
                  DEBT CONVERSION AND MUTUAL RELEASE AGREEMENT

      This Debt  Conversion and Mutual Release  Agreement (the  "Agreement")  is
entered  into  as of the  11th  day of  October,  2005 by and  among  EarthShell
Corporation, a Delaware corporation ("EarthShell"), and E. Khashoggi Industries,
LLC, a  Delaware  limited  liability  company  ("EKI"),  with  reference  to the
following facts:

                                    RECITALS:

      A.  bio-tec  Biologische  Naturverpackungen  GmbH & Co.  KG, an  indirect,
wholly owned  subsidiary of EKI  ("Biotec")  was owed  $837,145.69 by EarthShell
(the  "Biotec  Receivable")  as a result of fees owed by  EarthShell  under that
certain License and Information  Transfer Agreement,  dated as of July 29, 2002,
between EarthShell,  Biotec, EKI and Biotec's affiliated entities (the "Original
Biotec License  Agreement").  The Biotec  Receivable has not heretofore  accrued
interest.

      B. Biotec has assigned the Biotec Receivable to EKI.

      C.  EarthShell  has  requested  that EKI convert the entire  amount of the
Biotec  Receivable into shares of EarthShell  common stock (the "Common Stock"),
and EKI is willing to convert the Biotec  Receivable into  EarthShell  shares of
common stock,  in full  satisfaction of the Biotec  Receivable,  pursuant to the
terms and conditions set forth herein.

      D. In  conjunction  with the sale of EKI's  indirect  interest  in Biotec,
EarthShell  and Biotec entered into an Amended and Restated  License  Agreement,
dated August 31, 2005 (the "Restated Biotec License Agreement").

      E. The parties also wish to resolve any outstanding issues between them as
to past transactions.

                                   AGREEMENT:

      1. Conversion. The parties hereby convert the entire balance of the Biotec
Receivable  into  shares of Common  Stock at the  conversion  price of $3.00 per
share. Upon the conversion,  EarthShell shall have no further  obligation to EKI
in  respect  of the  Biotec  Receivable  and it shall  be  deemed  to have  been
satisfied  in full  through  the  issuance  of the Common  Stock as set forth in
Section 2 below.

      2. Mechanics of the  Conversion.  The conversion of the Biotec  Receivable
shall take place upon (i) EarthShell's delivery to EKI of a stock certificate or
certificates  in the name of EKI  evidencing  its ownership of 279,048 shares of
Common Stock (the "Conversion  Shares"),  (ii) EarthShell's  payment of $1.69 to
EKI,  and (iii) EKI's  delivery to  EarthShell  of written  evidence  reasonably
satisfactory to EarthShell that the instrument  evidencing the Biotec Receivable
has been cancelled.

<PAGE>

      3.  Registration;  Legends.  EKI  understands  that the Conversion  Shares
constitute  "restricted  securities"  inasmuch as they are being  acquired  from
EarthShell in a transaction not involving a public offering, and accordingly may
not be resold or transferred  without  registration  under the Securities Act of
1933, as amended or an applicable  exemption from such registration.  Unless the
Conversion Shares are subsequently  registered,  EKI may be required to bear the
economic risk of such investment  indefinitely.  EKI further  acknowledges  that
each  certificate  representing  the  Conversion  Shares  may be  endorsed  with
substantially the following legend:

            THE SECURITIES  EVIDENCED BY THIS  CERTIFICATE  HAVE NOT
            BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933, AS
            AMENDED  (THE  "SECURITIES  ACT"),  AND MAY NOT BE SOLD,
            TRANSFERRED, ASSIGNED OR HYPOTHECATED EXCEPT PURSUANT TO
            AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
            ACT COVERING SUCH SECURITIES OR IF SUCH SALE,  TRANSFER,
            ASSIGNMENT   OR   HYPOTHECATION   IS  EXEMPT   FROM  THE
            REGISTRATION AND PROSPECTUS DELIVERY  REQUIREMENTS UNDER
            THE SECURITIES ACT.

      4. Mutual Release.

            (a) Release. The parties hereto fully, finally, and forever release,
quit claim,  and  discharge  one another  from any and all claims,  liabilities,
demands, debts, accounts, obligations, actions, and causes of action ("Claims"),
known or unknown,  at law or in equity,  of whatever  character  in any way that
each party  hereto may have  against  the other  party  through the date of this
Agreement,  that  arise out of,  relate  to, or  otherwise  concern  the  Biotec
Receivable  or  the  Original  Biotec  License  Agreement,   including,  without
limitation,  the timely performance of any monetary or non-monetary  obligations
thereunder and the prior  conversion of a portion of the accrued payable owed to
Biotec into shares of  EarthShell  common  stock  (collectively,  the  "Released
Matters"),  excluding, however, any and all Claims pursuant to this Agreement or
that certain Promissory Note, dated of even date herewith, made by EarthShell in
favor of EKI (the "Excluded  Matters").  The Released Matters expressly include,
but are not limited to, any claims for indemnity, contribution,  subrogation, or
other similar principal of recovery that one of the parties may have against the
other party with regard to the Released Matters now or in the future. EarthShell
agrees  and  acknowledges  that EKI is not a party  to,  and has no  obligations
under, the Restated Agreement, and therefore EarthShell has no Claims thereunder
to be asserted against EKI.

            (b) Release of Unknown Claims. Except for the Excluded Matters, each
of the parties hereto  acknowledges  and agrees that this release extends to all
Claims  relating to the Released  Matters of every  nature and kind  whatsoever,
known or unknown,  suspected or  unsuspected,  that exist as of the date of this
Agreement.  Each party expressly  intends that this Agreement shall be effective
as a full and final accord and satisfaction,  and release,  of each and every of
the  Released  Matters.  The parties  acknowledge  that they are  familiar  with
Section 1542 of the California Civil Code, which provides as follows:

      A general  release does not extend to claims which the creditor does
      not know or suspect  to exist in his favor at the time of  executing
      this release,  which if known by him must have  materially  affected
      his settlement with debtor.


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<PAGE>

            The parties  waive and  relinquish  every right or benefit that they
have or may have under Section 1542 of the California  Civil Code or any similar
provision in any  jurisdiction,  to the full extent that lawfully they may waive
such a right or benefit.  The parties  acknowledge  that they may later discover
facts in addition to, or different from, those which they now know or believe to
be true, but that it is their  intention to fully,  finally,  and forever settle
and release all of the Released Matters, whether known or unknown,  suspected or
unsuspected,  which now  exist,  may  exist in the  future,  or have  previously
existed, between the persons or entities granted releases.

            (c)  Covenant  Not to Sue.  Each of the  parties  hereto  shall  not
initiate,  file,  institute,  maintain or proceed upon, or encourage,  advise or
voluntarily assist any other person or entity to initiate,  institute,  maintain
or proceed  upon,  any claim  against  the other party with regard to any of the
Released Matters.

            (d)  Third  Party  Beneficiaries.  . Each of the  parties  expressly
agrees  that this  release  shall  inure to the benefit of the parties and their
respective  officers,   directors,   managers,   agents,  servants,   employees,
attorneys,  affiliated and subsidiary  entities,  successors,  predecessors  and
assigns, past and present.

            (e) No  Admissions.  The  parties  acknowledge  and agree  that this
release is entered into as a compromise of doubtful and disputed claims,  and is
not to be construed  as an  admission of liability on the part of any party,  by
each of whom all liability is expressly denied.

            (f) No  Assignments.  Each  of the  parties  hereto  represents  and
warrants that it has not  heretofore  assigned or  transferred,  or purported to
have assigned or transferred, to any firm, corporation or person whatsoever, any
claim, debt, liability,  demand,  obligation,  cost, expense, action or cause of
action herein released and agrees to indemnify and hold harmless the other party
against any claim, debt, liability, demand, obligation, cost, expense, action or
cause of action based on, arising out of or in connection with any such transfer
or assignment or purported transfer or assignment.

      5. Miscellaneous.

            (a) Construction.  This Agreement shall be construed and enforced in
accordance  with and  governed by the laws of the State of  California,  without
regard to the conflicts of law provisions thereof.

            (b)  Entire   Agreement.   This   Agreement   contains   the  entire
understanding   of  the  parties  and  supersedes   all  prior   agreements  and
understandings relating to the subject matter hereof.

            (c)  Invalid  Provisions.  In the event that any  provision  of this
Agreement or any word, phrase, clause,  sentence or other portion thereof should
be held to be unenforceable or invalid for any reason, such provision or portion
thereof  shall  be  modified  or  deleted  in such a manner  so as to make  this
Agreement,  as modified,  legal and enforceable to the fullest extent  permitted
under applicable laws.


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<PAGE>

            (d)  Counterparts.  This Agreement may be executed by the parties in
separate counterparts,  each of which when so executed and delivered shall be an
original,  but all such counterparts  shall together  constitute but one and the
same instrument.

            (e) Successors and Assigns.  Subject to the following sentence, this
Agreement  will  be  binding  upon,  and  will  inure  to the  benefit  of,  the
successors, assigns, heirs, executors and estates of the parties hereto.

            (f) Opportunity to Consult  Counsel and Other Advisors.  Each of the
parties  hereto  acknowledges  and  understands  that  such  party  has  had  an
opportunity to consult with the legal,  tax, business and other advisors of such
party's choice regarding this Agreement and the transactions contemplated hereby
and that such party has read this Agreement  carefully and fully understands all
of the terms and provisions contained herein and their significance.

            (g) Further Assurances.  Each party hereto shall execute and deliver
such further instruments, and take such other actions, as any other party hereto
may  reasonably  request  in  order to carry  out  this  Agreement  and to fully
consummate the transactions contemplated hereby.

            (h) Arbitration and Litigation.  Any  controversy,  claim or dispute
arising  out of or  relating  to  this  Agreement  or the  breach,  termination,
enforcement,  interpretation or validity thereof, including the determination of
the scope or applicability  of this agreement to arbitrate,  shall be determined
by  arbitration  in Santa  Barbara,  California,  before a sole  arbitrator,  in
accordance  with the laws of the State of California for agreements  made in and
to be performed in California.  The  arbitration  shall be  administered  by the
American Arbitration  Association ("AAA").  Judgment on the award may be entered
in any court having jurisdiction.  Either party may, without  inconsistency with
this  Agreement,  seek from a court any  interim or  provisional  relief that is
necessary  to  protect  the  rights  or  property  of that  party,  pending  the
appointment of the arbitrator. The exclusive forum for such application shall be
the Los  Angeles  Superior  Court or the United  States  District  Court for the
Central District of California. Upon the request of any party, a mediation shall
be conducted  prior to the  arbitration  pursuant to the Mediation  Rules of the
AAA. In the event of any dispute under this Agreement,  the prevailing  party as
determined  by the  arbitrator  shall be  entitled  to  recover  its  reasonable
attorneys fees and expenses and arbitration costs.


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<PAGE>

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

                                     EARTHSHELL CORPORATION


                                     By: /s/ Vincent J. Truant
                                         ---------------------------------------
                                     Name:  Vincent J. Truant
                                     Title: Chief Executive Officer

                                     E. KHASHOGGI INDUSTRIES, LLC


                                     By: /s/ Essam Khashoggi
                                         ---------------------------------------
                                     Name:  Essam Khashoggi
                                     Title: Chairman and Chief Executive Officer


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