital Markets
                            Telephone: (201) 985-8300
                            Facsimile: (201) 985-8266

                  (iii) This Agreement shall be governed by and construed in all
respects  under the laws of the State of New Jersey,  without  reference  to its
conflict of laws rules or principles. Any suit, action, proceeding or litigation
arising out of or relating to this Agreement  shall be brought and prosecuted in
such federal or state court or courts  located within the State of New Jersey as
provided by law. The parties hereby irrevocably and  unconditionally  consent to
the  jurisdiction  of each such court or courts  located within the State of New
Jersey and to service of process by registered or certified mail, return receipt
requested,  or by any other  manner  provided  by  applicable  law,  and  hereby
irrevocably and unconditionally  waive any right to claim that any suit, action,
proceeding  or litigation  so commenced  has been  commenced in an  inconvenient
forum.

                  (iv) This Agreement and the other agreements referenced herein
contain  the entire  understanding  between  the  parties  hereto and may not be
modified or amended  except by a writing  duly signed by the party  against whom
enforcement of the modification or amendment is sought.

                  (v) If any  provision  of this  Agreement  shall be held to be
invalid or unenforceable,  such invalidity or unenforceability  shall not affect
any other provision of this Agreement.


                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       15
<PAGE>


      IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as of
the date first written above.

                                        COMPANY:
                                        EARTHSHELL CORPORATION

                                        By:  /s/ Scott Houston
                                            ------------------------------------
                                        Name:    Scott Houston
                                        Title:   Chief Financial Officer


                                        PLACEMENT AGENT:
                                        SLOAN SECURITIES CORP.

                                        By:  /s/ James C. Ackerman
                                            ------------------------------------
                                        Name:    James C. Ackerman
                                        Title:   President


                                        INVESTOR:
                                        CORNELL CAPITAL PARTNERS, LP

                                        BY:      YORKVILLE ADVISORS, LLC
                                        ITS:     GENERAL PARTNER

                                        By:  /s/ Mark A. Angelo
                                            ------------------------------------
                                        Name:    Mark A. Angelo
                                        Title:   Portfolio Manager


                                       16
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.4
<SEQUENCE>5
<FILENAME>v015142_ex99-4.txt
<TEXT>

                                                                    Exhibit 99.4

                               SECURITY AGREEMENT

      THIS  SECURITY  AGREEMENT  (the  "Agreement"),  is  entered  into and made
effective  as of March  23,  2005,  by and  between  EARTHSHELL  CORPORATION,  a
Delaware  corporation  located at 3916 State Street,  Number 110, Santa Barbara,
California 93105 (the "Company"), and CORNELL CAPITAL PARTNERS, LP (the "Secured
Party").

      WHEREAS,  the Company shall issue to the Secured Party, secured promissory
notes in the principal amount of Two Million Five Hundred Thousand  ($2,500,000)
(collectively,  the  "Note") of which One Million  One  Hundred  Fifty  Thousand
Dollars ($1,150,000) shall be funded within three (3) business day following the
date hereof (the "First  Closing") and One Million Three Hundred Fifty  Thousand
Dollars ($1,350,000) shall be funded two (2) business days prior to the date the
registration statement (the "Registration  Statement") is filed, pursuant to the
Registration  Rights  Agreement  dated the date hereof,  with the United  States
Securities  and  Exchange   Commission   (the  "SEC")  (the  "Second   Closing")
(individually  referred  to as a  "Closing"  collectively  referred  to  as  the
"Closings"); and

      WHEREAS,  to induce the Secured Party to enter into the Note,  the Company
hereby  grants to the  Secured  Party a security  interest in and to the pledged
property   identified  on  Exhibit  A  hereto  until  the  satisfaction  of  the
Obligations, as defined herein below.

      NOW, THEREFORE,  in consideration of the promises and the mutual covenants
herein contained,  and for other good and valuable  consideration,  the adequacy
and receipt of which are hereby acknowledged, the parties hereto hereby agree as
follows:

                                   ARTICLE 1.

                         DEFINITIONS AND INTERPRETATIONS

      Section 1.1. Recitals.

      The above recitals are true and correct and are  incorporated  herein,  in
their entirety, by this reference.

      Section 1.2. Interpretations.

      Nothing  herein  expressed or implied is intended or shall be construed to
confer upon any person other than the Secured  Party any right,  remedy or claim
under or by reason hereof.

      Section 1.3. Obligations Secured.

      The obligations  secured hereby are any and all obligations of the Company
now  existing or  hereinafter  incurred to the Secured  Party,  whether  oral or
written  and whether  arising  before,  on or after the date  hereof  including,
without limitation,  those obligations of the Company to the Secured Party under
this Agreement,  the Note, the Pledge and Escrow Agreement of even date herewith
by and among the Company, Benton Wilcoxon, the Secured Party and David Gonzalez,
Esq. (the "Pledge  Agreement"),  and any other amounts now or hereafter  owed to
the Secured  Party by the Company  thereunder  or hereunder  (collectively,  the
"Obligations").   This  Agreement,   the  Note  and  the  Pledge  Agreement  are
collectively referred to herein as the "Transaction Documents".

<PAGE>

      Section 1.4. Closing Dates.

      The First Closing of the purchase and sale of the Note shall take place at
10:00 a.m.  Eastern  Standard Time on the third (3rd) business day following the
date hereof,  subject to  notification  of satisfaction of the conditions to the
First Closing set forth herein and in Sections 8 and 9 below (or such later date
as is  mutually  agreed to by the  Company  and the  Secured  Party) (the "First
Closing  Date"),  and the Second  Closing of the  purchase  and sale of the Note
shall  take  place  at  10:00  a.m.  Eastern  Standard  Time on the date two (2)
business  days prior to the date the  Registration  Statement  is filed with the
SEC,  subject to  notification  of  satisfaction of the conditions to the Second
Closing set forth herein and in Sections 8 and 9 below (or such later date as is
mutually  agreed to by the Company and the Secured  Party) (the "Second  Closing
Date") (collectively referred to a the "Closing Dates"). The Closing shall occur
on the respective Closing Dates at the offices of Yorkville Advisors,  LLC, 3700
Hudson Street, Suite 3700, Jersey City, New Jersey 07302 (or such other place as
is mutually agreed to by the Company and the Secured Party).

                                   ARTICLE 2.

                 PLEDGED PROPERTY, ADMINISTRATION OF COLLATERAL
                      AND TERMINATION OF SECURITY INTEREST

      Section 2.1. Pledged Property.

            (a) Company hereby pledges to the Secured Party,  and creates in the
Secured Party for its benefit, a security interest in and to all of the property
of the  Company  as set forth in  Exhibit A  attached  hereto  and the  products
thereof  and  the  proceeds  of  all  such  items  (collectively,  the  "Pledged
Property") for such time until the Obligations are paid in full.

            (b)   Simultaneously   with  the  execution  and  delivery  of  this
Agreement,  the  Company  shall make,  execute,  acknowledge,  file,  record and
deliver to the Secured Party any documents  reasonably  requested by the Secured
Party to perfect its security interest in the Pledged  Property.  Simultaneously
with the  execution  and  delivery of this  Agreement,  the Company  shall make,
execute,  acknowledge  and  deliver  to the  Secured  Party such  documents  and
instruments, including, without limitation, financing statements,  certificates,
affidavits  and forms as may, in the Secured  Party's  reasonable  judgment,  be
necessary to effectuate,  complete or perfect, or to continue and preserve,  the
security interest of the Secured Party in the Pledged Property,  and the Secured
Party shall hold such documents and instruments as secured party, subject to the
terms and conditions contained herein.

      Section 2.2. Rights; Interests; Etc.

            (a) So long as no Event of Default (as  hereinafter  defined)  shall
have occurred and be continuing:

<PAGE>

                  (i) the Company  shall be  entitled  to  exercise  any and all
rights  pertaining  to the Pledged  Property or any part thereof for any purpose
not  inconsistent  with the  terms  hereof  including  the  sale of the  Pledged
Property in the ordinary course of business; and

                  (ii) the  Company  shall be entitled to receive and retain any
and all payments paid or made in respect of the Pledged Property.

            (b) Upon the  occurrence  and during the  continuance of an Event of
Default:

                  (i) All rights of the Company to exercise  the rights which it
would otherwise be entitled to exercise pursuant to Section 2.2(a)(i) hereof and
to receive payments which it would otherwise be authorized to receive and retain
pursuant to Section  2.2(a)(ii)  hereof shall be suspended,  and all such rights
shall thereupon  become vested in the Secured Party who shall thereupon have the
sole right to exercise  such rights and to receive and hold as Pledged  Property
such  payments;  provided,  however,  that if the  Secured  Party  shall  become
entitled  and shall  elect to  exercise  its  right to  realize  on the  Pledged
Property  pursuant  to  Article 5 hereof,  then all cash  sums  received  by the
Secured Party,  or held by Company for the benefit of the Secured Party and paid
over  pursuant  to  Section  2.2(b)(ii)  hereof,  shall be applied  against  any
outstanding Obligations; and

                  (ii) All interest,  dividends,  income and other  payments and
distributions  which are received by the Company  contrary to the  provisions of
Section  2.2(b)(i)  hereof  shall be  received  in trust for the  benefit of the
Secured Party,  shall be segregated from other property of the Company and shall
be forthwith paid over to the Secured Party; or

                  (iii)  The  Secured  Party  in its  sole  discretion  shall be
authorized to sell any or all of the Pledged  Property at public or private sale
in order to recoup all of the outstanding  principal plus accrued  interest owed
pursuant to the Note as described herein.

            (c) Each of the  following  events shall  constitute a default under
this Agreement (each an "Event of Default"):

                  (i) any default,  whether in whole or in part,  shall occur in
the payment to the Secured Party of principal, interest or other item comprising
the  Obligations as and when due or with respect to any other debt or obligation
of the Company to a party other than the Secured Party;

                  (ii)  any  misrepresentation,   breach  of  warranty,  breach,
nonfulfillment,  event of default or default, whether in whole or in part, shall
occur  in the  due  observance  or  performance  of any  agreement,  obligation,
representation,  warranty or any covenant,  term or provision to be performed by
the Company under this  Agreement or any other  Transaction  Document;  provided
that the Secured  Party  shall have  provided  the Company  with (10) days prior
written notice of such default (which notice may be satisfied by the delivery of
written notice pursuant to any Transaction Document);

                  (iii) the Company shall: (1) make a general assignment for the
benefit  of its  creditors;  (2) apply for or consent  to the  appointment  of a
receiver,  trustee,  assignee,  custodian,  sequestrator,  liquidator or similar
official  for  itself  or any of its  assets  and  properties;

<PAGE>

(3)  commence a voluntary  case for relief as a debtor  under the United  States
Bankruptcy Code; (4) file with or otherwise submit to any governmental authority
any petition,  answer or other  document  seeking:  (A)  reorganization,  (B) an
arrangement  with  creditors or (C) to take  advantage  of any other  present or
future  applicable  law  respecting  bankruptcy,   reorganization,   insolvency,
readjustment of debts, relief of debtors,  dissolution or liquidation;  (5) file
or otherwise submit any answer or other document admitting or failing to contest
the  material  allegations  of a petition or other  document  filed or otherwise
submitted  against it in any proceeding under any such applicable law, or (6) be
adjudicated a bankrupt or insolvent by a court of competent jurisdiction; or

                  (iv) any case,  proceeding  or other action shall be commenced
against  the  Company for the  purpose of  effecting,  or an order,  judgment or
decree shall be entered by any court of  competent  jurisdiction  approving  (in
whole or in part)  anything  specified  in Section  2.2(c)(iii)  hereof,  or any
receiver,  trustee,  assignee,  custodian,  sequestrator,  liquidator  or  other
official shall be appointed  with respect to the Company,  or shall be appointed
to take or shall otherwise acquire possession or control of all or a substantial
part of the assets and properties of the Company, and any of the foregoing shall
continue unstayed and in effect for any period of thirty (30) days.


                                   ARTICLE 3.

                          ATTORNEY-IN-FACT; PERFORMANCE

      Section 3.1. Secured Party Appointed Attorney-In-Fact.

      Upon the occurrence of an Event of Default,  the Company  hereby  appoints
the Secured Party as its attorney-in-fact,  with full authority in the place and
stead of the Company and in the name of the Company or  otherwise,  from time to
time in the  Secured  Party's  discretion  to take any action and to execute any
instrument  which the Secured Party may reasonably  deem necessary to accomplish
the purposes of this Agreement,  including,  without limitation,  to receive and
collect all instruments made payable to the Company representing any payments in
respect of the Pledged  Property or any part thereof and to give full  discharge
for the same.  The  Secured  Party may demand,  collect,  receipt  for,  settle,
compromise,  adjust, sue for,  foreclose,  or realize on the Pledged Property as
and when the Secured Party may determine. To facilitate collection,  the Secured
Party may notify  account  debtors and obligors on any Pledged  Property to make
payments directly to the Secured Party.

      Section 3.2. Secured Party May Perform.

      If the Company fails to perform any agreement  contained  herein after any
applicable cure periods,  the Secured Party, at its option,  may itself perform,
or cause  performance of, such agreement,  and the expenses of the Secured Party
incurred in connection  therewith shall be included in the  Obligations  secured
hereby and payable by the Company under Section 10.3.

<PAGE>

                                   ARTICLE 4.

                         REPRESENTATIONS AND WARRANTIES

      The Company  represents and warrants to the Secured Party that,  except as
set forth in the SEC  Documents  (as  defined in  Section  4.5),  the  following
representations and warranties are true and correct as of the date hereof.

      Section 4.1. Organization and Qualification

      The Company and its  subsidiaries  are  corporations  duly  organized  and
validly  existing in good standing under the laws of the  jurisdiction  in which
they are  incorporated,  and have the  requisite  corporate  power to own  their
properties  and to carry on their business as now being  conducted.  Each of the
Company and its  subsidiaries  is duly qualified as a foreign  corporation to do
business and is in good  standing in every  jurisdiction  in which the nature of
the business conducted by it makes such qualification  necessary,  except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on the Company and its subsidiaries taken as a whole.

      Section 4.2. Authorization, Enforcement, Compliance with Other Instruments

      The Company has the requisite  corporate power and authority to enter into
and perform the Transaction  Documents and any related  agreements in accordance
with the terms  hereof and  thereof,  (ii) the  execution  and  delivery  of the
Transaction  Documents  by  the  Company  and  the  consummation  by it  of  the
transactions contemplated hereby and thereby, including, without limitation, the
issuance  of the Note  have  been  duly  authorized  by the  Company's  Board of
Directors and no further  consent or  authorization  is required by the Company,
its Board of Directors or its stockholders, (iii) the Transaction Documents have
been duly executed and delivered by the Company,  (iv) the Transaction Documents
constitute the valid and binding  obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited by general  principles of equity or applicable  bankruptcy,  insolvency,
reorganization,   moratorium,  liquidation  or  similar  laws  relating  to,  or
affecting  generally,  the  enforcement of creditors'  rights and remedies.  The
authorized  officer of the Company executing the Transaction  Documents knows of
no reason why the Company  cannot  perform the Company's  obligations  under the
Transaction Documents.

      Section 4.3. Capitalization.

      The authorized  capital stock of the Company consists of 40,000,000 shares
of common stock,  par value $0.01 per share (the "Common  Stock") and 10,000,000
shares of Preferred  Stock.  As of the date hereof,  the Company has  18,234,615
shares of Common Stock issued and outstanding.  All of such  outstanding  shares
have  been  validly  issued  and are  fully  paid and  nonassessable.  Except as
disclosed  in the SEC  Documents,  no  shares of Common  Stock  are  subject  to
preemptive  rights or any  other  similar  rights  or any liens or  encumbrances
suffered or permitted by the Company.  Except as disclosed in the SEC Documents,
as of the  date  of  this  Agreement,  (i)  there  are no  outstanding  options,
warrants,  scrip,  rights to subscribe to, calls or commitments of any character
whatsoever  relating to, or securities or rights convertible into, any shares of
capital  stock  of  the  Company  or  any of  its  subsidiaries,  or  contracts,
commitments,  understandings  or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional  shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character  whatsoever  relating to, or
securities  or rights  convertible  into,  any  shares of  capital  stock of the
Company  or  any  of its  subsidiaries,

<PAGE>

(ii) there are no outstanding  debt securities and (iii) there are no agreements
or arrangements  under which the Company or any of its subsidiaries is obligated
to register the sale of any of their securities under the Securities Act (except
pursuant  to the  Registration  Rights  Agreement  between  the  Company and the
Secured  Party  dated  the  date  hereof)  and  (iv)  there  are no  outstanding
registration  statements and there are no outstanding  comment  letters from the
SEC or any other  regulatory  agency.  There are no  securities  or  instruments
containing  anti-dilution  or similar  provisions  that will be triggered by the
issuance of the Note as described in this  Agreement.  The Company has furnished
to the Secured  Party true and correct  copies of the Company's  Certificate  of
Incorporation,  as amended and as in effect on the date hereof (the "Certificate
of  Incorporation"),  and the Company's By-laws, as in effect on the date hereof
(the "By-laws"), and the terms of all securities convertible into or exercisable
for  Common  Stock and the  material  rights of the  holders  thereof in respect
thereto other than stock options issued to employees and consultants.

      Section 4.4. No Conflicts

      Except as  disclosed in the SEC  Documents,  the  execution,  delivery and
performance of the Transaction  Documents by the Company and the consummation by
the  Company of the  transactions  contemplated  hereby will not (i) result in a
violation of the Certificate of  Incorporation,  any certificate of designations
of any  outstanding  series of preferred  stock of the Company or the By-laws or
(ii)  conflict  with or  constitute  a default (or an event which 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  of,  any
agreement,  indenture  or  instrument  to  which  the  Company  or  any  of  its
subsidiaries is a party, or result in a violation of any law, rule,  regulation,
order,  judgment  or decree  (including  federal and state  securities  laws and
regulations  and the  rules  and  regulations  of The  National  Association  of
Securities  Dealers  Inc.'s  OTC  Bulletin  Board on which the  Common  Stock is
quoted)  applicable  to the Company or any of its  subsidiaries  or by which any
property  or  asset  of the  Company  or any of its  subsidiaries  is  bound  or
affected. Except as disclosed in the SEC Documents,  neither the Company nor its
subsidiaries  is in violation of any term of or in default under its Certificate
of  Incorporation  or  By-laws  or  their  organizational  charter  or  by-laws,
respectively,  or any  material  contract,  agreement,  mortgage,  indebtedness,
indenture,  instrument,  judgment,  decree  or  order  or any  statute,  rule or
regulation  applicable to the Company or its  subsidiaries.  The business of the
Company and its subsidiaries is not being conducted,  and shall not be conducted
in violation of any law,  ordinance,  or regulation of any  governmental  entity
which  would  have  a  material  adverse  effect  on  the  Company.   Except  as
specifically contemplated by this Agreement and as required under the Securities
Act and any  applicable  state  securities  laws, the Company is not required to
obtain  any  consent,   authorization  or  order  of,  or  make  any  filing  or
registration with, any court or governmental  agency in order for it to execute,
deliver  or  perform  any of its  obligations  under  or  contemplated  by  this
Agreement in accordance with the terms hereof or thereof. Except as disclosed in
the  SEC  Documents,   all  consents,   authorizations,   orders,   filings  and
registrations  which the Company is required to obtain pursuant to the preceding
sentence  have been  obtained or effected  on or prior to the date  hereof.  The
Company and its  subsidiaries  are unaware of any facts or  circumstance,  which
might give rise to any of the foregoing.

<PAGE>

      Section 4.5. SEC Documents: Financial Statements

      Since  January 1, 2003,  the  Company  has filed all  reports,  schedules,
forms,  statements and other  documents  required to be filed by it with the SEC
under of the Securities  Exchange Act of 1934, as amended (the  "Exchange  Act")
(all of the  foregoing  filed prior to the date hereof or amended after the date
hereof and all exhibits included therein and financial  statements and schedules
thereto and  documents  incorporated  by reference  therein,  being  hereinafter
referred to as the "SEC  Documents").  The Company has  delivered to the Secured
Party or its  representatives,  or made  available  through the SEC's website at
http://www.sec.gov.,  true and complete copies of the SEC Documents. As of their
respective  dates, the financial  statements of the Company disclosed in the SEC
Documents  (the  "Financial  Statements")  complied  as to form in all  material
respects with  applicable  accounting  requirements  and the published rules and
regulations of the SEC with respect thereto. Such Financial Statements have been
prepared  in  accordance   with  generally   accepted   accounting   principles,
consistently  applied,  during  the  periods  involved  (except  (i)  as  may be
otherwise  indicated in such Financial  Statements or the notes thereto, or (ii)
in the case of  unaudited  interim  statements,  to the extent  they may exclude
footnotes or may be condensed or summary  statements) and, fairly present in all
material respects the financial  position of the Company as of the dates thereof
and the  results of its  operations  and cash flows for the  periods  then ended
(subject,  in the  case  of  unaudited  statements,  to  normal  year-end  audit
adjustments).  No other  information  provided by or on behalf of the Company to
the Secured Party which is not included in the SEC Documents, including, without
limitation,  information  referred  to in this  Agreement,  contains  any untrue
statement of a material  fact or omits to state any material  fact  necessary in
order to make the statements  therein,  in the light of the circumstances  under
which they were made, not misleading.

      Section 4.6. 10(b)-5.

      The SEC Documents do not include any untrue  statements of material  fact,
nor do they omit to state  any  material  fact  required  to be  stated  therein
necessary to make the statements made, in light of the circumstances under which
they were made, not misleading.

      Section 4.7. Absence of Litigation

      Except  as  disclosed  in the SEC  Documents,  there is no  action,  suit,
proceeding,  inquiry  or  investigation  before or by any court,  public  board,
government  agency,  self-regulatory  organization  or body  pending  against or
affecting the Company,  the Common Stock or any of the  Company's  subsidiaries,
wherein an  unfavorable  decision,  ruling or finding  would (i) have a material
adverse effect on the transactions contemplated hereby (ii) adversely affect the
validity or  enforceability  of, or the  authority  or ability of the Company to
perform  its  obligations   under,  this  Agreement  or  any  of  the  documents
contemplated  herein,  or  (iii)  except  as  expressly  disclosed  in  the  SEC
Documents,  have  a  material  adverse  effect  on  the  business,   operations,
properties,  financial condition or results of operations of the Company and its
subsidiaries taken as a whole.

<PAGE>

      Section 4.8.  Acknowledgment  Regarding Secured Party's  Acceptance of the
                      Note

      The  Company  acknowledges  and agrees  that the  Secured  Party is acting
solely in the capacity of an arm's length lender with respect to this  Agreement
and the transactions  contemplated hereby. The Company further acknowledges that
the  Secured  Party is not acting as a  financial  advisor or  fiduciary  of the
Company (or in any similar  capacity)  with  respect to this  Agreement  and the
transactions  contemplated  hereby and any advice given by the Secured  Party or
any of their  respective  representatives  or  agents  in  connection  with this
Agreement and the transactions  contemplated hereby is merely incidental to such
Secured Party's  acceptance of the Note. The Company  further  represents to the
Secured Party that the Company's  decision to enter into this Agreement has been
based   solely  on  an   independent   evaluation   by  the   Company   and  its
representatives.

      Section 4.9. Intellectual Property Rights

      The  Company  and its  subsidiaries  own or  possess  adequate  rights  or
licenses  to use all  trademarks,  trade  names,  service  marks,  service  mark
registrations,  service names, patents, patent rights,  copyrights,  inventions,
licenses,  approvals,  governmental  authorizations,  trade  secrets  and rights
necessary to conduct their respective  businesses as now conducted.  The Company
and its  subsidiaries  do not  have any  knowledge  of any  infringement  by the
Company or its  subsidiaries of trademark,  trade name rights,  patents,  patent
rights, copyrights,  inventions, licenses, service names, service marks, service
mark registrations,  trade secret or other similar rights of others, and, to the
knowledge of the Company there is no claim,  action or proceeding  being made or
brought against, or to the Company's  knowledge,  being threatened against,  the
Company or its subsidiaries  regarding  trademark,  trade name, patents,  patent
rights,  invention,  copyright,  license,  service names, service marks, service
mark registrations,  trade secret or other infringement; and the Company and its
subsidiaries are unaware of any facts or circumstances  which might give rise to
any of the foregoing.

      Section 4.10. Environmental Laws

      The Company and its  subsidiaries  are (i) in compliance  with any and all
applicable foreign,  federal,  state and local laws and regulations  relating to
the protection of human health and safety, the environment or hazardous or toxic
substances or wastes,  pollutants or contaminants  ("Environmental  Laws"), (ii)
have received all permits,  licenses or other  approvals  required of them under
applicable  Environmental Laws to conduct their respective  businesses and (iii)
are in compliance  with all terms and conditions of any such permit,  license or
approval.

      Section 4.11. Title.

      Any real property and  facilities  held under lease by the Company and its
subsidiaries  are held by them under valid,  subsisting and  enforceable  leases
with such  exceptions as are not material and do not interfere with the use made
and proposed to be made of such  property  and  buildings by the Company and its
subsidiaries.

<PAGE>

      Section 4.12. Insurance.

      The  Company  and each of its  subsidiaries  are  insured by  insurers  of
recognized  financial  responsibility  against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and its  subsidiaries  are engaged.  Neither the
Company nor any such  subsidiary has been refused any insurance  coverage sought
or applied for and neither the Company nor any such 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 at a cost that would not materially
and adversely  affect the  condition,  financial or otherwise,  or the earnings,
business or operations of the Company and its subsidiaries, taken as a whole.

      Section 4.13. Regulatory Permits

      The  Company  and its  subsidiaries  possess  all  material  certificates,
authorizations and permits issued by the appropriate  federal,  state or foreign
regulatory  authorities  necessary to conduct their respective  businesses,  and
neither  the  Company  nor any  such  subsidiary  has  received  any  notice  of
proceedings  relating to the revocation or modification of any such certificate,
authorization or permit.

      Section 4.14. Internal Accounting Controls

      The  Company  and each of its  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,  and  (iii) the
recorded  amounts for assets is compared with the existing  assets at reasonable
intervals and appropriate action is taken with respect to any differences.

      Section 4.15. No Material Adverse Breaches, etc

      Except as set forth in the SEC  Documents,  neither the Company nor any of
its   subsidiaries  is  subject  to  any  charter,   corporate  or  other  legal
restriction,  or any judgment,  decree,  order,  rule or regulation which in the
judgment of the  Company's  officers  has or is expected in the future to have a
material  adverse  effect on the  business,  properties,  operations,  financial
condition,   results  of   operations   or  prospects  of  the  Company  or  its
subsidiaries.  Except as set forth in the SEC Documents, neither the Company nor
any of its  subsidiaries is in breach of any contract or agreement which breach,
in the judgment of the Company's officers, has or is expected to have a material
adverse effect on the business,  properties,  operations,  financial  condition,
results of operations or prospects of the Company or its subsidiaries.

      Section 4.16. Tax Status

      Except  as set forth in the SEC  Documents,  the  Company  and each of its
subsidiaries  has made and filed all federal and state  income and all other tax
returns,  reports and  declarations  required by any jurisdiction to which it is
subject  and  (unless  and only to the extent  that the  Company and each of its
subsidiaries has set aside on its books provisions  reasonably  adequate for the
payment  of all  unpaid  and  unreported  taxes)  has paid all  taxes  and other
governmental  assessments  and charges  that are  material  in amount,  shown or
determined to be due on such  returns,  reports and  declarations,  except those
being  contested  in good  faith  and  has  set  aside  on its  books  provision
reasonably  adequate for the payment of all taxes for periods  subsequent to the
periods  to which such  returns,  reports or  declarations  apply.  There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction,  and the officers of the Company know of no basis for any such
claim.

<PAGE>

      Section 4.17. Certain Transactions

      Except as set forth in the SEC  Documents,  and  except  for arm's  length
transactions pursuant to which the Company makes payments in the ordinary course
of business  upon terms no less  favorable  than the Company  could  obtain from
third  parties and other than the grant of stock  options  disclosed  in the SEC
Documents,  none of the  officers,  directors,  or  employees  of the Company is
presently a party to any  transaction  with the Company (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 corporation, partnership, trust or other entity in which any
officer,  director,  or any such  employee has a  substantial  interest or is an
officer, director, trustee or partner.

      Section 4.18. Ownership of Pledged Property.

      The Company  warrants and  represents  that it is the legal and beneficial
owner of the Pledged  Property  free and clear of any lien,  security  interest,
option or other charge or encumbrance  except for the security  interest created
by this Agreement and security interest disclosed in the SEC Documents.

      Section 4.19. Employee Relations

      Neither the Company nor any of its  subsidiaries  is involved in any labor
dispute nor, to the knowledge of the Company or any of its subsidiaries,  is any
such dispute threatened. None of the Company's or its subsidiaries' employees is
a member of a union and the  Company  and its  subsidiaries  believe  that their
relations with their employees are good.


                                   ARTICLE 5.

                                DEFAULT; REMEDIES

      Section 5.1. Default and Remedies.

            (a) If an Event of Default  described in Section  2.2(c)(i) and (ii)
occurs,  then in each such case the Secured Party may declare the Obligations to
be due and payable immediately,  by a notice in writing to the Company, and upon
any such declaration,  the Obligations shall become  immediately due and payable
and the Secured  Party can  immediately  exercise any of its rights and remedies
pursuant to the  Transaction  Documents or under any applicable law.

<PAGE>

If an Event of Default  described in Sections  2.2(c)(iii) or (iv) occurs and is
continuing  for the  period  set  forth  therein,  then  the  Obligations  shall
automatically  become  immediately due and payable without  declaration or other
act on the part of the  Secured  Party and the  Secured  Party  can  immediately
exercise any of its rights and remedies  pursuant to the  Transaction  Documents
and under any applicable law.

            (b) Upon the  occurrence  of an Event of Default,  the Secured Party
shall: (i) be entitled to receive all distributions  with respect to the Pledged
Property,  (ii) to cause the Pledged Property to be transferred into the name of
the Secured Party or its nominee, (iii) to dispose of the Pledged Property, (iv)
to realize  upon any and all  rights in the  Pledged  Property  then held by the
Secured Party,  and (v) exercise any of its rights and remedies  pursuant to the
Transaction Documents and any applicable law.

      Section  5.2.  Method  of  Realizing  Upon  the  Pledged  Property:  Other
                        Remedies.

      Upon the occurrence of an Event of Default,  in addition to any rights and
remedies  available at law or in equity,  the following  provisions shall govern
the Secured Party's right to realize upon the Pledged Property:

            (a) Any item of the Pledged  Property  may be sold for cash or other
value in any number of lots at brokers board, public auction or private sale and
may be sold without  demand,  advertisement  or notice  (except that the Secured
Party shall give the Company ten (10) days' prior written notice of the time and
place  or of the  time  after  which  a  private  sale  may be made  (the  "Sale
Notice")),  which notice period is hereby agreed to be commercially  reasonable.
At any  sale or sales  of the  Pledged  Property,  the  Company  may bid for and
purchase the whole or any part of the Pledged Property and, upon compliance with
the terms of such  sale,  may hold,  exploit  and  dispose  of the same  without
further  accountability  to the  Secured  Party.  The Company  will  execute and
deliver,  or cause to be executed and delivered,  such  instruments,  documents,
assignments,  waivers,  certificates,  and  affidavits and supply or cause to be
supplied such further  information  and take such further  action as the Secured
Party reasonably shall require in connection with any such sale.

            (b) Any cash being held by the Secured Party as Pledged Property and
all cash  proceeds  received  by the  Secured  Party  in  respect  of,  sale of,
collection  from,  or other  realization  upon  all or any  part of the  Pledged
Property shall be applied as follows:

                  (i) to the payment of all  amounts  due the Secured  Party for
the expenses reimbursable to it hereunder or owed to it pursuant to Section 10.3
hereof;

                  (ii) to the payment of the Obligations then due and unpaid.

                  (iii) the balance, if any, to the Company.

            (c) In addition to all of the rights and remedies  which the Secured
Party may have pursuant to this  Agreement,  the Secured Party shall have all of
the rights and remedies provided by law, including,  without  limitation,  those
under the Uniform Commercial Code.

<PAGE>

                  (i) If the  Company  fails  to pay such  amounts  due upon the
occurrence  of an Event of Default which is  continuing,  then the Secured Party
may institute a judicial  proceeding  for the  collection of the sums so due and
unpaid,  may  prosecute  such  proceeding  to judgment  or final  decree and may
enforce the same against the Company and collect the monies  adjudged or decreed
to be payable in the manner  provided  by law out of the  property  of  Company,
wherever situated.

                  (ii)  The  Company  agrees  that it shall  be  liable  for any
reasonable fees,  expenses and costs incurred by the Secured Party in connection
with  enforcement,  collection and  preservation of the  Transaction  Documents,
including,  without  limitation,  reasonable  legal fees and expenses,  and such
amounts shall be deemed  included as  Obligations  secured hereby and payable as
set forth in Section 10.3 hereof.

      Section 5.3. Proofs of Claim.

      In case of the  pendency  of any  receivership,  insolvency,  liquidation,
bankruptcy,  reorganization,   arrangement,  adjustment,  composition  or  other
judicial proceeding relating to the Company or the property of the Company or of
such other obligor or its creditors,  the Secured Party (irrespective of whether
the  Obligations  shall  then be due and  payable  as  therein  expressed  or by
declaration  or otherwise  and  irrespective  of whether the Secured Party shall
have made any demand on the Company for the payment of the Obligations), subject
to the rights of Previous Security Holders, shall be entitled and empowered,  by
intervention in such proceeding or otherwise:

                  (i) to file and  prove a claim  for the  whole  amount  of the
Obligations  and to file such other  papers or  documents as may be necessary or
advisable in order to have the claims of the Secured Party  (including any claim
for the  reasonable  legal fees and expenses and other expenses paid or incurred
by the Secured  Party  permitted  hereunder  and of the Secured Party allowed in
such judicial proceeding), and

                  (ii) to  collect  and  receive  any  monies or other  property
payable or  deliverable  on any such claims and to distribute  the same; and any
custodian,  receiver,  assignee,  trustee,  liquidator,  sequestrator  or  other
similar  official in any such judicial  proceeding  is hereby  authorized by the
Secured  Party to make such payments to the Secured Party and, in the event that
the Secured Party shall  consent to the making of such payments  directed to the
Secured  Party,  to pay to the Secured  Party any amounts  for  expenses  due it
hereunder.

      Section 5.4. Duties Regarding Pledged Property.

      The Secured Party shall have no duty as to the collection or protection of
the Pledged  Property  or any income  thereon or as to the  preservation  of any
rights pertaining thereto, beyond the safe custody and reasonable care of any of
the Pledged Property actually in the Secured Party's possession.

<PAGE>

                                   ARTICLE 6.

                              AFFIRMATIVE COVENANTS

      The Company  covenants and agrees that, from the date hereof and until the
Obligations  have been fully paid and satisfied,  unless the Secured Party shall
consent otherwise in writing (as provided in Section 10.4 hereof):

      Section 6.1. Existence, Properties, Etc.

            (a) The  Company  shall  do,  or cause to be done,  all  things,  or
proceed with due  diligence  with any actions or courses of action,  that may be
reasonably necessary (i) to maintain Company's due organization, valid existence
and good  standing  under  the laws of its state of  incorporation,  and (ii) to
preserve  and keep in full  force and effect all  qualifications,  licenses  and
registrations in those  jurisdictions in which the failure to do so could have a
Material Adverse Effect (as defined below).

            (b) The Company shall not do, or cause to be done, any act impairing
the  Company's  corporate  power or  authority  (i) to  carry  on the  Company's
business as now conducted,  and (ii) to execute or deliver this Agreement or any
other document delivered in connection herewith,  including, without limitation,
any UCC-1 Financing  Statements  required by the Secured Party to which it is or
will be a party, or perform any of its obligations hereunder or thereunder.

            (c) For  purpose  of this  Agreement,  the  term  "Material  Adverse
Effect"  shall mean any material  and adverse  affect as  determined  by Secured
Party in its sole discretion, whether individually or in the aggregate, upon (a)
the Company's assets, business,  operations,  properties or condition, financial
or otherwise;  (b) the Company's  ability to make payment as and when due of all
or any part of the Obligations; or (c) the Pledged Property.

      Section 6.2. Financial Statements and Reports.

      Upon request by the Secured Party the Company shall furnish to the Secured
Party  financial  data that the Secured Party may reasonably  request,  within a
reasonable time after such request, including,  without limitation the following
financial data:

            (a) The balance  sheet of the Company as of the close of each fiscal
year,  the statement of earnings and retained  earnings of the Company as of the
close of such fiscal year,  and statement of cash flows for the Company for such
fiscal year,  all in reasonable  detail,  prepared in accordance  with generally
accepted  accounting  principles  consistently  applied,  certified by the chief
executive and chief financial  officers of the Company as being true and correct
and  accompanied  by a certificate  of the chief  executive and chief  financial
officers of the Company, stating that the Company has kept, observed,  performed
and fulfilled  each covenant,  term and condition of this Agreement  during such
fiscal  year  and  that no  Event  of  Default  hereunder  has  occurred  and is
continuing, or if an Event of Default has occurred and is continuing, specifying
the nature of same,  the period of  existence of same and the action the Company
proposes to take in connection therewith;

<PAGE>

            (b) A balance  sheet of the  Company as of the close of each  month,
and  statement of earnings and retained  earnings of the Company as of the close
of  such  month,  all  in  reasonable  detail,  and  prepared  substantially  in
accordance with generally accepted accounting  principles  consistently applied,
certified by the chief executive and chief financial  officers of the Company as
being true and correct; and

            (c) Copies of all accountants'  reports and  accompanying  financial
reports  submitted to the Company by independent  accountants in connection with
each annual examination of the Company.

      Section 6.3. Accounts and Reports.

      The Company shall  maintain a standard  system of accounting in accordance
with generally accepted accounting principles  consistently applied and provide,
at its sole expense, to the Secured Party the following:

            (a)  as  soon  as   available,   a  copy  of  any  notice  or  other
communication  alleging any nonpayment or other material  breach or default,  or
any  foreclosure or other action  respecting any material  portion of its assets
and properties,  received  respecting any of the  indebtedness of the Company in
excess of $50,000 (other than the  Obligations),  or any demand or other request
for  payment  under any  guaranty,  assumption,  purchase  agreement  or similar
agreement or arrangement respecting the indebtedness or obligations of others in
excess of $50,000,  including  any received  from any person acting on behalf of
the Secured Party or beneficiary thereof; and

            (b) within fifteen (15) days after the making of each  submission or
filing,  a copy of any report,  financial  statement,  notice or other document,
whether periodic or otherwise,  submitted to the shareholders of the Company, or
submitted to or filed by the Company with any governmental  authority  involving
or affecting (i) the Company that could have a Material Adverse Effect; (ii) the
Obligations;  (iii)  any  part  of the  Pledged  Property;  or  (iv)  any of the
transactions contemplated in this Agreement or the Loan Instruments.

      Section 6.4. Maintenance of Books and Records; Inspection.

      The Company shall  maintain its books,  accounts and records in accordance
with generally accepted accounting  principles  consistently applied, and permit
the Secured Party, its officers and employees and any  professionals  designated
by the  Secured  Party in  writing,  at any time to visit and inspect any of its
properties  (including but not limited to the collateral  security  described in
the  Transaction  Documents  and/or the Loan  Instruments),  corporate books and
financial  records,  and to discuss its accounts,  affairs and finances with any
employee, officer or director thereof.

      Section 6.5. Maintenance and Insurance.

            (a) The Company shall maintain or cause to be maintained, at its own
expense,  all of its assets and  properties in good working order and condition,
making all necessary repairs thereto and renewals and replacements thereof.


<PAGE>

            (b) The Company shall maintain or cause to be maintained, at its own
expense, insurance in form, substance and amounts (including deductibles), which
the Company deems reasonably  necessary to the Company's business,  (i) adequate
to insure all assets and properties of the Company,  which assets and properties
are of a  character  usually  insured by persons  engaged in the same or similar
business  against loss or damage  resulting from fire or other risks included in
an extended coverage policy; (ii) against public liability and other tort claims
that may be incurred by the Company; (iii) as may be required by the Transaction
Documents  and/or  applicable  law and (iv) as may be  reasonably  requested  by
Secured Party, all with adequate, financially sound and reputable insurers.

      Section 6.6. Contracts and Other Collateral.

      The Company shall perform all of its obligations  under or with respect to
each  instrument,  receivable,  contract  and other  intangible  included in the
Pledged  Property  to which the Company is now or  hereafter  will be party on a
timely basis and in the manner therein required,  including, without limitation,
this Agreement.

      Section 6.7. Defense of Collateral, Etc.

      The Company shall defend and enforce its right,  title and interest in and
to any part of: (a) the Pledged  Property;  and (b) if not  included  within the
Pledged  Property,  those assets and properties whose loss could have a Material
Adverse Effect,  the Company shall defend the Secured  Party's right,  title and
interest in and to each and every part of the Pledged Property, each against all
manner of claims and demands on a timely  basis to the full extent  permitted by
applicable law.

      Section 6.8. Payment of Debts, Taxes, Etc.

      The Company shall pay, or cause to be paid,  all of its  indebtedness  and
other liabilities and perform, or cause to be performed,  all of its obligations
in accordance with the respective terms thereof, and pay and discharge, or cause
to be paid or discharged,  all taxes, assessments and other governmental charges
and levies  imposed upon it, upon any of its assets and  properties on or before
the last day on which the same may be paid without  penalty,  as well as pay all
other  lawful  claims  (whether  for  services,  labor,  materials,  supplies or
otherwise) as and when due

      Section 6.9. Taxes and Assessments; Tax Indemnity.

      The  Company  shall (a) file all tax  returns  and  appropriate  schedules
thereto that are required to be filed under applicable law, prior to the date of
delinquency,  (b) pay and  discharge  all taxes,  assessments  and  governmental
charges or levies imposed upon the Company,  upon its income and profits or upon
any  properties  belonging  to it, prior to the date on which  penalties  attach
thereto,  and (c) pay all taxes,  assessments and governmental charges or levies
that,  if  unpaid,  might  become a lien or charge  upon any of its  properties;
provided,  however,  that the  Company in good faith may  contest  any such tax,
assessment,  governmental  charge or levy described in the foregoing clauses (b)
and (c) so long as appropriate reserves are maintained with respect thereto.

<PAGE>

      Section 6.10. Compliance with Law and Other Agreements.

      The Company shall  maintain its business  operations and property owned or
used in connection  therewith in  compliance  with (a) all  applicable  federal,
state and  local  laws,  regulations  and  ordinances  governing  such  business
operations and the use and ownership of such property,  and (b) all  agreements,
licenses,  franchises,  indentures and mortgages to which the Company is a party
or by which the Company or any of its properties is bound.  Without limiting the
foregoing,  the Company shall pay all of its indebtedness promptly in accordance
with the terms thereof.

      Section 6.11. Notice of Default.

      The  Company  shall  give  written  notice  to the  Secured  Party  of the
occurrence  of any  default  or Event  of  Default  under  this  Agreement,  the
Transaction  Documents or any other Loan  Instrument  or any other  agreement of
Company  for the  payment of money,  promptly  after the  Company  learns of the
occurrence thereof.

      Section 6.12. Notice of Litigation.

      The Company shall give notice, in writing, to the Secured Party of (a) any
actions,  suits or  proceedings  wherein  the  amount  at issue is in  excess of
$50,000,  instituted by any persons against the Company, or affecting any of the
assets of the Company,  and (b) any dispute,  not resolved  within  fifteen (15)
days of the  commencement  thereof,  between the Company on the one hand and any
governmental  or regulatory  body on the other hand,  which might  reasonably be
expected  to have a  Material  Adverse  Effect  on the  business  operations  or
financial condition of the Company.

      Section 6.13. Reporting Status

      Until the date on which the entire  outstanding  principal and interest of
the Note has been  satisfied,  the  Company  shall  file in a timely  manner all
reports  required to be filed with the SEC  pursuant to the Exchange Act and the
regulations  of the SEC  thereunder,  and the Company  shall not  terminate  its
status as an issuer  required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would otherwise permit such
termination.

      Section 6.14. Listings or Quotation

      The Company  shall  maintain  the listing or quotation of the Common Stock
upon  each  national  securities  exchange,  automated  quotation  system or The
National  Association  of Securities  Dealers Inc.'s  Over-The-Counter  Bulletin
Board  ("OTCBB") or other market,  if any, upon which shares of Common Stock are
then  listed or quoted  (subject to official  notice of  issuance).  The Company
shall maintain the Common Stock's authorization for quotation on the OTCBB.

      Section 6.15. Corporate Existence

      So long as any portion of the Note is  outstanding,  the Company shall not
directly or indirectly  consummate  any merger,  reorganization,  restructuring,
reverse  stock  split  consolidation,  sale of all or  substantially  all of the
Company's assets or any similar  transaction or related  transactions (each such
transaction,  an "Organizational  Change") unless,  prior to the consummation an
Organizational  Change,  the Company  obtains the written consent of the Secured
Party.

<PAGE>

In any such case,  the Company will make  appropriate  provision with respect to
such holders' rights and interests to insure that the provisions of this Section
6.15 will thereafter be applicable to the Note.

      Section 6.16. Transactions With Affiliates

      So long as any portion of the Note is outstanding,  the Company shall not,
and shall cause each of its  subsidiaries not to, enter into,  amend,  modify or
supplement,  or permit any subsidiary to enter into, amend, modify or supplement
any agreement,  transaction,  commitment,  or arrangement with any of its or any
subsidiary's officers,  directors,  person who were officers or directors at any
time during the previous two (2) years,  stockholders  who beneficially own five
percent (5%) or more of the Common Stock,  or Affiliates  (as defined  below) or
with  any  individual  related  by  blood,  marriage,  or  adoption  to any such
individual or with any entity in which any such entity or individual owns a five
percent (5%) or more beneficial  interest (each a "Related  Party"),  except for
(a) customary employment  arrangements and benefit programs on reasonable terms,
(b)  any  investment  in  an  Affiliate  of  the  Company,  (c)  any  agreement,
transaction, commitment, or arrangement on an arms-length basis on terms no less
favorable than terms which would have been  obtainable  from a person other than
such Related Party, (d) any agreement  transaction,  commitment,  or arrangement
which is approved by a majority of the  disinterested  directors of the Company,
for purposes  hereof,  any director who is also an officer of the Company or any
subsidiary of the Company shall not be a disinterested  director with respect to
any such agreement,  transaction,  commitment,  or arrangement.  "Affiliate" for
purposes hereof means,  with respect to any person or entity,  another person or
entity that, directly or indirectly,  (i) has a ten percent (10%) or more equity
interest  in that person or entity,  (ii) has ten  percent  (10%) or more common
ownership with that person or entity,  (iii) controls that person or entity,  or
(iv) shares common  control with that person or entity.  "Control" or "controls"
for  purposes  hereof  means that a person or entity  has the  power,  direct or
indirect, to conduct or govern the policies of another person or entity.

      Section 6.17. Restriction on Issuance of the Capital Stock

      So long as any portion of the Note is outstanding,  the Company shall not,
without the prior written consent of the Secured Party, (i) issue or sell shares
of Common Stock or Preferred Stock without  consideration or for a consideration
per share less than the Bid Price of the  Common  Stock  determined  immediately
prior to its issuance, (ii) issue any warrant, option, right, contract, call, or
other  security  instrument  granting the holder  thereof,  the right to acquire
Common Stock without  consideration or for a consideration less than such Common
Stock's Bid Price value  determined  immediately  prior to it's issuance,  (iii)
enter into any security  instrument  granting the holder a security  interest in
any and all assets of the Company,  or (iv) file any  registration  statement on
Form S-8.

<PAGE>

      Section 6.18. Escrow of Shares

      The Company and Benton Wilcoxon shall escrow with David Gonzalez, Esq., as
escrow  agent Two Million One  Hundred  Eleven  Thousand  Three  Hundred  Twelve
(2,111,312) shares of Common Stock (the "Composite  Pledged Shares"),  which may
be issued to the Secured Party pursuant to the terms of the Pledge Agreement.

      Section 6.19. Transfer Agent

      In the event that the  Company's  agency  relationship  with the  transfer
agent  is  terminated  for  any  reason  prior  to  the  full  repayment  of the
Obligations, the Company shall immediately appoint a new transfer agent.

      Section 6.20. Use of Proceeds

      The Company shall use the proceeds from the Note for general corporate and
working capital purposes.

      Section 6.21. Best Efforts.

      Each  party  shall  use its best  efforts  timely to  satisfy  each of the
conditions  to be  satisfied  by it as  provided  in  Sections  8 and 9 of  this
Agreement.

      Section 6.22. Fees and Expenses.

      Each of the Company and the Secured Party shall pay all costs and expenses
incurred  by such  party  in  connection  with the  negotiation,  investigation,
preparation,  execution and delivery of this Agreement and the Note. The Company
shall pay the Secured Party a commitment  fee of two and one half percent (2.5%)
of the principal amount of the Note. Such fees shall be non-refundable and shall
be credited against future Advances that may be requested by the Company.


                                   ARTICLE 7.

                               NEGATIVE COVENANTS

      The Company  covenants  and agrees  that,  from the date hereof  until the
Obligations  have been fully paid and satisfied,  the Company shall not,  unless
the Secured Party shall consent otherwise in writing:

      Section 7.1. Liens and Encumbrances.

      The Company shall not directly or indirectly make, create,  incur,  assume
or permit to exist any assignment, transfer, pledge, mortgage, security interest
or other lien or  encumbrance  of any  nature in, to or against  any part of the
Pledged Property or of the Company's  capital stock, or offer or agree to do so,
or assign,  pledge or in any way  transfer or encumber  its right to receive any
income or other  distribution or proceeds from any part of the Pledged  Property
or the  Company's  capital  stock;  or enter into any  sale-leaseback  financing
respecting  any part of the Pledged  Property as lessee,  or cause or assist the
inception or continuation of any of the foregoing.

<PAGE>

      Section   7.2.   Certificate   of   Incorporation,    By-Laws,    Mergers,
                          Consolidations, Acquisitions and Sales.

      Without  the prior  express  written  consent of the  Secured  Party,  the
Company shall not: (a) Amend its Certificate of Incorporation or By-Laws; (b) be
a party to any merger,  consolidation  or corporate  reorganization,  unless the
Company is the  surviving  entity  (c)  purchase  or  otherwise  acquire  all or
substantially all of the assets or stock of, or any partnership or joint venture
interest in, any other person, firm or entity, (d) sell, transfer, convey, grant
a security interest in or lease all or any substantial part of its assets except
for  purchase  money  security  interest  up to  $50,000,  nor  (e)  create  any
subsidiaries nor convey any of its assets to any subsidiary.

      Section 7.3. Management, Ownership.

      The Company shall not materially change its ownership,  executive staff or
management  without the prior  written  consent of the Secured Party which shall
not be unreasonably withheld.  The ownership,  executive staff and management of
the Company are material factors in the Secured Party's willingness to institute
and maintain a lending relationship with the Company.

      Section 7.4. Dividends, Etc.

      The Company  shall not declare or pay any dividend of any kind, in cash or
in property, on any class of its capital stock, nor purchase,  redeem, retire or
otherwise  acquire for value any shares of such stock, nor make any distribution
of any kind in respect thereof,  nor make any return of capital to shareholders,
nor make any payments in respect of any  pension,  profit  sharing,  retirement,
stock option,  stock bonus,  incentive  compensation  or similar plan (except as
required  or  permitted  hereunder),  without the prior  written  consent of the
Secured Party except for dividends of shares of common stock.

      Section 7.5. Guaranties; Loans.

      The  Company  shall not  guarantee  nor be liable in any  manner,  whether
directly or  indirectly,  or become  contingently  liable after the date of this
Agreement in connection  with the  obligations or  indebtedness of any person or
persons,  except  for  (i)  the  indebtedness  currently  secured  by the  liens
identified on the Pledged  Property  identified on Exhibit A hereto and (ii) the
endorsement  of  negotiable  instruments  payable to the  Company for deposit or
collection  in the ordinary  course of business.  The Company shall not make any
loan,  advance or  extension  of credit to any  person  other than in the normal
course of its business.

      Section 7.6. Debt.

      The  Company  shall  not  create,  incur,  assume  or  suffer to exist any
additional  indebtedness of any description whatsoever in an aggregate amount in
excess of $50,000  (excluding  any  indebtedness  of the  Company to the Secured
Party,  trade  accounts  payable and accrued  expenses  incurred in the ordinary
course of business and the endorsement of negotiable  instruments payable to the
Company,  respectively  for  deposit or  collection  in the  ordinary  course of
business).

<PAGE>

      Section 7.7. Conduct of Business.

      The  Company  will  continue to engage,  in an  efficient  and  economical
manner, in a business of the same general type as conducted by it on the date of
this Agreement.

      Section 7.8. Places of Business.

      The  location  of the  Company's  chief  place of  business  is 3916 State
Street,  Number 110,  Santa  Barbara,  California  93105.  The Company shall not
change the location of its chief place of business,  chief  executive  office or
any place of business  disclosed to the Secured Party or move any of the Pledged
Property  from its current  location  without  thirty  (30) days' prior  written
notice to the Secured Party in each instance.


                                   ARTICLE 8.

                     CONDITIONS TO THE COMPANIES OBLIGATIONS

      The obligation of the Company  hereunder to issue the Notes to the Secured
Party at the Closings is subject to the satisfaction,  at or before the Closing,
of each of the following conditions,  provided that these conditions are for the
Company's  sole benefit and may be waived by the Company at any time in its sole
discretion:

      Section  8.1.  The  Secured  Party  shall have  executed  the  Transaction
Documents and delivered them to the Company.


                                   ARTICLE 9.

                  CONDITIONS TO THE SECURED PARTY'S OBLIGATIONS

      Section 9.1. The  obligation  of the Secured  Party  hereunder to fund the
Note at the First Closing is subject to the satisfaction, at or before the First
Closing Date, of each of the following conditions:

            a) The Company  shall have  executed the  Transaction  Documents and
delivered the same to the Secured Party.

            b) The  representations  and warranties of the Company shall be true
and  correct in all  material  respects  (except to the extent  that any of such
representations and warranties is already qualified as to materiality,  in which
case,  such  representations  and warranties  shall be true and correct  without
further qualification) as of the date when made and as of the First Closing Date
as though made at that time  (except for  representations  and  warranties  that
speak as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants,  agreements and conditions
required by this  Agreement to be  performed,  satisfied or complied with by the
Company at or prior to the First Closing.

<PAGE>

            c) The Company  shall have  executed  and  delivered  to the Secured
Party the Note in the amount of One Million One Hundred Fifty  Thousand  Dollars
($1,150,000).

            d)  The  Company   shall  have  provided  to  the  Secured  Party  a
certificate of good standing from the secretary of state from the state in which
the Company is incorporated.

            e) The Company  shall have filed a form UCC-1 or such other forms as
may be required to perfect the Secured Party's  interest in the Pledged Property
as detailed in this Agreement and the Subsidiary Security Agreement and provided
proof of such filings to the Secured Party.

            f) The Company shall have  delivered to the Escrow Agent the Pledged
Shares as well  executed  and  medallion  guaranteed  stock  powers as  required
pursuant to the Pledge Agreement.

      Section 9.2. The  obligation  of the Secured  Party  hereunder to fund the
Note on the Second  Closing is  subject  to the  satisfaction,  at or before the
Second Closing Date, of each of the following conditions:

            a) The  representations  and warranties of the Company shall be true
and  correct in all  material  respects  (except to the extent  that any of such
representations and warranties is already qualified as to materiality,  in which
case,  such  representations  and warranties  shall be true and correct  without
further  qualification)  as of the date when made and as of the  Second  Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants,  agreements and conditions
required by this  Agreement to be  performed,  satisfied or complied with by the
Company at or prior to the Second  Closing  Date.  If  requested  by the Secured
Party,  the Secured  Party shall have  received a  certificate,  executed by the
Chief Executive Officer and the Chief Financial Officer of the Company, dated as
of the Second Closing Date, to the foregoing effect and as to such other matters
as  may  be  reasonably  requested  by  the  Secured  Party  including,  without
limitation an update as of the Second Closing Date regarding the  representation
contained in Section 4.3 above.

            b) The Company  shall have  executed  and  delivered  to the Secured
Party the Note in the amount of One Million Three Hundred Fifty Thousand Dollars
($1,350,000)  substantially  in the form  attached  hereto as  Exhibit B.

            c) The value of the Pledged  Shares (as  calculated  below) shall be
equal to or exceed  $7,500,000,  which is three (3) times the  $2,500,000  being
funded hereunder.  For the purposes of this Section, the Pledged Shares shall be
valued by  multiplying  the total  number of Pledged  Shares by the  closing bid
price of Composite Technology Corporation's common stock on the date immediately
prior  to  funding  date.

<PAGE>

            d) The Company shall have  certified  that (i) all conditions to the
Second  Closing  have  been  satisfied  and  (ii)  the  Company  will  file  the
Registration  Statement  with the SEC (as  contemplated  under the  Registration
Rights  Agreement of even date herewith  between the parties  hereto) within two
(2) business days after the Second Closing,  which Registration  Statement shall
fully comply with the rules and  regulations  promulgated  by the SEC for filing
thereof.  If  requested  by the  Secured  Party,  the  Secured  Party shall have
received a certificate,  executed by the Chief  Executive  Officer and the Chief
Financial  Officer of the Company,  dated as of the Second  Closing Date, to the
foregoing effect. The Secured Party shall have no obligation to fund the Company
at the Second Closing if the Company filed the  Registration  Statement.

            e) The Company shall have pledged to the Secured Party as additional
collateral  8,000,000 restricted shares of its common stock pursuant to a Pledge
and  Escrow  Agreement  in a form  satisfactory  to  the  Secured  Party  in its
discretion.  To the extent that either party  determines that the Company cannot
pledge such additional shares for any reason,  then the Secured Party shall have
the  right  to  request  other  collateral  in such  form and  amount  as may be
acceptable  to it.

            f) All conditions specified under Section 9.2 hereof shall have been
satisfied to the Secured Party's complete satisfaction on or before May 1, 2005.


                                   ARTICLE 10.

                                  MISCELLANEOUS
      Section 10.1. Notices.

      All  notices or other  communications  required or  permitted  to be given
pursuant to this  Agreement  shall be in writing and shall be considered as duly
given on:  (a) the date of  delivery,  if  delivered  in person,  by  nationally
recognized  overnight  delivery  service or (b) five (5) days  after  mailing if
mailed from within the  continental  United  States by  certified  mail,  return
receipt requested to the party entitled to receive the same:

   If to the Secured Party:  Cornell Capital Partners, LP
                             101 Hudson Street-Suite 3700
                             Jersey City, New Jersey 07302
                             Attention: Mark Angelo
                                        Portfolio Manager
                             Telephone: (201) 986-8300
                             Facsimile: (201) 985-8266

   With a copy to:           Troy Rillo, Esq.
                             101 Hudson Street, Suite 3700
                             Jersey City, NJ 07302
                             Telephone: (201) 985-8300
                             Facsimile: (201) 985-8266

<PAGE>

   And if to the Company:    Earthshell Corporation
                             3916 State Street, Number 110
                             Santa Barbara, California 93105
                             Attention: Scott Houston
                                        Chief Financial Officer
                             Telephone:         (805) 563-7590
                             Facsimile:         (805) 563-7954

   With a copy to:           Kirkpatrick & Lockhart Nicholson Graham, LLP
                             201 South Biscayne Boulevard, Suite 2000
                             Miami, Florida 33131
                             Attention:        Clayton E. Parker, Esquire
                             Telephone:        (305) 539-3306
                             Facsimile:        (305) 358-7095

      Any party may  change  its  address  by giving  notice to the other  party
stating its new address.  Commencing on the tenth (10th) day after the giving of
such notice, such newly designated address shall be such party's address for the
purpose of all notices or other communications required or permitted to be given
pursuant to this Agreement.

      Section 10.2. Severability.

      If any provision of this Agreement shall be held invalid or unenforceable,
such  invalidity  or  unenforceability  shall attach only to such  provision and
shall not in any  manner  affect or render  invalid or  unenforceable  any other
severable  provision of this Agreement,  and this Agreement shall be carried out
as if any such invalid or unenforceable provision were not contained herein.

      Section 10.3. Expenses.

      In the event of an Event of Default,  the Company  will pay to the Secured
Party the amount of any and all  reasonable  expenses,  including the reasonable
fees  and  expenses  of its  counsel,  which  the  Secured  Party  may  incur in
connection  with: (i) the custody or  preservation  of, or the sale,  collection
from, or other realization upon, any of the Pledged Property;  (ii) the exercise
or enforcement of any of the rights of the Secured Party  hereunder or (iii) the
failure by the Company to perform or observe any of the provisions hereof.

      Section 10.4. Waivers, Amendments, Etc.

      The Secured  Party's  delay or failure at any time or times  hereafter  to
require  strict  performance  by  Company  of any  undertakings,  agreements  or
covenants shall not waiver,  affect,  or diminish any right of the Secured Party
under this Agreement to demand strict compliance and performance  herewith.  Any
waiver by the  Secured  Party of any Event of Default  shall not waive or affect
any other Event of Default, whether such Event of Default is prior or subsequent
thereto and whether of the same or a different type.  None of the  undertakings,
agreements  and  covenants of the Company  contained in this  Agreement,  and no
Event of Default,  shall be deemed to have been waived by the Secured Party, nor
may this  Agreement  be  amended,  changed  or  modified,  unless  such  waiver,
amendment,  change or  modification  is  evidenced by an  instrument  in writing
specifying  such waiver,  amendment,  change or  modification  and signed by the
Secured Party.

<PAGE>

      Section 10.5. Continuing Security Interest.

      This Agreement shall create a continuing  security interest in the Pledged
Property and shall: (i) remain in full force and effect until payment in full of
the  Obligations;  and (ii) be binding upon the Company and its  successors  and
heirs and (iii) inure to the benefit of the Secured Party and its successors and
assigns.  Upon the  payment  or  satisfaction  in full of the  Obligations,  the
Company shall be entitled to the return, at its expense,  of such of the Pledged
Property as shall not have been sold in  accordance  with  Section 5.2 hereof or
otherwise applied pursuant to the terms hereof.

      Section 10.6. Independent Representation.

      Each party hereto  acknowledges and agrees that it has received or has had
the opportunity to receive  independent legal counsel of its own choice and that
it has been sufficiently apprised of its rights and responsibilities with regard
to the substance of this Agreement.

      Section 10.7. Applicable Law: Jurisdiction.

      This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New Jersey  without regard to the principles of conflict of
laws.  The parties  further agree that any action between them shall be heard in
Hudson County,  New Jersey,  and expressly consent to the jurisdiction and venue
of the  Superior  Court of New Jersey,  sitting in Hudson  County and the United
States  District  Court for the  District of New Jersey  sitting in Newark,  New
Jersey  for the  adjudication  of any civil  action  asserted  pursuant  to this
Paragraph.

      Section 10.8. Waiver of Jury Trial.

      AS A FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT
AND TO MAKE THE  FINANCIAL  ACCOMMODATIONS  TO THE COMPANY,  THE COMPANY  HEREBY
WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING  RELATED IN ANY WAY TO
THIS AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS TRANSACTION.

      Section 10.9. Entire Agreement.

      This  Agreement  constitutes  the entire  agreement  among the parties and
supersedes any prior agreement or  understanding  among them with respect to the
subject matter hereof.


                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


<PAGE>


      IN WITNESS  WHEREOF,  the  parties  hereto  have  executed  this  Security
Agreement as of the date first above written.


                                     EARTHSHELL CORPORATION


                                     By: /s/ Scott Houston
                                        ----------------------------
                                     Name:   Scott Houston
                                     Title:  Chief Financial Officer


                                     CORNELL CAPITAL PARTNERS, LP

                                     BY:     YORKVILLE ADVISORS, LLC
                                     ITS:    GENERAL PARTNER

                                     By: /s/ Mark Angelo
                                        ----------------------------
                                     Name:   Mark Angelo
                                     Title:  Portfolio Manager

<PAGE>


                                    EXHIBIT A
                         DEFINITION OF PLEDGED PROPERTY


      For the purpose of securing prompt and complete payment and performance by
the  Company  of  all  of  the  Obligations,  the  Company  unconditionally  and
irrevocably hereby grants to the Secured Party a continuing security interest in
and to, and lien upon, the following Pledged Property of the Company:

            (a)  all  goods  of  the  Company,  including,  without  limitation,
machinery,  equipment, furniture,  furnishings,  fixtures, signs, lights, tools,
parts,  supplies  and  motor  vehicles  of every  kind and  description,  now or
hereafter owned by the Company or in which the Company may have or may hereafter
acquire any interest, and all replacements, additions, accessions, substitutions
and proceeds thereof,  arising from the sale or disposition  thereof,  and where
applicable,  the proceeds of insurance  and of any tort claims  involving any of
the foregoing;

            (b) all inventory of the Company, including, but not limited to, all
goods, wares,  merchandise,  parts, supplies,  finished products, other tangible
personal  property,  including such inventory as is temporarily out of Company's
custody or  possession  and  including  any returns  upon any  accounts or other
proceeds,  including insurance proceeds,  resulting from the sale or disposition
of any of the foregoing;

            (c) all  contract  rights and general  intangibles  of the  Company,
including, without limitation,  goodwill, trademarks, trade styles, trade names,
leasehold interests,  partnership or joint venture interests, patents and patent
applications,  copyrights,  deposit  accounts  whether  now  owned or  hereafter
created;

            (d) all documents, warehouse receipts, instruments and chattel paper
of the Company whether now owned or hereafter created;

            (e) all accounts and other  receivables,  instruments or other forms
of  obligations  and  rights to  payment  of the  Company  (herein  collectively
referred  to as  "Accounts"),  together  with the  proceeds  thereof,  all goods
represented  by such  Accounts  and all such goods that may be  returned  by the
Company's  customers,  and  all  proceeds  of any  insurance  thereon,  and  all
guarantees,  securities  and liens which the Company may hold for the payment of
any such  Accounts  including,  without  limitation,  all rights of  stoppage in
transit,  replevin and reclamation and as an unpaid vendor and/or lienor, all of
which  the  Company  represents  and  warrants  will be bona  fide and  existing
obligations of its respective customers, arising out of the sale of goods by the
Company in the ordinary course of business;

            (f) to the extent assignable,  all of the Company's rights under all
present and future  authorizations,  permits,  licenses and franchises issued or
granted in connection with the operations of any of its facilities;

            (g)  all  products  and  proceeds  (including,  without  limitation,
insurance proceeds) from the above-described Pledged Property.

<PAGE>

                                    EXHIBIT B
                         FORM OF SECOND PROMISSORY NOTE
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.5
<SEQUENCE>6
<FILENAME>v015142_ex99-5.txt
<TEXT>

                                                                    Exhibit 99.5
                                 PROMISSORY NOTE

                                 MARCH 23, 2005

JERSEY CITY, NEW JERSEY                                               $1,150,000

FOR  VALUE  RECEIVED,  the  undersigned,   EARTHSHELL  CORPORATION,  a  Delaware
corporation (the "Company"),  promises to pay CORNELL CAPITAL PARTNERS,  LP (the
"Lender") at 101 Hudson  Street,  Suite 3700,  Jersey City,  New Jersey 07302 or
other address as the Lender shall  specify in writing,  the principal sum of ONE
MILLION ONE HUNDRED  FIFTY  THOUSAND  DOLLARS  ($1,150,000)  and interest at the
annual  rate of twelve  percent  (12%) on the  unpaid  balance  pursuant  to the
following terms:

1. PRINCIPAL AND INTEREST.  For value  received,  the Company hereby promises to
pay to the order of the Lender on the one year anniversary of the date hereof in
lawful money of the United States of America and in immediately  available funds
the  principal  sum  of  One  Million  One  Hundred   Fifty   Thousand   Dollars
($1,150,000), together with interest on the unpaid principal of this note at the
rate of twelve  percent (12%) per year  (computed on the basis of a 365-day year
and the actual days elapsed) from the three month anniversary of this Promissory
Note (the "Note") until paid.

2. MONTHLY  PRINCIPAL  AND  INTEREST  PAYMENTS.  The Company  shall make monthly
payments of  principal  and  interest in  accordance  with the payment  schedule
attached hereto as Exhibit A (the "Payment Schedule"). Each payment shall be due
and payable as of the payment due date set forth on the Payment Schedule and all
payment amounts shall be first applied to interest and the balance to principal.
There shall be no prepayment fee or penalty.

3. RIGHT OF PREPAYMENT.  Notwithstanding the payments pursuant to Section 2, the
Company at its option shall have the right to prepay any  additional  amounts of
outstanding principal of the Note.

4. WAIVER AND  CONSENT.  To the fullest  extent  permitted  by law and except as
otherwise  provided  herein,  the Company waives demand,  presentment,  protest,
notice of dishonor,  suit against or joinder of any other person,  and all other
requirements necessary to charge or hold the Company liable with respect to this
Note.

5. COSTS, INDEMNITIES AND EXPENSES. In the event of default as described herein,
the Company agrees to pay all  reasonable  fees and costs incurred by the Lender
in  collecting  or  securing  or  attempting  to  collect  or secure  this Note,
including  reasonable  attorneys'  fees and  expenses,  whether or not involving
litigation,  collecting  upon  any  judgments  and/or  appellate  or  bankruptcy
proceedings.  The Company agrees to pay any documentary stamp taxes,  intangible
taxes  or other  taxes  which  may now or  hereafter  apply to this  Note or any
payment made in respect of this Note,  and the Company  agrees to indemnify  and
hold the Lender harmless from and against any liability, costs, attorneys' fees,
penalties, interest or expenses relating to any such taxes, as and when the same
may be incurred.


<PAGE>


6. SECURED NATURE OF THE NOTE. This Note is secured by the Security Agreement of
even  date  herewith   between  the  Company  and  the  Lender  (the   "Security
Agreement"),  the Pledge  Agreement  of even date  herewith  among the  Company,
Benton Wilcoxon, the Lender, and David Gonzalez, Esq. (the "Pledge Agreement")

7. EVENT OF DEFAULT. An "Event of Default" shall be deemed to have occurred upon
the  occurrence  of any of the  following:  (i) the Company  should fail for any
reason or for no reason to make any payment of the principal,  interest,  costs,
indemnities,  or expenses pursuant to this Note within ten (10) days of the date
due as  prescribed  herein;  (ii) failure by the Company for ten (10) days after
notice to it to satisfy any of its other  obligations or  requirements or comply
with any of its other agreements  under this Note;  (iii) any proceedings  under
any bankruptcy laws of the United States of America or under any insolvency, not
disclosed to the Lender,  reorganization,  receivership,  readjustment  of debt,
dissolution,  liquidation or any similar law or statute of any  jurisdiction now
or  hereinafter  in effect  (whether in law or at equity) is filed by or against
the  Company  or for all or any part of its  property;  or (iv) a breach  by the
Company of any of its obligations, or a default or an event of default under the
Security Agreement,  the Pledge Agreement, or any other Transaction Document (as
defined in the Security  Agreement),  or any other contract or agreement between
the Company and the Lender which is not cured within any applicable  cure period
contained in such  contract or  agreement.  Upon an Event of Default (as defined
above), the entire principal balance and accrued interest outstanding under this
Note,  and all other  obligations  of the  Company  under  this  Note,  shall be
immediately  due and  payable  without  any  action  on the part of the  Lender,
interest  shall  accrue on the unpaid  principal  balance at twenty four percent
(24%) per year  until  collected  (whether  before or after the entry of a court
order) or the highest rate permitted by applicable  law, if lower and the Lender
shall be entitled to seek and institute any and all remedies available to it.

8. MAXIMUM  INTEREST  RATE.  In no event shall any agreed to or actual  interest
charged,  reserved or taken by the Lender as consideration  for this Note exceed
the limits imposed by New Jersey law. In the event that the interest  provisions
of this Note shall result at any time or for any reason in an effective  rate of
interest  that exceeds the maximum  interest rate  permitted by applicable  law,
then without further agreement or notice the obligation to be fulfilled shall be
automatically  reduced  to such  limit and all sums  received  by the  Lender in
excess of those lawfully  collectible  as interest shall be applied  against the
principal of this Note immediately  upon the Lender's receipt thereof,  with the
same force and effect as though the Company  had  specifically  designated  such
extra  sums to be so applied  to  principal  and the Lender had agreed to accept
such extra payment(s) as a premium-free prepayment or prepayments.

9.  ISSUANCE  OF  CAPITAL  STOCK.  So  long  as any  portion  of  this  Note  is
outstanding,  the Company shall not,  without the prior  written  consent of the
Lender,  (i) issue or sell shares of common  stock or  preferred  stock  without
consideration  or for a  consideration  per share less than the bid price of the
common  stock  determined  immediately  prior to its  issuance,  (ii)  issue any
warrant,  option, right,  contract,  call, or other security instrument granting
the holder thereof,  the right to acquire common stock without  consideration or
for a  consideration  less than such common  stock's bid price value  determined
immediately  prior to it's  issuance,  (iii) enter into any security  instrument
granting  the holder a security  interest  in any and all assets of the  Company
except for  purchase  money  indebtedness  or other  indebtedness  not to exceed
$50,000  without  the prior  written  consent of the Lender  which  shall not be
unreasonably withheld, or (iv) file any registration statement on Form S-8.


                                       2
<PAGE>


10.  CANCELLATION  OF NOTE.  Upon the  repayment  by the  Company  of all of its
obligations  hereunder  to  the  Lender,  including,   without  limitation,  the
principal  amount  of  this  Note,  plus  accrued  but  unpaid   interest,   the
indebtedness  evidenced hereby shall be deemed canceled and paid in full. Except
as  otherwise  required  by law or by the  provisions  of  this  Note,  payments
received by the Lender  hereunder  shall be applied first  against  expenses and
indemnities,  next against  interest accrued on this Note, and next in reduction
of the outstanding principal balance of this Note.

11. SEVERABILITY.  If any provision of this Note is, for any reason,  invalid or
unenforceable,  the remaining provisions of this Note will nevertheless be valid
and enforceable and will remain in full force and effect.  Any provision of this
Note that is held invalid or unenforceable by a court of competent  jurisdiction
will be deemed modified to the extent necessary to make it valid and enforceable
and as so modified will remain in full force and effect.

12.  AMENDMENT  AND WAIVER.  This Note may be amended,  or any provision of this
Note may be waived,  provided that any such  amendment or waiver will be binding
on a party  hereto  only if such  amendment  or waiver is set forth in a writing
executed by the parties hereto.  The waiver by any such party hereto of a breach
of any  provision  of this Note shall not operate or be construed as a waiver of
any other breach.

13. SUCCESSORS.  Except as otherwise  provided herein,  this Note shall bind and
inure to the  benefit  of and be  enforceable  by the  parties  hereto and their
permitted successors and assigns.

14.  ASSIGNMENT.  This Note shall not be directly or  indirectly  assignable  or
delegable  by the  Company.  The  Lender  may  assign  this Note as long as such
assignment complies with the Securities Act of 1933, as amended.

15. NO STRICT CONSTRUCTION.  The language used in this Note will be deemed to be
the language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction will be applied against any party.

16.  FURTHER  ASSURANCES.  Each party hereto will execute all documents and take
such  other  actions  as the other  party  may  reasonably  request  in order to
consummate the  transactions  provided for herein and to accomplish the purposes
of this Note.

17.  NOTICES,   CONSENTS,   ETC.  Any  notices,   consents,   waivers  or  other
communications  required or permitted to be given under the terms hereof must be
in writing and will be deemed to have been  delivered:  (i) upon  receipt,  when
delivered  personally;  (ii)  upon  receipt,  when sent by  facsimile  (provided
confirmation of transmission  is  mechanically or  electronically  generated and
kept on file by the sending  party);  or (iii) one (1) trading day after deposit
with a nationally  recognized  overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile  numbers
for such communications shall be:


                                       3
<PAGE>


If to Company:                  Earthshell Corporation
                                3916 State Street, Number 110
                                Santa Barbara, California 93105
                                Attention:     Scott Huston
                                               Chief Financial Officer
                                Telephone:     (805) 563-7590
                                Facsimile:     (805) 563-7954

With a Copy to:                 Kirkpatrick & Lockhart Nicholson Graham LLP
                                201 S. Biscayne Blvd., Suite 2000
                                Miami, Florida 33131
                                Attention:     Clayton E. Parker, Esq.
                                Telephone:     (305) 539-3306
                                Facsimile:     (305) 358-7095

If to the Lender:               Cornell Capital Partners, LP
                                101 Hudson Street, Suite 3700
                                Jersey City, NJ 07302
                                Attention:     Mark A. Angelo
                                Telephone:     (201) 985-8300
                                Facsimile:     (201) 985-8744


or at such other address and/or facsimile number and/or to the attention of such
other person as the  recipient  party has  specified by written  notice given to
each other  party  three (3)  trading  days prior to the  effectiveness  of such
change.  Written  confirmation  of receipt  (A) given by the  recipient  of such
notice,   consent,   waiver  or  other   communication,   (B)   mechanically  or
electronically  generated by the sender's facsimile machine containing the time,
date,  recipient  facsimile  number  and an  image  of the  first  page  of such
transmission  or (C)  provided by a  nationally  recognized  overnight  delivery
service, shall be rebuttable evidence of personal service,  receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.

18. REMEDIES,  OTHER  OBLIGATIONS,  BREACHES AND INJUNCTIVE RELIEF. The Lender's
remedies  provided in this Note shall be cumulative and in addition to all other
remedies available to the Lender under this Note, at law or in equity (including
a decree of specific  performance and/or other injunctive  relief), no remedy of
the Lender  contained  herein  shall be deemed a waiver of  compliance  with the
provisions  giving  rise to such  remedy  and  nothing  herein  shall  limit the
Lender's right to pursue actual damages for any failure by the Company to comply
with the terms of this Note. No remedy conferred under this Note upon the Lender
is  intended  to be  exclusive  of any other  remedy  available  to the  Lender,
pursuant to the terms of this Note or otherwise.  No single or partial  exercise
by the Lender of any right,  power or remedy  hereunder shall preclude any other
or further exercise thereof.  The failure of the Lender to exercise any right or
remedy  under  this Note or  otherwise,  or delay in  exercising  such  right or
remedy,  shall not  operate as a waiver  thereof.  Every right and remedy of the
Lender under any document  executed in connection  with this  transaction may be
exercised  from  time to time  and as often as may be  deemed  expedient  by the
Lender.  The  Company  acknowledges  that  a  breach  by it of  its  obligations


                                       4
<PAGE>


hereunder will cause  irreparable  harm to the Lender and that the remedy at law
for any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the Lender shall be entitled,  in
addition to all other  available  remedies,  to an  injunction  restraining  any
breach, and specific  performance without the necessity of showing economic loss
and without any bond or other security being required.

19.  GOVERNING LAW;  JURISDICTION.  All questions  concerning the  construction,
validity,  enforcement and interpretation of this Agreement shall be governed by
the  internal  laws of the State of New  Jersey,  without  giving  effect to any
choice of law or conflict of law  provision or rule (whether of the State of New
Jersey or any other  jurisdictions) that would cause the application of the laws
of any  jurisdictions  other than the State of New  Jersey.  Each  party  hereby
irrevocably  submits to the exclusive  jurisdiction of the Superior Court of the
State of New Jersey sitting in Hudson  County,  New Jersey and the United States
Federal  District  Court for the District of New Jersey  sitting in Newark,  New
Jersey, for the adjudication of any dispute hereunder or in connection  herewith
or therewith,  or with any transaction  contemplated hereby or discussed herein,
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  brought  in an
inconvenient  forum or that the  venue of 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 to such party at the address for such 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.

20. NO INCONSISTENT AGREEMENTS.  None of the parties hereto will hereafter enter
into any agreement, which is inconsistent with the rights granted to the parties
in this Note.

21. THIRD PARTIES.  Nothing herein  expressed or implied is intended or shall be
construed to confer upon or give to any person or entity, other than the parties
to this Note and their respective permitted successor and assigns, any rights or
remedies under or by reason of this Note.

22. WAIVER OF JURY TRIAL. AS A MATERIAL INDUCEMENT FOR THE LENDER TO LOAN TO THE
COMPANY THE MONIES  HEREUNDER,  THE COMPANY  HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND
ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION.

23. ENTIRE  AGREEMENT.  This Note (including any recitals  hereto) set forth the
entire  understanding  of the parties with respect to the subject matter hereof,
and shall not be  modified  or affected  by any offer,  proposal,  statement  or
representation, oral or written, made by or for any party in connection with the
negotiation of the terms hereof,  and may be modified only by instruments signed
by all of the parties hereto.


                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       5
<PAGE>


      IN WITNESS WHEREOF, this Promissory Note is executed by the undersigned as
of the date hereof.

                                         CORNELL CAPITAL PARTNERS, LP

                                         By: Yorkville Advisors, LLC
                                         Its: General Partner

                                         By: /s/ Mark Angelo
                                            ----------------------------
                                         Name:   Mark Angelo
                                         Its:    Portfolio Manager


                                         EARTHSHELL CORPORATION

                                         By: /s/ Scott Houston
                                            ----------------------------
                                         Name:   Scott Houston
                                         Title:  Chief Financial Officer

                                       6
<PAGE>


                                             SCHEDULE A
                                          PAYMENT SCHEDULE

Principal                        $1,150,000
Interest                         12%
Closing Date:                    March 23, 2005

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------
 PAYMENT     PAYMENT DUE DATE     INTEREST      PRINCIPAL        TOTAL       OUTSTANDING
                                                              PAYMENT DUE     PRINCIPAL
----------------------------------------------------------------------------------------
<S>          <C>               <C>             <C>           <C>             <C>

         1          4/24/2005  $        0.00  $        0.00  $         0.00  $ 1,150,000
         2          5/24/2005  $        0.00  $        0.00  $         0.00  $ 1,150,000
         3          6/24/2005  $        0.00  $        0.00  $         0.00  $ 1,150,000
         4          7/24/2005  $   11,500.00  $  125,000.00  $   136,500.00  $ 1,025,000
         5          8/24/2005  $   10,250.00  $  125,000.00  $   135,250.00  $   900,000
         6          9/24/2005  $    9,000.00  $  125,000.00  $   134,000.00  $   775,000
         7         10/24/2005  $    7,750.00  $  125,000.00  $   132,750.00  $   650,000
         8         11/24/2005  $    6,500.00  $  125,000.00  $   131,500.00  $   525,000
         9         12/24/2005  $    5,250.00  $  125,000.00  $   130,250.00  $   400,000
        10          1/24/2006  $    4,000.00  $  125,000.00  $   129,000.00  $   275,000
        11          2/24/2006  $    2,750.00  $  125,000.00  $   127,750.00  $   150,000
        12          3/24/2006  $    1,500.00  $  150,000.00  $   151,500.00  $         0
----------------------------------------------------------------------------------------
                                              $1,150,000.00

</TABLE>


                                       A-1
</TEXT>
</DOCUMENT>
</SUBMISSION>
