EARTHSHELL CONTAINER CORP, S-1, 1996-10-02

EARTHSHELL CONTAINER CORP
S-1, 1996-10-02

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 2, 1996

REGISTRATION NO. 333-

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

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

<TABLE>
<S> <C> <C>
DELAWARE 2656 77-0322379
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>

800 MIRAMONTE DRIVE
SANTA BARBARA, CALIFORNIA 93109
(805) 897-2294
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
--------------------------

SIMON K. HODSON
CHIEF EXECUTIVE OFFICER
EARTHSHELL CONTAINER CORPORATION
800 MIRAMONTE DRIVE
SANTA BARBARA, CALIFORNIA 93109
(805) 897-2294
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
--------------------------

WITH COPIES TO:

ROBERT K. MONTGOMERY PATRICK T. SEAVER
CLAY A. HALVORSEN CHARLES K. RUCK
Gibson, Dunn & Crutcher LLP Latham & Watkins
2029 Century Park East, Suite 4000 650 Town Center Drive, 20th Floor
Los Angeles, California 90067 Costa Mesa, California 92626
(310) 552-8500 (714) 540-1235

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

Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AGGREGATE AMOUNT OF
TO BE REGISTERED OFFERING PRICE(1)(2) REGISTRATION FEE
<S> <C> <C>
Common Stock $.01 par value............................................. $250,000,000 $75,758
</TABLE>

(1) Includes shares subject to the Underwriters' over-allotment option.

(2) Estimated solely for the purpose of calculating the registration fee.
--------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.

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<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 2, 1996

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
Shares
EarthShell Corporation
Common Stock

($.01 PAR VALUE)
--------------

OF THE SHARES OF COMMON STOCK, $.01 PAR VALUE (THE "COMMON STOCK")
OF EARTHSHELL CORPORATION (THE "COMPANY") OFFERED HEREBY, SHARES
ARE BEING SOLD BY THE COMPANY AND SHARES ARE BEING SOLD BY
THE SELLING STOCKHOLDERS NAMED HEREIN UNDER "PRINCIPAL AND
SELLING STOCKHOLDERS." THE COMPANY WILL NOT RECEIVE ANY OF
THE PROCEEDS OF THE SHARES BEING SOLD BY THE SELLING
STOCKHOLDERS.

OF THE SHARES OF COMMON STOCK BEING OFFERED, SHARES
INITIALLY ARE BEING OFFERED IN THE UNITED STATES AND CANADA (THE "U.S.
SHARES") BY THE U.S. UNDERWRITERS (THE "U.S. OFFERING") AND
SHARES ARE INITIALLY BEING CONCURRENTLY OFFERED OUTSIDE THE UNITED
STATES AND CANADA (THE "INTERNATIONAL SHARES") BY THE MANAGERS (THE
"INTERNATIONAL OFFERING" AND, TOGETHER WITH THE U.S. OFFERING, THE
"OFFERING"). THE OFFERING PRICE AND UNDERWRITING DISCOUNTS AND
COMMISSIONS OF THE U.S. OFFERING AND THE INTERNATIONAL OFFERING
ARE IDENTICAL.

PRIOR TO THE OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON
STOCK. IT IS ANTICIPATED THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE
BETWEEN $ AND $ PER SHARE. FOR INFORMATION RELATING TO THE
FACTORS CONSIDERED IN DETERMINING THE INITIAL OFFERING PRICE TO
THE PUBLIC, SEE "UNDERWRITING." APPLICATION WILL BE MADE TO
LIST THE COMMON STOCK ON THE NASDAQ STOCK MARKET'S
NATIONAL MARKET UNDER THE SYMBOL "ERTH."
--------------

FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" BEGINNING ON PAGE 6
HEREIN.
-------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR AD-
EQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS
PRICE TO DISCOUNTS AND TO PROCEEDS TO SELLING
PUBLIC COMMISSIONS COMPANY(1) STOCKHOLDERS
-------- ------------- ---------- -------------------
<S> <C> <C> <C> <C>
PER SHARE........... $ $ $ $
TOTAL (2)........... $ $ $ $
</TABLE>

(1) BEFORE DEDUCTION OF EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $1,000,000.

(2) ONE OF THE SELLING STOCKHOLDERS HAS GRANTED THE U.S. UNDERWRITERS AND THE
MANAGERS AN OPTION, EXERCISABLE BY CS FIRST BOSTON CORPORATION FOR 30 DAYS
FROM THE DATE OF THIS PROSPECTUS, TO PURCHASE A MAXIMUM OF
ADDITIONAL SHARES TO COVER OVER-ALLOTMENTS OF SHARES. IF THE OPTION IS
EXERCISED IN FULL, THE TOTAL PRICE TO PUBLIC WILL BE $ , UNDERWRITING
DISCOUNTS AND COMMISSIONS WILL BE $ AND PROCEEDS TO SELLING
STOCKHOLDERS WILL BE $ .

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

THE U.S. SHARES ARE OFFERED BY THE SEVERAL U.S. UNDERWRITERS WHEN, AS AND IF
ISSUED BY THE COMPANY, DELIVERED TO AND ACCEPTED BY THE U.S. UNDERWRITERS AND
SUBJECT TO THEIR RIGHT TO REJECT ORDERS IN WHOLE OR IN PART. IT IS EXPECTED THAT
THE U.S. SHARES OF COMMON STOCK WILL BE READY FOR DELIVERY ON OR ABOUT ,
1996, IN IMMEDIATELY AVAILABLE FUNDS.

CS First Boston
Salomon Brothers Inc
Montgomery Securities

THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>
[PICTURE TO BE INSERTED]

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

The Company intends to furnish its stockholders with annual reports
containing audited financial statements and quarterly reports for the first
three quarters of each fiscal year containing unaudited summary financial
information.

IN CONNECTION WITH THIS OFFERING, CS FIRST BOSTON CORPORATION ON BEHALF OF
THE U.S. UNDERWRITERS AND THE MANAGERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF THE COMPANY
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ STOCK MARKET'S NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE
ACCOUNTS OF OTHERS IN THE SHARES OF COMMON STOCK PURSUANT TO EXEMPTIONS FROM
RULES 10b-6, 10b-7 AND 10b-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934.

EARTHSHELL-REGISTERED TRADEMARK- IS A REGISTERED TRADEMARK OF THE COMPANY.
ALI-ITE-REGISTERED TRADEMARK- IS A REGISTERED TRADEMARK OF E. KHASHOGGI
INDUSTRIES ("EKI"). THIS PROSPECTUS ALSO CONTAINS THE REGISTERED TRADEMARKS OF
OTHER COMPANIES.

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE
IN THIS PROSPECTUS. INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET
FORTH UNDER THE HEADING "RISK FACTORS."

THE COMPANY

EarthShell Corporation (the "Company") is engaged in the development,
licensing and commercialization of a newly-developed composite material for the
manufacture of food-service disposables, such as sandwich containers, cups,
plates and bowls. This new proprietary material is composed primarily of
commonly available raw materials such as powdered limestone and sand, potato or
corn starch, wood fiber and water. The Company believes that food-service
disposables made of this new composite material ("EARTHSHELL products") can be
designed to have certain superior performance characteristics, will be able to
be produced at a competitive cost and will have a reduced environmental impact
in many respects of their manufacture and disposal, as compared to many of the
conventional paper and polystyrene foam food-service disposables currently in
use. According to an industry study, more than $8 billion was spent in the
United States in 1994 on the types of food-service disposables that the Company
believes can be made out of this new composite material. The Company believes
that international markets represent additional significant opportunities for
EARTHSHELL products.

The Company's objective is to establish EARTHSHELL products as the preferred
disposable packaging for the food-service industry throughout the world. The
Company intends to work with major users of food-service disposables in the
development and testing of prototype EARTHSHELL products to demonstrate product
performance and cost in order to encourage their adoption. For example, as a
result of its work with the Company, McDonald's Corporation ("McDonald's") has
begun a market test of the first EARTHSHELL product, a sandwich container for
the McDonald's Quarter Pounder with Cheese sandwich ("QPC"), in approximately 40
McDonald's restaurants in the Las Vegas area.

The Company intends to grant licenses to or joint venture with existing
manufacturers of disposable packaging for the manufacture and distribution of
EARTHSHELL products. By licensing its technology or entering into joint venture
relationships, the Company believes it can take advantage of the manufacturing
experience and distribution networks of existing manufacturers, thereby
accelerating the market penetration of EARTHSHELL products. The Company intends
to use a substantial portion of the proceeds of the Offering to construct
turnkey manufacturing lines for lease to its licensees or contribution to joint
ventures. The Company intends to engage a leading food processing and packaging
engineering firm to design and manage the construction of these manufacturing
lines. The Company expects that substantially all of its revenues will come from
royalties paid by the manufacturers of EARTHSHELL products, income from its
joint venture manufacturing of EARTHSHELL products and lease payments for
equipment leased to licensee or joint venture manufacturers of EARTHSHELL
products. To date, the Company has entered into licensing arrangements with
several manufacturers of conventional packaging products, including Genpak
Corporation ("Genpak"), Sweetheart Cup Company Inc. ("Sweetheart") and Dopaco,
Inc. ("Dopaco"), each of which has agreed to pay an effective royalty of 20% of
the wholesale price of EARTHSHELL products sold.

The new composite material used to make EARTHSHELL products ("ALI-ITE
composite material") was developed through more than 10 years of basic materials
science research by EKI, the Company's principal stockholder. EKI has received
13 U.S. and 17 foreign patents with respect to the compounds, manufacturing
processes and product designs applicable to EARTHSHELL products and has 61 U.S.
and 136 foreign patent applications pending. Since the Company's inception in
November 1992, the Company has expended approximately $46 million (including
research and development, patent prosecution, capital equipment and general and
administrative expenditures) to develop commercially viable food-service
disposables based on this research. The Company has an exclusive, worldwide,
royalty-free license from EKI to use and license the technology and any
improvements in connection with the manufacture and sale of selected disposable
food and beverage containers for use in the food-service industry. In general,
the

3
<PAGE>
license permits the Company and its licensees to use the technology to
manufacture and sell disposable, single-use containers for packaging or serving
food or beverages intended for consumption within a short period of time (less
than 24 hours). See "Business--Relationship with EKI."

Disposable food and beverage containers used in the food-service industry
are currently manufactured from a variety of materials, including paper,
plastic, foil and polystyrene foam. The Company believes that no disposable
packaging material has been developed, however, which fully addresses each of
the three principal concerns of the food-service industry--performance, cost and
environmental impact. The Company believes that EARTHSHELL products better
address these concerns of the food-service industry as compared to any existing
disposable packaging alternative.

THE OFFERING

<TABLE>
<CAPTION>
Common Stock offered by:

<S> <C>
The Company..................... shares

The Selling Stockholders........ shares

Total......................... shares

Common Stock offered for sale in:

The U.S. Offering............... shares

The International Offering...... shares

Total......................... shares

Common Stock to be outstanding
after the Offering.............. shares (1)

Use of proceeds................... Purchase of manufacturing equipment for lease to
licensees or contribution to joint ventures; marketing
expenditures associated with the introduction of
EARTHSHELL products; repayment of indebtedness to EKI;
the Company's principal stockholder; patent procurement
and protection; construction of an EARTHSHELL product
development and commercial manufacturing demonstration
facility; payment of accrued dividends; and general
corporate purposes.

Proposed Nasdaq Stock Market's
National Market symbol.......... ERTH
</TABLE>

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

(1) Excludes options outstanding on the date hereof to purchase 4,280 shares of
Common Stock and assumes that the 26,675 shares of Series A Preferred Stock
of the Company outstanding on the date hereof will be converted into 26,675
shares of Common Stock.

UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS HAS BEEN
ADJUSTED TO REFLECT (I) THE ASSUMED CONVERSION OF THE 26,675 SHARES OF SERIES A
PREFERRED STOCK OF THE COMPANY OUTSTANDING INTO 26,675 SHARES OF COMMON STOCK
AND (II) A RECAPITALIZATION AND STOCK SPLIT, EFFECTIVE , 1996, IN
WHICH EACH SHARE THE COMMON STOCK THEN OUTSTANDING WAS CONVERTED INTO
SHARES OF COMMON STOCK, $.01 PAR VALUE. ADDITIONALLY, UNLESS OTHERWISE
INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES (A) NO EXERCISE OF THE
UNDERWRITERS' OVER-ALLOTMENT OPTION, AND (B) NO EXERCISE OF OPTIONS TO PURCHASE
COMMON STOCK OF THE COMPANY OF WHICH 4,280 OPTIONS WERE OUTSTANDING AT JUNE 30,
1996. SEE "MANAGEMENT--STOCK OPTION PLANS," "DESCRIPTION OF CAPITAL STOCK" AND
"UNDERWRITING." ALL REFERENCES HEREIN TO "EKI" REFER TO E. KHASHOGGI INDUSTRIES,
A CALIFORNIA GENERAL PARTNERSHIP, AND CONCRETE TECHNOLOGY CORPORATION, THE
PREDECESSOR COMPANY TO EKI. THE COMPANY AMENDED ITS CERTIFICATE OF INCORPORATION
AND AMENDED AND RESTATED ITS BYLAWS TO, AMONG OTHER THINGS, CHANGE ITS NAME TO
EARTHSHELL CORPORATION FROM EARTHSHELL CONTAINER CORPORATION, EFFECTIVE
, 1996.

4
<PAGE>
SUMMARY FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
NOVEMBER 1,
1992
SIX MONTHS ENDED (INCEPTION)
YEAR ENDED DECEMBER 31, JUNE 30, THROUGH
--------------------------------- -------------------- JUNE 30,
1993 (1) 1994 1995 1995 1996 1996
----------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Research and development expenses............... $ 3,309 $ 11,411 $ 9,384 $ 4,274 $ 5,306 $ 29,410
General and administrative expenses............. 2,500 2,947 2,079 774 1,093 8,616
Interest (income) expenses, net................. (147) (290) 478 97 647 688
Depreciation.................................... 601 797 44 6 116 1,558
Patent prosecution expenses..................... 1,520 1,717 1,929 1,301 782 5,948
Net loss........................................ (7,783) (16,582) (13,914) (6,452) (7,944) (46,223)
Pro forma net loss per share (2)(3)............. $ (40.31) $ (23.02)
Weighted average number of shares used in
computing pro forma net loss per share (3).... 345,163 345,163
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA (2) ADJUSTED (2)(4)
--------- ------------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................. $ 61 $ 61 $ 161,591
Working capital (deficit)............................................. (22,648) (28,530) 158,470
Total assets.......................................................... 2,598 2,598 164,128
Notes payable, accrued interest and accrued dividends................. 19,588 25,470 --
Deficit accumulated during development stage.......................... (46,223) (52,105) (52,105)
Stockholders' equity (deficit) (5).................................... (20,147) (26,029) 160,971
</TABLE>

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

(1) Includes the financial results for the period from November 1, 1992
(inception) through December 31, 1992.

(2) Pro forma to give effect to the assumed conversion of the 26,675 shares of
Series A Preferred Stock of the Company outstanding into 26,675 shares of
Common Stock and the accrual of $5,882,000 in dividends on such preferred
stock as of such conversion.

(3) As a result of the significant pro forma changes in the capitalization of
the Company, pro forma net loss per share and weighted average shares
outstanding information is presented only for the most recent fiscal year
and interim period.

(4) Adjusted to give effect to the receipt of the net proceeds of $187,000,000
from the sale of shares of Common Stock offered by the Company hereby (at an
assumed initial public offering price of $ per share and after deducting
underwriting discounts and commissions and estimated offering expenses) and
the application of the estimated net proceeds therefrom for the repayment of
$18,330,000 in notes and accrued interest payable to EKI, $1,258,000 in
notes payable to Imperial Bank and the payment of preferred dividends of
$5,882,000. See "Use of Proceeds" and "Capitalization."

(5) No cash dividends were declared or paid in any of the periods presented
except as noted in note (2) above.

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

The Company was incorporated in Delaware on November 1, 1992. The Company's
principal executive offices are located at 800 Miramonte Drive, Santa Barbara,
California 93109, and its telephone number is (805) 897-2294.

5
<PAGE>
RISK FACTORS

THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK. THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN ADDITION TO
THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE PURCHASING THE COMMON
STOCK OFFERED HEREBY. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH IN THE FOLLOWING RISK
FACTORS AND ELSEWHERE IN THIS PROSPECTUS.

UNCERTAIN PRODUCTION COSTS

EARTHSHELL products are currently in various stages of development and have
yet to be produced on a fully integrated production line or at consistent
manufacturing efficiencies required to successfully commercialize such products.
As a result, the actual cost of manufacturing EARTHSHELL products is not known
and no assurance can be given that they will be manufactured at competitive
costs. The EARTHSHELL QPC sandwich container being test marketed in Las Vegas by
McDonald's was produced on a single pilot manufacturing line in Rock Hill, South
Carolina. Based on its experience with the pilot line and the efficiencies and
throughputs anticipated, the Company believes that when produced commercially on
a full-scale manufacturing line, the price of the EARTHSHELL QPC sandwich
container (including the Company's royalty) will be less than the price of the
F-flute paper container currently used by McDonald's, but somewhat greater than
the price of a polystyrene sandwich container. Upon a firm commitment by
McDonald's to purchase the EARTHSHELL QPC sandwich container or other EARTHSHELL
sandwich containers for system-wide use, the Company intends to establish a
commercial manufacturing line which it expects will significantly improve the
efficiency of the mixing, baking, printing, coating and material handling
systems by using other commercially available equipment and improvements to this
equipment. As licensees and joint ventures begin commercial production of
EARTHSHELL products, difficulties may be encountered that cause costs of
production to exceed those currently anticipated by the Company. No assurances
can be given that EARTHSHELL products can be manufactured at commercially
competitive prices. The failure of EARTHSHELL products to achieve cost
competitiveness with conventional food service disposables would have a material
adverse effect on market acceptance of such EARTHSHELL products and on the
business, financial condition and results of operations of the Company.

ENVIRONMENTAL IMPACT OF PRODUCTS

The Company's success depends, in substantial part, on the ability of the
Company to design, develop and manufacture food-service disposables having a
reduced environmental impact as compared to disposable food-service containers
made from paper, foil and polystyrene foam. According to a comprehensive life
cycle inventory of the manufacturing, distribution and disposal processes of
various sandwich containers conducted by an environmental consulting firm
commissioned by the Company, the first EARTHSHELL product, the QPC sandwich
container, has a reduced environmental impact in many respects compared to
similarly sized paper and polystyrene containers. The same life cycle inventory
indicated that the manufacture, distribution and disposal of the EARTHSHELL QPC
sandwich container, however, also result in the release of greater amounts of
several pollutants than do the manufacture, distribution and disposal of F-flute
paper, and to a greater extent, polystyrene foam sandwich containers and also
result in more solid waste by weight and volume than such paper and polystyrene
containers. No assurance can be given that environmentalists, regulators,
customers or consumers will agree with the results of the Company's life cycle
inventory or conclude that EARTHSHELL products have an environmental advantage
over conventional packaging. The Company has been working with one national
environmental organization which has stated that without reductions in package
weight, use of less starch and use of recycled, rather than virgin fiber, the
EARTHSHELL QPC sandwich container should not, in its view, be described as an
environmental improvement over McDonald's current F-flute packaging. This
environmental organization has suggested that if the post-consumer recycled
content of the F-flute container were increased, it would significantly improve
its performance relative to the EARTHSHELL QPC container. Although the Company
disagrees

6
<PAGE>
with this view, it has not yet been able to dissuade the organization from its
assessment of the environmental impact of the EARTHSHELL QPC sandwich container,
which is based primarily on the container's agricultural (starch) content and
package weight. The Company's other EARTHSHELL products are in various stages of
development and may utilize unique material formulations and coatings.
Therefore, no similar life cycle inventory can be completed with respect to
these products at this time and there can be no assurance that any future
EARTHSHELL products will have a reduced environmental impact. If these products
did not exhibit a reduced environmental impact, or if currently unidentified
negative environmental qualities of EARTHSHELL products are discovered, or if
currently identified negative qualities become more important, market acceptance
of EARTHSHELL products and the business, financial condition and results of
operations of the Company would be materially adversely affected.

RISK OF ADVERSE PERFORMANCE CHARACTERISTICS

While the Company generally believes that EARTHSHELL products can be
engineered in many respects to meet the specific needs of food-service
operators, individual products may have one or more adverse performance
characteristics when compared to conventional food-services disposables. For
example, while the EARTHSHELL QPC sandwich container is stronger and more rigid
than paper and polystyrene sandwich containers, it is also less flexible and
more susceptible to breakage in handling. Many EARTHSHELL products are under
development and their performance characteristics have not yet been determined.
The failure of the Company to develop EARTHSHELL products with comparable or
superior performance characteristics when compared to conventional food service
disposables would have a material adverse effect on market acceptance of such
EARTHSHELL products and on the business, financial condition and results of
operations of the Company.

NEED FOR CONTINUED DEVELOPMENT OF PRODUCTS AND MANUFACTURING PROCESSES

The Company has developed a number of prototype products, such as cups,
plates and bowls. However, only one EARTHSHELL product, the EARTHSHELL QPC
sandwich container for McDonald's, has been commercially introduced. The
Company's success depends, in substantial part, upon its ability to complete the
development and commercialization of these and other additional EARTHSHELL
products. The development and commercialization of these and other EARTHSHELL
products may present unique design and development challenges requiring
substantial time and effort by the Company, including the development of new
formulations of ALI-ITE composite material, product coatings, additives and
manufacturing techniques. Additionally, none of the EARTHSHELL products has yet
been produced on a fully integrated production line or at consistent
manufacturing efficiencies required to successfully commercialize EARTHSHELL
products. There can be no assurance that the Company will be successful in
designing, developing or commercializing, or that the Company or its licensees
or joint venture partners will be successful in manufacturing or selling, any
additional EARTHSHELL products. The failure of the Company to develop and
commercialize additional EARTHSHELL products would have a material adverse
effect on the business, financial condition and results of operations of the
Company.

DEVELOPMENT STAGE COMPANY

The Company is a development-stage company with no commercial operating
history and is therefore subject to the risks inherent in the establishment of a
new business enterprise. The Company must, among other things, develop
additional products, achieve market acceptance of EARTHSHELL products, respond
to competitive developments, attract, retain and motivate qualified personnel
and develop systems to effectively manage its growth. To date, there have been
no revenues from the sales of any EARTHSHELL products. Due to the uncertainties
inherent in product development, market acceptance of newly-developed products
and reliance on the Company's licensees and joint venture partners who will
manufacture, distribute and sell EARTHSHELL products, the Company does not
believe it can predict when it will receive any significant revenues. The
Company is expected to continue to incur substantial operating losses until
EARTHSHELL products receive market acceptance. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

7
<PAGE>
HISTORY OF OPERATING LOSSES

The Company has incurred aggregate net operating losses of approximately $46
million from its inception in November 1992 through June 30, 1996. At June 30,
1996, the Company had a working capital deficit of approximately $23 million, an
accumulated deficit of $46 million and a shareholders' equity deficit of $20
million. The Company's operations in the past 20 months have been financed
through loans from EKI, its principal stockholder. EKI, however, is under no
obligation to make additional loans or capital contributions to Company.
Primarily because of the Company's history of operating losses and its reliance
on its principal stockholder to provide cash to sustain operations, there is
substantial doubt about the Company's ability to continue as a going concern
unless the Company is able to obtain equity financing through the Offering,
additional loans from its principal stockholder or other funding. In the absence
of a significant level of sales of EARTHSHELL products, the Company will
continue to generate significant losses. There is no assurance that the
Company's operations will be successful or will result in a profit in the
future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

LACK OF MARKET ACCEPTANCE

The Company's future success will depend in large part on market acceptance
of EARTHSHELL products by consumers, food-service operators, and manufacturers
and distributors of disposable packaging. EARTHSHELL products are expected to be
an alternative to conventional food-service disposables. Market acceptance of
EARTHSHELL products as such an alternative, however, will depend upon
recognition of such products as having comparable or superior performance
characteristics, as being cost competitive and as having a reduced environmental
impact. The Company does not know how broad such recognition and consumer
acceptance of EARTHSHELL products, including the McDonald's QPC sandwich
container, will be, or if such recognition and acceptance will ultimately occur.
Except for the QPC sandwich container, all EARTHSHELL products are under
development and have not undergone testing by food-service operators or consumer
market testing. The QPC sandwich container has undergone only limited testing in
a small number of McDonald's restaurants and is expected to undergo further
refinement prior to any system-wide introduction, which may affect market
acceptance of the product. An unsuccessful commercial introduction of the
EARTHSHELL QPC sandwich container by McDonald's could have an adverse effect on
the Company's ability to achieve market acceptance of other EARTHSHELL products
and therefore could have a material adverse effect on the business, financial
condition and results of operations of the Company. No assurance can be given
that the Company's products will be successfully introduced, licensed or
marketed or that they will achieve broad market acceptance. The failure of
EARTHSHELL products to achieve such market acceptance would have a material
adverse effect on the business, financial condition and results of operations of
the Company.

RISKS OF DELAY

There are substantial risks of delay, some of which are beyond the Company's
control, associated with the development of the Company's products and related
manufacturing processes, market acceptance of and demand for the Company's
products, the development of sufficient production capacity for the production
of EARTHSHELL products and the development of raw material sources. The Company
has experienced significant delays in the initial pilot production of its QPC
sandwich container. These delays resulted from, among other things, difficulties
in machine assembly, poor mold quality, inadequate molding pressure control,
systems integration, quality control problems and refinement of ALI-ITE
composite material. There can be no assurance that the Company or its licensees
or joint venture partners will not experience similar or other problems in
start-up or ongoing operations. In addition, the baking machines which produce
molded products, such as the EARTHSHELL QPC sandwich container, must be obtained
through special orders, currently through a manufacturer in Germany, which
require several months for delivery. Any of the foregoing delays could have a
material adverse effect on market acceptance of EARTHSHELL products and on the
business, financial condition and results of operations of the Company . See
"--Need for Continued Development of Products and Manufacturing Processes,"
"--No Existing Manufacturing Capacity," "--Lack of Market Acceptance,"
"--Dependence on Licensee and Joint Venture Partner Manufacturers," "--Reliance
on Few Customers" and "--Raw Material Supplies."

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<PAGE>
NO EXISTING MANUFACTURING CAPACITY

EARTHSHELL products have not been manufactured on a fully integrated
production line or at consistent manufacturing efficiencies required to
successfully commercialize EARTHSHELL products. The Company believes that
EARTHSHELL products can be manufactured on made-to-order machines which are
similar to conventional wafer or ice cream baking machines. The Company has
identified a number of equipment manufacturers in Europe that are capable of
producing this machinery to the Company's specifications, and these
manufacturers have indicated their willingness to provide a sufficient quantity
of machines to support the projected commercial introduction of EARTHSHELL
products. The production of this number of machines by existing manufacturers,
however, would require a significant increase in the current production capacity
of such manufacturers and would require a substantial period of time. The
Company's pilot manufacturing line in Rock Hill, South Carolina utilizes
commercial equipment which does not have the capacity or manufacturing
efficiencies required to successfully commercialize EARTHSHELL products. The
Company has experienced substantial delays in the integration and operation of
this pilot manufacturing line. The Company anticipates that the make and model
of baking machines used to manufacture the QPC sandwich container for the
McDonald's Las Vegas area test will not be used for commercial production of the
EARTHSHELL QPC sandwich container. There can be no assurance that equipment
capable of successfully manufacturing EARTHSHELL products can be manufactured
or, if successfully manufactured, that a sufficient number of machines will be
available when needed to permit a timely roll-out of EARTHSHELL products. In
addition, the Company has had no experience with these European manufacturers
whose operations are subject to the risks of foreign operations, including
fluctuations in currency exchange rates. The production of EARTHSHELL products
also requires various materials handling, mixing, coating, printing and
packaging equipment. While the Company believes that this equipment is generally
available from existing commercial sources, there can be no assurance that
made-to-order equipment will not be required or that it will be available
without substantial delay. In addition, the integration of this equipment in a
coordinated manufacturing line could require greater time and effort than
anticipated. The Company anticipates that it will engage one or more engineering
consulting firms to assist in the development of manufacturing facilities and
the integration of equipment. There can be no assurance that any such firms will
be successful in developing efficient manufacturing facilities on a timely
basis, if at all, or that it can do so at a cost which is acceptable to the
Company. The failure of adequate manufacturing equipment to be available and
properly working in an integrated manner when needed to permit a timely roll-out
of EARTHSHELL products could have a material adverse effect on market acceptance
of EARTHSHELL products and on the business, financial condition and results of
operations of the Company.

DEPENDENCE ON LICENSEES AND JOINT VENTURE PARTNERS

The Company has no experience in the commercial manufacture, distribution
and marketing of food-service disposables. The Company initially will be
dependent on its licensee and joint venture partner manufacturers for the
manufacture and distribution of EARTHSHELL products. The Company has entered
into nonexclusive license agreements with a number of existing manufacturers of
food-service disposables, including Sweetheart, Genpak and Dopaco, permitting
the manufacture and sale of certain food-service disposable packaging products
using ALI-ITE composite material, and the Company intends to enter into
additional license agreements as well as joint venture relationships in the
future. Under the terms of these license agreements, the Company has not
realized any revenue and other than the limited production for the McDonald's
Las Vegas test, which were not produced under the terms of these license
agreements, none of the licensees have produced or distributed any products.
These licensees have no experience in the commercial manufacturing, distribution
and marketing of EARTHSHELL products. Under the terms of the existing license
agreements, the licensee manufacturers will not be obligated to achieve minimum
sales quotas and will have the right to terminate their respective license
agreements at any time without penalty. Success in the manufacturing,
distribution and marketing of the Company's products will depend to a
substantial degree on the resources devoted to such efforts by the Company's
licensees and joint venture partners. Many of the Company's licensees and joint
venture partners manufacture paper, plastic or foil packaging which will compete
with EARTHSHELL products. There can be no assurance that the Company's licensees
and joint venture partners will devote sufficient resources to successfully
manufacture, distribute

9
<PAGE>
or market EARTHSHELL products. Further, because of the cost and time required to
modify manufacturing equipment to produce EARTHSHELL products, any interruption
in supply or nonperformance could result in the discontinuance of the use of the
Company's products by customers. Additionally, the Company will be dependent on
the efforts of its licensees and joint venture partners to monitor production
and implement effective quality-control measures. There can be no assurance that
the licensees and joint venture partners will be able to successfully
manufacture, distribute and market EARTHSHELL products and the failure of such
persons to successfully manufacture, distribute and market EARTHSHELL products
would have a material adverse effect on the business, financial condition and
results of operations of the Company.

DEVELOPMENT OF PIONEER MANUFACTURING PLANTS

The Company anticipates that it may be necessary, among other things, to
provide manufacturing equipment by leasing it to licensees or contribution to
joint ventures and/or to guarantee the performance of its equipment in order to
induce existing manufacturers of food-service disposables to begin production of
EARTHSHELL products during their initial commercial introduction. The Company
may enter into joint venture arrangements, particularly with respect to the
development of pioneer manufacturing plants, with established manufacturers,
that require the Company to warrant certain aspects of its technology or
equipment it provides to the joint venture (either in the form of a lease or a
capital contribution). For example, warranties may be made as to the production
capacity of the equipment, its cost (including the cost of installation and
start-up), its efficiency or the rate of its obsolescence. Such warranties may
obligate the Company to contribute substantial funds to the joint venture, a
portion or all of which may not be reimbursable or returned to the Company. In
addition, the Company's right to receive a return of (or on) its investment in
the equipment, if any, may be subordinated to the return of the other partner's
capital investment and the payment of the joint venture's other obligations. The
Company may offer similar warranties and incentives to existing and new
licensees in connection with the lease of equipment or otherwise to induce such
licensees to develop pioneer manufacturing plants. As a result, there can be no
assurances that the Company will receive a return on the equipment, or that if a
return is received that it that will cover the Company's associated costs. The
Company's obligation to contribute funds to a joint venture, or its failure to
receive an adequate return on its investment in the equipment, may adversely
affect the business, financial condition and results of operations of the
Company.

DEPENDENCE ON LICENSE FROM EKI

The Company does not own the technology for ALI-ITE composite material and
is dependent upon its royalty-free, exclusive license from EKI for the use of
the technology necessary to develop and manufacture EARTHSHELL products. The
Company's use of the technology is limited to the development, manufacture and
sale of certain specified food-service disposables for use in the food-service
industry and the Company will have no right to exploit opportunities for the
application of this technology or improvements outside this field of use.
Pursuant to the Amended and Restated License Agreement between EKI and the
Company (the "License Agreement"), any improvements developed by the Company
relating to the composition or formulation of ALI-ITE composite material, and
any improvements developed jointly by the Company and EKI relating to the method
of producing EARTHSHELL products or the physical design of EARTHSHELL products,
will become the property of EKI and will be licensed to the Company for the term
of the License Agreement. EKI may terminate the license at any time if the
Company is in breach of any material obligations under the License Agreement and
does not cure such breach within a specified period. The license expires in the
United States on the date the last U.S. patent of EKI (including any extensions
of subsequently filed additional patents or improvements) relating to the
technology expires and expires outside the United States on the date the last
patent of EKI relating to the technology issued anywhere in the world expires.
EKI currently has patents granted in the United States that would extend
protection of the technology through 2014, has additional patent applications
pending, and anticipates that additional patents will be granted to it that
would extend this protection to an even later date. If EKI were to file for or
be declared bankrupt, the Company would likely be able to retain its rights
under the License Agreement with respect to U.S. patents; however, it is
possible that steps could be taken to terminate its rights under the License
Agreement with respect to international patents. The

10
<PAGE>
Company also has certain business, reporting, indemnification and
confidentiality obligations under the License Agreement. See
"Business--Relationship with EKI."

RELIANCE ON EKI

The management and operations of the Company and EKI have been closely
related since the incorporation of the Company. Immediately prior to the
Offering, EKI owned approximately 88% of the outstanding common stock of the
Company. The Company shares certain key management personnel with EKI, relies on
EKI and EKI's scientific and technical personnel for substantially all of its
scientific and technical services and leases all of its current facilities from
EKI. Simon Hodson, Chief Executive Officer of the Company, is also an employee
of EKI and his salary is paid by EKI. The Company is dependent on EKI's
scientific and technical services, which are provided pursuant to a Technical
Services and Sublease Agreement, terminating on July 1, 1997, for the design and
development of the Company's products and the operation of its laboratory
production facility. The Company paid an aggregate of $3,300,000, $9,472,000 and
$8,427,000 to EKI for these services during 1993, 1994 and 1995, respectively
(excluding amounts paid under a Patent Allocation Agreement). The Company is
also dependent on EKI for further development and refinement of the basic
technology used in EARTHSHELL products, although EKI is not obligated to
complete any further development or refinement under the terms of the Amended
and Restated License Agreement between the Company and EKI. Any disruptions in
the operations or financial condition of EKI or the failure by EKI to perform
services required by the Company could have a material adverse effect on the
business, financial condition and results of operations of the Company. See
"--Dependence on License From EKI" and "Business--Relationship with EKI."

POTENTIAL CONFLICTS WITH EKI

The Company and EKI are both controlled by a common indirect, majority
equity owner, Essam Khashoggi, and they share certain directors and officers,
including Mr. Khashoggi, who is also the Chairman of the Board of the Company,
and Simon Hodson, the Vice Chairman of the Board and Chief Executive Officer of
the Company, whose salary is paid by EKI. As a result, certain conflicts may
arise between EKI and the Company, particularly with respect to corporate
opportunities, including, the development of new markets and uses for products
based on the ALI-ITE composite material, the allocation of research and
development resources, the devotion of the common directors' and officers' time
to the respective businesses and the performance by EKI and the Company of their
respective obligations under the License Agreement, the Technical Services and
Sublease Agreement and the Patent Allocation Agreement. These agreements
themselves may give rise to conflicts based on, among other things, the
ownership of improvements to EARTHSHELL products and their manufacturing
processes and the allocation of expenses incurred in connection with research
and development and the filing and prosecution of patent applications. In
particular, under the Patent Allocation Agreement, the Company is obligated to
pay or reimburse EKI for all costs and expenses associated with the filing,
prosecuting and maintaining of patents or patent applications for technology
which is directly related to food and beverage containers within the field of
use licensed to the Company under the License Agreement or which has significant
teachings, claims or applications for such uses. The costs and expenses incurred
in connection with the filing, prosecuting and maintaining of these patents and
patent applications will be controlled by EKI. Any patents granted will be the
property of EKI, and EKI may obtain a benefit therefrom other than under the
license, including the utilization and/or licensing of the patents and related
technology in a manner or for uses unrelated to the license granted to the
Company. The Board of Directors of the Company has established a Conflicts
Committee made up of disinterested directors to administer the License
Agreement, the Technical Services and Sublease Agreement and the Patent
Allocation Agreement on behalf of the Company. See "Business--Relationship with
EKI" and "Business--The Technology."

CONTROL BY PRINCIPAL STOCKHOLDER

Upon completion of the Offering, Essam Khashoggi, the Chairman of the Board
of the Company, will be the beneficial owner of shares of Common Stock
directly or indirectly through various entities that he controls, including EKI.
Thus, Mr. Khashoggi will have the ability to elect all of the directors of the
Company, to control the direction and policies of the Company, to determine the
outcome of corporate

11
<PAGE>
transactions requiring the approval of the Company's stockholders, including
mergers, consolidations and the sale of all or substantially all of the assets
of the Company, and to prevent or cause a change in control of the Company. Mr.
Khashoggi also will have the power to control the Company's relationship with
EKI, which he also controls, and upon which the Company is dependent, among
other things, for its research and development efforts. In addition, to date,
the Company has been dependent on debt and equity investments from EKI, which is
controlled by Mr. Khashoggi. As of June 30, 1996, demand notes payable by the
Company to EKI totaled $17,977,000 and accrued interest totaled $353,000. See
"--Reliance on EKI", "--Potential Conflicts with EKI" and "Principal and Selling
Stockholders."

RELIANCE ON FEW CUSTOMERS

The Company initially will be dependent on the willingness of a relatively
few companies to enter into supply contracts with the Company's licensees or
joint ventures. In particular, McDonald's will initially be the only customer
using EARTHSHELL products. The loss of McDonald's or any of its other initial
customers as a purchaser of the Company's products could delay the introduction
and market acceptance of one or more EARTHSHELL products and have a material
adverse effect on the Company's business, financial condition and results of
operations.

CERTAIN FEDERAL TAX CONSEQUENCES

There is a significant risk that the Company will be classified as a
"personal holding company" for federal income tax purposes, with the result that
the Company will be subject to an additional federal tax equal to 39.6%,
generally, of its undistributed after tax earnings for each taxable year in
which it is so classified. The Company intends to take appropriate measures to
avoid being classified as a personal holding company, including primarily
entering into joint venture relationships to reduce its royalty and other
passive type income to less than 60% of its "adjusted ordinary gross income"
(generally, ordinary gross income, as distinguished from capital gains income,
adjusted to reflect certain statutory exclusions and deductions) for the year.
There can be no assurance, however, that the Company will be successful in these
efforts. In the event that the Company is unsuccessful in these efforts, the
Company intends to make distributions to its stockholders of all or part of its
after tax earnings for the applicable taxable year to minimize its liability for
the personal holding company tax. There can be no assurance, however, that the
Company will have adequate cash reserves to make such distributions. If made,
such distributions would likely be treated as dividends taxable as ordinary
income for federal and state income tax purposes. The application of the
personal holding company tax to the Company's undistributed after tax earnings
would have a material adverse effect on the business, financial condition and
results of operations of the Company. See "Dividends" and "Certain United States
Federal Tax Considerations."

PROTECTION OF PROPRIETARY TECHNOLOGY

The Company's ability to compete effectively will depend in part on its
ability to maintain the proprietary nature of the licensed technology. The
Company seeks to protect the licensed technology through a combination of
patents, brand development and goodwill, trade secrets and confidentiality
agreements. EKI has licensed to the Company 13 U.S. patents and 17 foreign
patents. EKI has 61 U.S. and 136 foreign patent applications pending relating to
EARTHSHELL products. Only one of the issued patents relates specifically to
molded food and beverage containers manufactured from ALI-ITE composite
material, the formulation of ALI-ITE composite material used in the EARTHSHELL
QPC sandwich container and substantially all of the EARTHSHELL products
currently under development. EKI, however, has also received four notices of
allowance with respect to patent applications relating specifically to molded
products. There can be no assurance that patents will issue with respect to the
notices of allowance, that additional patents will be issued or that the Company
or EKI will develop new technology that is patentable. Moreover, there can be no
assurance that any patent issued to EKI and licensed to the Company will not be
circumvented or infringed by others. Patents and patent applications on
formulations of ALI-ITE composite material are based in part on specific
proportional mixtures of the components of the material. The Company continues
to undergo testing and modification of the components and their proportional
mixtures to balance environmental, economic and performance concerns. There can
be no assurance that the mixture that is ultimately determined to be optimal
will be protected under the

12
<PAGE>
Company's patents or that it will not be subject to a patent held by others. The
Company is aware of at least one other patent held by others which protects
materials and methods for manufacturing materials containing some similar
components as are found in ALI-ITE composite material. If the optimal mixture is
not protected under the Company's patents or is subject to a patent held by
others, it would have a material adverse effect on the Company's business,
financial condition and results of operations. Under the License Agreement, EKI
has the exclusive right to seek and obtain patent protection for the technology
(other than improvements in the technology), and, under the Patent Allocation
Agreement, the Company is obligated to pay and reimburse EKI for all costs and
expenses associated with the filing, prosecuting and maintaining of patents or
patent applications for the technology which are directly related to food and
beverage containers within the field of use licensed to the Company or which
have significant teachings, claims or applications for such uses. Pursuant to
the Patent Allocation Agreement, the Company became obligated to reimburse EKI a
total of $1,520,000, $1,717,000 and $1,993,000 in 1993, 1994 and 1995,
respectively.

The Company also relies on trade secrets and proprietary know-how that it
seeks to protect in part by confidentiality agreements with its licensee
manufacturers, proposed joint venture partners, employees and consultants. These
agreements have limited terms (typically five years or less) and there can be no
assurance that these agreements will not be breached, that the Company would
have adequate remedies for any breach, or that the Company's trade secrets will
not otherwise become known or be independently developed by the Company's
competitors. Likewise, no assurance can be given that the technologies used by
the Company do not infringe upon the proprietary rights of others, although the
Company is not aware of any such infringement or adverse claim. The Company
could incur substantial cost in seeking enforcement of its licensed patents
against infringement or the unauthorized use of its trade secrets and
proprietary know-how by others or in defending itself against claims of
infringement by others.

Litigation may be necessary to enforce patents issued or licensed to the
Company, to protect trade secrets or know-how owned by the Company or to
determine the enforceability, scope and validity of the proprietary rights of
others. Although the Company knows of no infringement of patents held by others,
it is always possible that a third party may assert infringement. The Company
believes that it owns or has the rights to use all technology incorporated into
its products, but an adverse determination in any such proceedings or in other
litigation or infringement proceedings to which the Company may become a party
could subject the Company to significant liabilities to third parties or require
the Company to seek licenses from third parties. Although patent and
intellectual property disputes have often been settled through licensing or
similar arrangements, costs associated with such arrangements may be substantial
and could include ongoing royalties. Furthermore, there can be no assurance that
necessary licenses would be available to the Company on satisfactory terms or at
all. Accordingly, an adverse determination in a judicial or administrative
proceeding or failure to obtain necessary licenses would prevent the Company
from manufacturing or licensing others to manufacture certain of its products,
which could have a material adverse effect on the Company's business, financial
condition and results of operations.

DEVELOPMENT OF EARTHSHELL PAPER PRODUCTS

The Company's QPC sandwich container for McDonald's is and certain other
EARTHSHELL products are expected to be made out of the Company's proprietary
ALI-ITE composite material which is formed into a moldable, foam-like material.
EKI and the Company have also developed a paper-like, sheet application of
ALI-ITE composite material which the Company has formed into prototype
food-service disposables, such as paper cups, french fry scoops and paper
plates. EKI and the Company have not completed the development of EARTHSHELL
paper roll stock or related manufacturing processes. The Company expects that
such activities and the design and development of EARTHSHELL paper products will
require substantial time, effort and expense. As a result, the Company cannot
predict when or if EARTHSHELL paper products will be introduced in the
commercial marketplace. No assurance can be given that EKI or the Company will
be successful in developing EARTHSHELL paper roll stock, related manufacturing
processes, or specific EARTHSHELL paper products. Additionally, if such
material, processes and products are developed, no assurance can be given that
they will be patentable, or will have a reduced environmental impact or will not
require FDA approval. Under the terms of the License Agreement

13
<PAGE>
between the Company and EKI, any further developments of or improvements to the
paper application of ALI-ITE composite material, whether developed by EKI or the
Company, will be the property of EKI and will be licensed by EKI to the Company
for no additional consideration for use in connection with the manufacture, sale
and other commercial development of specified food-service disposables. See
"Business--Food-Service Disposables Market."

RAW MATERIAL SUPPLIES

ALI-ITE composite material is composed primarily of naturally occurring raw
materials, such as limestone, starch, wood fiber and water. While the Company
believes that sufficient quantities of all raw materials are generally
available, the unavailability of any raw materials could result in delays in the
commercial introduction and could hinder acceptance of EARTHSHELL products,
thereby adversely affecting the Company's business, financial condition and
results of operations. Prices of certain of the raw materials used to
manufacture ALI-ITE composite material, including wood fiber and certain other
materials, are subject to fluctuations which could affect the prices charged for
EARTHSHELL products. In addition, future products may incorporate different
mixtures of the components of ALI-ITE composite material, including different
product coatings and stabilizing agents, which may have the effect of increasing
the price of EARTHSHELL products. See "Business--Manufacturing of EARTHSHELL
Products" and "--Raw Materials."

COMPETITION; RISK OF TECHNOLOGICAL ADVANCEMENT

Competition among existing food and beverage container manufacturers in the
food-service industry is intense. Currently, a small number of large U.S. and
Canadian manufacturers have a dominant share of the market for paper roll stock
and expanded polystyrene beads. A large number of manufacturers worldwide
convert paper roll stock and expanded polystyrene beads into paper and
polystyrene food-service disposables. Some of these competitors have
substantially greater financial and marketing resources at their disposal than
does the Company, and many have well-established supply, production and
distribution relationships and channels. To be successful, EARTHSHELL products
must be recognized as being superior, in either or both their performance and
environmental impact, to existing products and must be capable of commercial
production at prices competitive with those of existing products. There can be
no assurance that the Company's products can be manufactured at cost-competitive
prices or will be able to achieve such recognition or that companies producing
competitive products will not reduce their prices or engage in advertising or
marketing campaigns designed to protect their respective market shares and
impede market acceptance of EARTHSHELL products. Additionally, some of the
Company's licensees and prospective joint venture partners manufacture paper,
plastic and foil packaging which will compete with EARTHSHELL products. There
can be no assurance that these licensees and prospective joint venture partners
will devote sufficient resources to successfully manufacture, market or
distribute EARTHSHELL products.

Recently, a number of paper and plastic disposable packaging manufacturers
and converters and others have made efforts to increase the recycling of these
products. Increased recycling of paper and plastic products could lessen their
negative environmental impact, one significant basis upon which the Company
intends to compete. A number of companies have introduced rice and other
starch-based materials as potential environmentally superior packaging
alternatives, although, to date, many of these products have suffered from
performance limitations and have not proven to be economically viable methods of
packaging. A number of companies are also developing biodegradable plastics and
other specialty polymers which may be used to manufacture food service
disposables with a reduced environmental impact. Several foreign countries
subsidize the development and use of biodegradable plastic packaging which may
have the result of reducing their cost to below that of EARTHSHELL products. To
date, biodegradable plastic packaging has also suffered from cost and
performance limitations. There can be no assurances, however, that these or
other newly developed materials will not become more significant competitive
factors in the future. In addition, it is expected that many existing packaging
manufacturers may actively seek competitive alternatives to the Company's
products and processes. The development of competitive, environmentally
attractive, disposable food-service containers, whether or not based on the
Company's products and technology, could render the Company's technology
obsolete and could have a

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<PAGE>
material adverse effect on the business, financial condition and results of
operations of the Company. See "--Dependence on Licensee and Joint Venture
Partner Manufacturers."

DEPENDENCE ON QUALIFIED PERSONNEL AND KEY MANAGEMENT

The success of the Company is dependent upon obtaining the services of
qualified scientific and technical personnel. At present, the Company is
entirely dependent upon EKI personnel, including Dr. Per Just Andersen, the Vice
President of Product Engineering of EKI, who provide these services to the
Company pursuant to a Technical Services and Sublease Agreement. The Technical
Services and Sublease Agreement expires on July 1, 1997. In addition, the
Company is dependent upon its key management personnel. In particular, the
Company is highly dependent upon its Vice Chairman of the Board and Chief
Executive Officer, Simon Hodson. The loss of Mr. Hodson could adversely effect
the Company. Mr. Hodson has not entered into any employment or other similar
agreement with the Company. Additionally, Mr. Hodson does not receive any direct
compensation for his services to the Company (other than the receipt of director
stock options). Mr. Hodson is an employee of and paid a salary by EKI. See
"Management--Executive Officers and Directors."

FDA REGULATION

The manufacture, sale and use of EARTHSHELL products is subject to
regulation by the U.S. Food and Drug Administration (the "FDA"). The FDA's
regulations are concerned with substances used in food packaging materials, not
with specific finished food packaging products. Thus, food or beverage
containers should be acceptable to the FDA if the components used in the food
and beverage containers: (i) are approved by the FDA as indirect food additives
for their intended uses and comply with the applicable FDA indirect food
additive regulations; or (ii) are generally recognized as safe ("GRAS") for
their intended uses and are of suitable purity for those intended uses. While
the Company believes that each of the components of the EARTHSHELL QPC sandwich
container is either approved by the FDA as an indirect food additive for its
intended use, codified in the FDA's regulations as GRAS for its intended use, or
regarded by the Company and its consultants as GRAS for its intended use, the
Company has not sought the concurrence of the FDA and there can be no assurance
that the FDA would agree with these determinations.

Other EARTHSHELL products under development may use components that are not
approved by the FDA as indirect food additives, and that cannot reasonably be
considered GRAS for their intended uses. If such a component is used, it will be
necessary for the manufacturers of the product, or the Company on their behalf,
to: (i) obtain an FDA indirect food additive approval covering the component and
its intended uses; or (ii) obtain an informal determination from the FDA stating
that the substance will not be regulated as an indirect food additive because
the amount of the substance migrating to food is considered insignificant by the
FDA and therefore below the FDA's threshold of regulation. A food additive
petition must be supported by detailed information concerning the composition
and manufacture of the food additive, as well as by the results of testing to
establish the safety of the additive. Typically, safety testing at exaggerated
doses in several species of laboratory animals is required. The testing required
to support a food additive petition could take a considerable length of time to
perform. According to FDA data, from October 1994 to March 1995, the average
time for FDA review and approval of a food additive petition was 48 months from
the date of submission. A request to the FDA for an informal determination that
a substance need not be the subject of an indirect food additive petition must
be supported by a more limited amount of data than needed to support an indirect
food additive petition. The FDA has announced that it anticipates being able to
respond to these informal determination requests within three to four months.

If the FDA were to disagree with the Company's determinations with respect
to the EARTHSHELL QPC sandwich container or future products, the FDA could ask
the Company to voluntarily withdraw the products from the marketplace, initiate
legal action to remove the products from the marketplace and, if appropriate,
pursue additional sanctions against the Company and its management. Such actions
by the FDA could have a material adverse effect on the business, financial
condition and results of operations of the Company.

15
<PAGE>
ABSENCE OF PRIOR MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public trading market for the
Common Stock, and there can be no assurance that an active trading market will
develop or be sustained after the Offering. The stock market from time to time
has experienced extreme price and volume fluctuations which often have been
unrelated to the operating performance of particular companies. Announcements of
technological innovations or new commercial products by the Company or its
competitors, development or disputes concerning proprietary rights, changes in
earnings estimated by analysts, and economic and other external factors, as well
as period-to-period fluctuations in financial results of the Company, may have a
significant impact on the market price and marketability of the Common Stock.
Fluctuations or decreases in the trading price of the Common Stock may adversely
affect the liquidity of the trading market for the Common Stock and the
Company's ability to raise capital through future equity financing. The initial
public offering price of the Common Stock in the Offering will be determined by
negotiations among the Company, the Selling Stockholders and the Representatives
of the Underwriters based on several factors and may not be indicative of prices
that will prevail in the trading market. See "Underwriting."

DILUTION AND ABSENCE OF DIVIDENDS

The initial public offering price per share of the Common Stock will exceed
the net tangible book value per share of the Common Stock. Accordingly, the
purchasers of shares of Common Stock in the offering will experience immediate
and substantial dilution of net tangible book value per share of $ . To date,
the Company has not paid any dividends on its Common Stock. Although the Company
currently intends to retain all available funds for use in its business to the
extent possible, the Company intends to pay accrued dividends, which were
approximately $5,882,000 as of June 30, 1996, on its Series A Preferred Stock
immediately following completion of the Offering and if necessary intends to
make distributions of its earnings to stockholders in order to minimize the
personal holding company tax levied on its undistributed personal holding
company income, if any. See "--Certain Federal Tax Consequences," "Dividend
Policy" and "Certain United States Federal Tax Considerations."

EFFECT ON SHARE PRICE OF SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the shares offered hereby ( shares if
the over-allotment option is exercised in full) will be eligible for immediate
sale in the public market without restriction unless they are held by affiliates
of the Company. The outstanding shares not sold in the Offering will be
"restricted securities" within the meaning of Rule 144 ("Rule 144") promulgated
under the Securities Act of 1933, as amended (the "Securities Act"), and may not
be sold in the absence of regulation under the Securities Act unless an
exemption from registration is available, including the exemptions contained in
Rule 144. Of these shares, approximately shares held by current stockholders
will be eligible for sale pursuant to Rule 144 beginning 90 days after the
completion of the Offering, subject to the volume and manner of sale limitations
of Rule 144. The directors, officers and certain principal stockholders of the
Company, beneficially holding (upon completion of the offering) an aggregate of
shares ( if the over-allotment option is exercised in full), have agreed,
subject to certain exceptions, not to sell or otherwise dispose of any such
shares for at least 180 days after the date of the Underwriting Agreement
relating to the Offering without the prior written consent of the
Representatives of the Underwriters. All of the Company's current stockholders,
including EKI, have been granted certain "demand" and "piggy-back" registration
rights with respect to the shares of Common Stock owned by them. No predictions
can be made as to the effect, if any, that public sales of shares or the
availability of shares for sale will have on the market price prevailing from
time to time. Nevertheless, sales of substantial amounts of the Common Stock in
the public market, particularly by directors and officers of the Company, or the
perception that such sales could occur, could have an adverse impact on the
market price. See "Certain Transactions" and "Shares Eligible for Future Sale."

ANTI-TAKEOVER PROVISIONS

The Company's Certificate of Incorporation and Bylaws and the Delaware
General Corporation Law include provisions that may have the effect of
discouraging persons from pursuing a non-negotiated

16
<PAGE>
takeover of the Company and preventing certain changes of control. See
"Description of Capital Stock-- Anti-Takeover Law and Charter Provisions."

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares offered by
the Company are estimated to be approximately $187,000,000 based upon an assumed
offering price of $ per share and after deducting underwriting discounts and
commissions and estimated offering expenses. The Company will not receive any
proceeds from the sale of Common Stock by the Selling Stockholders nor any of
the proceeds from the exercise of the over-allotment option should it be
exercised. The Company currently intends to use the net proceeds of the Offering
to facilitate the development of manufacturing capacity for EARTHSHELL products
by directly purchasing manufacturing equipment for lease to licensees or
contribution to joint ventures (approximately $84,000,000), to launch an initial
public relations and advertising campaign of EARTHSHELL products (approximately
$20,000,000), to prosecute additional patent applications for its licensed
technology and to establish a fund for the enforcement and protection of patents
(together, approximately $10,000,000), to construct an EARTHSHELL product
development and commercial manufacturing demonstration facility (approximately
$10,000,000) and to pay accrued dividends on the Series A Preferred Stock
(approximately $5,882,000 as of June 30, 1996).

In addition, approximately $19,588,000 of the net proceeds of the Offering
will be used by the Company to repay certain indebtedness to its principal
stockholder, EKI (approximately $18,330,000 in principal and accrued interest)
and Imperial Bank (approximately $1,258,000 in principal). The indebtedness to
EKI, which was incurred at various times between February 1995 and June 30,
1996, bears interest at the prime rate published in THE WALL STREET JOURNAL,
which interest rate is adjusted to the prime rate in effect on the first day of
each calendar quarter, and is due and payable upon demand by EKI. At June 30,
1996, this indebtedness bore interest at an annual rate of 8.25%. The
indebtedness to Imperial Bank, which was incurred in June 1996, bears interest
at an annual rate of 1% in excess of the Bank's announced prime lending rate
which varies with any change in such prime rate. At June 30, 1996, this
indebtedness bore interest at an annual rate of 9.25%. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

Any remaining net proceeds will be used by the Company for general corporate
purposes, including the employment of additional personnel and the continued
design and development of EARTHSHELL products. Except as indicated, the Company
cannot presently determine the specific amounts of funds, and the timing of any
payments, that may be required in connection with the use of the portion of the
net proceeds allocated to general corporate purposes. The Company's management
will have broad discretion in applying the net proceeds, and the Company
reserves the right to change the use of proceeds if unanticipated developments
in the Company's business or changes in economic or competitive conditions make
shifts in the allocation of net proceeds necessary or desirable. Pending
application of the net proceeds for the above purposes, the Company intends to
invest the net proceeds from the Offering in investment-grade, short-term,
interest-bearing securities.

DIVIDEND POLICY

The Company expects to pay accrued dividends ($5,882,000 as of June 30,
1996) on its Series A Preferred Stock following completion of the Offering.
Other than these contemplated dividends, the Company has never paid dividends on
its capital stock. The Company currently intends to retain all available funds
for use in its business; provided, however, that if the Company is subject to
personal holding company tax on its undistributed income, the Company intends to
make distributions of all or part of its after tax earnings to stockholders if
necessary to minimize this tax liability. See "Risk Factors-- Certain Federal
Tax Consequences."

17
<PAGE>
CAPITALIZATION

The following table sets forth, at June 30, 1996, the actual capitalization
of the Company, and the pro forma capitalization of the Company (i) as if the
conversion of the Company's outstanding Series A Preferred Stock had occurred as
of such date and (ii) as further adjusted to give effect to the sale of the
shares of Common Stock offered by the Company hereby at an assumed initial
public offering price of $ per share and the application of the estimated
net proceeds thereof as described under "Use of Proceeds." This table should be
read in conjunction with the Management's Discussion and Analysis of Financial
Condition and Results of Operations, the Financial Statements and notes thereto
included elsewhere herein.

<TABLE>
<CAPTION>
JUNE 30, 1996
------------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA (1) ADJUSTED (1)(2)
---------- ------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Notes payable to majority stockholder................................ $ 18,330 $ 18,330 $ --
Notes payable to bank................................................ 1,258 1,258 --
Dividends payable.................................................... -- 5,882 --
---------- ------------- ---------------
Stockholders' equity (deficit):...................................... $ (19,588) $ (25,470) --
---------- ------------- ---------------
---------- ------------- ---------------
Preferred Stock, par value $.01 per share: 100,000 shares authorized;
35,000 Series A shares designated; 26,675 Series A shares issued
and outstanding; no shares outstanding pro forma and as adjusted... 0.3 -- --
Common stock, par value $.01 per share: 1,000,000 shares authorized;
315,000 shares issued and outstanding; (pro forma 341,675); 361,066
shares issued and outstanding as adjusted(3)....................... $ 3 $ 3.3 $ 73.3
Additional paid-in capital (preferred and common).................... 26,073 26,073 213,003
Deficit accumulated during the development stage(4).................. (46,223) (52,105) (52,105)
---------- ------------- ---------------
Total stockholders' equity (deficit)............................. $ (20,147) $ (26,029) $ 160,971
---------- ------------- ---------------
---------- ------------- ---------------
</TABLE>

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

(1) Adjusted to give effect to the assumed conversion of the 26,675 shares of
Series A Preferred Stock of the Company outstanding into 26,675 shares of
Common Stock and the accrual of $5,882,000 in dividends on such preferred
stock as of such conversion.

(2) Pro forma to give effect to the receipt of the net proceeds of $187,000,000
from the sale of shares of Common Stock offered by the Company hereby (at an
assumed initial public offering price of $ per share and after
deducting underwriting discounts and commissions and estimated offering
expenses) and the application of the estimated net proceeds therefrom for
the repayment of $18,330,000 in notes and accrued interest payable to EKI,
$1,258,000 in notes payable to Imperial Bank and the payment of preferred
dividends of $5,882,000. See "Use of Proceeds" and "Capitalization."

(3) Excludes 4,280 shares issuable upon exercise of outstanding stock options.
See "Management--Stock Option Plans."

(4) Deficit accumulated during the development stage includes $5,882,000 of
dividends paid upon conversion of shares of Series A Preferred Stock to
shares of Common Stock.

18
<PAGE>
DILUTION

The pro forma net tangible deficit of the Company as of June 30, 1996 was
$26,029,000, or $76.18 per share, assuming the conversion of the Company's
outstanding Series A Preferred Stock into 26,675 shares of Common Stock as of
such date. Net tangible deficit per share is determined by dividing the tangible
deficit of the Company (tangible assets less total liabilities) by the number of
shares outstanding. Without taking into account any changes in such pro forma
net tangible deficit after June 30, 1996 other than to give effect to the sale
of the shares of Common Stock offered by the Company hereby at an assumed
initial public offering price of $ per share, pro forma net tangible book
value of the Company as of June 30, 1996 would have been approximately $ ,
or $ per share (after deducting the underwriting discounts and commissions and
estimated offering expenses payable by the Company). This represents an
immediate increase in pro forma net tangible book value of $ per share to
existing stockholders and an immediate dilution of $ per share to new
stockholders. Dilution to new stockholders is determined by subtracting the pro
forma net tangible book value per share after the Offering from the initial
public offering price per share. The following table illustrates this per-share
dilution.

<TABLE>
<S> <C> <C>
Initial public offering price per share................. $

Pro forma net tangible deficit per share before
offering (1)........................................ $

Increase per share attributable to new stockholders...

Pro forma net tangible book value per share after
offering..............................................

Dilution per share to new stockholders.................. $
</TABLE>

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

(1) The table excludes shares issuable and proceeds that would be received upon
exercise of options outstanding on June 30, 1996. See "Management--Stock
Option Plans" and "Description of Capital Stock."

The following table summarizes, as of June 30, 1996, the number of shares
purchased from the Company, the total investment made and the average price per
share invested by existing stockholders and new stockholders.

<TABLE>
<CAPTION>
SHARES
PURCHASED (1)(2) TOTAL INVESTMENT AVERAGE
----------------- -------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 341,675 % $26,685,000 % $78.10
New stockholders..............
------- ------- ----------- ------- ---------
Total..................... 100% $ 100% $
------- ------- ----------- ------- ---------
------- ------- ----------- ------- ---------
</TABLE>

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

(1) Includes shares of Common Stock issuable upon conversion of the 26,675
shares of Series A Preferred Stock of the Company outstanding into 26,675
shares of Common Stock. Excludes 4,280 shares issuable upon the exercise of
4,280 stock options outstanding. See "Management--Stock Option Plans" and
"Description of Capital Stock."

(2) Sales by the Selling Stockholders in the Offering will reduce the number of
shares held by existing stockholders to or approximately % (or
approximately % if the Underwriters' over-allotment option is exercised in
full) and will increase the number of shares purchased by new stockholders
to or approximately % (or approximately % if the Underwriters' over-
allotment option is exercised in full) of the total number of shares of
Common Stock outstanding after the Offering.

19
<PAGE>
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The selected financial data presented below at December 31, 1994 and 1995,
and for each of the years in the three-year period ended December 31, 1995, are
derived from the financial statements of the Company, audited by Deloitte &
Touche LLP, independent auditors, included elsewhere in this Prospectus. The
balance sheet information for the year ended December 31, 1993 is derived from
audited financial statement balance sheets that are not included elsewhere in
this Prospectus. The financial data for the year ended December 31, 1993 also
includes the Company's results of operations for the period from November 1,
1992 (inception) through December 31, 1992. The selected financial data for the
six months ended June 30, 1995 and 1996, and for the period from inception,
November 1, 1992, through June 30, 1996, have been derived from the unaudited
financial statements of the Company. In the opinion of management, the unaudited
financial statements have been prepared on the same basis as the audited
financial statements and include all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of the financial position and the
results of operations for these periods. The results for the six-month period
ended June 30, 1996 are not necessarily indicative of the results to be expected
for the entire year.

<TABLE>
<CAPTION>
NOVEMBER 1,
1992
SIX MONTHS ENDED (INCEPTION)
YEAR ENDED DECEMBER 31, JUNE 30, THROUGH
------------------------------- -------------------- JUNE 30,
1993 (1) 1994 1995 1995 1996 1996
--------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Research and development expenses............ $ 3,309 $ 11,411 $ 9,384 $ 4,274 $ 5,306 $ 29,410
General and administrative expenses.......... 2,500 2,947 2,079 773 1,092 8,616
Interest (income) expenses, net.............. (147) (290) 478 97 647 688
Depreciation................................. 601 797 44 6 116 1,558
Patent prosecution expenses.................. 1,520 1,717 1,929 1,301 782 5,948
Net loss..................................... (7,783) (16,582) (13,914) (6,452) (7,944) (46,223)
Pro forma net loss per share(2)(3)........... $ 40.31 $ 23.02
Weighted average shares used in computing pro
forma net loss per share(3)................ 345,163 345,163
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1996
------------------------------- ------------------------
1993 1994 1995 ACTUAL PRO FORMA (2)
--------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......................... $ 16,170 $ 2,885 $ 266 $ 61 $ 61
Working capital (deficit)......................... 15,230 (124) (14,569) (22,648) (28,530)
Total assets...................................... 17,640 3,250 2,228 2,598 2,598
Notes payable, accrued interest and accrued
dividends....................................... -- 2,000 12,985 19,588 25,470
Deficit accumulated during development stage...... (7,783) (24,365) (38,279) (46,223) (52,105)
Stockholders' equity (deficit)(4)................. 16,700 118 (12,678) (20,147) (26,029)
</TABLE>

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

(1) Includes the financial results for the period from November 1, 1992
(inception) through December 31, 1992.

(2) Pro forma to give effect to the assumed conversion of the 26,675 shares of
Series A Preferred Stock of the Company outstanding into 26,675 shares of
Common Stock and accrual of $5,882,000 in dividends on such preferred stock
as of such conversion.

(4) No cash dividends were declared or paid in any of the periods presented
except as noted in note (2) above.

20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company was organized in November 1992 as a Delaware corporation and
remains a development-stage enterprise. The Company's principal stockholder,
EKI, and its predecessor have been involved since July 1985 in the development
of various new material technologies including the ALI-ITE composite material.
The Company was formed to develop, license and commercialize food-service
disposables made of ALI-ITE composite material. The Company has an exclusive,
worldwide, royalty-free license from EKI to use certain technology for this
purpose. The Company intends to license or joint venture with existing
manufacturers of food-service disposables for the manufacture and distribution
of EARTHSHELL products. The Company expects to derive revenues primarily from
license royalties, income from joint venture royalties and lease payments from
equipment leased to manufacturers of EARTHSHELL products.

The Company has incurred aggregate net losses of approximately $46 million
from its inception in November 1992 through June 30, 1996. The Company has been
unprofitable to date and expects to continue to suffer operating losses until
its products are commercially introduced and receive widespread market
acceptance. Since its inception, the Company has not generated any revenues from
operations. Successful future operations will depend upon the ability of the
Company, its licensees and joint venture partners to commercialize EARTHSHELL
products.

The Company has financed its operations from inception primarily through the
private placement of preferred stock and loans from its principal stockholder,
EKI. The Company's principal activities to date have included material and
product development, development of commercial manufacturing processes,
demonstration of the licensed technology, licensing the licensed technology to
key manufacturers and producers and obtaining the patent protection of the
licensed technology. The accompanying financial statements reflect the costs and
expenses related to the development of the licensed technology as it relates to
food-service disposables since the Company's formation in 1992.

Since inception, the Company has relied on EKI to provide extensive
administrative, management and technical support. From September 1, 1993 through
June 30, 1994, the Company operated under a Management, Administrative Services
and Professional Services Agreement (the "Management Agreement") with EKI,
providing for the reimbursement to EKI of direct research expenses and an
allocation of EKI's overhead and general administrative costs based on a
percentage of payroll costs charged to Company-specific projects. The agreement
also provided for the payment of monthly administrative fees. Effective July 1,
1994, the Company and EKI entered into a Technical Services and Sublease
Agreement (the "Technical Services Agreement") which superseded the Management
Agreement. Under the terms of this agreement, the Company pays EKI for all
direct project labor hours incurred at specified hourly billing rates and direct
expenses incurred on approved projects. In addition, the Technical Services
Agreement eliminated the payment of the administrative fee to EKI. See
"Business--Relationship with EKI."

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) COMPARED TO SIX MONTHS ENDED JUNE
30, 1995 (UNAUDITED)

The Company's net loss increased $1,492,000 from $6,452,000 for the six
months ended June 30, 1995 to $7,944,000 for the six months ended June 30, 1996.
The Company has generated no revenues from operations since its inception.

Research and development expenditures for the development of EARTHSHELL
products increased $1,032,000 from $4,274,000 for the six months ended June 30,
1995 to $5,306,000 for the six months ended June 30, 1996. This increase was
primarily due to the Company's development of the EARTHSHELL sandwich container
pilot manufacturing line at the Genpak research facility in South Carolina.

21
<PAGE>
General and administrative expenses increased $319,000 from $773,000 for the
six months ended June 30, 1995 to $1,092,000 for the six months ended June 30,
1996. The increase was due primarily to the recognition of compensation expense
related to stock options.

Depreciation expense increased $110,000 from $6,000 for the six months ended
June 30, 1995 to $116,000 for the six months ended June 30, 1996. The increase
in depreciation was mainly due to the purchase of pilot manufacturing equipment
for EARTHSHELL sandwich containers.

Patent prosecution expenses under the Patent Allocation Agreement with EKI
decreased $519,000 from $1,301,000 for the six months ended June 30, 1995 to
$782,000 for the six months ended June 30, 1996. The decrease was primarily as a
result of filing fewer new patent applications.

Net interest expense increased $550,000 from $97,000 for the six months
ended June 30, 1995 to $647,000 for the six months ended June 30, 1996. The
increase in net interest expense was due to additional borrowings from EKI.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

Research and development expenditures for the development of EARTHSHELL
products decreased $2,027,000 from $11,411,000 for the year ended December 31,
1994 to $9,384,000 for the year ended December 31, 1995. This decrease was
primarily due to the reduction in project costs related to the development and
testing of a pilot EARTHSHELL paper line.

General and administrative expenses decreased $869,000 from $2,947,000 to
$2,078,000 for the years ended December 31, 1994 and 1995, respectively. This
decrease was primarily due to the elimination in 1995 of the administrative fees
which were paid to EKI in 1994. The elimination of the administrative fees paid
to EKI was partially offset by an increase in salary expense as the Company
hired key executives to position itself for commercial product introduction.

Depreciation expense decreased from $753,000 from $797,000 for the year
ended December 31, 1994 to $44,000 for the year ended December 31, 1995. The
decrease was largely due to the sale on December 31, 1994 of substantially all
of the Company's laboratory equipment and leasehold improvements to EKI at their
original acquisition price. In addition, the Company sold surplus commercial
process equipment originally purchased for the pilot EARTHSHELL paper line to a
third party in March 1995.

Patent prosecution expenses under the Patent Allocation Agreement with EKI
increased $212,000 from $1,717,000 for the year ended December 31, 1994 to
$1,929,000 for the year ended December 31, 1995. The increase was due primarily
to the filing of additional patent applications in foreign countries.

Net interest expense increased $768,000 from $290,000 interest earnings for
the year ended December 31, 1994 to $478,000 interest expense for the year ended
December 31, 1995. The increase in interest expense was due primarily to
borrowings from EKI in 1995.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
(INCLUDING PERIOD FROM NOVEMBER 1, 1992 (DATE OF INCEPTION) TO DECEMBER 31,
1992)

The Company's net loss increased $8,799,000 from $7,783,000 for the year
ended December 31, 1993 (including the period from November 1, 1992 (date of
inception) to December 31, 1992) to $16,582,000 for the year ended December 31,
1994. This increase was due primarily to expenditures in connection with the
development and commercialization of EARTHSHELL products.

Research and development expenses increased $8,102,000 from $3,309,000 for
the year ended December 31, 1993 to $11,411,000 for the year ended December 31,
1994. The increase was due primarily to the shift from organizational activities
and basic laboratory research to extensive commercialization activities.

General and administrative expenses increased $448,000 from $2,500,000 for
the year ended December 31, 1993 to $2,947,000 for the year ended December 31,
1994. This increase was due primarily to the

22
<PAGE>
Company hiring its own executive and administrative staff. From its inception
through July 1, 1994, the Company relied on EKI to provide extensive
administrative and management support and reimbursed EKI for an allocation of
EKI's overhead and general and administrative costs. However, beginning in the
last quarter of 1993, the Company began to hire its own executive and
administrative staff to minimize the reliance on EKI for such services.

Depreciation expense increased $196,000 from $601,000 for the year ended
December 31, 1993 to $797,000 for the year ended December 31, 1994. The increase
was due to the purchase of commercial pilot manufacturing equipment for
EARTHSHELL paper as the Company transitioned from organizational activities and
basic laboratory research to extensive commercialization activities.

Patent prosecution expenses under the Patent Allocation Agreement increased
$197,000 from $1,520,000 for the year ended December 31, 1993 to $1,717,000 for
the year ended December 31, 1994. The increase was primarily attributable to an
increased number of patent applications.

Net interest income increased $142,000 from $148,000 for the year ended
December 31, 1993 to $290,000 for the year ended December 31, 1994. The increase
in interest income was due to the investment of the remaining cash proceeds from
the private offering of the Company's Series A Preferred Stock completed in
September 1993.

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations from inception primarily through the
private placement of its Series A Preferred Stock and loans from EKI. Net
proceeds from the September 1993 private placement of Series A Preferred Stock
totaled $24,473,000. Loans from EKI totaled $17,977,000 as of June 30, 1996.

From inception through June 30, 1996, the Company used approximately
$28,041,000 of cash for operating activities, and approximately $4,648,000 in
investing activities. Cash and cash equivalents at June 30, 1996 totaled
$61,000.

As a development stage enterprise, the Company relied primarily on funding
from the Series A Preferred Stock private placement offering to sustain its
operations during 1994. Subsequent to December 31, 1994, the Company's
operations have been funded with loans from EKI. As of June 30, 1996, notes
payable to EKI totaled $17,977,000. The promissory notes evidencing these
obligations are payable on demand and provide for interest at an initial annual
rate of 8.25%, compounded quarterly. The interest rate on the notes payable to
EKI is adjusted quarterly to equal the current prime rate as published in THE
WALL STREET JOURNAL. Although EKI has made these loans to the Company to fund
its on-going operations, EKI is under no obligation to make additional loans or
capital contributions to the Company. In June 1996, the Company established a
$3,000,000 line of credit with Imperial Bank which was subsequently increased to
$4,500,000 in July 1996. Borrowings under this line of credit have been
guaranteed by EKI, Mr. Essam Khashoggi, the Chairman of the Board and indirect
controlling shareholder of the Company, and a trust controlled by Mr. Khashoggi.
In connection with such financing, the Company issued to Imperial Bank warrants
to purchase $150,000 of common stock issuable upon the completion of the
Offering at a per share price equal to the price per share in an initial public
offering of the Company's common stock. Interest is payable monthly on the note
evidencing this obligation at an annual rate of 1% in excess of the Bank's
announced prime lending rate which varies with any change in such prime rate.
The annual interest rate at June 30, 1996 was 9.25% and outstanding principal
was $1,408,000.

The Company has incurred aggregate net operating losses of approximately $46
million from its inception in November 1992 through June 30, 1996. Primarily
because of the Company's history of operating losses and its reliance on its
stockholders to provide cash flow to sustain operations, there is substantial
doubt about the Company's ability to continue as a going concern unless the
Company is able to obtain equity financing through the Offering, loans from its
principal stockholder or otherwise. Without the proceeds of the Offering or
other funding, the Company would run out of cash to fund its operations. The
report of independent accountants on the Company's financial statements included
herein includes an

23
<PAGE>
explanatory paragraph to this effect. The Company believes that the proceeds of
the Offering will be sufficient to meet its currently foreseeable working
capital requirements through at least the next two years.

NET OPERATING LOSS TAX CARRYFORWARDS

The Company has sustained net operating losses ("NOLs") for federal income
tax purposes in the aggregate amount of approximately $26,011,000 from its
inception through December 31, 1995. Under the Internal Revenue Code of 1986, as
amended (the "Code"), the Company generally would be entitled to reduce its
future federal income tax liabilities by carrying unused NOLs forward for a
period of 15 years to offset future taxable income earned.

In the event that the Company is subject to the federal personal holding
company tax in any taxable year, the Company will only be able to use its NOLs,
if any, from the immediately preceding taxable year to offset its income subject
to the personal holding company tax for such year. See "Certain United States
Federal Tax Considerations."

24
<PAGE>
BUSINESS

The Company's objective is to establish EARTHSHELL products as the preferred
disposable packaging for the food-service industry throughout the world. The
Company intends to work with major users of food-service disposables in the
development and testing of prototype EARTHSHELL products to demonstrate product
performance and cost in order to encourage their adoption. For example, as a
result of its work with the Company, McDonald's has begun a market test of the
first EARTHSHELL product, the EARTHSHELL QPC sandwich container, in
approximately 40 McDonald's restaurants in the Las Vegas area.

The Company intends to grant licenses to or joint venture with existing
manufacturers of disposable packaging for the manufacture and distribution of
EARTHSHELL products. By licensing its technology or entering into joint venture
relationships, the Company believes it can take advantage of the manufacturing
experience and distribution networks of existing manufacturers, thereby
accelerating the market penetration of EARTHSHELL products. The Company intends
to use a substantial portion of the proceeds of the Offering to construct
turnkey manufacturing lines for lease to its licensees or contribution to joint
ventures. The Company intends to engage a leading food processing and packaging
engineering firm to design and manage the construction of these manufacturing
lines. The Company expects that substantially all of its revenues will come from
royalties paid by the manufacturers of EARTHSHELL products, income from its
joint venture manufacturing of EARTHSHELL products and lease payments for
equipment leased to licensee or joint venture manufacturers of EARTHSHELL
products. To date, the Company has entered into licensing arrangements with
several manufacturers of conventional packaging products, including Genpak,
Sweetheart and Dopaco, each of which has agreed to pay an effective royalty of
20% of the wholesale price of EARTHSHELL products sold.

ALI-ITE composite material was developed through more than 10 years of basic
materials science research by EKI, the Company's principal stockholder. EKI has
received 13 U.S. and 17 foreign patents with respect to the compounds,
manufacturing processes and product designs applicable to EARTHSHELL products
and has 61 U.S. and 136 foreign patent applications pending. Since the Company's
inception in November 1992, the Company has expended approximately $46 million
(including research and development, patent prosecution, capital equipment and
general and administrative expenditures) to develop commercially viable
food-service disposables based on this research. The Company has an exclusive,
worldwide, royalty-free license from EKI to use and license the technology and
any improvements in connection with the manufacture and sale of selected
disposable food and beverage containers for use in the food-service industry. In
general, the license permits the Company and its licensees to use the technology
to manufacture and sell disposable, single use containers for packaging or
serving food or beverages intended for consumption within a short period of time
(less than 24 hours). See "--Relationship with EKI."

25
<PAGE>
BACKGROUND

For example, while polystyrene products are relatively inexpensive and
provide good insulation, their manufacture and disposal have been shown to have
adverse environmental consequences. Production of polystyrene products requires
the processing of non-renewable crude oil and natural gas and also results in
the release of significant amounts of hydrocarbons into the atmosphere, which
can contribute to the formation of smog. Because polystyrene does not easily
degrade, polystyrene litter can accumulate and remain visible on beaches, lake
shores and roadways. Environmentally concerned consumers have actively lobbied
against the use of polystyrene packaging, and a number of communities have
banned polystyrene disposables. Because of environmental and performance
concerns, a number of quick-serve restaurant chains, including McDonald's, have
reduced their use of polystyrene products in favor of paper.

Paper products in many instances are more expensive than polystyrene
products, offer reduced functional performance and have their own set of adverse
environmental consequences. The paper industry uses the wood from millions of
trees each year, and the manufacture of paper products requires substantial
amounts of energy and releases significant amounts of pollutants into both the
air and water. Corrugated paper and plastic laminate ("F-flute") sandwich
containers, which are currently used by McDonald's to package large sandwiches,
and paper wraps have both been used as replacements for polystyrene sandwich
containers, but are generally less effective at maintaining a sandwich's shape.
Similarly, paper hot cups are much less effective at heat insulation than
polystyrene foam cups, resulting in "double cupping" in some instances.

A number of companies have introduced rice and other starch-based materials
as potential environmentally superior packaging alternatives; to date, many of
these materials have suffered from performance limitations and have not proven
to be economically viable methods of packaging. A number of companies are also
developing biodegradable plastics and other specialty polymers which may be used
to manufacture food service disposables with a reduced environmental impact,
although many of these products have also suffered from cost and performance
limitations.

THE EARTHSHELL SOLUTION

The Company believes that EARTHSHELL products offer a better alternative to
the current packaging products used in the food service industry.

PERFORMANCE CHARACTERISTICS. The Company believes that EARTHSHELL products
can be engineered in many instances to address the specific needs of
food-service operators. For example, the Company has designed the EARTHSHELL QPC
sandwich container to be strong and rigid in order to better protect sandwich
shape and enhance sandwich presentation, particularly for take-out orders. The
prototype EARTHSHELL cold cup has been designed to be strong and rigid, even
after holding liquid over a period of time. The prototype EARTHSHELL hot cup has
been engineered to offer better heat insulation than existing paper hot cups,
thereby eliminating the need to "double cup" hot beverages. EARTHSHELL hot and
cold cups made of ALI-ITE composite material can be designed to have a more
desirable "mouth feel" than existing polystyrene cups. The EARTHSHELL hot and
cold cups can also be designed to fit existing lids.

COST COMPETITIVE. The Company believes that EARTHSHELL products can be
manufactured at costs which are competitive with existing food-service
disposables. EARTHSHELL products are made in large part of low-cost abundant
materials such as limestone and sand. The Company has produced test quantities
of EARTHSHELL QPC sandwich containers at its pilot facility at which the
components of ALI-ITE composite material are mixed in standard mixers, formed in
conventional baking ovens, coated with standard spray equipment and printed on
standard egg carton printers, all modified to varying degrees to produce the
EARTHSHELL QPC sandwich container. These production processes have been
developed and long used in

26
<PAGE>
other manufacturing industries, and the Company believes they can be adapted to
the production of EARTHSHELL products. The manufacture and distribution of an
EARTHSHELL QPC sandwich container requires relatively small amounts of energy
when compared to the manufacture and distribution of F-flute paper and
polystyrene sandwich containers. Although the EARTHSHELL QPC sandwich container
has not been produced commercially on a fully integrated production line and
there can be no assurance as to its actual cost when so produced, the Company
believes that the price of the EARTHSHELL QPC sandwich container (including the
Company's royalty) will be less than the price of the F-flute sandwich container
currently being used by McDonald's and somewhat greater than the price of a
polystyrene sandwich container. The Company expects that the cost of producing
the EARTHSHELL QPC sandwich container will decrease over time as the technology
and initial production processes are further refined.

ENVIRONMENTAL IMPACT. The Company believes that EARTHSHELL products can be
designed to have a reduced impact on the environment in several significant
areas when compared to existing disposable food packaging products. According to
a comprehensive life cycle inventory conducted by Franklin Associates, Ltd., a
leading environmental consulting firm retained by the Company, polystyrene foam
and F-flute paper sandwich containers require approximately 78% and 56% more
energy, respectively, to manufacture and distribute than the EARTHSHELL QPC
sandwich container. Also according to this study, while the EarthShell QPC
sandwich container is not better in all categories of emissions, the manufacture
and distribution of the EarthShell QPC sandwich container releases significantly
smaller quantities of many pollutants into the air and water than the F-Flute
paper sandwich container. Moreover, unlike paper and polystyrene disposable food
packaging which are manufactured primarily from precious resources such as trees
and crude oil, EARTHSHELL products are composed primarily of low-cost, abundant
and naturally occurring ingredients (such as powdered limestone, sand and
water), abundant renewable resources (such as natural starches), and relatively
small amounts of wood fiber.

The use of EARTHSHELL products could also help mitigate one of the main
problems associated with disposable packaging materials--litter. Most of the
paper and polystyrene containers that wash-up on beaches and lake shores can be
traced to storm sewers which carry these materials into natural waterways. The
Company believes that EARTHSHELL products could help relieve this problem
because EARTHSHELL products will dissolve in water into its component parts.

EARTHSHELL products also offer a number of disposal alternatives not
available with conventional paper and polystyrene foam packaging. For example,
research commissioned by the Company and performed by Cal Recovery Inc., an
international waste management consulting company, shows that EARTHSHELL QPC
sandwich containers can be composted in a backyard compost pile, and used as a
soil conditioner. The State University of New York, Stony Brook has completed a
field test, commissioned by the Company, using the Town of Easthampton
composting facility on Long Island, New York to demonstrate that EARTHSHELL QPC
sandwich containers can be composted commercially. While food-service
disposables are not commonly recycled through composting, the ability of
EARTHSHELL products to be composted may be a significant advantage if this
method of recycling becomes more widely used.

While the Company believes that EarthShell products offer a better
alternative to current food-service disposables based on performance
characteristics, expected cost of production and environmental impact,
EarthShell products are undergoing development and have yet to be produced
commercially or introduced to the public on a widespread basis. Additionally,
certain environmental groups and others may disagree with the Company's
conclusions concerning the comparative environmental impact of EarthShell
products. See "Risk Factors--Uncertain Production Costs," "--Environmental
Impact of Products," "--Risk of Adverse Performance Characteristics," "--Need
for Continued Development of Products and Manufacturing Processes" and "--Lack
of Market Acceptance."

BUSINESS STRATEGY

The Company believes that EARTHSHELL products can be designed to have
superior performance characteristics, will be able to be produced at a
competitive cost and will have a reduced environmental impact in many respects
of their manufacture and disposal, as compared to many of the conventional

27
<PAGE>
paper, polystyrene foam and plastic food-service disposables currently in use.
Accordingly, the Company's objective is to establish EARTHSHELL products as the
preferred disposable packaging for the food-service industry throughout the
world. The key elements of the Company's strategy for attaining this objective
are:

CREATE CONSUMER DEMAND FOR EARTHSHELL PRODUCTS. The Company will continue
to work with the major users of food-service disposables in the development and
testing of prototype products to demonstrate product performance and cost and
encourage the adoption of EARTHSHELL products. For example, as a result of its
work with the Company, McDonald's has begun a market test of the first
EARTHSHELL product, a sandwich container for the McDonald's QPC sandwich, in
approximately 40 McDonald's restaurants in the Las Vegas area. The Company
believes that the adoption of EARTHSHELL products by influential users, such as
McDonald's, will accelerate the adoption of EARTHSHELL products by other users.
The Company is currently working with, and has developed prototype products for,
several other significant users of food-service disposables. The Company intends
to use a portion of the proceeds of the Offering to construct a product
development and commercial manufacturing demonstration facility at which it
intends to develop and produce prototype EARTHSHELL products for commercial
testing by food-service operators.

CREATE BRAND AWARENESS. The Company intends to develop a high level of
consumer awareness of the brand name EARTHSHELL. In connection with the
commercial introduction of its products, the Company plans to use a portion of
the proceeds of the Offering to launch an initial public relations and
advertising campaign which will include television and print advertising
describing the benefits of EARTHSHELL products. The Company also intends to
promote the environmental benefits of EARTHSHELL products to environmental
groups, policy makers, legislators, the media and the general public. The
Company intends to promote the use of the EARTHSHELL brand name on all
EARTHSHELL products by either requiring licensees to place the EARTHSHELL logo
on the products or allowing them a 2% royalty rebate (resulting in an effective
royalty rate of 20%) for all products on which the logo is displayed.

LICENSE EXISTING MANUFACTURERS OF FOOD-SERVICE DISPOSABLES. The Company's
strategy is to license or joint venture with existing manufacturers of
disposable packaging for the manufacture and distribution of EARTHSHELL
products. By licensing its technology or entering into joint venture
relationships, the Company believes it can avoid the time and cost required to
develop its own distribution network. The Company intends to provide its
licensees and joint venture partners with technical and ongoing support designed
to facilitate the application of EARTHSHELL technology, further refine
manufacturing processes, reduce production costs and allow the Company to
monitor product quality.

DEVELOP PRODUCTION CAPACITY. A key element in the Company's strategy is to
drive the development of sufficient production capacity to meet anticipated
demand for EARTHSHELL products. The Company intends to use a substantial portion
of the proceeds of the Offering to construct turnkey manufacturing lines for
lease to its licensees or contribution to joint ventures. The Company intends to
engage Simons Engineering, a leading food processing and packaging engineering
firm, to design and manage the construction of these manufacturing lines. In
order to ensure that manufacturing equipment is properly installed, integrated
and producing EARTHSHELL products of acceptable quality, the Company intends to
deliver manufacturing lines on a turnkey basis, fully installed and tested at
the licensee's or joint venturer's facility.

DEVELOP INTERNATIONAL MARKETS. In international markets, the Company's
strategy is to introduce EARTHSHELL products through international quick-serve
restaurant industry leaders, such as McDonald's, who will have already
introduced EARTHSHELL food-service disposables in the United States. The Company
intends to enter into strategic joint ventures with key international industry
participants who enjoy strong positions in their respective markets.

PROTECT EARTHSHELL TECHNOLOGY. The Company, together with EKI, will
continue to seek extensive patent protection broadly covering the development
and composition of ALI-ITE composite material, as well as the manufacturing
equipment and processes used to create EARTHSHELL products. The Company and EKI
intend to continue to seek domestic and international patent protection for
developments in the

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<PAGE>
technology and intend to vigorously enforce their rights against any person
thought to be infringing the technology.

FOOD-SERVICE DISPOSABLES MARKET

According to an industry study, more than $8 billion was spent in the United
States during 1994 on the types of food-service disposables that the Company
believes can be made of ALI-ITE composite material. In addition, according to an
industry study, approximately $4.4 billion was spent in the United Kingdom,
France, Germany, Belgium, the Netherlands, Japan, Australia and Brazil on such
products. While these countries together with the U.S. constitute only 14% of
the world population, they nevertheless expended approximately $12 billion on
food service disposables. The Company believes that the remaining international
markets also present significant opportunities for EARTHSHELL products.

According to an industry study, in 1994 U.S. sales of those food-service
disposables targeted for replacement by EARTHSHELL products were as follows:

<TABLE>
<CAPTION>
EARTHSHELL TARGET MARKET
1994 U.S. PURCHASES
(DOLLARS IN MILLIONS)
- ---------------------------------------------------------------------------------------------------
AMOUNT OF
PRODUCT TYPE PURCHASES PERCENT
- ------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Cold Cups................................................................ $ 1,460 17.6%
Hot Cups................................................................. 850 10.2
Cups for home use........................................................ 440 5.3
Plates and Bowls......................................................... 1,640 19.8
Containers, Trays and Carriers........................................... 1,230 14.8
Pizza Boxes.............................................................. 680 8.2
Beverage Lids............................................................ 620 7.5
Cutlery.................................................................. 600 7.2
Hinged-lid Containers.................................................... 500 6.0
Wraps.................................................................... 280 3.4
----------- -----
Total................................................................ $ 8,300 100.0%
----------- -----
----------- -----
</TABLE>

According to an industry study on the U.S. market, approximately 48% of the
total food-service disposables purchased in 1994 were purchased by quick-serve
restaurants, 40% by other institutions, such as hospitals, stadiums, airlines,
schools and restaurants (other than quick-serve restaurants), and the remaining
12% by retail stores. Of the food-service disposables purchased in the United
States by quick-serve restaurants and other institutions, approximately 55% were
made of paper and 45% were made of plastic or polystyrene foam or foil.

The Company has completed the initial development of the first EARTHSHELL
product, a hinged-lid container for the McDonald's QPC sandwich, although the
Company anticipates that this product will undergo ongoing refinement prior to
and following its commercial introduction. The Company has also developed
prototype hot cups, cold cups, plates, bowls and other hinged containers. The
Company anticipates that EARTHSHELL products will ultimately include hinged-lid
containers, hot cups, cold cups, containers and trays, pizza boxes, plates and
bowls and may include cutlery. A number of these products, including some cold
beverage cups and lids, may be made from a paper-like application of ALI-ITE
composite material. The Company anticipates that the development of
manufacturing processes for the manufacture of ALI-ITE paper roll stock, as well
as the design and development of EARTHSHELL paper products, will require
substantial time, effort and expense. Additionally, the Company anticipates that
the production of EARTHSHELL cutlery will require the development and testing of
a hot press production process and formulations of ALI-ITE composite material
specifically engineered for this process. No assurance can be given that the
Company will be successful in developing the commercial process for
ALI-ITE composite material paper-like application or the hot press production
process for cutlery.

29
<PAGE>
THE TECHNOLOGY

ALI-ITE composite material was developed through more than 10 years of basic
research by EKI, the Company's principal stockholder, in the materials science
of natural minerals (such as limestone and sand) and natural binders (such as
potato and corn starch). EKI has employed materials science methodologies and
state-of-the-art analytical equipment and research methods unconstrained by any
specific materials or processes to develop this proprietary composite material
and related manufacturing processes.

EKI made several significant discoveries that led to the commercialization
of this new composite material. For example, EKI learned how to use a higher
percentage of natural, low-cost fillers (such as limestone and sand) in the
composite. These fillers reduce cost and provide rigidity, thermal stability and
environmental benefits to the materials, without significantly compromising the
strength, flexibility and moldability of the material. EKI also learned how to
disperse fibers into the material at a lower water content than paper, resulting
in a reduction in the amount of natural fibers necessary to give the material
flexibility and toughness. EKI also engineered ALI-ITE composite material to
allow the manufacturing of EARTHSHELL products using conventional processes such
as heated molds. The result of these discoveries is a new composite material
which can be made from low-cost limestone, sand, starches, fibers and other
materials, which can be processed using existing manufacturing processes and
equipment and which the Company believes can be engineered for specific product
applications and performance characteristics with reduced environmental impact
in many respects.

The Company's initial research and development efforts have focused on
EARTHSHELL products made from a moldable foam-like formulation of ALI-ITE
composite material. The EARTHSHELL QPC sandwich container and the Company's
current prototype products are made of this formulation. There is also a
paper-like application of ALI-ITE composite material that the Company believes
can also be formulated into EARTHSHELL food-service disposables in the future.

EKI has received 13 U.S. patents and 17 foreign patents with respect to
compositions, manufacturing processes and product designs applicable to
EARTHSHELL products and has 61 U.S. and 136 foreign patent applications pending.
The Company believes that these patents provide coverage of the composition,
certain manufacturing equipment and processes and use of advanced, inorganically
filled, composite materials. The Company has received one issued patent and
notices of allowance on four additional patent applications relating
specifically to molded food and beverage containers manufactured from the
formulation of ALI-ITE composite material, used in the EARTHSHELL QPC sandwich
container and substantially all of the other EARTHSHELL products currently under
development. The Company has an exclusive, worldwide, royalty-free license from
EKI to use and license this technology and any improvements in connection with
the manufacture and sale of selected disposable food and beverage containers for
use primarily in the food-service industry. In general, this license permits the
Company and its licensees to use the technology to manufacture and sell
disposable, single use containers for packaging or serving food or beverages
intended for consumption within a short period of time (less than 24 hours), and
excludes containers intended for the long term storage of food, such as soft
drink cans, milk cartons, cereal boxes and frozen food containers. See
"--Relationship with EKI."

Although the initial development of ALI-ITE composite material was conducted
by EKI, the Company has incurred substantial expenses in connection with the
application of this technology to the food-service packaging market since the
Company's formation in 1992. The Company's research and development expenses in
the years ended December 31, 1993, 1994 and 1995 were approximately $3,309,000,
$11,411,000 and $9,384,000, respectively. The Company's research and development
efforts are ongoing and the Company expects to continue to incur substantial
research and development expenses in the future.

MARKETING

The Company's primary marketing strategies are to work directly with major
users and distributors of food-service disposables to encourage their adoption
of EARTHSHELL products and to develop consumer awareness of the brand name
EARTHSHELL and the environmental benefits of EARTHSHELL products. In

30
<PAGE>
working with significant users of food-service disposables, the Company expects
to develop specific prototype products designed to address operator
specifications. These operators will then be able to use the prototype products
to perform market tests and determine product performance and cost. The Company
believes that the adoption of EARTHSHELL products by influential users, such as
McDonald's, will accelerate market penetration of EARTHSHELL products, as well
as promote the interest of existing container manufacturers in producing and
distributing EARTHSHELL products.

The Company intends to use a portion of the proceeds of the Offering to
construct a product development and commercial manufacturing demonstration
facility at which it intends to develop and produce prototype EARTHSHELL
products for commercial testing by food-service operators. The demonstration
facility is expected to include a laboratory at which Company engineers will be
able to computer design and produce prototype products and make prototype
product machine molds. The facility is also expected to include one or more
demonstration commercial production lines at which the laboratory produced molds
can be used to produce prototype products on commercial machines in sufficient
quantities to permit in-store testing.

In order to introduce EARTHSHELL products to the public, the Company plans
to launch an advertising campaign which will include television and print
advertising describing the benefits of EARTHSHELL products. This advertising
campaign will be designed to develop a high level of consumer awareness of the
brand name EARTHSHELL and the environmental benefits of EARTHSHELL products.
McDonald's has also indicated that it intends to support the introduction of the
EARTHSHELL QPC sandwich container with colorful in-store tray liners, counter
displays, a toll-free telephone number and a take-out bag sticker. As an
additional part of the Company's strategy of establishing brand name
recognition, licensees will either be required to place the EARTHSHELL logo on
all products or will be allowed a 2% royalty rebate (resulting in an effective
royalty rate of 20%) for all products on which the logo is displayed.

Distribution of EARTHSHELL products is expected to be accomplished through
the established product distribution networks of existing manufacturers and
distributors of food service disposables who become licensees of or joint
venture partners with the Company. Because the Company's licensees and joint
venture partners will be responsible for the distribution of EARTHSHELL
products, the Company does not expect to employ substantial numbers of sales or
marketing personnel.

LICENSE AND JOINT VENTURE RELATIONSHIPS

The Company intends to grant licenses to, and enter into joint venture
relationships with, a broad group of companies throughout the world to
manufacture and distribute EARTHSHELL products. Both license agreements and
joint venture relationships will typically be on a non-exclusive basis (except
in some foreign countries where an exclusive relationship may be appropriate)
with a specific geographic and product scope.

Currently, the Company has license agreements with Sweetheart, Genpak,
Dopaco, Mobil Oil Corporation ("Mobil") and International Paper Company
("International Paper") for the manufacture and sale of specific EARTHSHELL
products in the United States, and, in the case of certain of the license
agreements, Canada, Mexico, Central America and the Caribbean. Sweetheart,
Genpak and Dopaco are required to pay to the Company a royalty of 22% (less a 2%
discount if EARTHSHELL products produced by the licensees bear the EARTHSHELL
logo) of the gross sales price of EARTHSHELL products sold by each of them.
Mobil and International Paper are required to pay to the Company a royalty of
20% of the gross sales price of EARTHSHELL products sold by each of them and are
required to place the EARTHSHELL logo on all products. Under the terms of these
agreements, the manufacturers are not obligated to achieve minimum sales quotas
and have the right to terminate the license agreements at their election without
penalty. Unless sooner terminated, each license continues in effect until the
expiration of the Company's license from EKI, subject to the right of the
Company to terminate such license under limited circumstances. The Company may
terminate the license agreements if the royalty payments in any calendar year
are not at least 50% of the royalty payments made in the previous year and, in
the case of the Sweetheart, Genpak and Dopaco license agreements, the Company
may also terminate each such license agreement if

31
<PAGE>
the royalty payments in any calendar year are not $100,000 or greater. Each of
the Sweetheart, Genpak and Dopaco license agreements also provides that, during
the first three years of its term, if the licensee experiences an adverse
material change in circumstances, such as a significant and unexpected increase
in the cost of necessary raw materials, the Company and the licensee will
negotiate appropriate adjustments in the terms of the license. Under the
agreements, all domestic licenses (within the United States of America) granted
by the Company are required to contain substantially the same terms and
conditions so that no domestic licensee will gain a material advantage over
another licensee by virtue of the license agreement. Other than limited
production for the McDonald's Las Vegas area test, none of the licensees are
currently producing or distributing any products under the terms of these
license agreements and the Company has not realized any revenue. The Company
anticipates that it may be necessary, among other things, to provide
manufacturing equipment through leases or joint venture contribution and/or
guarantee the performance of its equipment to induce existing manufacturers of
food-service disposables to begin production of EARTHSHELL products during their
initial commercial introduction.

In addition to licensing its technology, the Company intends to enter into
joint venture or combined joint venture and license relationships. The Company
expects to derive joint venture and license revenues of not less than 20% of the
wholesale price of the EARTHSHELL products sold by the joint venture. The terms
of such joint ventures may include the contribution by the Company of turnkey
manufacturing lines, the grant of exclusive or non-exclusive licenses for
defined territories and, may provide during the initial commercial introduction
of EARTHSHELL products, guarantees of manufacturing line efficiency for a
limited period of time and, funding to meet the joint venture's start-up costs.
The Company anticipates, however, that the terms of such relationships may vary
significantly between joint ventures. To date, the Company has not entered into
any joint venture relationships.

The Company will provide ongoing assistance and technical support to its
licensee manufacturers and joint venture partners. This support will be designed
to facilitate the application of the licensed technology, further develop
manufacturing processes, reduce production costs and allow the Company to
monitor product quality. Because certain properties of natural materials such as
limestone differ depending on the region from which such materials are obtained,
the Company anticipates that its licensees and joint venture partners will also
need to utilize the Company's substantial expertise in inorganic materials in
order to begin successful commercial production of EARTHSHELL products. Support
will be provided by the Company primarily through EKI technical personnel
working on behalf of the Company pursuant to the Technical Services Agreement
and through outside independent consulting firms which have assisted the Company
in developing its products. EKI has constructed a laboratory production facility
which will allow the Company to assist licensees and joint venture partners in
making further refinements to current processes as well as to develop new
production processes. In addition, a portion of the proceeds from the Offering
will be used by the Company to construct a product development and commercial
manufacturing demonstration facility that will produce EARTHSHELL products for
commercial testing as well as serve as a research and development facility, and
support the transfer of technologies to licensees.

Although it has no current intention of doing so, in addition to license
agreements and joint venture relationships, the Company may also decide to
construct its own commercial production facilities and manufacture and
distribute EARTHSHELL products directly.

MANUFACTURING OF EARTHSHELL PRODUCTS

Based on test production of the EARTHSHELL QPC sandwich container by the
Company and Genpak at a pilot manufacturing line in Genpak's facility in Rock
Hill, South Carolina, the Company believes that EARTHSHELL products can be
manufactured on currently available commercial processing equipment, subject to
certain product specific modifications. The manufacturing process consists of
blending the component ingredients of ALI-ITE composite material in a mixer,
depositing the mixture into the cavity molds of a modified ice-cream cone or
wafer baking machine, baking the molded mixture for less than one minute,
removing the product and trimming excess material, spraying on coatings and
printing any desired graphics. The Company's pilot manufacturing line in Rock
Hill, South Carolina utilizes commercial equipment which does not have the
capacity or manufacturing efficiencies required to successfully

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<PAGE>
commercialize EARTHSHELL products. The Company has experienced substantial
delays in the integration and operation of this pilot manufacturing line. The
Company anticipates that the make and model of baking machines used to
manufacture the QPC sandwich container for the McDonald's Las Vegas area test
will not be used for commercial production of the EARTHSHELL QPC sandwich
container. The Company currently estimates that the cost of the machinery
(including the baking machines, mixers, pumps, spray coating equipment and
installation costs) required for a commercial manufacturing line capable of
producing 150 million sandwich containers annually is less than $3.0 million.

The Company has identified a number of equipment manufacturers in Europe
that produce baking machinery on which the Company believes that EARTHSHELL
products can be produced subject to product specific modifications. The Company
believes that these and other equipment manufacturers can produce a sufficient
number of baking machines and other equipment to support the projected
commercial introduction of EARTHSHELL products. Once the Company or a licensee
has made a decision to purchase a commercial line baking machine, the Company
believes that it will take at least six months before the machine is delivered,
can be installed and becomes fully operational. See "Risk Factors--No Existing
Manufacturing Capacity."

As part of its strategy of assisting in the development of sufficient
production capacity to meet anticipated demand for EARTHSHELL products, the
Company expects to use a substantial portion of the proceeds of the Offering to
construct turnkey manufacturing lines for lease to its licensees or contribution
to joint ventures. In order to ensure that manufacturing equipment is properly
installed, integrated and producing EARTHSHELL products of acceptable quality,
the Company intends to deliver manufacturing lines on a turnkey basis,
fully-installed and tested at the licensee's or joint venture's facility. The
Company anticipates that it will engage Simons Engineering or another
engineering firm to assist the Company in all aspects of the design and
construction of manufacturing lines, including the completion of detailed
engineering plans, procurement of vendors and subcontractors for equipment,
construction and installation of equipment, testing of equipment and start-up
and testing of the complete manufacturing line in the licensee's or joint
venture's facility.

Most EARTHSHELL products will require one or more product-specific coatings
to deliver product specific performance characteristics. The EARTHSHELL QPC
sandwich container has an interior (food contact side) wax coating which serves
principally as a moisture barrier. The container also has an exterior coating
which contributes to the flexibility of the product and an additive which
facilitates mold release. The Company is in the process of identifying existing
coatings and additives as well as developing product specific coatings and
additives for use with new products. See "Risk Factors--Need for Continued
Development of Products and Manufacturing Processes."

EARTHSHELL products use naturally occurring raw materials, such as
limestone, starch, wood fiber and water. The Company believes that these raw
materials are currently available from multiple existing suppliers in amounts
sufficient to satisfy projected demand. The Company intends to identify and
qualify suitable suppliers of raw materials for manufacturers of EARTHSHELL
products. See "Risk Factors--Raw Material Supplies."

PATENTS, PROPRIETARY RIGHTS AND TRADEMARKS

The Company's licensed technology is the subject of numerous issued and
pending patents in both the United States and foreign countries. The Company and
EKI intend to continue to seek additional patent protection broadly covering the
development and composition of, as well as the manufacturing equipment and
processes used to create, EARTHSHELL products. The Company has a license from
EKI to the rights to 13 U.S. and 17 foreign patents, as well as 61 U.S. and 136
foreign pending patent applications relating to the compositions, processes and
equipment used to produce EARTHSHELL food and beverage containers. Only one of
the issued patents relates specifically to molded food and beverage containers
manufactured from ALI-ITE composite material, the formulation of ALI-ITE
composite material used in the EARTHSHELL QPC sandwich container and
substantially all of the EARTHSHELL products currently under development. EKI,
however, has also received four notices of allowance with respect to patent
applications relating

33
<PAGE>
specifically to molded products. In addition to its pending patent applications,
several additional U.S. and foreign patent applications are currently being
prepared by EKI. These new applications when filed by EKI, as well as
subsequently filed applications or inventions and improvements, are included
within the scope of EKI's license of technology to the Company to the extent
that they relate to the production and use of disposable food-service containers
made of ALI-ITE composite material. There can be no assurance that the pending
patents relating to the Company's products (including pending patent
applications for which the Company has received notices of allowance) or other
additional patents will be issued or that the Company or EKI will develop new
technology that is patentable. Moreover, there can be no assurance that any
patent issued to EKI and licensed to the Company will not be circumvented or
infringed by others. Patent and patent applications on formulations of ALI-ITE
composite material are based in part on specific proportional mixtures of the
components of the material. The Company continues to undergo testing and
modification of the components and their proportional mixtures to balance
environmental, economic and performance concerns. There can be no assurance that
the mixture that is ultimately determined to be optimal will be protected under
the Company's patents or that it will not be subject to a patent held by others.
The Company is aware of at least one other patent held by others which protects
materials and methods for manufacturing materials containing some similar
components as are found in ALI-ITE composite material. If the optimal mixture is
not protected under the Company's patents or is subject to a patent held by
others, it would have a material adverse effect on the Company's business,
financial condition and results of operations. The Company and EKI have entered
into an agreement regarding the allocation of patent costs relating to patents
and patent applications for EARTHSHELL products and ALI-ITE composite material.
See "--Relationship with EKI--Patent Allocation Agreement."

Litigation may be necessary to enforce patents issued or licensed to the
Company, to protect trade secrets or know-how owned by the Company or to
determine the enforceability, scope and validity of the proprietary rights of
others. Although the Company knows of no infringement by its products of patents
held by others, it is always possible that a third party may assert
infringement. The Company believes that it owns or has the rights to use all
technology incorporated into its products, but an adverse determination in any
such proceedings or in other litigation or infringement proceedings to which the
Company may become a party could subject the Company to significant liabilities
to third parties or require the Company to seek licenses from third parties.
Although patent and intellectual property disputes have often been settled
through licensing or similar arrangements, costs associated with such
arrangements may be substantial and could include ongoing royalties.
Furthermore, there can be no assurance that necessary licenses would be
available to the Company on satisfactory terms or at all. Accordingly, an
adverse determination in a judicial or administrative proceeding or failure to
obtain necessary licenses would prevent the Company from manufacturing or
licensing others to manufacture certain of its products, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.

The Company also relies on proprietary know-how and trade secrets which are
not the subject of patents. Some of this proprietary information is licensed
from EKI and some has been developed by the Company. To protect its rights in
proprietary know-how and trade secrets, both the Company and EKI require certain
employees, consultants, advisors and collaborators to enter into confidentiality
agreements. These confidentiality agreements, however, have limited terms
(typically, five years or less), and there can be no assurance, however, that
these agreements will provide meaningful protection for the Company's and EKI's
trade secrets, know-how or other proprietary information in the event of any
unauthorized use or disclosure. In addition, the Company's business may be
adversely affected by competitors who independently develop competing
technologies.

The Company owns the trademark EARTHSHELL and certain other trademarks, and
has been licensed by EKI to use the trademark ALI-ITE.

COMPETITION

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<PAGE>
the market for paper roll stock and expanded polystyrene resin. A large number
of manufacturers worldwide convert paper roll stock and expanded polystyrene
resin into paper and polystyrene food disposables. Many of these competitors
have substantially greater financial and marketing resources than the Company,
and many have well-established supply, production and distribution relationships
and channels. To be successful, EARTHSHELL products must be recognized as being
superior, in either or both their performance and environmental impact, to
existing products and must be capable of commercial production at prices
competitive with those of existing products. There can be no assurance that the
EARTHSHELL products can be manufactured at cost-competitive prices or that they
will be able to achieve such recognition, nor can there be any assurance that
companies producing competitive products will not reduce their prices or engage
in advertising or marketing campaigns designed to protect their respective
market shares and impede market acceptance of EARTHSHELL products. Additionally,
some of the Company's licensees and joint venture partners manufacture paper,
plastic and foil packaging which will compete with EARTHSHELL products.

Recently, a number of paper and plastic disposable packaging manufacturers
and converters and others have made efforts to increase the recycling of these
products. Increased recycling of paper and plastic products could lessen their
negative environmental impact, one significant basis upon which the Company
intends to compete. A number of companies have introduced rice and other
starch-based materials as potential environmentally superior packaging
alternatives, although, to date, many of these products have suffered from
performance limitations and they have not proven to be economically viable
methods of packaging. A number of companies are developing composites or other
materials which may be used to manufacture food service disposables with reduced
environmental impact. Several foreign countries subsidize the development and
use of biodegradable plastic packaging which may have the result of reducing
their cost to below that of EARTHSHELL products. To date, biodegradable plastic
packaging has also suffered from cost and performance limitations. It is
expected that many existing packaging manufacturers may actively seek
competitive alternatives to the Company's products and processes. The
development of competitive, environmentally attractive, disposable food-service
containers, whether or not based on the Company's products and technology, could
render the Company's technology obsolete and could have a material adverse
effect on the business, financial condition and results of operations of the
Company. See "Risk Factors--Competition; Risk of Technological Advancement."

GOVERNMENT REGULATION

The U.S. Food and Drug Administration (the "FDA") administers the Federal
Food, Drug and Cosmetic Act, which regulates food packaging substances that may
migrate from packaging material to food. The FDA's regulations are concerned
with substances used in food packaging materials, not with specific finished
food packaging products. Thus, food or beverage containers will be in compliance
with FDA Regulations if the components used in the food and beverage containers:
(i) are approved by the FDA as indirect food additives for their intended uses
and comply with the applicable FDA indirect food additive regulations; or (ii)
are generally recognized as safe ("GRAS") for their intended uses and are of
suitable purity for those intended uses.

The manufacture, sale and use of EARTHSHELL products are subject to
regulation by the FDA. While the Company believes that each of the components of
the EARTHSHELL QPC sandwich container is either approved by the FDA as an
indirect food additive for its intended use, codified in the FDA's regulations
as GRAS for its intended use, or regarded by the Company and its consultants as
GRAS for its intended use, the Company has not sought the concurrence of the
FDA. The Company intends to ensure that the raw materials used in the EARTHSHELL
QPC sandwich container are of suitable purity for their intended uses by
specifying standards to be met by suppliers of raw materials and by material and
product testing. There is no requirement that the Company or a manufacturer of
EARTHSHELL products seek FDA concurrence that certain components are GRAS for
their intended uses or that the raw materials are of suitable purity for their
intended uses. As a result, the Company believes that the EARTHSHELL QPC
sandwich container will be in compliance with all requirements of the FDA and
does not require FDA approval. There can be no assurance, however, that the FDA
would agree with these determinations.

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<PAGE>
Other EARTHSHELL products under development may use components that are not
approved by the FDA as indirect food additives, or that cannot reasonably be
considered GRAS for their intended uses. If such a component is used, it will be
necessary for the manufacturers of the product, or the Company on their behalf,
to: (i) obtain an FDA indirect food additive approval covering the component and
its intended uses; or (ii) obtain an informal determination from the FDA stating
that the substance will not be regulated as an indirect food additive because
the amount of the substance migrating to food is considered insignificant by the
FDA and therefore below the FDA's threshold of regulation. A food additive
petition must be supported by detailed information concerning the composition
and manufacture of the food additive, as well as by the results of testing to
establish the safety of the additive. Typically, safety testing at exaggerated
doses in several species of laboratory animals is required. The testing required
to support a food additive petition could take a considerable length of time to
perform. According to FDA data, from October 1994 to March 1995, the average
time for FDA review and approval of a food additive petition was 48 months from
the date of submission. A request to the FDA for an informal determination that
a substance need not be the subject of an indirect food additive petition must
be supported by a more limited amount of data than needed to support an indirect
food additive petition. The FDA has announced that it anticipates being able to
respond to these informal determination requests within three to four months.
See "Risk Factors--FDA Regulation."

RELATIONSHIP WITH EKI

EKI is the Company's principal stockholder and, upon consummation of the
Offering, will own approximately % of the Company's outstanding Common
Stock. EKI has licensed certain of its technology to the Company and has entered
into various other agreements with the Company pursuant to which it provides
technical and other services upon the Company's request.

LICENSE AGREEMENT

The Company's principal asset is a world-wide, exclusive, royalty-free
license (the "License") to use and license others the right to use EKI's
proprietary technology in manufacturing, selling, and otherwise commercially
developing EARTHSHELL "Food Service Disposables."

Pursuant to the Amended and Restated License Agreement (the "License
Agreement"), the Company is authorized and empowered to grant licenses to
manufacturers of food and beverage containers and also to enter into joint
ventures with or invest in other domestic or foreign entities which will utilize
EKI's technology for "Food Service Disposables." The license grants the Company
exclusive rights to current and future issued patents, pending patents, patents
based on issued or pending patents, patent improvements and trade secrets to the
extent that they relate to "Food Service Disposables" produced from inorganic-
based materials. "Food Service Disposables" are generally defined as disposable,
single use containers, for packaging, serving or dispensing food or beverages
intended for consumption within a short period of time (less than 24 hours)
which incorporate in whole or in part any portion of the technology. "Food
Service Disposables" do not include (i) sealed containers for the long-term
storage of liquids whether for single or multiple portions (E.G., soft drink
cans, milk cartons, sealed juice or drink containers), except that single
service (E.G., 16 oz. or less) milk-containing cartons are within the scope of
"Food Service Disposables," (ii) boxes or containers for the long-term storage
of single or multiple servings of foods or which are designed to extend the
shelf life of foods beyond same-day consumption (E.G., dry cereal boxes, egg
cartons, pre-packaged frozen food containers and packaging, dairy product
containers, produce containers, condiment packaging, and meat and deli trays),
(iii) aseptic or sealed packaging, (iv) secondary packaging (E.G., corrugated
containers and paper bags) and (v) wrapping products for consumer use.

The License expires in the United States on the date the last U.S. patent of
EKI (including any extensions or subsequently filed additional patents) relating
to the licensed technology expires, and expires outside the United States on the
date the last patent of EKI issued anywhere in the world relating to the
licensed technology expires. EKI currently has patents granted in the United
States that would extend protection of the licensed technology through 2014 and
anticipates that it will file additional patent applications that would extend
this protection to a later date. Following the expiration of these patents and

36
<PAGE>
the License, the technology will no longer be subject to patent protection and
can be used by the Company and others without license from EKI.

Under the terms of the License Agreement, the Company is required to use
commercially reasonable efforts to diligently exploit the License by actively
and aggressively manufacturing, marketing, advertising or selling "Food Service
Disposables" and granting sublicenses or entering into joint ventures to do the
same. If the Company develops or acquires any improvements to the "Food Service
Disposables," under the terms of the License Agreement the Company must assign
its rights in the improvement to EKI, and EKI will grant a license to such
improvement to the Company.

TECHNICAL SERVICES AGREEMENT

The Company's research and development activities are carried on by EKI
personnel pursuant to the terms of the Technical Services and Sublease Agreement
(the "Technical Services Agreement") between the Company and EKI which expires
on July 1, 1997. The Company anticipates that following completion of the
Offering it will employ its own product design personnel who will be responsible
for the research and development of EARTHSHELL products for use in the
quick-serve restaurant and food-service industries, while EKI will continue
broad research and development efforts with respect to the materials science of
inorganic materials and the specific use of ALI-ITE composite material in other
types of packaging.

Pursuant to the Technical Services Agreement, EKI provides technical
assistance on a priority basis upon the request of the Company. The Company pays
EKI for these technical services on a project-by-project basis based on
established hourly billing rates and reimburses EKI for out-of-pocket expenses
related to specific research projects. The Company does not currently employ any
scientific or technical employees, and is dependent on the services of EKI's
scientific and technical employees pursuant to the Technical Services Agreement
for the design and development of its products. The Company incurred expenses
payable to EKI of approximately $3,300,000, $8,900,000 and $8,500,000 in 1993,
1994 and 1995, respectively, pursuant to the Technical Services Agreement and
its predecessor agreement, the Management Agreement.

PATENT ALLOCATION AGREEMENT

The Company has also entered into an Agreement for Allocation of Patent
Costs (the "Patent Allocation Agreement") with EKI. Pursuant to the Patent
Allocation Agreement, the Company is obligated to pay or reimburse EKI for all
costs and expenses associated with the filing, prosecuting and maintaining of
patents or patent applications for technology which is directly related to food
and beverage containers within the field of use licensed to the Company under
the License Agreement or which is outside the field of use under the License
Agreement, but which has significant teachings, claims or applications for such
uses. These patents will be the property of EKI, and EKI may obtain a benefit
therefrom other than under the License, including the utilization and/or
licensing of the patents and related technology in a manner or for uses
unrelated to the License. EKI is obligated to pay or reimburse the Company for
all costs and expenses associated with filing, prosecuting and maintaining
patents or patent applications which have no significant teachings, claims or
applications for food and beverage containers within the field of use covered by
the License. Pursuant to the Patent Allocation Agreement and its predecessor
agreement, the Company became obligated to reimburse EKI a total of $1,519,000,
$1,717,000 and $1,929,000 in 1993, 1994 and 1995, respectively.

LOANS FROM EKI

Subsequent to December 31, 1994, the Company's operations have been funded
with loans from EKI. As of June 30, 1996, notes payable to EKI totaled
$17,977,000. The promissory notes evidencing these obligations are payable on
demand and provide for interest at an initial annual rate of 8.25% compounded
quarterly. The interest rate on the notes payable to EKI is adjusted quarterly
to equal the current prime rate as published in THE WALL STREET JOURNAL.
Although EKI has made these loans to the Company to fund

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<PAGE>
its ongoing operations, EKI is under no obligation to make additional loans on
capital contributions to the Company.

GUARANTEES OF CREDIT AGREEMENT

EKI, Mr. Essam Khashoggi, the Chairman of the Board and an indirect
controlling shareholder of the Company, and a trust controlled by Mr. Khashoggi
guaranteed the borrowings under the $4.5 million line of credit provided by
Imperial Bank to the Company in July 1996.

PERSONNEL

As of June 30, 1996, the Company had seven employees. In addition, pursuant
to the terms of the Technical Services Agreement, the Company has a priority
right to the services of 27 technical personnel currently serving as employees
of EKI as of June 30, 1996. The Company anticipates that during the one-year
period following completion of the Offering, the Company will add an additional
18 employees, of whom 12 will be involved in product development, five will be
involved in administration and one will be involved in management. None of the
Company's employees is represented by a labor union and the Company believes
that its relationship with its employees is good.

PROPERTY

The Company's executive offices are located in Santa Barbara, California.
The Company subleases 1,600 square feet of office and research and development
space from EKI which sublease will expire upon the earlier of July 1, 1997 or 30
days after notice by the Company. The Company's monthly lease payments with
respect to this space are $5,600.

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<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- -------------------------------------------------------------------
<S> <C> <C>
Essam Khashoggi(1)(2).................. 57 Chairman of the Board
Simon K. Hodson(2)..................... 41 Chief Executive Officer and Vice Chairman of the Board
Graham H. Phillips..................... 57 President
Richard K. Hulme(2).................... 41 Executive Vice President and Chief Operating Officer and Director
D. Scott Houston....................... 42 Chief Financial Officer
Laird Q. Cagan......................... 38 Senior Vice President--Corporate Development
John Daoud(3).......................... 60 Secretary and Director
Ellis B. Jones(1)(3)(4)................ 42 Director
Layla Khashoggi........................ 39 Director
Mark A. Koob(5)........................ 42 Director
William Marquard....................... 76 Director
Jerold H. Rubinstein(1)(3)(4)(5)....... 58 Director
</TABLE>

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

(1) Member of the Compensation Committee.

(2) Member of the Executive Committee.

(3) Member of the Audit Committee.

(4) Member of the Stock Option Committee.

(5) Member of the Conflicts Committee.

ESSAM KHASHOGGI has served as Chairman of the Board of the Company since its
organization in November 1992. Mr. Khashoggi also serves as Chairman of the
Management Committee and Chief Executive Officer of EKI, and Chairman of the
Board of Concrete Technology Corporation ("CTC"), a partner in EKI. Mr.
Khashoggi has also served as a director and officer of a number of domestic and
foreign companies engaged in manufacturing, real estate and design and has
served as a Trustee at the University of California Santa Barbara Foundation.

SIMON K. HODSON has served as Chief Executive Officer and Vice Chairman of
the Board of the Company since its organization. He also currently serves as
President and on the Management Committee of EKI and as President and as a
director of CTC. Mr. Hodson also served as President of the Company from
December 1995 until May 1996. Mr. Hodson was President of National Cement &
Ceramics Laboratories, Inc. ("NCCL"), a company previously engaged in materials
science research, from June 1990 through 1995. He is a co-inventor of 17 issued
U.S. patents and 17 issued foreign patents, 55 U.S. patents pending and 136
foreign patents pending, all belonging to EKI and all related to various aspects
of concrete processing and advanced cement-based materials. He is an Executive
Committee Member of the Infrastructure Technology Institute (Northwestern
University) and Board Member of the Federal Highway Innovative Technology
Evaluation Center. Mr. Hodson is EKI's representative to the National Science
Foundation's Advanced Cement-Based Materials Center.

GRAHAM H. PHILLIPS has served as President of the Company since May 1996.
Mr. Phillips was Senior Vice President--Marketing of the Company from January
1993 to May 1996. Mr. Phillips was Chairman and Chief Executive Officer, from
December 1989 to June 1992, of Ogilvy & Mather Worldwide, one of the largest
advertising groups in the world. Mr. Phillips spent 28 years with Ogilvy &
Mather in various client service and management functions, serving in Europe,
Canada and the United States.

RICHARD K. HULME has served as an Executive Vice President since September
1996, and Chief Operating Officer since December 1995, as well as from February
1995 to May 1995. Mr. Hulme also has served as a Director of the Company since
September 1994. Mr. Hulme served as President from

39
<PAGE>
September 1994 until December 1995. From February 1991 until joining the
Company, Mr. Hulme was a Project Director and later a Vice President of JLW
Realty Advisors, an international real estate firm. From February 1986 through
January 1991, Mr. Hulme served as Vice President, Marketing/Operations for CTC
and was involved in organizing and managing NCCL, a wholly-owned subsidiary of
CTC. Mr. Hulme also previously served as project manager/partner with Lincoln
Property Company, a real estate developer.

D. SCOTT HOUSTON has served as Chief Financial Officer of the Company since
July 1993. From August 1986 until joining the Company, Mr. Houston served EKI
and its affiliates in various positions, including as Chief Financial Officer
and Vice President of CTC, as an officer and Director of NCCL, and as a
consultant. Prior to August 1986, Mr. Houston operated Houston & Associates, a
consulting firm working with start-up and troubled companies and real estate
projects, which he founded in September 1983. From July 1980 until September
1983, Mr. Houston held various positions with the Management Information
Consulting Division of Arthur Andersen & Co., an international accounting and
consulting firm.

LAIRD Q. CAGAN has served as Senior Vice President--Corporate Development of
the Company since September 1995. From March 1995 through August 1995, Mr. Cagan
served as a consultant to the Company. From April 1993 until February 1995, Mr.
Cagan served as a consultant to EKI. From February 1990 until March 1993, Mr.
Cagan was the founder and President of Cagan Capital, an investment banking firm
and the holding company for several acquisitions made by Mr. Cagan. From
September 1986 to January 1990 he was a Vice President in the Mergers &
Acquisition department of Drexel Burnham Lambert Inc. Prior to 1986, Mr. Cagan
was a member of the Mergers & Acquisition department of Goldman, Sachs & Co.

JOHN DAOUD has served as Assistant Secretary and a Director of the Company
since its organization and became its Secretary in May 1996. Mr. Daoud has
served as the business manager for Mr. Essam Khashoggi and his affiliated
entities since 1972. From 1970 to 1972, Mr. Daoud was a Senior Auditor with
Price Waterhouse and Company.

ELLIS B. JONES has served as a Director of the Company since December 1995.
Mr. Jones has been a Managing Director of Wasserstein Perella & Co., Inc. since
February 1995. Mr. Jones was also a Managing Director, from 1993 until February
1995, and a Director, from 1990 to 1992, in Corporate Finance of Salomon
Brothers Inc. Prior to that time, Mr. Jones was a Vice President at The First
Boston Corporation.

LAYLA KHASHOGGI has served as a Director of the Company since its
organization. Ms. Khashoggi currently serves as director and officer of the
Santa Barbara Zoo and the Laguna Blanca School. Ms. Khashoggi is Essam
Khashoggi's spouse.

MARK A. KOOB has served as a Director of the Company since July 1993. From
July 1993 until September 1994, Mr. Koob also served as President and Chief
Operating Officer of the Company. From September 1994 to February 1995, Mr. Koob
served as Acting Director, Paper Development. Mr. Koob has over 20 years of
consumer products experience in the fields of general management and sales and
marketing. From 1992 until joining the Company, he served as Vice President and
General Manager-- Fluid Dairy Products of the Borden Company. Mr. Koob began at
Bumble Bee Seafoods, Inc. in 1986 as Director of Marketing and progressed to
President and Chief Executive Officer of Bumble Bee Seafoods, Inc. from 1990 to
1992.

WILLIAM MARQUARD has served as a Director of the Company since June 1994.
Mr. Marquard is a retired businessman. From 1952 through 1985, Mr. Marquard
served in various capacities for American Standard Corp. (and its predecessor,
Mosler, Inc.), including as President, Chief Executive Officer and Chairman. He
continued to serve as the Chairman of American Standard's Executive Committee
until 1988 and later served as its Chairman of the Board from 1989 until March
1992. Mr. Marquard serves as Chairman of the Board of Arkansas Best Corporation
and Mosler, Inc. He also serves as a Director of Americold Corporation, Earle M.
Jorgensen Co., Earle M. Jorgensen Holding Co., Kelso and Company, and Treadco,
Inc.

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<PAGE>
JEROLD H. RUBINSTEIN has served as a Director of the Company since June
1994. Mr. Rubinstein has served as the Chairman and Chief Executive Officer of
DMX, Inc., a start-up music network using new technologies and new presentations
of music listening, since 1986. From 1981 to 1987, Mr. Rubinstein was the
General Partner at JRC Oil, a Northern Colorado oil-drilling and exploration
company, as well as the co-founder and Chairman of Los Angeles-based Bel-Air
Savings and Loan. From December 1978 until January 1980, he was the Chairman and
Chief Executive Officer of United Artists Records, which he had purchased with a
partner. From January 1975 until March 1978, he was the Chairman and Chief
Executive Officer of the American Broadcasting Company music division. Mr.
Rubinstein was also a founder of, and from 1971 to 1975 was a partner in, Segel,
Rubinstein & Goldman, a business management firm that handled the financial
affairs of a number of prominent members of the entertainment industry. Mr.
Rubinstein is a Director of United Service Advisors Inc.

The Company's Board of Directors is divided into three classes. One class of
directors will be elected at each annual meeting of stockholders for a
three-year term and until their successors have been elected and qualified. The
Board is currently composed of three Class I directors ( , and
), three Class II directors ( , and ) and three Class III
directors ( , and ). The officers of the Company are elected
annually and serve at the discretion of the Board of Directors. The holders of
the Company's outstanding Series A Preferred Stock currently have the right to
elect one director. Mr. Marquard was elected by the Series A stockholders. This
right will terminate upon the conversion or redemption of the Series A Preferred
Stock, which the Company currently anticipates will happen approximately 60 days
after the completion of the Offering. See "Description of Capital
Stock--Preferred Stock."

At least a majority of the members of the Board's Audit Committee and
Compensation Committee are independent directors. All of the members of the
Board's Conflicts Committee are disinterested directors with respect to the
financial interests of EKI. All of the members of the Board's Stock Option
Committee are disinterested directors. The Compensation Committee establishes
salaries, incentives and other forms of compensation for Directors, officers and
other employees of the Company, and is charged with administering various
incentive compensation and benefit plans. The Audit Committee oversees actions
taken by the Company's independent auditors and reviews internal audit controls.
The Conflicts Committee administers on behalf of the Company the License
Agreement, the Technical Services and Sublease Agreement and the Patent
Allocation Agreement between EKI and the Company. The Stock Option Committee
oversees and administers the Company's 1995 Stock Incentive Plan and 1994 Stock
Option Plan.

In addition to the above-named Directors and executive officers, the
following employees of EKI have been instrumental in the development of the
Company's business:

DR. PER JUST ANDERSEN has served as the Vice President of Product
Engineering at EKI and has led EKI's technical development since he joined EKI
in 1992. Dr. Andersen's professional experience includes work as a Project
Manager and Industrial Researcher. Since 1983, he has worked as a worldwide
consultant in advanced concrete projects as a Senior Engineer at G.M. Idorn
Consult NS where he has held the position of Manager of Materials Optimization
and Instrumentation Development. In this capacity, Dr. Andersen led and
participated in major concrete consulting projects around the world, including
consulting with Spie-Battinole on the design of the concrete on the French side
of the French-English tunnel, with the U.S. Strategic Highway Research Program
("SHRP") in conjunction with Pennsylvania State University on concrete
microstructure as well as with major U.S. corporations and universities
including Ameron, Gifford-Hill American, Price Brothers, Purdue University,
Northwestern University, and University of Illinois at Champaign-Urbana. Dr.
Andersen is the co-inventor of seven issued patents and 129 patents pending
regarding the EARTHSHELL technology. Dr. Andersen received a M.Sc. in Chemical
Engineering from the Engineering Academy of Denmark, a Masters in Materials
Science from Pennsylvania State University, and a Ph.D. in Materials Science
from the Technical University in Denmark.

DR. BRUCE CHRISTENSEN has served as a Research Scientist of EKI since May
1994. From June 1993 until April 1994, Dr. Christensen was a Post-Doctoral
Fellow in the Materials Science and Engineering

41
<PAGE>
Department of Northwestern University. Dr. Christensen earned a B.Sc. in
Chemical Engineering and a B.Sc. in Materials Science and Engineering from the
University of Minnesota in June 1989, and a Ph.D. in Materials Science and
Engineering from Northwestern University in June 1993.

DR. DAVID DELLINGER has served as a Research Scientist of EKI since April
1992. From 1982 until April 1992, he was enrolled in the University of
California, Santa Barbara, Ph.D. program in Geological Science where he
researched major and trace element analyses. Dr. Dellinger received a B.S. in
Geology at Stanford University in 1977 and a Ph.D. from the University of
California, Santa Barbara in March 1996.

DR. DIPANJAN SENGUPTA has served as a Research Scientist of EKI since April
1996. Dr. Sengupta served as a research associate specializing in polymer
chemistry in the Department of Chemistry at the University of California, Santa
Barbara from October 1994 to April 1996. From May 1991 to September 1994, Dr.
Sengupta was a Chemistry Department research associate at the State University
of New York at Albany. Dr. Sengupta received an M.S in Chemistry in 1982 and a
Ph.D. in Organic Chemistry in 1987 from Jadapur University in India.

DR. AMITABHA KUMAR has served as a Research Scientist of EKI since June
1994. From May 1988 through May 1994, Dr. Kumar worked as a Senior Research
Scientist at the Central Glass and Ceramic Research Institute in Calcutta,
India. Dr. Kumar currently also serves as associate editor for The Indian
Ceramic Society and has over 35 publications in international scientific
journals and has presented approximately 20 papers at seminars and symposiums.
Dr. Kumar earned a B.Sc. in Ceramics from Banaras Hindu University in June 1978,
and a M.Sc. and a Ph.D. in Solid State Science from Pennsylvania State
University in August 1985.

DR. JAN LOFVANDER has served as a Research Scientist of EKI since December
1993. From August 1989 until November 1993, Dr. Lofvander was a research
engineer studying microstructural characterization in the Materials Department
at the University of California, Santa Barbara. Dr. Lofvander's professional
experience includes managing projects at the High Performance Composites Center
at University of California, Santa Barbara. Dr. Lofvander has 36 publications in
international scientific journals and six industrial reports relating to
materials applications. Dr. Lofvander received his M.Sc. in Metallurgy and
Materials Science from the Royal Institute of Technology in Stockholm, Sweden in
December 1984, and a Ph.D. in Materials Science and Engineering from University
of Illinois, Urbana-Champaign, Illinois in June 1989.

DR. SHAODE ONG has served as a Research Scientist of EKI since June 1994.
Prior to joining EKI, Dr. Ong worked as a Research Associate in the Materials
Group in the School of Civil Engineering at Purdue University from January 1988
until May 1993. Dr. Ong received his B.Sc. in Building Materials Science from
Tongji University, Shanghai, China in July 1986, and a M.Sc. E. and a Ph.D. in
Civil Engineering Materials from Purdue University, West Lafayette, Indiana in
May 1993.

SANDEEP KUMAR has served as a Research Scientist of EKI since August 1992.
Mr. Kumar received a B.Sc. in Ceramic Engineering from the Institute of
Technology in India in June 1988, and a M.Sc. in Material Engineering from the
University of California, Santa Barbara in December 1995. From September 1988 to
June 1992 Mr. Kumar served as a research/engineering assistant for the
Engineering Materials Department at the University of California, Santa Barbara.

DENISE MILLER has served as a Research Scientist of EKI since August 1992.
From March 1989 until June 1992, Ms. Miller was a Graduate Research Assistant in
the Engineering Materials Department of the University of California, Santa
Barbara. Ms. Miller has several professional publications and is a member of the
Minerals, Metals & Materials Society (TMS)/ASM International Joint Membership.
Ms. Miller received a B.Sc. in Chemical Engineering from the University of
California, Santa Barbara in 1986. In 1992, she obtained a M.Sc. in Mechanical
Engineering with an emphasis in Materials Processing at the University of
California, Santa Barbara.

VERA JACQUELINE RUBLEE has served as a Research Scientist of EKI since
August 1993. During 1991 Ms. Rublee was a Geologist in the Geology Department at
the University of California, Santa Barbara. From 1987 to 1989, she was a Stable
Isotope Technician at the Geology Department of the University of

42
<PAGE>
Ottowa. Ms. Rublee received a B.Sc. in Geology from the University of British
Columbia in May 1985, and a M.Sc. in Geology from the University of Ottawa in
March 1994.

KRISTOPHER TURNER has served as a Research Scientist of the Company since
November 1993. From September 1990 until October 1993, Mr. Turner was a Graduate
Student Researcher at the University of California, Santa Barbara. Mr. Turner
received a B.Sc. in Metallurgical Engineering from the University of Texas, El
Paso in December 1989, and a M.Sc. in Materials from the University of
California, Santa Barbara in July 1993.

COMPENSATION OF DIRECTORS

Directors receive automatic option grants to purchase 20 shares on an annual
basis pursuant to the Company's 1995 Stock Incentive Plan. Options granted to
Directors in November 1995 under the 1995 Stock Incentive Plan are exercisable
at $2,000 per share, vest in full in November 1996 and expire in November 2000.
See "--Stock Option Plans." The Directors have never received any cash
compensation for their service as directors other than reimbursement for
out-of-pocket expenses incurred in connection with attendance at such meetings
and the Company has no current intention of paying cash compensation to the
Directors.

In 1995, each member of the 1995 Board of Directors was granted a
non-qualified stock option to purchase 20 shares of Common Stock at an exercise
price of $2,000 per share as compensation for past services.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

All decisions relating to executive compensation during 1995 were made by
the Company's Board of Directors. Mr. Hodson, Chief Executive Officer of the
Company who also served as President from December 1995 through May 1996,
participated in deliberations of the Board of Directors concerning 1995
executive officer compensation. Mr. Hodson did not receive any cash compensation
from the Company in 1995. Mr. Koob, Acting Director of Paper Development until
February 1995, and Mr. Hulme, Executive Vice President of the Company since
December 1995, President from September 1994 until December 1995 and Chief
Operating Officer from February 1995 to May 1995, did not participate in
deliberations of the Board of Directors concerning 1995 executive officer
compensation.

43
<PAGE>
EXECUTIVE COMPENSATION

The following table sets forth, for the year ended December 31, 1995, the
cash compensation of the Chief Executive Officer and the other executive
officers of the Company who received compensation in excess of $100,000 in such
year (the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY* BONUS (NUMBER OF OPTIONS) COMPENSATION
- ------------------------------------------------ --------- ---------- ----------- ------------------------- ---------------
<S> <C> <C> <C> <C> <C>
Simon K. Hodson(1).............................. 1995 $ -- -- 20 $ --
Chief Executive Officer
Graham H. Phillips(2)........................... 1995 230,000 -- -- --
President
Richard K. Hulme(3)............................. 1995 220,000 -- 20 --
Executive Vice President and Chief Operating
Officer
D. Scott Houston................................ 1995 180,250 -- -- --
Chief Financial Officer
Laird Q. Cagan(4)............................... 1995 143,750 -- -- --
Senior Vice President--Corporate Development
</TABLE>

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

* The Company provides various perquisites to its executives which are not
disclosed in accordance with SEC regulations because the value of such
perquisites is less than 10% of the executive's salary.

(1) Mr. Hodson did not receive any compensation directly from the Company in
1995. Mr. Hodson is an employee of and is paid a salary by EKI. In addition
to serving as Chief Executive Officer of the Company since its inception,
Mr. Hodson served as President of the Company from September 1995 through
May 1996.

(2) Mr. Phillips served as Senior Vice President--Marketing of the Company in
fiscal 1995.

(3) Mr. Hulme served as President of the Company from September 1994 to December
1995 and Chief Operating Officer of the Company from February 1995 through
May 1995.

(4) Effective September 1995, Mr. Cagan assumed the position of Senior Vice
President--Corporate Development of the Company. Prior to that time in 1995
he served as a consultant to the Company and EKI. Mr. Cagan's reported
compensation during 1995 includes amounts paid to him both as an employee of
the Company and as a consultant to the Company and EKI.

44
<PAGE>
The following table sets forth information with respect to options to
purchase shares of the Company's Common Stock granted in 1995 to the Chief
Executive Officer and the other Named Executive Officers.

STOCK OPTION GRANTS IN 1995

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------------------- RATES
NUMBER OF % OF TOTAL OF STOCK
SHARES OPTIONS APPRECIATION
UNDERLYING GRANTED EXERCISE FOR OPTION TERM (1)
OPTIONS TO EMPLOYEES PRICE EXPIRATION --------------------
NAME GRANTED IN 1995 (PER SHARE) DATE 5% 10%
- ---------------------------------------- ------------- --------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Simon K. Hodson(2)...................... 20 33.3% $ 2,000 11/27/00 $ 51,051 $ 70,862
Graham H. Phillips...................... -- -- -- -- -- --
Richard K. Hulme(2)..................... 20 33.3% $ 2,000 11/27/00 $ 51,051 $ 70,862
D. Scott Houston........................ -- -- -- -- -- --
Laird Q. Cagan.......................... -- -- -- -- -- --
</TABLE>

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

(1) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price.

(2) Represents 20 shares of Common Stock underlying options granted to each
member of the Board of Directors of the Company on a nondiscretionary basis
under the 1995 Plan, the material terms of which are described under the
caption "--Stock Option Plans." The options will vest in full in November
1996.

The following table sets forth, for the Chief Executive Officer and the
Named Executive Officers, information with respect to options exercised,
unexercised options and year-end option values, in each case with respect to
options to purchase shares of the Company's Common Stock.

AGGREGATED OPTION EXERCISES IN 1995 AND 1995 YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
OPTIONS
SHARES AT DECEMBER 31, 1995
ACQUIRED ON VALUE ----------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE
- -------------------------------------------------------------- --------------- ----------- --------------- -----------------
<S> <C> <C> <C> <C>
Simon K. Hodson............................................... -- -- 20 --
Graham H. Phillips............................................ -- -- 500 500
Richard K. Hulme.............................................. -- -- 520 500
D. Scott Houston.............................................. -- -- 300 700
Laird Q. Cagan................................................ -- -- -- --
</TABLE>

EMPLOYMENT AGREEMENTS

D. Scott Houston entered into an employment agreement with the Company
effective October 15, 1993. Mr. Houston's employment agreement provides that his
employment is "at will" at the discretion of the Company, and that he may be
terminated at any time for cause, and at any time without cause subject to 30
days written notice. Mr. Houston's employment agreement provides for an annual
salary of $180,000, subject to annual review and increase at the discretion of
the Board of Directors.

STOCK OPTION PLANS

1995 STOCK INCENTIVE PLAN

The Board of Directors of the Company has adopted the 1995 Stock Incentive
Plan (the "1995 Plan"), pursuant to which employees, directors and consultants
of the Company will be eligible to receive options

45
<PAGE>
to purchase Common Stock. The following is a description of the material
features of the 1995 Plan. The following description does not purport to be
complete and is qualified in its entirety by reference to the full text of the
1995 Plan, which is filed as an exhibit to the Registration Statement of which
this Prospectus is a part.

The purpose of the 1995 Plan is to enable the Company to attract, retain and
motivate employees, directors and consultants by providing for or increasing
their proprietary interests in the Company. Every employee and consultant of the
Company or any of its subsidiaries and any director of the Company is eligible
to be considered for the grant of awards under the 1995 Plan. Directors will be
eligible to receive annual automatic grants pursuant to the 1995 Plan. The term
"employees" in the following discussion is used to refer to employees (including
employee directors) and consultants.

The 1995 Plan authorizes the Stock Option Committee (the "Committee") to
enter into any type of arrangement with an eligible employee that, by its terms,
involves or might involve the issuance of (i) Common Stock or (ii) a derivative
security with an exercise or conversion privilege at a price related to the
Common Stock with a value derived from the value of the Common Stock. Awards
under the 1995 Plan are not restricted to any specified form or structure and
may include arrangements such as sales or bonuses of stock, restricted stock,
stock options, reload stock options, stock purchase warrants, other rights to
acquire stock, securities convertible into or redeemable for stock, stock
appreciation rights, phantom stock, dividend equivalents, performance units or
performance shares. An award may consist of one such arrangement or two or more
such arrangements in tandem or in the alternative. Any stock option granted to
an employee may be an ISO (as defined below) or a non-qualified stock option.

The 1995 Plan generally provides that no one employee may be granted options
or other awards with respect to more than 1,500 shares of Common Stock in any
one calendar year, subject to certain anti-dilution adjustments. The
anti-dilution provisions of the 1995 Plan generally provide that no adjustment
shall be made under those provisions to the extent such adjustment would cause
ISOs issued or issuable under the 1995 Plan to be treated as other than ISOs, or
to the extent the Committee determines that such adjustment would result in the
disallowance of a federal income tax deduction for compensation attributable to
awards by causing such compensation to be treated as other than
"performance-based compensation," as defined in the 1995 Plan. Awards may not be
granted under the 1995 Plan on or after the tenth anniversary of its adoption.

1994 STOCK OPTION PLAN

The Board of Directors of the Company adopted the 1994 Stock Option Plan
(the "1994 Plan"), pursuant to which employees and consultants of the Company
were eligible to receive options to purchase Common Stock granted prior to the
adoption of the 1995 Plan. The following is a description of the material
features of the 1994 Plan. The following description does not purport to be
complete and is qualified in its entirety by reference to the full text of the
1994 Plan, which is filed as an exhibit to the Registration Statement of which
this Prospectus is a part.

The purpose of the 1994 Plan is to provide incentives to key employees and
consultants to pursue actions that will create shareholder value and promote the
overall success of the Company and to attract and retain key talent for
positions of substantial responsibility. Every employee and consultant of the
Company or any of its subsidiaries is eligible to be considered for the grant of
awards under the 1994 Plan. The term "employees" in the following discussion is
used to refer to employees (including employee directors) and consultants. The
1994 Plan authorizes the Committee to award ISOs and non-incentive stock options
to employees. Awards may not be granted under the 1994 Plan on or after the
tenth anniversary of its adoption. The 1995 Plan effectively supersedes the 1994
Plan for options issued on or after the date of adoption of the 1995 Plan.

CERTAIN PROVISIONS APPLICABLE TO THE 1995 PLAN AND THE 1994 PLAN

Awards may be issued under the 1995 Plan and the 1994 Plan (collectively,
the "Plans") for any lawful consideration including services rendered by the
employee. The maximum number of shares of Common

46
<PAGE>
Stock that may be issued pursuant to awards granted under the Plans is 17,500
(subject to adjustment to prevent dilution).

Except for provisions in the 1994 Plan setting minimum exercise prices for
ISOs, the Plans do not specify a minimum amount that employees are required to
pay to acquire the benefits in connection with an award. Any such amount will be
established by the Committee and set forth in the agreement evidencing the
award. For federal income tax purposes, the maximum compensation payable to
employees pursuant to the Plans, during the term of the Plans and awards granted
thereunder, is equal to the number of shares of Common Stock with respect to
which awards may be issued thereunder, multiplied by the value of such shares on
the date such compensation is measured (which, in the case of non-incentive
options, will generally be the date of exercise of the options).

An award under the Plans may permit the recipient to pay all or part of the
purchase price of the shares or other property issuable pursuant thereto by,
among other things (i) delivering previously owned shares of capital stock of
the Company or (ii) delivering a promissory note, the terms and conditions of
which will be determined by the Committee. Previously owned shares of stock of
the Company acquired upon exercise of an option, however, may be used to pay the
purchase price for shares pursuant to an option only if such previously owned
shares have been owned by the grantee for more than six months.

The Plans are designed to comply with Rule 16b-3. The Company intends to
file a registration statement under the Securities Act to register shares to be
issued pursuant to the Plans. See "Shares Eligible for Future Sale."

The Plans are administered by the Committee. The Committee has full and
final authority to select the employees to receive awards pursuant to the Plans
and to grant such awards. Subject to the provisions of each of the Plans, the
Committee has a wide degree of flexibility in determining the terms and
conditions of any award and the number of shares to be issued pursuant such
award. The expenses of administering the Plans will be borne by the Company.

47
<PAGE>
CERTAIN TRANSACTIONS

LICENSE AGREEMENT AND PATENT ALLOCATION AGREEMENT

Pursuant to its License Agreement with EKI, the Company has been granted a
world-wide, exclusive, royalty-free license to utilize and sublicense others to
utilize EKI's proprietary technology in manufacturing, selling, and otherwise
commercially developing EARTHSHELL "Food Service Disposables" (as defined in the
License Agreement). See "Business--Relationship with EKI." The License grants
the Company exclusive rights to issued patents, pending patents and trade
secrets to the extent that they relate to food-service disposables produced from
inorganic-based materials. The Company also has certain business, reporting,
indemnification and confidentiality obligations under the License Agreement.

Pursuant to its Patent Allocation Agreement with EKI, the Company is
obligated to pay or reimburse EKI for all costs and expenses associated with the
filing, prosecuting and maintaining of patents and patent applications in
connection with technology which directly relates to food and beverage
containers or the process to manufacture food and beverage containers, within
the field of use licensed to the Company under the License Agreement or which
has significant teachings to the manufacture of food and beverage containers,
even if outside such field of use. The Company incurred, or reimbursed EKI for,
total costs of $1,520,000, $1,717,000, $1,929,000 and $782,000 in connection
with these applications during 1993, 1994, 1995 and the six months ended June
30, 1996, respectively. These patents will be the property of EKI, and EKI may
obtain a benefit therefrom other than under the License, including the
utilization and/or licensing of the patents and related technology in a manner
or for uses unrelated to the License.

Under the predecessor agreement to the License Agreement, the Company was
obligated to pay EKI a royalty of 10% of all sublicense fees received by the
Company and 10% of the net sales price of any products sold by the Company to
any third party. All royalty payments under this predecessor agreement were
waived by EKI, and this requirement has been deleted from the amended License
Agreement.

TECHNICAL SERVICES AND RELATED AGREEMENTS

In addition to the License Agreement and the Patent Allocation Agreement,
the Company has entered into a Technical Services and Sublease Agreement dated
July 1, 1994 (the "Technical Services Agreement") with EKI that supersedes the
Management Agreement (as defined below). Pursuant to the Technical Services
Agreement, the Company pays EKI for technical services specifically requested by
the Company based on established hourly billing rates and reimburses EKI for
out-of-pocket expenses related to specific research projects. The Technical
Services Agreement gives the Company a first priority right to the services of
certain EKI personnel during its term (which expires July 1, 1997). The Company
paid an aggregate of $3,309,000 $9,472,000 and $8,427,000 to EKI for these
services under the Technical Services Agreement during 1993, 1994 and 1995,
respectively. In addition, the Technical Services Agreement provides for the
sublease by EKI to the Company of approximately 1,600 square feet of office
space for its headquarters. The Company paid an aggregate of $34,000 and $67,000
to EKI for the sublease of this space during 1994 and 1995, respectively. The
term of the sublease expires July 1, 1997 and may otherwise be terminated by the
Company on 30 days' written notice.

Prior to entering into the Technical Services Agreement, EKI provided
technical services to the Company pursuant to a Management, Administrative
Services and Professional Services Agreement (the "Management Agreement"). Under
the terms of the Management Agreement, the Company paid EKI a monthly fee (which
was subject to quarterly adjustment based upon the approximate variation in
EKI's cost of furnishing services and facilities to the Company) for services
rendered by EKI personnel to the Company. The Company incurred expenses of
$400,000 and $1,200,000 during 1993 and 1994, respectively, in connection with
the Management Agreement.

Under the terms of a Master Lease Agreement, the Company also previously
leased to EKI the machinery, equipment, leasehold improvements and other
property constituting the Company's laboratory production facility (the
"Equipment"). The Equipment had been purchased by the Company from EKI in July
1993 for a total price of $2,340,000. The lease had a term of five years
commencing September 1, 1993

48
<PAGE>
and required that EKI make variable monthly lease payments based on the relative
usage of the Equipment by EKI and the Company. EKI made total lease payments to
the Company of $156,000 and $348,000 in 1993 and 1994, respectively, net of an
equal amount of lease charges paid by the Company to EKI under its various
projects. The Master Lease Agreement was terminated as of December 31, 1994 and,
pursuant to an Agreement and Bill of Sale, the Company sold certain of the
Equipment back to EKI for a purchase price of approximately $2,018,000, which
was the Company's original acquisition cost of such equipment from EKI. The
purchase price was paid by delivery of a promissory note from EKI, and on
September 30, 1995 this promissory note was canceled and offset against
promissory notes of the Company payable to EKI. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

REGISTRATION RIGHTS

As additional consideration for EKI's services under the Technical Services
Agreement, the Company has entered into a Registration Rights Agreement with EKI
(the "Registration Rights Agreement"). The Registration Rights Agreement
provides certain registration rights for the 315,000 shares of Common Stock
originally issued to EKI (whether held by EKI or subsequent transferees). The
Company is also obligated, following the date one year after the consummation of
the Offering, to prepare and keep in place (at the Company's expense) a
Registration Statement on Form S-3 covering certain shares of Common Stock
currently held by EKI which will be issued upon the exercise of options to be
granted by EKI to its employees and consultants.

The Registration Rights Agreement grants two "piggyback" registration rights
for offerings of Common Stock by the Company (subject to cutback provisions for
the registration rights of other holders of Common Stock and the holders of the
Company's Series A Preferred Stock) and the right to participate in one demand
registration upon a request by the holders of 78,750 shares of Common Stock
originally issued to EKI, some of which shares have been transferred to other
holders. The holders of such shares will be responsible, on a pro-rata basis,
for most of the expenses relating to the exercise of the demand registration
right and a portion of the expenses relating to the exercise of their piggyback
registration rights. See "Shares Eligible for Future Sale."

LOANS BY EKI

At various times between February 1995 and June 30, 1996, EKI made cash
advance loans in an aggregate amount of $8,075,000 for general working capital
purposes. Additionally, intercompany charges payable to EKI under the Technical
Services Agreement and Patent Allocation Agreement totaling $9,902,000 were
converted to demand notes through June 30, 1996. Each of these loans bears
interest at the prime rate as shown from time to time in THE WALL STREET JOURNAL
(subject to quarterly adjustment). As of June 30, 1996, the Company had incurred
an aggregate of $1,125,000 in interest expense associated with these loans from
EKI. The Company intends to use a portion of the proceeds of the Offering to
repay these loans. See "Use of Proceeds" and note 3 to the Financial Statements
of the Company included elsewhere herein.

GUARANTEES OF CREDIT AGREEMENT

LOAN BY MCDONALD'S

In December 1994, McDonald's made a loan to the Company in the principal
amount of $2,000,000 to be used for general working capital purposes. This loan
was evidenced by a demand promissory note and bore an annual interest rate of
8%. The loan was fully repaid in February 1995.

49
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of each class of the Company's voting securities as of
September 26, 1996, and as adjusted to reflect the sale of shares of
Common Stock by the Company and the sale of shares of Common Stock by
the Selling Stockholders, by (i) each person known by the Company to own
beneficially more than 5% of any class of voting securities of the Company, (ii)
each Director of the Company, (iii) each Named Executive Officer of the Company,
(iv) all Directors and executive officers as a group and (v) the Selling
Stockholders.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED PRIOR TO OFFERING COMMON SHARES
--------------------------------------------------
BENEFICIALLY OWNED AFTER
COMMON PREFERRED, SERIES A OFFERING (1)
---------------------- -------------------------- NUMBER OF SHARES ------------------------
PERCENT OF PERCENT OF OF COMMON STOCK PERCENT OF
NAME AND ADDRESS(3) NUMBER CLASS (2) NUMBER CLASS BEING OFFERED NUMBER CLASS
- ----------------------------- --------- ----------- ------------- ----------- ----------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Essam Khashoggi.............. 277,588 (5) 88.1% -- --
Simon K. Hodson.............. 20 (6) * -- --
Graham H. Phillips........... 500(7) * -- --
Richard K. Hulme............. 520(5) * -- --
D. Scott Houston............. 300(7) * -- --
Laird Q. Cagan............... 500(7) * 52 *
John Daoud................... 120(5) * -- --
Ellis Jones.................. 50 * -- --
Layla Khashoggi(8)........... 20(5) * -- --
Mark A. Koob................. 20(5) * -- --
William Marquard............. 20(5) * -- --
Jerold H. Rubinstein......... 20(5) * -- --
All Directors and Executive
Officers as a Group (12
Persons)................... 279,678 88.7% 52 *
Selling Stockholders.........
</TABLE>

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

* Indicates ownership of less than one percent.

(1) Assumes that all 26,675 shares of Series A Preferred Stock outstanding are
converted into shares of Common Stock. See "Description of Capital Stock."

(2) Computed by treating the 26,675 shares of Common Stock into which the Series
A Preferred Stock is convertible as issued and outstanding.

(3) The address of each of these persons is c/o EarthShell Corporation, 800
Miramonte Drive, Santa Barbara, California 93109.

(4) Represents 247,829 shares held by EKI of which Mr. Khashoggi indirectly owns
a 90% beneficial interest and 29,759 shares held by Mr. Khashoggi's
affiliated entities. Mr. Khashoggi has sole voting and dispositive power
with respect to all 277,588 shares.

(5) Includes options to purchase 20 shares of Common Stock issued to directors
in 1995 under the 1995 Stock Incentive Plan.

(6) Does not include any of the shares held by EKI in which Mr. Hodson holds an
indirect 10% interest.

(7) Represents options to purchase shares of Common Stock that are exercisable
within 60 days.

(8) Ms. Khashoggi is Essam Khashoggi's spouse.

50
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of shares of
Common Stock, par value $.01 per share, and shares of Preferred Stock,
par value $.01 per share. The following statements are summaries of certain
provisions applicable to the Company's capital stock.

COMMON STOCK

As of September 26, 1996, there were 315,000 shares of Common Stock
outstanding, held of record by 66 stockholders. The holders of Common Stock are
entitled to one vote per share on all matters submitted to a vote of
stockholders. Holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. In the event of liquidation, dissolution or winding up of
the Company, holders of Common Stock would be entitled to share ratably in the
Company's assets remaining after payment of liabilities, and after provision is
made for each class of stock, if any, having preference over the Common Stock.
Holders of Common Stock have no preemptive, subscription, redemption or
conversion rights. All of the outstanding shares of Common Stock are, and the
Common Stock offered by the Company hereby, when issued against the
consideration set forth in this Prospectus, will be, fully paid and
nonassessable.

PREFERRED STOCK

The Board of Directors has the authority, without further action by
shareholders, to issue up to shares of Preferred Stock in one or more
series and to fix the powers, designations, rights, preferences, privileges,
qualifications and restrictions thereof, including dividend rights, conversion
rights, voting rights, rights and terms of redemption, liquidation preferences
and sinking fund terms, any or all of which may be greater than the rights of
the Common Stock. The Board of Directors, without shareholder approval, can
issue Preferred Stock with voting, conversion, and other rights which could
adversely affect the voting power and other rights of the holders of Common
Stock. The issuance of Preferred Stock in certain circumstances may have the
effect of delaying, deferring or preventing a change of control of the Company
without further action by the stockholders, may discourage bids for the
Company's Common Stock at a premium over the market price of the Common Stock,
and may adversely affect the market price of the Common Stock. At present, the
Company has no plans to issue any additional shares of Preferred Stock.

As of September 26, 1996, there were 26,675 shares of Series A Preferred
Stock outstanding (convertible into 26,675 shares of Common Stock), held of
record by 31 stockholders. Concurrently with or shortly following the
consummation of the Offering, the Company will deliver to the holders of the
Series A Preferred Stock notice of the Company's election to redeem all
outstanding shares of the Series A Preferred Stock approximately sixty (60) days
after the date of such notice. The holders of the Series A Preferred Stock have
the right pursuant to the terms thereof to convert their Series A Preferred
Stock into Common Stock, with each share of Series A Preferred Stock being
convertible into one share of Common Stock. The Company expects that all of the
holders of Series A Preferred Stock will convert such stock into Common Stock
prior to redemption. Any shares of Series A Preferred Stock not converted will
be redeemed by the Company at a price of $1,030 per share plus accrued
dividends, the equivalent of $1,030 per common share on an as converted basis.

ANTI-TAKEOVER LAW AND CHARTER PROVISIONS

The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which restricts certain transactions and business
combinations between a corporation and an "Interested Stockholder" owning 15% or
more of the corporation's outstanding voting stock, for a period of three years
from the date the stockholder becomes an Interested Stockholder. Subject to
certain exceptions, unless the transaction is approved by the board of directors
and the holders of at least 66 2/3% of the outstanding voting stock of the
corporation (excluding shares held by the Interested Stockholder), Section 203
prohibits significant business transactions such as a merger with, disposition
of assets to, or receipt of disproportionate financial benefits by the
Interested Stockholder, or any other transaction that

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would increase the Interested Stockholder's proportionate ownership of any class
or series of the corporation's stock. The statutory ban does not apply if, upon
consummation of the transaction in which any person becomes an Interested
Stockholder, the Interested Stockholder owns at least 85% of the outstanding
voting stock of the corporation (excluding shares held by persons who are both
directors and officers or by certain employee stock plans).

The Company's Certificate of Incorporation and Bylaws include a number of
provisions which may have the effect of discouraging persons from pursuing
non-negotiated takeover attempts. These provisions include a classified Board of
Directors with staggered terms, prohibitions on the ability of stockholders to
take action by written consent, to remove directors without cause, to fill
vacancies on the Board of Directors and to call special meetings of
stockholders, and a requirement of advance notice for the submission of
stockholder proposals or director nominees. In addition, the Company's
Certificate of Incorporation requires that certain business combinations be
approved by the holders of 66 2/3% of the Common Stock (which requirement is
substantially similar to the provisions of Section 203 of the Delaware General
Corporation Law discussed above).

LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Certificate of Incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware law provides that
directors of a company will not be personally liable for monetary damages for
breach of their fiduciary duties as directors, except for liability for (i) any
breach of their duty of loyalty to the company or its stockholders, (ii) acts or
omissions not in good faith or involving intentional misconduct or a knowing
violation of law, (iii) unlawful payment of dividends or unlawful stock
repurchases or redemptions as provided in Section 174 of the Delaware General
Corporation Law, or (iv) any transaction from which the director derived an
improper personal benefit.

The Company's Bylaws provide that the Company shall indemnify its officers,
directors, employees and other agents to the extent permitted by Delaware law.
The Company's Bylaws also permit it to secure insurance on behalf of any
officer, Director, employee or other agent for any liability arising out of his
or her actions in such capacity, regardless of whether the Bylaws would permit
indemnification.

The Company believes that the provisions in its Certificate of Incorporation
and its Bylaws are necessary to attract and retain qualified persons as officers
and Directors.

OTHER ATTRIBUTES OF THE STOCK OF THE COMPANY

The Company is a corporation organized under the laws of Delaware and
generally the laws of the state of incorporation govern the corporate operations
of a corporation and the rights of its stockholders. Certain provisions of the
California Corporations Code become applicable to a corporation incorporated
outside of California, however, if (i) the corporation transacts business in
California and the average of its California property, payroll and sales factors
(as defined in the California Revenue and Taxation Code) with respect to it is
more than 50% during its latest fiscal year, (ii) more than one-half of its
outstanding voting securities are held of record by persons having addresses in
California and (iii) the corporation is not otherwise exempt. An exemption is
provided if the corporation has outstanding securities qualified for trading as
a national market security on the National Association of Securities Dealers
Automated Quotation System ("Nasdaq") if such corporation has at least 800
record and nominee holders of its equity securities as of the record date of its
most recent annual meeting of stockholders.

The Company intends to apply for the quotation of its Common Stock on The
Nasdaq National Market. At present, most of the Company's activities occur in
California and approximately % of the Common Stock will be owned upon
completion of the Offering by EKI. EKI's principal office is located in
California, so that certain provisions of California corporate law may apply to
the Company, as described below, unless as a result of the Offering there are
more than 800 holders of its equity securities as of the applicable date.

Except as discussed herein, provisions of California law which could be
applicable to the Company if the Company meets these tests and is not exempt
include, without limitation, those provisions relating to

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<PAGE>
the number of directors to be elected each year (all directors must be elected
each year under California law while the Delaware law permits staggered election
of directors), the stockholders' right to cumulate votes in elections of
directors (cumulative voting is mandatory under California law), the
stockholders' right to remove directors without cause (which under California
law is subject to the stockholders' right to cumulate votes), the right of
stockholders to call a special meeting (such right is mandatory under California
law if the requesting stockholder owns at least 10% of the voting stock) and the
Company's ability to indemnify its officers, directors and employees (which is
more limited in California than in Delaware). Notwithstanding the foregoing, a
corporation may provide for a classified board of directors, or eliminate
cumulative voting, or both if it is a "listed corporation." A "listed
corporation" means a corporation with outstanding shares listed on the New York
Stock Exchange or the American Stock Exchange, or a corporation with outstanding
securities qualified for trading as a national market security on Nasdaq if such
corporation has at least 800 holders of its equity securities as of the record
date of its most recent annual meeting of stockholders.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Company's Common Stock is
.

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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering and assuming the conversion of the
outstanding shares of Series A Preferred Stock into Common Stock, the Company
will have shares of Common Stock outstanding (assuming no exercise of
the Underwriters' over-allotment option to purchase up to an additional
shares). The shares sold in the Offering ( ) shares if the
Underwriters' over-allotment option is exercised in full) will be freely
tradable without restriction under the Securities Act, except for any such
shares held at any time by an "affiliate" of the Company, as such term is
defined under Rule 144 promulgated under the Securities Act.

The remaining shares were issued and sold by the Company in private
transactions and may be publicly sold only if registered under the Securities
Act or sold in accordance with an applicable exemption from registration, such
as Rule 144. In general, under Rule 144, as currently in effect, a person who
has beneficially owned shares for at least two years, including an "affiliate,"
as that term is defined in Rule 144, is entitled to sell, within any three-month
period, a number of "restricted" shares that does not exceed the greater of one
percent (1%) of the then outstanding shares of Common Stock shares
immediately after the Offering) or the average weekly trading volume during the
four calendar weeks preceding such sale. Sales under Rule 144 are subject to
certain manner of sale limitations, notice requirements and the availability of
current public information about the Company. Rule 144(k) provides that a person
who is not deemed an "affiliate" and who has beneficially owned shares for at
least three years is entitled to sell such shares at any time under Rule 144
without regard to the limitations described above. Of the remaining
shares outstanding, affiliates hold shares, and have owned such shares
for Rule 144 purposes since the incorporation of the Company. Of the shares
owned by non-affiliates, shares have been held by such non-affiliates in
excess of two years.

Any employee, officer, director, advisor or consultant to the Company who
purchased his or her shares pursuant to a written compensatory plan or contract
is entitled to rely on the resale provisions of Rule 701, which permits
nonaffiliates to sell their Rule 701 shares without having to comply with the
public information, holding period, volume limitation or notice provisions of
Rule 144 and permits affiliates to sell their Rule 701 shares without having to
comply with Rule 144's holding period restrictions, in each case commencing 90
days after the Company becomes subject to the reporting requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934.

The holders of 6,667 shares of Common Stock, and the holders of 26,675
shares of Series A Preferred Stock convertible into 26,675 shares of Common
Stock, have been granted demand and piggyback registration rights with respect
to such shares of Common Stock under various registration rights agreements.
Under their demand registration rights, subject to certain conditions, the
holders of at least 25% of such registrable securities may require the Company
to use commercially reasonable efforts to register such shares under the
Securities Act. The Company is obligated to complete no more than two demand
registrations, and in no event is the Company required to complete a demand
registration within six months after the effective date of its most recent
registration statement. Under their piggyback registration rights, these persons
may elect to participate and sell their registrable securities in up to a
maximum of two (assuming all securities requested to be registered are so
registered) subsequent public offerings in which the Company issues additional
securities for its own behalf, subject to reduction (with all shares of the
Company first being registered) in the event that the managing underwriter in
such offering advises the Company that the number of securities sought to be
registered exceeds the number of shares of Common Stock which could be sold
without having an adverse effect on the offering.

Holders of an additional 1,813 shares of Common Stock have been granted
piggyback registration rights entitling them to sell their registrable
securities in subsequent public offerings in which the Company issues additional
securities for its own behalf, subject to reduction (with all Company shares and
registrable securities referenced in the preceding paragraph first being
registered) in the event that the managing underwriter in such offering advises
the Company that the number of securities sought to be registered exceeds the
number of shares of Common Stock which could be sold without having an adverse
effect on the offering.

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<PAGE>
The Company has also entered into a Registration Rights Agreement with EKI
(the "EKI Registration Rights Agreement"). The EKI Registration Rights Agreement
provides certain registration rights for the 315,000 shares of Common Stock
originally issued to EKI (whether held by EKI or subsequent transferees). The
Company is also obligated, following the date one year after the consummation of
the Offering, to prepare and keep in place (at the Company's expense) a
Registration Statement on Form S-3 covering certain shares of Common Stock
currently held by EKI which may be transferred upon the exercise of options to
be granted by EKI to its employees and consultants. The EKI Registration Rights
Agreement grants two "piggyback" registration rights for offerings of Common
Stock by the Company (subject to cutback provisions for the registration rights
of other holders of Common Stock and the holders of the Company's Series A
Preferred Stock) and the right to participate in one demand registration upon a
request by the holders of 78,750 of the 315,000 shares of Common Stock
originally issued to EKI, some of which shares have been transferred to other
holders. The holders of such shares will be responsible, on a pro-rata basis,
for most of the expenses relating to the exercise of the demand registration
right and a portion of the expenses relating to the exercise of their piggyback
registration rights. See "Certain Transactions."

Except as noted above, the cost of all registrations pursuant to the
foregoing registration rights will be borne by the Company, except for
underwriters' commissions and discounts which will be borne by the sellers of
the registrable securities.

As of September 26, 1996, there were outstanding stock options to purchase
an aggregate of 4,280 shares of Common Stock. All outstanding stock options are
held by Directors and officers of the Company and are subject to the lock-up
arrangements described below. Following the Offering, the Company intends to
file a Registration Statement on Form S-8 covering an aggregate of 17,500 shares
of Common Stock that have been reserved for issuance under the Company's 1995
Stock Incentive Plan and 1994 Stock Option Plan, thus permitting the resale of
such shares in the public market without restriction under the Securities Act
upon the expiration of the lock-up period described below and the exercise of
such options. See "Management--Stock Option Plan."

The Company and all stockholders who are officers, Directors or affiliates
have agreed with the Underwriters not to sell or otherwise dispose of any shares
of Common Stock for a period of 180 days from the date of this Prospectus
without the prior written consent of CS First Boston Corporation.

The Company is unable to estimate the number of shares that may be sold in
the future by its existing stockholders or the effect, if any, that sales of
shares by such stockholders will have on the market price of the Common Stock
prevailing from time to time. Sales of substantial amounts of Common Stock by
existing stockholders could adversely affect prevailing market prices.

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<PAGE>
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS

The following is a summary of certain of the United States federal tax
considerations that may be relevant to the purchase, ownership and disposition
of the Common Stock by investors who hold the Common Stock as a capital asset
and does not purport to be a complete analysis of all the potential tax
consequences thereof. The discussion is based upon the Internal Revenue Code of
1986, as amended (the "Code"), Treasury regulations, Internal Revenue Service
("IRS") rulings and judicial decisions now in effect, all of which are subject
to change at any time by legislative, judicial or administrative action. Any
such changes could be retroactively applied in a manner that adversely affects
holders of such Common Stock. Potential investors should be aware that the
discussion does not address all of the tax considerations that may be relevant
to particular investors in light of their individual circumstances or to holders
subject to special treatment under United States federal tax laws, such as
dealers in securities, insurance companies, tax-exempt organizations and
financial institutions.

PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE
UNITED STATES FEDERAL TAX CONSEQUENCES, AS WELL AS ALL APPLICABLE STATE, LOCAL,
FOREIGN AND OTHER TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF
COMMON STOCK.

PERSONAL HOLDING COMPANY TAX

As a corporation, the Company will be subject to federal, state, local and
foreign income taxes on its taxable income. In addition, because more than 50%
of the value of the Company's outstanding stock will be owned directly or
indirectly by five or fewer individuals, and a substantial portion of the
Company's income is expected to be derived from royalties and equipment leasing,
there is a significant risk that the Company will be classified as a "personal
holding company." As a personal holding company, the Company will be subject to
an additional federal tax equal to 39.6% of, in general, its undistributed after
tax earnings for any year in which, generally, the Company's royalty and other
passive type income constitutes 60% or more of its "adjusted ordinary gross
income" (I.E., ordinary gross income, as distinguished from capital gains
income, adjusted to reflect certain statutory exclusions and deductions) for the
year. In the event that the Company is subject to the personal holding company
tax in a taxable year, the Company will only be able to use its net operating
loss, if any, for the immediately preceding year to offset its income subject to
the personal holding company tax for such year. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Net Operating Loss
Tax Carryforwards."

The Company intends to minimize its liability for the personal holding
company tax either by deriving more than 40% of its adjusted ordinary gross
income for each year from non-passive sources (such as through joint venture
arrangements with manufacturing or other operating companies), or by
distributing all or part of its personal holding company income for any taxable
year in which that threshold cannot be satisfied. The amount of any such
distribution generally will be treated as a dividend taxable as ordinary income.

TAXATION OF UNITED STATES HOLDERS

DIVIDENDS

A distribution made with respect to the Common Stock will be treated as a
dividend, taxable as ordinary income to the extent of the Company's current or
accumulated earnings and profits for tax purposes. Distributions in excess of
the current or accumulated earnings and profits of the Company will be treated
for federal income tax purposes first as a return of the holder's adjusted tax
basis in its shares and then as a gain from the sale or exchange of such shares.
In general, certain distributions of Common Stock and Preferred Stock and
distributions of Notes or other property will be taxable in an amount equal to
the fair market value of such property even though no cash is received.

A distribution treated as a dividend should qualify for the 70%
intercorporate dividends-received deduction subject to the minimum holding
period (generally at least 46 days) and other applicable

56
<PAGE>
requirements. Under certain circumstances, a corporate holder may be subject to
the alternative minimum tax with respect to the amount of its dividends-received
deduction. Legislation has been proposed to reduce the amount of the
intercorporate dividends-received deduction from 70% to 50% of the amount of
dividends received and disallow the dividends-received deduction if the 46 day
holding period is not satisfied with respect to such stock over a period
immediately before and immediately after the stockholder becomes entitled to
receive the dividend. It is impossible to predict whether this or similar
legislation will be enacted.

GAIN OR LOSS ON DISPOSITION OF COMMON STOCK

Gain or loss realized upon a sale, exchange or other disposition of Common
Stock will be treated as long-term capital gain or loss, provided that the
Common Stock has been held as a capital asset for more than one year.

BACKUP WITHHOLDING

Certain noncorporate holders may be subject to backup withholding at a rate
of 31% on dividends and redemption proceeds received with respect to the Common
Stock. Generally, backup withholding applies only when the taxpayer fails to
furnish or certify a proper Taxpayer Identification Number or when the taxpayer
is notified by the IRS that he has failed to report payments of interests and
dividends properly. The Company may require holders of the Common Stock to
establish an exemption from backup withholding or to make arrangements
satisfactory to the Company with respect to the payment of backup withholding. A
Holder who does not provide the Company with a current Taxpayer Identification
Number may be subject to penalties imposed by the IRS. Holders should consult
their tax advisors regarding their qualification for exemption from backup
withholding and the procedure for obtaining any applicable exemption.

TAXATION OF NON-UNITED STATES HOLDERS

The following is a general discussion of the principal United States federal
tax consequences of the ownership and disposition of Common Stock by a holder of
Common Stock that, for United States federal tax purposes, is a Non-United
States Holder. For purposes of this discussion, a "Non-United States Holder" is
any person who is, for United States federal income tax purposes, a foreign
corporation, a non-resident alien individual, a foreign partnership or a foreign
estate or trust, and for United States Federal Estate tax purposes, non-resident
not a citizen of the United States (as specifically defined for United States
federal estate tax purposes). This discussion does not consider any specific
facts or circumstances that may apply to a particular Non-United States Holder
and applies only to Non-United States Holders that hold Common Stock as a
capital asset. Prospective investors are urged to consult their tax advisors
regarding the United States federal tax consequences of acquiring, holding and
disposing of Common Stock (including such investor's status as a United States
person or Non-United States Holder), as well as any tax consequences that may
arise under the laws of any state, municipality or other taxing jurisdiction.

DIVIDENDS

Dividends paid to a Non-United States Holder generally will be subject to
withholding of United States federal income tax at the rate of 30%, unless the
withholding rate is reduced under an applicable income tax treaty between the
United States and the country of tax residence of the Non-United States Holder.
A Non-United States Holder may be required to satisfy certain certification
requirements in order to claim treaty benefits or to otherwise claim a reduction
of or exemption from withholding. The 30% withholding tax will not apply if the
dividend is effectively connected with a trade or business conducted within the
United States by the Non-United States Holder (or, alternatively, where an
income tax treaty applies, if the dividend is effectively connected with a
permanent establishment maintained within the United States by the Non-United
States Holder). In such event, the dividend, less any deductions available to
the holder in respect of such dividend will be subject to the United States
federal income tax at a

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maximum marginal rate of 39.6% for individuals and 35% for corporations.
Corporate holders may also be subject to the branch profits tax imposed under
Section 884 of the Code.

GAIN ON DISPOSITION OF COMMON STOCK

A Non-United States Holder generally will not be subject to United States
federal income tax on gain recognized on a sale or other disposition of Common
Stock unless the gain is effectively connected with a trade or business
conducted within the United States by the Non-United States Holder (or,
alternatively, where an income tax treaty applies, unless the gain is
effectively connected with a permanent establishment maintained within the
United States by the Non-United States Holder). Any such effectively connected
gain would be subject to the United States federal income tax on net income that
applies to United States persons (and, with respect to corporate holders, also
may be subject to the branch profits tax). In addition, a Non-United States
Holder who is an individual generally will be subject to federal income tax at a
30% rate on any gain recognized on the disposition of Common Stock if such
individual is present in the United States for 183 days or more in the taxable
year of disposition and either (i) has a "tax home" in the United States (as
specifically defined for purposes of the United States federal income tax), or
(ii) maintains an office or other fixed place of business in the United States
and the gain from the sale of the stock is attributable to such office or other
fixed place of business.

If the Company is or becomes a "United States real property holding
corporation" ('USRPHC"), Non-United States Holders may be subject to federal
income tax on any gain recognized upon the disposition of the Common Stock. As a
very general rule, the Company will be considered a USRPHC if 50% or more of the
value of its assets consist of United States real property interests. The
Company believes that it has not been, is not currently, and is not likely to
become, a USRPHC.

Legislation was proposed as recently as 1995 that, if enacted, would have
resulted under certain circumstances in the imposition of United States federal
income tax on gain realized from the disposition of Common Stock by certain
Non-United States Holders who own or owned, directly or by attribution, 10% or
more of the Common Stock. It is impossible to predict whether or in what form
any such legislation or other legislation might be enacted and what the scope or
effective date of any such legislation might be.

UNITED STATES FEDERAL ESTATE TAXES

Common Stock owned or treated as owned by a Non-United States Holder at his
or her date of death, or Common Stock subject to certain lifetime transfers made
by such an individual, will be subject to United States federal estate tax
unless an applicable estate tax treaty provides otherwise. Estates of
nonresident aliens are generally allowed a tax credit that is equivalent to an
exclusion of $60,000 of otherwise taxable assets.

INFORMATION REPORTING AND BACKUP WITHHOLDING

The Company must report annually to the IRS and to each Non-United States
Holder the amount of dividends paid to, and the tax withheld with respect to,
such holder, regardless of whether any tax was actually withheld. That
information may also be made available to the tax authorities of the country in
which a Non-United States Holder resides.

United States federal backup withholding tax (which generally is imposed at
the rate of 31% on certain payments to persons not otherwise exempt who fail to
furnish information required under United States information reporting
requirements) generally will not apply to dividends paid to a Non-United States
Holder either at an address outside the United States under temporary United
States Treasury regulations (provided that the payor does not have actual
knowledge that the payee is a United States person), or if the dividends are
subject to withholding at the 30% rate (or lower treaty rate). As a general
matter, information reporting and backup withholding also will not apply to a
payment of the proceeds of a sale of Common Stock by a foreign office of a
broker. However, information reporting requirements (but not backup withholding)
will apply to a payment of the proceeds of a sale of Common Stock by a foreign
office of a broker that is a United States person, or by a foreign office of a
foreign broker that derives 50%

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or more of its gross income for certain periods from the conduct of a trade or
business in the United States, or that is a "controlled foreign corporation," as
to the United States, unless the broker has documentary evidence in its records
that the holder is a Non-United States Holder and certain conditions are met, or
the holder otherwise establishes an exemption. Payment by a United States office
of a broker of the proceeds of a sale of Common Stock is subject to both backup
withholding and information reporting unless the holder certifies as to its
non-United States status under penalties of perjury or otherwise establishes an
exemption.

The backup withholding tax is not an additional tax and may be credited
against the Non-United States Holder's United States federal income tax
liability or refunded to the extent excess amounts are withheld, provided that
the required information is supplied to the IRS.

The backup withholding rules are currently under review by the Treasury
Department and their application to the Common Stock could be altered by future
regulations.

LEGISLATIVE PROPOSALS/REFORMS

A wide variety of legislation has been proposed, some of which, if enacted,
would substantially modify and replace the current federal income tax system. It
is impossible to predict whether or in what form any such legislation or other
legislation might be enacted and what the scope or effective date of any such
legislation might be.

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UNDERWRITING

Under the terms and subject to the conditions contained in an Underwriting
Agreement dated , 1996 (the "U.S. Underwriting Agreement"),
the underwriters named below (the "U.S. Underwriters"), for whom CS First Boston
Corporation, Salomon Brothers Inc and Montgomery Securities are acting as
representatives (the "Representatives"), have severally but not jointly agreed
to purchase from the Company and the Selling Stockholders the following
respective numbers of U.S. Shares of Common Stock:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER U.S. SHARES
- --------------------------------------------------------------------------------- -------------
<S> <C>
CS First Boston Corporation......................................................
Salomon Brothers Inc.............................................................
Montgomery Securities............................................................
-----
Total..........................................................................
-----
-----
</TABLE>

The U.S. Underwriting Agreement provides that the obligations of the U.S.
Underwriters are subject to certain conditions precedent and that the U.S.
Underwriters will be obligated to purchase all the U.S. Shares of the Common
Stock offered hereby (other than those shares covered by the over-allotment
option described below) if any are purchased. The U.S. Underwriting Agreement
provides that, in the event of a default by a U.S. Underwriter, in certain
circumstances the purchase commitments of non-defaulting U.S. Underwriters may
be increased or the U.S. Underwriting Agreement may be terminated.

The Company and the Selling Stockholders have entered into a Subscription
Agreement (the "Subscription Agreement") with the Managers of the International
Offering (the "Managers") providing for the concurrent offer and sale of the
International Shares outside the United States and Canada. The closing of the
U.S. Offering is a condition to the closing of the International Offering and
vice versa.

One of the Selling Stockholders has granted to the U.S. Underwriters and the
Managers an option, exercisable by CS First Boston Corporation, expiring at the
close of business on the 30th day after the date of this Prospectus, to purchase
up to additional shares at the initial public offering price, less the
underwriting discounts and commissions, all as set forth on the cover page of
this Prospectus. Such option may be exercised only to cover over-allotments in
the sale of the shares of Common Stock offered hereby. To the extent that such
option to purchase is exercised, each U.S. Underwriter and each Manager will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of additional shares of Common Stock being sold to the U.S.
Underwriters and the Managers as the number of U.S. Shares set forth next to
such U.S. Underwriter's name in the preceding table and as the number set forth
next to such Manager's name in the corresponding table in the prospectus
relating to the International Offering bears to the sum of the total number of
Common Stock in such tables.

The Company and the Selling Stockholders have been advised by the
Representatives that the U.S. Underwriters propose to offer the U.S. Shares of
the Common Stock in the United States and Canada to the public initially at the
public offering price set forth on the cover page of this Prospectus and,
through the Representatives, to certain dealers at such price less a concession
of $ per share, and the U.S. Underwriters and such dealers may allow a
discount of $ per share on sales to certain other dealers. After the initial
public offering, the public offering price and concession and discount to
dealers may be changed by the Representatives.

The Underwriters and Representatives have informed the Company that they do
not expect discretionary sales by the Underwriters to exceed 5% of the shares
being offered hereby.

The public offering price, the aggregate underwriting discounts and
commissions per share and per share concession and discount to dealers for the
U.S. Offering and the concurrent International Offering will be identical.
Pursuant to an Agreement between the U.S. Underwriters and the Managers (the
"Intersyndicate Agreement") relating to the Common Stock offering, changes in
the public offering price,

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<PAGE>
concession and discount to dealers will be made only upon the mutual agreement
of CS First Boston Corporation, as representative of the U.S. Underwriters, and
CS First Boston Limited ("CSFBL"), on behalf of the Managers.

Pursuant to the Intersyndicate Agreement, each of the U.S. Underwriters has
agreed that, as part of the distribution of the U.S. Shares and subject to
certain exceptions, it has not offered or sold, and will not offer or sell,
directly or indirectly, any shares of Common Stock or distribute any prospectus
relating to the Common Stock to any person outside the United States or Canada
or to any other dealer who does not so agree. Each of the Managers has agreed or
will agree that, as part of the distribution of the International Shares and
subject to certain exceptions, it has not offered or sold, and will not offer or
sell, directly or indirectly, any shares of Common Stock or distribute any
prospectus relating to the Common Stock in the United States or Canada or to any
other dealer who does not so agree. The foregoing limitations do not apply to
stabilization transactions or to transactions between the U.S. Underwriters and
the Managers pursuant to the Intersyndicate Agreement. As used herein, "United
States" means the United States of America (including the States and the
District of Columbia), its territories, possessions and other areas subject to
its jurisdiction. "Canada" means Canada, its provinces, territories, possessions
and other areas subject to its jurisdiction, and an offer or sale shall be in
the United States or Canada if it is made to (i) any individual resident in the
United States or Canada or (ii) any corporation, partnership, pension, profit-
sharing or other trust or other entity (including any such entity acting as an
investment adviser with discretionary authority) whose office most directly
involved with the purchase is located in the United States or Canada.

Pursuant to the Intersyndicate Agreement, sales may be made between the U.S.
Underwriters and the Managers of such number of shares of Common Stock as may be
mutually agreed upon. The price of any shares so sold will be the public
offering price, less such amount as may be mutually agreed upon by CS First
Boston Corporation, as representative of the U.S. Underwriters, and CSFBL, on
behalf of the Managers, but not exceeding the selling concession applicable to
such shares. To the extent there are sales between the U.S. Underwriters and the
Managers pursuant to the Intersyndicate Agreement, the number of shares of
Common Stock initially available for sale by the U.S. Underwriters or by the
Managers may be more or less than the amount appearing on the cover page of the
Prospectus. Neither the U.S. Underwriters nor the Managers are obligated to
purchase from the other any unsold shares of Common Stock.

The Company and all stockholders who are officers, Directors or affiliates
have agreed that they will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933
(the "Securities Act") relating to, any additional shares of Common Stock or
securities convertible into or exchangeable or exercisable for any shares of
Common Stock without the prior written consent of CS First Boston Corporation
for a period of 180 days after the date of this Prospectus.

The Company and the Selling Stockholders have agreed to indemnify the U.S.
Underwriters and the Managers against certain liabilities, including civil
liabilities under the Securities Act, or contribute to payments which the U.S.
Underwriters and the Managers may be required to make in respect thereof.

Application will be made to list the shares of Common Stock on the Nasdaq
Stock Market's National Market under the symbol "ERTH".

Prior to the Offering, there has been no public trading market for the
Common Stock. The initial public offering price for the Common Stock will be
determined by negotiation between the Company and the Representatives. Among the
factors to be considered in determining the initial public offering price will
be the market valuation of comparable companies; market conditions for initial
public offerings; the history of, and the prospects for, the Company's business;
the Company's past and present operations; the Company's current financial
position; an assessment of the Company's management; and the general condition
of the securities markets. The estimated initial public offering price range set
forth on the cover page of this Preliminary Prospectus is subject to change as a
result of market conditions and other factors.

61
<PAGE>
NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that the Company prepare and
file a prospectus with the securities regulatory authorities in each province
where trades of the Common Stock are effected. Accordingly, any resale of the
Common Stock in Canada must be made in accordance with applicable securities
laws which will vary depending on the relevant jurisdiction, and which may
require resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the Common Stock.

REPRESENTATIONS OF PURCHASERS

Each purchaser of the Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company and the dealer from whom
such purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such Common Stock without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."

RIGHTS OF ACTION AND ENFORCEMENT

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the SECURITIES ACT (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.

All of the Company's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Ontario purchasers to effect service of process within Canada upon the
Company or such persons. All or a substantial portion of the assets of the
Company and such persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against the Company or such persons in
Canada or to enforce a judgment obtained in Canadian courts against such Company
or persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

A purchaser of the Common Stock to whom the SECURITIES ACT (British
Columbia) applies is advised that such purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any Common Stock acquired by such purchaser pursuant to the Offering. Such
report must be in the form attached to British Columbia Securities Commission
Blanket Order BOR #95/17, a copy of which may be obtained from the Company. Only
one such report must be filed in respect of the Common Stock acquired on the
same date and under the same prospectus exemption.

LEGAL MATTERS

The legality of the Common Stock being offered hereby will be passed upon
for the Company by Gibson, Dunn & Crutcher LLP, Los Angeles, California. Certain
legal matters will be passed upon for the Underwriters by Latham & Watkins,
Costa Mesa, California.

EXPERTS

The financial statements of the Company as of December 31, 1994 and 1995,
and for each of the three years in the period ended December 31, 1995, and for
the period from inception through December 31, 1995 included in this Prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as

62
<PAGE>
stated in their report (which report contains an emphasis paragraph relating to
the Company's ability to continue as a going concern), and have been so included
in reliance upon the report of such firm given upon their authority of as
experts in auditing and accounting.

The portions of this Prospectus entitled "Risk Factors--Protection of
Proprietary Technology" and "Business--Patents, Proprietary Rights and
Trademarks" have been reviewed and approved by Workman, Nydegger & Seeley, Salt
Lake City, Utah, as experts in patent law.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act with
respect to the Common Stock offered hereby. This Prospectus, which constitutes
part of the Registration Statement, omits certain of the information contained
in the Registration Statement and the exhibits and schedules thereto on file
with the Commission pursuant to the Securities Act and the rules and regulations
of the Commission thereunder. The Registration Statement, including exhibits and
schedules thereto, may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the Commission's Regional Offices at Seven World
Trade Center, Suite 1300, New York, New York 10048, and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and copies
may be obtained at the prescribed rates from the Public Reference Section of the
Commission at its principal office in Washington, D.C. The Commission maintains
a web site that contains reports, proxy and information statements and other
information filed electronically with the Commission at http://www.sec.gov.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference.

63
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
EARTHSHELL CORPORATION

Independent Auditors' Report.............................................................. F-2

Balance Sheets as of December 31, 1994 and
1995 and (unaudited) June 30, 1996 and pro forma June 30, 1996.......................... F-3

Statements of Operations for the years ended
December 31, 1993, 1994 and 1995, and for the
period from November 1, 1992 (inception)
through December 31, 1995 and (unaudited) the
six months ended June 30, 1995 and 1996 and inception through June 30, 1996............. F-4

Statements of Stockholders' Equity (Deficit) for the years
ended December 31, 1993, 1994 and 1995 and
(unaudited) the six months ended
June 30, 1996 and pro forma June 30, 1996............................................... F-5

Statements of Cash Flows for the years ended
December 31, 1993, 1994 and 1995, and for the
period from November 1, 1992 (inception)
through December 31, 1995 and (unaudited)
the six months ended June 30, 1995 and 1996 and inception through June 30, 1996......... F-6

Notes to Financial Statements............................................................. F-8
</TABLE>

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
EarthShell Container Corporation:

We have audited the accompanying balance sheets of EarthShell Container
Corporation (a development stage enterprise -- the "Company") as of December 31,
1994 and 1995, and the related statements of operations, stockholders' equity
(deficit), and cash flows for each of the three years in the period ended
December 31, 1995 and for the period from inception (November 1, 1992) through
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of EarthShell Container Corporation as of
December 31, 1994 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995 and for the
period from inception through December 31, 1995 in conformity with generally
accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1, the Company is
a development stage enterprise that has incurred losses in its operations since
inception, currently has negative working capital and continues to rely on its
stockholders to provide cash flow to sustain its operations. Although the
Company's operations subsequent to December 31, 1995 have been funded by loans
from its majority stockholder, the stockholder is under no obligation to
continue to fund the Company, and without additional funding from its
stockholders or other sources, there is substantial doubt about the Company's
ability to continue as a going concern. Management's plans to procure additional
long-term funding are also described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

Deloitte & Touche LLP

Los Angeles, California

February 2, 1996

F-2
<PAGE>
EARTHSHELL CONTAINER CORPORATION

(A DEVELOPMENT STAGE ENTERPRISE)

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
-------------------------- JUNE 30, 1996
1994 1995 JUNE 30, 1996 (NOTE 1)
------------ ------------ -------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................. $ 180,938 $ 266,046 $ 61,497 $ 61,497
Investments--U.S. government securities.... 2,704,011
Prepaid insurance.......................... 71,675 68,862 22,954 22,954
Other assets............................... 51,361 1,641 12,431 12,431
------------ ------------ -------------- ---------------
Total current assets....................... 3,007,985 336,549 96,882 96,882
PROPERTY AND EQUIPMENT, NET.................. 242,017 1,891,122 2,501,358 2,501,358
------------ ------------ -------------- ---------------
TOTAL........................................ $ 3,250,002 $ 2,227,671 $ 2,598,240 $ 2,598,240
------------ ------------ -------------- ---------------
------------ ------------ -------------- ---------------

LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)

CURRENT LIABILITIES:
Notes payable and accrued interest to
majority stockholder..................... $ 2,000,000 $ 12,984,736 $ 18,330,472 $ 18,330,472
Note payable to bank....................... 1,257,750 1,257,750
Dividends payable.......................... 5,881,665
Payable to majority stockholder............ 366,367 574,857 2,024,459 2,024,459
Accounts payable and accrued expenses...... 765,265 1,346,179 1,132,744 1,132,744
------------ ------------ -------------- ---------------
Total current liabilities................ 3,131,632 14,905,772 22,745,425 28,627,090
------------ ------------ -------------- ---------------
COMMITMENTS
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred Stock, $.01 par value, 100,000
shares authorized; 35,000 Series A shares
designated; 26,675 Series A shares issued
and outstanding as of December 31, 1994
and 1995 and (unaudited) June 30, 1996... 267 267 267
Additional paid-in preferred capital....... 24,472,734 24,472,734 24,472,734
Common stock, $.01 par value, 1,000,000
shares authorized; 315,000 issued and
outstanding as of December 31, 1994 and
1995 and (unaudited) June 30, 1996 (Pro
forma 341,675 shares).................... 3,150 3,150 3,150 3,417
Additional paid-in common capital.......... 6,850 1,124,573 1,599,573 26,072,307
Deficit accumulated during the development
stage.................................... (24,364,631) (38,278,825) (46,222,909) (52,104,574)
------------ ------------ -------------- ---------------
Total stockholders' equity (deficit)..... 118,370 (12,678,101) (20,147,185) (26,028,850)
------------ ------------ -------------- ---------------
TOTAL........................................ $ 3,250,002 $ 2,227,671 $ 2,598,240 $ 2,598,240
------------ ------------ -------------- ---------------
------------ ------------ -------------- ---------------
</TABLE>

See notes to financial statements.

F-3
<PAGE>
EARTHSHELL CONTAINER CORPORATION

(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
INCEPTION SIX MONTHS ENDED JUNE 30, INCEPTION
YEAR ENDED DECEMBER 31, THROUGH THROUGH
------------------------------------ DECEMBER 31, -------------------------- JUNE, 30,
1993 1994 1995 1995 1995 1996 1996
---------- ----------- ----------- ------------ ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
EXPENSES:
Research and development......... $3,309,231 $11,411,327 $ 9,383,674 $24,104,232 $4,274,219 $5,305,884 $29,410,116
General and administrative....... 2,499,343 2,946,600 2,078,058 7,524,001 773,372 1,091,902 8,615,903
Depreciation..................... 601,182 796,826 44,047 1,442,055 6,337 116,195 1,558,250
Patent prosecution expenses...... 1,519,729 1,716,560 1,929,266 5,165,555 1,300,625 782,047 5,947,602
---------- ----------- ----------- ------------ ----------- ----------- -----------
Total expenses................. 7,929,485 16,871,313 13,435,045 38,235,843 6,354,553 7,296,028 45,531,871

INTEREST (INCOME) EXPENSE, NET..... (147,734) (290,033) 478,349 40,582 96,894 647,256 687,838
---------- ----------- ----------- ------------ ----------- ----------- -----------
LOSS BEFORE INCOME TAXES........... 7,781,751 16,581,280 13,913,394 38,276,425 6,453,047 7,944,884 46,221,309

INCOME TAXES....................... 800 800 800 2,400 800 800 3,200
---------- ----------- ----------- ------------ ----------- ----------- -----------
NET LOSS........................... $7,782,551 $16,582,080 $13,914,194 $38,278,825 $6,452,247 $7,944,084 $46,222,909
---------- ----------- ----------- ------------ ----------- ----------- -----------
---------- ----------- ----------- ------------ ----------- ----------- -----------
PRO FORMA NET LOSS PER SHARE (Note
1)............................... $ 40.31 $ 23.02
----------- -----------
----------- -----------
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES USED
IN COMPUTING PRO FORMA NET LOSS
PER SHARE (Note 1)............... 345,163 345,163
----------- -----------
----------- -----------
</TABLE>

See notes to financial statements.

F-4
<PAGE>
EARTHSHELL CONTAINER CORPORATION

(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
CUMULATIVE
CONVERTIBLE DEFICIT
PREFERRED STOCK ADDITIONAL ADDITIONAL ACCUMULATED
SERIES A PAID-IN COMMON STOCK PAID-IN DURING
--------------- PREFERRED --------------- COMMON DEVELOPMENT
SHARES AMOUNT CAPITAL SHARES AMOUNT CAPITAL STAGE TOTAL
------- ------ ------------ ------- ------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ISSUANCE OF COMMON STOCK AT
INCEPTION
($.03 per share) 315,000 $3,150 $ 6,850 $ 10,000
Sale of preferred stock, net....... 26,675 $ 267 $ 24,472,734 24,473,001
Net loss........................... $ (7,782,551) (7,782,551)
------- ------ ------------ ------- ------ ----------- ------------- -------------
BALANCE, DECEMBER 31, 1993......... 26,675 267 24,472,734 315,000 3,150 6,850 (7,782,551) 16,700,450
Net loss........................... (16,582,080) (16,582,080)
------- ------ ------------ ------- ------ ----------- ------------- -------------
BALANCE, DECEMBER 31, 1994......... 26,675 267 24,472,734 315,000 3,150 6,850 (24,364,631) 118,370
Contribution to equity............. 1,117,723 1,117,723
Net loss........................... (13,914,194) (13,914,194)
------- ------ ------------ ------- ------ ----------- ------------- -------------
BALANCE, DECEMBER 31, 1995......... 26,675 267 24,472,734 315,000 3,150 1,124,573 (38,278,825) (12,678,101)
------- ------ ------------ ------- ------ ----------- ------------- -------------
Contribution to equity
(unaudited)...................... 325,000 325,000
Issuance of stock warrant
(unaudited)...................... 150,000 150,000
Net loss (unaudited)............... (7,944,084) (7,944,084)
------- ------ ------------ ------- ------ ----------- ------------- -------------
BALANCE, JUNE 30, 1996
(Unaudited)...................... 26,675 267 24,472,734 315,000 3,150 1,599,573 (46,222,909) (20,147,185)
------- ------ ------------ ------- ------ ----------- ------------- -------------
Conversion (on a pro forma basis)
of preferred stock to common
stock (unaudited)................ (26,675) (267) (24,472,734) 26,675 267 $24,472,734
Accrual of preferred stock
dividends (unaudited)............ (5,881,665) (5,881,665)
------- ------ ------------ ------- ------ ----------- ------------- -------------
PRO FORMA BALANCE, JUNE 30, 1996
(Unaudited) (Note 1)............. -- $ -- $ -- 341,675 $3,417 $26,072,307 $(52,104,574) $ (26,028,850)
------- ------ ------------ ------- ------ ----------- ------------- -------------
------- ------ ------------ ------- ------ ----------- ------------- -------------
</TABLE>

See notes to financial statements.

F-5
<PAGE>
EARTHSHELL CONTAINER CORPORATION

(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
INCEPTION SIX MONTHS ENDED JUNE 30,
YEAR ENDED DECEMBER 31, THROUGH
---------------------------------------- DECEMBER 31, ---------------------------
1993 1994 1995 1995 1995 1996
------------ ------------ ------------ ------------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss........................... $ (7,782,551) $(16,582,080) $(13,914,194) $(38,278,825) $(6,452,247) $(7,944,084)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization.... 601,182 796,826 44,047 1,442,055 6,337 116,195
Non-cash compensation............ 325,000
Loss on sale or disposal of
property and equipment......... 540 65,099 65,639
Net loss on sale of
investments.................... 32,496 32,496
Accretion of discounts on
investments.................... (115,217) (294,867) (410,084)
Changes in operating assets and
liabilities:
Prepaid expenses and other
assets......................... (69,360) (53,676) 52,533 (70,503) (8,284) 35,118
Accounts payable and accrued
expenses....................... 315,699 449,566 580,914 1,346,179 (127,141) (213,435)
Payable to majority
stockholder.................... 623,627 643,221 7,866,439 9,133,287 2,201,392 6,025,938
Accrued interest on notes payable
to majority stockholder........ 234,510 234,510 119,400
------------ ------------ ------------ ------------- ------------ ------------
Net cash used in operating
activities................. (6,426,080) (14,943,415) (5,135,751) (26,505,246) (4,379,943) (1,535,868)
------------ ------------ ------------ ------------- ------------ ------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of investments--U.S.
government securities............ (33,421,722) (3,496,532) (36,918,254) -- --
Proceeds from sales and redemptions
of investments................... 17,997,119 16,594,712 2,704,011 37,295,842 2,704,011 --
Proceeds from sale of property and
equipment........................ 72,670 225,000 297,670 225,000 --
Purchase of property and
equipment........................ (2,002,504) (676,311) (1,918,152) (4,596,967) -- (726,431)
------------ ------------ ------------ ------------- ------------ ------------
Net cash provided by (used
in) investing activities... (17,427,107) 12,494,539 1,010,859 (3,921,709) 2,929,011 (726,431)
------------ ------------ ------------ ------------- ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of notes
payable to stockholders.......... 2,000,000 6,210,000 8,210,000 3,425,000 2,057,750
Proceeds from issuance of common
stock............................ 10,000 (10,000)
Proceeds from issuance of preferred
stock............................ 25,675,000 25,675,000
Preferred stock issuance costs..... (1,201,999) (1,201,999)
Repayment of note payable.......... (2,000,000) (2,000,000) (2,000,000)
------------ ------------ ------------ ------------- ------------ ------------
Net cash provided by
financing activities....... 24,483,001 2,000,000 4,210,000 30,693,001 1,425,000 2,057,750
------------ ------------ ------------ ------------- ------------ ------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................. 629,814 (448,876) 85,108 266,046 (25,932) (204,549)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD.............. 629,814 180,938 180,938 266,046
------------ ------------ ------------ ------------- ------------ ------------
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 629,814 $ 180,938 $ 266,046 $ 266,046 $ 155,006 $ 61,497
------------ ------------ ------------ ------------- ------------ ------------
------------ ------------ ------------ ------------- ------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION--
Cash paid for:
Income taxes..................... $ 800 $ 800 $ 800 $ 2,400 $ 800 $ 800
Interest......................... $ 337 $ 500 $ 275,415 $ 276,252 $ 98,849 $ 5,391

INCEPTION
THROUGH JUNE
30, 1996
-------------
(UNAUDITED)
<S> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss........................... $ (46,222,909)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization.... 1,558,250
Non-cash compensation............ 325,000
Loss on sale or disposal of
property and equipment......... 65,639
Net loss on sale of
investments.................... 32,496
Accretion of discounts on
investments.................... (410,084)
Changes in operating assets and
liabilities:
Prepaid expenses and other
assets......................... (35,385)
Accounts payable and accrued
expenses....................... 1,132,744
Payable to majority
stockholder.................... 353,910
Accrued interest on notes payable
to majority stockholder........ 15,159,228
-------------
Net cash used in operating
activities................. (28,041,114)
-------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of investments--U.S.
government securities............ (36,918,254)
Proceeds from sales and redemptions
of investments................... 37,295,842
Proceeds from sale of property and
equipment........................ 297,670
Purchase of property and
equipment........................ (5,323,398)
-------------
Net cash provided by (used
in) investing activities... (4,648,140)
-------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of notes
payable to stockholders.......... 10,267,750
Proceeds from issuance of common
stock............................ (10,000)
Proceeds from issuance of preferred
stock............................ 25,675,000
Preferred stock issuance costs..... (1,201,999)
Repayment of note payable.......... (2,000,000)
-------------
Net cash provided by
financing activities....... 32,750,751
-------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................. 61,497
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD.............. --
-------------
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 61,497
-------------
-------------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION--
Cash paid for:
Income taxes..................... $ 3,200
Interest......................... $ 281,643
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Non-cash compensation of $325,000 represents the difference between fair
market value and exercise price of options on the date of grant.

In consideration of the $3,000,000 line of credit established on June 7, 1996,
the Company issued a stock warrant which entitles the lender to purchase
common stock valued at $150,000 upon the initial public offering. A discount
has been recorded against the debt.

On December 31, 1994, the Company sold substantially all of its equipment and
leasehold improvements to EKI resulting in a gain of $1,117,723 which was
offset against the note receivable from EKI related to the sale. During
1995, the note receivable was eliminated, and the gain was recorded as a
contribution to additional paid-in common capital.

See notes to financial statements.

F-6
<PAGE>
EARTHSHELL CONTAINER CORPORATION

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS

(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)

1. GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

EarthShell Container Corporation (the "Company") was incorporated in
Delaware on November 1, 1992 and is a subsidiary of E. Khashoggi Industries
("EKI"). Both the Company and EKI are development stage enterprises. In
connection with the formation of the Company, the Company entered into a license
agreement (see Note 3) for certain technology developed by EKI, exclusively for
use in connection with the manufacture and sale of selected disposable and food
beverage containers for use in the food-service industry. The accompanying
financial statements reflect only the costs and expenses related to this
application of the technology under development since the Company's formation on
November 1, 1992. Expenses incurred prior to November 1, 1992 by EKI and its
predecessor entities have been excluded, as they related to broader applications
of the technology not included in the license agreement. The accompanying
financial statements have been presented as if the Company commenced operations
on January 1, 1993. Expenses for the two-month period from November 1, 1992
(date of inception) to December 31, 1992 totaled $2,749 and are included in the
1993 financial statements.

The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements, from the date of inception to June 30, 1996, the Company incurred
accumulated losses of $46,222,909, and as of June 30, 1996, the Company's
current liabilities exceeded its current assets by $22,648,543. As a development
stage enterprise, the Company has relied on funding from its stockholders to
sustain its operations. In September 1993, the Company completed a private
placement offering of preferred stock, raising $24,473,001 in net proceeds (see
Note 6). During 1994, the Company applied substantially all of these proceeds to
the furtherance of its research and development activities and the repayment of
stockholder advances. During and subsequent to December 31, 1995, the Company's
operations have been substantially funded with loans from its majority
stockholder. However, the majority stockholder is under no obligation to loan or
make additional capital contributions to the Company.

Management is currently preparing for a public offering of the Company's
common stock to obtain additional funds so that the Company can meet its
obligations, sustain its development activities and repay the stockholder loans
and other debt. Management anticipates that the offering will be initiated upon
the completion of certain product commercialization activities currently in
process.

If the Company is unable to successfully complete an offering or obtain
funding from other sources, the Company may not be able to continue as a going
concern. The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.

PROPERTY AND EQUIPMENT

Property and equipment are carried at cost less accumulated depreciation and
amortization. Depreciation and amortization are recorded on the straight-line
basis over the estimated useful lives of the assets of three years.

INVESTMENTS

Investments are accounted for in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 115 and are classified as available for sale.

F-7
<PAGE>
EARTHSHELL CONTAINER CORPORATION

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)

1. GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
STATEMENT OF CASH FLOWS

For presentation purposes, cash and cash equivalents include cash and funds
invested in short-term money market accounts with original maturities of three
months or less (see disclosure of noncash activities in Note 3).

PRO FORMA NET LOSS PER COMMON AND COMMON EQUIVALENT SHARE

Net loss per common and common equivalent share for year ended December 31,
1995 and for the six months ended June 30, 1996 have been determined by dividing
net losses by the weighted average common and common equivalent shares
outstanding during the period, computed in accordance with the treasury stock
method. As required by rules promulgated by the Securities and Exchange
Commission, shares, options, warrants or convertible preferred shares issued at
prices below the offering price in the twelve months prior to the initial public
offering have been included in the calculation of weighted average common and
common equivalent shares as if outstanding using the treasury stock method. Loss
per share for all periods prior to the year ended December 31, 1995 have not
been presented as such information is not indicative of the Company as an
on-going entity.

UNAUDITED PRO FORMA INFORMATION

As of June 30, 1996, the unaudited pro forma balance sheet and statement of
stockholders' equity (deficit) have been presented assuming the conversion of
the Company's cumulative convertible preferred stock. It is contemplated that
all of the outstanding shares of the Company's cumulative convertible preferred
stock will be converted to an aggregate of 26,675 shares of the Company's common
stock. In addition, upon conversion, the Company will declare dividends of
$5,881,665 in accordance with the terms of the cumulative senior convertible
preferred stock.

INCOME TAXES

The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes."

FAIR VALUE OF FINANCIAL INSTRUMENTS

The recorded values of the Company's financial instruments approximate their
fair values. The Company's financial instruments are primarily composed
primarily of investments in U.S. government securities and notes payable. The
investments are short term in nature and carry current market rates. Notes
payable initially bear interest at the prime rate in effect at the date of
issuance, which is adjusted to the prime rate in effect on the first day of each
calendar quarter.

USE OF ESTIMATES IN THE PREPARATION OF THE FINANCIAL STATEMENTS

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

F-8
<PAGE>
EARTHSHELL CONTAINER CORPORATION

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)

1. GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
UNAUDITED FINANCIAL STATEMENTS

In the opinion of management, the unaudited financial statements have been
prepared on the same basis as the audited financial statements and include all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of the financial position and the results of operations as of such
dates and for such periods.

RECLASSIFICATIONS

Certain reclassifications have been made to prior year financial statements
to conform to 1996 classifications.

2. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------- 1996
1994 1995 (UNAUDITED)
----------- ------------ ------------
<S> <C> <C> <C>
Furniture and lab equipment.......................... $ 408,660 $ 426,089 $1,449,790
Deposits on equipment................................ -- 1,513,187 1,215,918
----------- ------------ ------------
408,660 1,939,276 2,665,708
Accumulated depreciation and amortization............ (166,643) (48,154) (164,350)
----------- ------------ ------------
Property and equipment, net.......................... $ 242,017 $ 1,891,122 $2,501,358
----------- ------------ ------------
----------- ------------ ------------
</TABLE>

3. RELATED PARTY TRANSACTIONS

The Company's administrative and research offices are located in shared
facilities with EKI. In addition, the conduct of the Company's current
operations requires sharing of technical support and management personnel of
EKI, primarily to assist in furthering the Company's development of the licensed
technology and product applications. To confirm these arrangements, the Company
and EKI entered into certain intercompany agreements. From September 1, 1993
through June 30, 1994, the Company operated under a management, administrative
services and professional services agreement (the "Management Services
Agreement"). Under the terms of the Management Services Agreement, the Company
reimbursed EKI for all direct payroll costs and related expenses incurred on
approved projects, plus an allocation of EKI's overhead and general and
administrative costs. Overhead and general and administrative costs were
allocated to the Company based on payroll costs charged to Company-specific
projects compared to EKI's total payroll cost. The Management Services Agreement
also provided for the payment of monthly administrative fees during the first
two quarters of 1994 and throughout 1993. Administrative fees totaled $400,000
and $1,200,000 in 1993 and 1994, respectively. Effective July 1, 1994 the
Company and EKI entethd into a technical services and sublease agreement (the
"Technical Services Agreement"), which superseded the previous Management
Services Agreement between the Company and EKI. Under the terms of the Technical
Services Agreement, the Company pays EKI for all direct project labor hours
incurred at specified hourly billing rates, which are subject to revision
semiannually, and direct

F-9
<PAGE>
EARTHSHELL CONTAINER CORPORATION

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)

3. RELATED PARTY TRANSACTIONS (CONTINUED)
expenses incurred on approved projects. The technical services portion of the
Technical Services Agreement is effective through June 30, 1997. The Company
subleases office space from EKI for $5,600 per month under this agreement. The
sublease is effective through July 1, 1997. Total rent expense included in 1994
and 1995 general and administrative expenses was $33,600 and $67,200,
respectively. For the six months ended June 30, 1995 and 1996, the Company paid
or accrued $3,931,171 and $4,632,708, respectively, for services performed under
the Technical Services Agreement and $33,600 in sublease payments for each of
the respective periods.

Included in 1993, 1994 and 1995 research and development expenses are
$3,309,231, $9,472,220 and $8,427,239, respectively, in project costs incurred
under the Technical Services Agreement and/or the Management Services Agreement.

Projects conducted by EKI for the Company include development efforts
related to the technology, such as development of commercial production
processes. In addition, during 1993 and 1994, the Company leased certain
Company-owned equipment to EKI for use by EKI employees on Company projects.
During 1993 and 1994, $156,000 and $348,000, respectively, of lease income
related to this arrangement was reported net of an equal amount of lease charges
paid by the Company to EKI under its various projects. No such transactions
occurred in 1995. On December 31, 1994, the Company sold substantially all of
its equipment and leasehold improvements to EKI. EKI issued a note receivable to
the Company totaling $2,018,204, representing the Company's original cost of the
assets. The transaction resulted in a gain of $1,117,723, which was offset
against the note receivable from EKI. The net note receivable balance of
$900,481 was netted against the payable to EKI in the accompanying 1994
financial statements. During 1995, the note receivable was offset by notes
payable that were issued to EKI. As a result, the note receivable was
eliminated, and the gain was recorded as a contribution to additional paid-in
common capital.

In connection with the formation of the Company, the Company entered into a
license agreement with EKI to manufacture, use, sell and sublicense certain
technology rights and to use certain trademarks owned by EKI in connection with
the products covered under the license agreement. The license covers the period
of the patents covering the technologies. The agreement requires the Company to
reimburse EKI for all costs and expenses associated with the filing, prosecuting
and maintaining of patents or patent applications or technology which is
directly related to food and beverage containers within the field of use
licensed to the Company under the License Agreement, or which is outside the
field of use under the License Agreement, but which has significant teachings,
claims or applications for such uses. Under this agreement, legal fees of
$1,519,729, $1,716,560 and $1,929,266, were paid to or on behalf of EKI during
1993, 1994 and 1995, respectively. In addition, legal fees of $782,047 and
$1,300,625 were paid to or on behalf of EKI for the six months ended June 30,
1996 and 1995, respectively.

At December 31, 1995, the notes payable to the majority stockholder of
$12,750,226 include amounts due to EKI under the Technical Services Agreement
and the Patent Allocation Agreement. During 1995, $8,558,430 of the payables to
EKI were converted to notes payable and several other notes payable were issued
to EKI for cash loans totaling $6,210,000. The total notes payable of
$14,768,430 issued to EKI throughout 1995 was reduced by the cancellation of the
note receivable of $2,018,204 related to the sale of equipment and leasehold
improvement to EKI discussed above. The notes initially bear interest at the
prime rate in effect at the date of issuance. The interest rates are adjusted to
the prime rate in effect on the first day of each calendar quarter. At December
31, 1995 and June 30, 1996, all of the notes accrued interest at 8.75% and
8.25%, respectively, and were payable on demand.

F-10
<PAGE>
EARTHSHELL CONTAINER CORPORATION

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)

3. RELATED PARTY TRANSACTIONS (CONTINUED)
During the six months ended June 30, 1996, $3,070,665 of billings due under
the Technical Services Agreement and Patent Allocation Agreement and $290,671 of
interest due to EKI were converted to notes payable. In addition, several other
notes were issued to EKI for cash loans totaling $1,865,000. As a result, total
notes payable to EKI increased from $12,750,226 as of December 31, 1995 to
$17,976,562 as of June 30, 1996.

The amount payable to the majority stockholder of $366,367, $574,857 and
$2,024,459 as of December 31, 1994 and 1995 and June 30, 1996 includes amounts
due to EKI under the Technical Services Agreement and the Patent Allocation
Agreement.

The Company borrowed $2,000,000 from a preferred stockholder on December 21,
1994 and executed a demand note payable that accrued interest at the rate of 8%
per annum. The note was fully repaid in February 1995.

4. NOTES PAYABLE

As of June 30, 1996, notes payable includes $17,976,562 in notes due to the
majority stockholder, as described in Note 3, and $1,407,750 outstanding on a
line of credit less an original issue discount of $150,000 related to the stock
warrants described in Note 8.

In June 1996, the Company established a $3,000,000 line of credit which
expires on May 30, 1997, unless otherwise extended. The extension of credit has
been guaranteed by EKI, Mr. Essam Khashoggi, the Chairman of the Board and an
indirect controlling shareholder of the Company, and a trust controlled by Mr.
Khashoggi. Interest is payable monthly at an annual rate of 1% in excess of the
Bank's announced prime lending rate which varies with any change in such prime
rate. As of June 30, 1996, the annual rate was 9.25% and the outstanding
principal was $1,407,750. In July 1996, the line of credit was increased to
$4,500,000.

5. COMMITMENTS

At December 31, 1995, the unpaid balances due to foreign vendors for
equipment purchases totaled $1,565,727. In addition, the Company entered an
agreement with a sublicensee to purchase the sublicensee's demonstration machine
at a price of $238,000, at the sublicensee's option to be exercised on or before
July 31, 1996. The sublicensee exercised this option and the Company became
obligated to purchase the equipment in July 1996.

6. CUMULATIVE CONVERTIBLE PREFERRED STOCK

On September 17, 1993, the Company completed a private placement of
preferred stock totaling $26,675,000, with net proceeds to the Company totaling
$24,473,001. Under the Series A Cumulative Senior Convertible Preferred Stock
Purchase Agreement, the Company issued 26,675 shares of cumulative convertible
preferred stock at $1,000 per share. Dividends, when declared, are payable on a
quarterly basis at 8% per annum. At December 31, 1995, and June 30, 1996
cumulative undeclared dividends totaled $4,882,000 and $5,881,665, respectively.
Such dividends will automatically accrue upon conversion of the preferred stock
into shares of common stock. Each share of preferred stock is convertible into
one share of common stock. After three years from the issuance, registration
rights enable the preferred stockholders to cause the Company to effect two
registration statements for the common stock into which their shares of
preferred stock are convertible. Preferred stockholders have the right to vote
with the common stock as if

F-11
<PAGE>
EARTHSHELL CONTAINER CORPORATION

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)

6. CUMULATIVE CONVERTIBLE PREFERRED STOCK (CONTINUED)
the preferred stock had converted to common stock of the Company. Preferred
stockholders have the right to elect one member to the Board of Directors.

7. STOCK OPTIONS

The Company adopted the EarthShell Container Corporation 1994 Stock Option
Plan on June 22, 1994 (the "1994 Plan"). The Company subsequently adopted the
EarthShell Container Corporation 1995 Stock Incentive Plan effective as of
November 27, 1995 (the "1995 Plan") which effectively supersedes the 1994 Plan
for options issued on or after the date of the 1995 Plan's adoption. The 1994
and 1995 Plans provide that the Company may grant an aggregate number of options
for up to 16,625 shares of common stock to employees or other eligible persons
as defined by the Plans. Options issued to date under the 1994 Plan and the 1995
Plan generally vest at varying rates from 0 to 5 years and generally expire 10
years from the date of grant. Options for 160 fully vested shares were granted
to directors in 1995 under the 1995 Plan at an exercise price of $2,000 per
share. (In September 1995, shares were sold by a stockholder of the Company to
independent investors at $2,000 per share. Accordingly, $2,000 represents the
fair market value of the shares at approximately that period of time.) Options
for 400 shares were canceled during 1995. In January 1996, options for 1,575
shares were granted under the 1995 Plan at an exercise price of $2,000 per
share. Of these options, 1,000 shares were granted whereby the individual will
be reimbursed $1,300 per share by EKI upon exercise. Accordingly, compensation
expense of $325,000 representing the portion of the exercise price to be
reimbursed by EKI was recognized during the six months ended June 30, 1996. At
June 30, 1996, options exerciseable into 2,705 shares of common stock were
outstanding at a per share exercise price of $1,000 for options issued under the
1994 Plan. Together under both plans, 4,280 options were outstanding of which
1,115 were exercisable as of June 30, 1996.

In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation," which will be effective for the
Company beginning January 1, 1996. SFAS No. 123 requires expanded disclosures of
stock-based compensation arrangements with employees and encourages (but does
not require) compensation cost to be measured based on the fair value of the
equity instrument awarded. The Company has decided not to adopt the fair value
measurement features of the statement and will instead continue to apply APB
Opinion No. 25, which recognizes compensation cost based on the intrinsic value
of the equity instrument awarded.

The impact of this accounting standard on the Company's financial position
and results of operations is expected to be immaterial.

8. STOCK WARRANTS

On June 7, 1996, in consideration of the $3,000,000 line of credit financing
arrangement, the Company issued a warrant which entitles the lender to purchase
common stock shares equal to $150,000 divided by the price per share of the
Company's common stock in an initial public offering. This warrant can be
exercised at any time following an initial public offering by the Company and
prior to its expiration date of June 7, 2001.

On July 2, 1996, the line of credit was increased to $4,500,000 and an
additional warrant was issued which entitles the lender to purchase another
$150,000 in common stock shares similar to the terms in the previously issued
warrant of June 7, 1996.

F-12
<PAGE>
EARTHSHELL CONTAINER CORPORATION

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)

9. INCOME TAXES

Deferred income taxes result from temporary differences in the recognition
of revenues and expenses for financial and tax reporting purposes. At December
31, deferred tax assets and liabilities were composed primarily of the
following:

<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
Federal:
Depreciation................................................ $ 96,934 $ 59,020
Capitalized operating expenses.............................. 2,435,923 1,884,978
Capitalized research and development........................ 1,655,379 1,569,120
Net operating loss carryforward............................. 8,843,661 4,389,904
Other....................................................... (1,779)
-------------- --------------
13,031,897 7,901,243
-------------- --------------
State:
Depreciation................................................ 1,883 16,144
Capitalized operating expenses.............................. 666,296 515,597
Capitalized research and development........................ 2,268,314 1,551,077
Net operating loss carryforward............................. 378,400 174,127
Other....................................................... (486)
-------------- --------------
3,314,893 2,256,459
-------------- --------------
Net deferred tax asset........................................ 6,346,790 10,157,702
Valuation allowance........................................... (16,346,790) (10,157,702)
-------------- --------------
Net deferred tax asset...................................... $ -- $ --
-------------- --------------
-------------- --------------
</TABLE>

For federal income tax purposes, the Company has net operating loss
carryforwards of $26,010,769 as of December 31, 1995 that expire through 2010.
For state income tax purposes, the Company has net operating loss carryforwards
of $4,068,820 as of December 31, 1995 that expire through 2000. The valuation
allowance was increased by $6,189,088 in 1995.

Income tax expense for 1993, 1994 and 1995 consists of the minimum state
franchise tax expense.

F-13
<PAGE>
- -------------------------------------------
-------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDERS, OR ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH
DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 17
Dividend Policy........................................................... 17
Capitalization............................................................ 18
Dilution.................................................................. 19
Selected Consolidated Financial Data...................................... 20
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 21
Business.................................................................. 25
Management................................................................ 39
Certain Transactions...................................................... 48
Principal and Selling Stockholders........................................ 50
Description of Capital Stock.............................................. 51
Shares Eligible for Future Sale........................................... 54
Certain United States Federal Income Tax Considerations................... 56
Underwriting.............................................................. 60
Notice to Canadian Residents.............................................. 62
Legal Matters............................................................. 62
Experts................................................................... 62
Additional Information.................................................... 63
Index to Financial Statements............................................. F-1
</TABLE>

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

UNTIL , 1996 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

EarthShell Corporation

Common Stock

PROSPECTUS

CS First Boston
Salomon Brothers Inc
Montgomery Securities

- -------------------------------------------
-------------------------------------------
<PAGE>
[ALTERNATE COVER PAGE OF INTERNATIONAL PROSPECTUS]

SUBJECT TO COMPLETION, DATED OCTOBER 2, 1996

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
Shares
EarthShell Corporation
Common Stock

($.01 PAR VALUE)
--------------

OF THE SHARES OF COMMON STOCK, $.01 PAR VALUE (THE "COMMON STOCK") OF
EARTHSHELL CORPORATION (THE "COMPANY") OFFERED HEREBY, SHARES ARE BEING
SOLD BY THE COMPANY AND SHARES ARE BEING SOLD BY THE SELLING.
STOCKHOLDERS NAMED HEREIN UNDER "PRINCIPAL AND SELLING STOCKHOLDERS." THE
COMPANY WILL NOT RECEIVE ANY OF THE PROCEEDS OF THE SHARES BEING SOLD BY
THE SELLING STOCKHOLDERS.

OF THE SHARES OF COMMON STOCK BEING OFFERED, SHARES INITIALLY ARE
BEING OFFERED OUTSIDE THE UNITED STATES AND CANADA (THE "INTERNATIONAL
SHARES") BY THE MANAGERS (THE "INTERNATIONAL OFFERING") AND SHARES
ARE INITIALLY BEING CONCURRENTLY OFFERED IN THE UNITED STATES AND CANADA
(THE "U.S. SHARES") BY THE U.S. UNDERWRITERS (THE "U.S. OFFERING" AND,
TOGETHER WITH THE INTERNATIONAL OFFERING, THE "OFFERING"). THE
OFFERING PRICE AND UNDERWRITING DISCOUNTS AND COMMISSIONS OF
THE INTERNATIONAL OFFERING AND THE U.S. OFFERING ARE
IDENTICAL.

PRIOR TO THE OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON STOCK. IT
IS ANTICIPATED THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN $
AND $ PER SHARE. FOR INFORMATION RELATING TO THE FACTORS CONSIDERED
IN DETERMINING THE INITIAL OFFERING PRICE TO THE PUBLIC, SEE
"SUBSCRIPTION AND SALE." APPLICATION WILL BE MADE TO LIST THE
COMMON STOCK ON THE NASDAQ STOCK MARKET'S NATIONAL MARKET
UNDER THE SYMBOL "ERTH."
--------------

FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN
INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" BEGINNING ON PAGE 6 HEREIN.
-------------

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO PROCEEDS TO
PRICE TO DISCOUNTS AND THE SELLING
PUBLIC COMMISSIONS COMPANY(1) STOCKHOLDERS
---------- ------------- ------------- -----------------
<S> <C> <C> <C> <C>
PER SHARE........................................... $ $ $ $
TOTAL (2)........................................... $ $ $ $
</TABLE>

(1) BEFORE DEDUCTION OF EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $1,000,000.

(2) ONE OF THE SELLING STOCKHOLDERS HAS GRANTED THE U.S. UNDERWRITERS AND THE
MANAGERS AN OPTION, EXERCISABLE BY CS FIRST BOSTON CORPORATION FOR 30 DAYS
FROM THE DATE OF THIS PROSPECTUS, TO PURCHASE A MAXIMUM OF ADDITIONAL
SHARES TO COVER OVER-ALLOTMENTS OF SHARES. IF THE OPTION IS EXERCISED IN
FULL, THE TOTAL PRICE TO PUBLIC WILL BE $ , UNDERWRITING DISCOUNTS AND
COMMISSIONS WILL BE $ AND PROCEEDS TO SELLING STOCKHOLDERS WILL BE
$ .

THE INTERNATIONAL SHARES ARE OFFERED BY THE SEVERAL MANAGERS WHEN, AS AND IF
ISSUED BY THE COMPANY, DELIVERED TO AND ACCEPTED BY THE MANAGERS AND SUBJECT TO
THEIR RIGHT TO REJECT ORDERS IN WHOLE OR IN PART. IT IS EXPECTED THAT THE
INTERNATIONAL. SHARES OF COMMON STOCK WILL BE READY FOR DELIVERY ON OR ABOUT
, 1996, IN IMMEDIATELY AVAILABLE FUNDS.

CS First Boston
Salomon Brothers International Limited Montgomery Securities

THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>
[ALTERNATE INSIDE COVER PAGE OF INTERNATIONAL PROSPECTUS]

[PICTURE TO BE INSERTED]
<PAGE>
[ALTERNATE INSIDE FACING PAGE OF INTERNATIONAL PROSPECTUS]

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY MANAGER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.

In this Prospectus, references to "dollars" and "$" are to United States
dollars.

IN CONNECTION WITH THIS OFFERING, CS FIRST BOSTON CORPORATION ON BEHALF OF
THE U.S. UNDERWRITERS AND THE MANAGERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT A LEVEL
ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS
MAY BE EFFECTED ON THE NASDAQ STOCK MARKET'S NATIONAL MARKET, OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

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

TABLE OF CONTENTS

--------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY........................................................ 3
RISK FACTORS.............................................................. 6
USE OF PROCEEDS........................................................... 17
DIVIDEND POLICY........................................................... 17
CAPITALIZATION............................................................ 18
DILUTION.................................................................. 19
SELECTED CONSOLIDATED FINANCIAL DATA...................................... 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.......................................................... 21
BUSINESS.................................................................. 25
MANAGEMENT................................................................ 39

<CAPTION>
PAGE
----
<S> <C>
CERTAIN TRANSACTIONS...................................................... 48
PRINCIPAL AND SELLING STOCKHOLDERS........................................ 50
DESCRIPTION OF CAPITAL STOCK.............................................. 51
SHARES ELIGIBLE FOR FUTURE SALE........................................... 54
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS................... 56
SUBSCRIPTION AND SALE..................................................... 60
NOTICE TO CANADIAN RESIDENTS.............................................. 62
LEGAL MATTERS............................................................. 62
EXPERTS................................................................... 62
ADDITIONAL INFORMATION.................................................... 63
INDEX TO FINANCIAL STATEMENTS............................................. F-1
</TABLE>
<PAGE>
[ALTERNATE UNDERWRITING SECTION OF INTERNATIONAL PROSPECTUS]

SUBSCRIPTION AND SALE

The institutions named below (the "Managers") have, pursuant to a
Subscription Agreement dated , 1996 (the "Subscription Agreement"),
severally and not jointly, agreed with the Company and the Selling Stockholders
to subscribe and pay for the following respective numbers of International
Shares as set forth opposite their names:

<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL
MANAGER SHARES
- -------------------------------------------------------------------------------- ------------
<S> <C>
CS First Boston Limited.........................................................
Salomon Brothers International Limited..........................................
Montgomery Securities...........................................................
------------
Total.......................................................................
------------
------------
</TABLE>

The Subscription Agreement provides that the obligations of the Managers are
such that, subject to certain conditions precedent, the Managers will be
obligated to purchase all the International Shares of the Common Stock offered
hereby (other than those shares covered by the over-allotment option discussed
below) if any are purchased. The Subscription Agreement provides that, in the
event of a default by a Manager, in certain circumstances the purchase
commitments of the non-defaulting managers may be increased or the Subscription
Agreement may be terminated.

The Company and the Selling Stockholders have entered into an Underwriting
Agreement with the U.S. Underwriters of the U.S. Offering (the "U.S.
Underwriters") providing for the concurrent offer and sale of the U.S. Shares in
the United States and Canada. The closing of the U.S. Offering is a condition to
the closing of the International Offering and vice versa.

The Selling Stockholders have granted to the Managers and the U.S.
Underwriters an option, exercisable by CS First Boston Corporation, expiring at
the close of business on the 30th day after the date of this Prospectus to
purchase up to additional shares at the initial public offering price, less the
underwriting discounts and commissions, all as set forth on the cover page of
this Prospectus. Such option may be exercised only to cover over-allotments in
the sale of the shares of Common Stock offered hereby. To the extent that this
option to purchase is exercised, each Manager and each U.S. Underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of additional shares being sold to the Managers and the U.S.
Underwriters as the number of International Shares set forth next to such
Manager's name in the preceding table and as the number set forth next to such
U.S. Underwriter's name in the corresponding table in the Prospectus relating to
the U.S. Offering bears to the sum of the total number of shares of Common Stock
in such tables.

The Selling Shareholders have been advised by CS First Boston Limited, on
behalf of the Managers, that the Managers propose to offer the International
Shares outside the United States and Canada initially at the public offering
price set forth on the cover page of this Prospectus and, through the Managers,
to certain dealers at such price less a commission of $ per share and
that the Managers and such dealers may reallow a commission of $ per
share on sales to certain other dealers. After the initial public offering, the
public offering price and commission and reallowance may be changed by the
Managers.

The offering price and the aggregate underwriting discounts and commissions
per share and per share commission and re-allowance to dealers for the
International Offering and the concurrent U.S. Offering will be identical.
Pursuant to an Agreement between the U.S. Underwriters and Managers (the
"Intersyndicate Agreement") relating to the Common Stock Offering, changes in
the offering price, the aggregate underwriting discounts and commissions per
share and per share commission and reallowance to dealers will be made only upon
the mutual agreement of CS First Boston Limited, on behalf of the Managers, and
CS First Boston Corporation, as representative of the U.S. Underwriters.

60
<PAGE>
Pursuant to the Intersyndicate Agreement, each of the Managers has agreed
that, as part of the distribution of International Shares and subject to certain
exceptions, it has not offered or sold, and will not offer or sell, directly or
indirectly, any shares of Common Stock or distribute any prospectus relating to
the Common Stock in the United States or Canada or to any other dealer who does
not so agree. Each of the U.S. Underwriters has agreed that, as part of the
distribution of the U.S. Shares and subject to certain exceptions, it has not
offered or sold and will not offer or sell, directly or indirectly, any shares
of Common Stock or distribute any prospectus relating to the Common Stock to any
person outside the United States and Canada or to any other dealer who does not
so agree. The foregoing limitations do not apply to stabilization transactions
or to transactions between the Managers and the U.S. Underwriters pursuant to
the Intersyndicate Agreement. As used herein, "United States" means the United
States of America (including the States and the District of Columbia), its
territories, possessions and other areas subject to its jurisdiction, "Canada"
means Canada, its provinces, territories, possessions and other areas subject to
its jurisdiction, and an offer or sale shall be in the United States or Canada
if it is made to (i) any individual resident in the United States or Canada or
(ii) any corporation, partnership, pension, profit-sharing or other trust or
other entity (including any such entity acting as an investment adviser with
discretionary authority) whose office most directly involved with the purchase
is located in the United States or Canada.

Pursuant to the Intersyndicate Agreement, sales may be made between the
Managers and the U.S. Underwriters of such number of shares of Common Stock as
may be mutually agreed upon. The price of any shares so sold will be the public
offering price less such amount agreed upon by CS First Boston Limited, on
behalf of the Managers, and CS First Boston Corporation, as representative of
the U.S. Underwriters, but not exceeding the selling concession applicable to
such shares. To the extent there are sales between the Managers and the U.S.
Underwriters pursuant to the Intersyndicate Agreement, the number of shares of
Common Stock initially available for sale by the Managers or by the U.S.
Underwriters may be more or less than the amount appearing on the cover page of
this Prospectus. Neither the Managers nor the U.S. Underwriters are obligated to
purchase from the other any unsold shares of Common Stock.

Each of the Managers and the U.S. Underwriters severally represents and
agrees that: (i) it has not offered or sold and prior to the date six months
after the date of issue of the Class A Common Stock will not offer or sell any
Class A common Stock to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (ii) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Class A Common Stock in, from or
otherwise involving the United Kingdom; and (iii) it has only issued or passed
on and will only issue or pass on in the United Kingdom any document received by
it in connection with the issue of the Class A Common Stock to a person who is
of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such
document may otherwise lawfully be issued or passed on.

The Company and the Selling Shareholders have agreed that they will not
offer, sell, contract to sell, announce their intentions to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933
(the "Securities Act") relating to, any additional shares of Common Stock or
securities convertible into or exchangeable or exercisable for any shares of
Common Stock without the prior written consent of CS First Boston Corporation
for a period of 180 days after the date of this Prospectus, except for grants of
employee stock options or rights by the Company pursuant to a plan in effect on
the date of this Prospectus, issuances pursuant to the exercise of such options
or rights and any filing of a registration statement under the Securities Act
with respect to any of the foregoing permitted issuances or grants.

The Company and the Selling Stockholders have agreed to indemnify the
Managers and the U.S. Underwriters against certain liabilities, including civil
liabilities under the Securities Act, or to contribute to payments that the
Managers and the U.S. Underwriters may be required to make in respect thereof.

61
<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The estimated expenses in connection with the offering are as follows:

<TABLE>
<CAPTION>
EXPENSES AMOUNT
- ---------------------------------------------------------------------------------- ----------
<S> <C>
Registration Fee.................................................................. $ 75,758
NASD Fees......................................................................... 25,500
Nasdaq National Market Fees....................................................... 50,000
Printing Expenses................................................................. *
Legal Fees and Expenses........................................................... *
Transfer Agent and Registrar Fees................................................. *
Accounting Fees and Expenses...................................................... *
Blue Sky Fees and Expenses........................................................ 12,000
Miscellaneous Expenses............................................................ *
----------
TOTAL........................................................................... $ *
----------
----------
</TABLE>

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

* To be filed by amendment.

ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

Section 145 of the Delaware General Corporation Law (the "DGCL") makes
provision for the indemnification of officers and directors in terms
sufficiently broad to indemnify officers and directors of the Company under
certain circumstances from liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933. The Company's Charter and
Bylaws provide, in effect, that, to the fullest extent and under the
circumstances permitted by Section 145 of the DGCL, the Company will indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is a
director or officer of the Company or is or was serving at the request of the
Company as a director or officer of another corporation or enterprise. The
Company may, in its discretion, similarly indemnify its employees and agents.
The Charter relieves its directors from monetary damages to the Company or its
stockholders for breach of such director's fiduciary duty as directors to the
fullest extent permitted by the DGCL. Under Section 102(b)(7) of the DGCL, a
corporation may relieve its directors from personal liability to such
corporation or its stockholders for monetary damages for any breach of their
fiduciary duty as directors except (i) for a breach of the duty of loyalty, (ii)
for failure to act in good faith, (iii) for intentional misconduct or knowing
violation of law, (iv) for willful or negligent violation of certain provisions
in the DGCL imposing certain requirements with respect to stock repurchases,
redemption and dividends, or (v) for any transactions from which the director
derived an improper personal benefit. Depending upon the character of the
proceeding, under Delaware law, the Company may indemnify against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with any action, suit or
proceeding if the person indemnified acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interest of the
Company, and, with respect to any criminal action or proceeding, had no cause to
believe his or her conduct was unlawful. To the extent that a director or
officer of the Company has been successful in the defense of any action, suit or
proceeding referred to above, the Company will be obligated to indemnify him or
her against expenses (including attorneys' fees) actually and reasonably
incurred in connection therewith.

II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

On November 2, 1992 the Company authorized the issuance of 315,000 shares of
Common Stock for $10,000 cash to E. Khashoggi Industries, a California
partnership in which Essam Khashoggi, a director of the Company, owns a 90%
beneficial interest. The sale of these shares was exempt from registration
pursuant to Section 4(2) of the Securities Act.

In September 1993, the Company sold an aggregate of 26,675 shares of its
Series A Preferred Stock at $1,000 per share for an aggregate of $26,675,000 in
private transactions with 24 individual and institutional investors, each of
which the Company believes to be an "accredited investor" within the meaning of
Rule 501 of the Securities Act. Salomon Brothers Inc served as placement agent
and earned a placement agent fee of $1,000,000 and 1,000 shares of Series A
Preferred Stock. The sales of shares in the offering were exempt from
registration pursuant to Section 4(2) of the Securities Act.

In June 1996, in consideration of the extension of a $3,000,000 line of
credit financing arrangement, the Company issued a warrant to Imperial Bank
which entitles the lender to purchase common stock shares equal $150,000 divided
by the price per share of the Company's Common Stock in an initial public
offering. The issuance of this warrant was exempt from registration pursuant to
Section 4(2) of the Securities Act.

In July of 1996, in consideration of an increase of the Imperial Bank line
of credit to $4,500,000, the Company issued an additional warrant to purchase
common shares equal to an additional $150,000 divided by the price per share of
the Company's common stock in an initial public offering. The issuance of this
warrant was exempt from registration pursuant to Section 4(2) of the Securities
Act.

ITEM 16. EXHIBITS.

(a) Exhibits.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -----------
<C> <S>
1.1 Form of Underwriting Agreement.*

1.2 Form of International Subscription Agreement.*

3.1 Certificate of Incorporation of the Company.

3.2 Bylaws of EarthShell Container Corporation.

3.3 Certificate of Designation, Preferences Relative, Participating, Optional and Other Special Rights of
the Company's Series A Cumulative Senior Convertible Preferred Stock.

3.4 Form of Amendment to Certificate of Incorporation of the Company.*

3.5 Form of Amended and Restated Bylaws of the Company.*

4.1 Specimen certificate of Common Stock.*

5.1 Opinion and consent of Gibson, Dunn & Crutcher LLP.*

10.1 Amended and Restated License Agreement dated February 28, 1995 by and between the Company and E.
Khashoggi Industries ("EKI").

10.2 Technical Services and Sublease Agreement dated July 1, 1994 by and between the Company and EKI.*

10.3 Agreement and Bill of Sale dated February 28, 1995 by and between the Company and EKI.

10.4 Registration Rights Agreement dated as of February 28, 1995 by and between the Company and EKI, as
amended.

10.5 Promissory Note dated May 21, 1996 in the principal amount of $250,000 made by the Company in favor of
EKI.
</TABLE>

II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -----------
<C> <S>
10.6 Promissory Note dated May 13, 1996 in the principal amount of $200,000 made by the Company in favor of
EKI.

10.7 Promissory Note dated April 30, 1996 in the principal amount of $864,440 made by the Company in favor of
EKI.

10.8 Promissory Note dated April 16, 1996 in the principal amount of $200,000 made by the Company in favor of
EKI.

10.9 Promissory Note dated March 31, 1996 in the principal amount of $16,462,122 made by the Company in favor
of EKI.

10.10 Employment Agreement dated October 19, 1993 by and between the Company and Scott Houston, as amended.

10.11 Employment Agreement dated October 19, 1993 by and between the Company and Mark A. Koob.

10.12 Stock Purchase Agreement dated as of September 16, 1993 by and between the Company and the persons named
therein.

10.13 Registration Rights Agreement dated as of September 16, 1993 by and between the Company and the persons
named therein, as amended.

10.14 Sublicense Agreement dated June 19, 1995 by and between the Company and Dopaco, Inc, as amended.

10.15 Sublicense Agreement dated November 9, 1994 by and between the Company and Genpak Corporation, as
amended.

10.16 Sublicense Agreement dated October 7, 1994 by and between the Company and Sweetheart Cup Company Inc.

10.17 Sublicense Agreement dated October 21, 1993 by and between the Company and International Paper.

10.18 Sublicense Agreement dated October 4, 1993 by and between the Company and Mobil Chemical Company.

10.19 Promissory Note dated December 21, 1994 made by the Company in favor of McDonald's Corporation.

10.20 EarthShell Container Corporation 1994 Stock Option Plan.

10.21 EarthShell Container Corporation 1995 Stock Incentive Plan.

10.22 Form of Stock Option Agreement under the EarthShell Container Corporation 1994 Stock Option Plan.

10.23 Form of Stock Option Agreement under the EarthShell Container Corporation 1995 Stock Incentive Plan.

10.24 Agreement for Allocation of Patent Costs dated July 31, 1993 by and between the Company and EKI.*

10.25 Promissory Note dated July 5, 1996 in the principal amount of $4,500,000 made by the Company in favor of
Imperial Bank.

10.26 Warrant to Purchase Stock issued July 2, 1996 by the Company to Imperial Bank.

10.27 Credit Agreement dated June 7, 1996 by and between the Company and Imperial Bank.

10.28 Warrant to Purchase Stock issued June 7, 1996 by the Company to Imperial Bank.

11.1 Statement Regarding Computation of Per Share Earnings.*
</TABLE>

II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -----------
<C> <S>
23.1 Consent of Deloitte & Touche LLP.

23.3 Consent of Workman, Nydegger & Seeley.*

23.2 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1).*

24.1 Power of Attorney (included on signature page).

27.1 Financial Data Schedule.
</TABLE>

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

* To be filed by amendment.

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising out of the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable, in the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense in any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Act, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be
deemed to be part of this registration statement as of the time it was declared
effective.

(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

The undersigned registrant hereby undertakes to provide to the Underwriter
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.

II-4
<PAGE>
SIGNATURES AND POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Santa Barbara, State of
California, on October 2, 1996.

EARTHSHELL CONTAINER CORPORATION

By: /s/ SIMON K. HODSON
-----------------------------------------
Simon K. Hodson
VICE CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Simon K. Hodson, Richard K. Hulme and D.
Scott Houston his or her true and lawful attorneys-in-fact and agents, each with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all amendments
to this Registration Statement, and to file the same, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------

/s/ ESSAM KHASHOGGI
- ------------------------------ Chairman of the Board October 2, 1996
Essam Khashoggi

Vice Chairman of the Board
/s/ SIMON K. HODSON and Chief Executive
- ------------------------------ Officer (Principal October 2, 1996
Simon K. Hodson Executive Officer)

/s/ D. SCOTT HOUSTON Chief Financial Officer
- ------------------------------ (Principal Financial and October 2, 1996
D. Scott Houston Accounting Officer)

/s/ JOHN DAOUD
- ------------------------------ Secretary and Director October 2, 1996
John Daoud

/s/ RICHARD K. HULME Executive Vice President
- ------------------------------ and Chief Operating October 2, 1996
Richard K. Hulme Officer and Director
</TABLE>

II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------

<C> <S> <C>
/s/ ELLIS JONES
- ------------------------------ Director October 2, 1996
Ellis Jones

/s/ LAYLA KHASHOGGI
- ------------------------------ Director October 2, 1996
Layla Khashoggi

/s/ MARK A. KOOB
- ------------------------------ Director October 2, 1996
Mark A. Koob

/s/ WILLIAM A. MARQUARD
- ------------------------------ Director October 2, 1996
William A. Marquard

/s/ JEROLD H. RUBINSTEIN
- ------------------------------ Director October 2, 1996
Jerold H. Rubinstein
</TABLE>

II-6

<PAGE>
EXHIBIT 3.1

STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF
CORPORATIONS
FILED 04:30 PM 10/27/1992
732301033 - 2314007

CERTIFICATE OF INCORPORATION
OF
EARTHCRETE CONTAINER CORPORATION

* * * *

1. The name of the corporation is:
EarthCrete Container Corporation.

2. The address of its registered office in the state of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.

3. The nature of the business or purposes to be conducted or promoted is
to manufacture, make, use, develop, market and sell, either directly or
indirectly or through licensees, and other wise deal in all manner of disposable
or reusable food and beverage containers, plates, trays, packaging materials,
cutlery, straws and similar products within the United States of America or
anywhere in the world; and to have and exercise any and all the powers now or
hereafter conferred by the laws of the State of Delaware upon corporations
organized pursuant to the laws of the State of Delaware and any and all acts
amendatory thereof and supplementary thereto and to engage in any other lawful
activities.

4. The total number of shares of stock which the corporation shall have
authority to issue is one million (1,000,000) and the par value of each of such
shares is One Cent ($.01) amounting in the aggregate to Ten Thousand Dollars
($10,000.00).

<PAGE>

5. The name and mailing address of each incorporator is as follows:

NAME MAILING ADDRESS

M. C. Kinnamon Corporation Trust Center
1209 Orange Street
Wilmington, DE 19801

J. L. Austin Corporation Trust Center
1209 Orange Street
Wilmington, DE 19801

A. S. Wright Corporation Trust Center
1209 Orange Street
Wilmington, DE 19801

6. The corporation is to have perpetual existence.

7. The names and post-office addresses of the directors of the first
board of directors, who shall act in such capacity until the first meeting of
the shareholders of the corporation or until a successor is elected and
qualified, are as follows:

NAME POST-OFFICE ADDRESS

Essam Khashoggi 800 Miramonte Drive
Santa Barbara, CA 93109

Layla Khashoggi 800 Miramonte Drive
Santa Barbara, CA 93109

Simon K. Hodson 800 Miramonte Drive
Santa Barbara, CA 93109

Adelle M. Demko 800 Miramonte Drive
Santa Barbara, CA 93109

John Daoud 800 Miramonte Drive
Santa Barbara, CA 93109

8. The names of the first officers of the corporation, who shall act in
such capacity until the first meeting of the

<PAGE>

shareholders of the corporation or until a successor is elected and qualified,
are as follows:

Chairman of the Board Essam Khashoggi

Vice Chairman of the Simon K. Hodson
Board

President Adelle M. Demko

Secretary Howard J. Marsh

9. In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized to make, alter or repeal
the by-laws of the corporation.

10. Elections of directors need not be by written ballot unless the by-
laws or the corporation shall so provide.

11. Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board of directors or in the by-laws of the corporation.

12. The corporation reserves the right to amend, alter, change or repeal
any provision contained in the Certificate of Incorporation, in the manner now
or hereafter prescribed by statue, and all rights conferred upon stockholders
herein are granted subject to this reservation.

13. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith

<PAGE>

or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived any improper personal benefit.

14. This Certificate of Incorporation shall be effective as of November 1,
1992.

We, the undersigned, being each of the incorporators hereinbefore named,
for the purpose of forming a corporation pursuant to the General Corporation Law
of the State of Delaware, do make this certificate, hereby declaring and
certifying that this is our act and deed and the facts herein stated are true,
and accordingly have hereunto set our hands this 27th day of October, 1992.

/s/ M. C. Kinnamon
--------------------------------
M. C. Kinnamon

/s/ J. L. Austin
--------------------------------
J. L. Austin

/s/ A. S. Wright
--------------------------------
A. S. Wright

<PAGE>

STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 05/27/1993
931485295 - 2314007

CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION

* * * * *

EARTHCRETE CONTAINER CORPORATION, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,

DOES HEREBY CERTIFY:

FIRST: That the Board of Directors of said corporation, by the
unanimous written consent of its members, filed with the minutes of the Board,
adopted a resolution proposing and declaring advisable the following amendment
to the Certificate of Incorporation of said corporation:

RESOLVED, that the Certificate of Incorporation of EarthCrete
Container Corporation be amended by changing the first paragraph
or Article thereof so that, as amended, said paragraph or Article
shall be and read as follows:

"1. The name of the corporation is:
EarthShell Container Corporation."

SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given unanimous written consent to said amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.

THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Sections 242 and 228 of the General
Corporation Law of the State of Delaware.

<PAGE>

IN WITNESS WHEREOF, said EarthCrete Container Corporation has caused
this certificate to be signed by Adelle M. Demko, its President, and attested by
Howard J. Marsh, its Secretary, this 24th day of May, 1993.

EARTHCRETE CONTAINER CORPORATION

By /s/ Adelle M. Demko
--------------------------------
Adelle M. Demko, President

ATTEST:

By /s/ Howard J. Marsh
--------------------------
Howard J. Marsh, Secretary

<PAGE>

STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 09/13/1993
713256018 - 2314007

CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION

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

EarthShell Container Corporation (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware,

DOES HEREBY CERTIFY:

FIRST: That the Board of Directors of the Corporation, by unanimous
written consent of its members, filed with the minutes of the Board, adopted a
resolution setting forth and declaring a proposed amendment to the Certificate
of Incorporation of the Corporation to be advisable and calling for
consideration thereof by the sole stockholder of the Corporation. The
resolution setting forth the proposed amendment is as follows:

RESOLVED, that the Certificate of Incorporation of the Corporation be
amended by changing Paragraph 4 thereof so that, as amended, said Paragraph
shall be and read as follows:

"4. The Corporation shall be authorized to issue two
classes of shares of stock to be designated, respectively,
"Common Stock" and "Preferred Stock"; the total number of
shares of all classes of stock that the Corporation shall
have authority to issue is One Million One Hundred Thousand
(1,100,000) shares, consisting of One Million (1,000,000)
shares of Common Stock, par value $.01 per share, and One
Hundred Thousand (100,000) shares of Preferred Stock, par
value $.01 per share.

(a) Effective as of the close of business on the
date on which this Certificate of Amendment of Certificate
of Incorporation shall have been filed, every share of
Common Stock outstanding prior to such effective date shall
be deemed to be converted into and reconstituted as Sixty-
Three One Hundredths (.63) of a share of Common Stock (the
"Reverse Split").

<PAGE>

(b) No fractional shares of Common Stock may be
issued as a result of the Reverse Split. In lieu thereof,
the Corporation shall pay, in cash, the fair market value of
any fractional shares.

(c) COMMON STOCK. All shares of Common Stock
shall be of one class without series and shall be
denominated "Common Stock."

(d) PREFERRED STOCK. Shares of Preferred Stock
may be issued from time to time in one or more series.
Shares of Preferred Stock that are redeemed, purchased or
otherwise acquired by the Corporation may be reissued except
as otherwise provided by law. The Board is hereby
authorized to fix or alter the designations, powers and
preferences, and relative, participating, optional or other
rights, if any, and qualifications, limitations or
restrictions thereof, including, without limitation,
dividend rights (and whether dividends are cumulative),
conversion rights, if any, voting rights (including the
number of votes, if any, per share, as well as the number of
members, if any, of the Board or the percentage of members,
if any, of the Board each class or series of Preferred Stock
may be entitled to elect), rights and terms of redemption
(including sinking fund provisions, if any), redemption
price and liquidation preferences of any wholly unissued
series of Preferred Stock, and the number of shares
constituting any such series and the designation thereof,
and to increase or decrease the number of shares of any such
series subsequent to the issuance of shares of such series,
but not below the number of shares of such series then
outstanding.

(e) DISTRIBUTIONS UPON LIQUIDATION. In the event
of any dissolution, liquidation or winding up of the affairs
of the Corporation, whether voluntary or involuntary, after
payment or provision for payment of the debts and other
liabilities of the Corporation, the holders of each series
of Preferred Stock shall be entitled to receive, out of the
net assets of the Corporation, an amount

<PAGE>

for each share of such series of Preferred Stock equal to the amount fixed and
determined by the Board in the resolution or resolutions creating such series
and providing for the issuance of such shares, and no more, before any of the
assets of the Corporation shall be distributed or paid over to the holders of
shares of Common Stock. After payment in full of said amounts to the holders of
Preferred Stock of all series, the remaining assets and funds of the Corporation
shall be divided among and paid to the holders of shares of Common Stock. If,
upon such dissolution, liquidation or winding up, the assets of the Corporation
distributable as aforesaid among the holders of Preferred Stock of all series
shall be insufficient to permit full payment to them of said preferential
amounts, then such assets shall be distributed ratably among such holders of
Preferred Stock in proportion to the respective total amounts which they shall
be entitled to receive as provided in this Paragraph 4."

SECOND: That thereafter, the sole stockholder of the corporation
considered and voted in favor of the amendment.

THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 and 228 of the General Corporation Law of the State of
Delaware.

<PAGE>

IN WITNESS WHEREOF, this Certificate of Amendment was duly executed
this 13th day of September, 1993.

EARTHSHELL CONTAINER CORPORATION

BY: /s/ Mark A. Koob
-----------------------------
Mark A. Koob, President

ATTEST: /s/ Howard J. Marsh
---------------------------
Howard J. Marsh, Secretary

<PAGE>

EARTHSHELL CONTAINER CORPORATION

* * * * *

B Y - L A W S

* * * * *

ARTICLE I

OFFICERS

Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.

Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may from
time to time determine or the business of the corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of Santa Barbara, State of California, at
such place as may be fixed from time to time by the board of directors, or at
such other place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.

Section 2. The annual meeting of stockholders, commencing with the year
1995, shall be held at such date and time as shall be designated from time to
time by the board of directors

EXHIBIT 3.2
<PAGE>

and stated in the notice of the meeting, at which they shall elect by plurality
vote a board of directors, and transact such other business as may properly be
brought before the meeting.

Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than 10 nor more than 60 days before the date of the
meeting.

Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.

Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the chairman of the board or the president and
shall be called by the president or secretary at the request in writing of a
majority of the board of directors, or at the request in writing of stockholders
owning a majority in amount of the entire capital stock of the corporation
issued and outstanding and entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting.

Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than

<PAGE>

10 nor more than 60 days before the date of the meeting, to each stockholder
entitled to vote at such meeting.

Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.

Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statue or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.

Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.

Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no

<PAGE>

proxy shall be voted on after three years from its date, unless the proxy
provides for a longer period.

Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.

ARTICLE III

DIRECTORS

Section 1. The number of directors which shall constitute the whole
board shall be not less than 9. The first board shall consist of 5 directors.
Thereafter, within the limits above specified, the number of directors shall be
determined by resolution of the board of directors or by the stockholders at the
annual meeting. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this Article, and each director
elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.

Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify,

<PAGE>

unless sooner displaced. If there are no directors in office, then an election
of directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding have the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.

Section 3. The business of the corporation shall be managed by or under
the direction of its board of directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or by these by-laws directed or required to
be exercised or done by the stockholders.

MEETINGS OF THE BOARD OF DIRECTORS

Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.

Section 5. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.

<PAGE>

Section 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.

Section 7. Special meetings of the board may be called by the chairman
of the board or the president on one day's notice to each director, either
personally or by mail or by telegram; special meetings shall be called by the
president or secretary in like manner and on like notice on the written request
of two directors unless the board consists of only one director; in which case
special meetings shall be called by the president or secretary in like manner
and on like notice on the written request of the sole director.

Section 8. At all meetings of the board a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the board of directors the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.

Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.

Section 10. Unless otherwise restricted by the certificate of
incorporation or these by-laws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of which all

<PAGE>

persons participating in the meeting can hear each other, and such participation
in a meeting shall constitute presence in person at the meeting.

COMMITTEES OF DIRECTORS

Section 11. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.

In the absence or disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the board of directors to act at the meeting in the place of any such
absent or disqualified member.

Any such committee, to the extent provided in the resolution of the board
of directors, shall have and may exercise all the powers and authority of the
board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation (except that
a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the board of directors
as provided in Section 151(a) fix any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation) adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property

<PAGE>

and assets, recommending to the stockholders a dissolution of the corporation or
a revocation of a dissolution, or amending the by-laws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock or to adopt a certificate of ownership and
merger. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the board of directors.

Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.

COMPENSATION OF DIRECTORS

Section 13. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting of the board of directors or a stated
salary as director. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.

REMOVAL OF DIRECTORS

Section 14. Unless otherwise restricted by the certificate of
incorporation or by law, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.

ARTICLE IV

NOTICES

<PAGE>

Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.

Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.

ARTICLE V

OFFICERS

Section 1. The officers of the corporation shall be chosen by the board
of directors and shall be a chairman of the board of directors, a vice chairman
of the board of directors and chief executive officer, a president and chief
operating officer, a secretary and a treasurer. The board of directors may also
choose vice-presidents, one of whom may be designated as executive vice-
president, and one or more assistant secretaries and assistant treasurers. Any
number of offices may be held by the same person, unless the certificate of
incorporation or these by-laws otherwise provide.

Section 2. The board of directors at its first meeting after each
annual meeting of stockholders shall elect officers to serve until the next
annual meeting of stockholders and until their successors are elected and
qualified.

<PAGE>

Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.

Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.

Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by
the board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.

THE CHAIRMAN OF THE BOARD

Section 6. The chairman of the board shall be responsible for
initiating policy decisions for the corporation, shall preside at all meetings
of the stockholders and the board of directors, and shall see that all orders
and resolutions of the board of directors are carried into effect.

Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where are
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.

THE VICE CHAIRMAN OF THE BOARD

Section 8. In the absence of the chairman of the board or in the event
of his inability or refusal to act, the vice chairman of the board shall perform
the duties of the chairman of the board, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the chairman of the board.
In addition, the vice chairman of the board shall be the chief executive officer
of the corporation.

<PAGE>

THE PRESIDENT AND VICE-PRESIDENTS

Section 9. The president shall be the chief operating officer of the
corporation and shall be responsible for the activities of the corporation. In
the absence of the president or in the event of his inability or refusal to act,
the executive vice-president shall perform the duties of the president, and when
so acting, shall have all the powers of the be subject to all the restrictions
upon the president. Other vice-presidents shall perform such other duties and
have such other powers as the board of directors may from time to time so
designate.

THE SECRETARY AND ASSISTANT SECRETARY

Section 10. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.

Section 11. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall

<PAGE>

perform such other duties and have such other powers as the board of directors
may from time to time prescribe.

THE TREASURER AND ASSISTANT TREASURER

Section 12. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.

Section 13. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.

Section 14. If required by the board of directors, he shall give
the corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as shall be satisfactory to the board of directors
for the faithful performance of the duties of his office and for the restoration
to the corporation, in case of his death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation.

Section 15. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the board of directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.

<PAGE>

ARTICLE VI

CERTIFICATES FOR SHARES

Section 1. The shares of the corporation shall be represented by a
certificate or shall be uncertificated. Certificates shall be signed by, or in
the name of the corporation by, the chairman or vice-chairman of the board of
directors, or the president or a vice-president, and by the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
corporation.

Within a reasonable time after the issuance or transfer or uncertificated
stock, the corporation shall send to the registered owner thereof a written
notice containing the information required to be set forth or stated on
certificates pursuant to Sections 151, 156, 202(a) or 218(a) or a statement that
the corporation will furnish without charge to each stockholder who so requests
the powers, designations, preferences and relative participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.

Section 2. Any of or all the signatures on a certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.

LOST CERTIFICATES

Section 3. The board of directors may direct a new certificate or
certificates or uncertificated shares to be issued in place of any certificate
or certificates therefore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When

<PAGE>

authorizing such issue of a new certificate or certificates or uncertificated
shares, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and/or to give the corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.

TRANSFER OF STOCK

Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Upon receipt of proper transfer instructions from the registered owner of
uncertificated shares such uncertificated shares shall be canceled and issuance
of new equivalent uncertificated shares or certificated shares shall be made to
the person entitled thereto and the transaction shall be recorded upon the books
of the corporation.

FIXING RECORD DATE

Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a

<PAGE>

meeting of stockholders shall apply to any adjournment of the meeting:
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.

REGISTERED STOCKHOLDERS

Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.

ARTICLE VII

GENERAL PROVISIONS

DIVIDENDS

Section 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.

Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.

ANNUAL STATEMENT

<PAGE>

Section 3. The board of directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.

CHECKS

Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.

FISCAL YEAR

Section 5. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.

SEAL

Section 6. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.

INDEMNIFICATION

Section 7. The corporation shall indemnify its officers, directors,
employees and agents to the extent permitted by the General Corporation Law of
Delaware.

ARTICLE VIII

AMENDMENTS

<PAGE>

Section 1. These by-laws may be altered, amended or repealed or new by-
laws may be adopted by the stockholders or by the board of directors, which such
power is conferred upon the board of directors by the certificate of
incorporation at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new by-
laws be contained in the notice of such special meeting. If the power to adopt,
amend or repeal by-laws is conferred upon the board of directors by the
certificate of incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws.

<PAGE>

CERTIFICATE OF DESIGNATION, PREFERENCES
RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS
(SERIES A CUMULATIVE SENIOR
CONVERTIBLE PREFERRED STOCK)

The undersigned, Mark A. Koob, President, and Howard J. Marsh,
Secretary, of EarthShell Container Corporation, a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), do hereby
certify that:

FIRST: The Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation") authorizes the issuance of 100,000 shares of
its Preferred Stock, par value $.01 per share, in series (the "Preferred
Stock"). By said Certificate of Incorporation, authority was expressly
granted to and vested in the Board of Directors of the Corporation within the
limits and restrictions stated in the Certificate of Incorporation, among
other things, from time to time, to fix or alter the dividend rate,
conversion rate, voting rights, rights and terms of redemption (including
sinking fund provisions), redemption price or prices, liquidation
preferences, or the number of shares and the designation or title of any
wholly unissued series of the Preferred Stock.

SECOND: The Board of Directors of the Corporation duly adopted the
following resolutions by Unanimous Written Consent dated September 15, 1993:

RESOLVED, that pursuant to the authority presently granted to and
vested in the Board of Directors of the Corporation under the provisions of the
Certificate of Incorporation and pursuant to the provisions of Section 151 of
the General Corporation Law of the State of Delaware, this Board of Directors
hereby creates a series of Preferred Stock to consist of 35,000 shares, par
value $.01 per share, and hereby fixes the powers, preferences and relative
participating, voting, optional and other special rights, and the
qualifications, limitations and restrictions thereof, of said series of
Preferred Stock, which have not heretofore been set forth in the Certificate of
Incorporation as follows:

(1) DESIGNATION. The designation of the series so created shall be
"Series A Cumulative Senior Convertible Preferred Stock" (the "Series A
Preferred Stock").

EXHIBIT 3.3

<PAGE>

(2) RANKING. With regard to rights to receive dividends and distributions
upon liquidation, dissolution or winding up of the Corporation, the Series A
Preferred Stock shall rank (i) senior to the Common Stock of the Corporation,
(ii) senior to any series of Preferred Stock of the Corporation the terms of
which specifically provide that such series shall rank junior to the Series A
Preferred Stock and (iii) on parity with any series of Preferred Stock of the
Corporation the terms of which do not specifically provide that such series
shall rank junior to the Series A Preferred Stock.

(3) DIVIDENDS.

(a) Holders of the series A Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors of the Corporation out
of funds legally available therefor (which for purposes of this Section 3 shall
be deemed to not include any surplus created by or otherwise resulting from the
sale of the Series A Preferred Stock), cumulative cash dividends at the rate per
share (as a percentage of the liquidation preference per share) equal to 8% per
annum, payable quarterly in arrears on the fifteenth day of each January, April,
July and October, in each year, with the first dividend payable on January 15,
1994. Dividends on the Series A Preferred Stock shall accrue from the date of
original issue and shall be deemed to accrue from day to day whether or not
earned or declared. Each such dividend will be payable to holders of record as
they appear on the books of the Corporation on such record dates, which shall be
30 days prior to the payment dates thereof unless another record date, which
shall be no more than 45 days prior to such payment dates, shall be fixed by the
Board of Directors of the Corporation. The party that holds the Series A
Preferred Stock on an applicable record date for any dividend payment will be
entitled to receive such dividend payment and any other accrued and unpaid
dividends which were accrued prior to such dividend payment date, without regard
to any sale or disposition of such Series A Preferred Stock subsequent to the
applicable record date but prior to the applicable dividend payment date. The
Corporation will pay no interest on accrued and unpaid dividends on the Series
A Preferred Stock.

(b) So long as any Series A Preferred Stock shall remain
outstanding, in no event shall any dividend (other than stock dividends ) be
paid upon, nor shall any distribution be made in respect of, the Common Stock
or any other class of stock ranking junior to the Series A Preferred Stock,
whether now or hereafter authorized, or any class of stock ranking on a
parity with the Series A Preferred Stock with respect to dividends and rights
on

<PAGE>

liquidation, whether now or hereafter authorized ("Parity Stock"), nor shall
any monies be set aside for or applied to the purchase or redemption (through
a sinking fund or otherwise) of Common Stock or of any other class of stock
junior to the Series A Preferred Stock or of Parity Stock unless all
dividends on the Series A Preferred Stock for all past quarterly dividend
periods shall have been paid, but without interest, and the full dividend on
all outstanding Series A Preferred Stock for the then current quarterly
dividend period shall have been paid, or declared and set apart for payment;
PROVIDED, HOWEVER, that in the event of such failure to pay accrued dividends
with respect to the outstanding shares of Series A Preferred Stock and
outstanding shares of Parity Stock, dividends may be declared, paid or set
apart for payment, pro rata, on shares of Series A Preferred Stock and shares
of Parity Stock so that the amounts of any dividends declared, paid or set
apart for payment on shares of Series A Preferred Stock and shares of Parity
Stock shall in all cases bear to each other the same ratio that, at the time
of such declaration, payment or setting apart for payment, all accrued but
unpaid dividends on shares of Series A Preferred Stock and Parity Stock bear
to each other.

(c) So long as any Series A Preferred Stock shall remain outstanding,
in no event shall the Corporation authorize, create or issue any class or series
of stock senior to or ranking higher in priority to the Series A Preferred Stock
except upon the affirmative vote or consent of the holders of at least 70% of
the outstanding Series A Preferred Stock as set forth in Section 5(a) hereof.

(4) LIQUIDATION RIGHTS. In the event of the liquidation, dissolution
or winding up of this Corporation, whether voluntary or involuntary, the
holders of Series A Preferred Stock shall be entitled to receive, out of the
assets of the Corporation, whether such assets are capital or surplus of any
nature, $1,000 per share, plus an amount equal to accrued dividends per share
to the date of distribution, whether earned or declared or not, but without
interest, before any payment shall be made or any assets distributed to the
holders of the Common Stock or the holders of any other class of stock junior
in respect of liquidation rights to the Series A Preferred Stock; but the
holders of the Series A Preferred Stock shall not be entitled to any further
payments.

If upon such liquidation, dissolution or winding up, whether
voluntary or involuntary, the assets of the Corporation or proceeds thereof
shall be insufficient to make the full liquidating payment of $1,000 per
share and accrued and unpaid dividends on the Series A Preferred Stock

<PAGE>

and liquidating payments on any other outstanding Parity Stock (including
accrued and unpaid dividends, if any), then such assets and proceeds shall be
distributed among the holders of the Series A Preferred Stock and any other
outstanding Parity Stock ratably on a share for share basis in accordance
with the respective amounts which would be payable on all series of Parity
Stock (including accrued and unpaid dividends, if any) if all remaining
liquidating amounts payable were paid in full and nothing shall be paid to
the holders of the Common Stock or any other class of stock junior to the
Series A Preferred Stock.

Neither a consolidation nor merger of this Corporation with or into
one or more corporations, nor a sale of all or a substantial part of the
assets of this Corporation shall be deemed to be a liquidation, dissolution
or winding up, within the meaning of this Section 4 unless such
consolidation, merger or sale shall be in connection with a plan of
liquidation, dissolution or winding up of the business of the Corporation.

(5) VOTING RIGHTS

(a) VOTING RIGHTS TIED TO PREFERENCES OF SERIES A PREFERRED STOCK.
The Series A Preferred Stock shall have the following class voting rights (in
addition to the voting rights set forth with respect to directors in Section
5(c) hereof) which shall become effective as to certain events, not relating
to an acquisition of the Common Stock of the Corporation, which reasonably
can be expected to adversely affect the preference rights of the Series A
Preferred Stock. So long as any shares of the Series A Preferred Stock
remain outstanding, the Corporation shall not, without the affirmative vote
or consent of the holders of at least a majority of the shares of the Series
A Preferred Stock outstanding at the time, given in person or by proxy, (i)
amend, alter or repeal the provisions of the Series A Preferred Stock,
whether by merger, consolidation or otherwise, so as to affect adversely any
right, preference privilege or voting power of the Series A Preferred Stock;
PROVIDED, HOWEVER, that any creation and issuance of other series of
Preferred Stock shall not be deemed to materially and adversely affect such
rights, preferences, privileges or voting powers; (ii) amend the Certificate
of Incorporation of the Corporation; (iii) reclassify the Corporation's
outstanding securities; or (iv) enter into any transaction, other than
pursuant to an agreement existing on the date of this Certificate, with any
Affiliate (other than a wholly owned subsidiary), including without
limitation, the purchase, sale, lease or exchange of property or the
rendering or purchase of any service to or from any Affiliate (other than a
wholly owned subsidiary), the

<PAGE>

lending or borrowing of monies to or from any Affiliate (other than a wholly
owned subsidiary), the guaranty of liabilities of any Affiliate (other than a
wholly owned subsidiary), the merger, consolidation or other similar
reorganization with any Affiliate (other than a wholly owned subsidiary) and
the payment of any compensation to any Affiliate (other than a wholly owned
subsidiary), other than the payment or provision of reasonable compensation
and related fringe benefits, reasonable out-of-pocket expenses and
indemnification rights to any of the officers, directors, consultants and
employees of the Corporation and the payment of reasonable fees and
reasonable out-of-pocket expenses to directors who are not employees of the
Corporation. "Affiliate" shall mean any person (a) that directly or
indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with, the Corporation, including without
limitation the officers and directors of the Corporation, (b) that directly
or indirectly owns or holds 5% or more of any equity interest in the
Corporation or (c) 5% or more of whose voting stock (or in the case of an
entity which is not a corporation, 5% or more of any equity interest) is
owned directly or beneficially or held by the Corporation. So long as any
shares of the Series A Preferred Stock remain outstanding, the Corporation
shall not, without the affirmative vote or consent of the holders of at least
70% of the shares of the Series A Preferred Stock outstanding at the time,
given in person or by proxy, (i) authorize, create or issue or increase the
authorized or issued amount of, any class or series of stock ranking senior
or on a parity with the Series A Preferred Stock with respect to the payment
of dividends or the distribution of assets on liquidation or (ii) amend,
alter or repeal any of the provisions of Section 7 of this Certificate.

(b) VOTING RIGHTS RELATING TO TRANSACTIONS UPON WHICH THE COMMON
STOCK VOTES. Except with respect to transactions upon which the Series A
Preferred Stock shall be entitled to vote separately as a class pursuant to
Section 5(a) above and except with respect to the election of directors of
the Corporation on which the holders of the Common Stock vote, the Series A
Preferred Stock and the Common Stock shall vote together as a class on any
transaction with respect to which the Common Stock is entitled to vote
pursuant to applicable Delaware law or the Certificate of Incorporation.
Each share of Series A Preferred Stock shall be entitled to the number of
votes per share equal to (A) one (1) multiplied by (B) the number of shares
of Common Stock into which each share of Series A Preferred Stock is
convertible on the record date used to determine shares eligible to vote on
such transaction.

<PAGE>

(i) NUMBER OF DIRECTORS. So long as any shares of the Series
A Preferred Stock remain outstanding, the holders of a majority of the Series
A Preferred Stock then outstanding shall be entitled, voting as a class, to
elect in person or by proxy one member of the Corporation's Board of
Directors whose term of office shall expire at the next succeeding annual
meeting of stockholders, with each such director to hold office until his
successor shall have been duly elected and qualified.

(ii) ADJUSTMENTS. In the event that the number of directors of
the Corporation is increased or decreased from seven (including the Series A
Preferred Stock director), the number of directors that the holders of the
Series A Preferred Stock shall be entitled to elect voting separately as a
class pursuant to Section 5(c)(i) shall be adjusted so that such number of
directors is increased or decreased so that such holders shall be entitled to
elect the same proportion of the number of directors of the Corporation as they
would otherwise be entitled to elect, rounded up if the adjusted number of
directors is greater than a whole number plus one-half and rounded down if
the adjusted number of directors is less than or equal to a whole number plus
one-half; PROVIDED, HOWEVER, that the holders of the Series A Preferred Stock
shall at no time be entitled to elect less than one director of the
Corporation.

(iii) VACANCIES AND REMOVAL. In the event of a vacancy or
vacancies on the Board of Directors of the Corporation caused by the removal
or resignation of one or more directors elected by the holders of the Series
A Preferred Stock, except in the event that the Series A Preferred Stock
shall become entitled to elect fewer directors voting separately as a class
pursuant to this Section 5(c), such vacancy may be filled only by the
directors (or the remaining director, if only one) elected by the holders of
the Series A Preferred Stock or by a majority vote of the holders of the
Series A Preferred Stock then outstanding. Any person elected as a director
by the holders of the Series A Preferred Stock, or by the directors elected
by them, may be removed only by a majority vote of the holders of the Series
A Preferred Stock outstanding at the time of such removal.

(d) MAJORITY VOTE REQUIRED. The vote of a majority of the
outstanding Series A Preferred Stock shall be required as to all matters upon
which the Series A Preferred Stock is entitled to vote as a separate class
except as otherwise provided under applicable Delaware law or under Section 5(a)
of this Certificate.

<PAGE>

(e) NO OTHER VOTING RIGHTS. Except as otherwise expressly provided
in this Certificate of Designation or otherwise expressly required by law, the
Series A Preferred Stock shall not have any voting rights with respect to the
affairs of the Corporation.

(f) NOTICE. So long as any shares of the Series A Preferred Stock
remain outstanding, the Corporation will provide the Series A Preferred Stock
with notice of each annual and special meeting of stockholders, including
without limitation any meeting at which matters on which the Series A Preferred
Stock is entitled to vote pursuant to Section 5(b) will be considered, to the
same extent as the holders of the Common Stock.

6. OPTIONAL CONVERSION RIGHTS.

(a) Each share of Series A Preferred Stock shall be convertible, at
the option of the holder thereof, at any time into the number of shares of
Common Stock which results from dividing $1,000 by the Conversion Price in
effect at the time of conversion. The initial Conversion Price shall be $1,000
per share (the "Conversion Price"). Such Conversion Price shall be subject to
adjustment from time to time as provided herein.

(b) Any holder of shares of Series A Preferred Stock may exercise the
conversion rights as to such shares by delivering to the Corporation during
regular business hours, at the office of the then transfer agent for the Series
A Preferred Stock, or at the principal office of the Corporation or at such
other place as may be designated in writing delivered to all holders of Series A
Preferred Stock by the Corporation, the certificate for the Series A Preferred
Stock to be converted, duly endorsed for transfer to the Corporation (if
required by it), accompanied by written notice stating the number of such shares
that the holder elects to convert. Conversion shall be deemed to have been
effected on the date when such delivery is made, and such date is referred to
herein as the "Conversion Date." As promptly as practicable thereafter, the
Corporation shall issue and deliver to such holder at such office a certificate
or certificates for the number of full shares of Common Stock to which such
holder is entitled and a check or cash with respect to any fractional interest
in a share of Common Stock as provided in Section 6(c) below. The holder shall
be deemed to have become a stockholder of record of the Common Stock on the
applicable Conversion Date. Upon conversion of only a portion of the number of
shares of Series A Preferred Stock represented by a certificate surrendered for
conversion, the Corporation shall issue and deliver to such holder, at the
expense of

<PAGE>

the Corporation, a new certificate covering the number of shares of Series A
Preferred Stock representing the unconverted portion of the certificate so
surrendered.

(c) No fractional shares of Common Stock or scrip shall be issued
upon conversion of Series A Preferred Stock. If more than one share shall be
surrendered for conversion at any one time by the same holder, the number of
full shares of Common Stock issuable upon conversion of such shares shall be
computed on the basis of the aggregate number of shares so surrendered.
Instead of any fractional shares of Common Stock which otherwise would be
issuable upon conversion of any shares of Series A Preferred Stock, the
Corporation shall pay a cash adjustment in respect of such fractional
interest based upon the "Market Price" (as defined in Section 6(h) below) of
the Common Stock at the close of business on the last business day prior to
the Conversion Date for such shares.

(d) With respect to each converted share of Series A Preferred Stock,
the Corporation shall be obligated to make payment of any accrued but unpaid
dividends existing at the time of conversion together with interest thereon from
the date of conversion to the date of payment at the rate of 8% per annum.
Payment shall be made at the time and in the manner declared by the Board of
Directors pursuant to Section 3 hereof. Payment shall be made to the person
registered as the holder of the converted shares at the time of conversion.

(e) If any shares of Common Stock to be reserved for the purpose of
conversion of Series A Preferred Stock require registration or listing with or
approval of any governmental authority, stock exchange or other regulatory body
under any federal or state law or regulation or otherwise before such shares may
be validly issued or delivered upon conversion, the Corporation shall, at its
sole cost and expense, in good faith and as expeditiously as possible, endeavor
to secure such registration, listing or approval, as the case may be.

(f) All shares of Common Stock which may be issued upon conversion of
Series A Preferred Stock upon issuance will be validly issued, fully paid and
nonassessable. The Corporation will pay any and all documentary and other taxes
that may be payable in respect of any issue or delivery of shares of Common
Stock on conversion of Series A Preferred Stock pursuant hereto. The Corporation
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of shares of Common Stock in
a name other than that in which the shares of Series A Preferred

8
<PAGE>

Stock so converted were registered, and no such issue or delivery shall be
made unless and until the person requesting such transfer has paid to the
Corporation the amount of any such tax or has established to the satisfaction
of the Corporation that such tax has been paid.

(g) All certificates representing Series A Preferred Stock
surrendered for conversion shall be appropriately cancelled on the books of the
Corporation and the shares so converted represented by such certificates shall
be restored to the status of authorized but unissued shares of Preferred Stock
of the Corporation, but may not be reissued as part of the Series A Preferred
Stock.

(h) The "Market Price" per share of Common Stock at the time as of
which such "Market Price" is determined shall be deemed to be the average of
the Closing Prices for 20 business days selected by the Corporation out of
the 30 consecutive days immediately preceding the date as of which such
"Market Price" is determined, except that for purposes of Section 6(c) above,
the "Market Price" shall be the Closing Price on the last business day
preceding the event requiring such determination. For the purpose of the
foregoing sentence, a "business day" means a day on which the New York Stock
Exchange or other principal stock exchange or over-the-counter market on
which the Common Stock is traded was open for at least one-half of its normal
business day. The "Closing Price" on any day shall be the last sale price,
regular way, as reported in a composite published report of transactions
which includes transactions on the exchange or other principal markets in
which the Common Stock is traded or, if there is no such composite report as
to any day, the last reported sale price, regular way (or if there is no such
reported sale on such day, the average of the closing reported bid and asked
prices) on the principal United States securities trading market (whether a
stock exchange, the National Association of Securities Dealers Automated
Quotation System or otherwise) on which the Common Stock is traded; PROVIDED,
HOWEVER, that if the Common Stock is not publicly traded or listed during the
time of any computation pursuant to this Section, the "Market Price" for the
purposes hereof shall be the fair value as determined in good faith and
certified to the Corporation by any person agreed upon by, and mutually
satisfactory to, the Chief Executive Officer or the President of the
Corporation and a member of the Board of Directors of the Corporation elected
by the holders of the Series A Preferred Stock; PROVIDED, HOWEVER, that if
such persons are unable to agree upon a mutually satisfactory person, or if
at the time there is no director in office who was elected by the holders of
the Series A Preferred Stock, then in each such case the "Market Price" shall
be the fair

9
<PAGE>

value as determined in good faith by the Board of Directors of the
Corporation.

Section 7. ADJUSTMENTS. The Conversion Price and the number of
shares of Common Stock issuable upon the conversion of each share of Series A
Preferred Stock shall be subject to adjustment from time to time as hereinafter
provided.

(a) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF COMMON STOCK.
If at any time after the date hereof the Corporation shall issue or sell any
shares of Common Stock (other than (i) shares of Common Stock issued upon
conversion of the Series A Preferred Stock and (ii) up to 17,500 shares of
Common Stock (subject to appropriate adjustment in proportion to any increase
or decrease in the number of shares of Common Stock outstanding as the result
of any recapitalization, reclassification, stock dividend, stock split or
stock combination) issued to employees, consultants and other persons
providing services to the Corporation pursuant to stock option plans approved
by the stockholders of the Corporation in accordance with applicable law) for
a consideration per share less than the Conversion Price in effect
immediately prior to the time of such issue or sale, then, forthwith upon
such issue or sale, the Conversion Price shall be reduced to equal the
Effective Price (as hereinafter defined) of the shares of Common Stock so
issued or sold. The "Effective Price" of shares of Common Stock issued or
sold shall mean the dollar amount determined by dividing the total number of
shares of Common Stock issued or sold by the Company in such issue (or deemed
to have been issued or sold) into the aggregate consideration received by the
Company (or deemed to have been received) for such issue.

(b) OTHER ADJUSTMENT EVENTS AND PROVISIONS. For the purposes of this
Section 7, the following clauses shall also be applicable:

(i) ISSUANCE OF RIGHTS, WARRANTS OR OPTIONS. In case at any time
the Corporation shall grant, issue or sell (whether directly or by
assumption in a merger or otherwise) any rights or warrants to
subscribe for or to purchase, or any options (other than Excluded
Options, as defined below) for the purchase of, Common Stock or any
stock or securities convertible into or exchangeable for Common Stock
(such convertible or exchangeable stock or securities being herein
called "CONVERTIBLE SECURITIES"), whether or not such rights, warrants
or options or the right to

10
<PAGE>

convert or exchange any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such rights, warrants or options or upon
conversion or exchange of such Convertible Securities (determined as
provided below) shall be less than the Conversion Price in effect
immediately prior to the time of the granting of such rights, warrants
or options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such rights, warrants or options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such rights, warrants or
options shall be deemed to be outstanding as of the date of granting
of such rights, warrants or options and to have been issued for such
price per share and the Conversion Price shall be adjusted (as of the
date of the granting of such rights, warrants or options) as set forth
in subsection 7(a) above. Except as provided in clause (iii) of this
subsection 7(b), no further adjustments of any Conversion Price shall
be made upon the actual issue of such Common Stock or of such
Convertible Securities upon exercise of such rights, warrants or
options or upon the actual issue of such Common Stock upon conversion
or exchange of such Convertible Securities. For the purposes of this
clause (i), the price per share for which Common Stock is issuable
upon the exercise of any such rights, warrants or options or upon
conversion or exchange of any such Convertible Securities shall be
determined by dividing (A) the total amount, if any, received or
receivable by the Corporation as consideration for the granting of
such rights, warrants or options, plus the minimum aggregate amount of
additional consideration payable to the Corporation upon the exercise
of all such rights, warrants or options, plus, in the case of such
rights, warrants or options that relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable
upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (B) the total maximum number of
shares of Common Stock issuable upon the exercise of such rights,
warrants or options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such rights,
warrants or options. For purposes of this subparagraph (i), "Excluded
Options" shall mean

11
<PAGE>

options to purchase shares of Common Stock issuable pursuant to a
stock option plan for the benefit of employees, consultants and other
persons providing services to the Corporation and which is approved by
the stockholders of the Corporation in accordance with applicable law,
so long as the number of shares subject to such plan, together with
the number of shares subject to all other similar plans (including any
shares issued upon the exercise of options which options are then
regranted and excluding any options which expire unexercised and are
not subject to regrant), does not exceed 17,500 shares of Common Stock
(subject to appropriate adjustment in proportion to any increase or
decrease in the number of shares of Common Stock outstanding as the
result of any recapitalization, reclassification, stock dividend,
stock split or stock combination).

(ii) ISSUANCE OF CONVERTIBLE SECURITIES. In case the Corporation
shall issue (whether directly or by assumption in a merger or
otherwise) or sell any Convertible Securities (other than the shares
of Series A Preferred Stock), whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the price per
share for which Common Stock is issuable upon conversion or exchange
of such Convertible Securities (determined as provided below) shall be
less than the Conversion Price in effect immediately prior to the time
of such issue or sale, then the total maximum number of shares of
Common Stock issuable upon conversion or exchange of all such
Convertible Securities shall be deemed to be outstanding as of the
date of the issue or sale of such Convertible Securities and to have
been issued for such price per share and the Conversion Price shall be
adjusted (as of the date of the issue or sale of such Convertible
Securities) as set forth in subsection 7(a) above; PROVIDED that (A)
except as provided in clause (iii) of this subsection 7(b), no further
adjustments of any Conversion Price shall be made upon the actual
issue of such Common Stock upon conversion or exchange of such
Convertible Securities and (B) if any such issue or sale of such
Convertible Securities is made upon exercise of any rights or warrants
to subscribe for or to purchase or any option to purchase any such
Convertible Securities for which adjustments of any Conversion Price
have been or are to be made

12
<PAGE>

pursuant to other provisions of this subsection 7(b), no further
adjustment of any Conversion Price shall be made by reason of such
issue or sale. For the purposes of this clause (ii), the price per
share for which Common Stock is issuable upon conversion or exchange
of Convertible Securities shall be determined by dividing (1) the
total amount received or receivable by the Corporation as
consideration for the issue or sale of such Convertible Securities,
PLUS the minimum aggregate amount of additional consideration, if any,
payable to the Corporation upon the conversion or exchange thereof, by
(2) the total maximum number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities.

(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the purchase
price provided for in any rights, warrants or options referred to in
clause (i) above, or the additional consideration, if any, payable
upon the conversion or exchange of Convertible Securities referred to
in clause (i) or (ii) above, or the rate at which any Convertible
Securities referred to in clause (i) or (ii) above are convertible
into or exchangeable for Common Stock, shall change (other than under
or by reason of provisions designed to protect against dilution), then
the Conversion Price in effect at the time of such event shall
forthwith be readjusted to the Conversion Price that would have been
in effect at such time had such rights, warrants, options or
Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold. If the
purchase price provided for in any such right, warrant or option
referred to in clause (i) above, or the rate at which any Convertible
Securities referred to in clause (i) or (ii) above, are convertible
into or exchangeable for Common Stock, shall change at any time under
or by reason of provisions with respect thereto designed to protect
against dilution, then, in case of the delivery of Common Stock upon
the exercise of any such right, warrant or option or upon conversion
or exchange of any such Convertible Security, the Conversion Price
then in effect hereunder shall forthwith be adjusted to such
respective amount as would have obtained had such right, warrant,
option or Convertible Security never been issued as to such Common
Stock

13
<PAGE>

and had adjustments been made upon the issuance of the shares of
Common Stock delivered as aforesaid, but only if as a result of such
adjustment the Conversion Price then in effect hereunder is thereby
decreased.

(iv) STOCK DIVIDENDS. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the
Corporation payable in Common Stock, then and in such event, the
Conversion Price then in effect shall be decreased by multiplying the
Conversion Price then in effect by a fraction:

(i) the numerator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior
to the time of such issuance; and

(ii) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior
to the time of such issuance plus the number of shares of Common
Stock issuable in payment of such dividend or distribution.

(v) CONSIDERATION FOR STOCK. In case any shares of Common Stock
or Convertible Securities or any rights, warrants or options to
purchase any such Common Stock or Convertible Securities shall be
issued or sold:

(A) for cash, the consideration received therefor shall be
deemed to be the amount received by the Corporation therefor,
without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the
Corporation in connection therewith;

(B) for a consideration other than cash, the amount of the
consideration other than cash received by the Corporation shall
be deemed to be the fair value of such consideration as
determined, in good faith and in the exercise of reasonable
business judgement, by the Board of Directors, without deduction
of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection
therewith; or

14
<PAGE>

(C) in connection with any merger or consolidation in which
the Corporation is the surviving corporation (other than any
consolidation or merger in which the previously outstanding
shares of Common Stock of the Corporation shall be changed into
or exchanged for the stock or other securities of another
corporation), the amount of consideration therefor shall be
deemed to be the fair value as determined, in good faith and in
the exercise of reasonable business judgment, by the Board of
Directors of such portion of the assets and business of the
non-surviving corporation as such Board of Directors may determine
to be attributable to such shares of Common Stock, Convertible
Securities, rights, warrants or options, as the case may be.

(vi) RECORD DATE. In case the Corporation shall take a record
of the holders of its Common Stock for the purpose of entitling them
(A) to receive a dividend or other distribution payable in Common
Stock or in Convertible Securities or (B) to subscribe for or purchase
Common Stock or Convertible Securities, then such record date shall be
deemed to be the date of the actual issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration
of such dividend or the actual making of such other distribution or
the date of the actual granting of such right of subscription or
purchase, as the case may be.

(vii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares directly or
indirectly owned or held by or for the account of the Corporation or
any of its subsidiaries, and the disposition of any such shares (other
than by retirement and/or cancellation) shall be considered an issue
or sale of Common Stock for the purposes of this subsection 7(b).

(c) CERTAIN DIVIDENDS AND DISTRIBUTIONS. If the Corporation shall
declare a dividend or make any other distribution (other than a distribution
referred to in subsection 7(b)) upon the Common Stock (other than cash
dividends payable out of legally available funds), then in each case the
Conversion Price in effect immediately prior to the declaration of such
dividend or making of such distribution shall be adjusted so that the same
shall equal

<PAGE>

the price determined by multiplying the Conversion Price in effect immediately
prior to the close of business on the date fixed for the determination of
stockholders entitled to receive such dividend or distribution by a fraction the
numerator of which shall be the Market Price on the date prior to the date fixed
for such determination, LESS, in the case of a dividend or distribution in cash,
the amount per share of Common Stock so declared or, in the case of any other
dividend or distribution, the then fair value (as determined, in good faith and
in the exercise of reasonable business judgment, by the Board of Directors) of
the portion of the property or assets so distributed applicable to one share of
Common Stock, and the denominator of which shall be such Market Price, such
adjustment to become effective immediately prior to the opening of business on
the day following the date fixed for the determination of stockholders entitled
to receive such distribution.

(d) SUBDIVISION OR COMBINATION OF STOCK. In case the Corporation
shall at any time subdivide the outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced and, conversely, in case
the outstanding shares of Common Stock shall be combined into a smaller
number of shares, the Conversion Price in effect immediately prior to
such combination shall be proportionately increased.

(e) ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS,
REORGANIZATION, ETC. In case the Corporation (i) consolidates with or merges
into any other corporation and is not the continuing or surviving corporation of
such consolidation or merger, (ii) permits any other corporation to consolidate
with or merge into the Corporation and the Corporation is the continuing or
surviving corporation but, in connection with such consolidation or merger, the
Common Stock is changed into or exchanged for stock or other securities of any
other corporation or cash or any other assets, or (iii) transfers all or
substantially all of its property and assets to any other corporation, or (iv)
effects a capital reorganization or reclassification of the capital stock of the
Corporation in such a way that holders of Common Stock shall be entitled to
receive stock, securities, cash or assets with respect to or in exchange for
Common Stock, then, and in each such case, proper provision shall be made so
that, upon the basis and upon the terms and in the manner provided in this
subsection 7(e), each holder of a share of Series A Preferred Stock, upon
conversion of a share of Series A Preferred Stock at any time after the
consummating of such consolidation, merger, transfer, reorganization or
reclassification, shall be entitled to receive, in lieu of shares of Common
Stock

<PAGE>

issuable upon such conversion prior to such consummation, the stock, securities,
cash and assets to which such holder would have been entitled upon such
consummation if such holder had so converted such share of Series A Preferred
Stock immediately prior thereto at the aggregate Conversion Price in effect
immediately prior to such consummation as adjusted to the time of such
transaction (subject to adjustments subsequent to such corporate action as
nearly equivalent as possible to the adjustments provided for in this Section
7).

(f) NOTICE OF ADJUSTMENT. Whenever the number of shares of Common
Stock or other stock or property or assets issuable upon the conversion of each
share of Series A Preferred Stock or the Conversion Price is adjusted pursuant
to this Section 7, then and in each such case the Chief Financial Officer of the
Corporation shall prepare and execute a certificate (the "Adjustment
Certificate") setting forth, in reasonable detail, the event requiring the
adjustment, the Conversion Price resulting from such adjustment, the method by
which such adjustment was calculated (including a description of the basis on
which the Board of Directors made any determination hereunder), and shall cause
a copy of the Adjustment Certificate to be filed with the transfer agent for the
Series A Preferred Stock, if any, and a notice thereof mailed to the holders of
record of the outstanding shares of such Series A Preferred Stock.

In any case which this Section 7 shall require that an adjustment be
made immediately following a record date or an effective date, the Corporation
may elect to defer (but only until five business days following the filing by
the Chief Financial Officer of the Corporation of the Adjustment Certificate
with said transfer agent) issuing to any holder of any share of Series A
Preferred Stock converted after such record date or effective date the shares of
Common Stock issuable upon such conversion over and above the shares of Common
Stock issuable upon such conversion on the basis of the Conversion Price prior
to adjustment, and paying to such holder any amount of cash in lieu of
fractional shares.

(g) OTHER NOTICES. If at any time:

(i) the Corporation shall declare any cash dividend on its
Common Stock;

(ii) the Corporation shall pay any dividend payable in stock
upon its Common Stock or make any

<PAGE>

distribution (other than regular cash dividends) to the holders of its
Common Stock;

(iii) the Corporation shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of any
class or any other rights;

(iv) the Corporation shall authorize the distribution to all
holders of its Common Stock of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out of
current earnings or dividends payable in Common Stock);

(v) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or any
repurchase, redemption or other acquisition for value of the Common
Stock of the Corporation, or consolidation or merger of the
Corporation with another corporation (other than a subsidiary of the
Corporation in which the Corporation is the surviving or continuing
corporation and no change occurs in the Corporation's Common Stock),
or sale of all or substantially all of its property and assets to
another corporation; or

(vi) there shall be a voluntary or involuntary dissolution,
liquidation, bankruptcy, assignment for the benefit of creditors, or
winding up of the Corporation;

then, in any one or more of such cases, the Corporation shall give written
notice, to the holders of record of the outstanding shares of the Series A
Preferred Stock at the addresses shown on the books of the Corporation, of (A)
the date on which the books of the Corporation shall close or a record shall be
taken for such dividend, distribution or subscription rights or (B) the date
(or, if not then known, a reasonable approximation thereof by the Corporation)
on which such reorganization, reclassification, repurchase, redemption,
acquisition, consolidation, merger, sale, dissolution, liquidation, bankruptcy,
assignment for the benefit of creditors, winding up or other action, as the case
may be, shall take place. Such notice shall also specify (or, if not then
known, reasonably approximate) the date as of which the holders of Common Stock
or record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to redeem or repurchase their Common Stock or shall
be entitled to exchange their Common Stock for securities or other property or
assets deliverable

<PAGE>

upon such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, bankruptcy, assignment for the benefit of creditors,
winding up or other action, as the case may be. Such written notice shall be
given at least 20 days prior to the action in question and not less than 15 days
prior to the record date or the date on which the Corporation's transfer books
are closed in respect thereto.

(h) NO AVOIDANCE. The Corporation shall not amend its Certificate of
Incorporation, or participate in any reorganization, sale or transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action for the purpose of avoiding or seeking to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but shall at all times in good faith use its best efforts, and
assist in carrying out all such action as may be reasonably necessary or
appropriate in order to protect the conversion rights of the holders of the
Series A Preferred Stock set forth herein.

8. REDEMPTION. The Corporation shall have the right to redeem in
whole or in part, the Series A Preferred Stock upon sixty days notice upon
payment of the following prices together with accrued but unpaid dividends to
holders of the Series A Preferred Stock: (a) If redeemed between September 30,
1996 and September 30, 1997, $1030 per share; (b) If redeemed between September
30, 1997 and September 30, 1998, $1015 per share; and (c) If redeemed after
September 30, 1998, $1,000 per share. In addition, not more than sixty days in
advance of a Registered Offering or Reorganization (as such terms are
hereinafter defined), the Corporation shall have the right to redeem in whole or
in part, the Series A Preferred Stock upon sixty days notice upon payment of the
following prices together with accrued but unpaid dividends to holders of the
Series A Preferred Stock: (i) If redeemed between September 30, 1994 and
September 30, 1995, $1,070 per share; and (ii) If redeemed between September 30,
1995 and September 30, 1996, $1,050 per share.

During the sixty day period following notice of redemption, holders of
the Series A Preferred Stock shall have the right to convert their Series A
Preferred Stock into shares of Common Stock in the manner contemplated by this
Certificate.

For purposes of this Section 8, (a) "Registered Offering" shall mean
the consummation of a public offering of Common Stock pursuant to an effective
registration statement under the Securities Act of 1933, as amended, for

19
<PAGE>

the account of the Corporation at an aggregate offering price in excess of
$35,000,000 and (b) "Reorganization" shall mean, subject to the limitations in
the following sentence, the consummation of any consolidation or merger to which
the Corporation is not the surviving party, the sale of all or substantially all
of the assets of the Corporation in a single transaction or a series of related
transactions, or any statutory exchange of securities with another corporation.
The term "Reorganization" shall not include, and there shall be no right of
redemption under this Section 8 as a result of, any consoldation, merger, sale
of assets or statutory exchange consummated while the Corporation is (A) subject
to an order for relief by any bankruptcy court, (B) subject to any receiver,
trustee, custodian, conservator, liquidator, rehabilitator or similar officer
appointed for it or for all or any material part of its property, (C) subject to
any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, custodianship, conservatorship, liquidation, rehabilitation or
similar proceeding relating to it or to all or any material part of its property
or (D) in material default under any agreement evidencing or otherwise relating
to indebtedness for borrowed money which default would permit the acceleration
of such indebtedness.

20
<PAGE>

IN WITNESS WHEREOF, the undersigned have executed this Certificate
this 15th day of September, 1993.

EARTHSHELL CONTAINER
CORPORATION

By /s/ Mark A. Koob
-------------------------
Mark A. Koob, President

By /s/ Howard Marsh
-------------------------
Howard Marsh, Secretary

<PAGE>

EXHIBIT 10.3

AGREEMENT AND BILL OF SALE

This Agreement and Bill of Sale (the "Agreement") is entered into as
of February 28, 1995 by and between EarthShell Container Corporation, a Delaware
corporation ("ECC"), and E. Khashoggi Industries, a California general
partnership ("EKI").

WHEREAS, EKI and ECC have entered into that certain Master Lease
Agreement, dated July 31, 1993 (the "Master Lease Agreement"), providing for the
lease to EKI of certain equipment and machinery owned by ECC; and

WHEREAS, EKI desires to purchase, and ECC desires to sell, certain of
the equipment and machinery currently leased to EKI pursuant to the Master Lease
Agreement; and

WHEREAS, upon such purchase and sale, EKI and ECC desire to terminate
the Master Lease Agreement;

NOW, THEREFORE, in consideration of the premises, the terms and
conditions contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:

1. SALE OF EQUIPMENT AND MACHINERY. ECC does hereby sell, convey,
transfer, assign and deliver to EKI all of its right, title and interest in and
to all of the assets, property and rights listed on Exhibit A attached hereto
(the "Equipment"). The foregoing sale and transfer shall be effective upon the
execution and delivery of this Agreement and this Section 1 shall serve as a
bill of sale with respect thereto.

2. PURCHASE PRICE. The purchase price for each item of Equipment
shall be its acquisition cost as listed on Exhibit A attached hereto and the
aggregate purchase price for all items of Equipment shall be the aggregate of
all such acquisition costs (the "Purchase Price"). The Purchase Price shall be
payable by EKI to ECC by wire transfer or delivery of a certified or cashier's
check upon the earlier of (i) the consummation of a public offering of ECC
capital stock pursuant to an effective registration statement under the
Securities Act of 1933, as amended, for the account of ECC at an aggregate
offering price in excess of $35,000,000 and (ii) June 30, 1996.

3. REPRESENTATIONS AND WARRANTIES REGARDING THE EQUIPMENT. ECC
represents and warrants that the Equipment is free and clear of any and all
liens and encumbrances or claims

<PAGE>

of any ownership interest. ECC makes no representation or warranty, express or
implied, as to the physical condition of the Equipment, the fitness of any item
of the Equipment for the use intended, or the merchantability of any item of the
Equipment.

4. GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the laws of the State of California applicable to
agreements made and to be performed wholly within such jurisdiction.

5. ENTIRE AGREEMENT. The Master Lease Agreement is hereby
terminated and the parties thereto shall have no further obligations thereunder.
This Agreement constitutes the entire agreement between the parties regarding
the subject matter hereof, and supersedes all prior discussions or agreements
related to the same.

IN WITNESS WHEREOF, the parties have caused this Agreement to be
signed by their duly authorized representatives as of the date set forth herein.

E. KHASHOGGI INDUSTRIES,
a California General Partnership

By: E. KHASHOGGI HOLDINGS, L.P.,
its Managing General Partner

By: E. KHASHOGGI INDUSTRIES, INC.,
the General Partner of
E. Khashoggi Holdings, L.P.

By: /s/ Essam Khashoggi
------------------------------------
Essam Khashoggi,
President

EARTHSHELL CONTAINER CORPORATION

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

<PAGE>

EXHIBIT A
EQUIPMENT AND MACHINERY

DESCRIPTION ACQ COST
- --------------------------------------------------------------------------------
LAB - LEASEHOLD IMPROVEMENTS:
DUV01: lab ventilation 5,332.50
INT01: exhaust system 906.40
RUD01: masonry shop 336.60
INT01: Int'l Electric / Remodel 8,087.14
ESC01: Plumbing 53,610.37
INT01: Electrical 15,744.28
PRE02: Asbestos abatement 2,960.00
OLY01: construction 9,218.17
MAN01: construction 25,883.73
DUV01: ventilation 14,333.84
SMI03: Engineering 325.00
TRI01: Blind deposit 1,000.00
SPE06: liquid hardener 145.73
CLA04: Architectural Svcs 1,625.00
WHI03 Architectural Svcs 3,042.20
SMI03: Electrical designs 325.00
INT01: Int'l Electric / Remodel 76,076.63
ESC01: plumbing remodel 73,589.04
NOR04: cabinets/shelves 16,647.02
BUE01: drier 801.66
PRE01: HVAC mounting 840.00
TRI01: mini blinds 2,654.87
OLY01: construction 11,788.58
SAN17: Exterior ceiling 1,052.00
DAH01: Insulate pipes 3,860.32
CVE01: HVAC, piping 1,737.00
COR02: painting 20,956.65
DUV01: construction 25,126.07
MAN01: construction 30,003.25
PAC02: ceiling acoustics 3,220.00
WAL04: ceiling work 7,390.00
MAC04: welding 3,703.00
SCH07: construction 1,190.00
GRA03: parking lot asphalt 3,589.00
TEL03: phones 1,093.82
SCH07: construction 660.00
MCL01: sump painting 205.93
CUR01: carpeting 809.00
WAL04: litewires 120.00
MAC04: welding 692.00
SMI03: electrical designs 775.00
WHI02: architectural 657.49
CLA04: architectural 300.00
SPE01: fabricate grid 86.20
DUV01: Duvall Mechanical 1,515.50
ESC01: Escalora Plumbing 11,683.67
JOR01: cabinets 1,510.00
COR02: painting 1,394.20
MAN01: construction 3,833.74
OLY01: construction 1,250.60
OLY01: construction 985.12

<PAGE>

EXHIBIT A
EQUIPMENT AND MACHINERY

DESCRIPTION ACQ COST
- --------------------------------------------------------------------------------
CLA04: architectural 312.50
ESC01: Installation 801.82
MAN01: skylight 2,315.00
DUV01: ac units 983.00
ER #VO57 R. Smith: supplies 31.19
ESC01: sewer repair 865.00
ESC01: relocate drums, etc. 2,031.47

---------------
TOTAL LAB LEASEHOLD IMPROVEMENTS 461,800.20
---------------
---------------

<PAGE>

EXHIBIT A
EQUIPMENT AND MACHINERY

DESCRIPTION ACQ COST
- --------------------------------------------------------------------------------

MACHINE SHOP FURNITURE, COMPUTERS AND EQUIPMENT

Cabinets 4,543.64
Cad System 9,952.12
486 Computer for CNC mill 2,429.77
CNC memory 3,874.75
NOV01: printer plotter 7,739.08
JAP01: Manual lathe & mill 27,680.98
ONE01: Horizontal bandsaw 5,220.49
ONE01: Vertical bandsaw 4,477.01
YAM01: Mori Saike CNC lathe 91,587.50
YAM01: Mori Saike CNC mill 102,595.00
YAM01: Preset Arm 3,000.00
LIQ01: Syncrowave-welding 5,043.65
YAM01: Rotary table 25,294.31
ONE01: mill vise 1,892.65
---------------
TOTAL MACHINE SHOP 295,130.95
---------------
---------------

<PAGE>

EXHIBIT A
EQUIPMENT AND MACHINERY

DESCRIPTION ACQ COST
- --------------------------------------------------------------------------------

LAB EQUIPMENT:
Loomis Extruder 81,141.23
Curing Oven 45,778.58
Hepburn Press 627,639.28
ROB01: Trim press 9,500.00
POL05: cutting die 506.43
KRH Rollers 61,958.83

---------------
TOTAL LAB EQUIPMENT 826,524.35
---------------
---------------

<PAGE>

EXHIBIT A
EQUIPMENT AND MACHINERY

DESCRIPTION ACQ COST
- --------------------------------------------------------------------------------

ANALYTICAL EQUIPMENT:
PAA01: RHEOLAB 38,305.08
RJL01: SEM system 161,155.78
ENV02: Humidity chamber DP 2,760.00
MAT01: Zeta potential analyzer 57,373.50
SHI01: TGA/DSC System 51,016.69
COU01: Optical bench 46,762.47
INS01: load frame 87,385.25

---------------
TOTAL ANALYTICAL EQUIPMENT 434,748.75
---------------
---------------

<PAGE>

EARTHSHELL CONTAINER CORPORATION
315,000 Shares of Common Stock

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

REGISTRATION RIGHTS AGREEMENT

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

Dated as of February 28, 1995

EXHIBIT 10.4

<PAGE>

TABLE OF CONTENTS

1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. Securities Subject to this Agreement . . . . . . . . . . . . . . . . . 2

3. Demand, Piggyback and Shelf Registration Rights . . . . . . . . . . . 2

4. Hold-Back Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 7

5. Registration Procedures. . . . . . . . . . . . . . . . . . . . . . . . 7

6. Registration Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 13

7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

8. Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

9. Participation in Underwritten Registrations. . . . . . . . . . . . . . 17

10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

<PAGE>

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (the "Agreement") is made and
entered into as of February 28, 1995, by and among EarthShell Container
Corporation, a Delaware corporation (the "Company"), and E. Khashoggi
Industries, a California general partnership ("EKI").

This Agreement is being entered into in conjunction with the Technical
Services and Sublease Agreement between the Company and EKI (the "Technical
Services Agreement"). In order to induce EKI to enter into the Technical
Services Agreement, the Company has agreed, among other things, to provide the
registration rights set forth in this Agreement.

The parties hereby agree as follows:

1. DEFINITIONS

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

COMMON STOCK: The Company's common stock, par value $.01 per share.

EXCHANGE ACT: The Securities Exchange Act of 1934, as amended from
time to time.

NASD: National Association of Securities Dealers, Inc.

PERSON: An individual, partnership, corporation, trust, unincorporated
organization, limited liability company or other business entity, or a
government or agency or political subdivision thereof.

PROSPECTUS: The prospectus included in any Registration Statement, as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated by
reference in such prospectus.

PUBLIC OFFERING: See Section 3(b)(i).

REGISTRABLE SECURITIES: The 315,000 shares of Common Stock issued to
EKI by the Company on or prior to the date hereof (whether such shares are held
by EKI or an assignee as of the date hereof), including any Common Stock issued
or issuable with respect to the Registrable Securities by reason of stock
dividend or stock split or in connection with a combination of shares,

<PAGE>

recapitalization, merger, consolidation or other reorganization; provided that a
security ceases to be a Registrable Security when it is no longer a Restricted
Security.

REGISTRATION EXPENSES: See Section 6 hereof.

REGISTRATION STATEMENT: Any registration statement of the Company
which covers any of the Registrable Securities pursuant to the provisions of
this Agreement, including the Prospectus, amendments and supplements to such
Registration statement, including post-effective amendments, all exhibits and
all material incorporated by reference in such Registration Statement.

RESTRICTED SECURITY: Any Registrable Securities upon original issuance
thereof, and with respect to any particular such security, so long as such
security was acquired by the holder thereof other than pursuant to an effective
registration under Section 5 of the Securities Act or pursuant to Rule 144
promulgated under the Securities Act; PROVIDED that a security that has ceased
to be Restricted Security cannot thereafter become a Restricted Security.

SEC: The Securities and Exchange Commission.

SECURITIES ACT: The Securities Act of 1933, as amended from time to
time.

UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A registration in
which securities of the Company are sold to an underwriter or underwriters on a
firm commitment or best efforts basis for reoffering to the public.

2. SECURITIES SUBJECT TO THIS AGREEMENT

(a) REGISTRABLE SECURITIES. The securities entitled to the benefits
of this Agreement are the Registrable Securities.

(b) HOLDERS OF REGISTRABLE SECURITIES. A Person (whether EKI or any
successor or assign) is deemed to be a holder of Registrable Securities whenever
such Person owns Registrable Securities.

3. DEMAND, PIGGYBACK AND SHELF REGISTRATION RIGHTS

(a) DEMAND REGISTRATION.

(i) TIMING OF DEMAND REGISTRATION

At any time after the earlier of (i) September 16 1996 or (ii) the
date one year after the consummation of a public offering of Common Stock
pursuant to an effective Registration Statement under the Securities Act for the
account of the Company

<PAGE>

at an aggregate offering price in excess of $35,000,000 (the "Demand
Registration Period"), the holders of at least 25% of the Registrable Securities
may make a written request (a "Registration Request") that the Company register
under the Securities Act the Registrable Securities that are the subject of such
request (the "Demand Registration"). Promptly after receipt of such request,
which shall specify the number of Registrable Securities to be registered and
the intended method of disposition thereof, the Company shall as expeditiously
as reasonably possible and, in the case of the initial registered public
offering of shares of Common Stock, in no event later than four months after the
date of receipt of the Registration Request ("Registration Request Date"), and,
in the case of all subsequent registrations of shares of Common Stock, in no
event later than three months after the Registration Request Date, prepare and
file with the SEC, a Registration Statement with respect to the Registrable
Securities requested to be included therein. The Company agrees to use
commercially reasonable efforts to cause such Demand Registration to become
effective as expeditiously as reasonably possible and thereafter to keep it
continuously effective for a period of ninety days from the date on which the
SEC declares the Demand Registration effective or such shorter period which will
terminate when all the Registrable Securities covered by the Demand Registration
have been sold pursuant to such Demand Registration.

If the Company has been requested to effect a Demand Registration,
whether or not a Registration Statement with respect thereto has been filed or
has become effective, and furnishes to the holders of Registrable Securities
requesting such registration a copy of a resolution of the Board of Directors of
the Company certified by the Secretary of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company and its stockholders for such Registration Statement (i) to be filed
on or before the date such filing would otherwise be required hereunder, (ii) to
become effective, or (iii) to remain effective as long as such Registration
Statement would otherwise be required to remain effective, the Company shall
have the right, but not more than once with respect to any Demand Registration,
to defer such filing or effectiveness or to suspend such effectiveness for a
period of not more than 90 days; provided that if the effectiveness of a
Registration Statement is suspended pursuant to this provision, the period of
such suspension shall be added to the end of the period that such Registration
Statement would otherwise be required to be effective hereunder so that the
aggregate number of days that such Registration Statement is required to remain
effective hereunder shall remain unchanged.

<PAGE>

(ii) NUMBER OF DEMAND REGISTRATIONS

The Company shall be obligated to prepare, file and cause to become
effective pursuant to Section 3(a)(i) no more than one Registration Statement.

(iii) PARTICIPATION

The Company shall promptly give written notice to all holders of
Registrable Securities upon receipt of a request for a Demand Registration
pursuant to Section 3(a)(i) above. The Company shall include in such Demand
Registration such Registrable Securities for which it has received written
requests to register such securities within 30 days after such written notice
has been given.

(iv) LIMITATIONS

The Demand Registration rights granted in this Section 3(a) are
subject to the following limitations: (i) the Company shall not be obligated to
cause any Registration Statement filed under this Section 3(a) to be declared
effective less than six months after the effective date of the most recent
registration statement filed by the Company (other than the Registration
Statement on Form S-3 filed pursuant to Section 3(c) hereof); (ii) any such
offering shall be pursuant to a firm commitment underwriting; provided, however,
that after the initial public offering of Common Stock registered under the
Securities Act, such restrictions shall not apply to any registration pursuant
to Rule 415 under the Securities Act or any similar rule that may be adopted by
the SEC; and (iii) notwithstanding the delivery of a Registration Request by the
holders of the Registrable Securities, the Company may elect to convert such
registration into a registration pursuant to Section 3(b) hereof by providing
notice to the holders of the Registrable Securities as provided in Section 3(b)
and in such event the provisions of Section 3(b) shall apply to such
registration rather than the provisions of this Section 3(a) and no Demand
Registration right will be deemed to have been exercised under this Section
3(a).

(b) PIGGYBACK REGISTRATION.

(i) TIMING OF PIGGYBACK REGISTRATION. If the Company proposes to
file a registration statement in connection with a public offering for the
account of the Company (a "Public Offering") of its Common Stock (other than in
connection with a Demand Registration and other than a registration statement on
Form S-4 or S-8 or any successor forms or otherwise in connection with any
exchange offer, merger, sale of substantially all assets or other reorganization
or recapitalization of the Company or the issuance of securities in connection
with employee stock options, stock awards or other employee benefit plans), then
the Company shall give written notice of such proposed filing to all holders of
Registrable Securities at least 20 days before the anticipated

<PAGE>

filing date of such registration statement (a "Piggyback Registration
Statement"), which notice shall offer the holders of Registrable Securities the
opportunity to include in such Piggyback Registration Statement all shares of
Registrable Securities held by such holders. Each holder of Registrable
Securities desiring to have its Registrable Securities registered pursuant to
this Section 3(b)(i) shall advise the Company in writing within 10 days after
the date of receipt of the Company's notice (which request shall set forth the
amount of Registrable Securities for which registration is requested). The
Company shall include in any such Piggyback Registration Statement all
Registrable Securities so requested to be included.

Notwithstanding the foregoing, if the managing underwriter or
underwriters of any such proposed Public Offering that is an Underwritten
Offering deliver a letter to the Company and to the holders of Registrable
Securities stating that the total number of shares of Common Stock that the
Company intends to include in such Public Offering (the "Primary Shares") and
that the holders of the Registrable Securities and any other persons or entities
entitled to have shares included in such Public Offering have requested to be
included (the "Secondary Shares") would exceed the number of shares of Common
Stock that could be sold without having an adverse effect on such Public
Offering (the "Allowable Shares," and the difference between the Allowable
Shares and the Primary Shares being hereinafter referred to as the "Allowable
Secondary Shares"), the number of Secondary Shares permitted to be included in
the offering shall be reduced as follows: (a) if the number of Allowable
Secondary Shares exceeds two times the number of Secondary Shares that persons
or entities other than the holders of Registrable Securities have requested to
be included (the "Non-EKI Secondary Shares"), then the number of Secondary
Shares requested to be included on behalf of the holders of the Registrable
Securities (the "EKI Secondary Shares") shall be reduced pro rata (based on the
number of shares of Common Stock that each holder of the Registrable Securities
has requested to be included) so that the total number of Secondary Shares
included in such Piggyback Registration Statement equals the number of Allowable
Secondary Shares and as a result the number of Non-EKI Secondary Shares included
in such Piggyback Registration Statement shall not be reduced, and (b) if the
number of Allowable Secondary Shares is less than two times the number of Non-
EKI-Secondary Shares, then (1) the number of EKI Secondary Shares permitted to
be included (if greater than the number of Non-EKI Secondary Shares) shall be
reduced pro rata (based on the number of shares of Common Stock that each holder
thereof has requested to be included) until the number of EKI Secondary Shares
and Non-EKI Secondary Shares are equal in number, and (2) thereafter the number
of Secondary Shares included shall be reduced pro rata from all persons or
entities (based on the number of shares of Common Stock that each holder has
requested to be included) until the number of Secondary Shares included equals
the number of Allowable Secondary Shares. In the event that the contemplated
distribution

<PAGE>

does not involve an Underwritten Offering such determination that the inclusion
of such Registrable Securities shall adversely affect the success of the
offering shall be made by the Company in its reasonable discretion.

(ii) NUMBER OF PIGGYBACK REGISTRATIONS. The Company shall be
obligated to provide the opportunity to include Registrable Securities in not
more than two Piggyback Registration Statements pursuant to Section
3(b)(i). Notwithstanding the foregoing, if the amount of securities which the
holders of the Registrable Securities have requested to be registered is reduced
pursuant to Section 3(b)(i), then such Piggyback Registration Statement shall
not count towards the limit of two Piggyback Registration Statements contained
in the preceding sentence.

(iii) DECISION NOT TO FILE PIGGYBACK REGISTRATION STATEMENT. If,
after proposing to file a Piggyback Registration Statement in connection with
a Public Offering, the Company decides not to file the Piggyback Registration
Statement, then the holders of Registrable Securities requesting inclusion of
their shares pursuant to Section 3(b)(i) will not be entitled to have their
Registrable Securities registered at such time.

(c) SHELF REGISTRATION. The Company shall use all commercially
reasonable efforts to cause to be prepared, filed with the SEC and become
effective, as expeditiously as reasonably possible following the date one year
after the consummation of a public offering of Common Stock pursuant to an
effective Registration Statement under the Securities Act for the account of the
Company at an aggregate offering price in excess of $35,000,000, a Registration
Statement on Form S-3 (or any appropriate successor form) with respect to 15,000
Registrable Securities to be transferred by EKI to its employees, consultants,
agents or any other persons providing services to EKI or any affiliate of EKI
(including the Company) upon the exercise of options granted by EKI. The
Company agrees to use all commercially reasonable efforts to keep such
registration statement continuously effective for a period that will terminate
upon the earlier of (i) the date when all of the Registrable Securities covered
by such Registration Statement have been sold pursuant to such Registration
Statement and (ii) the date fifteen years from the date of this Agreement.
Notwithstanding any other provision of this Agreement, there will be no
Underwritten Registration or Offering in connection with the filing of the
Registration Statement covered by this Section 3(c).

During the period that the Company is required to prepare, file and
keep effective a Registration Statement pursuant to this Section 3(c), the
Company shall have the right to postpone such registration or the preparation
and/or filing of any supplement or amendment to any registration statement filed
pursuant to this Section 3(c) or any prospectus included therein for up to
ninety (90) days (the "Stand-Off Period") if, in the

<PAGE>

good faith judgment of the Board of Directors of the Company, (i) such
registration would interfere with any material transaction then being pursued by
the Company or (ii) the offer or sale of the Common Stock pursuant to such
registration would require disclosure of information, the disclosure of which
could reasonably be expected to be materially harmful to the interests of the
Company. Upon notice by the Company to the holders of the Registrable
Securities of the Company's determination to delay registration or the filing of
a supplement or amendment to a registration statement or prospectus hereunder,
each of the holders of the Registrable Securities hereby covenants that it shall
keep the fact of such notice strictly confidential. In addition to the
requirements of the third paragraph of Section 5(p) hereof, each of the holders
of the Registrable Securities hereby further covenants that, upon receipt of
such notice, it shall (i) promptly halt any offer, sale, trading or transfer of
any of the Registrable Securities for the duration of the Stand-Off Period and
(ii) promptly halt any use, publication or distribution of the registration
statement or any prospectus included therein for the duration of the Stand-Off
Period.

4. HOLD-BACK AGREEMENTS

(a) RESTRICTIONS ON PUBLIC SALE BY HOLDER OF REGISTRABLE SECURITIES.
Each holder of Registrable Securities whose Registrable Securities are covered
by a Registration Statement filed pursuant to Section 3 hereof agrees, if
requested by the managing underwriters in an Underwritten Offering, not to
effect any sale or other distribution of equity securities of the Company,
including any sale pursuant to Rule 144 under the Securities Act (except as part
of such Underwritten Registration), during the l0-day period prior to, and
during the 120-day period beginning with, the effectiveness of such Registration
Statement, to the extent timely notified in writing by the Company or the
managing underwriters.

(b) RESTRICTIONS ON SALE OF EQUITY SECURITIES BY THE COMPANY. To the
extent timely requested by the managing underwriters in an Underwritten
Offering, the Company agrees not to effect any offer, sale or other distribution
of its equity securities, including a sale pursuant to Regulation D under the
Securities Act, during the l0-day period prior to, and during the 120-day period
beginning with, the effectiveness of a Registration Statement filed under
Section 3 (except as part of such registration, if permitted, or pursuant to
registrations on Forms S-4 or S-8 or any successor forms or otherwise in
connection with any exchange offer, merger, sale of substantially all assets or
other reorganization or recapitalization of the Company or the issuance of
securities in connection with employee stock options, stock awards or other
employee benefit plans).

<PAGE>

5. REGISTRATION PROCEDURES

In connection with the Company's registration obligations pursuant to
Section 3 hereof, the Company will use its best efforts to effect such
registration to permit the sale of such Registrable Securities in accordance
with the intended method or methods of distribution thereof, and pursuant
thereto the Company will as expeditiously as possible:

(a) prepare and file with the SEC, as soon as practicable (or, in the
case of the Company's obligations under Section 3(c), within the time period
prescribed in Section 3(c)), a Registration Statement or Registration Statements
on any appropriate form under the Securities Act (which form shall be a Form S-3
(or its successor form) in the event of the Registration Statement covered by
Section 3(c)), which form shall be available for the sale of the Registrable
Securities in accordance with the intended method or methods of distribution
thereof and shall include all financial statements required by the SEC to be
filed therewith, cooperate and assist in any filings required to be made with
the NASD, and use its best efforts to cause such Registration Statement to
become effective; provided that before filing a Registration Statement or
Prospectus or any amendments or supplements thereto, the Company will furnish to
the holders of the Registrable Securities covered by such Registration Statement
and the underwriters, if any, copies of all such documents proposed to be filed,
which documents will be subject to the reasonable review of such holders and
underwriters, and the Company will not file any Registration Statement or
amendment thereto or any Prospectus or any supplement thereto to which the
holders of a majority of shares of the Registrable Securities covered by such
Registration Statement or the underwriters, if any, shall reasonably object;

(b) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep the
Registration Statement effective for the applicable period, or such shorter
period that will terminate when all Registrable Securities covered by such
Registration Statement have been sold; cause the Prospectus to be supplemented
by any required Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 under the Securities Act; and comply with the provisions of
the Securities Act with respect to the disposition of all securities covered by
such Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof set forth in
such Registration Statement or supplement to the Prospectus; the Company shall
not be deemed to have used its best efforts to keep a Registration Statement
effective during the applicable period if it voluntarily takes any action that
would result in the selling holders of the Registrable Securities covered
thereby not being able to sell such Registrable Securities during that period
unless such action is required under applicable law, provided that the foregoing
shall not apply

<PAGE>

to actions taken by the Company in good faith and for valid business reasons,
including without limitation the acquisition or divestiture of assets, so long
as the Company promptly thereafter complies with the requirements of Section
5(k), if applicable;

(c) notify the selling holders of Registrable Securities and the
managing underwriters, if any, promptly, and (if requested by any such Person)
confirm such advice in writing, (1) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective, (2) of any request by the SEC for amendments or supplements to the
Registration Statement or the Prospectus or for additional information, (3) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the initiation of any proceedings for that
purpose, (4) if at any time the representations and warranties of the Company
contemplated by paragraph (n) below cease to be true and correct in any material
respect, (5) of the receipt by the Company of any notification with respect to
the suspension of the qualification of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose and (6) of the happening of any event which makes any statement made in
the Registration Statement, the Prospectus or any document incorporated therein
by reference untrue in any material respect or which requires the making of any
changes in the Registration Statement, the Prospectus or any document
incorporated therein by reference in order to make the statements therein not
misleading;

(d) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at the earliest
possible time;

(e) if requested by the managing underwriter or underwriters or a
holder of Registrable Securities being sold in connection with an Underwritten
Offering, promptly incorporate in a Prospectus supplement or post-effective
amendment such information as the managing underwriters and the holders of a
majority of shares of the Registrable Securities being sold reasonably agree
should be included therein relating to the plan of distribution with respect to
such Registrable Securities, including, without limitation, information with
respect to the principal amount of Registrable Securities being sold to such
underwriters, the purchase price being paid therefor by such underwriters and
with respect to any other terms of the Underwritten Offering of the Registrable
Securities to be sold in such offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment;

<PAGE>

(f) furnish to each selling holder of Registrable Securities and each
managing underwriter, without charge, at least one signed copy of the
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);

(g) deliver to each selling holder of Registrable Securities and the
underwriters, if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement thereto
as such Persons may reasonably request; the Company consents to the use of the
Prospectus or any amendment or supplement thereto by each of the selling holders
of Registrable Securities and the underwriters, if any, in connection with the
offering and sale of the Registrable Securities covered by the Prospectus or any
amendment or supplement thereto;

(h) prior to any public offering of Registrable Securities, register
or qualify or cooperate with the selling holders of Registrable Securities, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification of such Registrable Securities for offer and sale
under the securities or blue sky laws of such jurisdictions as any seller or
underwriter reasonably requests in writing and do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions of
the Registrable Securities covered by the Registration Statement; provided that
the Company will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process in any such jurisdiction where it is
not then so subject;

(i) cooperate with the selling holders of Registrable Securities and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and not
bearing any restrictive legends; and enable such Registrable Securities to be in
such denominations and registered in such names as the managing underwriters may
request at least two business days prior to any sale of Registrable Securities
to the underwriters;

(j) 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 enable
the seller or sellers thereof or the underwriters, if any, to consummate the
disposition of such Registrable Securities;

<PAGE>

(k) upon the occurrence of any event contemplated by paragraph (c)(6)
above, prepare a supplement or posteffective amendment to the Registration
Statement or the related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of the Registrable Securities, the Prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;

(l) cause all Registrable Securities covered by the Registration
Statement to be listed, to the degree the Common Stock is so listed, on each
securities exchange on which the Common Stock is then listed if requested by the
holders of a majority of shares of such Registrable Securities or the managing
underwriters, if any;

(m) not later than the effective date of the applicable Registration
Statement, provide a CUSIP number for all Registrable Securities and provide the
applicable transfer agents with printed certificates for the Registrable
Securities which are in a form eligible for deposit with The Depository Trust
Company;

(n) enter into such agreements (including an underwriting agreement)
and take all such other actions in connection therewith in order to expedite or
facilitate the disposition of such Registrable Securities and in such
connection, whether or not an underwriting agreement is entered into and whether
or not the registration is an Underwritten Registration (1) make such
representations and warranties to the holders of such Registrable Securities and
the underwriters, if any, in form, substance and scope as are customarily made
by issuers to underwriters in primary Underwritten Offerings; (2) obtain
opinions of counsel to the Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably satisfactory to the
managing underwriters, if any, and the holders of a majority of shares of the
Registrable Securities being sold) addressed to each selling holder and the
underwriters, if any, covering the matters customarily covered in opinions
requested in Underwritten Offerings; (3) obtain "cold comfort" letters and
updates thereof from the Company's independent certified public accountants
addressed to the selling holders of Registrable Securities and the underwriters,
if any, such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters to underwriters in connection with
primary Underwritten Offerings; and (4) deliver such documents and certificates
as may be requested by the holders of a majority of the Registrable Securities
being sold and the managing underwriters, if any, to evidence compliance with
clause (k) above and with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company. The above shall be
done at

<PAGE>

each closing under such underwriting or similar agreement or as and to the
extent required thereunder;

(o) make available for inspection by a representative of the holders
of a majority of shares of the Registrable Securities, any underwriter
participating in any disposition pursuant to such Registration Statement, and
any attorney or accountant retained by the selling holders or underwriters, all
financial and other records, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such representative, underwriter,
attorney or accountant in connection with such Registration Statement; provided
that any records, information or documents that are designated by the Company in
writing as confidential shall be kept confidential by such Persons unless
disclosure of such records, information or documents is required by court or
administrative order; and

(p) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make generally available to its security
holders, earnings statements satisfying the provisions of Section 11(a) of the
Securities Act, no later than 45 days after the end of any 12-month period (or
90 days, if such period is a fiscal year) (1) commencing at the end of any
fiscal quarter in which Registrable Securities are sold to underwriters in an
Underwritten Offering, or (2) if not sold to underwriters in such an offering,
beginning with the first month of the Company's first fiscal quarter commencing
after the effective date of the Registration Statement, which statements shall
cover said 12-month periods.

The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding the distribution of such securities as the Company may
from time to time reasonably request in writing.

EKI agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in section 5(k) hereof, EKI (or any
transferee of the Registrable Securities) will forthwith discontinue disposition
of Registrable Securities (including pursuant to the exercise of any option to
purchase Registrable Securities granted by EKI, as provided in Section 3(c))
until such holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 5(k) hereof, or until it is advised in
writing (the "Advice") by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings which
are incorporated by reference in the Prospectus, and, if so directed by the
Company, such holder will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such holder's possession, of
the Prospectus covering such Registrable Securities current at the time of

<PAGE>

receipt of such notice. In the event the company shall give any such notice,
the time periods regarding the maintenance of the effectiveness of any
Registration Statement filed pursuant to Section 3 hereof shall be extended by
the number of days during the period from and including the date of the giving
of such notice pursuant to section 5(c)(6) hereof to and including the date when
each seller of Registrable Securities covered by such Registration Statement
shall have received the copies of the supplemented or amended prospectus
contemplated by section 5(k) hereof or the Advice.

6. REGISTRATION EXPENSES

(a) DEMAND REGISTRATION OUT-OF-POCKET EXPENSES. In
connection with the exercise of any demand registration rights hereunder, all
out-of-pocket expenses incident to the Company's performance of or compliance
with the provisions of this Agreement, including without limitation all
registration and filing fees, fees and expenses associated with filings required
to be made with the NASD (including, if applicable, the fees and expenses of any
"qualified independent underwriter" and its counsel as may be required by the
rules and regulations of the NASD), fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of
counsel for the underwriters or selling shareholders in connection with blue sky
qualifications of the Registrable Securities and determination of their
eligibility for investment under the laws of such jurisdictions as the managing
underwriters or holders of a majority of the Registrable Securities being sold
may designate), printing expenses (including expenses of printing certificates
for the Registrable Securities in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses), fees and expenses
incurred in connection with the listing of the Registrable Securities to be
registered on each exchange on which the Common Stock is then listed, and fees
and disbursements of counsel for the Company and one counsel for the sellers of
the Registrable Securities, incremental fees and expenses of the independent
certified public accountants of the Company (including the expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), and expenses of all marketing and promotional efforts requested by
the underwriters (all such expenses being herein called "Registration
Expenses"), will be borne by the holders of the Registrable Securities pro rata
based on the number of shares of Common Stock held by each such holder and
included in such Registration Statement, regardless of whether the Registration
Statement becomes effective. In no event shall "Registration Expenses" be
deemed to include underwriting discounts or brokerage fees or commissions
relating to the sale of any securities, including any Registrable Securities,
which shall in all events be borne by the seller of such securities.

<PAGE>

(b) PIGGYBACK REGISTRATION OUT-OF-POCKET EXPENSES. In connection
with the exercise of any piggyback registration rights hereunder, all
Registration Expenses will be borne by the Company, except that any incremental
Securities and Exchange Commission registration and filing fees, fees associated
with filings required to be made with the NASD and fees and expenses associated
with listings on any exchange on which the Common Stock is then listed, to the
extent attributable to the inclusion of Registrable Securities in such Piggyback
Registration Statement, shall be borne by the holders of the Registrable
Securities pro rata based on the number of shares of Common Stock held by each
such holder and included in such Piggyback Registration Statement.

(c) SHELF REGISTRATION OUT-OF-POCKET EXPENSES. In connection with
the exercise of any shelf registration rights hereunder, all Registration
Expenses will be borne by the Company.

(d) COMPANY INTERNAL EXPENSES. In connection with the exercise of
any demand, piggyback or shelf registration rights hereunder, the Company will
pay its internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties)
and the expense of any annual audit.

7. INDEMNIFICATION

(a) INDEMNIFICATION BY COMPANY. The Company agrees to indemnify and
hold harmless, to the full extent permitted by law, each holder of Registrable
Securities, its partners, its officers, directors and employees (and those of
any of its partners) and each Person who controls such holder (within the
meaning of the Securities Act) against all losses, claims, damages, liabilities
and expenses (including reasonable costs of investigation and legal expenses)
arising out of or based upon any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, Prospectus or preliminary
Prospectus or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same arise out of or are based upon any
information relating to such holder furnished in writing to the Company by such
holder expressly for use therein; provided, however, that the Company shall not
be liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any such
preliminary Prospectus included in a Registration Statement if (i) such holder,
being obligated to do so, failed to deliver a copy of the Prospectus prior to or
concurrently with the sale of the Registrable Securities to the person asserting
such loss, claim, damage, liability or expense after the Company

<PAGE>

had furnished such holder with a sufficient number of copies of the same and
(ii) the Prospectus corrected such untrue statement or omission; and provided,
further, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission in the Prospectus, if such untrue statement or alleged untrue
statement, omission or alleged omission is corrected in an amendment or
supplement to the Prospectus and the holder of Registrable Securities thereafter
fails to deliver such Prospectus as so amended or supplemented prior to or
concurrently with the sale of the Registrable Securities to the person asserting
such loss, claim, damage, liability or expense after the Company had furnished
such holder with a sufficient number of copies of the same. The Company will
also indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, their
officers and directors and each Person who controls such Persons (within the
meaning of the Securities Act) to the same extent as provided above with respect
to the indemnification of the holders of Registrable Securities, if requested.

(b) INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. In
connection with each Registration Statement, each holder of Registrable
Securities will furnish to the Company such information and affidavits as the
Company reasonably requests for use in connection with any Registration
Statement or Prospectus and agrees to indemnify and hold harmless, to the full
extent permitted by law, the Company, its directors, officers and employees and
each Person who controls the Company (within the meaning of the Securities Act)
against any losses, claims, damages, liabilities and expenses resulting from any
untrue statement of a material fact or any omission of a material fact required
to be stated in the Registration Statement or Prospectus or preliminary
Prospectus or necessary to make the statements therein not misleading, to the
extent, but only to the extent, that such untrue statement or omission relates
to the holders of the Registrable Securities and is contained in any information
or affidavit so furnished in writing by such holder to the Company specifically
for inclusion in such Registration Statement, Prospectus or preliminary
Prospectus. In no event shall the liability of any selling holder of
Registrable Securities hereunder be greater in amount than the dollar amount of
the proceeds received by such holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation. The Company shall be entitled
to receive indemnities from underwriters, selling brokers, dealer managers and
similar securities industry professionals participating in the distribution, to
the same extent as provided above with respect to information so furnished in
writing by such Persons specifically for inclusion in any preliminary
Prospectus, Prospectus or Registration Statement, if requested.

<PAGE>

(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled to
indemnification hereunder will (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit
such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party; provided, however, that any
Person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such Person unless (a)
the indemnifying party has agreed to pay such fees or expenses, or (b) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such Person or (c) in the reasonable
judgment of any such Person, based upon advice of its counsel, a conflict of
interest exists between such Person and the indemnifying party with respect to
such claims (in which case, if the Person notifies the indemnifying party in
writing that such Person elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense of such claim on behalf of such Person). If such defense is not
assumed by the indemnifying party, the indemnifying party will not be subject to
any liability for any settlement made without its consent (but such consent will
not be unreasonably withheld). No indemnifying party will be required to consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation. An indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the fees and expenses
of more than one counsel for all parties indemnified by such indemnifying party
with respect to such claim, unless in the reasonable judgment of any indemnified
party a conflict of interest exists between such indemnified party and any other
of such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels.

(d) CONTRIBUTION. If for any reason the indemnification provided for
in the preceding clauses (a) and (b) is unavailable to an indemnified party or
insufficient to hold it harmless as contemplated by the preceding clauses (a)
and (b), then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect not only the relative
benefits received by the indemnified party and the indemnifying party, but also
the relative fault of the indemnified party and the indemnifying party, as well
as any other relevant equitable considerations, provided that no holder of
Registrable Securities shall be required to contribute an amount greater than
the dollar amount of the proceeds received by such holder with respect to the
sale of any securities. No person guilty of fraudulent

<PAGE>

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.

(e) ADDITIONAL INDEMNIFICATION AND CONTRIBUTION. In the event of an
Underwritten Offering, the Company and each holder of Registrable Securities
participating in a registration will provide such additional indemnification and
contribution as is reasonably required by the underwriters and as is customarily
contained in underwriting agreements.

8. RULE 144

The Company covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder (or, if the Company is not required to
file such reports, it will, upon the request of the holders of a majority of the
Registrable Securities, made after September 16, 1998, make publicly available
other information so long as necessary to permit sales pursuant to Rule 144
under the Securities Act) (provided, however, that the Company may request no
more than one filing extension pursuant to Rule 12b-25 under the Exchange Act in
any calendar year), and it will take such further action as the holders of a
majority of the Registrable Securities may reasonably request after September
16, 1998, all to the extent required from time to time to enable the holders to
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by (a) Rule 144 under the Securities
Act, as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the SEC. Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such information and requirements.

9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS

If any of the Registrable Securities covered by any of the
Registration Statements are to be sold in an Underwritten Offering, the
investment banker or investment bankers and managing underwriter or underwriters
that will administer the offering will be selected by the Company after
consultation with the holders of the Registrable Securities.

<PAGE>

No Person may participate in any Underwritten Registration hereunder
unless such Person (a) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
Nothing in this Section 9 shall be construed to create any additional rights
regarding the registration of Registrable Securities in any Person otherwise
than as set forth herein.

10. MISCELLANEOUS

(a) REMEDIES. Each holder of Registrable Securities, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.

(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of holders
of at least a majority of the Registrable Securities.

(c) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, telex, telecopier, or air courier guaranteeing overnight delivery:

(i) if to EKI, initially at 800 Miramonte Drive, Santa Barbara,
California 93109-1419 Attention: Chairman of the Board & Chief Legal Officer,
and thereafter at such other address, notice of which is given in accordance
with the provisions of this Section 10(c); and

(ii) if to the Company, initially at 800 Miramonte Drive, Santa
Barbara, California 93109-1419 Attention: President, and thereafter at such
other address, notice of which is given in accordance with the provisions of
this Section 10(c), with a copy to, Gibson, Dunn & Crutcher, 2029 Century Park
East, Los Angeles, California 90067, Attention: Robert K. Montgomery, Esq.

All such notices and communications shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; when answered
back, if telexed; when

<PAGE>

receipt acknowledged, if telecopied; and on the next business day if timely
delivered to an air courier guaranteeing overnight delivery.

(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent holders of Registrable Securities, except that the shelf
registration rights set forth in Section 3(c) shall only be exercisable by EKI
or by a person who has been expressly assigned such rights in writing by EKI.

(e) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

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

(g) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of California.

(h) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.

(i) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company hereunder. This
Agreement supersedes all prior agreements and understandings whether written or
oral and all contemporaneous oral agreements and understandings among the
parties with respect to such subject matter.

(j) ATTORNEYS' FEES. In any action or proceeding brought to enforce
any provision of this Agreement, the successful party shall be entitled to
recover reasonable attorneys' fees in addition to its costs and expenses and any
other available remedy.

<PAGE>

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

EARTHSHELL CONTAINER CORPORATION

By: ____________________________
Name: __________________________
Title: __________________________

E. KHASHOGGI INDUSTRIES, a California
general partnership

By: E. Khashoggi Holdings, L.P.
its Managing General Partner
By: E. Khashoggi Industries, Inc.
General Partner of
E. Khashoggi Holdings, L.P.

By: _____________________________
Its: ____________________________

<PAGE>

PROMISSORY NOTE

$250,000 May 21, 1996

FOR VALUE RECEIVED, the undersigned promises to pay to E. Khashoggi Industries
or order, the principal amount of Two Hundred Fifty Thousand Dollars ($250,000),
together with interest from date hereof at the initial rate of Eight and one-
quarter percent (8.25%) per annum which represents the Prime Rate as published
in the Wall Street Journal on May 21, 1996, on the unpaid balance, payable:

On Demand

in lawful money of the United States of America, negotiable and payable at the
office of E. Khashoggi Industries without defalcation or discount. The interest
rate shall be adjusted to the Prime Rate in effect on the first day of each
calendar quarter (January 1, April 1, July 1 and October 1). The term "Prime
Rate" means the highest "Prime Rate" as published in the Wall Street Journal's
"Money Rates" table, which is described as the base rate on the corporate loans
at large US money center banks. Interest shall be compounded and paid at the
last day of each calendar quarter commencing on June 30, 1996. The unpaid
principal balance shall be payable upon demand and in all events any unpaid
principal and all accrued but unpaid interest shall be due and payable on June
30, 1999. Unless otherwise provided herein, all payments hereunder shall be
applied first to accrued interest and balance to reduction of principal. Any
portion of principal or interest not paid upon demand shall continue to bear
interest as stipulated above until paid.

In case of default in the payment of principal or interest hereunder,
proceedings may at once be instituted for the recovery of the same by law, with
accrued interest and costs, including reasonable attorney's fees.

The makers can pay this Note in part or in full without penalty.

The makers and endorsers severally waive presentment, protest and demand; and
waive notice of protest, demand and of dishonor and non-payment of this note,
and expressly agree that this note, or any payment thereunder, may be extended
from time to time without in any way effecting the liability of the makers and
endorsers thereof.

EARTHSHELL CONTAINER CORPORATION:

_________________________________
Richard K. Hulme
Executive Vice President and Chief Operating Officer

ATTEST:

_________________________________
Scott Houston
Chief Financial Officer

EXHIBIT 10.5

<PAGE>

PROMISSORY NOTE

$200,000 May 13, 1996

FOR VALUE RECEIVED, the undersigned promises to pay to E. Khashoggi Industries
or order, the principal amount of Two Hundred Thousand Dollars ($200,000),
together with interest from date hereof at the initial rate of Eight and One-
Quarter Percent (8.25%) per annum which represents the Prime Rate as published
in the Wall Street Journal on May 13, 1996, on the unpaid balance, payable:

On Demand

The makers can pay this Note in part or in full without penalty.

EARTHSHELL CONTAINER CORPORATION:

_________________________________________________
Richard K. Hulme
Executive Vice President and Chief Operating Officer

ATTEST:

_________________________________________________
Scott Houston
Chief Financial Officer

EXHIBIT 10.6

<PAGE>

PROMISSORY NOTE

$864,440 April 30, 1996

FOR VALUE RECEIVED, the undersigned promises to pay to E. Khashoggi Industries
or order, the principal amount of Eight Hundred Sixty-Four Thousand Four Hundred
Forty Dollars ($864,440), together with interest from date hereof at the initial
rate of Eight and One-Quarter Percent (8.25%) per annum which represents the
Prime Rate as published in the Wall Street Journal on April 30, 1996, on the
unpaid balance, payable:

On Demand

The makers can pay this Note in part or in full without penalty.

EARTHSHELL CONTAINER CORPORATION:

_________________________________
Richard K. Hulme
Executive Vice President and Chief Operating Officer

ATTEST:

_________________________________
Scott Houston
Chief Financial Officer

EXHIBIT 10.7

<PAGE>

PROMISSORY NOTE

$200,000 April 16, 1996

On Demand

The makers can pay this Note in part or in full without penalty.

EARTHSHELL CONTAINER CORPORATION:

_________________________________
Richard K. Hulme
Executive Vice President and Chief Operating Officer

ATTEST:

_________________________________
Scott Houston
Chief Financial Officer

EXHIBIT 10.8

<PAGE>

DEMAND PROMISSORY NOTE

$16,462,122 March 31, 1996

FOR VALUE RECEIVED AND FOR THE PURPOSE OF CONSOLIDATING THE INDEBTEDNESS LISTED
ON THE ATTACHED EXHIBIT A, the undersigned promises to pay to E. Khashoggi
Industries or order, the principal amount of Sixteen Million Four Hundred Sixty-
Two Thousand One Hundred Twenty-Two Dollars ($16,462,122), together with
interest from date hereof at the initial rate of Eight and One-Quarter Percent
(8.25%) per annum which represents the Prime Rate (as defined below) on March
31, 1996, on the unpaid balance, payable in lawful money of the United States of
America at the office of E. Khashoggi Industries without defalcation or
discount. The interest rate shall be adjusted to the Prime Rate in effect on
the first day of each calendar quarter (January 1, April 1, July 1 and October
1), commencing July 1, 1996. The term "Prime Rate" means the highest "Prime
Rate" as published in the Wall Street Journal's "Money Rates" table, which is
described as the base rate on the corporate loans at large U.S. money center
banks. Interest shall be compounded quarterly and paid on the last day of each
calendar quarter commencing on June 30, 1996. The unpaid principal balance, and
any accrued but unpaid interest, shall be payable upon demand and in all events
shall be due and payable on June 30, 1999. Any interest not paid when due shall
be added to the principal balance. Unless otherwise provided herein, all
payments hereunder shall be applied first to accrued interest and the balance to
the reduction of principal. Any portion of principal or interest not paid when
due shall continue to bear interest as stipulated above until paid.

In case of default in the payment of principal or interest hereunder,
proceedings may at once be instituted for the recovery of the same, and the
undersigned agrees to pay all costs of such proceedings and any other costs of
collection, including reasonable attorney's fees.

The undersigned may pay this Note in part or in full without penalty.

The undersigned severally waives presentment, protest and demand; and waives
notice of protest, demand and of dishonor and non-payment of this Note, and
expressly agrees that this Note, or any payment thereunder, may be extended from
time to time without in any way effecting the liability of the undersigned.

Upon due execution and delivery of this Note, E. Khashoggi Industries will
deliver to the undersigned any promissory notes or other written obligations
evidencing the indebtedness listed in the attached Exhibit A, marked "canceled".

EARTHSHELL CONTAINER CORPORATION:

____________________________________________
Richard K. Hulme
Executive Vice President and Chief Operating Officer

ATTEST:

____________________________________________
Scott Houston
Chief Financial Officer

EXHIBIT 10.9

<PAGE>

EMPLOYMENT AGREEMENT

This Agreement is entered into on this 19th day of October, 1993, by and
between EarthShell Container Corporation ("ECC"), a California partnership, and
D. Scott Houston ("EMPLOYEE").

FACTUAL BACKGROUND

The following facts are not mere recitals, but are agreed upon and are
integral to this Agreement:

A. An offer of employment by ECC has been made to EMPLOYEE, contingent
upon the execution of this Agreement.

B. ECC is a research and development company which develops, licenses,
commercializes, and provides scientific and technical services to various other
companies, customers, and clients.

C. ECC business activities involve highly confidential and proprietary
technology and other commercial and business information.

D. By virtue of the employment relationship between D. Scott Houston and
ECC and the services performed by EMPLOYEE, EMPLOYEE will be exposed to
confidential and proprietary technology and other commercial and business
information pertaining to or belonging to ECC or its customers and clients.

E. It is the desire of ECC and EMPLOYEE to safeguard the confidential
information of ECC and its customers and clients and to establish the terms of
the employment relationship between ECC and EMPLOYEE.

F. It is the desire of ECC and EMPLOYEE to reduce the terms of their
relationship to writing.

NOW, THEREFORE, in consideration of the employment of EMPLOYEE, the parties
hereto agree as follows:

1. DEFINITIONS. The following definitions shall govern this Agreement
unless clearly stated to the contrary:

a. The term ECC shall specifically include EarthShell Container
Corporation, its partners, subsidiaries, affiliates (including but not
limited to Concrete Technology Corporation, National Cement & Ceramics
Laboratories, Inc., and E. Khashoggi Industries), and their officers,
directors, employees, consultants, and agents.

EXHIBIT 10.10

<PAGE>

b. The term "ECC CLIENTS" shall mean and refer to all customers and
clients for whom ECC has in the past provided services, exchanged ECC
CONFIDENTIAL INFORMATION or licensed any type of technology; for whom ECC
now provides such services, ECC CONFIDENTIAL INFORMATION or licenses; and
for whom ECC may in the future provide services, ECC CONFIDENTIAL
INFORMATION, or licenses.

c. The term "ECC CONFIDENTIAL INFORMATION" shall mean and refer to all
financial, marketing, sales, strategy, personnel, and salary information;
all forms, legal documents, memoranda, software, computer programs, and
databases; all methods, processes, techniques, shop practices, formulas,
compositions, equipment, compilation of information or data, reports,
plans, tools, inventions, trade secrets, know-how, technical disclosures,
patent application, blueprints, specifications, information, and any other
proprietary or confidential technical information pertaining or belonging
to ECC; any documents prepared on behalf of ECC CLIENTS: the identities of
ECC CLIENTS; and other proprietary or confidential information pertaining
to the operations and business of ECC, and which have not been published or
disclosed to the general public. The ECC CONFIDENTIAL INFORMATION may be
embodied in any document, article, or tangible form, or in oral
disclosures.

d. The term "CLIENT CONFIDENTIAL INFORMATION" shall mean and refer to all
equipment, compilations of information or data, reports, plans, tools,
inventions, trade secrets, technical disclosures, patent applications,
blueprints, specifications, information, and any other proprietary or
confidential technical information pertaining or belonging to ECC CLIENTS,
as well as all financial, business, marketing, strategy, personnel, salary,
and other confidential business information pertaining or belonging to ECC
CLIENTS.

e. The term "LINE OF BUSINESS" shall refer to the investigation,
engineering or any other effort to improve the performance characteristics
of products made from hydraulically settable material (including but not
limited to cement, gypsum, and clay), and all manufacturing processes and
uses related to such products.

f. The term "TERRITORY" shall refer to the United States and any country
in which ECC sells products or services prior to the end of EMPLOYEE'S
employment therewith.

2. SAFEGUARDING OF ECC CONFIDENTIAL INFORMATION. EMPLOYEE acknowledges
that ECC CONFIDENTIAL INFORMATION has been developed by ECC at great expense and
effort, and that ECC CONFIDENTIAL INFORMATION is of independent economic value,
actual or potential, to ECC by reason of its not being generally known to and
not readily ascertainable by proper means by other persons who might obtain
economic benefit by its use. EMPLOYEE further acknowledges the confidentiality
of ECC CONFIDENTIAL INFORMATION. EMPLOYEE agrees that he/she will not, either
during the term of his/her employment by ECC or thereafter disclose or assist or
allow others to obtain or disclose ECC CONFIDENTIAL INFORMATION to any person or
entity outside ECC. EMPLOYEE further

<PAGE>

agrees that he/she will not use ECC CONFIDENTIAL INFORMATION for any purpose not
specifically authorized by an officer of ECC.

3. SAFEGUARDING OF CLIENT CONFIDENTIAL INFORMATION. EMPLOYEE
acknowledges that CLIENT CONFIDENTIAL INFORMATION has been developed by ECC
CLIENTS at great expense and effort, and that CLIENT CONFIDENTIAL INFORMATION
is of independent economic value, actual or potential, to ECC CLIENTS by reason
of its not being generally known to and not readily ascertainable by proper
means by other persons who might obtain economic benefit by its use. EMPLOYEE
further acknowledges that ECC has received CLIENT CONFIDENTIAL INFORMATION under
conditions of trust and confidence, and that ECC and ECC CLIENTS have made
reasonable efforts under the circumstances to maintain the confidentiality of
CLIENT CONFIDENTIAL INFORMATION. EMPLOYEE agrees that he/she will not, either
during the term of his/her employment by ECC or thereafter disclose or assist or
allow others to obtain or disclose CLIENT CONFIDENTIAL INFORMATION to any person
or entity outside ECC without the express and authorization of ECC CLIENTS.
EMPLOYEE further agrees that he/she will not remove CLIENT CONFIDENTIAL
INFORMATION from the premises of ECC and will not use CLIENT CONFIDENTIAL
INFORMATION for any purpose not authorized by an officer of ECC.

4. INDEMNIFICATION. EMPLOYEE agrees to indemnify, defend, and hold
harmless ECC for any claims, counterclaims, or any other cause of action,
including all expenses, all judgments, and all attorneys' fees which ECC may
incur or be liable for as a result of EMPLOYEE disclosing CLIENT CONFIDENTIAL
INFORMATION without authorization from ECC.

5. RETURN OF ECC AND CLIENT CONFIDENTIAL INFORMATION. EMPLOYEE agrees
that upon request and in any event upon termination of EMPLOYEE's employment
with ECC, EMPLOYEE will immediately return to ECC any and all originals and
copies of ECC CONFIDENTIAL INFORMATION and CLIENT CONFIDENTIAL INFORMATION in
his/her possession or control.

6. RIGHTS IN INVENTIONS. All inventions, discoveries, improvements, and
innovations, whether patentable or not (including all data and records
pertaining thereto), which EMPLOYEE may invent, discover, originate, or conceive
during the term of employment with ECC, and which in any way relate to or are or
may be useful in connection with the business of ECC or ECC CLIENTS, shall be
the sole and exclusive property of ECC. EMPLOYEE shall promptly and fully
disclose each and all such inventions, discoveries, improvements, or innovations
to ECC. Furthermore, EMPLOYEE shall assign to ECC, EMPLOYEE's entire right,
title, and interest to any of the discoveries, inventions, improvements, and
innovations described above and any related United States or foreign patents and
patent applications. EMPLOYEE shall also execute any instruments considered
necessary by ECC to convey or perfect ECC's ownership thereof and EMPLOYEE shall
assist ECC in obtaining, defending, and enforcing ECC's rights therein.

7. RIGHTS IN COPYRIGHTABLE WORKS. EMPLOYEE agrees that all works made in
the course of his/her employment by ECC are works made for hire and that all
copyrights therein are the sole property of ECC. EMPLOYEE shall assign to ECC,
EMPLOYEE's entire right, title,

<PAGE>

and interest to any copyrights and shall execute any instruments considered
necessary by ECC to convey and perfect ECC's ownership of the copyrights and
EMPLOYEE shall assist ECC in obtaining, defending, and enforcing ECC's rights
therein.

8. AGREEMENT NOT TO COMPETE. EMPLOYEE agrees he/she will not during the
term of employment by ECC, without the prior written consent of ECC, work for,
consult with, or be employed by any individual, business entity, governmental
agency, or other organization (hereinafter collectively referred to as "any
other person") involved in ECC's LINE OF BUSINESS. EMPLOYEE further agrees that
for a period of twelve (12) months after the end of employment by ECC, EMPLOYEE
will not, without the prior written consent of ECC, render service in the
TERRITORY within the LINE OF BUSINESS on EMPLOYEE's own behalf or as an EMPLOYEE
or consultant for any other person which is or could within the reasonably
foreseeable future become a competitor with ECC. The provisions of this
paragraph 8 are to be considered severed, as per the provisions of paragraph 12,
to the extent that they conflict with or are deemed non-enforceable in the State
of California.

9. INTEGRATION. This Agreement may not be modified except in a writing
signed by EMPLOYEE and an officer of ECC. Specifically, ECC may in its
discretion modify its other policies which may be adopted by ECC from time-to-
time without affecting the terms of this Agreement. In the event of any
conflict between such policies and this Agreement, the terms of this Agreement
shall control, particularly the terms of paragraph six (6) below shall control
over the terms of any conflicting policy.

10. SALARY AND OTHER BENEFITS.

(a) EMPLOYEE's original salary shall be set at One Hundred Thirty
Eight Thousand and no/100 Dollars ($138,000.00) per annum payable in
semi-monthly installments. It is anticipated that there will be an
annual review of EMPLOYEE's performance and salary level. In addition
EMPLOYEE shall be eligible for vacation pay and sick leave in
accordance with the standard policies of ECC which may from
time-to-time be in effect. Also EMPLOYEE shall be eligible to
participate in ECC's group medical insurance plan as it currently
exists or as it may, at ECC's sole discretion, be altered or amended.

(b) EMPLOYEE originally will work at ECC's Santa Barbara, California
facility, and employment will commence on October 15, 1993. Expense of
relocation to Santa Barbara, California will be reimbursed by ECC up to
------------------------ Dollars ($ 0 ).

(c) It is contemplated that ECC will adopt a stock option plan, bonus
plan or some other form of providing incentive compensation. EMPLOYEE
will be eligible to participate in any such plan, but the form and
extent of EMPLOYEE's participation shall be at the sole discretion of
ECC.

(d) EMPLOYEE's original employment will be in the capacity indicated
on the job description set forth on Exhibit "a" attached hereto.
However,

<PAGE>

EMPLOYEE agrees to serve in such capacity as ECC from time-to-time
might designate.

12. TRANSFER OF AGREEMENT. This Agreement shall endure to the benefit of
and be binding upon ECC, it successors, and assignees, as well as upon
EMPLOYEE's heirs and legal representatives. The rights of ECC under this
Agreement shall be assignable.

13 SEVERABILITY. The provisions of this Agreement are severable, and in
the event that any provisions of this Agreement shall be held to be held
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.

14. APPLICABLE LAW. This Agreement shall be interpreted, construed, and
enforced in accordance with the laws of the State of California.

15. ATTORNEY FEES. If either party hereto retains the services of an
attorney to enforce any provisions of this Agreement, the prevailing party shall
be entitled to its court costs and reasonable attorney fees.

Dated the 31 day of October, 1993.

EMPLOYEE

/s/ D. Scott Houston
------------------------------------
D. Scott Houston

EARTHSHELL CONTAINER CORPORATION

By: _________________________________
Simon K. Hodson
Vice Chairman
Chief Executive Officer

<PAGE>

EMPLOYMENT AGREEMENT

This Agreement is entered into on this 19th day of October, 1993, by and
between EarthShell Container Corporation ("ECC"), a California partnership, and
Mark A. Koob ("EMPLOYEE").

FACTUAL BACKGROUND

The following facts are not mere recitals, but are agreed upon and are
integral to this Agreement:

A. An offer of employment by ECC has been made to EMPLOYEE, contingent
upon the execution of this Agreement.

B. ECC is a research and development company which develops, licenses,
commercializes, and provides scientific and technical services to various other
companies, customers, and clients.

C. ECC business activities involve highly confidential and proprietary
technology and other commercial and business information.

D. By virtue of the employment relationship between Mark A. Koob and ECC
and the services performed by EMPLOYEE, EMPLOYEE will be exposed to confidential
and proprietary technology and other commercial and business information
pertaining to or belonging to ECC or its customers and clients.

F. It is the desire of ECC and EMPLOYEE to reduce the terms of their
relationship to writing.

NOW, THEREFORE, in consideration of the employment of EMPLOYEE, the parties
hereto agree as follows:

1 . DEFINITIONS. The following definitions shall govern this Agreement
unless clearly stated to the contrary:

EXHIBIT 10.11

<PAGE>

c. The term "ECC CONFIDENTIAL INFORMATION" shall mean and refer to all
financial marketing, sales, strategy, personnel, and salary information;
all forms, legal documents, memoranda, software, computer programs, and
databases; all methods, processes, techniques, shop practices, formulas,
compositions, equipment, compilation of information or data, reports,
plans, tools, inventions, trade secrets, know-how, technical disclosures,
patent application, blueprints, specifications, information, and any other
proprietary or confidential technical information pertaining or belonging
to ECC; any documents prepared on behalf of ECC CLIENTS: the identities of
ECC CLIENTS; and other proprietary or confidential information pertaining
to the operations and business of ECC, and which have not been published or
disclosed to the general public. The ECC CONFIDENTIAL INFORMATION may be
embodied in any document, article, or tangible form, or in oral
disclosures.

f. The term "TERRITORY" shall refer to the United States and any country
in which ECC sells products or services prior to the end of EMPLOYEE'S
employment therewith.

<PAGE>

agrees that he/she will not use ECC CONFIDENTIAL INFORMATION for any purpose not
specifically authorized by an officer of ECC.

3. SAFEGUARDING OF CLIENT CONFIDENTIAL INFORMATION. EMPLOYEE acknowledges
that CLIENT CONFIDENTIAL INFORMATION has been developed by ECC CLIENTS at great
expense and effort, and that CLIENT CONFIDENTIAL INFORMATION is of independent
economic value, actual or potential, to ECC CLIENTS by reason of its not being
generally known to and not readily ascertainable by proper means by other
persons who might obtain economic benefit by its use. EMPLOYEE further
acknowledges that ECC has received CLIENT CONFIDENTIAL INFORMATION under
conditions of trust and confidence, and that ECC and ECC CLIENTS have made
reasonable efforts under the circumstances to maintain the confidentiality of
CLIENT CONFIDENTIAL INFORMATION. EMPLOYEE agrees that he/she will not, either
during the term of his/her employment by ECC or thereafter disclose or assist or
allow others to obtain or disclose CLIENT CONFIDENTIAL INFORMATION to any person
or entity outside ECC without the express and authorization of ECC CLIENTS.
EMPLOYEE further agrees that he/she will not remove CLIENT CONFIDENTIAL
INFORMATION from the premises of ECC and will not use CLIENT CONFIDENTIAL
INFORMATION for any purpose not authorized by an officer of ECC.

<PAGE>

8. AGREEMENT NOT TO COMPETE. EMPLOYEE agrees he/she will not during the
term of employment by ECC, without the prior written consent of ECC, work for,
consult with, or be employed by any individual, business entity, governmental
agency, or other organization (hereinafter collectively referred to as "any
other person") involved in ECC's LINE OF BUSINESS. EMPLOYEE further agrees that
for a period of twelve (12) months after the end of employment by ECC, EMPLOYEE
will not, without the prior written consent of ECC, render service in the
TERRITORY within the LINE OF BUSINESS on EMPLOYEE's own behalf or as an employee
or consultant for any other person which is or could within the reasonably
foreseeable future become a competitor with ECC. The provisions of this
paragraph 8 are to be considered severed, as per the provisions of paragraph 12,
to the extent that they conflict with or are deemed non-enforceable in the State
of California.

10. SALARY AND OTHER BENEFITS

(a) EMPLOYEE's original salary shall be set AT THREE HUNDRED FIFTY
THOUSAND AND N0/100 ------ Dollars ($350,000.00) per annum payable in
semi-monthly installments. It is anticipated that there will be an
annual review of EMPLOYEE's performance and salary level. In addition
EMPLOYEE shall be eligible for vacation pay and sick leave in
accordance with the standard policies of ECC which may from
time-to-time be in effect. Also EMPLOYEE shall be eligible to
participate in ECC's group medical insurance plan as it currently
exists or as it may, at ECC's sole discretion, be altered or amended.

<PAGE>

(d) EMPLOYEE's original employment will be in the capacity indicated
on the job description set forth on Exhibit "a" attached hereto.
However, EMPLOYEE agrees to serve in such capacity as ECC from
time-to-time might designate.

11. TERMINATION OF EMPLOYMENT. Notwithstanding the provisions of
paragraph 10 above, EMPLOYEE acknowledges that neither this Agreement nor any
of the policies of ECC is a guarantee of continued employment of EMPLOYEE by
ECC; the employment covered hereby is deemed to be "at hire" at the discretion
of ECC; and that EMPLOYEE may be terminated at any time for cause without
further consideration. At the sole discretion of ECC, EMPLOYEE may be
terminated at any time. If such termination occurs before October 15, 1995,
ECC will pay EMPLOYEE one year of additional salary as severance compensation.
Thereafter, the severance compensation will be 90 days salary upon termination
without cause.

13. SEVERABILITY. The provisions of this Agreement are severable, and in
the event that any provisions of this Agreement shall be held to be held
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.

14. APPLICABLE LAW. This Agreement shall be interpreted, construed, and
enforced in accordance with the laws of the State of California.

Dated the 22nd day of October, 1993.

EMPLOYEE

/s/ Mark A. Koob
--------------------------------
Mark A. Koob

EARTHSHELL CONTAINER CORPORATION

By: /s/ Simon K. Hodson
---------------------------
Simon K. Hodson
Vice Chairman
Chief Executive Officer

<PAGE>

EARTHSHELL CONTAINER CORPORATION

26,675 Shares of Series A Cumulative
Senior Convertible Preferred Stock

STOCK PURCHASE AGREEMENT

Dated as of September 16, 1993

EXHIBIT 10.12

<PAGE>

TABLE OF CONTENTS

PAGE
----
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. PURCHASE AND SALE OF SECURITIES . . . . . . . . . . . . . . 3
2.1 Issue of Securities . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Sale and Purchase of the Securities;
the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

SECTION 3. CLOSING CONDITIONS. . . . . . . . . . . . . . . . . . . . . 4

3.1 Conditions to Purchasers' Obligations . . . . . . . . . . . . . . 4
3.1.1 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . 4
3.1.2 Representations and Warranties
True . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1.3 Compliance with this Agreement . . . . . . . . . . . . . . 4
3.1.4 Purchase Permitted by Applicable
Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1.5 Completion of Registration Rights
Agreement. . . . . . . . . . . . . . . . . . . . . . . . 4
3.1.6 Consents and Permits . . . . . . . . . . . . . . . . . . . 5
3.1.7 Absence of Material Adverse Change . . . . . . . . . . . . 5
3.1.8 Amendment of Certificate of
Incorporation. . . . . . . . . . . . . . . . . . . . . . 5
3.1.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 5

3.2 Conditions to Company's Obligations . . . . . . . . . . . . . . . 5

3.2.1 Representations and Warranties True. . . . . . . . . . . . 5
3.2.2 Compliance with this Agreement . . . . . . . . . . . . . . 5
3.2.3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . 6

4.1 Organization, Standing and Qualification . . . . . . . . . . . . 6
4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.3 Authorization of Agreement and Other
Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . 7
4.6 No Material Adverse Change; Conduct of
Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.8 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.9 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . 9
4.10 Governmental Consents. . . . . . . . . . . . . . . . . . . . . . 9

<PAGE>

PAGE
----

4.11 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.12 Affiliate Agreements . . . . . . . . . . . . . . . . . . . . . . 10
4.13 Intangible Personal Property . . . . . . . . . . . . . . . . . . 10
4.14 Other Information. . . . . . . . . . . . . . . . . . . . . . . . 10
4.15 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . 10
4.16 License Agreement. . . . . . . . . . . . . . . . . . . . . . . . 10
4.17 Survival of Representations and Warranties . . . . . . . . . . . 10

SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE
PURCHASERS . . . . . . . . . . . . . . . . . . . . . . . . 11

5.1 Securities Act Representation. . . . . . . . . . . . . . . . . . 11
5.2 Investment Representation. . . . . . . . . . . . . . . . . . . . 11
5.3 No Brokers or Finders. . . . . . . . . . . . . . . . . . . . . . 11

SECTION 6. COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . 12

6.1 Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.2 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.3 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.4 Priority Subscription Rights . . . . . . . . . . . . . . . . . . 13
6.5 Right to Join in Sale. . . . . . . . . . . . . . . . . . . . . . 14

SECTION 7. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . 15

7.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 16
7.3 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . 16
7.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.5 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.6 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 17
7.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.9 Expenses; Attorneys' Fees. . . . . . . . . . . . . . . . . . . . 17

SCHEDULES:

Schedule 2.3 List of Purchasers
Schedule 4.2 Capitalization
Schedule 4.4 Consents
Schedule 4.6 Conduct of Business
Schedule 4.12 Affiliate Agreements

ANNEXES:

Annex A Certificate of Designation
Annex B Registration Rights Agreement
Annex C Legal Opinion of Counsel to the Company

<PAGE>

------------------------
STOCK PURCHASE AGREEMENT
------------------------

This Stock Purchase Agreement, dated as of September 16, 1993 (the
"Agreement"), is being entered into by and among EarthShell Container
Corporation, a Delaware corporation (the "Company"), each of the Purchasers
whose names appear on the signature pages of this Agreement (collectively, the
"Purchasers"), and, solely with respect to and for purposes of the covenants set
forth in Section 6.5, E. Khashoggi Industries, a California General Partnership
("EKI").

SECTION 1. DEFINITIONS

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

AFFILIATE: Any person (i) that directly or indirectly, through one or
more intermediaries, controls or is controlled by, or is common control with,
the Company, including without limitation the officers and directors of the
Company, (ii) that directly or indirectly owns or holds 5% or more of any equity
interest in the Company or (iii) 5% or more of whose voting stock (or in the
case of an entity which is not a corporation, 5% or more of any equity interest)
is owned directly or beneficially or held by the Company.

AGREEMENT: This Stock Purchase Agreement between the Company and the
Purchasers, as amended from time to time.

CERTIFICATE OF DESIGNATION: See Section 2.1.

CHARTER DOCUMENTS: The Certificate of Incorporation and Bylaws, as
amended or restated (or both) to date, of the Company.

CLOSING: See Section 2.3.

CLOSING DATE: September 16, 1993 or such other date as determined
pursuant to Section 2.3.

COMMON STOCK: The Company's common stock, par value $.01 per share.

COMPANY: EarthShell Container Corporation, a Delaware corporation,
and its successors and assigns.

<PAGE>

DOCUMENTS: This Agreement and the Registration Rights Agreement,
together with any exhibits, schedules or other attachments hereto or thereto.

EKI: E. Khashoggi Industries, a California General Partnership.

LIEN: With respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell and any filing of or agreement to
give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).

NEW SECURITIES: Any capital stock of the Company issued after the date
hereof, whether now or hereafter authorized, and all rights, options or warrants
to purchase capital stock of the Company, and securities or indebtedness of any
type whatsoever that are, or may become, convertible into or exchangeable for
capital stock of the Company; provided that the term "New Securities" does not
include (i) any securities issued upon exercise or conversion of other
securities in accordance with their terms or any other securities which, when
issued, were subject to Section 6.4 hereof; (ii) securities issued pursuant to
an acquisition by the Company; (iii) securities issued in connection with any
reclassification, split, combination or other change of any then outstanding
securities of Company; (iv) securities paid as dividends on any then outstanding
securities of the Company; (v) any securities issued pursuant to conversion of
the Preferred Stock; and (vi) any Common Stock issued in connection with stock
options (or similar rights) issued pursuant to stock option plans for the
benefit of employees, consultants and other persons providing services to the
Company, provided that the number of shares subject to all such plans does not
exceed 5% of the then outstanding shares of Common Stock.

PERSON: An individual, partnership, corporation, trust or
unincorporated organization or a government or agency or political subdivision
thereof.

PREFERRED STOCK: See Section 2.1.

PRO RATA SHARE: With respect to each Purchaser, such Purchaser's
percentage interest in the Company resulting from its ownership of Preferred
Stock and computed as if all outstanding shares of Preferred Stock had been
converted into Common Stock.

PURCHASER: The Persons, other than the Company and EKI, listed on the
signature page hereto and their successors, assigns and designees.

<PAGE>

REGISTRATION RIGHTS AGREEMENT: The Registration Rights Agreement
attached as Annex B hereto, as amended from time to time.

SEC: The Securities and Exchange Commission.

SECURITIES ACT: The Securities Act of 1933, as amended.

SECTION 2. PURCHASE AND SALE OF SECURITIES

2.1 ISSUE OF SECURITIES

The Company has authorized the issue of an aggregate of 26,675 shares
of its Series A Cumulative Senior Convertible Preferred Stock, with a
liquidation preference of $1,000 per share (the "Preferred Stock").

The Preferred Stock will be issued pursuant to, and will have the
terms set forth in, the Company's Certificate of Designation, Preferences
Relative, Participating, Optional and Other Special Rights (the "Certificate of
Designation") in substantially the form attached hereto as Annex A.

The Purchasers will have the registration rights with respect to the
Preferred Stock set forth in the Registration Rights Agreement, attached hereto
as Annex B.

2.2 SALE AND PURCHASE OF THE SECURITIES; THE CLOSING

In reliance upon the Purchasers' representations made in Section 5 and
subject to the terms and conditions set forth herein and in the other Documents,
the Company hereby agrees to sell to the Purchasers the Preferred Stock and, in
reliance upon the representations and warranties of the Company contained herein
and in the other Documents, and subject to the terms and conditions set forth
herein and therein, the Purchasers hereby agree to purchase the Preferred Stock
from the Company.

The purchase price for the Preferred Stock purchased and sold
hereunder shall be $26,675,000.

2.3 CLOSING

The sale and purchase of the Preferred Stock shall take place at a
closing (the "Closing") at the offices of Gibson, Dunn & Crutcher, 2029 Century
Park East, Suite 4000, Los Angeles, California 90067, at 10:00 a.m. on or prior
to [insert day and month of closing], 1993. At the Closing, each Purchaser will
pay to the Company in cash, by wire transfer of next day funds, the amount set
forth as the purchase price opposite such Purchaser's name in Schedule 2.3
hereto, and the Company will issue to each Purchaser the respective number of
shares of Preferred Stock set forth opposite such Purchaser's name in Schedule
2.3 hereto. The

<PAGE>

Company will deliver to each Purchaser stock certificates issued in such
Purchaser's name representing the shares of Preferred Stock to be issued to such
Purchaser, in such denominations as such Purchaser may specify by timely notice
(or, in the absence of such notice to the Company, one stock certificate issued
in the name of such Purchaser with respect to the shares of Preferred Stock to
be issued to it hereunder).

SECTION 3. CLOSING CONDITIONS

3.1 CONDITIONS TO PURCHASERS' OBLIGATIONS

The Purchasers' obligations to purchase and pay for the Preferred
Stock at the Closing shall be subject to the satisfaction or waiver by the
Purchasers of the following conditions on or before the Closing Date:

3.1.1 OPINION OF COUNSEL. The Purchasers shall have received a
favorable opinion, dated the Closing Date and addressed to the Purchasers, from
Gibson, Dunn & Crutcher, counsel for the Company, in the form attached hereto as
Annex C. In rendering its opinion, such counsel may rely as to factual matters
upon certificates or other documents furnished by officers and directors of the
Company (copies of which shall be delivered to you) and by government officials,
and upon such other documents as such counsel may deem appropriate as a basis
for its opinion.

3.1.2 REPRESENTATIONS AND WARRANTIES TRUE. The Company's
representations and warranties contained in Section 4 hereof shall be true at
and as of the Closing Date, as if made on and as of such date (except as to such
representations and warranties which speak as to a particular date).

3.1.3 COMPLIANCE WITH THIS AGREEMENT. The Company shall have
performed and complied with all agreements, covenants and conditions contained
herein, in the other Documents and in any other document contemplated hereby or
thereby which are required to be performed or complied with by the Company on or
before the Closing Date.

3.1.4 PURCHASE PERMITTED BY APPLICABLE LAWS. The receipt by the
Purchasers of the Preferred Stock to be issued to them hereunder on the Closing
Date shall be permitted by the laws and regulations of the jurisdictions to
which they are subject, and the Purchasers shall have received such certificates
or other evidence as they may reasonably request to establish compliance with
this condition.

3.1.5 COMPLETION OF REGISTRATION RIGHTS AGREEMENT. Prior to or
simultaneously with the sale to the Purchasers of the Preferred Stock at the
Closing, the Company shall have entered into the Registration Rights Agreement
and the Purchasers shall

<PAGE>

have received an original, duly executed by the Company, of the Registration
Rights Agreement.

3.1.6 CONSENTS AND PERMITS. The Company shall have received all
material consents, permits and other authorizations, and made all such material
filings and declarations, as may be required from any Person pursuant to any
law, statute, regulation or rule (federal, state, local and foreign), or
pursuant to any agreement, order or decree to which the Company is a party or to
which it is subject, in connection with the transactions contemplated by this
Agreement and the sale of the Preferred Stock.

3.1.7 ABSENCE OF MATERIAL ADVERSE CHANGE. There shall not have
occurred any material adverse change in the assets, liabilities, results of
operations, business or prospects of the Company.

3.1.8 AMENDMENT OF CERTIFICATE OF INCORPORATION. The Company's
Board of Directors shall have duly authorized the issuance of the Preferred
Stock and the amendment of the Company's Certificate of Incorporation to include
the Certificate of Designation.

3.1.9 LITIGATION. No federal or state court of competent
jurisdiction or other federal or state governmental body shall have issued an
order, decree or ruling, or taken any other action restraining, enjoining or
otherwise prohibiting the consummation of the sale of the Preferred Stock.

3.2 CONDITIONS TO COMPANY'S OBLIGATIONS

The Company's obligation to sell the securities to be delivered to the
Purchasers at the Closing shall be subject to the satisfaction of the following
conditions:

3.2.1 REPRESENTATIONS AND WARRANTIES TRUE. The Purchasers'
representations and warranties contained in Section 5 hereof shall be true at
and as of the Closing Date, as if made on and as of such date.

3.2.2 COMPLIANCE WITH THIS AGREEMENT. The Purchasers shall have
performed and complied with all agreements, covenants and conditions contained
herein, in the other Documents and in any other document contemplated hereby or
thereby which are required to be performed or complied with by the Purchasers,
or any of them, on or before the Closing Date,

3.2.3 LITIGATION. No federal or state court of competent
jurisdiction or other federal or state governmental body shall have issued an
order, decree or ruling, or taken any other action restraining, enjoining or
otherwise prohibiting the consummation of the sale of the Preferred Stock.

<PAGE>

SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Purchasers as follows:

4.1 ORGANIZATION, STANDING AND QUALIFICATION

(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own or lease and operate its properties and to
carry on its business as now conducted. The Company is duly qualified or
licensed to do business as a foreign corporation in good standing in all
jurisdictions in which it owns or leases property or in which the conduct of its
business requires it to so qualify or be licensed, except for such jurisdictions
where the failure to so qualify or be licensed would not have a material adverse
effect on the business or financial condition of the Company. The Company has
heretofore delivered to you complete and correct copies of its Charter Documents
as presently in effect and a list of all jurisdictions in which it is qualified
or licensed to do business as a foreign corporation.

(b) The Company has all requisite corporate power and authority to
enter into and perform all of its obligations under this Agreement and the other
Documents, to issue the Preferred Stock and to carry out the transactions
contemplated hereby and thereby.

4.2 CAPITALIZATION

(a) The authorized capital stock of the Company consists of (i)
100,000 shares of preferred stock, $.01 par value, no shares of which were
issued and outstanding as of the date hereof, and (ii) 1,000,O0O shares of
Common Stock, $.01 par value, of which 315,000 shares were issued and
outstanding as of the date hereof. All such outstanding shares have been duly
and validly issued, are fully paid and nonassessable. Except as set forth in
Schedule 4.2 hereto and as contemplated by the Registration Rights Agreement,
(i) there are no outstanding subscriptions, warrants, options, calls or
commitments of any character relating to or entitling any Person to purchase or
otherwise acquire any stock of the Company from the Company; (ii) there are no
obligations or securities convertible into or exchangeable for shares of any
stock of the Company from the Company or any commitments of any character
relating to or entitling any Person to purchase or otherwise acquire any such
obligations or securities from the Company; (iii) there are no preemptive or
similar rights to subscribe for or to purchase any stock of the Company (except
as provided herein); and (iv) the

<PAGE>

Company has not entered into any agreement to register its equity or debt
securities under the Securities Act.

(b) Immediately following the Closing, 26,675 shares of Preferred
Stock and 315,000 shares of Common Stock will be issued and outstanding.

4.3 AUTHORIZATION OF AGREEMENT AND OTHER DOCUMENTS

The Company has taken all actions necessary to authorize it to enter
into and perform its obligations under this Agreement, the Preferred Stock and
the other Documents and to consummate the transactions contemplated hereby and
thereby. This Agreement is, and, as of the Closing Date, the Preferred Stock
will be, legal, valid and binding obligations of the Company, enforceable in
accordance with their respective terms, except for (i) the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium, arrangement and
similar laws of general application relating to or affecting creditor's rights,
including, without limitation, the effect of statutory or other law regarding
fraudulent conveyances, fraudulent transfers and preferential transfers and (ii)
the limitations imposed by general principles of equity (regardless of whether
considered in a proceeding at law or in equity).

4.4 NO VIOLATION

Neither the execution or delivery by the Company of the Documents nor
the issuance, sale or delivery of the Preferred Stock, nor the performance by
the Company of its obligations under the Documents and the Preferred Stock, nor
the consummation of the transactions contemplated hereby and thereby, will as of
the Closing Date (i) violate any provision of the Charter Documents of the
Company; (ii) violate any statute or law or any judgment, decree, order,
regulation or rule of any court or governmental authority to which the Company
or any of its properties may be subject, the violation of which would have a
material adverse effect upon the Company; (iii) cause the acceleration of the
maturity of any debt of the Company; or (iv) violate, or be in conflict with, or
constitute a default under, or permit the termination of, or require the consent
of any Person (other than consents which have been or will be obtained prior to
the Closing Date as identified on Schedule 4.4) under, or result in the creation
of any Lien upon any property of the Company under, any material agreement to
which the Company is a party or by which the Company is bound.

4.5 FINANCIAL STATEMENTS

The Company has delivered to each of the Purchasers true and complete
copies of the audited balance sheet of the Company as of June 30, 1993 and the
related audited statement of operations for the period beginning November, 1992
(inception of the Company) and ended June 30, 1993 together with the notes

<PAGE>

thereto and the report thereon of Deloitte & Touche (collectively, the
"Financial Statements"). Each of the Financial Statements were prepared in
accordance with the books and records of the Company and fairly present, in
conformity with generally accepted accounting principles ("GAAP"), the financial
position, results of operations and cash flows of the Company at the respective
dates thereof and for the respective periods covered thereby.

4.6 NO MATERIAL ADVERSE CHANGE; CONDUCT OF BUSINESS

Since June 30, 1993, the Company has not suffered any material
adverse change in its properties, business, operations, earnings, assets,
liabilities or condition (financial or otherwise). Except as set forth in
Schedule 4.6 hereto, since June 30, 1993, the Company (i) has conducted its
operations in the ordinary and usual course of business and consistent with
past practices; (ii) has used its best efforts to preserve intact its
businesses, organizations and the goodwill of its customers, suppliers,
employees and other similar business relationships; (iii) has not sold,
leased or otherwise disposed of any of its property or assets other than in
the ordinary course of business; (iv) has not incurred any liability, made
any commitment or entered into any other transaction, except in the ordinary
and usual course of business and consistent with past practices; (v) has not
paid bonuses to any member of management, officer, director or employee with
an annual salary of $75,000 or more; and (vi) has not declared any dividends
on its capital stock.

4.7 LITIGATION

There is no action, proceeding or investigation pending, or to the
best knowledge of the Company threatened, against or affecting the Company in
any court or before any governmental authority or arbitration board or
tribunal, which can reasonably be expected to have a material adverse effect
on the Company; and, except as described above, the Company is not subject to
any judgment, order or decree of any court, governmental authority or
arbitration board or tribunal which has materially adversely affected or
which can reasonably be expected to materially adversely affect the
properties, business, operations, earnings, assets, liabilities or condition
(financial or otherwise) of the Company.

4.8 TAXES

All tax returns required to be filed by the Company in any jurisdiction
have been so filed, and all taxes, assessments, fees and other charges shown
thereon to be due and payable have been paid, other than those being contested
in good faith or those currently payable without penalty or interest. The
Company does not know of any actual or proposed material additional tax
assessments for any fiscal period against it. None of the Company's tax returns
is under audit, and no waivers of the

<PAGE>

statute of limitations or extensions of time with respect to any tax returns
have been granted to the Company.

4.9 COMPLIANCE WITH LAWS

The Company is not in violation of any statutes, laws, ordinances,
governmental rules or regulations or any judgment, order or decree (federal,
state, local or foreign) to which it is subject or has failed to obtain any
licenses, permits, franchises or other governmental authorizations necessary to
the ownership or operation of its properties or the conduct of its business
(including, without limitation, matters relating to environmental laws or
regulations), except for such violations and failures to obtain that are not
material to the properties, business, operations, earnings, assets, liabilities
or condition (financial or otherwise) of the Company.

4.10 GOVERNMENTAL CONSENTS

Neither the nature of the Company or of its business or properties,
nor any relationship between the Company and any other Person, nor any
circumstance in connection with the offer, issuance, sale or delivery of the
Preferred Stock as contemplated hereby, is such as to require a consent,
approval or authorization of, or filing, registration or qualification with, any
governmental authority on the part of the Company as a condition to the
execution and delivery of this Agreement or the offer, issuance, sale or
delivery of the Preferred Stock at the Closing, other than (i) the filings,
registrations or qualifications under federal and state securities (or "blue
sky") laws that may be required to be made or obtained, including filings under
Rule 503 of Regulation D of the General Rules and Regulations promulgated under
the Securities Act, and (ii) the filing of the Certificate of Designation with
the Secretary of State of the State of Delaware, each of which shall have been
made or obtained.

4.11 BROKERS

Other than its engagement of Salomon Brothers Inc and any amounts
payable with respect thereto which shall be the sole responsibility of the
Company, (i) the Company has dealt with no broker, finder, commission agent or
other Person in connection with the sale of the Preferred Stock and the
transactions contemplated by this Agreement and (ii) the Company is under no
obligation to pay any broker's fee or commission in connection with such
transactions. The Company hereby indemnifies and holds harmless each of the
Purchasers from any and all claims, liabilities, damages, actions, causes of
action, demands, costs and expenses of every kind or nature including, without
limitation, reasonable attorneys' fees, court costs, and costs incurred in
connection with appeals, arising out of, relating to or resulting from any
broker's or finder's fees or other such commissions incurred by the Company.

<PAGE>

4.12 AFFILIATE AGREEMENTS

Schedule 4.12 hereto sets forth a true and correct list of each
contract, agreement and commitment between the Company and any Affiliate.

4.13 INTANGIBLE PERSONAL PROPERTY

To the best of the Company's knowledge, the Company has the right and
authority to use all material items of intangible personal property, including
all patents, inventions, proprietary rights, confidential information,
trademarks and trade names, used by the Company in connection with the conduct
of its business in the manner described in the Private Placement Memorandum,
and, to the best of the Company's knowledge, such use does not conflict with,
infringe upon or violate any rights of any other person.

4.14 OTHER INFORMATION

To the best of the Company's knowledge, the information contained in
this Agreement and the Private Placement Memorandum and in all other information
concerning the Company provided to the Purchasers by or on behalf of the Company
in connection with the transactions contemplated herein, taken as a whole, does
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.

4.15 USE OF PROCEEDS

The proceeds from the sale of the Preferred Stock will be used by the
Company for general corporate purposes. None of such proceeds will be used,
directly or indirectly, for the payment of any dividend or distribution on the
Stock of the Companny. Pending application of the proceeds from the sale of the
Preferred Stock, such proceeds will be invested in short-term, investment grade,
interest-bearing securities or certificates of deposit.

4.16 LICENSE AGREEMENT

The Company has delivered to the Purchasers a true and correct copy
of that certain License Agreement, dated as of February 24, 1993, between the
Company and EKI, as amended by an addendum of even date therewith, which
License Agreement is in full force and effect.

4.17 SURVIVAL OF REPRESENTATIONS AND WARRANTIES

The representations and warranties made by the Company in this
Agreement or in any certificate delivered by the Company pursuant to this
Agreement will survive the Closing, and will

<PAGE>

remain in full force and effect, until the date four years after the Closing
Date.

SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

5.1 SECURITIES ACT REPRESENTATION

Each of the Purchasers represents to the Company that it is (i) an
"accredited investor" (as that term is defined in Rule 501 of Regulation D under
the Securities Act) and (ii) by reason of its business and financial experience,
and the business and financial experience of those Persons, if any, retained by
it to advise it with respect to its investment in the Preferred Stock, it
together with its advisors, have such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating the merits
and risks of the prospective investment; it is able to bear the economic risk of
the prospective investment; and it is able to afford a complete loss of the
prospective investment.

5.2 INVESTMENT REPRESENTATION

Each of the Purchasers represents and warrants to the Company that it
is purchasing the Preferred Stock to be purchased by it hereunder for its
account for the purpose of investment and not with a view to or for the sale in
connection with any distribution thereof; provided that the disposition of each
Purchasers' property shall at all times be and remain within its control.

Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Securities Act and
applicable state securities laws, the Preferred Stock (and all securities issued
in exchange therefor or substitution thereof) shall bear the following legend:

"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT AND SUCH LAWS AND THE RESPECTIVE RULES AND
REGULATIONS THEREUNDER."

5.3 NO BROKERS OR FINDERS

Each of the Purchasers represents and warrants that it has not engaged
or otherwise retained any broker, finder, commission agent or other Person in
connection with the sale of the Preferred Stock and the transactions
contemplated by this Agreement and it is under no obligation to pay any broker's
fee or commission in connection with such transactions. Each of the Purchasers
hereby indemnities and holds harmless the Company from

<PAGE>

any and all claims, liabilities, damages, actions, causes of action,
demands, costs and expenses of every kind or nature including, without
limitation, reasonable attorneys' fees, court costs, and costs incurred in
connection with appeals, arising out of, relating to or resulting from any
brokers or finders fees or other such commissions incurred by such Purchaser.

SECTION 6. COVENANTS OF THE COMPANY

6.1 INFORMATION.

So long as any of the Preferred Stock remains outstanding, the Company
shall deliver to each Purchaser, and to each other Person who then holds 2% or
more of the outstanding shares of Preferred Stock, copies of (i) all reports,
registration statements or other filings made with the SEC; (ii) as soon as
available and in any event within 45 days after the end of each of the three
fiscal quarters of each fiscal year, the financial information, including the
financial statements and the Management's Discussion and Analysis of Financial
Condition and Results of Operations, required under Part I of Form 10-Q
promulgated by the SEC as if the Company were required to file Quarterly Reports
on such form; (iii) as soon as available and in any event within 90 days after
the end of each fiscal year, the financial information required under items 7
and 8 of Part II of Form 10-K promulgated by the SEC as if the Company were
required to file Annual Reports on such form; (iv) together with the delivery of
the financial information required by clauses (ii) and (iii) above, a letter
signed by its President and Chief Executive Officer or Chief Financial Officer
setting forth the details thereof and what action the Company is taking with
respect to any of the following events: (a) any material adverse change in the
business, assets, financial condition or results of operations of the Company,
(b) a default under any agreement governing the Company's indebtedness, or (c)
the institution, threat or notice of any action, suit, proceeding or
investigation relating to the Company before or by any court, arbitrator or
governmental body, agency or official, or any judicial or other order which
could have a material adverse effect upon the business, assets, financial
condition or results of operations of the Company; and (v) such other
information relating to the business, assets, financial condition or results of
operations of the Company as such Purchaser or other Person may from time to
time reasonably request.

6.2 INDEMNITY

In consideration of the execution and delivery of this Agreement by
the Purchasers, the Company hereby agrees to indemnify, exonerate and hold each
Purchaser and each of the officers, directors, subsidiaries, affiliates,
partners, employees and agents of each Purchaser (herein called the
"Indemnitees") free and harmless from and against any and all actions, causes of
action, suits, losses, liabilities and

<PAGE>

damages, and expenses in connection therewith, including, without limitation,
reasonable counsel fees and disbursements (herein called the "Indemnified
Liabilities", which term shall not include, however, any actions, causes of
action or suits (or any losses, liabilities or damages or expenses in connection
therewith)) incurred by the Indemnities or any of them as a result of, or
arising out of, or relating to (i) any untruth or inaccuracy of any
representation or warranty of the Company set forth in this Agreement or any
certificate delivered pursuant to this Agreement or (ii) any breach or non-
performance of any covenant or agreement of the Company set forth in this
Agreement. If and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Company hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.

6.3 PUBLICITY

The Company and the representative of the Purchasers shall coordinate
the timing and content of all press releases, announcements or other publicity
pertaining to this Agreement and the transactions contemplated hereby in that
neither party will release any information about this Agreement without the
approval of the other; provided that nothing herein shall prevent either party
from filing such reports, documents, press releases or announcements as may be
required by law or appropriate governmental authorities.

6.4 PRIORITY SUBSCRIPTION RIGHTS

6.4.1 GRANT OF RIGHT. The Company hereby grants to each Purchaser
the priority subscription right to purchase up to such Purchaser's Pro Rata
Share of any New Securities (plus such Purchaser's Pro Rata Share of any
Remaining Securities, as hereinafter defined) which the Company may, from time
to time after the date hereof, propose to sell or issue. A Purchaser's priority
subscription rights hereunder shall be assignable by the Purchaser to any of its
Affiliates. Nothing contained in this Section 6.4 shall require the Company to
offer or sell to the Purchasers a number of New Securities in excess of the
Purchasers' aggregate Pro Rata Share of New Securities.

6.4.2 EXERCISE OF RIGHT. In the event the Company proposes to
undertake an issuance or sale of New Securities, it will give each Purchaser
written notice of its intention, describing the type of New Securities and the
price and all material terms upon which the Company proposes to issue or sell
the same, and provide to each Purchaser a copy of all offering materials to be
used in connection with the offer and sale of such New Securities. Each
Purchaser will have 20 days from the date such notice is given to give the
Company written notice (a "Purchaser's Acceptance") of such Purchaser's election
to purchase all or any portion of the Purchaser's Pro Rata Share of

<PAGE>

such New Securities for the price and upon the terms specified in the notice,
stating the quantity of New Securities to be purchased. Any Purchaser who does
not give such notice within such 20-day period shall be deemed to have waived
its priority subscription rights with respect to such New Securities, provided
the Company consummates the issuance thereof within 180 days after the
expiration of the l0-day period referenced in the following sentence at a price
equal to or higher than the price specified in the notice given to the
Purchasers by the Company under this Section 6.4.2 and on the terms specified in
the Company's notice or on terms no less advantageous to the Company. In the
event that less than all Purchasers elect to Purchase their entire Pro Rata
Share of the New Securities, the Company shall provide written notice to the
Purchasers electing to purchase their entire Pro Rata Share (the "Electing
Purchasers") of the number of shares of New Securities which were offered to
Purchasers and for which Purchaser Acceptances were not received (the "Remaining
Securities"), and the Electing Purchasers shall have 10 days from the date such
notice is given to give the Company written notice (an "Additional Acceptance")
of such Electing Purchaser's election to purchase all or any portion of the
Remaining Securities for the price and upon the terms specified in the notice,
stating the quantity of the Remaining Securities to be purchased. In the event
that the Electing Purchasers return Additional Acceptances for a number of
shares of Remaining Securities in excess of the number of Remaining Securities,
the Remaining Securities will be allocated among the Electing Purchaser pro rata
according to their respective Pro Rata Shares, provided that no Electing
Purchaser shall be required to purchase a number of shares of Remaining
Securities in excess of the number set forth in such Electing Purchaser's
Additional Acceptance. A Purchaser's Acceptance and Additional Acceptance shall
each be deemed to be an irrevocable commitment to purchase from the Company the
number of New Securities which such Purchaser has elected to purchase pursuant
to such acceptance subject to the allocation provisions hereof.

6.5 RIGHT TO JOIN IN SALE

(a) In the event EKI proposes, in a single transaction or a series of
related transactions, to sell, dispose of or otherwise transfer shares of Common
Stock, EKI shall refrain from effecting such transaction unless, prior to the
consummation thereof, each Purchaser shall have been afforded the opportunity to
join in such sale as hereinafter provided; PROVIDED, HOWEVER, that
notwithstanding any other provision of this section 6.5, EKI shall be permitted
to sell, dispose of or otherwise transfer up to an aggregate of 63,000 shares of
Common Stock (subject to appropriate adjustment in proportion to any increase or
decrease in the number of shares of Common Stock outstanding as a result of any
recapitalization, reclassification, stock dividend, stock split or stock
combination) from the date hereof without affording the Purchasers the
opportunity to join in such sale, disposition or other transfer. The
obligations of EKI to afford

<PAGE>

the Purchasers the opportunity to join in sales pursuant to this Section 6.5
shall expire and terminate upon the earlier to occur of (i) the date 5 years
from the Closing Date and (ii) the consummation of a public offering of Common
Stock pursuant to an effective registration statement under the Securities Act
for the account of the Company at an aggregate offering price in excess of
$35,000,000.

(b) Prior to the consummation of any transaction subject to this
Section 6.5, EKI shall cause the person or group that proposes to acquire shares
of Common Stock in a transaction subject to this Section 6.5 (the "Proposed
Purchaser") to offer (the "Purchase Offer") in writing to each Purchaser to
purchase up to a number of shares of Common Stock equal to the number of shares
of Common Stock which the Proposed Purchaser proposes to purchase from EKI on
such terms and conditions (the "Offering Terms") as the Proposed Purchaser has
offered to purchase the shares of Common Stock to be sold by EKI. Each
Purchaser shall have 20 days from the receipt of the Purchase Offer in which to
accept such Purchase Offer, which acceptance (a "Purchase Acceptance") shall be
in writing and delivered to EKI and the Proposed Purchaser and may be in respect
of all or less than all of the shares of Common Stock subject to such Purchase
Offer. In the event that the Purchasers elect to sell a number of shares of
Common Stock in excess of the Purchase Offer, each Purchaser who has delivered a
Purchase Acceptance shall be permitted to sell that number of shares of Common
Stock which such Purchaser's percentage interest in the Company (computed from
its ownership of Common Stock and Preferred Stock, and treating Preferred Stock
as if it had been converted into Common Stock) bears to the aggregate percentage
interest of all Purchasers delivering Purchase Acceptances, provided that in no
event will any Purchaser be obligated to sell a number of shares of Common Stock
in excess of the number set forth in its Purchase Acceptance. In the event that
the Purchasers deliver Purchase Acceptances for a number of shares of Common
Stock less than the number of shares of Common Stock set forth in the Purchase
Offer, then EKI shall be permitted to sell on the Offering Terms the remaining
shares of Common Stock to be sold to the Proposed Purchaser.

SECTION 7. MISCELLANEOUS
7.1 NOTICES

All notices and other communications provided for or permitted
hereunder shall be made by hand-delivery, first-class mail (registered or
certified, return receipt requested), telex, telecopier, or overnight courier
guaranteeing next day delivery:

(i) if to any Purchaser, to the address or telex or telecopy number
set forth for such communications with respect to such Purchaser on Schedule 2.3
hereto, or to such other address or telex or telecopy number as such Purchaser
may designate to the Company in writing;

<PAGE>
(ii) if to any other holder of shares of Preferred Stock, to the last
address of such holder shown in the official stock transfer register maintained
by the Company;

(iii) if to the Company, to EarthShell Container Corporation, 8OO
Miramonte Drive, Santa Barbara, California 93109-1419; and

(iv) if to EKI, to E. Khashoggi Industries, 80O Miramonte Drive, Santa
Barbara, California 93109-1419.

All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and the
next business day after timely delivery to the courier, if sent by overnight
courier guaranteeing next day delivery.

7.2 SUCCESSORS AND ASSIGNS

All covenants and agreements in this Agreement contained by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not. The provisions of this Agreement are intended to be for the benefit of all
holders, from time to time, of any shares of Preferred Stock, and shall be
enforceable by any such holder, whether or not an express assignment to such
holder of rights under this Agreement has been made by any Purchaser or its
successors or assigns; provided, however, that the benefit of Section 6.1 shall
be limited as provided therein.

7.3 AMENDMENT AND WAIVER

(a) Any term, covenant, agreement or condition of this Agreement may,
with the consent of the Company, be amended, or compliance therewith may be
waived (either generally or in a particular instance and either retroactively or
prospectively), by one or more substantially concurrent written instruments
signed by the holders of a majority of the then outstanding shares of Preferred
Stock, except that no amendment to or waiver of any of the provisions of Section
6.1, 6.4 or 6.5 or this Section 7.3(a) shall be effected without the unanimous
written consent of the holders of the then outstanding Preferred Stock.

(b) Any amendment or waiver pursuant to subsection (a) of this
Section 7.3 shall apply equally to all the holders of the Preferred Stock at the
time and shall be binding upon them, upon each future holder of any Preferred
Stock, and upon the Company, in each case whether or not a notation thereof
shall have been placed on any shares of Preferred Stock.

<PAGE>

7.4 COUNTERPARTS

This Agreement may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.

7.5 HEADINGS

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

7.6 GOVERNING LAW

This Agreement shall be governed by and construed in accordance with
the internal laws of the State of California.

7.7 ENTIRE AGREEMENT

This Agreement, together with the other Documents and the Preferred
Stock, is intended by the parties as a final expression of their agreement and
intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein. There are no restrictions, promises, representations,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, together with the other Documents and the Preferred
Stock, supersedes all prior written and prior and contemporaneous oral
agreements and understandings between the parties with respect to such subject
matter.

7.8 SEVERABILITY

In the event that any one or more of the provisions contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired or affected, it being
intended that each of the Purchasers' and the Company's rights and privileges
shall be enforceable to the fullest extent permitted by law.

7.9 EXPENSES; ATTORNEYS' FEES

(a) Each party to this Agreement shall bear its own costs and
expenses in connection with the transactions contemplated herein, except that
the Company shall bear the customary and reasonable fees and expenses of Latham
& Watkins, counsel to the Purchasers, relating to the Purchasers' purchase of
the Preferred Stock pursuant to the terms of this Agreement.

<PAGE>

(b) In any action or proceeding brought to enforce any provision of
this Agreement, the other Documents or the Preferred Stock or where any
provision hereof or thereof is validly asserted as a defense, the successful
party shall be entitled to recover reasonable attorneys' fees in addition to any
other available remedy.

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

EARTHSHELL CONTAINER CORPORATION

By: /s/ Simon K. Hodson
-------------------------------
Its: CHIEF EXECUTIVE OFFICER
-------------------------------

E. KHASHOGGI INDUSTRIES,
a California General Partnership

By: E. Khashoggi Holdings, L.P.,
its Managing General Partner

By: E. Khashoggi Industries, Inc.,
General Partner of
E. Khashoggi Holdings, L.P.

By: /s/ E. Khashoggi
-----------------------------------
Its:
-----------------------------------

18
<PAGE>

PURCHASERS:

/s/ David A. Gardner
----------------------------------------
(Name, if Individual)

/s/ [illegible]
----------------------------------------
(Signature, if Individual)

----------------------------------------
(Name, if Entity)

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

19
<PAGE>

PURCHASERS:

G. LYNN SHOSTACK
----------------------------------------
(Name, if Individual)

/s/ G. Lynn Shostack
----------------------------------------
(Signature, if Individual)

----------------------------------------
(Name, if Entity)

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

19
<PAGE>

PURCHASERS:

----------------------------------------
(Name, if Individual)

----------------------------------------
(Signature, if Individual)

EARTHSHELL JOINT VENTURE
----------------------------------------
(Name, if Entity)

By: /s/ Gordon B. Pattee
------------------------------------
Title: MANAGING INVESTOR
---------------------------------

19
<PAGE>

PURCHASERS:

----------------------------------------
(Name, if Individual)

----------------------------------------
(Signature, if Individual)

McDonalds Corporation
----------------------------------------
(Name, if Entity)

By: /s/ [illegible]
------------------------------------
Title: Vice President
---------------------------------

19
<PAGE>

PURCHASERS:

----------------------------------------
(Name, if Individual)

----------------------------------------
(Signature, if Individual)

STEVEN K. SCOTT & SHANNON L. SCOTT
FAMILY TRUST
----------------------------------------
(Name, if Entity)

By: /s/ Steven K. Scott
------------------------------------
Title: TRUSTEE
---------------------------------

20
<PAGE>

PURCHASERS:

----------------------------------------
(Name, if Individual)

----------------------------------------
(Signature, if Individual)

WILLIAMS, JONES & ASSOCIATES, INC.
as Manager for ES FUND
----------------------------------------
(Name, if Entity)

By: /s/ [illegible]
------------------------------------
Title: Chairman
---------------------------------

20
<PAGE>

PURCHASERS:

----------------------------------------
(Name, if Individual)

----------------------------------------
(Signature, if Individual)

UNION CENTRAL LIFE INSURANCE COMPANY
----------------------------------------
(Name, if Entity)

By: /s/ [illegible]
------------------------------------
Title: ASSISTANT TREASURER
---------------------------------

16
<PAGE>

PURCHASERS:

----------------------------------------
(Name, if Individual)

----------------------------------------
(Signature, if Individual)

CARILLON BOND FUND
----------------------------------------
(Name, if Entity)

By: /s/ [illegible]
------------------------------------
Title: VICE-PRESIDENT
---------------------------------

16
<PAGE>

PURCHASERS:

----------------------------------------
(Name, if Individual)

----------------------------------------
(Signature, if Individual)

CARGILL FINANCIAL SERVICES CORPORATION
----------------------------------------
(Name, if Entity)

By: /s/ [illegible]
------------------------------------
Title: President
---------------------------------

19
<PAGE>

PURCHASERS:

----------------------------------------
(Name, if Individual)

----------------------------------------
(Signature, if Individual)

FMA HIGH YIELD INCOME LIMITED PARTNERS
----------------------------------------
(Name, if Entity)

Authorized By: /s/ [illegible]
-------------------------
Title: [illegible]
---------------------------------

20
<PAGE>

PURCHASERS:

----------------------------------------
(Name, if Individual)

----------------------------------------
(Signature, if Individual)

WSIS HIGH INCOME LIMITED PARTNERSHIP
----------------------------------------
(Name, if Entity)

By: /s/ E. William Smethhurst, Jr.
------------------------------------
Title: Wertheim Schroeder Inv. Svcs. -
General Partner
---------------------------------

20
<PAGE>

PURCHASERS:

----------------------------------------
(Name, if Individual)

----------------------------------------
(Signature, if Individual)

WSIS FLEXIBLE INCOME LIMITED PARTNERS,
L.P.
----------------------------------------
(Name, if Entity)

Authorized By: /s/ WSIS FLEXIBLE INCOME
LIMITED PARTNERS, L.P.
-------------------------
Title: [illegible]
---------------------------------

19
<PAGE>

PURCHASERS:

Frank J & Victoria K. Fertitta Trust
----------------------------------------
(Name, if Individual)

Frank J. Fertitta, Trustee
----------------------------------------
(Signature, if Individual)

Frank J. & Victoria K. Fertitta Trust
----------------------------------------
(Name, if Entity)

By: Frank J. Fertitta, Jr.
------------------------------------
Title: Trustee
---------------------------------

16
<PAGE>

PURCHASERS:

----------------------------------------
(Name, if Individual)

----------------------------------------
(Signature, if Individual)

Junction Partners, as nominee
----------------------------------------
(Name, if Entity)

By: /s/ [illegible]
------------------------------------
Title: G.P.
---------------------------------

20
<PAGE>

PURCHASERS:

----------------------------------------
(Name, if Individual)

----------------------------------------
(Signature, if Individual)

M. H. Whittier Corporation
----------------------------------------
(Name, if Entity)

By: /s/ Terry Smith
------------------------------------
Title: Terry Smith, Secretary
---------------------------------

Stock Purchase Agreement

<PAGE>

PURCHASERS:

----------------------------------------
(Name, if Individual)

----------------------------------------
(Signature, if Individual)

Whittier Trust Company, as Trustee of the
Winifred W. Rhodes-Bea 1966 Trust
----------------------------------------
(Name, if Entity)

By: /s/ Steven A. Anderson
------------------------------------
Title: Steven A. Anderson, Vice-President
---------------------------------

Stock Purchase Agreement

<PAGE>

PURCHASERS:

----------------------------------------
(Name, if Individual)

----------------------------------------
(Signature, if Individual)

Arlo G. Sorensen, Linda J. Blinkenberg &
Steven A. Anderson, as Trustee of the
Trust Under the Will of Olive Whittier
----------------------------------------
(Name, if Entity)

By: /s/ Arlo G. Sorensen
------------------------------------
Title: Arlo G. Sorensen, Trustee
---------------------------------

By: /s/ Linda J. Blinkenberg
---------------------------------
Linda J. Blinkenberg, Trustee

By: /s/ Steven A. Anderson
---------------------------------
Steven A. Anderson, Trustee

Stock Purchase Agreement

<PAGE>

PURCHASERS:

----------------------------------------
(Name, if Individual)

----------------------------------------
(Signature, if Individual)

Whittier Trust Company, as Trustee of the
Marcia W. Constance 1966 Trust.
----------------------------------------
(Name, if Entity)

By: /s/ Steven A. Anderson
------------------------------------
Title: Steven A. Anderson, Vice-President
---------------------------------

Stock Purchase Agreement

<PAGE>

PURCHASERS:

----------------------------------------
(Name, if Individual)

----------------------------------------
(Signature, if Individual)

Whittier Trust Company, as Trustee of the
Donald A. Whittier 1949 Trust.
----------------------------------------
(Name, if Entity)

By: /s/ Steven A. Anderson
------------------------------------
Title: Steven A. Anderson, Vice-President
---------------------------------

Stock Purchase Agreement

<PAGE>

PURCHASERS:

----------------------------------------
(Name, if Individual)

----------------------------------------
(Signature, if Individual)

Whittier Trust Company, as Trustee of the
Laura-Lee W. Woods 1966 Trust.
----------------------------------------
(Name, if Entity)

By: /s/ Steven A. Anderson
------------------------------------
Title: Steven A. Anderson, Vice-President
---------------------------------

Stock Purchase Agreement

<PAGE>

PURCHASERS:

----------------------------------------
(Name, if Individual)

----------------------------------------
(Signature, if Individual)

SeaShell Partners L.P.
----------------------------------------
(Name, if Entity)

By: Samuel James Limited
-------------------------------------
Title: General Parner
----------------------------------

By: /s/ Francis X. Poggi
------------------------------------
Title: Francis X. Poggi, President
---------------------------------

Stock Purchase Agreement 20

<PAGE>

PURCHASERS:

Francis F. MacGrath
----------------------------------------
(Name, if Individual)

Francis F. MacGrath
----------------------------------------
(Signature, if Individual)

----------------------------------------
(Name, if Entity)

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

<PAGE>

PURCHASERS:

ADIL KHASHOGGI
----------------------------------------
(Name, if Individual)

/s/ Adil Khashoggi
----------------------------------------
(Signature, if Individual)

----------------------------------------
(Name, if Entity)

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

<PAGE>

PURCHASERS:

----------------------------------------
(Name, if Individual)

----------------------------------------
(Signature, if Individual)

SALOMON BROTHERS INC
----------------------------------------
(Name, if Entity)

By: /s/ Ellis B. Jones
------------------------------------
Title: Managing Director
---------------------------------

<PAGE>

SCHEDULE 2.3

Name Amount of Shares
- ---- ----------------
<S> <C>
David A. Gardner 500

G. Lynn Shostack 500

EarthShell Joint Venture 1,000

McDonald's Corporation 3,000

Steven K. Scott, Shannon
L. Scott Family Trust 1,000

Williams, Jones & Associates,
Inc. 4,875

Union Central Life Insurance
Company 2,000

Carillon Bond Fund 500

Cargill Financial Services
Corporation 500

FMA High Yield Income Limited
Partnership 1,500

WSIS High Income Limited
Partnership 1,000

WSIS Flexible Income Limited
Partners, L.P. 500

Frank J. and Victoria K. Fertitta
Trust 2,000

Junction Partners, as nominee 3,500

M. H. Whittier Corporation 500

Whittier Trust Company, as Trustee
of the Winifred W. Rhodes-Bea
1966 Trust 150

Arlo G. Sorensen, Linda J.
Blinkenberg & Steven A. Anderson, as
Trustee of the Trust Under the Will
of Olive Whittier 150

<PAGE>

Whittier Trust Company, as Trustee
of the Marcia W. Constance 1966 Trust 150

Whittier Trust Company, as Trustee
of the Donald A. Whittier 1949 Trust 150

Whittier Trust Company, as Trustee
of the Laura-Lee W. Woods 1966 Trust 150

SeaShell Partners L.P. 800

Francis MacGrath 250

Adil Khashoggi 1,000

Salomon Brothers Inc 1,000
------

26,675
------
------

</TABLE>

<PAGE>

SCHEDULE 4.2

CAPITALIZATION

1. Registration Rights Agreement dated as of April 23, 1993 among the
Company, Barry DeVorzon, Kenny Loggins and Eva Ein.

<PAGE>

SCHEDULE 4.4

CONSENTS

None

<PAGE>

SCHEDULE 4.6

CONDUCT OF BUSINESS

Since June 30, 1993, the Company has entered into the following
transactions which may not be deemed to be part of its ordinary course of
business:

1. Agreement for Allocation of Patent Costs, dated as of July 31, 1993, between
the Company and EKI.

2. Bill of Sale, dated as of June 30, 1993, between the Company and EKI.

3. Master Lease Agreement, dated July 31, 1993, between the Company and EKI.

4. Management, Administrative Services and Professional Services Agreement,
dated as of September 1, 1993, between the Company and EKI.

<PAGE>

SCHEDULE 4.12

AFFILIATE AGREEMENTS

1. Stock Purchase Agreement, dated as of September 16, 1993, between the
Company, the purchasers named therein and EKI.

2. License Agreement, dated as of February 24, 1993, between the Company and
EKI, as amended by an Addendum of even date therewith.

3. Agreement for Allocation of Patent Costs, dated as of July 31, 1993, between
the Company and EKI.

4. Bill of Sale, dated as of June 30, 1993, between the Company and EKI.

5. Master Lease Agreement, dated July 31, 1993, between the Company and EKI.

6. Management, Administrative Services and Professional Services Agreement,
dated as of September 1, 1993, between the Company and EKI.

<PAGE>

EARTHSHELL CONTAINER CORPORATION

35,000 Shares of Series A Cumulative
Senior Convertible Preferred Stock

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

REGISTRATION RIGHTS AGREEMENT

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

DATED AS OF SEPTEMBER 16, 1993

EXHIBIT 10.13

<PAGE>

TABLE OF CONTENTS

1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. Securities Subject to this Agreement. . . . . . . . . . . . . . . 2

3. Demand and Piggyback Registration . . . . . . . . . . . . . . . . 3

4. Hold-Back Agreements. . . . . . . . . . . . . . . . . . . . . . . 6

5. Registration Procedures . . . . . . . . . . . . . . . . . . . . . 6

6 . Registration Expenses . . . . . . . . . . . . . . . . . . . . . . 11

7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 12

8. Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

9. Participation in Underwritten Registrations . . . . . . . . . . . 15

10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . 16

<PAGE>

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (the "Agreement") is made and entered
into as of September 16, 1993, by and among EarthShell Container Corporation, a
Delaware corporation (the "Company"), and the other Persons whose names appear
on the signature pages of this Agreement (collectively, the "Purchasers").

This Agreement is made pursuant to that certain Stock Purchase Agreement,
dated as of September 16, 1993, among the Company and the Purchasers (the
"Purchase Agreement"). In order to induce the Purchasers to enter into the
Purchase Agreement, the Company has agreed to provide the registration rights
set forth in this Agreement. The execution of this Agreement is a condition to
the closing of the transactions contemplated in the Purchase Agreement.

The parties hereby agree as follows:

1. DEFINITIONS

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

COMMON STOCK: The Company's common stock, par value $.01 per share.

EXCHANGE ACT: The Securities Exchange Act of 1934, as amended from time to
time.

NASD: National Association of Securities Dealers, Inc.

PERSON: An individual, partnership, corporation, trust, unincorporated
organization, limited liability company or other business entity, or a
government or agency or political subdivision thereof.

PREFERRED STOCK: The Company's Series A Cumulative Senior Convertible
Preferred Stock, with a liquidation preference of $1,000 per share.

PUBLIC OFFERING: See Section 3(b)(i).

<PAGE>

REGISTRABLE SECURITIES: The shares of Common Stock issuable upon conversion
of the Preferred Stock; provided that a security ceases to be a Registrable
Security when it is no longer a Restricted Security.

REGISTRATION EXPENSES: See Section 6 hereof.

REGISTRATION STATEMENT: Any registration statement of the Company which
covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
Registration statement, including post-effective amendments, all exhibits and
all material incorporated by reference in such Registration Statement.

RESTRICTED SECURITY: Any Registerable Securities upon original issuance
thereof, and with respect to any particular such security, so long as such
security was acquired by the holder thereof other than pursuant to an effective
registration under Section 5 of the Securities Act or pursuant to Rule 144
promulgated under the Securities Act; PROVIDED that a security that has ceased
to be Restricted Security cannot thereafter become a Restricted Security.

SEC: The Securities and Exchange Commission.

SECURITIES ACT: The Securities Act of 1933, as amended from time to time.

UNDERWRITTEN RECRISTRATION or UNDERWRITTEN OFFERING: A registration in
which securities of the Company are sold to an underwriter or underwriters on a
firm commitment or best efforts basis for reoffering to the public.

2. SECURITIES SUBJECT TO THIS AGMEEMENT

(a) REGISTRABLE SECURITIES. The securities entitled to the benefits of
this Agreement are the Registrable Securities.

(b) HOLDERS OF REGISTRABLE SECURITIES. A Person is deemed to be a holder
of Registrable Securities whenever such Person owns Registrable Securities or
has the right to acquire, upon conversion of shares of Preferred Stock or
otherwise, such Registrable Securities, whether or not such acquisition has
actually been effected and disregarding any legal restrictions upon the exercise
of such right. For purposes of determining the Registrable Securities
outstanding in connection with any action to be taken hereunder by the holders
of the Registrable Securities, the shares of Common Stock issuable upon exercise
of outstanding shares of Preferred Stock shall be deemed outstanding.

<PAGE>

3. DEMAND AND PIGGYBACK REGISTRATION

(a) DEMAND REGISTRATION.

(i) TIMING OF DEMAND REGISTRATION

At any time after the earlier of (i) September 16, 1996 or (ii) the
consummation of a public offering of Common Stock pursuant to an effective
Registration Statement under the Securities Act for the account of the Company
at an aggregate offering price in excess of $35,000,000 (the "Demand
Registration Period"), the holders of at least 25% of the Registrable
Securities may make a written request (a "Registration Request") that the
Company register under the Securities Act the Registrable Securities that are
the subject of such request (the "Demand Registration"). Promptly after receipt
of such request, which shall specify the number of Registrable Securities to be
registered and the intended method of disposition thereof, the Company shall as
expeditiously as reasonably possible and, in the case of the initial registered
public offering of shares of Common Stock, in no event later than four months
after the date of receipt of the Registration Request ("Registration Request
Date"), and, in the case of all subsequent registrations of shares of Common
Stock, in no event later than three months after the Registration Request Date,
prepare and file with the SEC, a Registration Statement with respect to the
Registrable Securities requested to be included therein. The Company agrees to
use commercially reasonable efforts to cause such Demand Registration to
become effective as expeditiously as reasonably possible and thereafter to keep
it continuously effective for a period of ninety days from the date on which the
SEC declares the Demand Registration effective or such shorter period which will
terminate when all the Registrable Securities covered by the Demand Registration
have been sold pursuant to such Demand Registration.

If the Company has been requested to effect a Demand Registration, whether
or not a Registration Statement with respect thereto has been filed or has
become effective, and furnishes to the holders of Registrable Securities
requesting such registration a copy of a resolution of the Board of Directors of
the Company certified by the Secretary of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company and its stockholders for such Registration Statement (i) to be filed
on or before the date such filing would otherwise be required hereunder, (ii) to
become effective, or (iii) to remain effective as long as such Registration
Statement would otherwise be required to remain effective, the Company shall
have the right, but not more than once with respect to any Demand Registration,
to defer such filing or effectiveness or to suspend such effectiveness for a
period of not more than 90 days; provided that if effectiveness of a
Registration Statement is suspended pursuant to this provision, the period of
such suspension shall

<PAGE>

be added to the end of the period that such Registration Statement would
otherwise be required to be effective hereunder so that the aggregate number of
days that such Registration Statement is required to remain effective hereunder
shall remain unchanged.

(ii) NUMBER OF DEMAND REGISTRATIONS

The Company shall be obligated to prepare, file and cause to become
effective pursuant to Section 3(a)(i) no more than two Registration Statements.

(iii) PARTICIPATION

(iv) LIMITATIONS

The Demand Registration rights granted in this Section 3(a) are subject to
the following limitations: (i) the Company shall not be obligated to cause any
Registration Statement filed under this Section 3(a) to be declared effective
less than six months after the effective date of the most recent registration
statement filed by the Company; (ii) any such offering shall be pursuant to a
firm commitment, provided, however, that after the initial public offering of
Common Stock registered under the Securities Act, such restrictions shall not
apply to any registration pursuant to Rule 415 under the Securities Act or any
similar rule that may be adopted by the SEC; and (iii) notwithstanding the
delivery of a Registration Request by the holders of the Registrable Securities,
the Company may elect to convert such registration into a registration pursuant
to Section 3(b) hereof by providing notice to the holders of the Registrable
Securities as provided in Section 3(b) and in such event the provisions of
Section 3(b) shall apply to such registration rather than the provisions of this
Section 3(a) and no Demand Registration right will be deemed to have been
exercised under this Section 3 (a).

(b) PIGGYBACK REGISTRATION.

(i) TIMING OF PIGGYBACK REGISTRATION. If the Company
proposes to file a registration statement in connection with a public offering
(the "Public Offering") of its Common Stock (other than in connection with a
Demand Registration and other than a registration statement on Form S-4 or S-8
or any successor forms or otherwise in connection with any exchange offer,
merger, sale of substantially all assets or other reorganization or

<PAGE>

recapitalization of the Company or the issuance of securities in connection
with employee stock options, stock awards or other employee benefit plans),
then the Company shall give written notice of such proposed filing to all
holders of Registrable Securities at least 20 days before the anticipated
filing date of such registration statement (a "Piggyback Registration
Statement"), which notice shall offer the holders the opportunity to include
in such Piggyback Registration Statement all shares of Registrable Securities
held by such holders. Each holder of Registrable Securities desiring to have
its Registrable Securities registered pursuant to this Section 3(b)(i) shall
advise the Company in writing within 10 days after the date of receipt of the
Company's notice (which request shall set forth the amount of Registrable
Sedurities for which registration is requested). The Company shall include
in any such Piggyback Registration Statement all Registrable Securities so
requested to be included.

Notwithstanding the foregoing, if the managing underwriter or underwriters
of any such proposed public offering that is an Underwritten Offering deliver a
letter to the Company and to the holders of Registrable Securities stating that
the total number of shares of Common Stock which the Company intends to include
in such public offering and which the holders of the Registrable Securities and
any other persons or entities entitled to have shares included in such public
offering would exceed the number of shares of Common Stock which could be sold
without having an adverse effect on such public offering, then the number of
shares of Common Stock to be offered for the accounts of holders of Registrable
Securities and any other persons (other than the Company) entitled to have
shares of Common Stock included in such public offering shall be reduced pro
rata based on the number of shares of Common Stock that each such person has
requested to be so included, to the extent necessary to reduce the total number
of shares of Common Stock to be included in such public offering to the amount
recommended by the managing underwriter or underwriters thereof. In the event
that the contemplated distribution does not involve an Underwritten Offering
such determination that the inclusion of such Registrable Securities shall
adversely affect the success of the offering shall be made by the Company in its
reasonable discretion.

(ii) NUMBER OF PIGGYBACK REGISTRATIONS. The Company shall be obligated to
provide the opportunity to include Registrable Securities in not more than two
Piggyback Registration Statements pursuant to Section 3(b)(i).
Notwithstanding the foregoing, if the amount of securities which the holders of
the Registrable Securities have requested to be registered is reduced pursuant
to Section 3(b)(i), then such Piggyback Registration Statement shall not count
towards the limit of two Piggyback Registration Statements contained in the
preceding sentence.

<PAGE>

(iii) DECISION NOT TO FILE PIGGYBACK REGISTRATION STATEMENT. If, after
proposing to file a Piggyback Registration Statement in connection with a Public
Offering, the Company decides not to file the Piggyback Registration Statement,
then the holders of Registrable Securities requesting inclusion of their shares
pursuant to Section 3(b)(i) will not be entitled to have their Registrable
Securities registered at such time.

4. HOLD-BACK AGREEMENTS

(a) RESTRICTIONS ON PUBLIC SALE BY HOLDER OF REGISTRABLE SECURITIES. Each
holder of Registrable Securities whose Registrable Securities are covered by a
Registration Statement filed pursuant to Section 3 hereof agrees, if requested
by the managing underwriters in an Underwritten Offering, not to effect any sale
or other distribution of equity securities of the Company, including any sale
pursuant to Rule 144 under the Securities Act (except as part of such
Underwritten Registration), during the 10-day period prior to, and during the
120-day period beginning with, the effectiveness of such Registration Statement,
to the extent timely notified in writing by the Company or the managing
underwriters.

(b) RESTRICTIONS ON SALE OF EQUITY SECURITIES BY THE COMPANY. To the
extent timely requested by the managing underwriters in an Underwritten
Offering, the Company agrees not to effect any offer, sale or other distribution
of its equity securities, including a sale pursuant to Regulation D under the
Securities Act, during the 10-day period prior to, and during the 120-day period
beginning with, the effectiveness of a Registration Statement filed under
Section 3 (except as part of such registration, if permitted, or pursuant to
registrations an Forms S-4 or S-8 or any successor forms or otherwise in
connection with any exchange offer, merger, sale of substantially all assets or
other reorganization or recapitalization of the Company or the issuance of
securities in connection with employee stock options, stock awards or other
employee benefit plans).

5. REGISTRATION PROCEDURES

<PAGE>

(a) prepare and file with the SEC, as soon as practicable, a Registration
Statement or Registration Statements on any appropriate form under the
Securities Act, which form shall be available for the sale of the Registrable
Securities in accordance with the intended method or methods of distribution
thereof and shall include all financial statements required by the SEC to be
filed therewith, cooperate and assist in any filings required to be made with
the NASD, and use its best efforts to cause such Registration Statement to
become effective; provided that before filing a Registration Statement or
Prospectus or any amendments or supplements thereto, the Company will furnish to
the holders of the Registrable Securities covered by such Registration Statement
and the underwriters, if any, copies of all such documents proposed to be filed,
which documents will be subject to the reasonable review of such holders and
underwriters, and the company will not file any Registration Statement or
amendment thereto or any Prospectus or any supplement thereto to which the
holders of a majority of shares of the Registrable Securities covered by such
Registration Statement or the underwriters, if any, shall reasonably object;

(b) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep the
Registration Statement effective for the applicable period, or such shorter
period which will terminate when all Registrable Securities covered by such
Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to
be filed pursuant to Rule 424 under the Securities Act; and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during the applicable
period in accordance with the intended method or methods of distribution by
the sellers thereof set forth in such Registration Statement or supplement to
the Prospectus; the Company shall not be deemed to have used its best efforts
to keep a Registration Statement effective during the applicable period if it
voluntarily takes any action that would result in the selling holders of the
Registrable Securities covered thereby not being able to sell such
Registrable Securities during that period unless such action is required
under applicable law, provided that the foregoing shall not apply to actions
taken by the Company in good faith and for valid business reasons, including
without limitation the acquisition or divestiture of assets, so long as the
Company promptly thereafter complies with the requirements of section 5(k),
if applicable;

<PAGE>

Prospectus or for additional information, (3) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose, (4) if at any time the
representations and warranties of the Company contemplated by paragraph (n)
below cease to be true and correct in any material respect, (5) of the receipt
by the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose and (6) of the
happening of any event which makes any statement made in the Registration
Statement, the Prospectus or any document incorporated therein by reference
untrue in any material respect or which requires the making of any changes in
the Registration Statement, the Prospectus or any document incorporated therein
by reference in order to make the statements therein not misleading;

(d) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the earliest
possible time;

(e) if requested by the managing underwriter or underwriters or a holder
of Registrable Securities being sold in connection with an Underwritten
Offering, promptly incorporate in a Prospectus supplement or post-effective
amendment such information as the managing underwriters and the holders of a
majority of shares of the Registrable Securities being sold reasonably agree
should be included therein relating to the plan of distribution with respect to
such Registrable Securities, including, without limitation, information with
respect to the principal amount of Registrable Securities being sold to such
underwriters, the purchase price being paid therefor by such underwriters and
with respect to any other terms of the Underwritten Offering of the Registrable
Securities to be sold in such offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such Prospectus supplement or posteffective
amendment;

<PAGE>

Registrable Securities covered by the Prospectus or any amendment or supplement
thereto;

(h) prior to any public offering of Registrable Securities, register or
qualify or cooperate with the selling holders of Registrable Securities, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification of such Registrable Securities for offer and sale
under the securities or blue sky laws of such jurisdictions as any seller or
underwriter reasonably requests in writing and do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions of
the Registrable Securities covered by the Registration Statement; provided that
the Company will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process in any such jurisdiction where it is
not then so subject;

(i) cooperate with the selling holders of Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be sold and not bearing
any restrictive legends; and enable such Registrable Securities to be in such
denominations and registered in such names as the managing underwriters may
request at least two business days prior to any sale of Registrable Securities
to the underwriters;

(j) 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 enable the
seller or sellers thereof or the underwriters, if any, to consummate the
disposition of such Registrable Securities;

(l) cause all Registrable Securities covered by the Registration Statement
to be listed, to the degree the Common Stock is so listed, on each securities
exchange on which the Common Stock is then listed if requested by the holders of
a majority of shares of such Registrable Securities or the managing
underwriters, if any;

<PAGE>

(n) enter into such agreements (including an underwriting agreement) and
take all such other actions in connection therewith in order to expedite or
facilitate the disposition of such Registrable Securities and in such
connection, whether or not an underwriting agreement is entered into and
whether or not the registration is an Underwritten Registration (1) make such
representations and warranties to the holders of such Registrable Securities and
the underwriters, if any, in form, substance and scope as are customarily made
by issuers to underwriters in primary Underwritten Offerings; (2) obtain
opinions of counsel to the Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably satisfactory to the
managing underwriters, if any, and the holders of a majority of shares of the
Registrable Securities being sold) addressed to each selling holder and the
underwriters, if any, covering the matters customarily covered in opinions
requested in Underwritten Offerings; (3) obtain "cold comfort" letters and
updates thereof from the Company's independent certified public accountants
addressed to the selling holders of Registrable Securities and the underwriters,
if any, such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters to underwriters in connection with
primary Underwritten Offerings; and (4) the Company shall deliver such documents
and certificates as may be requested by the holders of a majority of the
Registrable Securities being sold and the managing underwriters, if any, to
evidence compliance with clause (k) above and with any customary conditions
contained in the underwriting agreement or other agreement entered into by the
Company. The above shall be done at each closing under such underwriting or
similar agreement or as and to the extent required thereunder;

(o) make available for inspection by a representative of the holders of a
majority of shares of the Registrable securities, any underwriter participating
in any disposition pursuant to such Registration Statement, and any attorney or
accountant retained by the selling holders or underwriters, all financial and
other records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors and employees to supply all information
reasonably requested by any such representative, underwriter, attorney or
accountant in connection with such Registration Statement; provided that any
records, information or documents that are designated by the company in writing
as confidential shall be kept confidential by such Persons unless disclosure of
such records, information or documents is required by court or administrative
order; and

<PAGE>

(p) otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC, and make generally available to its security holders,
earnings statements satisfying the provisions of Section 11(a) of the
Securities Act, no later than 45 days after the end of any 12-month period (or
90 days, if such period is a fiscal year) (1) commencing at the end of any
fiscal quarter in which Registrable Securities are sold to underwriters in an
Underwritten Offering, or (2) if not sold to underwriters in such an offering,
beginning with the first month of the Company's first fiscal quarter commencing
after the effective date of the Registration Statement, which statements shall
cover said 12-month periods.

The Company may require each seller of Registrable Securities as to which
any registration is being effected to furnish to the Company such information
regarding the distribution of such securities as the Company may from time to
time reasonably request in writing.

Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of
the happening of any event of the kind described in section 5(k) hereof, such
holder will forthwith discontinue disposition of Registrable Securities until
such holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(k) hereof, or until it is advised in writing (the
"Advice") by the Company that the use, of the Prospectus may be resumed, and
has received copies of any additional or supplemental filings which are
incorporated by reference in the Prospectus, and, if so directed by the
Company, such holder will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in such holder's
possession, of the Prospectus covering such Registrable Securities current at
the time of receipt of such notice. In the event the Company shall give any
such notice, the time periods regarding the maintenance of the effectiveness
of any Registration Statement filed pursuant to Section 3 hereof shall be
extended by the number of days during the period from and including the date
of the giving of such notice pursuant to section 5(c)(6) hereof to and
including the date when each seller of Registrable Securities covered by such
Registration Statement shall have received the copies of the supplemented or
amended prospectus contemplated by section 5(k) hereof or the Advice.

6. REGISTRATION EXPENSES

All expenses incident to the Company's performance of or compliance with
this Agreement, including without limitation all registration and filing fees,
fees and expenses associated with filings required to be made with the NASD
(including, if applicable, the fees and expenses of any "qualified independent
underwriter" and its counsel as may be required by the rules and regulations of
the NASD), fees and expenses of compliance with

<PAGE>

securities or blue sky laws (including reasonable fees and disbursements
of counsel for the underwriters or selling shareholders in connection with blue
sky qualifications of the Registrable Securities and determination of their
eligibility for investment under the laws of such jurisdictions as the managing
underwriters or holders of a majority of the Registrable Securities being sold
may designate), printing expenses (including expenses of printing certificates
for the Registrable securities in a form eligible for deposit with Depositary
Trust Company and of printing prospectuses), messenger, telephone and delivery
expenses, and fees and disbursements of counsel for the Company and for the
sellers of the Registrable Securities and of all independent certified public
accountants of the Company (including the expenses of any special audit and
"cold comfort" letters required by or incident to such performance),
underwriters (excluding discounts, commissions or fees of underwriters, selling
brokers, dealer managers or similar securities industry professionals relating
to the distribution of the Registrable Securities or legal expenses of any
Person other than the Company and the selling holders), securities acts
liability insurance if the Company so desires and fees and expenses of other
Persons retained by the Company (all such expenses being herein called
"Registration Expenses") will be borne by the Company, regardless whether the
Registration Statement becomes effective. The Company will, in any event, pay
its internal expenses (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting duties), the
expense of any annual audit, the fees and expenses incurred in connection with
the listing of the Registrable Securities to be registered on each securities
exchange on which the Common Stock is then listed and the fees and expenses of
any Person, including special experts, retained by the Company.

7. INDEMNIFICATION

(a) INDEMNIFICATION BY COMPANY. The Company agrees to indemnify and hold
harmless, to the full extent permitted by law, each holder of Registrable
Securities, its officers, directors and employees and each Person who controls
such holder (within the meaning of the Securities Act) against all losses,
claims, damages, liabilities and expenses (including reasonable costs of
investigation and legal expenses) arising out of or based upon any untrue or
alleged untrue statement of a material fact contained in any Registration
Statement, Prospectus or preliminary Prospectus or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same arise out of or are based upon any information relating to such holder
furnished in writing to the Company by such holder expressly for use therein;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or

<PAGE>

expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any such preliminary
Prospectus included in a Registration Statement if (i) such holder, being
obligated to do so, failed to deliver a copy of the Prospectus prior to or
concurrently with the sale of the Registrable Securities to the person asserting
such loss, claim, damage, liability or expense after the Company had furnished
such holder with a sufficient number of copies of the same and (ii) the
Prospectus corrected such untrue statement or omission; and provided, further,
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission in
the Prospectus, if such untrue statement or alleged untrue statement, omission
or alleged omission is corrected in an amendment or supplement to the Prospectus
and the holder of Registrable Securities thereafter fails to deliver such
Prospectus as so amended or supplemented prior to or concurrently with the sale
of the Registrable securities to the person asserting such loss, claim, damage,
liability or expense after the Company had furnished such holder with a
sufficient number of copies of the same. The Company will also indemnify
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, their officers and directors
and each Person who controls such Persons (within the meaning of the Securities
Act) to the same extent as provided above with respect to the indemnification of
the holders of Registrable Securities, if requested.

(b) INDEMNIFICATION BY HOLDERS, OF REGISTRABLE SECURITIES. In connection
with each Registration Statement, each holder of Registrable Securities will
furnish to the Company such information and affidavits as the Company reasonably
requests for use in connection with any Registration Statement or Prospectus and
agrees to indemnify and hold harmless, to the full extent permitted by law, the
Company, its directors, officers and employees and each Person who controls the
company (within the meaning of the Securities Act) against any losses, claims,
damages, liabilities and expenses resulting from any untrue statement of a
material fact or any omission of a material fact required to be stated in the
Registration Statement or Prospectus or preliminary Prospectus or necessary to
make the statements therein not misleading, to the extent, but only to the
extent, that such untrue statement or omission relates to the holders of the
Registrable Securities and is contained in any information or affidavit so
furnished in writing by such holder to the Company specifically for inclusion in
such Registration Statement, Prospectus or preliminary Prospectus. In no event
shall the liability of any selling holder of Registrable Securities hereunder be
greater in amount than the dollar amount of the proceeds received by such holder
upon the sale of the Registrable Securities giving rise to such indemnification
obligation. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar

<PAGE>

securities industry professionals participating in the distribution, to the same
extent as provided above with respect to information so furnished in writing by
such Persons specifically for inclusion in any preliminary Prospectus,
Prospectus or Registration Statement, if requested.

(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled to
indemnification hereunder will (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided, however, that any Person
entitled to indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the fees and
expenses of such counsel shall be at the expense of such Person unless (a) the
indemnifying party has agreed to pay such fees or expenses, or (b) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such Person or (c) in the reasonable
judgment of any such Person, based upon advice of its counsel, a conflict of
interest exists between such Person and the indemnifying party with respect to
such claims (in which case, if the Person notifies the indemnifying party in
writing that such Person elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense of such claim an behalf of such Person). If such defense is not
assumed by the indemnifying party, the indemnifying party will not be subject to
any liability for any settlement made without its consent (but such consent will
not be unreasonably withheld). No indemnifying party will be required to
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation. An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest exists between such indemnified
party and any other of such indemnified parties with respect to such claim, in
which event the indemnifying party shall be obligated to pay the fees and
expenses of such additional counsel or counsels.

<PAGE>

relative fault of the indemnified party and the indemnifying party, as well as
any other relevant equitable considerations, provided that no holder of
Registrable Securities shall be required to contribute an amount greater than
the dollar amount of the proceeds received by such holder with respect to the
sale of any securities. 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.

8. RULE 144

The Company covenants that it will file the reports required to be filed by
it under the Securities Act and the Exchange Act and the rules and regulations
adopted by the SEC thereunder (or, if the Company is not required to file such
reports, it will, upon the request of the holders of a majority of the
Registrable Securities, made after the fifth anniversary of the issuance of the
Preferred Stock, make publicly available other information so long as necessary
to permit sales pursuant to Rule 144 under the Securities Act) (provided,
however, that the Company may request no more than one filing extension pursuant
to Rule 12b-25 under the Exchange Act in any calendar year), and it will take
such further action as the holders of a majority of the Registrable Securities
may reasonably request after the fifth anniversary of the issuance of the
Preferred Stock, all to the extent required from time to time to enable the
holders to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the SEC. Upon the request of
any holder of Registrable Securities, the Company will deliver to such holder a
written statement as to whether it has complied with such information and
requirements.

9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS

If any of the Registrable Securities covered by any of the Registration
Statements are to be sold in an Underwritten Offering, the investment banker or
investment bankers and managing underwriter or underwriters that will administer
the offering will be selected by the Company after consultation with the holders
of the Registrable Securities.

<PAGE>

No Person may participate in any Underwritten Registration hereunder unless
such Person (a) agrees to sell such Person's securities on the basis provided in
any underwriting arrangements approved by the Persons entitled hereunder to
approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements. Nothing in this
Section 9 shall be construed to create any additional rights regarding the
registration of Registrable Securities in any Person otherwise than as set for
therein.

10. MISCELLANEOUS

(a) REMEDIES. Each holder of Registrable Securities, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.

(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given unless the Company has obtained the written consent
of holders of at least a majority of the Registrable Securities.

(i) if to a holder of Registrable Securities, at the most current address
given by such holder to the Company in accordance with the provisions of this
Section 10(d), which address initially is set forth opposite each such holder's
name on the signature pages of this Agreement; and

(ii) if to the Company, initially at 800 Miramonte Drive, Santa Barbara,
California 93109-1419 Attention: President, and thereafter at such other
address, notice of which is given in accordance with the provisions of this
Section 10(d), with a copy to, Gibson, Dunn & Crutcher, 2029 Century Park East,
Los Angeles, California 90067, Attention: Robert K. Montgomery, Esq.

All such notices and communications shall be deemed to have been duly given
at the time delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when

<PAGE>

receipt acknowledged, if telecopied; and on the next business day if timely
delivered to an air courier guaranteeing overnight delivery.

(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
holders of Registrable Securities.

(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

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

(h) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of California.

(i) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.

(j) ENTIRE AGREEMENT. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the securities sold pursuant to the Purchase Agreement. This Agreement
supersedes all prior agreements and understandings whether written or oral and
all contemporaneous oral agreements and understandings among the parties with
respect to such subject matter.

(k) ATTORNEYS' FEES. In any action or proceeding brought to enforce any
provision of this Agreement, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to its costs and expenses and any
other available remedy.

<PAGE>

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

EARTHSHELL CONTAINER CORPORATION

By: /s/ Simon K. Hodson
----------------------------
Name: Simon K. Hodson
----------------------------
Title: Chief Executive Officer
----------------------------

<PAGE>

PURCHASERS:

----------------------------
(Name, if Individual)

----------------------------
(Signature, if Individual)

----------------------------
(Name, if Entity)

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

<PAGE>

PURCHASERS:

G. LYNN SHOSTACK
----------------------------
(Name, if Individual)
/s/ G. LYNN SHOSTACK
----------------------------
(Signature, if Individual)

----------------------------
(Name, if Entity)

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

<PAGE>

PURCHASERS:

----------------------------
(Name, if Individual)

----------------------------
(Signature, if Individual)

EARTHSHELL JOINT VENTURE
----------------------------
(Name, if Entity)

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

<PAGE>

PURCHASERS:

----------------------------
(Name, if Individual)

----------------------------
(Signature, if Individual)

----------------------------
(Name, if Entity)

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

<PAGE>

PURCHASERS:

----------------------------
(Name, if Individual)

----------------------------
(Signature, if Individual)

STEVEN K. SCOTT, SHANNON L.
SCOTT FAMILY TRUST
----------------------------
(Name, if Entity)

By: /s/ STEVEN K. SCOTT
----------------------------
Title: Trustee
--------------------------

<PAGE>

PURCHASERS:

----------------------------
(Name, if Individual)

----------------------------
(Signature, if Individual)

WILLIAMS, JONES & ASSOCIATES, INC.
as Manager for ES FUND
----------------------------
(Name, if Entity)

By: /s/
----------------------------
Title: Chairman
--------------------------

<PAGE>

PURCHASERS:

----------------------------
(Name, if Individual)

----------------------------
(Signature, if Individual)

UNION CENTRAL LIFE INSURANCE COMPANY
----------------------------
(Name, if Entity)

By: /s/
----------------------------
Title: ASSISTANT TREASURER
--------------------------

<PAGE>

PURCHASERS:

----------------------------
(Name, if Individual)

----------------------------
(Signature, if Individual)

CARILLON BOND FUND
----------------------------
(Name, if Entity)

By: /s/
----------------------------
Title: VICE-PRESIDENT
--------------------------

<PAGE>

PURCHASERS:

----------------------------
(Name, if Individual)

----------------------------
(Signature, if Individual)

CARGILL FINANCIAL SERVICES CORPORATION
----------------------------
(Name, if Entity)

By: /s/
----------------------------
Title: President
--------------------------

<PAGE>

PURCHASERS:

----------------------------
(Name, if Individual)

----------------------------
(Signature, if Individual)

FMA High Yield Income Limited Partnership
-----------------------------------------
(Name, if Entity)

By: /s/
----------------------------
Title: General Partner
--------------------------

<PAGE>

PURCHASERS:

----------------------------
(Name, if Individual)

----------------------------
(Signature, if Individual)

WSIS High Income Limited Partnership
------------------------------------
(Name, if Entity)

By:
----------------------------
Title: General Partner--Wertheim Schroder
Investment Serv.
----------------------------------

<PAGE>

PURCHASERS:

----------------------------
(Name, if Individual)

----------------------------
(Signature, if Individual)

WSIS Flexible Income Partners, L.P.
-----------------------------------
(Name, if Entity)

By: /s/
----------------------------
Title: Wertheim Schroder Investment Serv.
-- General Partner
----------------------------------

<PAGE>

PURCHASERS:

FRANK J. & VICTORIA K. FERTITA TRUST
----------------------------
(Name, if Individual)

/s/
----------------------------
(Signature, if Individual)

FRANK J. & VICTORIA K. FERTITA TRUST
----------------------------
(Name, if Entity)

By: Frank J. Fertitta, Jr.
----------------------------
Title: Trustee
--------------------------

<PAGE>

PURCHASERS:

----------------------------
(Name, if Individual)

----------------------------
(Signature, if Individual)

Junction Partnerss, as nominee
----------------------------
(Name, if Entity)

By: /s/
----------------------------
Title: GP
--------------------------

<PAGE>

PURCHASERS:

----------------------------
(Name, if Individual)

----------------------------
(Signature, if Individual)

M. H. Whittier Corporation
----------------------------
(Name, if Entity)

By: /s/ Terry Smith
----------------------------
Title: Terry Smith, Secretary
--------------------------

Registration Rights Agreement

<PAGE>

PURCHASERS:

----------------------------
(Name, if Individual)

----------------------------
(Signature, if Individual)

Whittier Trust Company, as Trustee of
the Winifred W. Rhodes-Bea 1966 Trust
----------------------------
(Name, if Entity)

By: /s/
----------------------------
Title:Steven A. Anderson, Vice-President
--------------------------

Registration Rights Agreement

<PAGE>

PURCHASERS:

----------------------------
(Name, if Individual)

----------------------------
(Signature, if Individual)

Whittier Trust Company, as Trustee of
the Marcia W. Constance 1966 Trust
----------------------------
(Name, if Entity)

By: /s/
----------------------------
Title:Steven A. Anderson, Vice-President
--------------------------

Registration Rights Agreement

<PAGE>

PURCHASERS:

----------------------------
(Name, if Individual)

----------------------------
(Signature, if Individual)

Whittier Trust Company, as Trustee of
the Donald A. Whittier 1949 Trust
----------------------------
(Name, if Entity)

By: /s/
----------------------------
Title:Steven A. Anderson, Vice-President
--------------------------

Registration Rights Agreement

<PAGE>

PURCHASERS:

----------------------------
(Name, if Individual)

----------------------------
(Signature, if Individual)

Whittier Trust Company, as Trustee of
the Laura-Lee W. Woods 1966 Trust
----------------------------
(Name, if Entity)

By: /s/
----------------------------
Title:Steven A. Anderson, Vice-President
--------------------------

Registration Rights Agreement

<PAGE>

PURCHASERS:

----------------------------
(Name, if Individual)

----------------------------
(Signature, if Individual)

Arlo G. Sorensen, Linda J. Blinkenberg &
Steven A. Anderson, as Trustee of the
Trust Under the Will of Olive Whittier
----------------------------
(Name, if Entity)

By: /s/ Arlo G. Sorensen
----------------------------
Title: Arlo G. Sorensen, Trustee
--------------------------

By: /s/Linda J. Blinkenberg
----------------------------
Linda J. Blinkenberg, Trustee

By: /s/ Steven A. Anderson
----------------------------
Steven A. Anderson, Trustee

Registration Rights Agreement

<PAGE>

PURCHASERS:

----------------------------
(Name, if Individual)

----------------------------
(Signature, if Individual)

SeaShell Partners L.P.
----------------------------
(Name, if Entity)

By: /s/ Samuel James Limited
----------------------------
Title: General Parner
--------------------------

By: /s/
----------------------------
Title: Francis X. Poggi, President
--------------------------

Registration Rights Agreement 19

<PAGE>

PURCHASERS:

----------------------------
(Name, if Individual)

----------------------------
(Signature, if Individual)

----------------------------
(Name, if Entity)

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

<PAGE>

PURCHASERS:

----------------------------
(Name, if Individual)

----------------------------
(Signature, if Individual)

SALOMON BROTHERS INC
----------------------------
(Name, if Entity)

By: /s/
----------------------------
Title: Managing Partner
--------------------------

<PAGE>

PURCHASERS:

----------------------------
(Name, if Individual)
/s/
----------------------------
(Signature, if Individual)

----------------------------
(Name, if Entity)

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

<PAGE>

DOPACO - ECC
SUBLICENSE AGREEMENT

THIS SUBLICENSE AGREEMENT (the "Agreement") is made upon and shall be effective
as of June 19, 1995, by and between EARTHSHELL CONTAINER CORPORATION, a Delaware
corporation ("ECC"), and DOPACO, INC., a corporation formed and existing under
the laws of Pennsylvania ("Sublicensee").

RECITALS:

A. ECC has the exclusive right to utilize certain Technology (as defined
herein) to manufacture, use and sell, within a certain Field of Use (as defined
herein), certain containers made from inorganically filled moldable composites
and compounds for packaging, storing, portioning, dispensing, carrying,
presenting, serving and consuming food or beverages.

B. ECC has the right and authority to grant sublicenses which will permit
selected entities to utilize such Technology in order to manufacture, use and
sell certain food or beverage containers made from inorganically filled moldable
composites and compounds.

C. Sublicensee desires to obtain from ECC a sublicense to utilize the
Technology to manufacture, use and sell certain designated food or beverage
containers within a designated geographical area.

D. ECC is willing to grant a sublicense to Sublicensee upon the terms and
conditions set forth herein.

EXHIBIT 10.14

-1-

<PAGE>

AGREEMENT:

NOW, THEREFORE, in consideration of the foregoing Recitals, the covenants
and agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties covenant
and agree as follows:

1. DEFINITIONS. The capitalized terms used in this Agreement shall have
the meanings set forth below:

(a) The term "Affiliate" shall mean, with respect to any given
entity, any other entity directly or indirectly controlling, controlled by, or
under direct or indirect common control with such given entity. For purposes of
this definition, the ownership of a twenty-five percent (25%) or greater equity
interest in an entity shall be deemed control of such entity, and the ownership
of less than a twenty-five percent (25%) equity interest in an entity (absent
any other exercise of control) shall be deemed not to be control of such entity.

(b) The term "Core Technology" shall mean all of the confidential,
secret, or proprietary technology involving inorganically filled compositions
which are described or claimed in (i) any of the patents or patent applications
listed in Exhibit "A" hereto, including without limitation, any continuations,
divisionals or continuations-in-part, reissues and extensions thereto, and any
patents issued therefrom, and (ii) any future patent applications under the
Patent Cooperation Treaty, any future European Patent applications, and/or any
future national patent applications in or for any country that are based on any
of the applications listed in Section B or D of Exhibit "A" hereto, and any
patents issued therefrom.

(c) The term "Design Improvement" shall mean any improvement to the
physical shape, ornamental design or configuration of Products.

-2-

<PAGE>

(d) The term "Field of Use" shall mean (i) the use and sale of
Products in the food service and restaurant industry, (ii) the use and sale of
Products in other retail establishments selling Products (E.G., grocery stores,
convenience stores, food warehouses, and the like), but only with respect to
Products that have been introduced into the food service and restaurant
industry, (iii) the incidental use and sale in any manner of those Products
which are manufactured by Sublicensee hereunder where the predominant
use is within the food service and restaurant industry, and (iv) the sale of
Products to distributors and wholesalers for resale and use in retail outlets in
the food service and restaurant industry and, subject to clause (ii) above, in
retail establishments. As used in this subparagraph, the term "food service and
restaurant industry" is intended to include any facility (whether commercial,
nonprofit, governmental, or other), including vending machines wherever
located, where food or beverages are (x) sold for consumption on the premises or
(y) packaged for take-out in single or multiple portions intended for immediate
or same day consumption off the premises without substantial additional
preparation. By way of example, the term "food service and restaurant industry"
includes such facilities as eating establishments, diners, dining rooms, dine-in
restaurants, cafes, cafeterias, including institutional cafeterias, coffee
shops, delicatessens, quick service restaurants, take-out restaurants, snack
bars, cocktail lounges, bars, saloons, night clubs, cabarets, sports arenas and
the like, and their distributors, brokers and wholesalers, but does not include
other food industry facilities outside of the food service and restaurant
industry (such as packaging for pre-packaged foods in food processing
facilities, grocery stores, and food distributors, brokers and wholesalers)
except as specifically provided in clause (ii) of this subparagraph. As used in
this subparagraph, the term "incidental use and sale" shall encompass Products
designed for and predominantly used in the food service and restaurant "industry
but which, beyond the control or

-3-

<PAGE>

reasonable ability of Sublicensee to properly account for their end-use,
ultimately are used or sold outside of the Field of Use.

(e) The term "Moldable Compound Technology" shall mean all of the
confidential, secret, or proprietary technology involving inorganically
filled composites, including moldable compounds (both foam and non-foam
applications), articles manufactured from inorganically filled composites,
the compositions and uses of such inorganically filled composites or articles
made therefrom, and apparatus and methods for manufacturing same, which are
described or claimed in (i) any of the patents or patent applications listed
in Exhibit "B" hereto, including without limitation, any continuations,
divisionals or continuations-in-part, reissues and extensions thereto, any
patents issued therefrom, and (ii) any future patent applications under the
Patent Cooperation Treaty, any future European Patent applications, and/or
any future national patent applications in or for any country that are based
on any of the applications listed in Section B or D of Exhibit "B" hereto,
and any patents issued therefrom.

(f) The term "Net Sales Price" shall mean the gross invoice price
charged by Sublicensee, or its Affiliate as applicable, in the sale of a Product
to a non-Affiliate reduced by (i) any credit allowed by Sublicensee for the
return of the Product; (ii) trade, quantity and cash discounts (customer
reserves, allowances, rebates, bad debt) allowed by Sublicensee; (iii) excise,
value added and sales taxes actually paid by Sublicensee on the Product; and
(iv) freight charges actually paid by Sublicensee for the shipment and delivery
of the Product. In the case of non-cash consideration, "Net Sales Price" shall
be the fair market value of all non-cash-consideration actually received by
Sublicensee or its Affiliate for such Product. The "Net Sales Price" of
Products set aside for Sublicensee's own use, or sold or transferred to an
Affiliate or set aside for the Affiliate's

-4-

<PAGE>

own use, shall be deemed to be the price then charged to unrelated parties in
arms-length transactions for such Products in similar quantities and under
similar terms of sale.

(g) The term "Products" shall mean only those articles described in
Exhibit "C" hereto made from inorganically filled moldable composites or
compounds that incorporate or utilize the Technology in whole or in part. In
the event of any disagreement between the parties whether a particular item is
within or without the definition of "Product" hereunder, the parties may submit
the matter to arbitration pursuant to the provisions of paragraph 32 hereof.

(h) The term "Product Improvement" shall mean any improvement or
change, irrespective of whence derived, relating in whole or in part to the
composition, formulation or use of a Product or the Technology, including any
improvement, development or change relating to a Product by process (any
change in the processing of a Product which yields a materially different
Product), such as a change in chemical composition, change in physical
characteristics or properties brought about by substitution or replacement of
elements or components, change in method of formulation, change in rheology,
etc. The term "Product Improvement" shall not include improvements to the
physical shape, ornamental design, or configuration of Products (hereinafter
"Design Improvements").

(i) The term "Process Improvement" shall mean any improvement,
development, or change relating in whole or part to the Technology or a Product
which involves an apparatus, machine or process so long as such improvement,
development or change does not materially alter the finished Product, but rather
yields a more efficient production of a Product. The term "Process Improvement"
shall also include any development, refinement, improvement or change relating
in whole or in part to the application of materials, chemical compositions,
coatings or other substances, including the processes of application, to a
Product after the finish trim and forming or conversion

-5-

<PAGE>

of the Product is completed to the extent that such development, refinement.
improvement or change is not already known by ECC (unless ECC's prior knowledge
is pursuant to a confidentiality agreement with Sublicensee) or in the public
domain.

(j) The term "Technology" shall refer collectively to the Core
Technology, the Moldable Compound Technology and the Trade Secrets.

(k) The term "Territory" shall mean that certain geographic territory
described in Exhibit "F" hereto. Upon written notice to ECC that Sublicensee
services, or intends to expand its business to service, geographic areas outside
of the Territory and that Sublicensee desires to commercialize Products in such
additional geographic areas, which notice shall include evidence of such intent
reasonably satisfactory to ECC, ECC shall cooperate in amending this Agreement
to include such additional geographic areas by amending Exhibit "F hereto;
provided, however, that the parties must first reach an agreement as to the
royalty rate that shall apply to such additional geographic area and provided
further that ECC shall have no obligation to grant rights to Sublicensee in any
country in which (i) ECC has already granted to a third party an exclusive
license of the Technology or (ii) it is necessary or desirable for ECC to enter
into an exclusive license with a citizen of the country at issue due to monetary
restrictions or other legal, tax or business considerations under the local laws
of such country.

(l) The term "Trade Secrets" shall mean the proprietary information of ECC
that is related to the Technology and which is described in Exhibit "D" hereto
or which is delivered to Sublicensee by ECC and marked "Confidential", but only
to the extent that such proprietary information is directly utilized in the
manufacture, use, or sale of Products.

-6-

<PAGE>

2. THE SUBLICENSE.

(a) Subject to the terms and conditions set forth in this Agreement,
ECC hereby grants to Sublicensee a non-exclusive, royalty-bearing sublicense
(the "Sublicense") to use the Technology to make, use, sell and otherwise
commercialize the Products solely within the Territory and solely within the
Field of Use.

(b) Sublicensee shall not have the right to further sublicense,
assign or transfer the Technology, or any interest in or rights under the
Sublicense except (i) to an Affiliate, or (ii) in the case of the sale of
substantially all of Sublicensee's assets that are dedicated to the Technology,
with the prior written consent of ECC, which consent will not unreasonably be
withheld. Any attempted unauthorized sublicense or transfer shall be void and
shall constitute a breach of a material obligation of Sublicensee under this
Agreement.

(c) ECC is free to grant additional sublicenses to other third
parties to utilize the Technology to make, use and sell Products in the Field of
Use and in the Territory.

(d) Nothing in this Agreement shall be construed to constitute a
grant by ECC to Sublicensee of rights broader than that which ECC is entitled to
grant under its license from ECC's licensor of the Technology (hereinafter
referred to as "Licensor"). If and to the extent it is determined that
Sublicensee is selling, or desires to sell, Products outside of the Field of Use
(as defined in the master license agreement between ECC and its Licensor)
granted to ECC by its Licensor, then it is understood and agreed that
Sublicensee must obtain an appropriate license from, and pay royalties directly
to, ECC's Licensor.

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3. ROYALTIES.

(a) As consideration for the grant of the Sublicense, Sublicensee
shall pay to ECC a royalty (the "Royalty") of twenty-two percent (22%) of the
Net Sales Price for each Product sold by Sublicensee during the term of this
Agreement.

(b) Sublicensee shall be deemed to have "sold" a Product, and ECC
shall be deemed to have earned the Royalty, upon the earliest date that
Sublicensee actually ships, delivers, or invoices the Product to any person,
firm or entity other than an Affiliate of Sublicensee, or upon the earliest date
that Sublicensee sets such Product aside for Sublicensee's own use. For
Products transferred to an Affiliate, Sublicensee shall be deemed to have "sold"
the Product, and ECC shall be deemed to have earned the Royalty, upon the
earliest date that the Affiliate to whom the Product was transferred either (i)
sets aside such Product for an Affiliate's own use, or (ii) ships, delivers or
invoices such Product to any person, firm or entity which is not an Affiliate of
Sublicensee.

(c) Notwithstanding subparagraph (a) of this paragraph, during the
first three years of the term of this Agreement ECC shall be sensitive to
Sublicensee's ability to produce Products profitably under this Agreement. If,
during the first three years of the term of this Agreement, Sublicensee
demonstrates to ECC's reasonable satisfaction that a material change in
circumstance has occurred affecting Sublicensee's ability to produce Products
profitably under this Agreement, ECC shall cooperate with Sublicensee in
negotiating such adjustments as may be commercially reasonable under the
circumstances. If the parties are unable, in good faith, to reach an agreement
as to a mutually acceptable adjustment, then the matter may be referred to
arbitration under paragraph 32 hereof. By way of example, a "material change
in circumstance" may include a significant and unexpected increase in the cost
of one or more of the raw materials required for the manufacture of the
Products.

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(d) Between the third and fourth anniversaries of the effective date
of this Agreement, the parties shall jointly review and evaluate the continued
benefit of the advertising allowance set forth in subparagraph 20(b) hereof and
the economic impact thereof and shall cooperate in negotiating such adjustments
as are commercially reasonable under the circumstances. If the parties are
unable to agree as to the need for, or the nature or amount of, such an
adjustment, then the matter may be referred to arbitration under paragraph 32
hereof.

(e) Notwithstanding anything to the contrary contained in this
paragraph 3, no royalties shall be payable by Sublicensee with respect to (i)
marketing or promotional samples provided by Sublicensee without charge to
BONA FIDE prospective customers (other than Affiliates), provided that the
dollar value of such marketing or promotional samples does not exceed 0.05%
of Sublicensee's total Net Sales of Products for the calendar quarter in
which such marketing or promotional samples are given away or (ii) samples
used by Sublicensee for in-house quality control or customer product testing.

4. PAYMENT OF THE ROYALTY.

(a) Within sixty (60) days after the final day of each calendar month
(or fiscal month if Sublicensee is reporting on a fiscal basis) which occurs
during the term of this Agreement (a "Month"), Sublicensee shall pay to ECC the
Royalty earned on all Products sold by Sublicensee during such Month. Each
Royalty payment shall be accompanied by a written report (the "Royalty Report")
prepared by Sublicensee and certified as accurate by the appropriate financial
officer of Sublicensee. Each Royalty Report shall set forth, for the Month
covered by the Royalty Report, (i) the number of each of the Products sold by
the Sublicensee, (ii) the Net Sale Price for each of such Products, and (iii)
reductions to the Net Sales Price for applicable returns, discounts, freight
charges, bad debts/uncollected accounts and taxes with respect to the Products.

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(b) The Royalty payment shall accrue interest from the date payment
should have been made until actual payment is made at the per annum base rate on
corporate loans published as the "Prime Rate" in the WALL STREET JOURNAL on the
next business day following the day the Royalty payment was due.

5. SUBLICENSEE COVENANTS.

Sublicensee hereby covenants:

(a) not to utilize the Technology except strictly in accordance with
the terms and conditions set forth in this Agreement;

(b) to utilize the Technology solely in connection with the
manufacture, marketing, distribution, use and sale of the
Products;

(c) not to utilize the Technology for any purpose other than the
manufacture, marketing, distribution, use and sale of the
Products;

(d) not to manufacture, market, distribute, use and sell Products
except in strict accordance with the terms and conditions of this
Agreement;

(e) to manufacture, market, distribute, use and sell Products solely
within the Territory;

(f) not to market, distribute or sell any Product to any person, firm
or entity outside the Territory, or to any person, firm or entity
within the Territory if Sublicensee knows that such person, firm
or entity intends to make or sell the Product in question outside
the Territory;

(g) to market, distribute, use and sell Products solely within the
Field of Use; and

(h) not to market, distribute, use or sell Products outside of the
Field of Use.

Any breach by Sublicensee of any one or more of the foregoing covenants shall
constitute a breach by Sublicensee of a material obligation under this
Agreement.

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6. RIGHT TO AUDIT.

(a) Sublicensee shall keep and maintain complete and accurate records
concerning the manufacture and sale of the Products. ECC or its designee (the
"Representative") shall have the right, at ECC's expense, to periodically (but
not more frequently than once each calendar year) review those records and
operations of Sublicensee which deal with the design, manufacture, shipment or
sale of the Products or with Product Improvements or Process Improvements
developed by Sublicensee. Such reviews may take place only during the normal
business hours of Sublicensee and only upon written notice to Sublicensee given
at least ten (10) business days prior to such review. The Representative
conducting such review shall be required to execute a confidentiality agreement
pursuant to which the Representative shall agree that it will not disclose or
use the information obtained pursuant to such review to or for the benefit of
any person or entity except ECC unless required to do so in connection with the
resolution of any dispute concerning any payment required by this Agreement.

(b) ECC shall give written notice to Sublicensee of any dispute as to
proper payment of any Royalty due hereunder. If the parties are unable to
resolve any disputes raised by ECC in the notice to Sublicensee within thirty
(30) days from the date of such notice, then the dispute shall be submitted to
arbitration or mediation for resolution as provided under this Agreement.

7. IMPROVEMENTS TO THE TECHNOLOGY.

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Improvement as ECC shall reasonably request; provided, however, that all such
information shall be confidential and shall be subject to all restrictions on
disclosure as set forth in this Agreement. Sublicensee shall assign to ECC all
rights, title and interest in the Product Improvement for an assignment fee of
$1,000.00, and ECC shall grant back to Sublicensee the non-exclusive right to
utilize the Product Improvement within the Field of Use and within the Territory
as if such Product Improvement were originally within the scope of the
Sublicense for the full term of this Agreement. There shall be no royalty
charged to Sublicensee for the right to utilize the Product Improvement. For a
period of (i) one year from the date of commercialization of such Product
Improvement, or (ii) two years from the date of the development of such Product
Improvement, whichever is shorter, ECC shall not grant any right to utilize the
Product Improvement within the Field of Use to any third party within the
Territory. The failure of Sublicensee to disclose any such Product Improvement
to ECC within the time period set forth above shall constitute a material breach
of this Agreement. Product Improvements developed by any other ECC sublicensee
of the Technology shall be automatically licensed hereunder and promptly
disclosed by ECC to Sublicensee, but only after any period of exclusivity
provided to such other sublicensee shall have expired.

(b) PROCESS IMPROVEMENTS. If, while the Sublicense remains in
effect, Sublicensee should develop any material Process Improvement, then
Sublicensee shall notify ECC of such Process Improvement within a reasonable
time of, and in no event more than ninety (90) days after, its development and
shall provide ECC with access to all information concerning such improvements as
ECC shall reasonably request; provided, however, that all such information shall
be confidential and shall be subject to all restrictions on disclosure as set
forth in this Agreement. For a single lump sum payment of $ 1,000.00 by ECC to
Sublicensee, Sublicensee shall grant to ECC an exclusive, fully paid-up license
(including the right to further sublicense and/or assign its rights to ECC's

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Licensor) to utilize Process Improvement in connection with the Product and/or
the Technology (i) outside of the Territory and (ii) within the Territory,
outside of the Field of Use. The license granted to ECC under this subparagraph
7(b) shall be irrevocable and shall survive termination or expiration of this
Agreement for any reason whatsoever. The failure of Sublicensee to disclose any
such Process Improvement to ECC within the time period set forth above shall
constitute a material breach of this Agreement.

(c) PATENT RIGHTS FOR PRODUCT IMPROVEMENTS. ECC shall have the right
to seek patent protection for any Product Improvement at its own cost and
expense. Sublicensee shall provide to ECC or its assignee with such assistance
as may be reasonably requested, from time to time, in connection with such
efforts, including the execution of any documents necessary to obtain and
maintain such patent protection; provided, however, that ECC or its assignee
will reimburse Sublicensee for any out-of-pocket fees and expenses reasonably
incurred by Sublicensee in providing such assistance.

(d) PATENT RIGHTS FOR PROCESS IMPROVEMENTS. Sublicensee shall have
the right to seek patent protection for any Process Improvement at its own cost
and expense. ECC shall provide Sublicensee or its assignee with such assistance
as may be reasonably requested, from time to time, in connection with such
efforts, including the execution of any documents necessary to obtain and
maintain such patent protection; provided, however, that Sublicensee or its
assignee will reimburse ECC for any out-of-pocket expenses reasonably incurred
by ECC in providing such assistance. Sublicensee shall keep ECC informed of the
status of the prosecution of each patent application that Sublicensee elects to
pursue and shall consult with ECC on all material aspects of such application,
although all final decisions in regard to a patent application shall remain
within the sole discretion of Sublicensee. In the event Sublicensee elects not
to seek patent protection for a Process

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Improvement. Sublicensee shall promptly notify ECC in writing, and ECC shall
have the option, for a period of ninety (90) days after its receipt of such
written notice, to acquire by assignment from Sublicensee ail rights, title and
interests in and to the Process Improvement in question, including the right to
seek patent protection in ECC's name or its designee, in consideration of a
single lumpsum payment of One Thousand Dollars ($1,000.00). In the event ECC
exercises the option provided for in the preceding sentence, Sublicensee shall
provide to ECC or its designee such assistance as may reasonably be requested,
from time to time, in connection with ECC's or its designee's efforts to obtain
protection of the Process Improvement in question, including the execution of
any documents necessary to obtain and maintain such patent protection; provided,
however, that ECC or its assignee will reimburse Sublicensee for any out-of-
pocket fees and expenses reasonably incurred by Sublicensee in providing such
assistance.

(e) PROPRIETARY RIGHTS OF SUBLICENSEE. ECC acknowledges and agrees
that Sublicensee presently owns certain patents, trade secrets and other
proprietary information relating to the Technology ("Sublicensee Proprietary
Property") which is more fully set forth on Exhibit "E" attached herein and
incorporated herein. The Sublicensee Proprietary Property is and shall remain
the exclusive property of Sublicensee. All Sublicensee Proprietary Property
shall be subject to the conditions, and obligations of confidentiality which
apply to all confidential and proprietary information of the respective parties
hereto as required under this Agreement. Except for any developments,
improvements or modifications to the Sublicensee Proprietary Property which are
Product or Process Improvements which are otherwise governed by this Agreement,
ECC shall not acquire any right, title, interest or license in any of the
Sublicensee Proprietary Property as a result of this Agreement, or as a result
of any dealings between the parties pursuant to this Agreement. Any proprietary
information or technology relating to the Products and/or the Technology and not

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set forth in Exhibit "E" hereto shall be subject to the terms and conditions of
this Agreement governing Product Improvements and Process Improvements unless
such proprietary information or technology is in the public domain or in the
possession of ECC.

(f) IMPROVEMENTS TO PRODUCT CONFIGURATION. Sublicensee shall own the
rights to any Design Improvements that may be developed by Sublicensee during
the term of this Agreement.

(g) ECC DEVELOPED AND JOINTLY DEVELOPED PRODUCT, PROCESS AND DESIGN
IMPROVEMENTS. Any Product Improvements, Process Improvements or Design
Improvements developed by ECC during the term of this Agreement (hereinafter
referred to as "ECC Improvements") and any Product Improvements, Process
Improvements or Design Improvements developed jointly by ECC and Sublicensee
during the term of this Agreement (hereinafter referred to as "Jointly Developed
Improvements") shall be owned by ECC and, except as otherwise provided in this
Agreement, shall be disclosed and licensed by ECC to third parties. For a
period of (i) one year from the date of commercialization of any Jointly
Developed Improvement, or (ii) two years from the date of the development of the
Jointly Developed Improvement, whichever is shorter, ECC shall not grant any
right to utilize the Jointly Developed Improvement within the Field of Use to
any third party within the Territory. Any Jointly Developed Improvements shall
be deemed to be licensed to Sublicensee under this Agreement, shall be deemed to
be included within the definition of Technology, and shall be subject to all of
the terms, conditions and restrictions of this Agreement applicable to the
Technology.

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Improvements and all Process Improvements that may be developed jointly by ECC
and a third party or otherwise acquired by ECC or licensed to ECC (along with
the right to sublicense such improvements) during the term of this Agreement.
All such Product Improvements and Process Improvements that may be disclosed by
ECC to Sublicensee pursuant to this subparagraph shall be deemed to be licensed
to Sublicensee under this Agreement, shall be deemed to be included within the
definition of Technology, and shall be subject to all of the terms, conditions
and restrictions of this Agreement applicable to the Technology.

8. INFRINGEMENT.

(a) ECC and Sublicensee will promptly notify (within 30 days) one
another of any apparent infringement of the Technology (whether or not such
apparent infringement is within the Field of Use) or of the Trademarks which
comes to their attention while the Sublicense remains in effect, and if in ECC's
opinion the apparent infringement has substantial and adverse consequences, ECC
shall, at its sole cost and expense, bring suit to enjoin such infringement and
to recover damages therefor. In any action brought by ECC pursuant to this
subparagraph, ECC shall select and control counsel for the prosecution of such
suit. Sublicensee shall (i) have the right to receive, from time to time, full
and complete information from ECC concerning the status of such suit, (ii) have
the right, at Sublicensee's own expense, to be represented therein by counsel in
an advisory capacity, and (iii) cooperate fully with ECC and provide whatever
assistance is reasonably requested by ECC in connection with such suit,
including the preparation and signing of documents. If ECC decides not to bring
suit to enjoin an alleged infringement either because it is deemed inadvisable
or DE MINIMIS, no such action will be required by ECC; however, ECC's Licensor
shall, at its own cost and expense, have the right, but not the obligation, to
bring suit to enjoin such infringement and to recover damages therefore. In the
event ECC's Licensor elects to bring suit,

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Sublicensee's rights and obligations hereunder shall be the same as if ECC had
undertaken to enjoin such infringement. In the event the action taken by ECC or
its Licensor is not satisfactory to Sublicensee, then Sublicensee shall have the
right at its sole cost, to take whatever action it deems appropriate in its own
name against an alleged infringer. Additionally, ECC and its Licensor shall (i)
have the right to consult with Sublicensee prior to Sublicensee pursuing legal
action against a potential infringer and thereafter shall have the right to
receive, from time to time, full and complete information from Sublicensee
concerning any actions Sublicensee has taken against an alleged infringer, and
(ii) have the right, at ECC's or its Licensor's, as applicable, own expense, to
be represented by counsel in an advisory capacity in any legal proceedings
initiated by Sublicensee.

(b) ECC and Sublicensee will promptly notify (within 30 days) one
another of any apparent infringement of any Sublicensee owned Process
Improvement (whether or not such apparent infringement is within the Field of
Use) which comes to their attention and, if in Sublicensee's opinion, the
apparent infringement has substantial and adverse consequences, Sublicensee
shall, at its sole cost and expense, bring suit to enjoin such infringement and
to recover damages therefor. In any action brought by Sublicensee pursuant to
this subparagraph, Sublicensee shall select and control counsel for the
prosecution of such suit. ECC shall (i) have the right to receive, from time to
time, full and complete information from Sublicensee concerning the status of
such suit, (ii) have the right, at ECC's own expense, to be represented therein
by counsel in an advisory capacity, and (iii) cooperate fully with Sublicensee
and provide whatever assistance is reasonably requested by Sublicensee in
connection with such suit, including the preparation and signing of documents,
If Sublicensee decides not to bring suit to enjoin an alleged infringement of
Sublicensee owned Process Improvements either because it is deemed inadvisable
or DE MINIMIS, no such action will be required by Sublicensee. In the event the
action taken by Sublicensee is not

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satisfactory to ECC, then ECC shall have the right but not the obligation, at
its sole cost, to take whatever action it deems appropriate in its own name
against an alleged infringer. Additionally, Sublicensee shall (i) have the
right to consult with ECC prior to ECC pursuing legal action against a potential
infringer and thereafter shall have the right to receive, from time to time,
full and complete information from ECC concerning any actions ECC has taken
against an alleged infringer, and (ii) have the right, at Sublicensee's own
expense, to be represented by counsel in an advisory capacity in any legal
proceedings initiated by ECC with respect to infringement of Sublicensee owned
Process Improvements.

(c) The parties shall notify (within 30 days) each other of any claim
by any person that the manufacture or use of the Technology with respect to any
Product by Sublicensee in the Field of Use infringes the rights of such person
or of the commencement of any lawsuit against ECC, Sublicensee, or any customers
of the foregoing, as the result of such alleged infringement. ECC may assume
and control the defense of any such lawsuit, at its sole cost and expense,
irrespective of whether ECC is named as a defendant in such litigation.
Sublicensee will assist ECC in the defense of such suit or action by providing
information and fact witnesses as needed, provided, however, that ECC shall
reimburse Sublicensee for all out-of-pocket costs, excluding attorney fees
except as preapproved by ECC, incurred by Sublicensee in connection with such
action by allowing a credit or offset against the Royalty due hereunder.
Sublicensee shall have the right to be represented in such suit or action only
in an advisory capacity. If ECC decides not to assume the defense of
infringement lawsuit described in this subparagraph, then ECC's Licensor shall
have the right, but not the obligation, to do so. In the event ECC's Licensor
elects to assume the defense, Sublicensee's obligations shall be the same as if
ECC were assuming the defense of such litigation. If ECC's Licensor does not
assume defense of such litigation, then Sublicensee shall have the right, but
not

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the obligation, at Sublicensee's own cost and expense, to assume the defense of
such lawsuit utilizing legal counsel of its choice.

(d) If, as the result of any lawsuit referred to in the preceding
subparagraph, Sublicensee is required by final court order from which no appeal
can be taken (or by a court order which ECC's legal counsel believes has no
reasonable likelihood of success for modification on appeal) to obtain a license
under any third party's patent not licensed hereunder in order to continue with
Sublicensee's activities as contemplated by this Agreement, and to pay a royalty
under such license, and the infringement of such patent cannot reasonably be
avoided by Sublicensee, the future payment of the Royalty shall thereafter be
reduced by an amount equal to 100% of any fee or royalty payable by Sublicensee
under such additional license, but in no event shall the Royalty be reduced to
an amount less than zero, as long as the infringement was due to the Technology
licensed hereunder. In addition, if Sublicensee settles an infringement action
referred to in the foregoing subparagraph, after obtaining the prior written
consent of ECC (which shall not be unreasonably withheld), and pursuant to such
settlement Sublicensee obtains a license under any patent not licensed
hereunder, to make, use or sell the Products in any manner contemplated by this
Agreement, and agrees to pay a royalty under such license, and the infringement
of such patent cannot reasonably be avoided by Sublicensee, the Royalty shall
thereafter be reduced by an amount equal to 100% of the sum payable by
Sublicensee pursuant to such settlement, but in no event shall the Royalty be
reduced to an amount less than zero, as long as the settlement was for claims of
infringement due to the Technology licensed hereunder.

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9. ADDITIONAL DUTIES OF THE SUBLICENSEE. In addition to, and not in
limitation of, the other duties and obligations of Sublicensee, as set forth in
this Agreement, Sublicensee shall:

(a) Use all commercially reasonable efforts to diligently exploit the
Sublicense by developing a commercial manufacturing capacity for the Products
and by actively manufacturing, marketing, advertising and selling the Products
within the Territory. ECC's sole and exclusive remedy for breach of this
subparagraph 9(a) shall be termination of this Agreement.

(b) Continue to make all required payments under this Agreement to
ECC during any challenge of the validity of any of the patents (or claims
thereof) issued in connection with the Technology. In the event Sublicensee
terminates such payments based upon or in connection with such a challenge, ECC
may at its option terminate this Agreement upon written notice to Sublicensee.
Notwithstanding the foregoing, if ECC or its Licensor does not assume the
defense of any litigation set forth in subparagraph 8(c), and Sublicensee does
assume the defense of such litigation, all Royalty payments due during the
pendency of such litigation shall be paid into a mutually agreeable escrow, and
such Royalty payments shall be held in escrow until the litigation becomes
final, from which no further appeal can be taken. Once the litigation is final,
the Royalty payments held in escrow shall be paid to ECC, less an amount equal
to any damage or loss Sublicensee sustained as a result of the litigation,
including attorney fees and costs, which amounts shall be paid to Sublicensee.

(c) If Sublicensee is a publicly traded corporation or is otherwise
required to publicly disseminate its financial statements, Sublicensee shall
provide ECC with annual financial reports of Sublicensee which are published and
detail Sublicensee's annual earnings and statement of net worth for the
preceding calendar or fiscal year. If Sublicensee is required to file financial

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reports with the S.E.C., then Sublicensee may provide ECC with copies of those
financial reports required to be filed with the S.E.C. in lieu of the foregoing.

(d) Forty-five (45) days after the final day of each of Sublicensee's
calendar or fiscal quarter end (the "Quarter") or such other reporting period as
the parties may from time to time mutually agree, Sublicensee shall deliver to
ECC a written report (the "Development Report"), which shall set forth, in
reasonable detail, the scope and results of all research and development
activities relating to the Technology and/or Products undertaken by Sublicensee
during the Quarter which report shall also set forth, in reasonable detail, a
description of all marketing activities for the Products undertaken during the
Quarter by Sublicensee. The Development Reports shall be certified as correct
and accurate by an appropriate officer of Sublicensee.

10. REPRESENTATIONS AND WARRANTIES OF ECC. ECC hereby represents and
warrants to Sublicensee that:

(a) ECC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. ECC has all requisite
corporate power and authority to own, operate and lease its properties and to
carry on its business as now being conducted, and is duly qualified to do
business in every jurisdiction wherein the nature of the business conducted or
the assets owned or leased by it make such qualification material to the conduct
of its business.

(b) ECC has all requisite corporate power and authority to enter into
this Agreement and to perform its obligations hereunder, including but not
limited to the right to sublicense the Technology. This Agreement has been duly
and validly authorized, executed and delivered by ECC and, assuming the due
authorization, execution and delivery by Sublicensee, is the legal, valid and
binding obligation of ECC, enforceable against it in accordance with its terms,

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subject only to bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights generally and to general
principles of equity.

(c) To the best knowledge of ECC, no person, firm or entity has made
any claims or threatened, in writing or otherwise, that ECC is in violation of
or has infringed any patent, patent license, trade name, trademark, service
mark, brand mark, brand name, copyright, know-how, formula or other proprietary
or trade rights of such third party as they relate to the Technology. Except as
provided in this subparagraph, ECC makes no representation or warranty as to the
ownership or validity of the Technology. The license granted to Sublicensee
under this Agreement does not exceed the scope of the rights granted to ECC by
Licensor.

(d) To the best knowledge of ECC, the execution, delivery and
performance of this Agreement by ECC and the consummation by it of the
transactions contemplated hereby will not (i) constitute a violation (with or
without the giving of notice or lapse of time) of any provision of applicable
law, (ii) require any consent, approval or authorization of any person or
governmental authority, (iii) result in a default under, acceleration or
termination of, or the creation in any party of the right to accelerate,
terminate, modify or cancel any agreement, lease, franchise, permit, note or
other restriction, encumbrance, obligation or liability to which ECC is a party
or by which it is bound or to which any of its assets are subject, (iv) result
in the creation of any lien or encumbrance upon ECC's assets, (v) conflict with,
result in the breach of, or constitute a default under any provision of ECC's
certificate of incorporation or bylaws, or (vi) conflict with, result in a
tortious interference as a result of such conflict with, or otherwise violate,
any material contract or arrangement between ECC and any other person. The
representation and warranty given in this subparagraph shall not be deemed or
construed to expand or modify the representation and warranty given by ECC in
subparagraph 10(c).

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(e) Neither ECC, nor anyone acting on behalf, has taken any action
relating to any broker, finder, consultant or other expert which could result in
the imposition upon the Sublicensee of any obligation to pay a fee to any
broker, finder, consultant or similar expert in connection with the transactions
contemplated hereby.

11. REPRESENTATIONS AND WARRANTIES OF SUBLICENSEE. Sublicensee hereby
represents and warrants to ECC that:

(a) Sublicensee is a corporation duly organized, validly existing and
in good standing under the laws of Pennsylvania. Sublicensee has all requisite
power and authority to own, operate and lease the properties and to carry on its
business as now being conducted, and is duly qualified to do business in every
jurisdiction wherein the nature of the business conducted or the assets owned or
leased by it make such qualification material to the conduct of its business.

(b) Sublicensee has all requisite power and authority to enter into
this Agreement and to perform its obligations hereunder. This Agreement has
been duly and validly authorized, executed and delivered by Sublicensee and,
assuming the due authorization, execution and delivery by ECC, is a legal and
binding obligation of Sublicensee, enforceable against it in accordance with its
terms, subject only to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights generally and to general
principles of equity.

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franchise, permit, note or other restriction, encumbrance, obligation or
liability to which Sublicensee is a party or by which it is bound or to which
any of its assets are subject, (iv) result in the creation of any lien or
encumbrance upon Sublicensee's assets, (v) conflict with, result in the breach
of, or constitute a default under any provision of Sublicensee's charter
documents, or (vi) conflict with, result in tortious interference as a result of
such conflict with, or otherwise violate, any contract or arrangement between
ECC and any other person.

(d) Neither Sublicensee, nor anyone acting on its behalf, has taken
any action relating to any broker, finder, consultant or other expert which
could result in the imposition upon ECC of any obligation to pay a fee to any
broker, finder, consultant or similar expert in connection with the
transactions contemplated hereby.

12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the parties, as set forth herein, shall be true and accurate as of
the effective date of this Agreement, and shall survive the execution of this
Agreement.

13. DISCLAIMER OF WARRANTIES.

NEITHER ECC NOR ITS LICENSOR MAKE OR GIVE, AND THEY HEREBY EXPRESSLY
DISCLAIM ANY AND ALL WARRANTIES, WHETHER EXPRESS OR IMPLIED, WRITTEN OR ORAL,
INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF MERCHANTABILITY AND OF FITNESS
FOR A PARTICULAR PURPOSE, IN REGARD TO THE TECHNOLOGY AND/OR ANY PRODUCTS WHICH
MAY BE MANUFACTURED, USED OR SOLD BY SUBLICENSEE AND WHICH ARE BASED UPON OR
UTILIZE THE TECHNOLOGY.

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14. INDEMNIFICATION.

(a) ECC shall defend, indemnify and hold Sublicensee harmless from
and against, and hereby assumes liability for the payment of any and all
loss, liability or damage, and for all costs and expenses (including
reasonable costs of investigations and reasonable attorneys, accountants, and
expert witness fees) that may be imposed upon, suffered or incurred by, or
successfully asserted against Sublicensee as a consequence of or in
connection with any claim that may be asserted against Sublicensee that the
Technology infringes the valid patent rights of any third party. However,
ECC's liability to Sublicensee shall be limited to the total amount of all
Royalties paid to ECC by Sublicensee under this Agreement for (x) the
24-month period preceding the date that Sublicensee suffered a loss requiring
indemnification by ECC under this subparagraph or (y) in the case of patent
infringement litigation brought by a third party against Sublicensee, the
period from the date written notice of such infringement is received by
Sublicensee to the date final judgment is entered, whichever is longer.

In addition to, and not in lieu of, the indemnification of Sublicensee
by ECC under this subparagraph, during the first three years following the
initial product introduction by any ECC sublicensee of the Technology, ECC shall
obtain insurance covering third party claims of patent infringement from a
reputable insurance carrier reasonably acceptable to Sublicensee. Such policy
shall provide Sublicensee with minimum liability coverage as follows: (i)
$5,000,000.00 (U.S. Dollars) for the first year following the initial commercial
introduction of a Product by any ECC sublicensee of the Technology; (ii)
$15,000,000.00 (U.S. Dollars) for the second year following the initial
commercial introduction of a Product by any ECC sublicensee of the Technology;
and (iii) $25,000,000.00 (U.S. Dollars) for the third year following the initial
commercial introduction of a Product by any ECC sublicensee of the Technology.
Such patent infringement insurance policy shall

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be put into place prior to Sublicensee's initial commercial introduction of any
Product hereunder. For United States carriers, such carriers must have an A.M.
Best rating of "A-VI" or better. Upon Sublicensee's request, ECC shall provide
Sublicensee with a Certificate of Insurance evidencing such patent infringement
insurance policy.

(b) Sublicensee shall defend, indemnify and hold ECC and Licensor
harmless from and against, and hereby assumes liability for the payment of
any and all loss, liability or damage, and for all costs and expenses
(including reasonable costs of investigations and reasonable attorneys,
accountants, and expert witness fees) that may be imposed upon, suffered or
incurred by, or successfully asserted against ECC or its Licensor as a
consequence of or in connection with any claim or liability, other than those
expressly set forth in subparagraph 14(a) hereof, arising out of or as a
consequence of this Agreement, including, but not limited to, any product
liability claims that may be asserted against ECC or its Licensor in relation
to any Products manufactured, marketed, distributed, used and/or sold by
Sublicensee pursuant to this Agreement. In the event any action, suit or
proceeding is brought against ECC or its Licensor with respect to which there
may be indemnification pursuant to this subparagraph, the defense of such
action, suit or proceeding (including all settlements and arbitrations,
trials, appeals or other proceedings) shall be conducted by Sublicensee at
its sole cost and expense through legal counsel selected by Sublicensee. ECC
and its Licensor shall have the right to participate in such defense at their
own expense through legal counsel of their choice. If Sublicensee fails to
defend any such action, suit or proceedings, for any reason, such failure
shall constitute a material breach of this Agreement by Sublicensee, and ECC
or its Licensor may undertake defense of such action, suit or proceeding,
through legal counsel of their choice at the sole cost and expense of
Sublicensee (provided such legal costs and expenses are reasonable under the
circumstances). The parties shall make available to one

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another, their legal counsel and accountants, all information and documents
reasonably available to them which relate to such action, suit or proceeding and
shall render such other assistance as they may reasonably require of one another
in order to insure the proper and adequate defense of any such action, suit or
proceeding.

(c) Neither party shall have any liability to the other party
pursuant to an indemnity provided by this paragraph unless and until the
aggregate amount of all indemnified losses suffered or incurred by such
indemnified party after the effective date hereof equals or exceeds $100,000
(U.S. Dollars), at which time the indemnifying party shall be obligated to
pay the indemnified party the full amount of all indemnified losses,
including such initial $100,000 (U.S. Dollars) in losses. The amount of
indemnity payable pursuant to this paragraph shall be calculated after giving
affect to any insurance proceeds actually received by the indemnified party
provided that neither party shall subrogate to any insurance carrier any
rights or claims which it may have against the other party.

(d) The obligations set forth in this paragraph 14 shall survive
the expiration or termination of the Agreement for any reason whatsoever.

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coverage under, or termination or cancellation of, the policy. Upon ECC's
request, Sublicensee shall provide ECC with a Certificate of Insurance
evidencing such product liability insurance. Sublicensee shall be required to
obtain and maintain the product liability insurance policy called for by the
provisions of this subparagraph only from and after the date of the first
commercial sale of a Product by Sublicensee, or the first public testing of a
Product by Sublicensee.

16. CONFIDENTIALITY.

(a) Sublicensee acknowledges that ECC claims that the Technology, as
it may exist from time to time, as well as the other confidential or proprietary
information (including business and financial information) of ECC (whether owned
by ECC or acquired by license from third parties) are and shall remain the
valuable, special, unique and proprietary assets of ECC, and shall constitute
"Confidential Information" hereunder. In order for any information other than
the Technology to be deemed to be "Confidential Information" hereunder, whether
disclosed orally or in writing, it must be identified, orally or in writing, to
Sublicensee as "Confidential Information" at time of disclosure, or reasonably
thereafter, or be reasonably understood by Sublicensee to be "Confidential
Information." Additionally, as used herein, "Confidential Information" shall not
include any information or data which Sublicensee can show: (i) is in, or
becomes a part of, the public domain by any means other than the failure by
Sublicensee to fulfill its obligations hereunder; or (ii) is rightfully known to
Sublicensee at the time of disclosure by ECC; or (iii) is, at any time,
disclosed to Sublicensee by a third party who has received and disclosed such
information without the breach of any obligation of confidentiality to ECC or to
any third party assignor of such Confidential Information. For purposes of
this subparagraph, information shall not be deemed to be a part of the public
domain or in Sublicensee's knowledge merely because it may be embraced in a
more general disclosure or simply because it may be derived from combinations
of disclosures

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or information generally available to the public or within Sublicensee's
knowledge. The parties acknowledge that disclosure to Sublicensee of
Confidential Information will be necessary order to enable Sublicensee to
utilize the Sublicense in the manner contemplated by this Agreement, and
ECC will make such disclosures of the Confidential Information to Sublicensee as
it is necessary, required or appropriate in that regard. The parties
acknowledge that they have a confidential relationship with one another and,
accordingly, Sublicensee shall maintain all Confidential Information disclosed
to it pursuant to this Agreement in confidence and shall not disclose the same
to any third party (with the exception of its employees, accountants, attorneys
and other agents and professional advisors) either during or after the term of
this Agreement unless required to do so by court order or by law, in which case
Sublicensee shall notify ECC, in writing, prior to making such disclosure and
shall cooperate with ECC to preserve and protect the confidentiality of the
Confidential Information in question to the fullest extent possible.
Additionally, except as specifically contemplated by this Agreement, Sublicensee
shall not utilize any Confidential Information for its own benefit or for the
benefit of any third party. Prior to making any permitted disclosure of any
Confidential Information to its employees, accountants, attorneys and other
agents and professional advisors, Sublicensee shall use commercially reasonable
efforts to require such persons, firms, or entities to execute and deliver
written disclosure agreements which shall obligate such persons, firms, or
entities to comply with the same obligations of confidentiality and non-use as
imposed upon Sublicensee in this subparagraph. The obligation of
confidentiality as it relates to the Confidential Information shall survive the
termination of this Agreement and continue unabated until the expiration of the
last patent, including any extensions, reissues, or continuations thereof, which
has been or may be issued with respect to the Technology.

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(b) From time to time during the term of this Agreement, Sublicensee
may disclose to ECC certain information which Sublicensee deems to be
proprietary and confidential, including but not limited to, business plans,
marketing plans, financial information, and process technology (the "Sublicensee
Confidential Information"). The definition of "Sublicensee Confidential
Information." and ECC's use and disclosure thereof, shall be covered by terms
and conditions identical to those which govern Confidential Information, as set
forth in the preceding subparagraph; provided, however, that ECC shall have the
right to disclose Sublicensee Confidential Information to ECC's Licensor subject
to its accepting and treating it as Confidential Information in writing to
Sublicensee.

17. TERM AND TERMINATION.

(a) The term of this Agreement shall commence upon the effective date
hereof. Unless sooner terminated as hereinafter provided, this Agreement shall
continue in full force and effect until the expiration of the last material and
substantial patent covering the Technology which is utilized by Sublicensee, or
for so long as Sublicensee produces the Products which utilizes material and
substantial proprietary information or a material and substantial Trade Secret
of ECC; provided, however, that upon the expiration of the last aforementioned
patent, if Sublicensee desires to continue the Agreement in force, it will be
subject to an appropriate negotiated adjustment to the Royalty Payments or
License Fee. Any dispute as to the terms of this Agreement shall be resolved by
arbitration as provided under this Agreement.

(b) Sublicensee may terminate this Agreement, at any time, with or
without cause, upon sixty (60) days prior written notice of such termination to
ECC.

(c) If either party is in breach of any of its material obligations
hereunder, then the non-breaching party may give the breaching party written
notice of such breach. If such breach

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is not cured within ninety (90) days after the date such written notice is
delivered or, if such default cannot be cured within such ninety day period but
the breaching party has taken action to cure such default, then if the default
is not cured within one hundred eighty (180) days from the date of the original
notice, the non-breaching party shall have the right immediately to terminate
the Sublicense by written notice to the breaching party.

(d) Subject to the conditions set forth in the last sentence of this
subparagraph, ECC shall have the right to terminate the Sublicense, upon thirty
(30) days written notice to Sublicensee, in the event that the amount of the
Royalty paid to ECC in any calendar year is not at least the greater of (i) 50%
of the Royalty payment amount for the preceding calendar year, or (ii)
commencing one (1) year after the effective date of this Agreement, $100,000
(U.S. Dollars), prorated for any partial calendar year. In the event of
termination of this Agreement pursuant to this subparagraph, Sublicensee shall
have the right to sell at market price existing stock and inventory of
manufactured Products for a period of one hundred and eighty days.
Notwithstanding the other provisions of this subparagraph, ECC shall not be
entitled to exercise the right of termination provided under this subparagraph,
and the $100,000 minimum royalty shall not begin to accrue, until one year
after: (x) the technology to commercially manufacture the Products is made
commercially available to Sublicensee; AND (y) at least one of ECC's
sublicensees of the Technology has been able successfully to commercialize at
least one of the Products.

18. EFFECT OF EXPIRATION OF TERMINATION.

(a) From and after the effective date of the expiration or
termination of this Agreement, Sublicensee shall have no right, whatsoever, to
utilize the Technology (except for Process Improvements then owned by
Sublicensee) or the Trademarks pertinent to this Agreement, and shall return to
ECC all copies of Confidential Information which is then in the possession of

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Sublicensee or destroy the same and provide satisfactory assurances of the
destruction of all Confidential Information; provided, however, that nothing
contained herein shall, or shall be deemed to, restrict the Sublicensee's
ability or right to use, free of Royalty, any Technology, trade name, know-how
or confidential information which is or has come into the public domain through
no fault of Sublicensee and is not otherwise deemed Confidential Information.
Notwithstanding the return of confidential information by Sublicensee, ECC shall
cooperate with and shall make available to Sublicensee such information,
including confidential information, as Sublicensee may reasonably require in
connection with any warranty claims asserted by an unrelated third party against
Sublicensee in relation to Products sold by Sublicensee hereunder. ECC shall
also be required to return to Sublicensee all copies of Confidential Information
of Sublicensee which are then in the possession of ECC or destroy and provide
satisfactory assurances of the destruction of all Confidential Information.

(b) The right of termination under paragraph 17 hereof shall be in
addition to, and not in lieu of, all other rights and remedies the terminating
party may have under this Agreement, at law or in equity.

(c) The obligation of Sublicensee to pay to ECC the Royalty for all
Products actually sold by Sublicensee prior to the effective date of the
expiration or termination of this Agreement, as well as the obligations
concerning indemnification, product liability and of confidentiality set forth
in this Agreement, shall survive the expiration or termination of the Sublicense
and of this Agreement.

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19. MARKING.

(a) Where feasible, Sublicensee shall mark the Products and related
documents with the applicable United States patent numbers, as required by
applicable law, or as reasonably instructed by ECC.

(b) Sublicensee shall comply with all applicable laws, rules and
regulations of the United States, including but not limited to, the Export
Regulations of the United States Department of Commerce, in connection with the
Technology. Sublicensee acknowledges that ECC has not made and does not make
any representations that any license is, or is not required in connection with
such export or, if required, that such license will be issued by the United
States Department of Commerce; provided, however, that ECC shall apply for all
licenses required or necessary to enable the Sublicensee to export the
Technology within the Territory without imposing any additional Royalty.

20. TRADEMARKS.

(a) Sublicensee may utilize, in connection with the manufacture,
marketing, distribution and sale of the Products, the EARTHSHELL-TM- trademark
and such other trade names, trademarks, service marks, slogans and logo marks
that may be designated in writing by ECC to Sublicensee prior to commercial
production of the Products by Sublicensee or from time to time thereafter
(collectively the "Trademarks").

(b) To the extent Sublicensee elects to use the Trademarks on or in
connection with manufacture, marketing, distribution, use and/or sale of
Products hereunder, Sublicensee shall be entitled to receive an advertising
allowance credit equal to Two Percent (2%) of the Net Sale Price of such
Products that bear the Trademarks. To qualify for the aforementioned
advertising allowance credit, Sublicensee shall submit to ECC written
documentation, reasonably satisfactory

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to ECC, of sales by Sublicensee of Products that bear the Trademarks, and ECC
shall credit the appropriate amount against future royalties payable by
Sublicensee hereunder.

(c) To the extent Sublicensee elects to use the Trademarks on or in
connection with the marketing, distribution, use and/or sale of the Products,
the specific placement, size, and detail of the Trademarks on the Product must
be approved by ECC, but shall not be required to be placed on the Products in
such a size, placement, detail or configuration so as to impair the
marketability of the Product. In addition, on any Products manufactured,
marketed, distributed and sold by Sublicensee and bearing any Trademark,
Sublicensee shall also include the following legend: "This product is
manufactured by Dopaco, Inc. under license from EarthShell Container
Corporation." To the extent it is not feasible to include the foregoing legend
directly on any Product itself, then such legend shall appear on the secondary
packaging materials in which such Products are shipped or transported.

(d) In connection with any use of the Trademarks by Sublicensee,
Sublicensee shall not in any manner represent that it has any ownership interest
therein and shall not challenge or impugn the ownership of the Trademarks.
Sublicensee acknowledges that use of the Trademarks shall not create in its own
favor any right, title, or interest in or to the Trademarks, but that all uses
of these marks by Sublicensee shall inure to the benefit of ECC or its Licensor.
Sublicensee shall cooperate with ECC or its Licensor in the execution of any
appropriate and necessary documents in connection with the registration of any
Trademark. Upon termination of this Agreement, Sublicensee shall cease and
desist from use of the Trademarks in any way, including any word or phrase that
is similar to or likely to be confused with such marks. However, in the event
of termination, Sublicensee shall have the right to sell at market price
existing stock and inventory of

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manufactured Products for a period of one hundred and eighty days and
thereafter shall deliver to ECC or its duly authorized representative all
materials upon which the Trademarks appear.

(e) Subject to Sublicensee's review and acceptance of the ECC Quality
Standards Manual, which shall be provided to Sublicensee within eighteen months
from the date of this Agreement, all Products produced pursuant to this
Agreement bearing any Trademark shall be produced in compliance with the
specifications and procedures set forth "in the ECC Quality Standards Manual.
Sublicensee shall permit ECC to conduct periodic (but not more frequently than
once each calendar year) inspections/audits to ensure compliance with the ECC
Quality Standards Manual.

(f) Should any Product bearing any Trademark that is manufactured,
sold or otherwise commercialized by Sublicensee contain any material defect in
its appearance or function, Sublicensee shall cease any further manufacture,
sale or other commercialization of such Product containing such material defect.
Unless Sublicensee corrects such defect within a reasonable time following its
discovery by or disclosure to Sublicensee, Sublicensee shall be in breach of a
material obligation of this Agreement.

21. SPECIAL TAX PROVISIONS. Sublicensee or its agents shall be solely
responsible for the payment and discharge of any taxes, duties, or withholdings
relating to any transaction of Sublicensee or its agents in connection with the
manufacture, use, sale or commercialization of the Technology or the Products;
except that ECC shall be responsible for taxes, duties or withholding relating
to the payment to ECC of any Royalty payment under this Agreement and
Sublicensee shall be permitted to perform any withholding with respect to such
payments and fees required by law or regulation.

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22. TECHNOLOGY TRANSFER.

(a) Sublicensee acknowledges and agrees that ECC has delivered and
made to Sublicensee a disclosure of a general introduction to the Technology and
to its commercial feasibility prior to the execution of this Agreement. Except
to the extent such information falls within one or more of the exceptions to the
definition of "Confidential Information", all information disclosed by ECC to
Sublicensee prior to the execution of this Agreement shall be deemed to
constitute part of the Technology and shall be deemed to be confidential. The
timing and extent of additional disclosure by ECC to Sublicensee shall be as set
forth in subparagraph 22(b) hereof.

(b) Upon execution of this Agreement, ECC shall provide Sublicensee
with copies of the patents listed in Section B of Exhibit "B" hereto. Beyond
that, ECC shall not be required to provide additional information concerning, or
disclosure of, the Technology to Sublicensee until Sublicensee provides to ECC
(i) written notice of Sublicensee's intent to commercialize a Product, which
written notice shall include detailed specifications for the designated Product,
and (ii) evidence, reasonably satisfactory to ECC, of Sublicensee's intent to
commercialize the designated Product in the form of written documentation of
orders placed by Sublicensee of the equipment needed by Sublicensee to produce
and commercialize the designated Product or in the form of written documentation
from Sublicensee confirming the dedication and/or modification of existing
equipment necessary to produce the designated Product. Within ninety (90) days
after ECC's receipt of the items described in the preceding sentence, ECC shall
provide to Sublicensee the following additional disclosure: (w) a Product
specific recipe for the production of the designated Product; (x) Product
specific process specifications for the production of the designated Product;
(y) copies of all patent applications listed in the Exhibits hereto that ECC
deems relevant

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to the production of the designated Product; and (z) a list of known raw
materials suppliers and preferred equipment vendors.

23. MCDONALD'S CORPORATION. Because of work jointly undertaken by ECC and
McDonald's Corporation ("McDonald's") (as used herein the term "McDonald's"
shall include purchasing agents and franchisees thereof) with regards to studies
of market potential and food package design, it has been agreed that McDonald's
is to receive "priority" with regard to the distribution of the Products that
are ordered by it and covered by this Agreement. In compliance with this
arrangement, for a period of two (2) years from the effective date of this
Agreement, Sublicensee shall give priority to McDonald's orders for Products, in
that, on a regional basis, Sublicensee shall dedicate to the production and
delivery of Products to McDonald's such portion of Sublicensee's production
capacity (i) as is available at the time of receipt of a purchase order from
McDonald's and (ii) is reasonably necessary to fill such purchase order at the
rate of production and/or the delivery schedule contained in such order, and
Sublicense shall not accept additional purchase orders from, or deliver Products
to, any entity in the food service and restaurant industry other than McDonald's
unless or until Sublicensee has production capacity in excess of that required
to fill, on a timely basis, purchase orders from McDonald's that have previously
been accepted by Sublicense. A region shall be that geographic area which is
serviced by a specific "distribution center" that supplies products solely or
primarily to McDonald's in that geographic area.

24. FAVORED NATIONS. In the event ECC grants any sublicense within the
Territory of the Technology to any third party containing terms that are more
favorable than those granted to Sublicensee under this Agreement, ECC shall
notify Sublicensee of such more favorable terms and, upon written request by
Sublicensee, this Agreement shall be amended to incorporate such more favorable
terms; provided, however, that this paragraph 24 shall not apply with respect to
exclusivity

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provisions or the grant of rights to specific Products contained in any other
sublicense of the Technology by ECC. To the extent that ECC grants a license to
any party, either within or without the Territory, that includes the right to
import into the Territory and includes terms directed to Product Improvements,
Process Improvements and/or Royalties that are more favorable than those granted
to Sublicensee under this Agreement, ECC shall notify Sublicensee of such more
favorable terms and, upon written request by Sublicensee, this Agreement shall
be amended to incorporate such more favorable terms.

25. EQUITABLE RELIEF. A breach or default by Sublicensee of the
provisions of paragraph 5 and/or paragraph 16 hereof shall cause ECC to suffer
irreparable harm and, in such event, ECC shall be entitled, as a matter of
right, to a restraining order and other injunctive relief from any court of
competent jurisdiction, restraining any further violation thereof by
Sublicensee, its officers, agents, servants, employees, and those persons in
active concert or participation with them. The right to a restraining order or
other injunctive relief shall be supplemental to any other right or remedy ECC
may have, including, without limitation, the recovery of additional damages for
the breach or default of any of the terms of this Agreement.

26. RELATIONSHIP OF THE PARTIES. This Agreement shall not create any
partnership, joint venture or similar relationship between the parties hereto
(or ECC's Affiliates) and no representation to the contrary shall be made by
either party. Neither party shall have any authority to act for or on behalf of
or to bind the other party in any fashion, and no representations to the
contrary shall be made by either party.

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receipt requested, or by telecopier (FAX) transmission, confirmed by letter by
United States mail with postage prepaid and return receipt requested, or by
reputable overnight courier (pursuant to instructions requiring next-day
delivery) to the person in question as set forth below:

ECC: EarthShell Container Corporation
800 Miramonte Drive
Santa Barbara, California 93109-1419
Attention: President
Fax: (805) 897-2298

with copy to:

EarthShell Container Corporation
800 Miramonte Drive
Santa Barbara, California 93109-1419
Attention: Chief Legal Officer
Fax: (805) 897-2298

Sublicensee: Dopaco, Inc.
241 Woodbine Road
Downingtown, Pennsylvania 19335
Attention: Lois Meeth

ECC or Sublicensee may change its address by giving notice of such change in
the manner set forth herein. If delivered personally, a notice shall be deemed
delivered when actually received at the address specified herein. Any notice
given by mail shall be deemed delivered three (3) days following the date upon
which it is deposited in the mail, with postage prepaid and return receipt
requested. Any notice given by FAX shall be deemed delivered on the date it is
actually transmitted to the person in question at the FAX number specified
above. Any notice given by overnight courier shall be deemed delivered on the
next business day following the date it is placed in the possession of such
courier.

28. ENTIRE AGREEMENT. This Agreement supersedes all prior understandings
or agreements, whether written or oral, and any contemporaneous oral agreements,
between the parties

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hereto in regard to the subject matter hereof and contains, the entire agreement
between the parties in regard to the subject matter hereof. This Agreement may
not be changed or modified orally, but only by an agreement, in writing, signed
by both the parties hereto.

29. SAVINGS CLAUSE. Should any part or provision of this Agreement be
rendered or declared invalid by reason of any law or by decree of a court of
competent jurisdiction, the invalidation of such part or provision of this
Agreement shall not invalidate the remaining parts or provisions hereof, and the
remaining parts and provisions of this Agreement shall remain in full force and
effect.

30. WAIVER. Neither the failure or delay on the part of either party to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or privilege
preclude any other or further exercise thereof or of any other right or
privilege.

31. GOVERNING.LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
the choice of law rules thereof.

32. RESOLUTION OF DISPUTES.

(a) In the event of a breach of this Agreement, or a dispute as to
the meaning of this Agreement, or any of its terms which the parties cannot
resolve by themselves amicably, the parties agree to submit such dispute to
resolution in the manner hereinafter described. First, the parties shall
endeavor to resolve the dispute through the use of an acceptable alternative
dispute resolution procedure. If, within 30 days after one party notifies the
other in writing of the existence of a dispute which it desires to be resolved
under this paragraph, the parties have not agreed upon an acceptable alternative
dispute resolution procedure, then the matter shall be resolved by arbitration
as set forth below and according to the rules of the American Arbitration
Association,

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except as herein modified by the parties. Unless otherwise agreed to in
writing, all alternative dispute resolutions or arbitration hearings will be
held in Los Angeles, California.

(b) The parties shall cooperate and use their respective best efforts
to encourage compliance with the following time periods: (i) within 10 days
after the failure to agree to an acceptable alternative dispute resolution
procedure, each party will select an arbitrator, and notify the other party of
its selection; (ii) within 15 days after such notice, the respective arbitrators
will select a third arbitrator as Chairman of the panel; (iii) a hearing by the
arbitration panel shall be held Within 30 days after the selection of the
Chairman; and (iv) a majority decision and resolution shall be reached within 30
days of such hearing. Decisions of the panel must be in writing and will be
final and binding on the parties, and judgment may be entered thereon by any
court having jurisdiction of the parties.

(c) Each party shall bear its own costs of presenting its case in an
alternative dispute resolution procedure, or arbitration, as the case may be,

(d) The validity, construction and performance of this Agreement
shall be Governed by and interpreted in accordance with the laws of the State of
California (as if all aspects of the Agreement were to be performed in
California).

33. FORCE MAJEURE. The failure of either party to perform its obligations
under this Agreement (except the obligation to make payments) shall not subject
such party to any liability to the other or subject this Agreement to
termination if such failure is caused by acts such as, but not limited to, acts
of God, earthquake, explosion, flood, drought, war, riot, sabotage, embargo,
compliance with any order or regulation of any governmental entity acting with
color of right, intervention or delays created by any regulatory authority, or
by any other similar cause beyond the reasonable control of the parties. The
party so affected shall promptly notify the other party of the

-41-

<PAGE>

event of force majeure, and shall use all reasonable efforts to remove such
event as soon as reasonable practicable.

34. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

35. TERMINOLOGY. As used this Agreement, the singular shall include
the plural and the plural shall include the singular. Titles of sections and
paragraphs in this Agreement are for convenience only, and neither limit nor
amplify the provisions of the Agreement, and all references in this Agreement
to a section or paragraph shall refer to the corresponding section or
paragraph of this Agreement unless specific reference is made to the sections
of another document or instrument.

IN WITNESS WHEREOF, the parties have caused this Sublicense Agreement to be
executed and delivered by their duly authorized representatives upon the date
first herein written.

ECC: SUBLICENSEE:

EarthShell Container Corporation Dopaco, Inc.

By: /s/ Simon K. Hodson By: /s/ Ed Fitts
-------------------------------- --------------------------------
Simon K. Hodson Ed Fitts

Its: Chief Executive Officer Its: President

-42-

<PAGE>

EXHIBIT "A"

CORE TECHNOLOGY

A. ISSUED UNITED STATES LETTER PATENTS

1. U.S. Letters Patent No. 4,225,247, issued September 30, 1980, and entitled
"Mixing and Agitating Device."

2. U.S. Patent No. 4,552,463, issued November 12, 1985, and entitled "Methods
and Apparatus for Producing a Colloidal Mixture."

3. U.S. Letters Patent No. 4,944,595, issued July 31, 1990, and entitled
"Apparatus for Producing Cement Building Material."

4. U.S. Letters Patent No. 5,061,319, issued October 29, 1991, and entitled
The Process for Producing Cement Building Material."

5. U.S. Letters Patent No. 5,232,496, issued August 3, 1993, and entitled
"Process for Producing Improved Building Material and Product Thereof."

6. U.S. Patent No. 5,356,579, issued October 18, 1994, and entitled "Methods
of Manufacture and Use for Low Density Hydraulically Bonded Cement
Compositions."

7. U.S. Patent No. 5,358,676, issued October 25, 1994, and entitled
"Hydraulically Bonded Cement Compositions and Their Methods of Manufacture
and Use."

B. PENDING UNITED STATES PATENT APPLICATIONS

8. U.S. Patent Application entitled "Food and Beverage Containers Made from
inorganic Aggregates and Polysaccharide, Protein, or Synthetic Organic
Binders, and the Methods of Manufacturing Such Containers."

9. U.S. Patent Application entitled "Cementitious Materials for Use in
Packaging Containers and their Methods of Manufacture."

10. U.S. Patent Application entitled "Cementitious Materials for Use in
Cushioning, Spacing, Partitioning, Portioning or Wrapping Objects and the
Methods of Manufacturing Such Materials."

11. U.S. Patent Application entitled "Design Optimized Compositions and
Processed for Microstructurally Engineering Cementitious Mixtures."

A-1

<PAGE>

12. U.S. Patent Application entitled "Highly Insulative Cementitious Matrices
and Methods for Their Manufacture."

13. U.S. Patent Application and entitled "Hydraulically Settable Containers and
Other Articles for Storing, Dispensing, and Packaging Food and Beverages
and Methods for their Manufacture."

14. U.S. Patent Application entitled "Methods and Systems for Manufacturing
Containers and Other Articles of Manufacture from Hydraulically Settable
Mixtures."

15. U.S. Patent Application entitled "Articles of Manufacture Molded from
Inorganically Filled Compositions."

16. U.S. Patent Application entitled "Methods of Molding Articles from
Inorganically Filled Compositions."

17. U.S. Patent Application entitled "Methods for Continuously Placing
Filaments within Hydraulically Settable Compositions being Extruded into
Articles of Manufacture."

18. U.S. Patent Application entitled "Systems and Apparatus for Continuously
Placing Filaments within Hydraulically Settable Compositions being Extruded
into Articles of Manufacture."

19. U.S. Patent Application entitled "Coated Hydraulically Settable Containers
and Other Articles for Storing, Dispensing, and Packaging Food or
Beverages."

20. U.S. Patent Application entitled "Compressed Low Density Hydraulically
Bonded Composite Articles."

21. U.S. Patent Application entitled "Compressed Hydraulically Bonded Composite
Articles."

C. ISSUED FOREIGN PATENTS.

22. Great Britain Patent No. 174,994, issued June 17, 1992, and entitled
"Method and Apparatus for Producing a Colloidal Mixture."

23. Canadian Patent No. 1,207,212, issued July 8, 1986, and entitled "Method
and Apparatus for Producing a Colloidal Mixture."

24. Japanese Patent No. 1,552,158, issued March 3, 1990, and entitled "Method
and Apparatus for Producing a Colloidal Mixture."

A-2

<PAGE>

25. Australian Patent No. 594,555, issued June 26, 1990. and entitled "Method
and Apparatus for Producing a Colloidal Mixture."

26. Canadian Patent No. 1,298,282, issued March 31, 1992, and entitled
"Apparatus for Producing Cement Building Material."

27. Canadian Patent No. 1,298,830, issued April 14, 1992, and entitled "Process
for Producing Cement Building Material."

28. German Patent No. 3,586,229, issued July 23, 1992, and entitled "Method and
Apparatus for Producing a Colloidal Mixture."

29. Canadian Patent No. 1,321,609, issued August 24, 1993, and entitled "Cement
Building Material."

D. PENDING FOREIGN PATENT APPLICATIONS

30. Canadian Patent Application entitled "Process for Producing Improved
Building Material and Product Thereof."

31. European Patent Application entitled "Process for Producing Improved
Building Material and Product Thereof."

32. Japanese Patent Application entitled "Process for Producing Improved
Building Material and Product Thereof."

33. Canadian Patent Application entitled "Hydraulically Bonded Cement
Compositions and Their Methods of Manufacture and Use."

34. European Patent Application entitled "Hydraulically Bonded Cement
Compositions and Their Methods of Manufacture and Use."

35. PCT Patent Application entitled "Hydraulically Settable Containers and
Other Articles for Storing, Dispensing and Packaging Food and Beverages and
Methods for their Manufacture."

36. Argentine Patent Application entitled "Hydraulically Settable Containers
and Other Articles for Storing, Dispensing and Packaging Food and Beverages
and Methods for their Manufacture."

37. Chilean Patent Application entitled "Hydraulically Settable Containers and
Other Articles for Storing, Dispensing and Packaging Food and Beverages and
Methods for their Manufacture."

A-3

<PAGE>

38. Chinese Patent Application entitled "Hydraulically Settable Containers and
Other Articles for Storing, Dispensing and Packaging Food and Beverages and
Methods for their Manufacture."

39. Colombian Patent Application entitled "Hydraulically Settable Containers
and Other Articles for Storing, Dispensing and Packaging Food and Beverages
and Methods for their Manufacture."

40. Indian Patent Application entitled "Hydraulically Settable Containers and
Other Articles for Storing, Dispensing and Packaging Food and Beverages and
Methods for their Manufacture."

41. Mexican Patent Application entitled "Hydraulically Settable Containers and
Other Articles for Storing, Dispensing and Packaging Food and Beverages and
Methods for their Manufacture."

42. Peruvian Patent Application entitled "Hydraulically Settable Containers and
Other Articles for Storing, Dispensing and Packaging Food and Beverages and
Methods for their Manufacture."

43. Philippine Patent Application entitled "Hydraulically Settable Containers
and Other Articles for Storing, Dispensing and Packaging Food and Beverages
and Methods for their Manufacture."

44. South African Patent Application entitled "Hydraulically Settable
Containers and Other Articles for Storing, Dispensing and Packaging Food
and Beverages and Methods for their Manufacture."

45. Taiwanese Patent Application entitled "Hydraulically Settable Containers
and Other Articles for Storing, Dispensing and Packaging Food and Beverages
and Methods for their Manufacture."

46. Venezuelan Patent Application entitled "Hydraulically Settable Containers
and Other Articles for Storing, Dispensing and Packaging Food and Beverages
and Methods for their Manufacture."

47. PCT Patent Application entitled "Sealable, Liquid-Tight, Thin-Walled
Containers Composed of Hydraulically Settable Materials and Methods for
Manufacturing Such Containers."

48. Argentine Patent Application entitled "Sealable, Liquid-Tight, Thin-Walled
Containers Composed of Hydraulically Settable Materials and Methods for
Manufacturing Such Containers."

A-4

<PAGE>

49. Chilean Patent Application entitled "Sealable, Liquid-Tight, Thin-Walled
Containers Composed of Hydraulically Settable Materials and Methods for
Manufacturing Such Containers."

50. Chinese Patent Application entitled "Sealable, Liquid-Tight, Thin-Walled
Containers Composed of Hydraulically Settable Materials and Methods for
Manufacturing Such Containers."

51. Colombian Patent Application entitled "Sealable, Liquid-Tight, Thin-Walled
Containers Composed of Hydraulically Settable Materials and Methods for
Manufacturing Such Containers."

52. Egyptian Patent Application entitled "Sealable, Liquid-Tight, Thin-Walled
Containers Composed of Hydraulically Settable Materials and Methods for
Manufacturing Such Containers."

53. Indian Patent Application entitled "Sealable, Liquid-Tight, Thin-Walled
Containers Composed of Hydraulically Settable Materials and Methods for
Manufacturing Such Containers."

54. Iranian Patent Application entitled "Sealable, Liquid-Tight, Thin-Walled
Containers Composed of Hydraulically Settable Materials and Methods for
Manufacturing Such Containers."

55. Israeli Patent Application entitled "Sealable, Liquid-Tight, Thin-Walled
Containers Composed of Hydraulically Settable Materials and Methods for
Manufacturing Such Containers."

56. Mexican Patent Application entitled "Sealable, Liquid-Tight, Thin-Walled
Containers Composed of Hydraulically Settable Materials and Methods for
Manufacturing Such Containers."

57. Peruvian Patent Application entitled "Sealable, Liquid-Tight, Thin-Walled
Containers Composed of Hydraulically Settable Materials and Methods for
Manufacturing Such Containers."

58. Philippine Patent Application entitled "Sealable, Liquid-Tight, Thin-Walled
Containers Composed of Hydraulically Settable Materials and Methods for
Manufacturing Such Containers."

59. Saudi Patent Application entitled "Sealable, Liquid-Tight, Thin-Walled
Containers Composed of Hydraulically Settable Materials and Methods for
Manufacturing Such Containers."

A-5

<PAGE>

60. South African Patent Application entitled "Sealable, Liquid-Tight, Thin-
Walled Containers Composed of Hydraulically Settable Materials and Methods
for Manufacturing Such Containers."

61. Taiwanese Patent Application entitled "Sealable, Liquid-Tight, Thin-Walled
Containers Composed of Hydraulically Settable Materials and Methods for
Manufacturing Such Containers."

62. Venezuelan Patent Application entitled "Sealable, Liquid-Tight, Thin-Walled
Containers Composed of Hydraulically Settable Materials and Methods for
Manufacturing Such Containers."

63. Zimbabwean Patent Application entitled "Sealable, Liquid-Tight, Thin-Walled
Containers Composed of Hydraulically Settable Materials and Methods for
Manufacturing Such Containers."

64. Georgian Patent Application entitled "Sealable, Liquid-Tight, Thin-Walled
Containers Composed of Hydraulically Settable Materials and Methods for
Manufacturing Such Containers."

65. PCT Patent Application entitled "Design Optimized Compositions and
Processes for Microstructurally Engineering Cementitious Mixtures."

66. Argentine Patent Application entitled "Design Optimized Compositions and
Processes for Microstructurally Engineering Cementitious Mixtures."

67. Chilean Patent Application entitled "Design Optimized Compositions and
Processes for Microstructurally Engineering Cementitious Mixtures."

68. Chinese Patent Application entitled "Design Optimized Compositions and
Processes for Microstructurally Engineering Cementitious Mixtures."

69. Colombian Patent Application entitled "Design Optimized Compositions and
Processes for Microstructurally Engineering Cementitious Mixtures."

70. Egyptian Patent Application entitled "Design Optimized Compositions and
Processes for Microstructurally Engineering Cementitious Mixtures."

71. Indian Patent Application entitled "Design Optimized Compositions and
Processes for Microstructurally Engineering Cementitious Mixtures."

72. Iranian Patent Application entitled "Design Optimized Compositions and
Processes for Microstructurally Engineering Cementitious Mixtures."

A-6

<PAGE>

73. Israeli Patent Application entitled "Design Optimized Compositions and
Processes for Microstructurally Engineering Cementitious Mixtures."

74. Mexican Patent Application entitled "Design Optimized Compositions and
Processes for Microstructurally Engineering Cementitious Mixtures."

75. Peruvian Patent Application entitled "Design Optimized Compositions and
Processes for Microstructurally Engineering Cementitious Mixtures."

76. Philippine Patent Application entitled "Design Optimized Compositions and
Processes for Microstructurally Engineering Cementitious Mixtures."

77. Saudi Patent Application entitled "Design Optimized Compositions and
Processes for Microstructurally Engineering Cementitious Mixtures."

78. South African Patent Application entitled "Design Optimized Compositions
and Processes for Microstructurally Engineering Cementitious Mixtures."

79. Taiwanese Patent Application entitled "Design Optimized Compositions and
Processes for Microstructurally Engineering Cementitious Mixtures."

80. Venezuelan Patent Application entitled "Design Optimized Compositions and
Processes for Microstructurally Engineering Cementitious Mixtures."

81. Zimbabwean Patent Application entitled "Design Optimized Compositions and
Processes for Microstructurally Engineering Cementitious Mixtures."

82. Georgian Patent Application entitled "Design Optimized Compositions and
Processes for Microstructurally Engineering Cementitious Mixtures."

83. Australian Patent Application entitled "Hydraulically Settable Containers."

84. Brazilian Patent Application entitled "Hydraulically Settable Containers."

85. Canadian Patent Application entitled "Hydraulically Settable Containers."

86. European Patent Application entitled "Hydraulically Settable Containers.

87. Japanese Patent Application entitled "Hydraulically Settable Containers."

88. South Korean Patent Application entitled "Hydraulically Settable
Containers."

89. New Zealand Patent Application entitled "Hydraulically Settable
Containers."

A-7

<PAGE>

90. Russian Federation Patent Application entitled "Hydraulically Settable
Containers."

A-8

<PAGE>

EXHIBIT "B"

MOLDABLE COMPOUND TECHNOLOGY

A. ISSUED UNITED STATES LETTERS PATENTS

B. PENDING UNITED STATES PATENT APPLICATIONS

1. U.S. Patent Application entitled "Inorganically Filled, Starch-Bound
Compositions for Manufacturing Containers and Other Articles Having a
Thermodynamically Controlled Cellular Matrix."

2. U.S. Patent Application entitled "Methods and Systems for Manufacturing
Containers and Other Articles Having a Thermodynamically Controlled
Cellular Matrix From Inorganically Filled, Starch-Bound Compositions."

3. U.S. Patent Application entitled "Compositions and Methods for
Manufacturing Fiber-Reinforced, Inorganically Filled, Starch-Bound Articles
having a Foamed Cellular Matrix."

4. U.S. Patent Application entitled "Articles having Starch-Bound Cellular
Matrix Reinforced with Uniformly Dispersed Fibers."

5. U.S. Patent Application entitled "Methods and Systems for Manufacturing
Articles having Starch-Bound Cellular Matrix Reinforced with Uniformly
Dispersed Fibers."

6. U.S. Patent Application entitled "Starch-Based Compositions having
Uniformly Dispersed Fibers used to Manufacture High Strength Articles
having a Fiber-Reinforced, Starch-Bound Cellular Matrix."

C. ISSUED FOREIGN PATENTS

D. PENDING FOREIGN PATENT APPLICATIONS

7. PCT Patent Application entitled "Methods and Systems for Manufacturing
Packaging Materials, Containers, and Other Articles of Manufacture from
Hydraulically Settable Mixtures and Highly Inorganically Filled
Compositions."

8. Argentine Patent Application entitled "Methods and Systems for
Manufacturing Packaging Materials, Containers, and Other Articles of
Manufacture from Hydraulically Settable Mixtures and Highly Inorganically
Filled Compositions."

B-1

<PAGE>

9. Chilean Patent Application entitled "Methods and Systems for Manufactural
Packaging Materials, Containers, and Other Articles of Manufacture from
Hydraulically Settable Mixtures and Highly Inorganically Filled
Compositions."

10. Chinese Patent Application entitled "Methods and Systems for Manufacturing
Packaging Materials, Containers, and Other Articles of Manufacture from
Hydraulically Settable Mixtures and Highly Inorganically Filled
Compositions."

11. Colombian Patent Application entitled "Methods and Systems for
Manufacturing Packaging Materials, Containers, and Other Articles of
Manufacture from Hydraulically Settable Mixtures and Highly Inorganically
Filled Compositions."

12. Egyptian Patent Application entitled "Methods and Systems for Manufacturing
Packaging Materials, Containers, and Other Articles of Manufacture from
Hydraulically Settable Mixtures and Highly Inorganically Filled
Compositions."

13. Indian Patent Application entitled "Methods and Systems for Manufacturing
Packaging Materials, Containers, and Other Articles of Manufacture from
Hydraulically Settable Mixtures and Highly Inorganically Filled
Compositions."

14. Iranian Patent Application entitled "Methods and Systems for Manufacturing
Packaging Materials, Containers, and Other Articles of Manufacture from
Hydraulically Settable Mixtures and Highly Inorganically Filled
Compositions."

15. Israeli Patent Application entitled "Methods and Systems for Manufacturing
Packaging Materials, Containers, and Other Articles of Manufacture from
Hydraulically Settable Mixtures and Highly Inorganically Filled
Compositions."

16. Mexican Patent Application entitled "Methods and Systems for Manufacturing
Packaging Materials, Containers, and Other Articles of Manufacture from
Hydraulically Settable Mixtures and Highly Inorganically Filled
Compositions."

17. Peruvian Patent Application entitled "Methods and Systems for Manufacturing
Packaging Materials, Containers, and Other Articles of Manufacture from
Hydraulically Settable Mixtures and Highly Inorganically Filled
Compositions."

18. Philippine Patent Application entitled "Methods and Systems for
Manufacturing Packaging Materials, Containers, and Other Articles of
Manufacture from Hydraulically Settable Mixtures and Highly Inorganically
Filled Compositions."

19. Saudi Patent Application entitled "Methods and Systems for Manufacturing
Packaging Materials, Containers, and Other Articles of Manufacture from
Hydraulically Settable Mixtures and Highly Inorganically Filled
Compositions."

B-2

<PAGE>

20. South African Patent Application entitled "Methods and Systems for
Manufacturing Packaging Materials, Containers, and Other Articles of
Manufacture from Hydraulically Settable Mixtures and Highly Inorganically
Filled Compositions."

21. Taiwanese Patent Application entitled "Methods and Systems for
Manufacturing Packaging Materials, Containers, and Other Articles of
Manufacture from Hydraulically Settable Mixtures and Highly Inorganically
Filled Compositions."

22. Venezuelan Patent Application entitled "Methods and Systems for
Manufacturing Packaging Materials, Containers, and Other Articles of
Manufacture from Hydraulically Settable Mixtures and Highly Inorganically
Filled Compositions."

23. Zimbabwean Patent Application entitled "Methods and Systems for
Manufacturing Packaging Materials, Containers, and Other Articles of
Manufacture from Hydraulically Settable Mixtures and Highly Inorganically
Filled Compositions."

24. Georgian Patent Application entitled "Methods and Systems for Manufacturing
Packaging Materials, Containers, and Other Articles of Manufacture from
Hydraulically Settable Mixtures and Highly Inorganically Filled
Compositions."

B-3

<PAGE>

EXHIBIT "C"

ITEMS WITHIN THE DEFINITION OF PRODUCTS:

Beverage containers - Hot and/or cold beverage
- May or may not be insulating
- With or without handles. Includes
collectibles that are disposable/
reusable
- Malt mixing collars
- Single service milk-containing cartons
(16 oz. or less)
- Beverage carriers

Beverage Container Lids All types, including
- no spill
- domed
- sippers

Bowls All shapes, sizes

Cutlery (including - knife, fork, spoon
Sticks/Skewers) - large serving utensils
- chopsticks
- hors d'ouvers picks
- popsicle sticks
- corndog sticks
- shish-kabob skewers
- tooth pricks
- steak markers

Food Containers tubs used for:
- popcorn
- deli salads
- takeout anything
- ice cream
- chicken buckets

C-1

<PAGE>

Portion cups (souffle cups)
- sauces
- condiments
- butter
- candies
- side orders
- pills, medications

Trays used for:
- french fries
- nachos
- tacos
- burritos
- snacks
- hot dogs
- meal service
- vending
- single or multi-compartments

Boxes as used for:
- fry scoops
- popcorn
- chinese takeout
- kid's fun meal
- candy (vending)
- pie wedges
- bulky meals, pies, single compartment
- multi-compartment meals

Boats as used for:
- egg rolls
- ice-cream sundaes
- hot dogs, chili dogs
- hoagies, sub sandwiches
- chicken fingers
- baked potatoes

Cones
- snow cones
- ice cream cone holders
- foods

Food Container Lids All kinds

C-2

<PAGE>

Hinged Lid Containers Clamshells type boxes for specialty or
general food portion or meal carryout
such as:
- hamburgers
- chicken nuggets
- salads
- single or multi-portion meals
- with or without multiple compartments

Plates/Platters - All shapes, including round
- oval
- rectangular
- deep
- with or without compartments
- individual portion or serving sized
- cake/pie plates

Plates/Platters Lids All types including domed, insulating, etc.

Serving Dishes - pitchers
- catering trays
- casserole dishes
- chafing/steam table dishes

EXAMPLES OF ITEMS OUTSIDE THE DEFINITION OF "PRODUCTS":

Baking - pie/cake tins
- muffin/eclair tins
- muffin/eclair cups
- fluted pan liners
- cake circles/squares
- loaf pans
- bundt pans
- casseroles
- cookie/cake sheets
- cake decorating triangles

C-3

<PAGE>

Single or Multiple Portion - cereal boxes/bowls
Packaged Foods - sealed yogurt/desert cups
- sealed soups, stews, chili, pasta
- condiment packs (salt, pepper, catsup,
salsa, relish, etc.)
- a sealed frozen food containers
- egg cartons
- dairy product containers
- produce containers
- meat & deli trays

Aeseptic or Sealed
Packaging

Secondary Packaging - corrugated containers
- paper bags

Sealed Containers for - soft drink cans
Long Term Storage - milk cartons
of Liquids - sealed juice or drink containers

C-4

<PAGE>

EXHIBIT "D"

TRADE SECRETS

The term "Trade Secrets" as used in the Agreement shall include any
technical or business information, any invention, equipment or apparatus, method
or process, technology, know-how, trade secret, drawing, data, evaluation,
specifications, quality and inspection standards, sales literature, report,
business plan, memorandum, market study, customer lists, training materials,
computer program or software (including both source and object code), or any
other document or thing which is in whole or in part confidential, proprietary,
or secret and which is owned or controlled by, licensed or assigned to ECC or
for which ECC has the right to grant licenses thereon during the term of this
Agreement and which relates in whole or in part to any of the following:

1. The compositions, including the variable and preferred parameters for each
component, used in the Products or the Technology based on inorganically
filled cellular composites.

2. The processing steps, including the variable and preferred parameters for
each step, used in the Technology.

3. The equipment and apparatus used in the manufacture of Products.

4. Quality control, testing and research and development data, reports and
information, including patent applications in preparation.

5. Customers and suppliers of the components and equipment of the Technology,
including any agreements.

D-1

<PAGE>

EXHIBIT "E"

SUBLICENSEE PATENT, TRADE SECRET AND PROPRIETARY INFORMATION
RELATING TO THE TECHNOLOGY

None.

E-1

<PAGE>

EXHIBIT "F"

TERRITORY

As used in the appended Agreement, the term "Territory" shall mean all
fifty states of the United States of America and any territories or possessions
of the United States of America. The term "Territory" also shall include
Canada, Mexico, Central America, and the Caribbean islands and nations, subject
to any foreign territory being removed at ECC's option, if Sublicensee has not
commenced commercial production or sales of Products in such foreign territory
prior to January 1, 1999.

F-1

<PAGE>

[EARTHSHELL CONTAINER CORPORATION LETTERHEAD]

June 19, 1995

Dopaco, Inc.
241 Woodbine Road
Downington, Pennsylvania 19335
Attention: Lois Meeth

RE: ECC-DOPACO SUBLICENSE AGREEMENT

Dear Sirs:

This letter, when accepted as provided below, shall constitute an amendment
(this "Amendment") to that certain ECC-Dopaco Sublicense Agreement of even date
herewith (the "Sublicense Agreement"), pursuant to which the parties agree to
amend and supplement the Sublicense Agreement as follows:

1. Referring to subparagraph 5(f) of the Sublicense Agreement, to the
extent ECC elects to grant an exclusive license with respect to the Technology
outside of the Territory (such as, for example, in Japan), ECC shall endeavor to
negotiate with the exclusive licensee to provide a mechanism pursuant to which
major customers (E.G., McDonald's, Burger King and other customers of similar
magnitude) who purchase Products from Sublicensee within the Territory may
export or transship such Products to locations within the territory that is the
subject of such exclusive license.

2. This Amendment shall control in the event of any conflict between the
terms of this Amendment and the terms of the Sublicense Agreement; otherwise,
all of provisions of the Sublicense Agreement shall remain in full force and
effect.

* * *

<PAGE>

If the foregoing is acceptable to you, please indicate your acceptance
hereof by dating and signing the enclosed copy of this letter in the spaces
provided below and returning it to us.

EARTHSHELL CONTAINER CORPORATION

By: /s/ Simon K. Hodson
----------------------------------------
Simon K. Hodson, Chief Executive Officer

AGREED TO AND ACCEPTED
as of June 19, 1995.

DOPACO, INC.

By: /s/ Ed Fitts
---------------------------
Ed Fitts, President

<PAGE>

GENPAK-ECC

SUBLICENSE AGREEMENT

THIS SUBLICENSE AGREEMENT (the "Agreement") is made upon and shall be
effective as of November 9, 1994, by and between EARTHSHELL CONTAINER
CORPORATION, a Delaware corporation ("ECC"), and GENPAK CORPORATION, a
corporation formed and existing under the laws of the State of New York
("Sublicensee").

RECITALS:

A. ECC has the exclusive right to utilize certain Technology (as
defined herein) to manufacture, use and sell, within a certain Field of Use
(as defined herein), certain containers made from inorganically filled
moldable composites and compounds for packaging, storing, portioning,
dispensing, carrying, presenting, serving and consuming food or beverages.

C., Sublicensee desires to obtain from ECC a sublicense to utilize the
Technology to manufacture, use and sell certain designated food or beverage
containers within a designated geographical area.

D. ECC is willing to grant a sublicense to Sublicensee upon the terms and
conditions set forth herein.

EXHIBIT 10.15

-1-
<PAGE>
AGREEMENT:

NOW, THEREFORE, in consideration of the foregoing Recitals, the
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties covenant and agree as follows:

1. DEFINITIONS. The capitalized terms used in this Agreement shall have
the meanings set forth below:

(c) The term "Design Improvement" shall mean any improvement to the
physical shape, ornamental design or configuration of Products.

-2-
<PAGE>

(d) The term "Field of Use" shall mean (i) the use and sale of
Products in the food service and restaurant industry, (ii) the use and sale
of Products in other retail establishments selling Products (E.G., grocery
stores, convenience stores, food warehouses, and the like), but only with
respect to Products that have been introduced into the food service and
restaurant industry by a customer of an ECC sublicensee (including any
Affiliates) that operates retail outlets in the food service and restaurant
industry in at least six locations, (iii) the incidental use and sale in any
manner of those Products which are manufactured by Sublicensee hereunder
where the predominant use is within the food service and restaurant industry,
and (iv) the sale of Products to distributors and wholesalers for resale and
use in retail outlets in the food service and restaurant industry and,
subject to cause (ii) above, in retail establishments. As used in this
subparagraph, the term "food service and restaurant industry" is intended to
include any facility (whether commercial, nonprofit, governmental, or other),
including vending machines wherever located, where food or beverages are (x)
sold for consumption on the premises or (y) packaged for take-out in single
or multiple portions intended for immediate or same day consumption off the
premises without substantial additional preparation. By way of example, the
term "food service and restaurant industry" includes such facilities as
eating establishments, diners, dining rooms, dine-in restaurants, cafes,
cafeterias, including institutional cafeterias, coffee shops, delicatessens,
quick service restaurants, take out restaurants, snack bars, cocktail lounges,
bars, saloons, night clubs, cabarets, sports arenas and the like, and their
distributors, brokers and wholesalers, but does not include other food
industry facilities outside of the food service and restaurant industry (such
as packaging for pre-packaged foods in food processing facilities, grocery
stores, and food distributors, brokers and wholesalers) except as
specifically provided in clause (ii) of this subparagraph. As used in this
subparagraph, the term "incidental use and sale" shall encompass Products
designed for and predominantly used in the

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<PAGE>

food service and restaurant industry but which, beyond the control or reasonable
ability of Sublicensee to properly account for their end-use, ultimately are
used or sold outside of the Field of Use.

(e) The term "Moldable Compound Technology" shall mean all of the
confidential, secret, or proprietary technology involving inorganically filled
composites, including moldable compounds (both foam and non-foam applications),
articles manufactured from inorganically filled composites, the compositions and
uses of such inorganically filled composites or articles made therefrom, and
apparatus and methods for manufacturing same, which are described or claimed in
(i) any of the patents or patent applications listed in Exhibit "B" hereto,
including without limitation, any continuations, divisionals or continuations-
in-part, reissues and extensions thereto, any patents issued therefrom, and (ii)
any future patent applications under the Patent Cooperation Treaty, any future
European Patent applications, and/or any future national patent applications in
or for any country that are based on any of the applications listed in Section B
or D of Exhibit "B" hereto, and any patents issued therefrom.

(f) The term "Net Sales Price" shall mean the gross invoice price
charged by Sublicensee, or its Affiliate as applicable, in the sale of a Product
to a non-Affiliate reduced by (i) any credit allowed by Sublicensee for the
return of the Product; (ii) trade, quantity and cash discounts allowed by
Sublicensee; (iii) excise, value added and sales taxes actually paid by
Sublicensee on the Product; and (iv) freight charges actually paid by
Sublicensee for the shipment and delivery of the Product. In the case of non-
cash consideration, "Net Sales Price" shall be the fair market value of all non-
cash consideration actually received by Sublicensee or its Affiliate for such
Product. The "Net Sales Price" of Products set aside for Sublicensee's own use,
or sold or transferred to an Affiliate or set aside for the Affiliate's own use,
shall be deemed to be the price then charged

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to unrelated parties in arms-length transactions for such Products in similar
quantities and under similar terms of sale.

(h) The term "Product Improvement" shall mean any improvement
or change, irrespective of whence derived, relating in whole or in part to
the composition, formulation or use of a Product or the Technology, including
any improvement, development or change relating to a Product by process
(I.E., any change in the processing of a Product which yields a materially
different Product), such as a change in chemical composition, change in
physical characteristics or properties brought about by substitution or
replacement of elements or components, change in method of formulation,
change in rheology, etc. The term "Product Improvement" shall not include
improvements to the physical shape, ornamental design, or configuration of
Products (hereinafter "Design Improvements").

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<PAGE>

is not already known by ECC (unless ECC's prior knowledge is pursuant to a
confidentiality agreement with Sublicensee) or in the public domain.

(j) The term "Technology" shall refer collectively to the Core
Technology, the Moldable Compound Technology and the Trade Secrets.

(k) The term "Territory" shall mean that certain geographic
territory described in Exhibit "F" hereto. Upon written notice to ECC that
Sublicensee services, or intends to expand its business to service,
geographic areas outside of the Territory and that Sublicensee desires to
commercialize Products in such additional geographic areas, which notice
shall include evidence of such intent reasonably satisfactory to ECC, ECC
shall cooperate in amending this Agreement to include such additional
geographic areas by amending Exhibit "F" hereto; provided, however, that the
parties must first reach an agreement as to the royalty rate that shall apply
to such additional geographic area and provided further that ECC shall have
no obligation to grant rights to Sublicensee in any country in which (i) ECC
has already granted to a third party an exclusive license of the Technology
or (ii) it is necessary or desirable for ECC to enter into an exclusive
license with a citizen of the country at issue due to monetary restrictions
or other legal, tax or business considerations under the local laws of such
country.

(l) The term "Trade Secrets" shall mean the proprietary information
of ECC that is related to the Technology and which is described in Exhibit "D"
hereto or which is delivered to Sublicensee by ECC and marked "Confidential",
but only to the extent that such proprietary information is directly utilized in
the manufacture, use, or sale of Products.

2. THE SUBLICENSE.

(a) Subject to the terms and conditions set forth in this Agreement,
ECC hereby grants to Sublicensee a non-exclusive, royalty-bearing sublicense
(the "Sublicense") to use the

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Technology to make, use, sell and otherwise commercialize the Products solely
within the Territory and solely within the Field of Use.

(c) ECC is free to grant additional sublicenses to other third
parties to utilize the Technology to make, use and sell Products in the Field of
Use and in the Territory.

(d) Nothing in this Agreement shall be construed to
constitute a grant by ECC to Sublicensee of rights broader than that which
ECC is entitled to grant under its license from ECC's licensor of the
Technology (hereinafter referred to as "Licensor"). If and to the extent it
is determined that Sublicensee is selling, or desires to sell, Products
outside of the Field of Use (as defined in the master license agreement
between ECC and its Licensor) granted to ECC by its Licensor, then it is
understood and agreed that Sublicensee must obtain an appropriate license
from, and pay royalties directly to, ECC's Licensor.

3. ROYALTIES

(a) As consideration for the grant of the Sublicense,
Sublicensee shall pay to ECC a royalty (the "Royalty") of twenty-two percent
(22%) of the Net Sales Price for each Product sold by Sublicensee during the
term of this Agreement.

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<PAGE>

(b) Sublicensee shall be deemed to have "sold" a Product, and
ECC shall be deemed to have earned the Royalty, upon the earliest date that
Sublicensee actually ships, delivers, or invoices the Product to any person,
firm or entity other than an Affiliate of Sublicensee, or upon the earliest
date that Sublicensee sets such Product aside for Sublicensee's own use. For
Products transferred to an Affiliate, Sublicensee shall be deemed to have
"sold" the Product, and ECC shall be deemed to have earned the Royalty, upon
the earliest date that the Affiliate to whom the Product was transferred
either (i) sets aside such Product for an Affiliate's own use, or (ii) ships,
delivers or invoices such Product to any person, firm or entity which is not
an Affiliate of Sublicensee.

(c) Notwithstanding subparagraph (a) of this paragraph, during
the first three years of the term of this Agreement ECC shall be sensitive to
Sublicensee's ability to produce Products profitably under this Agreement. If,
during the first three years of the term of this Agreement, Sublicensee
demonstrates to ECC's reasonable satisfaction that a material change in
circumstance has occurred affecting Sublicensee's ability to produce Products
profitably under this Agreement, ECC shall cooperate with Sublicensee in
negotiating such adjustments as may be commercially reasonable under the
circumstances. If the parties are unable, in good faith, to reach an agreement
as to a mutually acceptable adjustment, then the matter may be referred to
arbitration under paragraph 32 hereof. By way of example, a "material change in
circumstance" may include a significant and unexpected increase in the cost of
one or more of the raw materials required for the manufacture of the Products.

(d) Between the third and fourth anniversaries of the
effective date this Agreement, the parties shall jointly review and evaluate
the continued benefit of the advertising allowance set forth in subparagraph
20(b) hereof and the economic impact thereof and shall cooperate in
negotiating such adjustments as are commercially reasonable under the
circumstances.

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<PAGE>

If the parties are unable to agree as to the need for, or the nature or amount
of, such an adjustment, then the matter may be referred to arbitration under
paragraph 32 hereof.

4. PAYMENT OF THE ROYALTY.

(a) Within sixty (60) days after the fina1
day of each calendar month
(or fiscal month if Sublicensee is reporting on a fiscal basis) which occurs
during the term of this Agreement (a "Month"), Sublicensee shall pay to ECC the
Royalty earned on all Products sold by Sublicensee during such Month. Each
Royalty payment shall be accompanied by a written report (the "Royalty Report")
prepared by Sublicensee and certified as accurate by the appropriate financial
officer of Sublicensee. Each Royalty Report shall set forth, for the Month
covered by the Royalty Report, (i) the number of each of the Products sold by
the Sublicensee, (ii) the Net Sale for each of such Products, and (iii)
reductions to the Net Sales Price for applicable returns, discounts, freight
charges, bad debts/uncollected accounts and taxes with respect to the Products.

(c) Failure to make payment when due of any Royalty hereunder is a
breach of a material obligation of Sublicensee and may result in the termination
of this Agreement.

5. SUBLICENSEE COVENANTS.

Sublicensee hereby covenants:

(a) not to utilize the Technology except strictly in accordance with
the terms and conditions set forth in this Agreement;

(b) to utilize the Technology solely in connection with the
manufacture, marketing, distribution, use and sale of the
Products;

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<PAGE>

(c) not to utilize the Technology for any purpose other than the
manufacture, marketing, distribution, use and sale of the
Products;

(d) not to manufacture, market, distribute, use and sell Products
except in strict accordance with the terms and conditions of this
Agreement;

(e) to manufacture, market, distribute, use and sell Products solely
within the Territory;

(f) not to market, distribute or sell any Product to any person, firm
or entity outside the Territory, or to any person, firm or entity
within the Territory if Sublicensee knows or has reason to
believe that such person, firm or entity intends to make or sell
the Product in question outside the Territory;

(g) to market, distribute, use and sell Products solely within the
Field of Use; and

(h) not to market, distribute, use or sell Products outside of the
Field of Use.

Any breach by Sublicensee of any one or more of the foregoing covenants shall
constitute a breach by Sublicensee of a material obligation under this
Agreement.

6. RIGHT TO AUDIT.

(a) Sublicensee shall keep and maintain complete and accurate
records concerning the manufacture and sale of the Products. ECC or its
designee (the "Representative") shall have the right, at ECC's expense, to
periodically review those records and operations of Sublicensee which deal
with the design, manufacture, shipment or sale of the Products or with
Product Improvements or Process Improvements developed by Sublicensee. Such
reviews may take place only during the normal business hours of Sublicensee
and only upon written notice to Sublicensee given at least three (3) business
days prior to such review. The Representative conducting such review shall
be required to execute a confidentiality agreement pursuant to which the
Representative shall agree that it will not disclose or use the information
obtained pursuant to such review to or for the benefit of any person or
entity except ECC unless required to do so in connection with the resolution
of any dispute concerning any payment required by this Agreement.

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<PAGE>

(b) ECC shall give written notice to Sublicensee of any dispute as to
proper payment of any Royalty due hereunder. If the parties are unable to
resolve any disputes raised by ECC in the notice to Sublicensee within (30) days
from the date of such notice, then the dispute shall be submitted to arbitration
or mediation for resolution as provided under this Agreement.

7. IMPROVEMENTS TO THE TECHNOLOGY.

(a) PRODUCT IMPROVEMENTS. If, while the Sublicense remains in
effect, Sublicensee should develop any Product Improvement, Sublicensee shall
notify ECC of such Product Improvement within a reasonable time of, and in no
event more than ninety (90) days after, its development and shall provide ECC
with access to all information concerning such Product Improvement as ECC
shall reasonably request; provided, however, that all such information shall
be confidential and shall be subject to all restrictions on disclosure as set
forth in this Agreement. Sublicensee shall assign to ECC all rights, title
and interest in the Product Improvement for an assignment fee of $1,000.00,
and ECC shall grant back to Sublicensee the non-exclusive right to utilize
the Product Improvement within the Field of Use and within the Territory as
if such Product Improvement were originally within the scope of the
Sublicense. There shall be no royalty charged to Sublicensee for the right
to utilize the Product Improvement. For a period of (i) one year from the
date of commercialization of such Product Improvement, or (ii) two years from
the date of the development of such Product Improvement, whichever is
shorter, ECC shall not grant any right to utilize the Product Improvement
within the Field of Use to any third party within the Territory. The failure
of Sublicensee to disclose any such Product Improvement to ECC within the
time period set forth above shall constitute a material breach of this
Agreement.

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<PAGE>

(b) PROCESS IMPROVEMENTS. If, while the Sublicense remains in
effect, Sublicensee should develop any Process Improvement, then Sublicensee
shall notify ECC of such Process Improvement within a reasonable time of, and
in no event more than ninety (90) days after, its development and shall
provide ECC with access to all information concerning such improvements as
ECC shall reasonably request; provided, however, that all such information
shall be confidential and shall be subject to all restrictions on disclosure
as set forth in this Agreement. For a single lump sum payment of $1,000.00
by ECC to Sublicensee, Sublicensee shall grant to ECC an exclusive, fully
paid-up license (including the right to further sublicense and/or assign its
rights to ECC's Licensor) to utilize the Process Improvement in connection
with the Product and/or the Technology (i) outside of the Territory and (ii)
within the Territory, outside of the Field of Use. The license granted to
ECC under this subparagraph 7(b) shall be irrevocable and shall survive
termination or expiration of this Agreement for any reason whatsoever. The
failure of Sublicensee to disclose any such Process Improvement to ECC within
the time period set forth above shall constitute a material breach of this
Agreement.

(d) PATENT RIGHTS FOR PROCESS IMPROVEMENTS. Sublicensee shall have
the right to seek patent protection for any Process Improvement at its own cost
and expense. ECC shall provide

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<PAGE>

Sublicensee or its assignee with such assistance as may be reasonably
requested, from time to time, in connection with such efforts, including the
execution of any documents necessary to obtain and maintain such patent
protection; provided, however, that Sublicensee or its assignee will
reimburse ECC for any out-of-pocket expenses reasonably incurred by ECC in
providing such assistance. Sublicensee shall keep ECC informed of the status
of the prosecution of each patent application that Sublicensee elects to
pursue and shall consult with ECC on all material aspects of such
application, although all final decisions in regard to a patent application
shall remain within the sole discretion of Sublicensee. In the event
Sublicensee elects not to seek patent protection for a Process Improvement,
Sublicensee shall promptly notify ECC in writing, and ECC shall have the
option, for a period of ninety (90) days after its receipt of such written
notice, to acquire by assignment from Sublicensee all rights, title and
interests in and to the Process Improvement in question, including the right
to seek patent protection in ECC's name or its designee, in consideration of
a single lump-sum payment of One Thousand Dollars ($1,000.00). In the event
ECC exercises the option provided for in the preceding sentence, Sublicensee
shall provide to ECC or its designee such assistance as may reasonably be
requested, from time to time, in connection with ECC's or its designee's
efforts to obtain protection of the Process Improvement in question,
including the execution of any documents necessary to obtain and maintain
such patent protection; provided, however, that ECC or its assignee will
reimburse Sublicensee for any out-of-pocket fees and expenses reasonably
incurred by Sublicensee in providing such assistance.

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<PAGE>

shall remain the exclusive property of Sublicensee. All Sublicensee Proprietary
Property shall be subject to the conditions and obligations of confidentiality
which apply to all confidential and proprietary information of the respective
parties hereto as required under this Agreement. Except for any developments,
improvements or modifications to the Sublicensee Proprietary Property which are
Product or Process Improvements which are otherwise governed by this Agreement,
ECC shall not acquire any right, title, interest or license in any of the
Sublicensee Proprietary Property as a result of this Agreement, or as a result
of any dealings between the parties pursuant to this Agreement. Any proprietary
information or technology relating to the Products and/or the Technology and not
set forth in Exhibit "E" hereto shall be subject to the terms and conditions of
this Agreement governing Product Improvements and Process Improvements unless
such proprietary information or technology is in the public domain or in the
possession of ECC.

(f) IMPROVEMENTS TO PRODUCT CONFIGURATION. Sublicensee shall own the
rights to any Design Improvements that may be developed by Sublicensee during
the term of this Agreement.

(g) ECC DEVELOPED AND JOINTLY DEVELOPED PRODUCT, PROCESS AND DESIGN
IMPROVEMENTS. Any Product Improvements, Process Improvements or Design
Improvements developed by ECC during the term of this Agreement (hereinafter
referred to as "ECC Improvements") and any Product Improvements, Process
Improvements or Design Improvements developed jointly by ECC and Sublicensee
during the term of this Agreement (hereinafter referred to as "Jointly Developed
Improvements") shall be owned by ECC and, except as otherwise provided in this
Agreement, may be disclosed and/or licensed by ECC to third parties at ECC's
discretion. For a period of (i) one year from the date of commercialization of
any Jointly Developed Improvement, or (ii) two years from the date of the
development of the Jointly Developed Improvement, whichever is shorter, ECC
shall not grant any right to utilize the Jointly Developed

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<PAGE>

Improvement within the Field of Use to any third party within the Territory.
Any Jointly Developed Improvements shall be deemed to be licensed to Sublicensee
under this Agreement, shall be deemed to be included within the definition of
Technology, and shall be subject to all of the terms, conditions and
restrictions of this Agreement applicable to the Technology.

(h) DISCLOSURE OF PRODUCT IMPROVEMENTS AND PROCESS IMPROVEMENTS.
ECC shall promptly disclose to Sublicensee (i) all Product Improvements and all
Process Improvements that may be developed solely by ECC during the term of this
Agreement and (ii) unless contractually restricted from doing so by any
agreement ECC may have with a third party, all Product Improvements and all
Process Improvements that may be developed jointly by ECC and a third party or
otherwise acquired by ECC or licensed to ECC (along with the right to sublicense
such improvements) during the term of this Agreement. All such Product
Improvements and Process Improvements that may be disclosed by ECC to
Sublicensee pursuant to this subparagraph shall be deemed to be licensed to
Sublicensee under this Agreement, shall be deemed to be included within the
definition of Technology, and shall be subject to all of the terms, conditions
and restrictions of this Agreement applicable to the Technology.

8. INFRINGEMENT.

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<PAGE>

receive, from time to time, full and complete information from ECC concerning
the status of such suit, (ii) have the right, at Sublicensee's own expense,
to be represented therein by counsel in an advisory capacity, and (iii)
cooperate fully with ECC and provide whatever assistance is reasonably
requested by ECC in connection with such suit, including the preparation and
signing of documents. If ECC decides not to bring suit to enjoin an alleged
infringement either because it is deemed inadvisable or DE MINIMIS, no such
action will be required by ECC; however, ECC's Licensor shall, at its own
cost and expense, have the right, but not the obligation, to bring suit to
enjoin such infringement and to recover damages therefore. In the event
ECC's Licensor elects to bring suit, Sublicensee's rights and obligations
hereunder shall be the same as if ECC had undertaken to enjoin such
infringement. In the event the action taken by ECC or its Licensor is not
satisfactory to Sublicensee, then Sublicensee shall have the right, at its
sole cost, to take whatever action it deems appropriate in its own name
against an alleged infringer. Additionally, ECC and its Licensor shall (i)
have the right to consult with Sublicensee prior to Sublicensee pursuing
legal action against a potential infringer and thereafter shall have the
right to receive, from time to time, full and complete information from
Sublicensee concerning any actions Sublicensee has taken against an allege
infringer, and (ii) have the right, at ECC's or its Licensor's, as applicable,
own expense, to be represented by counsel in an advisory capacity in any
legal proceedings initiated by Sublicensee.

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<PAGE>

shall select and control counsel for the prosecution of such suit. ECC shall
(i) have the right to receive, from time to time, full and complete information
from Sublicensee concerning the status of such suit, (ii) have the right, at
ECC's own expense, to be represented therein by counsel in an advisory capacity,
and (iii) cooperate fully with Sublicensee and provide whatever assistance is
reasonably requested by Sublicensee in connection with such suit, including the
preparation and signing of documents. If Sublicensee decides not to bring suit
to enjoin an alleged infringement of Sublicensee owned Process Improvements
either because it is deemed inadvisable or DE MINIMIS, no such action will be
required by Sublicensee. In the event the action taken by Sublicensee is not
satisfactory to ECC, then ECC shall have the right but not the obligation, at
its sole cost, to take whatever action it deems appropriate in its own name
against an alleged infringer. Additionally, Sublicensee shall (i) have the
right to consult with ECC prior to ECC pursuing legal action against a potential
infringer and thereafter shall have the right to receive, from time to time,
full and complete information from ECC concerning any actions ECC has taken
against an alleged infringer, and (ii) have the right, at Sublicensee's own
expense, to be represented by counsel in an advisory capacity in any legal
proceedings initiated by ECC with respect to infringement of Sublicensee owned
Process Improvements.

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ECC shall reimburse Sublicensee for all out-of-pocket costs, excluding
attorney fees except as pre-approved by ECC, incurred by Sublicensee in
connection with such action by allowing a credit or offset against the
Royalty due hereunder. Sublicensee shall have the right to be represented in
such suit or action only in an advisory capacity. If ECC decides not to
assume the defense of infringement lawsuit described in the subparagraph,
then ECC's Licensor shall have the right, but not the obligation, to do so.
In the event ECC's Licensor elects to assume the defense, Sublicensee's
obligations shall be the same as if ECC were assuming the defense of such
litigation. If ECC's Licensor does not assume defense of such litigation,
then Sublicensee shall have the right, but not the obligation, at
Sublicensee's own cost and expense, to assume the defense of such lawsuit
utilizing legal counsel of its choice.

(d) If, as the result of any lawsuit referred to in the preceding
subparagraph, Sublicensee is required by final court order from which no appeal
can be taken (or by a court order which ECC's legal counsel believes has no
reasonable likelihood of success for modification on appeal) to obtain a license
under any third party's patent not licensed hereunder in order to continue with
Sublicensee's activities as contemplated by this Agreement, and to pay a royalty
under such license, and the infringement of such patent cannot reasonably be
avoided by Sublicensee, the future payment of the Royalty shall thereafter be
reduced by an amount equal to 100% of any fee or royalty payable by Sublicensee
under such additional license, but in no event shall the Royalty be reduced to
an amount less than zero, as long as the infringement was due to the Technology
licensed hereunder. In addition, if Sublicensee settles and infringement action
referred to in the foregoing subparagraph, after obtaining the prior written
consent of ECC (which shall not be unreasonably withheld), and pursuant to such
settlement Sublicensee obtains a license under any patent not licensed
hereunder, to make, use or sell the Products in any manner contemplated by this
Agreement,

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<PAGE>

and agrees to pay a royalty under such license, and the infringement of such
patent cannot reasonably be avoided by Sublicensee, the Royalty shall thereafter
be reduced by an amount equal to 100% of the sum payable by Sublicensee pursuant
to such settlement, but in no event shall the Royalty be reduced to an amount
less than zero, as long as the settlement was for claims of infringement due to
the Technology licensed hereunder.

9. ADDITIONAL DUTIES OF THE SUBLICENSEE. In addition to, and not in
limitation of, the other duties and obligations of the Sublicensee, as set forth
in this Agreement, Sublicensee shall:

(b) Continue to make all required payments under this
Agreement to ECC during any challenge of the validity of any of the patents
(or claims thereof) issued in connection with the Technology. In the event
Sublicensee terminates such payments based upon or in connection with such a
challenge, ECC may at its option terminate this Agreement upon written notice
to Sublicensee. Notwithstanding the foregoing, if ECC or its Licensor does
not assume the defense of any litigation set forth in subparagraph 8(c) and
Sublicensee does assume the defense of such litigation, all Royalty payments
due during the pendency of such litigation shall be paid into a mutually
agreeable escrow, and such Royalty payments shall be held in escrow until the
litigation becomes final, from which no further appeal can be taken. Once
the litigation is final, the Royalty payments held in escrow shall be paid to
ECC less an amount equal to any damage or loss Sublicensee sustained as a
result of the litigation, excluding attorney fees and costs, which amounts
shall be paid to Sublicensee.

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<PAGE>

(c) If Sublicensee is a publicly traded corporation or is
otherwise required to publicly disseminate its financial statements, Sublicensee
shall provide ECC with annual financial reports of Sublicensee which are
published and detail Sublicensee's annual earnings and statement of net worth
for the preceding calendar or fiscal year. If Sublicensee is required to file
financial reports with the S.E.C., then Sublicensee may provide ECC with copies
of those financial reports required to be filed with the S.E.C., in lieu of the
foregoing.

(d) Forty-five (45) days after the final day of each of
Sublicensee's calendar or fiscal quarter end (the "Quarter"), Sublicensee shall
deliver to ECC a written report (the "Development Report"), which shall set
forth, in reasonable detail, the scope and results of all research and
development activities relating to the Technology and/or Products undertaken by
Sublicensee during the Quarter which report shall also set forth, in reasonable
detail, a description of all marketing activities for the Products undertaken
during the Quarter by Sublicensee. The Development Reports shall be certified
as correct and accurate by an appropriate officer of Sublicensee.

10. REPRESENTATIONS AND WARRANTIES OF ECC. ECC hereby represent and
warrants to Sublicensee that:

(a) ECC is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. ECC has all requisite
corporate power and authority to own, operate and lease its properties and to
carry on its business as now being conducted, and is duly qualified to do
business in every jurisdiction wherein the nature of the business conducted or
the assets owned or leased by it make such qualification material to the conduct
of its business.

(b) ECC has all requisite corporate power and authority to enter
into this Agreement and to perform its obligations hereunder, including but not
limited to the right to

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<PAGE>

sublicense the Technology. This Agreement has been duly and validly authorized,
executed and delivered by ECC and, assuming the due authorization, execution and
delivery by Sublicensee, is the legal, valid and binding obligation of ECC,
enforceable against it in accordance with its terms, subject only to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or affecting
creditors' rights generally and to general principles of equity.

(c) To the best knowledge of ECC, no person, firm or entity has
made any claims or threatened, in writing or otherwise, that ECC is in violation
of or has infringed any patent, patent license, trade name, trademark, service
mark, brand mark, brand name, copyright, know-how, formula or other proprietary
or trade rights of such third party as they relate to the Technology. To the
best of ECC's present knowledge and belief, the use of the Technology in the
manufacture of the Products pursuant to the terms of this Agreement will not
constitute infringement of the proprietary rights of any third party. Except as
provided in this subparagraph, ECC makes no representation or warranty as to the
ownership of validity of the Technology. The license granted to Sublicensee
under this Agreement does not exceed the scope of the rights granted to ECC by
Licensor.

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<PAGE>

provision of ECC's certificate of incorporation or bylaws, or (vi) conflict
with, result in a tortious interference as a result of such conflict with, or
otherwise violate, any material contract or arrangement between ECC and any
other person. The representation and warranty given in this subparagraph shall
not be deemed or construed to expand or modify the representation and warranty
given by ECC in subparagraph 10(c).

(e) Neither ECC, nor anyone acting on its behalf, has taken any
action relating to any broker, finder, consultant or other expert which could
result in the imposition upon the Sublicensee of any obligation to pay a fee to
any broker, finder, consultant or similar expert in connection with the
transactions contemplated hereby.

11. REPRESENTATIONS AND WARRANTIES OF SUBLICENSEE. Sublicensee hereby
represents and warrants to ECC that:

(a) Sublicensee is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York.
Sublicensee has all requisite power and authority to own, operate and lease the
properties and to carry on its business as now being conducted, and is duly
qualified to do business in every jurisdiction wherein the nature of the
business conducted or the assets owned or leased by it make such qualification
material to the conduct of its business.

(b) Sublicensee has all requisite power and authority to enter
into this Agreement and to perform its obligations hereunder. This Agreement
has been duly and validly authorized, executed and delivered by Sublicensee and,
assuming the due authorization, execution and delivery by ECC, is a legal and
binding obligation of Sublicensee, enforceable against it in accordance with its
terms, subject only to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights generally and to general
principles of equity.

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(c) To the best knowledge of the Sublicensee, the execution,
delivery and performance of this Agreement by Sublicensee and the consummation
by it of the transactions contemplated hereby will not (i) constitute a
violation (with or without the giving of notice or lapse of time) of any
provision of applicable law, (ii) require any consent, approval or authorization
of any person or governmental authority, (iii) result in a default under,
acceleration or termination of, or the creation in any party of the right to
accelerate, terminate, modify or cancel, any agreement, lease, franchise,
permit, note or other restriction, encumbrance, obligation or liability to which
Sublicensee is a party or by which it is bound or to which any of its assets are
subject, (iv) result in the creation of any lien or encumbrance upon
Sublicensee's assets, (v) conflict with, result in the breach of, or constitute
a default under any provision of Sublicensee's charter documents, or (vi)
conflict with, result in tortious interference as a result of such conflict
with, or otherwise violate, any contract or arrangement between ECC and any
other person.

(d) Neither Sublicensee, not anyone acting on its behalf, has
taken any action relating to any broker, finder, consultant or other expert
which could result in the imposition upon ECC of any obligation to pay a fee to
any broker, finder, consultant or similar expert in connection with the
transactions contemplated hereby.

12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the parties, as set forth herein, shall be true and accurate
as of the effective date of this Agreement, and shall survive the execution of
this Agreement.

13. DISCLAIMER OF WARRANTIES

NEITHER ECC NOR ITS LICENSOR MAKE OR GIVE, AND THEY HEREBY EXPRESSLY
DISCLAIM ANY AND ALL WARRANTIES, WHETHER EXPRESS OR IMPLIED, WRITTEN OR ORAL,
INCLUDING BUT NOT LIMITED TO THE WARRANTIES

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OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR PURPOSE, IN REGARD TO THE
TECHNOLOGY AND/OR ANY PRODUCTS WHICH MAY BE MANUFACTURED, USED OR SOLD BY
SUBLICENSEE AND WHICH ARE BASED UPON OR UTILIZE THE TECHNOLOGY.

14. INDEMNIFICATION

(a) ECC shall defend, indemnify and hold Sublicensee harmless
from and against, and hereby assumes liability for the payment of any and all
loss, liability or damage, and for all costs and expenses (including
reasonable costs of investigation, and reasonable attorneys, accountants, and
expert witness fees) that may be imposed upon, suffered or incurred by, or
successfully asserted against Sublicensee as a consequence of or in
connection with any claim (i) that may be asserted against Sublicensee that
the Technology infringes the valid patent rights of any third party, (ii)
that may be asserted against Sublicensee based on a breach of any
representations or warranties set forth in paragraph 10 hereof, or (iii)
based on the negligence or willful misconduct of ECC. However, ECC's
liability to Sublicensee for any matter arising under this Agreement or any
claims asserted against Sublicensee which relate, in whole or in part, to the
Technology, shall be limited to the total amount of all Royalties paid to ECC
by Sublicensee under this Agreement for (x) the 24-month period preceding the
date that Sublicensee suffered a loss requiring indemnification by ECC under
this subparagraph or (y) in the case of patent infringement litigation
brought by a third party against Sublicensee, the period from the date
written notice of such infringement is received by Sublicensee to the date
final judgment is entered, whichever is longer.

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<PAGE>

reasonable attorneys, accountants, and expert witness fees) that may be imposed
upon, suffered or incurred by, or successfully asserted against ECC or its
Licensor as a consequence of or in connection with any claim or liability, other
than those expressly set forth in subparagraph 14(a) hereof, arising out of or
as a consequence of this Agreement, included, but not limited to, any product
liability claims that may be asserted against ECC or its Licensor in relation to
any Products manufactured, marketed, distributed, used and/or sold by
Sublicensee pursuant to this Agreement. In the event any action, suit or
proceeding is brought against ECC or its Licensor with respect to which there
may be indemnification pursuant to this subparagraph, the defense of such
action, suit or proceeding (including all settlements and arbitrations, trials,
appeals or other proceedings) shall be conducted by Sublicensee at its sole cost
and expense through legal counsel selected by Sublicensee. ECC and its Licensor
shall have the right to participate in such defense at their own expense through
legal counsel of their choice. If Sublicensee fails to defend any such action,
suit or proceedings, for any reason, such failure shall constitute a material
breach of this Agreement by Sublicensee, and ECC or its Licensor may undertake
defense of such action, suit or proceeding, through legal counsel of their
choice at the sole cost and expense of the Sublicensee (provided such legal
costs and expenses are reasonable under the circumstances). The parties shall
make available to one another, their legal counsel and accountants, all
information and documents reasonably available to them which relate to such
action, suit or proceeding and shall render such other assistance as they may
reasonably require of one another in order to insure proper and adequate defense
of any such action, suit or proceeding.

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$100,000 (U.S. Dollars), at which time the indemnifying party shall be obligated
to pay the indemnified party the full amount of all indemnified losses,
including such initial $100,000 (U.S. Dollars) in losses. The amount of
indemnity payable pursuant to this paragraph shall be calculated after giving
affect to any insurance proceeds actually received by the indemnified party
provided that neither party shall subrogate to any insurance carrier any rights
or claims which it may have against the other party.

(d) The obligations set forth in this paragraph 14 shall survive the
expiration or termination of the Agreement for any reason whatsoever.

15. PRODUCT LIABILITY INSURANCE. In addition to the indemnification
provided under subparagraph 14(b) hereof, Sublicensee shall obtain, and shall
maintain during the entire term of this Agreement, a product liability
insurance policy with a reputable insurance carrier reasonably acceptable to
ECC. For United States carriers, such carriers must have an A.M. Best rating
of "A-VI" or better. Such policy shall provide Sublicensee with product
liability coverage with minimum liability coverage in the amount of
$1,000,000.00 (U.S. Dollars) aggregate and $1,000,000.00 (U.S. Dollars) per
occurrence. Such product liability insurance policy shall provide that ECC
will be given thirty (30) days prior written notice of any amendment or
modification that would reduce or change coverage under, or termination or
cancellation of, the policy. Upon ECC's request, Sublicensee shall provide
ECC with a copy of such policy and of all amendments or modifications
thereto. Sublicensee shall be required to obtain and maintain the product
liability insurance policy called for by the provisions of this subparagraph
only from and after the date of the first commercial sale of a Product by
Sublicensee, or the first public testing of a Product by Sublicensee. If
Sublicensee has a net worth in an amount satisfactory to ECC, then
Sublicensee shall not be required to obtain and maintain the product
liability insurance required in this subparagraph; however, Sublicensee shall

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be required to reimburse ECC or its Licensor for any loss suffered by ECC or its
Licensor which would have been covered under the product liability insurance
policy Sublicensee otherwise would have been required to obtain under this
subparagraph.

16. CONFIDENTIALITY.

(a) Sublicensee acknowledges that ECC claims that the Technology,
as it may exist from time to time, as well as the other confidential or
proprietary information (including business and financial information) of ECC
(whether owned by ECC or acquired by license from third parties) are and
shall remain the valuable, special, unique and proprietary assets of ECC, and
shall constitute "Confidential Information" hereunder. In order for any
information other than the Technology to be deemed to be "Confidential
Information" hereunder, whether disclosed orally or in writing, it must be
identified, orally or in writing, to Sublicensee as "Confidential
Information" at time of disclosure, or reasonably thereafter, or be
reasonably understood by Sublicensee to be "Confidential Information."
Additionally, as used herein, "Confidential Information" shall not include
any information or data which Sublicensee can show: (i) is in, or becomes a
part of, the public domain by any means other than the failure by Sublicensee
to fulfill its obligations hereunder; or (ii) is rightfully known to
Sublicensee at the time of disclosure by ECC; or (iii) is, at any time,
disclosed to Sublicensee by a third party who has received and disclosed such
information without the breach of any obligation of confidentiality to ECC or
to any third party assignor of such Confidential Information. For purposes
of this subparagraph, information shall not be deemed to be a part of the
public domain or in Sublicensee's knowledge merely because it may be embraced
in a more general disclosure or simply because it may be derived from
combinations of disclosures or information generally available to the public
or within Sublicensee's knowledge. The parties acknowledge that disclosure
to Sublicensee of Confidential Information will be necessary in order

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to enable Sublicensee to utilize the Sublicense in the manner contemplated by
this Agreement, and ECC will make such disclosures of the Confidential
Information to Sublicensee as it is necessary, required or appropriate in
that regard. The parties acknowledge that they have a confidential
relationship with one another and, accordingly, Sublicensee shall maintain
all Confidential Information disclosed to it pursuant to this Agreement in
confidence and shall not disclose the same to any third party (with the
exception of its employees, accountants, attorneys and other agents and
professional advisors) either during or after the term of this Agreement
unless required to do so by court order or by law, in which case Sublicensee
shall notify ECC, in writing, prior to making such disclosure and shall
cooperate with ECC to preserve and protect the confidentiality of the
Confidential Information in question to the fullest extent possible.
Additionally, except as specifically contemplated by this Agreement,
Sublicensee shall not utilize any Confidential Information for its own
benefit or for the benefit of any third party. Prior to making any permitted
disclosure of any Confidential Information to its employees, accountants,
attorneys and other agents and professional advisors, Sublicensee shall use
commercially reasonable efforts to require such persons, firms, or entities
to execute and deliver written disclosure agreements which shall obligate
such persons, firms, or entities to comply with the same obligations of
confidentiality and non-use as imposed upon Sublicensee in this subparagraph.
The obligation of confidentiality as it relates to the Confidential
Information shall survive the termination of this Agreement and continue
unabated until the expiration of the last patent, including any extensions,
reissues, or continuations thereof, which has been or may be issued with
respect to the Technology.

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technology (the "Sublicensee Confidential Information"). The definition of
"Sublicensee Confidential Information," and ECC's use and disclosure thereof,
shall be governed by terms and conditions identical to those which govern
Confidential Information, as set forth in the preceding subparagraph; provided,
however, that ECC shall have the right to disclose Sublicensee Confidential
Information to ECC's Licensor subject to its accepting and treating it as
Confidential Information in writing to Sublicensee.

17. TERM AND TERMINATION.

(a) The term of this Agreement shall commence upon the effective date
hereof. Unless sooner terminated as hereinafter provided, this Agreement shall
continue in full force and effect until the expiration of the last material and
substantial patent covering the Technology which is utilized by Sublicensee, or
for so long as Sublicensee produces the Products which utilizes material and
substantial proprietary information or a material and substantial Trade Secret
of ECC; provided, however, that upon the expiration of the last aforementioned
patent, if Sublicensee desires to continue the Agreement in force, it will be
subject to an appropriate negotiated adjustment to the Royalty Payments or
License Fee. Any dispute as to the term of this Agreement shall be resolved by
arbitration as provided under this Agreement.

(b) Sublicensee may terminate this Agreement, at any time, with or
without cause, upon sixty (60) days prior written notice of such termination to
ECC.

(c) If either party is in breach of any of its material obligations
hereunder, then the non-breaching party may give the breaching party written
notice of such breach. If such breach is not cured within ninety (90) days
after the date such written notice is delivered or, if such default cannot be
cured within such ninety day period but the breaching party has taken action to
cure such default, then if the default is not cured within one hundred eighty
(180) days from the date of the

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original notice, the non-breaching party shall have the right immediately to
terminate the Sublicense by written notice to the breaching party.

(d) Notwithstanding any other provision of this Agreement, ECC shall
have the right, at its sole discretion, to terminate the Sublicensee, upon
thirty (30) days written notice to Sublicensee, in the event that the amount of
the Royalty paid to ECC in any calendar year is not at least the greater of
(i) 50% of the Royalty payment amount for the preceding calendar year, or
(ii)commencing in calendar year 1996, $100,000 (U.S. Dollars). In the event of
termination of this Agreement pursuant to this subparagraph, Sublicensee shall
have the right to sell at market price existing stock and inventory of
manufactured Products for a period of one hundred and eighty days.

(e) For the calendar year 1996 only, if the aggregate royalty
attributable to Sublicensee's sales of Products in calendar year 1996 is less
than $100,000, Sublicensee shall be entitled to pay to ECC the difference
between $100,000 and the royalties attributable to actual Product sales in
calendar year 1996 in order to maintain this Agreement in effect and, in such
event, such difference shall be treated as prepaid royalties that may be
credited against royalties for Products actually sold in calendar year 1997.
In the event any amount is carried over from calendar year 1996 and credited
against royalties due for calendar year 1997 pursuant to this subparagraph,
the minimum royalty set forth in subparagraph 17(d) hereof for the calendar
year 1997 will be $100,000 plus the amount of the carry-over from calendar
year 1996.

18. EFFECT OF EXPIRATION OR TERMINATION.

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19. MARKING.

(a) Where feasible, Sublicensee shall mark the Products and related
documents with the applicable United States patent numbers, as required by
applicable law, or as reasonably instructed by ECC.

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<PAGE>

has not made and does not make any representations that any license is or is not
required in connection with such export or, if required, that such license will
be issued by the United States Department of Commerce; provided, however, that
ECC shall apply for all licenses required or necessary to enable the Sublicensee
to export the Technology within the Territory without imposing any additional
Royalty.

20. TRADEMARKS.

(b) To the extent Sublicensee elects to use the Trademarks on or
in connection with manufacture, marketing, distribution, use and/or sale of
Products hereunder, Sublicensee shall be entitled to receive an advertising
allowance credit equal to Two Percent (2%) of the Net Sale Price of such
Products that bear the Trademarks. To qualify for the aforementioned
advertising allowance credit, Sublicensee shall submit to ECC written
documentation, reasonably satisfactory to ECC, of sales by Sublicensee of
Products that bear the Trademarks, and ECC shall credit the appropriate amount
against future royalties payable by Sublicensee hereunder.

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sold by Sublicensee and bearing any Trademark, Sublicensee shall also include
the following legend: "This product is manufactured by ________________ under
license from EarthShell Container Corporation." To the extent it is not
feasible to include the foregoing legend directly on any Product itself, then
such legend shall appear on the secondary packaging materials in which such
Products are shipped or transported.

(e) All Products produced pursuant to this Agreement bearing
any Trademark shall be produced in compliance with the specifications and
procedures set forth in the ECC Quality Standards Manual, which shall be
provided to Sublicensee within eighteen months from the date of this Agreement.
Sublicensee shall permit ECC to conduct periodic inspections/audits to ensure
compliance with the ECC Quality Standards Manual.

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(f) Should any Product bearing any Trademark that is
manufactured, sold or otherwise commercialized by Sublicensee contain any
material defect in its appearance or function, Sublicensee shall cease any
further manufacture, sale or other commercialization of such Product containing
such material defect. Unless Sublicensee corrects such defect within a
reasonable time following its discovery by or disclosure to Sublicensee,
Sublicensee shall be in breach of a material obligation of this Agreement.

21. SPECIAL TAX PROVISIONS. Sublicensee or its agents shall be
solely responsible for the payment and discharge of any taxes, duties, or
withholdings relating to any transaction of Sublicensee or its agents in
connection with the manufacture, use, sale or commercialization of the
Technology or the Products; except that ECC shall be responsible for taxes,
duties or withholding relating to the payment to ECC of any Royalty payment
under this Agreement and Sublicensee shall be permitted to perform any
withholding with respect to such payments and fees required by law or
regulation.

22. TECHNOLOGY TRANSFER.

(a) Sublicensee acknowledges and agrees that ECC has delivered
and made to Sublicensee a disclosure of a general introduction to the Technology
and to its commercial feasibility prior to the execution of this Agreement.
Except to the extent such information falls within one or more of the exceptions
to the definition of "Confidential Information", all information disclosed by
ECC to Sublicensee prior to the execution of this Agreement shall be deemed to
constitute part of the Technology and shall be deemed to be confidential. The
timing and extent of additional disclosure by ECC to Sublicensee shall be as set
forth in subparagraph 22(b) hereof.

(b) Upon execution of this Agreement, ECC shall provide
Sublicensee with copies of the patents listed in Section B of Exhibit "B"
hereto. Beyond that, ECC shall not be

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required to provide additional information concerning, or disclosure of, the
Technology to Sublicensee until Sublicensee provides to ECC (i) written notice
of Sublicensee's intent to commercialize a Product, which written notice shall
include detailed specifications for the designated Product, and (ii) evidence,
reasonably satisfactory to ECC, of Sublicensee's intent to commercialize the
designated Product in the form of written documentation of orders placed by
Sublicensee of the equipment needed by Sublicensee to produce and commercialize
the designated Product or in the form of written documentation from Sublicensee
confirming the dedication and/or modification of existing equipment necessary to
produce the designated Product. Within ninety (90) days after ECC's receipt of
the items described in the preceding sentence, ECC shall provide to Sublicensee
the following additional disclosure: (w) a Product specific recipe for the
production of the designated Product; (x) Product specific process
specifications for the production of the designated Product; (y) copies of all
patent applications listed in the Exhibits hereto that ECC deems relevant to the
production of the designated Product; and (z) a list of known raw materials
suppliers and preferred equipment vendors.

23. McDONALD'S CORPORATION. Because of work jointly undertaken by
ECC and McDonald's Corporation ("McDonald's") (as used herein the term
"McDonald's" shall include purchasing agents and franchisees thereof) with
regards to studies of market potential and food package design, it has been
agreed that McDonald's is to receive "priority" with regard to the
distribution of the Products that are ordered by it and covered by this
Agreement. In compliance with this arrangement, for a period of two (2)
years from the effective date of this Agreement, Sublicensee shall give
priority to McDonald's orders for Products, in that, on a regional basis,
Sublicensee shall dedicate to the production and delivery of Products to
McDonald's such portion of Sublicensee's production capacity (i) as is
available at the time of receipt of a purchase order from

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McDonald's and (ii) is reasonably necessary to fill such purchase order at the
rate of production and/or the delivery schedule contained in such order, and
Sublicensee shall not accept additional purchase orders from, or deliver
Products to, any entity in the food service and restaurant industry other than
McDonald's unless or until Sublicensee has production capacity in excess of that
required to fill, on a timely basis, purchase orders from McDonald's that have
previously been accepted by Sublicensee. A region shall be that geographic area
which is serviced by a specific "distribution center" that supplies products
solely or primarily to McDonald's in that geographic area.

24. DOMESTIC SUBLICENSES. In the event ECC grants any domestic
(within the United States of America) sublicense of the Technology to any third
party containing terms that are more favorable than those granted to Sublicensee
under this Agreement, ECC shall notify Sublicensee of such more favorable terms
and, upon written request by Sublicensee, this Agreement shall be amended to
incorporate such more favorable terms; provided, however, that this paragraph 24
shall not apply with respect to exclusivity provisions or the grant of rights to
specific Products contained in any other sublicense of the Technology by ECC.

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27. NOTICES. Any notice which is required or permitted to be given to ECC
or Sublicensee pursuant to this Agreement shall be deemed to have been given
only if such notice is reduced to writing and delivered personally, or by United
States mail with postage prepaid and return receipt requested, or by telecopier
(FAX) transmission, confirmed by letter by United States mail with postage
prepaid and return receipt requested, or by reputable overnight courier
(pursuant to instructions requiring next-day delivery) to the person in question
as set forth below:

ECC: EarthShell Container Corporation
800 Miramonte Drive
Santa Barbara, California 93109-1419
Attention: President
Fax: (805) 897-2298

with copy to:

EarthShell Container Corporation
800 Miramonte Drive
Santa Barbara, California 93109-1419
Attention: Chief Legal Officer
Fax: (805) 897-2298

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Sublicensee: Genpak Corporation
68 Warren Street
Glen Falls, New York 12801
Attention: James J. Reilly
Fax (518) 798-3302

with copy to:

Genpak Corporation
1001 Westing Boulevard
Charlotte, North Carolina 28273
Attention: Walt Harfmann, R & D Manager
Fax: (704) 588-8239

ECC or Sublicensee may change its address by giving notice of such change in the
manner set forth herein. If delivered personally, a notice shall be deemed
delivered when actually received at the address specified herein. Any notice
given by mail shall be deemed delivered three (3) days following the date upon
which it is deposited in the mail, with postage prepaid and return receipt
requested. Any notice given by FAX shall be deemed delivered on the date it is
actually transmitted to the person in question at the FAX number specified
above. Any notice given by overnight courier shall be deemed delivered on the
next business day following the date it is placed in the possession of such
courier.

28. ENTIRE AGREEMENT. This Agreement supersedes all prior
understandings or agreements, whether written or oral, and any
contemporaneous oral agreements, between the parties hereto in regard to the
subject matter hereof and contains, along with the two side letter agreements
attached, the entire agreement between the parties in regard to the subject
matter hereof, and the parties hereby mutually acknowledge and agree that
that certain Sublicense Agreement by and between ECC and Sublicensee, dated
June 3, 1993, is hereby terminated. This Agreement may not be changed or
modified orally, but only by an agreement, in writing, signed by both the
parties hereto.

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31. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
the choice of law rules thereof.

32. RESOLUTION OF DISPUTES.

(a) In the event of a breach of this Agreement, or a dispute as to
the meaning of this Agreement, or any of its terms which the parties cannot
resolve by themselves amicably, the parties agree to submit such dispute to
resolution in the manner hereinafter described. First, the parties shall
endeavor to resolve the dispute through the use of an acceptable alternative
dispute resolution procedure. If, within 30 days after one party notifies
the other in writing of the existence of a dispute which it desires to be
resolved under this paragraph, the parties have not agreed upon an acceptable
alternative dispute resolution procedure, then the matter shall be resolved
by arbitration as set forth below and according to the rules of the American
Arbitration Association, except as herein modified by the parties. Unless
otherwise agreed to in writing, all alternative dispute resolutions or
arbitration hearings will be held in Los Angeles, California.

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(b) The parties shall cooperate and use their respective best efforts
to encourage compliance with the following time periods: (i) within 10 days
after the failure to agree to an acceptable alternative dispute resolution
procedure, each party will select an arbitrator, and notify the other party of
its selection; (ii) within 15 days after such notice, the respective arbitrators
will select a third arbitrator as Chairman of the panel; (iii) a hearing by the
arbitration panel shall be held within 30 days after the selection of the
Chairman; and (iv) a majority decision and resolution shall be reached within 30
days of such hearing. Decisions of the panel must be in writing and will be
final and binding on the parties, and judgment may be entered thereon by any
court having jurisdiction of the parties.

(c) Each party shall bear its own costs of presenting its case in an
alternative dispute resolution procedure, or arbitration, as the case may be.

(d) The validity, construction and performance of this Agreement
shall be governed by and interpreted in accordance with the laws of the State of
California (as if all aspects of the Agreement were to be performed in
California).

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34. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

35. TERMINOLOGY. As used in this Agreement, the singular shall include
the plural and the plural shall include the singular. Titles of sections and
paragraphs in this Agreement are for convenience only, and neither limit nor
amplify the provisions of the Agreement, and all references in this Agreement to
a section or a paragraph shall refer to the corresponding section or paragraph
of this Agreement unless specific reference is made to the sections of another
document or instrument.

IN WITNESS WHEREOF, the parties have caused this Sublicense Agreement to be
executed and delivered by their duly authorized representatives upon the date
first herein written.

ECC: SUBLICENSEE:

EarthShell Container Corporation Genpak Corporation

By: /s/ Simon K. Hodson By: /s/ James J. Reilly
---------------------------- ---------------------------------
Simon K. Hodson James J. Reilly
Its: Chief Executive Officer Its: President

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EXHIBIT "A"

CORE TECHNOLOGY

A. ISSUED UNITED STATES LETTERS PATENTS

1. U.S. Letters Patent No. 4,225,247, issued September 30, 1980, and entitled
"Mixing and Agitating Device."

2. U.S. Patent No. 4,552,463, issued November 12, 1985, and entitled "Methods
and Apparatus for Producing a Colloidal Mixture."

3. U.S. Letters Patent No. 4,944,595, issued July 31, 1990, and entitled
"Apparatus for Producing Cement Building Material."

4. U.S. Letters Patent No. 5,061,319, issued October 29, 1991, and entitled
"The Process for Producing Cement Building Material."

5. U.S. Letters Patent No. 5,232,496, issued August 3, 1993, and entitled
"Process for Producing Improved Building Material and Product Thereof."

6. U.S. Patent No. 5,356,579, issued October 18, 1994, and entitled "Methods
of Manufacture and Use for Low Density Hydraulically Bonded Cement
Compositions."

7. U.S. Patent No. 5,358,676, issued October 25, 1994, and entitled
"Hydraulically Bonded Cement Compositions and Their Methods of Manufacture
and Use."

B. PENDING UNITED STATES PATENT APPLICATIONS

8. U.S. Patent Application entitled "Food and Beverage Containers Made from
Inorganic Aggregates and Polysaccharide, Protein, or Synthetic Organic
Binders, and the Methods of Manufacturing Such Containers."

9. U.S. Patent Application entitled "Cementitious Materials for Use in
Packaging Containers and their Methods of Manufacture."

10. U.S. Patent Application entitled "Cementitious Materials for Use in
Cushioning, Spacing, Partitioning, Portioning or Wrapping Objects and the
Methods of Manufacturing Such Materials."

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11. U.S. Patent Application entitled "Design Optimized Compositions and
Processed for Microstructurally Engineering Cementitious Mixtures."

12. U.S. Patent Application entitled "Highly Insulative Cementitious Matrices
and Methods for Their Manufacture."

13. U.S. Patent Application entitled "Hydraulically Settable Containers and
Other Articles for Storing, Dispensing, and Packaging Food and Beverages
and Methods for their Manufacture."

14. U.S. Patent Application entitled "Methods and Systems for Manufacturing
Containers and Other Articles of Manufacture from Hydraulically Settable
Mixtures."

15. U.S. Patent Application entitled "Articles of Manufacture Molded from
Inorganically Filled Compositions."

16. U.S. Patent Application entitled "Methods of Molding Articles from
Inorganically Filled Compositions."

17. U.S. Patent Application entitled "Coated Hydraulically Settable Containers
and Other Articles for Storing, Dispensing, and Packaging Food or
Beverages."

18. U.S. Patent Application entitled "Compressed Low Density Hydraulically
Bonded Composite Articles."

19. U.S. Patent Application entitled "Compressed Hydraulically Bonded Composite
Articles."

C. ISSUED FOREIGN PATENTS.

20. Canadian Patent No. 1,207,212 issued July 8, 1986, and entitled "Method and
Apparatus for Producing a Colloidal Mixture."

21. Canadian Patent No. 1,298,282, issued March 31, 1992, and entitled
"Apparatus for Producing Cement Building Material."

22. Canadian Patent No. 1,298,830, issued April 14, 1992, and entitled "Process
for Producing Cement Building Material."

23. Canadian Patent No. 1,321,609, issued August 24, 1993, and entitled "Cement
Building Material."

D. PENDING FOREIGN PATENT APPLICATIONS

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<PAGE>

24. Canadian Patent Application entitled "Process for Producing Improved
Building Material and Product Thereof."

25. Canadian Patent Application entitled "Hydraulically Bonded Cement
Compositions and Their Methods of Manufacture and Use."

26. PCT Patent Application entitled "Hydraulically Settable Containers and
Other Articles for Storing, Dispensing and Packaging Food and Beverages and
Methods for their Manufacture."

27. PCT Patent Application entitled "Design Optimized Compositions and
Processes for Microstructurally Engineering Cementitious Mixtures."

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<PAGE>

EXHIBIT "B"

MOLDABLE COMPOUND TECHNOLOGY

A. ISSUED UNITED STATES LETTERS PATENTS

B. PENDING UNITED STATES PATENT APPLICATIONS

1. U.S. Patent Application entitled "Inorganically Filled, Starch-Bound
Compositions for Manufacturing Containers and Other Articles Having a
Thermodynamically Controlled Cellular Matrix."

2. U.S. Patent Application entitled "Methods and Systems for Manufacturing
Containers and Other Articles Having a Thermodynamically Controlled Cellular
Matrix From Inorganically Filled, Starch-Bound Compositions."

3 U.S. Patent Application entitled "Compositions and Methods for
Manufacturing Fiber-Reinforced, Inorganically Filled, Starch-Bound Articles
having a Foamed Cellular Matrix."

C. ISSUED FOREIGN PATENTS

D. PENDING FOREIGN PATENT APPLICATIONS

4. PCT Patent Application entitled "Methods and Systems for Manufacturing
Packaging Materials, Containers, and Other Articles of Manufacture from
Hydraulically Settable Mixtures and Highly Inorganically Filled
Compositions."

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EXHIBIT "C"

PRODUCTS

As used in the appended Agreement, the term "Products" shall mean the
following:

1. Clamshells:

2. Sandwich containers;

3. Breakfast platters;

4. Trays;

5. Plates; and

6. Bowls.

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EXHIBIT "D"

TRADE SECRETS

The term "Trade Secrets" as used in the Agreement shall include any
technical or business information, any invention, equipment or apparatus,
method or process, technology, know-how, trade secret, drawing, data,
evaluation, specifications, quality and inspection standards, sales
literature, report, business plan, memorandum, market study, customer lists,
training materials, computer program or software (including both source and
object code), or any other document or thing which is in whole or in part
confidential, proprietary, or secret and which is owned or controlled by,
licensed or assigned to ECC or for which ECC has the right to grant licenses
thereon during the term of this Agreement and which relates in whole or in
part to any of the following:

1. The compositions, including the variable and preferred parameters for
each component, used in the Products or the Technology based on
inorganically filled cellular composites.

2. The processing steps, including the variable and preferred parameters for
each step, used in the Technology.

3. The equipment and apparatus used in the manufacture of Products.

4. Quality control, testing and research and development data, reports and
information, including patent applications in preparation.

5. Customers and suppliers of the components and equipment of the
Technology, including any agreements.

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EXHIBIT "E"

SUBLICENSEE PATENT, TRADE SECRET AND PROPRIETARY INFORMATION
RELATING TO THE PRODUCTS AND/OR THE TECHNOLOGY

Product Design - Includes data on wall angles, stack height, nesting, etc.,
for existing Genpak Products.

Tooling Design - Includes techniques for manufacture (Tool manufacture and
tool path programming), material of construction, coating, finishes, and
in mold slot design.

Handling and Packaging of Finished Product

Box erectors and sealers

Automated sleeving and counting

Slurry pumping systems.

High shear mixing technology

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EXHIBIT "F"

TERRITORY

As used in the appended Agreement, the term "Territory" shall mean all
fifty states of the United States of America and any territories or
possessions of the United States of America. The term "Territory" also shall
include Canada, Mexico, Central America, and the Caribbean islands and
nations, subject to any foreign territory being removed at ECC's option, if
Sublicensee has not commenced commercial production or sales of Products in
such foreign territory prior to January 1, 1999.

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SWEETHEART - ECC

SUBLICENSE AGREEMENT

THIS SUBLICENSE AGREEMENT (the "Agreement") is made upon and shall be
effective as of October 7, 1994, by and between EARTHSHELL CONTAINER
CORPORATION, a Delaware corporation ("ECC"), and SWEETHEART CUP COMPANY INC.,
a corporation formed and existing under the laws of the State of Delaware
("Sublicensee").

RECITALS:

C. Sublicensee desires to obtain from ECC a sublicense to utilize the
Technology to manufacture, use and sell certain designated food or beverage
containers within a designated geographical area.

D. ECC is willing to grant a sublicense to Sublicensee upon the terms and
conditions set forth herein.

EXHIBIT 10.16

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AGREEMENT:

1. DEFINITIONS. The capitalized terms used in this Agreement shall have
the meanings set forth below:

(c) The term "Design Improvement" shall mean any improvement to the
physical shape, ornamental design or configuration of Products.

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(d) The term "Field of Use" shall mean (i) the use and sale of
Products in the food service and restaurant industry, (ii) the use and sale of
Products in other retail establishments selling Products (E.G. grocery stores,
convenience stores, food warehouses, and the like), but only with respect to
Products that have been introduced into the food service and restaurant industry
by a customer of an ECC sublicensee (including any Affiliates) that operates
retail outlets in the food service and restaurant industry in at least six
locations, (iii) the incidental use and sale in any manner of those Products
which are manufactured by Sublicensee hereunder where the predominant use is
within the food service and restaurant industry, and (iv) the sale of Products
to distributors and wholesalers for resale and use in retail outlets in the food
service and restaurant industry and, subject to clause (ii) above, in retail
establishments. As used in this subparagraph, the term "food service and
restaurant industry" is intended to include any facility (whether commercial,
nonprofit, governmental, or other), including vending machines wherever located,
where food or beverages are (x) sold for consumption on the premises or (y)
packaged for take-out in single or multiple portions intended for immediate or
same day consumption off the premises without substantial additional
preparation. By way of example, the term "food service and restaurant industry"
includes such facilities as eating establishments, diners, dining rooms, dine-in
restaurants, cafes, cafeterias, including institutional cafeterias, coffee
shops, delicatessens, quick service restaurants, take-out restaurants, snack
bars, cocktail lounges, bars, saloons, night clubs, cabarets, sports arenas and
the like, and their distributors, brokers and wholesalers, but does not include
other food industry facilities outside of the food service and restaurant
industry (such as packaging for pre-packaged foods in food processing
facilities, grocery stores, and food distributors, brokers and wholesalers)
except as specifically provided in clause (ii) of this subparagraph. As used in
this subparagraph, the term "incidental use and sale" shall encompass Products
designed for and predominantly used in the

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food service and restaurant industry but which, beyond the control or reasonable
ability of Sublicensee to properly account for their end-use, ultimately are
used or sold outside of the Field of Use.

(e) The term "Moldable Compound Technology" shall mean all of the
confidential, secret, or proprietary technology involving inorganically filled
composites, including moldable compounds (both foam and non-foam applications),
articles manufactured from inorganically filled composites, the compositions and
uses of such inorganically filled composites or articles made therefrom, and
apparatus and methods for manufacturing same, which are described or claimed in
(i) any of the patents or patent applications listed in Exhibit "B" hereto,
including without limitation, any continuations, divisionals or continuations-
in-part, reissues and extensions thereto, any patents issued therefrom, and (ii)
any future patent applications under the Patent Cooperation Treaty, any future
European Patent applications, and/or any future national patent applications in
or for any country that are based on any of the applications listed in Section B
or D of Exhibit "B" hereto, and any patents issued therefrom.

(f) The term "Net Sales Price" shall mean the gross invoice price
charged by Sublicensee, or its Affiliate as applicable, in the sale of a Product
to a non-Affiliate reduced by (i) any credit allowed by Sublicensee for the
return of the Product; (ii) trade, quantity and cash discounts allowed by
Sublicensee; (iii) excise, value added and sales taxes actually paid by
Sublicensee on the Product; and (iv) unreimbursed freight charges actually paid
by Sublicensee for the shipment and delivery of the Product. In the case of
non-cash consideration, "Net Sales Price" shall be the fair market value of all
non-cash consideration actually received by Sublicensee or its Affiliate for
such Product. The "Net Sales Price" of Products set aside for Sublicensee's own
use, or sold or transferred to an Affiliate or set aside for the Affiliate's own
use, shall be deemed to be

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the price then charged to unrelated parties in arms-length transactions for such
Products in similar quantities and under similar terms of sale.

(h) The term "Product Improvement" shall mean any improvement or
change, irrespective of whence derived, relating in whole or in part to the
composition, formulation or use of a Product or the Technology, including any
improvement, development or change relating to a Product by process (I.E., any
change in the processing of a Product which yields a materially different
Product), such as a change in chemical composition, change in physical
characteristics or properties brought about by substitution or replacement of
elements or components, change in method of formulation, change in rheology,
etc. The term "Product Improvement" shall not include improvements to the
physical shape, ornamental design, or configuration of Products (hereinafter
"Design Improvements").

(i) The term "Process Improvement" shall mean any improvement,
development, or change relating in whole or part to the Technology or a Product
which involves an apparatus, machine, or process so long as such improvement,
development or change does not materially alter the finished Product, but rather
yields a more efficient production of a Product. The term "Process Improvement"
shall also include any development, refinement, improvement or change relating
in whole or in part to the application of materials, chemical compositions,
coatings or other substances, including the processes of application, to a
Product after the finish trim and forming or conversion of the Product is
completed to the extent that such development, refinement, improvement or change

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<PAGE>

is not already known by ECC (unless ECC's prior knowledge is pursuant to a
confidentiality agreement with Sublicensee) or in the public domain.

(j) The term "Technology" shall refer collectively to the Core
Technology, the Moldable Compound Technology and the Trade Secrets.

(k) The term "Territory" shall mean that certain geographic territory
described in Exhibit "F" hereto. Upon written notice to ECC that Sublicensee
services, or intends to expand its business to service, geographic areas outside
of the Territory and that Sublicensee desires to commercialize Products in such
additional geographic areas, which notice shall include evidence of such intent
reasonably satisfactory to ECC, ECC shall cooperate in amending this Agreement
to include such additional geographic areas by amending Exhibit "F" hereto;
provided, however, that the parties must first reach an agreement as to the
royalty rate that shall apply to such additional geographic area and provided
further that ECC shall have no obligation to grant rights to Sublicensee in any
country in which (i) ECC has already granted to a third party an exclusive
license of the Technology or (ii) it is necessary or desirable for ECC to enter
into an exclusive license with a citizen of the country at issue due to monetary
restrictions or other legal, tax or business considerations under the local laws
of such country.

(l) The term "Trade Secrets" shall mean the proprietary information
of ECC that is related to the Technology and which is described in Exhibit "D"
hereto or which is delivered to Sublicensee by ECC and marked "Confidential",
but only to the extent that such proprietary information is directly utilized in
the manufacture, use, or sale of Products.

2. THE SUBLICENSE.

(a) Subject to the terms and conditions set forth in this Agreement,
ECC hereby grants to Sublicensee a non-exclusive, royalty-bearing sublicense
(the "Sublicense") to use the

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Technology to make, use, sell and otherwise commercialize the Products solely
within the Territory and solely within the Field of Use.

(b) Sublicensee shall not have the right to further sublicense,
assign or transfer the Technology, or any interest in or rights under the
Sublicense except (i) to an Affiliate, or (ii) in the case of the sale of
substantially all of Sublicensee's assets, with the prior written consent of
ECC, which consent will not unreasonably be withheld. Any attempted
unauthorized sublicense or transfer shall be void and shall constitute a breach
of a material obligation of Sublicensee under this Agreement.

(c) ECC is free to grant additional sublicenses to other third
parties to utilize the Technology to make, use and sell Products in the Field of
Use and in the Territory.

3. ROYALTIES.

(b) Sublicensee shall be deemed to have "sold" a Product, and ECC
shall be deemed to have earned the Royalty, upon the earliest date that
Sublicensee actually ships, delivers,

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or invoices the Product to any person, firm or entity other than an Affiliate of
Sublicensee, or upon the earliest date that Sublicensee sets such Product aside
for Sublicensee's own use. For Products transferred to an Affiliate,
Sublicensee shall be deemed to have "sold" the Product, and ECC shall be deemed
to have earned the Royalty, upon the earliest date that the Affiliate to whom
the Product was transferred either (i) sets aside such Product for an
Affiliate's own use, or (ii) ships, delivers or invoices such Product to any
person, firm or entity which is not an Affiliate of Sublicensee.

(c) Notwithstanding subparagraph (a) of this paragraph, during the
first three years of the term of this Agreement ECC shall be sensitive to
Sublicensee's ability to produce Products profitably under this Agreement. If,
during the first three years of the term of this Agreement, Sublicensee
demonstrates to ECC's reasonable satisfaction that a material change in
circumstance has occurred affecting Sublicensee's ability to produce Products
profitably under this Agreement, ECC shall cooperate with Sublicensee in
negotiating such adjustments as may be commercially reasonable under the
circumstances. If the parties are unable, in good faith, to reach an agreement
as to a mutually acceptable adjustment, Sublicensee may exercise its right to
terminate this Agreement pursuant to subparagraph 17(b) of this Agreement. By
way of example, a "material change in circumstance" may include a significant
and unexpected increase in the cost of one or more of the raw materials required
for the manufacture of the Products.

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4. PAYMENT OF THE ROYALTY.

(b) The Royalty payment shall accrue interest from the date payment
should have been made until actual payment is made at the per annum base rate
on corporate loans published as the "Prime Rate" in the WALL STREET JOURNAL on
the next business day following the day the Royalty payment was due.

(c) Failure to make payment when due of any Royalty hereunder is a
breach of a material obligation of Sublicensee and may result in the termination
of this Agreement.

5. SUBLICENSEE COVENANTS.

Sublicensee hereby covenants:

(a) not to utilize the Technology except strictly in accordance with
the terms and conditions set forth in this Agreement;

(b) to utilize the Technology solely in connection with the
manufacture, marketing, distribution, use and sale of the
Products;

(c) not to utilize the Technology for any purpose other than the
manufacture, marketing, distribution, use and sale of the
Products;

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<PAGE>

(d) not to manufacture, market, distribute, use and sell Products
except in strict accordance with the terms and conditions of this
Agreement;

(e) to manufacture, market, distribute, use and sell Products solely
within the Territory;

(g) to market, distribute, use and sell Products solely within the
Field of Use; and

(h) not to market, distribute, use or sell Products outside of the
Field of Use.

Any breach by Sublicensee of any one or more of the foregoing covenants shall
constitute a breach by Sublicensee of a material obligation under this
Agreement.

6. RIGHT TO AUDIT.

(a) Sublicensee shall keep and maintain complete and accurate records
concerning the manufacture and sale of the Products. ECC or its designee (the
"Representative") shall have the right, at ECC's expense, to periodically review
those records and operations of Sublicensee which deal with the design,
manufacture, shipment or sale of the Products or with Product Improvements or
Process Improvements developed by Sublicensee. Such reviews may take place only
during the normal business hours of Sublicensee and only upon written notice to
Sublicensee given at least three (3) business days prior to such review. The
Representative conducting such review shall be required to execute a
confidentiality agreement pursuant to which the Representative shall agree that
it will not disclose or use the information obtained pursuant to such review to
or for the benefit of any person or entity except ECC unless required to do so
in connection with the resolution of any dispute concerning any payment required
by this Agreement.

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7. IMPROVEMENTS TO THE TECHNOLOGY.

(a) PRODUCT IMPROVEMENTS. If, while the Sublicense remains in
effect, Sublicensee should develop any Product Improvement, Sublicensee shall
notify ECC of such Product Improvement within a reasonable time of, and in no
event more than ninety (90) days after, its development and shall provide ECC
with access to all information concerning such Product Improvement as ECC shall
reasonably request; provided, however, that all such information shall be
confidential and shall be subject to all restrictions on disclosure as set forth
in this Agreement. Sublicensee shall assign to ECC all rights, title and
interest in the Product Improvement for an assignment fee of $1,000.00, and ECC
shall grant back to Sublicensee the non-exclusive right to utilize the Product
Improvement within the Field of Use and within the Territory as if such Product
Improvement were originally within the scope of the Sublicense. There shall be
no royalty charged to Sublicensee for the right to utilize the Product
Improvement. For a period of (i) one year from the date of commercialization of
such Product Improvement, or (ii) two years from the date of the development of
such Product Improvement, whichever is shorter, ECC shall not grant any right to
utilize the Product Improvement within the Field of Use to any third party
within the Territory. The failure of Sublicensee to disclose any such Product
Improvement to ECC within the time period set forth above shall constitute a
material breach of this Agreement.

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(b) PROCESS IMPROVEMENTS. If, while the Sublicense remains in
effect, Sublicensee should develop any Process Improvement, then Sublicensee
shall notify ECC of such Process Improvement within a reasonable time of, and in
no event more than ninety (90) days after, its development and shall provide ECC
with access to all information concerning such improvements as ECC shall
reasonably request; provided, however, that all such information shall be
confidential and shall be subject to all restrictions on disclosure as set forth
in this Agreement. For a single lump sum payment of $1.000.00 by ECC to
Sublicensee, Sublicensee shall grant to ECC an exclusive, fully paid-up license
(including the right to further sublicense and/or assign its rights to ECC's
Licensor) to utilize the Process Improvement in connection with the Product
and/or the Technology (i) outside of the Territory and (ii) within the
Territory, outside of the Field of Use. The license granted to ECC under this
subparagraph 7(b) shall be irrevocable and shall survive termination or
expiration of this Agreement for any reason whatsoever. The failure of
Sublicensee to disclose any such Process Improvement to ECC within the time
period set forth above shall constitute a material breach of this Agreement.

(d) PATENT RIGHTS FOR PROCESS IMPROVEMENTS. Sublicensee shall have
the right to seek patent protection for any Process Improvement at its own cost
and expense. ECC shall provide

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Sublicensee or its assignee with such assistance as may be reasonably requested,
from time to time, in connection with such efforts, including the execution of
any documents necessary to obtain and maintain such patent protection;
provided, however, that Sublicensee or its assignee will reimburse ECC for
any out-of-pocket expenses reasonably incurred by ECC in providing such
assistance. Sublicensee shall keep ECC informed of the status of the
prosecution of each patent application that Sublicensee elects to pursue and
shall consult with ECC on all material aspects of such application, although
all final decisions in regard to a patent application shall remain within the
sole discretion of Sublicensee. In the event Sublicensee elects not to seek
patent protection for a Process Improvement, Sublicensee shall promptly
notify ECC in writing, and ECC shall have the option, for a period of ninety
(90) days after its receipt of such written notice, to acquire by assignment
from Sublicensee all rights, title and interests in and to the Process
Improvement in question, including the right to seek patent protection in
ECC's name or its designee, in consideration of a single lump-sum of payment
of One Thousand Dollars ($1,000.00). In the event ECC exercises the option
provided for in the preceding sentence, Sublicensee shall provide to ECC or
its designee such assistance as may reasonably be requested, from time to
time, in connection with ECC's or its designee's efforts to obtain protection
of the Process Improvement in question, including the execution of any
documents necessary to obtain and maintain such patent protection; provided,
however, that ECC or its assignee will reimburse Sublicensee for any
out-of-pocket fees and expenses reasonably incurred by Sublicensee in
providing such assistance.

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(f) IMPROVEMENTS TO PRODUCT CONFIGURATION. Sublicensee shall own the
rights to any Design Improvements that may be developed by Sublicensee during
the term of this Agreement.

(g) ECC DEVELOPED AND JOINTLY DEVELOPED PRODUCT, PROCESS AND DESIGN
IMPROVEMENTS. Any Product Improvements, Process Improvements or Design
Improvements developed by ECC during the term of this Agreement (hereinafter
referred to as "ECC Improvements") and any Product Improvements, Process
Improvements or Design Improvements developed jointly by ECC and Sublicensee
during the term of this Agreement (hereinafter referred to as "Jointly Developed
Improvements") shall be owned by ECC and, except as otherwise provided in this
Agreement, may be disclosed and/or licensed by ECC to third parties at ECC's
discretion. For a period of (i) one year from the date of commercialization of
any Jointly Developed Improvement, or (ii) two years from the date of the
development of the Jointly Developed Improvement; whichever is shorter, ECC
shall not grant any right to utilize the Jointly Developed

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Improvement within the Field of Use to any third party within the Territory.
Any ECC Improvements or Jointly Developed Improvements disclosed and/or licensed
by ECC to Sublicensee shall be deemed to be included within the definition of
Technology and shall be subject to all of the terms, conditions and restrictions
of this Agreement applicable to the Technology.

8. INFRINGEMENT.

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appropriate in its own name against an alleged infringer. Additionally, ECC and
its Licensor shall (1) have the right to consult with Sublicensee prior to
Sublicensee pursuing legal action against a potential infringer and thereafter
shall have the right to receive, from time to time, full and complete
information from Sublicensee concerning any actions Sublicensee has taken
against an alleged infringer, and (ii) have the right, at ECC's or its
Licensor's, as applicable, own expense, to be represented by counsel in an
advisory capacity in any legal proceedings initiated by Sublicensee.

(b) ECC and Sublicensee will promptly notify (within 30 days) one
another of any apparent infringement of any Sublicensee owned Process
Improvement (whether or not such apparent infringement is within the Field of
Use) which comes to their attention and, if in Sublicensee's opinion, the
apparent infringement has substantial and adverse consequences, Sublicensee
shall, at its sole cost and expense, bring suit to enjoin such infringement and
to recover damages therefor. In any action brought by Sublicensee pursuant to
this subparagraph, Sublicensee shall select and control counsel for the
prosecution of such suit. ECC shall (i) have the right to receive, from time to
time, full and complete information from Sublicensee concerning the status of
such suit, (ii) have the right, at ECC's own expense, to be represented therein
by counsel in an advisory capacity, and (iii) cooperate fully with Sublicensee
and provide whatever assistance is reasonably requested by Sublicensee in
connection with such suit, including the preparation and signing of documents.
If Sublicensee decides not to bring suit to enjoin an alleged infringement of
Sublicensee owned Process Improvements either because it is deemed inadvisable
or DE MINIMIS, no such action will be required by Sublicensee. In the event the
action taken by Sublicensee is not satisfactory to ECC, then ECC shall have the
right but not the obligation, at its sole cost, to take whatever action it deems
appropriate in its own name against an alleged infringer. Additionally,
Sublicensee shall (i) have the right to consult with ECC prior to ECC pursuing
legal action against

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a potential infringer and thereafter shall have the right to receive, from time
to time, full and complete information from ECC concerning any actions ECC has
taken against an alleged infringer, and (ii) have the right, at Sublicensee's
own expense, to be represented by counsel in an advisory capacity in any legal
proceedings initiated by ECC with respect to infringement of Sublicensee owned
Process Improvements.

(c) The parties shall notify (within 30 days) each other of any
claim by any person that the manufacture or use of the Technology with respect
to any Product by Sublicensee in the Field of Use infringes the rights of such
person or of the commencement of any lawsuit against ECC, Sublicensee, or any
customers of the foregoing, as the result of such alleged infringement. ECC may
assume and control the defense of any such lawsuit, at its sole cost and
expense, irrespective of whether ECC is named as a defendant in such litigation.
Sublicensee will assist ECC in the defense of such suit or action by providing
information and fact witnesses as needed; provided, however, that ECC shall
reimburse Sublicensee for all out-of-pocket costs, excluding attorney fees
except as preapproved by ECC, incurred by Sublicensee in connection with such
action by allowing a credit or offset against the Royalty due hereunder.
Sublicensee shall have the right to be represented in such suit or action only
in an advisory capacity. If ECC decides not to assume the defense of
infringement lawsuit described in this subparagraph, then ECC's Licensor shall
have the right, but not the obligation, to do so. In the event ECC's Licensor
elects to assume the defense, Sublicensee's obligations shall be the same as if
ECC were assuming the defense of such litigation. If ECC's Licensor does not
assume defense of such litigation, then Sublicensee shall have the right, but
not the obligation, at Sublicensee's own cost and expense, to assume the defense
of such lawsuit utilizing legal counsel of its choice.

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9. ADDITIONAL DUTIES OF THE SUBLICENSEE. In addition to, and not in
limitation of, the other duties and obligations of Sublicensee, as set forth in
this Agreement, Sublicensee shall:

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(b) Continue to make all required payments under this Agreement to
ECC during any challenge of the validity of any of the patents (or claims
thereto issued in connection with the Technology. In the event Sublicensee
terminates such payments based upon or in connection with such a challenge, ECC
may at its option terminate this Agreement upon written notice to Sublicensee.
Notwithstanding the foregoing, if ECC or its Licensor does not assume the
defense of any litigation set forth in subparagraph 8(c), and Sublicensee does
assume the defense of such litigation, all Royalty payments due during the
pendency of such litigation shall be paid into a mutually agreeable escrow, and
such Royalty payments shall be held in escrow until the litigation becomes
final, from which no further appeal can be taken. Once the litigation is final,
the Royalty payments held in escrow shall be paid to ECC less an amount equal to
any damage or loss Sublicensee sustained as a result of the litigation,
excluding attorney fees and costs, which amounts shall be paid to Sublicensee.

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of all marketing activities for the Products undertaken during the Quarter by
Sublicensee. The Development Reports shall be certified as correct and accurate
by an appropriate officer of Sublicensee.

10. REPRESENTATIONS AND WARRANTIES OF ECC. ECC hereby represents and
warrants to Sublicensee that:

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rights of any third party. Except as provided in this subparagraph, ECC makes
no representation or warranty as to the ownership or validity of the Technology.
The license granted to Sublicensee under this Agreement does not exceed the
scope of the rights granted to ECC by Licensor.

11. REPRESENTATIONS AND WARRANTIES OF SUBLICENSES. Sublicensee hereby
represents and warrants to ECC that:

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(a) Sublicensee is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Sublicensee has all
requisite power and authority to own, operate and lease the properties and to
carry on its business as now being conducted, and is duly qualified to do
business in every jurisdiction wherein the nature of the business conducted or
the assets owned or leased by it make such qualification material to the conduct
of its business.

(c) To the best knowledge of Sublicensee, the execution, delivery and
performance of this Agreement by Sublicensee and the consummation by it of the
transactions contemplated hereby will not (i) constitute a violation (with or
without the giving of notice or lapse of time) of any provision of applicable
law, (ii) require any consent, approval or authorization of any person or
governmental authority, (iii) result in a default under, acceleration or
termination of, or the creation in any party of the right to accelerate,
terminate, modify or cancel, any agreement, lease, franchise, permit, note or
other restriction, encumbrance, obligation or liability to which Sublicensee is
a party or by which it is bound or to which any of its assets are subject, (iv)
result in the creation of any lien or encumbrance upon Sublicensee's assets, (v)
conflict with, result in the breach of, or constitute a default under any
provision of Sublicensee's charter documents, or (vi) conflict with, result in
tortious interference as a result of such conflict with, or otherwise violate,
any contract or arrangement between ECC and any other person.

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13. DISCLAIMER OF WARRANTIES.

14. INDEMNIFICATION.

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warranties set forth in paragraph 10 hereof, or (iii) based on the negligence or
willful misconduct of ECC. However, ECC's liability to Sublicensee for any
matter arising under this Agreement or any claims asserted against Sublicensee
which relate, in whole or in part, to the Technology, shall be limited to the
total amount of all Royalties paid to ECC by Sublicensee under this Agreement
for (x) the 24-month period preceding the date that Sublicensee suffered a loss
requiring indemnification by ECC under this subparagraph or (y) in the case of
patent infringement litigation brought by a third party against Sublicensee, the
period from the date written notice of such infringement is received by
Sublicensee to the date final judgment is entered, whichever is longer.

(b) Sublicensee shall defend, indemnify and hold ECC and its Licensor
harmless from and against, and hereby assumes liability for the payment of any
and all loss, liability or damage, and for all costs and expenses (including
reasonable costs of investigations and reasonable attorneys, accountants, and
expert witness fees) that may be imposed upon, suffered or incurred by, or
successfully asserted against ECC or its Licensor as a consequence of or in
connection with any claim or liability, other than those expressly set forth in
subparagraph 14(a) hereof, arising out of or as a consequence of this Agreement,
including, but not limited to, any product liability claims that may be asserted
against ECC or its Licensor in relation to any Products manufactured, marketed,
distributed, used and/or sold by Sublicensee pursuant to this Agreement. In the
event any action, suit or proceeding is brought against ECC or its Licensor with
respect to which there may be indemnification pursuant to this subparagraph, the
defense of such action, suit or proceeding (including all settlements and
arbitrations, trials, appeals or other proceedings) shall be conducted by
Sublicensee at its sole cost and expense through legal counsel selected by
Sublicensee. ECC and its Licensor shall have the right to participate in such
defense at their own expense through legal counsel of their choice. If
Sublicensee fails to defend any such action, suit

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or proceedings, for any reason, such failure shall constitute a material breach
of this Agreement by Sublicensee, and ECC or its Licensor may undertake defense
of such action, suit or proceeding, through legal counsel of their choice at the
sole cost and expense of Sublicensee (provided such legal costs and expenses are
reasonable under the circumstances). The parties shall make available to one
another, their legal counsel and accountants, all information and documents
reasonably available to them which relate to such action, suit or proceeding and
shall render such other assistance as they may reasonably require of one another
in order to insure the proper and adequate defense of any such action, suit or
proceeding.

(c) Neither party shall have any liability to the other party
pursuant to an indemnity provided by this paragraph unless and until the
aggregate amount of all indemnified losses suffered or incurred by such
indemnified party after the effective date hereof equals or exceeds $100,000
(U.S. Dollars), at which time the indemnifying party shall be obligated to pay
the indemnified party the full amount of all indemnified losses, including such
initial $100,000 (U.S. Dollars) in losses. The amount of indemnity payable
pursuant to this paragraph shall be calculated after giving affect to any
insurance proceeds actually received by the indemnified party provided that
neither party shall subrogate to any insurance carrier any rights or claims
which it may have against the other party.

(d) The obligations set forth in this paragraph 14 shall survive the
expiration or termination of the Agreement for any reason whatsoever.

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<PAGE>

VI" or better. Such policy shall provide Sublicensee with product liability
coverage with minimum liability coverage in the amount of $1,000,000.00 (U.S.
Dollars) aggregate and $1,000,000.00 (U.S. Dollars) per occurrence. Such
product liability insurance policy shall provide that ECC will be given
thirty (30) days prior written notice of any amendment or modification that
would reduce or change coverage under, or termination or cancellation of, the
policy. Upon ECC's request, Sublicensee shall provide ECC with a copy of such
policy and of all amendments or modifications thereto. Sublicensee shall be
required to obtain and maintain the product liability insurance policy called
for by the provisions of this subparagraph only from and after the date of
the first commercial sale of a Product by Sublicensee, or the first public
testing of a Product by Sublicensee. If Sublicensee has a net worth in an
amount satisfactory to ECC, then Sublicensee shall not be required to obtain
and maintain the product liability insurance required in this subparagraph;
however, Sublicensee shall be required to reimburse ECC or its Licensor for
any loss suffered by ECC or its Licensor which would have been covered under
the product liability insurance policy Sublicensee otherwise would have been
required to obtain under this subparagraph.

16. CONFIDENTIALITY.

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"Confidential Information." Additionally, as used herein, "Confidential
Information" shall not include any information or data which Sublicensee can
show: (i) is in, or becomes a part of, the public domain by any means other than
the failure by Sublicensee to fulfill its obligations hereunder; or (ii) is
rightfully known to Sublicensee at the time of disclosure by ECC; or (iii) is,
at any time, disclosed to Sublicensee by a third party who has received and
disclosed such information without the breach of any obligation of
confidentiality to ECC or to any third party assignor of such Confidential
Information. For purposes of this subparagraph, information shall not be deemed
to be a part of the public domain or in Sublicensee's knowledge merely because
it may be embraced in a more general disclosure or simply because it may be
derived from combinations of disclosures or information generally available to
the public or within Sublicensee's knowledge. The parties acknowledge that
disclosure to Sublicensee of Confidential Information will be necessary in order
to enable Sublicensee to utilize the Sublicense in the manner contemplated by
this Agreement; and ECC will make such disclosures of the Confidential
Information to Sublicensee as it is necessary, required or appropriate in that
regard. The parties acknowledge that they have a confidential relationship with
one another and, accordingly, Sublicensee shall maintain all Confidential
Information disclosed to it pursuant to this Agreement in confidence and shall
not disclose the same to any third party (with the exception of its employees,
accountants, attorneys and other agents and professional advisors) either during
or after the term of this Agreement unless required to do so by court order or
by law, in which case Sublicensee shall notify ECC, in writing, prior to making
such disclosure and shall cooperate with ECC to preserve and protect the
confidentiality of the Confidential Information in question to the fullest
extent possible. Additionally, except as specifically contemplated by this
Agreement, Sublicensee shall not utilize any Confidential Information for its
own benefit or for the benefit of any third party. Prior to making any
permitted

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disclosure of any Confidential Information to its employees, accountants,
attorneys and other agents and professional advisors, Sublicensee shall use
commercially reasonable efforts to require such persons, firms, or entities to
execute and deliver written disclosure agreements which shall obligate such
persons, firms, or entities to comply with the same obligations of
confidentiality and non-use as imposed upon Sublicensee in this subparagraph.
The obligation of confidentiality as it relates to the Confidential Information
shall survive the termination of this Agreement and continue unabated until the
expiration of the last patent, including any extensions, reissues, or
continuations thereof, which has been or may be issued with respect to the
Technology.

(b) From time to time during the term of this Agreement, Sublicensee
may disclose to ECC certain information which Sublicensee deems to be
proprietary and confidential, including but not limited to, business plans,
marketing plans, financial information, and process technology (the "Sublicensee
Confidential Information"). The definition of "Sublicensee Confidential
Information," and ECC's use and disclosure thereof, shall be governed by terms
and conditions identical to those which govern Confidential Information, as set
forth in the preceding subparagraph; provided, however, that ECC shall have the
right to disclose Sublicensee Confidential Information to ECC's Licensor subject
to its accepting and treating it as Confidential Information in writing to
Sublicensee.

17. TERM AND TERMINATION.

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provided. however, that upon the expiration of the last aforementioned patent,
if Sublicensee desires to continue the Agreement in force, it will be subject to
an appropriate negotiated adjustment to the Royalty Payments or License Fee.
Any dispute as to the term of this Agreement shall be resolved by arbitration as
provided under this Agreement.

(b) Sublicensee may terminate this Agreement, at any time, with or
without cause, upon sixty (60) days prior written notice of such termination to
ECC.

(d) Notwithstanding any other provision of this Agreement, ECC shall
have the right, at its sole discretion, to terminate the Sublicense, upon thirty
(30) days written notice to Sublicensee, in the event that the amount of the
Royalty paid to ECC in any calendar year is not at least the greater of (i) 50%
of the Royalty payment amount for the preceding calendar year, or (ii)
commencing in calendar year 1995, $100,000 (U.S. Dollars). In the event of
termination of this Agreement pursuant to this subparagraph, Sublicensee shall
have the right to sell at market price existing stock and inventory of
manufactured Products for a period of one hundred and eighty days.

18. EFFECT OF EXPIRATION OR TERMINATION.

(a) From and after the effective date of the expiration or
termination of this Agreement, Sublicensee shall have no right, whatsoever, to
utilize the Technology (except for

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<PAGE>

Process Improvements then owned by Sublicensee) or the Trademarks pertinent to
this Agreement, and shall return to ECC all copies of Confidential Information
which is then in the possession of Sublicensee or destroy the same and provide
satisfactory assurances of the destruction of all Confidential Information;
provided, however, that nothing contained herein shall, or shall be deemed to,
restrict the Sublicensee's ability or right to use, free of Royalty, any
Technology, trade name, know-how or confidential information which is or has
come into the public domain through no fault of Sublicensee and is not otherwise
deemed Confidential Information. ECC shall also be required to return to
Sublicensee all copies of Confidential Information of Sublicensee which are then
in the possession of ECC or destroy and provide satisfactory assurances of the
destruction of all Confidential Information.

19. MARKING.

(a) Unless functionally impractical or unless the customer for which
Sublicensee is manufacturing Products objects, Sublicensee shall mark the
Products and related documents with the applicable United States patent numbers,
as required by applicable law, or as reasonably instructed by ECC.

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<PAGE>

(b) Sublicensee shall comply with all applicable laws, rules and
regulations of the United States, including but not limited to the Export
Regulations of the United States Department of Commerce, in connection with the
Technology. Sublicensee acknowledges that ECC has not made and does not make
any representations that any license is or is not required in connection with
such export or, if required, that such license will be issued by the United
States Department of Commerce; provided, however, that ECC shall apply for all
licenses required or necessary to enable the Sublicensee to export the
Technology within the Territory without imposing any additional Royalty.

20. TRADEMARKS.

(a) Sublicensee may utilize, in connection with the manufacture,
marketing, distribution and sale of the Products, the EARTHSHELL-TM- trademark,
and such other trade names, trademarks, service marks, slogans and logo marks
that may be designated in writing by ECC to Sublicensee prior to commercial
production of the Products by Sublicensee or from time to time thereafter
(collectively the "Trademarks").

(c) To the extent Sublicensee elects to use the Trademarks on or in
connection with the marketing, distribution, use and/or sale of the Products,
the specific placement, size, and

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<PAGE>

detail of the Trademarks on the Product must be approved by ECC, but shall not
be required to be placed on the Products in such a size, placement, detail or
configuration so as to impair the marketability of the Product. In addition, on
any Products manufactured, marketed, distributed and sold by Sublicensee and
bearing any Trademark, Sublicensee shall also include the following legend:
"This product is manufactured by ___________________________ under license from
EarthShell Container Corporation."

(e) All Products produced pursuant to this Agreement bearing any
Trademark shall be produced in compliance with the specifications and procedures
set forth in the ECC Quality Standards Manual. Sublicensee shall permit ECC to
conduct periodic inspections/audits to ensure compliance with the ECC Quality
Standards Manual.

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<PAGE>

22. TECHNOLOGY TRANSFER.

(b) Upon execution of this Agreement, ECC shall provide Sublicensee
with copies of the patents listed in Section B of Exhibit "B" hereto. Beyond
that, ECC shall not be

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<PAGE>

required to provide additional information concerning, or disclosure of the
Technology to Sublicensee until Sublicensee provides to ECC (i) written notice
of Sublicensee's intent to commercialize a Product, which written notice shall
include detailed specifications for the designated Product, and (ii) evidence,
reasonably satisfactory to ECC, of Sublicensee's intent to commercialize the
designated Product in the form of written documentation of orders placed by
Sublicensee of the equipment needed by Sublicensee to produce and commercialize
the designated Product or in the form of written documentation from Sublicensee
confirming the dedication and/or modification of existing equipment necessary to
produce the designated Product. Within ninety (90) days after ECC's receipt of
the items described in the preceding sentence, ECC shall provide to Sublicensee
the following additional disclosure: (w) a Product specific recipe for the
production of the designated Product; (x) Product specific process
specifications for the production of the designated Product; (y) copies of all
patent applications listed in the Exhibits hereto that ECC deems relevant to the
production of the designated Product; and (z) a list of known raw materials
suppliers and preferred equipment vendors.

23. MCDONALD'S CORPORATION. Because of work jointly undertaken by ECC
and McDonald's Corporation ("McDonald's") (as used herein the term
"McDonald's" shall include franchisees thereof) with regards to studies of
market potential and food package design, it has been agreed that McDonald's
is to have a "lead time" or "priority" with regard to the distribution of the
Products that are ordered by it and covered by this Agreement. In compliance
with this arrangement, for a period of two (2) years from the effective date
of this Agreement, Sublicensee shall not fill orders from, or deliver
Products to, on a regional basis, any entity in the food service and
restaurant industry other than McDonald's until such time as all Products
ordered by McDonald's in a specific region have been manufactured, shipped or
otherwise set aside for delivery to McDonald's by the

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Sublicensee. A region shall be that geographic area which is serviced by a
specific "distribution center" that supplies products solely or primarily to
McDonald's in that geographic area.

24. DOMESTIC SUBLICENSES. In the event ECC grants any domestic (within
the United States of America) sublicense of the Technology to any third party
containing terms that are more favorable than those granted to Sublicensee under
this Agreement, ECC shall notify Sublicensee of such more favorable terms and,
upon written request by Sublicensee, this Agreement shall be amended to
incorporate such more favorable terms; provided, however, that this paragraph 24
shall not apply with respect to exclusivity provisions or the grant of rights to
specific Products contained in any other sublicense of the Technology by ECC.

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27. NOTICES. Any notice which is required or permitted to be given to
ECC or Sublicensee pursuant to this Agreement shall be deemed to have been given
only if such notice is reduced to writing and delivered personally, or by United
States mail with postage prepaid and return receipt requested, or by telecopier
(FAX) transmission, confirmed by letter by United States mail with postage
prepaid and return receipt requested, or by reputable overnight courier
(pursuant to instructions requiring next-day delivery) to the person in question
as set forth below:

ECC: EarthShell Container Corporation
800 Miramonte Drive
Santa Barbara, California 93109-1419
Attention: President
Fax: (805) 897-2298

with copy to:

EarthShell Container Corporation
800 Miramonte Drive
Santa Barbara, California 93109-1419
Attention: Chief Legal Officer
Fax: (805) 897-2298

Sublicensee: Sweetheart Cup Company Inc.
7575 South Kostner Avenue
Chicago, Illinois 60652
Attention: Daniel M. Carson
Fax: (312) 767-9454

ECC or Sublicensee may change its address by giving notice of such change in the
manner set forth herein. If delivered personally, a notice shall be deemed
delivered when actually received at the address specified herein. Any notice
given by mail shall be deemed delivered three (3) days following the date upon
which it is deposited in the mail, with postage prepaid and return receipt
requested. Any notice given by FAX shall be deemed delivered on the date it is
actually transmitted to the person in question at the FAX number specified
above. Any notice given by overnight courier

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shall be deemed delivered on the next business day following the date it is
placed in the possession of such courier.

28. ENTIRE AGREEMENT. This Agreement supersedes all prior understandings
or agreements, whether written or oral, and any contemporaneous oral agreements,
between the parties hereto in regard to the subject matter hereof and contains
the entire agreement between the parties in regard to the subject matter hereof,
and the parties hereby mutually acknowledge and agree that that certain
Sublicense Agreement by and between ECC and Sublicensee, dated June 3, 1993, is
hereby terminated. This Agreement may not be changed or modified orally, but
only by an agreement, in writing, signed by both the parties hereto.

31. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
the choice of law rules thereof.

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32. RESOLUTION OF DISPUTES.

(b) The parties shall cooperate and use their respective best efforts
to encourage compliance with the following time periods: (i) within 10 days
after the failure to agree to an acceptable alternative dispute resolution
procedure, each party will select an arbitrator, and notify the other party of
its selection; (ii) within 15 days after such notice, the respective arbitrators
will select a third arbitrator as Chairman of the panel; (iii) a hearing by the
arbitration panel shall be held within 30 days after the selection of the
Chairman; and (iv) a majority decision and resolution shall be reached within
30 days of such hearing. Decisions of the panel must be in writing and will be
final and binding on the parties, and judgment may be entered thereon by any
court having jurisdiction of the parties.

(c) Each party shall bear its own costs of presenting its case in an
alternative dispute resolution procedure, or arbitration, as the case may be.

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34. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

35. TERMINOLOGY. As used in this Agreement, the singular shall include the
plural and the plural shall include the singular. Titles of sections and
paragraphs in this Agreement are for convergence only, and neither limit nor
amplify the provisions of the Agreement, and all references in this Agreement to
a section or paragraph shall refer to the corresponding section or paragraph of
this Agreement unless specific reference is made to the sections of another
document or instrument.

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IN WITNESS WHEREOF, the parties have caused this Sublicense Agreement to be
executed and delivered by their duly authorized representatives upon the date
first herein written.

ECC: SUBLICENSEE:

EarthShell Container Corporation Sweetheart Cup Company Inc.

By: /s/ Simon K. Hodson By: /s/ Daniel M. Carson
---------------------------- ----------------------------
Simon K. Hodson Daniel M. Carson

Its: Chief Executive Officer Its: Vice President, General Counsel
and Secretary

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EXHIBIT "A"

CORE TECHNOLOGY

A. ISSUED UNITED STATES LETTERS PATENTS

1. U.S. Letters Patent No. 4,225,247, issued September 30, 1980, and entitled
"Mixing and Agitating Device."

2. U.S. Patent No. 4,552,463, issued November 12, 1985, and entitled
"Methods and Apparatus for Producing a Colloidal Mixture."

3. U.S. Letters Patent No. 4,944,595, issued July 31, 1990, and entitled
"Apparatus for Producing Cement Building Material."

4. U.S. Letters Patent No. 5,061,319, issued October 29, 1991, and entitled
"The Process for Producing Cement Building Material."

5. U.S. Letters Patent No. 5,232,496, issued August, 1993, and entitled
"Process for Producing Improved Building Material and Product Thereof."

B. PENDING UNITED STATES PATENT APPLICATIONS

6. U.S. Patent Application entitled "Hydraulically Bonded Cement Compositions
and Their Methods of Manufacture and Use."

7. U.S. Patent Application entitled "Food and Beverage Containers Made from
Inorganic Aggregates and Polysaccharide, Protein, or Synthetic Organic
Binders, and the Methods of Manufacturing Such Containers."

8. U.S. Patent Application entitled "Cementitious Materials for Use in
Packaging Containers and their Methods of Manufacture."

9. U.S. Patent Application entitled "Cementitious Materials for Use in
Cushioning, Spacing, Partitioning, Portioning or Wrapping Objects and the
Methods of Manufacturing Such Materials."

10. U.S. Patent Application entitled "Methods of Manufacture and Use for Low
Density Hydraulically Bonded Cement Compositions."

11. U.S. Patent Application entitled "Design Optimized Compositions and
Processed for Microstructurally Engineering Cementitious Mixtures."

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<PAGE>

12. U.S. Patent Application entitled "Highly Insulative Cementitious Matrices
and Methods for Their Manufacture."

13. U.S. Patent Application entitled "Hydraulically Settable Containers and
Other Articles for Storing, Dispensing, and Packaging Food and Beverages
and Methods for their Manufacture."

14. U.S. Patent Application entitled "Methods and Systems for Manufacturing
Containers and Other Articles of Manufacture from Hydraulically Settable
Mixtures."

15. U.S. Patent Application entitled "Articles of Manufacture Molded from
Inorganically Filled Compositions."

16. U.S. Patent Application entitled "Methods of Molding Articles from
Inorganically Filled Compositions."

C. ISSUED FOREIGN PATENTS.

17. Canadian Patent No. 1,207,212, issued July 8, 1986, and entitled "Method
and Apparatus for Producing a Colloidal Mixture."

18. Canadian Patent No. 1,298,282, issued March 31, 1992, and entitled
"Apparatus for Producing Cement Building Material."

19. Canadian Patent No. 1,298,830, issued April 14, 1992, and entitled
"Process for Producing Cement Building Material."

20. Canadian Patent No. 1,321,609, issued August 24, 1993, and entitled
"Cement Building Material."

D. PENDING FOREIGN PATENT APPLICATIONS

21. Canadian Patent Application entitled "Process for Producing Improved
Building Material and Product Thereof."

22. Canadian Patent Application entitled "Hydraulically Bonded Cement
Compositions and Their Methods of Manufacture and Use."

23. PCT Patent Application entitled "Hydraulically Settable Containers and
Other Articles for Storing, Dispensing and Packaging Food and Beverages
and Methods for their Manufacture."

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<PAGE>

EXHIBIT "B"

MOLDABLE COMPOUND TECHNOLOGY

A. ISSUED UNITED STATES LETTERS PATENTS

B. PENDING UNITED STATES PATENT APPLICATIONS

1. U.S. Patent Application entitled "Inorganically Filled, Starch-Bound
Compositions for Manufacturing Containers and Other Articles Having a
Thermodynamically Controlled Cellular Matrix."

C. ISSUED FOREIGN PATENTS

D. PENDING FOREIGN PATENT APPLICATIONS

3. PCT Patent Application entitled "Methods and Systems for Manufacturing
Packaging Materials, Containers, and Other Articles of Manufacture from
Hydraulically Settable Mixtures and Highly Inorganically Filled
Compositions."

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<PAGE>

EXHIBIT "C"

PRODUCTS

As used in the appended Agreement, the term "Products" shall mean the
following:

1. Cold cups - 4 oz. to 32 oz.;

2. Hot cups - 4 oz. to 32 oz.; and

3. Sandwich containers.

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<PAGE>

EXHIBIT "D"

TRADE SECRETS

1. The compositions, including the variable and preferred parameters for each
component, used in the Products or the Technology based on inorganically
filled cellular composites.

2. The processing steps, including the variable and preferred parameters for
each step, used in the Technology.

3. The equipment and apparatus used in the manufacture of Products.

4. Quality control, testing and research and development data, reports and
information, including patent applications in preparation.

5. Customers and suppliers of the components and equipment of the Technology,
including any agreements.

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<PAGE>

EXHIBIT "E"

SUBLICENSEE PATENT, TRADE SECRET AND PROPRIETARY INFORMATION
RELATING TO THE PRODUCTS AND/OR THE TECHNOLOGY

Licensee shall have up to sixty (60) days after the receipt of the patent
applications listed in Section B of Exhibit "B" hereto to evaluate such patent
applications, to assemble its description of Sublicensee Patent, Trade Secret
and Proprietary Information Relating to the Products and/or the Technology, and
to amend this Exhibit "E" to incorporate such description.

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<PAGE>

EXHIBIT "F"

TERRITORY

As used in the appended Agreement, the term "Territory" shall mean the
United States of America, including any territories and possessions of the
United States of America, and Canada.

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[EARTH SHELL CONTAINER CORPORATION LETTERHEAD]

SWEETHEART CUP COMPANY, INC.
Attention: Daniel M. Carson
7575 South Kostner Avenue
Chicago, Illinois 60652

Dear Mr. Carson:

Reference is made to that certain Sweetheart-ECC Sublicense Agreement,
dated October 7, 1994, by and between EarthShell Container Corporation and
Sweetheart Cup Company, Inc., (the "Agreement"). This letter, when accepted by
you in the manner described below, shall constitute an amendment, amending the
Agreement as follows:

1. Section 17(d) is hereby amended to add the following additional
sentence: "ECC hereby waives its right of termination under this subparagraph
17(d) with respect to the calendar year 1995."

2. Exhibit "C" to the Agreement is hereby amended in its entirety to read
as follows: "As used in the appended Agreement, the term 'Products' shall mean
the following: (1) cold cups of all sizes; (2) hot cups of all sizes; and (3)
sandwich containers."

3. Except as otherwise specifically provided in paragraphs 1 and 2
hereof, all other terms and conditions of the Agreement shall remain unchanged
and in full force and effect.

* * *

If the foregoing amendments are acceptable to you, please indicate your
acceptance thereof by dating and signing the enclosed copy of this letter in the
spaces provided below and returning it to us.

SIGNED this the 20th day of July, 1995.

EARTHSHELL CONTAINER CORPORATION

By: /s/ Simon K. Hodson
--------------------------------------
Simon K. Hodson Chief Executive Office

AGREED TO AND ACCEPTED
on July 20, 1995.

SWEETHEART CUP COMPANY, INC.

By: /s/ Daniel M. Carson
-------------------------------
Daniel M. Carson, Vice President
General Counsel and Secretary

<PAGE>

AGREEMENT

THIS AGREEMENT is made upon and shall be effective as of October 21,
1993, by and between EARTHSHELL CONTAINER CORPORATION, a Delaware corporation
("ECC"), and International Paper Company, a Corporation formed and existing
under the laws of New York ("Sublicensee").

RECITALS:

A. Pursuant to that certain License Agreement, dated February 24,
1993, (the "License Agreement") between E. Khashoggi Industries, a California
general partnership ("EKI") and ECC, ECC has the exclusive right to utilize
specified technology to manufacture and sell within a specified field of use
certain containers made from hydraulically reacting materials for the packaging,
storage, portioning, dispensing, carrying, presenting, serving and consumption
of food and beverages.

B. ECC has the right and authority to grant sublicenses which will
permit selected entities to utilize such technology in order to manufacture and
sell certain food and beverage containers made from hydraulically reacting
materials.

C. Sublicensee desires to obtain from ECC a sublicense to convert
materials made from such technology into designated food and beverage containers
and thereafter use, sell or otherwise commercialize such containers within a
designated geographical area.

D. ECC is willing to grant a sublicense to Sublicensee upon the
terms and conditions set forth herein.

EXHIBIT 10.17

<PAGE>

AGREEMENT:

NOW, THEREFORE, in consideration of the foregoing Recitals and the
covenants and agreements set forth herein, together with other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:

1. DEFINITIONS. The capitalized terms used herein shall have the
meanings set forth below, or the meanings assigned to them elsewhere herein:

(a) The term "Affiliate" shall mean, with respect to any given
entity (which includes without limitation any company, organization, or person),
any other entity directly or indirectly controlling, controlled by, or under
direct or indirect common control with such given entity. For purposes of this
definition, the ownership of a twenty-five percent (25%) or greater equity
interest in an entity shall be deemed control of such entity, and the ownership
of less than a twenty-five percent (25%) equity interest in an entity (absent
any other exercise of control) shall be deemed not to be control of such entity.

(b) The term "Field of Use" shall mean the use and sale of Food
Packages in the food service or fast-food and restaurant industry. As used
herein, the term "food service" or "fast-food and restaurant industry" is
intended to include any facility (whether commercial, nonprofit, government, or
other) where food and beverages are (i) sold or provided for consumption on the
premises or (ii) packaged in single portions, or multiple portions, intended for
immediate consumption. The term "Field of Use" shall also include the use and
sale of Food Packages in other retail establishments selling food or beverages
or Food Packages (e.g., grocery stores, convenience stores, and food
warehouses -- hereinafter the "retail food selling industry"), but only with
respect to Food Packages which are the same

<PAGE>

or substantially similar to any Food Package which has been introduced into the
fast-food and restaurant industry or the retail food selling industry by an
entity (including any Affiliates) that operates retail establishments in the
fast-food and restaurant industry in at least six locations. The sale of Food
Packages to distributors and wholesalers for resale and use in the food service
or fast food and restaurant industry is included within the Field of Use.
Notwithstanding the foregoing, the parties agree, as set forth in paragraph
1(e), that certain items shall not be within the definition of Field of Use.

(c) The term "Food Packages" shall mean any product, apparatus,
device, or equipment for packaging, storage, portioning, dispensing, carrying,
presenting, serving or consumption of food or beverages.

(d) The term "Gross Sales Price" shall mean the gross invoice
price charged by Sublicensee in the sale of a Product to a non-Affiliate reduced
by (i) any credit allowed by Sublicensee for the return of Product; (ii)
customary trade, quantity and cash discounts allowed by Sublicensee; (iii)
excise, value added and sales taxes actually paid by Sublicensee on the Product;
(iv) freight charges actually paid by Sublicensee for the shipment and delivery
of the Product; and (v) bad debts or uncollected accounts. In the case of non-
cash consideration, "Gross Sales Price" shall be the fair market value of all
non-cash consideration actually received by Sublicensee or its Affiliate for
such Product. The "Gross Sales Price" of Products sold or transferred to an
Affiliate shall be deemed to be the price then charged to unrelated parties in
arms-length transactions for such Products in similar quantities and under
similar terms of sale.

3
<PAGE>

(e) The term "Products" shall mean only those Food Packages set
forth on Exhibit "B", attached hereto and incorporated herein by this reference,
which incorporate in whole or in part any portion of the Technology and which
are used or sold in the Field of Use. Notwithstanding any other provision of
this Agreement, the parties agree that the following items shall not be within
the scope of the definition of "Products" or otherwise available for licensing
under this Agreement: sealed containers for the long-term storage of liquids
whether for single or multiple portions (e.g., soft drink cans, milk cartons,
sealed juice or drink containers), or boxes or sealed containers for the long-
term storage of single or multiple servings of foods (e.g., dry cereals, egg
cartons, and meat and deli trays) -- the right to license such items has been
retained by EKI. Notwithstanding the foregoing, single service milk/juice
cartons are within the scope of definition of "Products".

(f) The term "Technology" shall mean all of the proprietary
technology involving hydraulically reacting materials which is (i) described or
claimed in any United States patent or patent application set forth in Exhibit
"A" attached hereto and incorporated herein, including without limitation, any
continuations, divisionals or continuations-in-part, reissues and extensions
thereto, and any patents issued therefrom, and (ii) the subject of any future
United States patents or patent applications to the extent that such patents or
patent applications are licensed to ECC and directly utilized in the conversion,
use or sale of Food Packages by the Sublicensee. The Technology, to the extent
it exists upon the execution date of this Agreement, is further described on
Exhibit "A". The term Technology shall also include the proprietary information
of ECC, or licensed to ECC, that is related to the Technology which is described
on Exhibit "A" as "Trade Secrets" and any other proprietary information

<PAGE>

of ECC, or licensed to ECC, which is delivered, orally or in writing, to the
Sublicensee and designated, orally or in writing, as "Confidential".

(g) The term "Territory" shall mean all fifty states of the
United States of America and any territories or possessions of the United
States. The term "Territory" also shall include Canada, Mexico, Central
America, and the Caribbean islands and nations, subject to any foreign territory
being removed, all or in part, at ECC's option, if Sublicensee has not commenced
commercial production or sales of Products in such foreign territory prior to
January 1, 1996.

(h) If Sublicensee conducts business and wants to sell Products
outside of the Territory, ECC agrees that it will negotiate in good faith with
Sublicensee for a separate non-exclusive sublicense covering a specified
geographic area outside of the Territory.

2. THE SUBLICENSE.

(a) ECC hereby grants to Sublicensee a nonexclusive, royalty-
bearing sublicense (the "Sublicense") to convert materials made from the
Technology into Products and thereafter use, sell or otherwise commercialize the
Products solely within the Territory and solely within the Field of Use. The
Sublicense shall be irrevocable except as specifically provided in this
Agreement

(b) In the event that Sublicensee wishes to sell Food Packages
which do not fall within the definition of the Field of Use, and which
incorporate in whole or in part a portion of the Technology, Sublicensee must
obtain an appropriate license for the same from EKI.

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<PAGE>

(c) Sublicensee shall not have the right to further sublicense,
assign or transfer the Technology, or any interest in or rights under the
Sublicense (i) except to an Affiliate or (ii) except with the prior written
consent of ECC, which consent will not unreasonably be withheld (such assignee
referred to herein as a "Proper Assignee"). Any such purported sublicense or
transfer shall be void and shall constitute a breach of a material obligations
of Sublicensee within the meaning of paragraph 16, hereof. The merger or
consolidation of Sublicensee or a Proper Assignee with, or the sale of
substantially all of Sublicensee's or a Proper Assignees' assets or equity
interest to, any other entity that is not, prior to such merger, consolidation
or sale, an Affiliate of Sublicensee, whether occurring by operation of law or
otherwise, shall not be deemed to be an assignment of the Technology and is
expressly permitted under the terms of this Agreement.

(d) As more fully set forth in paragraph 10(b) hereof,
Sublicensee is authorized and required to utilize, in connection with the
marketing, distribution and sale of the Products, those trade names, trademarks,
service marks, slogans and logo marks (collectively the "Trademarks") which are
designated by ECC to Sublicensee prior to commercial production of a Product by
Sublicensee or from time to time thereafter.

<PAGE>

requests that Exhibit "B" be amended in order to add an additional Product or
range of Products, ECC shall meet with representatives of Sublicensee at
reasonable times and at mutually agreeable locations and shall discuss, in good
faith, the amendment of Exhibit "B" requested by Sublicensee. ECC shall have no
obligation to amend Exhibit "B" hereto in accordance with any request by
Sublicensee unless the terms and conditions of the proposed amendment are
satisfactory to ECC.

(f) Sublicensee shall not market, distribute or sell any Product
to any person, firm or entity outside the Territory, or to any person, firm or
entity within the Territory if Sublicensee knows or has reason to believe that
such person, firm or entity intends to use the Product in question outside the
Territory. The sale or distribution of a Product outside the Territory by
Sublicensee shall constitute a breach of a material obligation of Sublicensee
within the meaning of paragraph 16 hereof.

3. ROYALTIES.

(a) As consideration for the grant of the Sublicense,
Sublicensee shall pay to ECC a royalty (the "Royalty") of twenty percent (20%)
of the Gross Sales Price for each Product which is sold by Sublicensee during
the term of this Agreement.

<PAGE>

as an end-user of the Product; or (ii) ships, delivers or invoices such Product
to any person, firm or entity which is not an Affiliate of Sublicensee.
Provided, however, that the Sublicensee shall be entitled to a credit for all
bad debt or uncollected accounts associated with the computation of Royalty for
a given period.

(c) No Royalty shall be payable on Products which are used by
Sublicensee to convert into other Products which are sold and for which a
Royalty is paid to ECC. No multiple Royalties shall be payable because a
Product is covered by more than one patent within the scope of the Technology.
No Royalty shall be due, owing or payable on Products used exclusively for
demonstration or market testing purposes.

(d) Failure to make payment when due of any Royalty hereunder is
a breach of a material obligation of Sublicensee and may result in the
termination of this Agreement pursuant to paragraph 16 hereof.

4. PAYMENT OF THE ROYALTY.

(a) Within thirty (30) days of the final day of each calendar
quarter (or fiscal quarter if Sublicensee is reporting on a fiscal basis) which
occurs during the term of this Agreement (a "Quarter"), Sublicensee shall pay to
ECC the Royalty earned on all Products sold by Sublicensee during such Quarter.
Each Royalty payment shall be accompanied by a written report (the "Royalty
Report") prepared by Sublicensee and certified as accurate by the appropriate
financial officer of Sublicensee. Each Royalty Report shall set forth, for the
Quarter covered by the Royalty Report, (i) the number of each of the Products
sold by the Sublicensee, (ii) the gross invoice price for each of such Products,
and (iii) reductions

<PAGE>

to the gross invoice price for applicable returns, discounts, freight charges,
bad debts/uncollected accounts and taxes with respect to Products sold.

(b) All payments called for by this Agreement shall be paid by
Sublicensee in United States dollars.

5. RIGHT TO AUDIT.

(a) Sublicensee shall keep and maintain complete and accurate
records concerning all aspects of the conversion of materials into, and sale of,
the Products. ECC or its designee (the "Representative") shall have the right,
at ECC's expense, periodically to review those records and operations of
Sublicensee which deal with the design, conversion of materials into, shipment
and sale of Products. Such reviews may take place only during the normal
business hours of Sublicensee and only upon written notice to Sublicensee given
at least three (3) business days prior to such review. The Representative
conducting such review shall be required to execute a confidentiality agreement
pursuant to which the Representative shall agree that it will not disclose or
use the information obtained pursuant to such review to or for the benefit of
any person or entity except ECC unless required to do so in connection with the
resolution of any dispute concerning any payment required by this Agreement.

<PAGE>

If Sublicensee does not notify ECC that Sublicensee disputes the findings set
forth in such report, it shall pay to ECC the full amount of the underpayment in
question within 15 days of the date of receipt of the Review Notice. All
underpaid amounts shall bear interest from the date upon which the payment in
question should have been made until it is actually paid at the lending interest
rate of prime (as published in the Wall Street Journal on the last previous
business day). Additionally, if Sublicensee agrees to make the underpayment
specified in the Review Notice, Sublicensee shall also reimburse ECC for the
actual costs of the review if the underpayment amount is 5% or more of the
Royalty payment due during the period in question and such underpayment exceeds
$100,000 in amount. In all other cases, ECC shall pay all expenses and fees of
the review, including all out-of-pocket expenses actually and reasonably
incurred by Sublicensee in connection therewith.

<PAGE>

Sublicensee and ECC shall not unreasonably withhold their approval of the
accounting firm selected by either party pursuant to clause (i) above. The
determination of such accountants or arbitrators (or mediators) in regard to the
accuracy of the payments made to ECC shall be final and binding upon the
parties, shall not be subject to appeal or review by any court or governmental
agency and shall be enforceable in the appropriate United States state and
federal courts. If such review reveals that Sublicensee has failed to pay to
ECC the full amount of a Royalty payment actually due, Sublicensee shall pay the
full amount of such discrepancy to ECC within three (3) days of the date of the
report of such accountants or the decision of the arbitrators, as the case may
be. The full amount of such underpayment shall bear interest at the lending
interest rate of prime (as published by the Wall Street Journal on the date of
the Dispute Notice or next business day) from the date the payment in question
should have been made until it is actually made. Additionally, if it is
determined by the review conducted pursuant to this paragraph 5(c) that
Sublicensee underpaid ECC by 5% or more of the Royalty payment due during the
period in question, and such underpayment exceeds $100,000 in amount,
Sublicensee shall pay all fees and expenses of the reviews and arbitration (or
mediation) conducted pursuant to paragraphs 5(b) and(c). In all other cases,
ECC shall pay all expenses and fees of both reviews and arbitration, including
all out-of-pocket expenses actually and reasonably incurred by Sublicensee in
connection therewith.

(d) The second failure within any two-year period by Sublicensee
to make timely payment of the correct Royalty amount due under this Agreement as
finally determined under paragraph 5(c) shall constitute a breach of a material
obligation of Sublicensee and may result in the termination of this Agreement
pursuant to paragraph 16 hereof, unless

<PAGE>

Sublicensee has cured such failure within sixty (60) days from the date notice
of such failure is delivered to Sublicensee.

6. IMPROVEMENTS TO TECHNOLOGY.

(a) If, while the Sublicense remains in effect, Sublicensee
should develop any improvement, refinement or change, whether patentable or
unpatentable, relating in whole or in part to any portion of the Technology or
the Products (such improvement hereinafter referred to as an "Improvement"), to
the extent that the Improvement is directed to a composition, formulation or the
material (i.e., other than a method of manufacture, handling or processing of
Food Packages) Sublicensee shall notify ECC of such Improvement within a
reasonable time of and in no event more than ninety (90) days after its
development and shall provide ECC with access to all information concerning such
improvement as ECC shall reasonably request: provided, however, that all such
information shall be confidential and shall be subject to all restriction on
disclosure as set forth in this Agreement or otherwise arising. Sublicensee (i)
shall assign the nonexclusive right to make, use, sell, sublicense and otherwise
commercialize the Improvement both within and outside of the Field of Use and
within and outside the Territory to ECC for an assignment fee of $1,000.00 and
(ii) notwithstanding whether ECC or its assignee files for patent protection,
Sublicensee shall retain a non-exclusive perpetual (i.e., to the fullest extent
it is legally empowered) license to make, use, sell or otherwise commercialize
the Improvement both within and outside of the Field of Use and within and
outside the Territory. If ECC (i) obtains rights in and to an Improvement from
another sublicensee of the Technology, in whole or in part, or otherwise or (ii)
develops such Improvement, it shall within a reasonable time of and in no event
more

<PAGE>

than ninety (90) days after it obtains such rights inform the Sublicensee of
such Improvement and at the request of the Sublicensee grant the Sublicensee a
nonexclusive perpetual (i.e., to the fullest extent it is legally empowered)
license to make, use, sell or assign (pursuant to the terms of this Sublicense
Agreement) the Improvement within the Field of Use within the Territory. No
additional Royalty will be due by virtue of the addition of an Improvement to
the Technology.

(b) With respect to an Improvement under paragraph 6(a), in the
event that Sublicensee does not seek patent protection for the Improvement, ECC
or its assignee may elect to seek patent protection either in the United States
or in any foreign jurisdiction. Sublicensee shall provide ECC or its assignee
with such assistance as may be reasonably requested, from time to time, in
connection with such efforts, including the execution of any documents necessary
to obtain and maintain such patent protection; provided, however, that ECC or
its assignee will reimburse Sublicensee for any out-of-pocket fees and expenses
reasonably incurred by Sublicensee in providing such assistance. ECC or its
assignee shall keep the Sublicensee informed of the status of the prosecution of
each patent application which it elects to pursue and shall consult with
Sublicensee on all material aspects of the prosecution of such application,
although all final decisions in regard to such patent application shall remain
within the sole discretion of ECC or its assignee.

(c) If the Improvement is directed to a method of converting,
handling, or processing of Food Packages, and if such converting, handling, or
processing Improvement has a substantial use with composition, formulation, and
materials within the scope of this Sublicense, then Sublicensee will notify
(within a reasonable time not to exceed ninety (90)

<PAGE>

days) ECC of the development of the Improvement and grant to ECC the exclusive
right to negotiate, for a period of ninety (90) days after delivery of such
notice, for a license which will authorize ECC to use, license or otherwise
commercialize such Improvement Sublicensee and ECC will negotiate in good faith
the terms of the license for the Improvement. Failure of ECC and Sublicensee to
agree on a license agreement shall not give rise to any right on the part of
either party to seek to resolve the impasse (i) through arbitration under this
Sublicense Agreement or (ii) otherwise. It is expressly understood by the
parties hereto, that an Improvement in the manufacturing process is the sole and
exclusive right and property of the Sublicensee; disclosure of such information
is subject to the confidentiality provisions of this Sublicensee Agreement or as
may otherwise apply; and the licensing of the same to ECC is subject to
negotiation of an agreement on terms mutually acceptable to ECC and Sublicensee.

(d) Notwithstanding the above, the foregoing provisions of this
paragraph 6 shall not apply to any improvement, refinement or change, based on
whole or in part, on any technology, knowledge, information, or intellectual
property owned by Sublicensee prior to September 2, 1993.

7. "NEW USE" PRODUCTS.

<PAGE>

Use to ECC (the "New Use Notice") within a reasonable time not to exceed ninety
(90) days of such a determination. If ECC, or its Affiliates, does not have any
existing intellectual property protection (whether in the form of a patent
application, a trade secret, or the subject of previous or continuing research
and development) relating to the New Use, then ECC, or its assignee, shall have
the exclusive right to negotiate, for a period of ninety (90) days after the New
Use Notice, with Sublicensee for a license which will authorize ECC, or its
assignee, to manufacture, sell, and commercialize the New Use so long as the New
Use relates to materials, formulations, or compositions. In any event
Sublicensee shall have the right to incorporate the New Use into Products
licensed hereunder and no additional Royalty will be due by virtue of the
incorporation of the New Use into Products licensed hereunder. However, if the
New Use relates to machinery and equipment, the Sublicensee shall have the
option to negotiate, or to not negotiate, with ECC, or its assigns, for a
license to manufacture, sale and commercialize the New Use relating to machinery
and equipment. However, if Sublicensee desires to sell the licensing rights of
such New Use relating to machinery and equipment, Sublicensee shall provide a
first right of refusal to ECC to acquire the such licensing rights on the same
terms and conditions as agreed to by a third party. Sublicensee and ECC will
negotiate in good faith the terms of the license for the New Use. In the event
that ECC, or its Affiliates, is seeking or has been granted patent protection on
the compositions, formulations, or materials to be incorporated into the New
Use, ECC, or its Affiliates will in good faith negotiate to grant Sublicensee a
license to incorporate such compositions, formulations or materials into the New
Use. Failure of ECC and Sublicensee to agree on a license agreement shall not
give rise to any right on the part of either party

<PAGE>

to seek to resolve the impasse (i) through arbitration under this Sublicense
Agreement or (ii) otherwise. It is expressly understood by the parties hereto,
that an Improvement in the manufacturing process is the sole and exclusive right
and property of the Sublicensee; disclosure of such information is subject to
the confidentiality provisions of this Sublicensee Agreement or as may otherwise
apply; and the licensing of the same to ECC is subject to negotiation of an
agreement on terms mutually acceptable to ECC and Sublicensee.

8. INFRINGEMENT MATTERS.

(a) ECC and Sublicensee will promptly notify (within 30 days)
one another of any apparent infringement of the Technology (whether or not such
apparent infringement is within the Field of Use) or of the Trademarks which
comes to their attention while the Sublicense remains in effect, and if in ECC's
opinion the apparent infringement has substantial and adverse consequences ECC
shall, at its sole cost and expense, bring suit to enjoin such infringement and
to recover damages therefor. In any action brought by ECC pursuant to paragraph
8(a) hereof, ECC shall select and control counsel for the prosecution of such
suit. Sublicensee shall (i) have the right to receive, from time to time, full
and complete information from ECC concerning the status of such suit, (ii) have
the right, at Sublicensee's own expense, to be represented therein by counsel in
an advisory capacity, and (iii) cooperate fully with ECC and provide whatever
assistance is reasonably requested by ECC in connection with such suit including
the preparation and signing of documents. If ECC decides not to bring suit to
enjoin an alleged infringement either because it is deemed inadvisable or de
minimis, no such action will be required by ECC; however, in the event the
action taken by ECC is not satisfactory to Sublicensee, then Sublicensee shall
have the right, at its sole discretion,

<PAGE>

and at its sole cost, to take whatever action it deems appropriate in its own
name against an alleged infringer. If the rules of the jurisdiction in which
the claim or suit is brought require the naming of ECC or its licensor, then
Sublicensee may make such claim or bring such suit in the name of ECC or its
licensor after first obtaining ECC's written consent, which consent shall not be
unreasonably withheld, however, Sublicensee shall indemnify ECC or its licensor
for any claim or judgment entered against ECC or its licensor as a result of
Sublicensee bringing such claim or suit in the name of ECC or its licensor.
Additionally, ECC shall (i) have the right to consult with Sublicensee prior to
Sublicensee pursuing such legal action and thereafter shall have the right to
receive, from time to time, full and complete information from Sublicensee
concerning any actions Sublicensee has taken against an alleged infringer; and
(ii) have the right, at ECC's own expense, to be represented by counsel in an
advisory capacity in any legal proceedings initiated by Sublicensee.

<PAGE>

due hereunder. If Sublicensee is enjoined or otherwise precluded by law from
exercising its rights under this Agreement, then ECC shall directly reimburse
Sublicensee for all of Sublicensee's out-of-pocket costs incurred in the defense
of such suit. Sublicensee shall have the right to be represented in such suit
or action by its own legal counsel, at its own expense, provided that such legal
counsel will act only in an advisory capacity. If ECC decides to not assume the
defense of any infringement lawsuit described in this paragraph 8(b),
Sublicensee shall have the right, but not the obligation, to assume the defense
of such lawsuit utilizing legal counsel of its choice. Additionally,
Sublicensee will indemnify and hold ECC and its licensor of the Technology
harmless from and against, and hereby assumes liability for the payment of any
and all loss, liability or damage, and for all costs and expenses, including
reasonable costs of investigation and reasonable attorneys, accountants and
expert witness fees (collectively "Losses") that may be imposed upon, suffered
or incurred by ECC and its licensor of the Technology as a consequence of or in
connection with any lawsuit described in this paragraph 8(b), but only to the
extent that such lawsuit and resulting liability is based on matters other than
the Technology licensed hereunder.

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<PAGE>

thereafter be reduced by an amount equal to 100% of any fee or royalty payable
by Sublicensee under such additional license (including all payments under such
agreement whether for periods prior to such agreement or order) as long as the
infringement was due to the Technology licensed hereunder. In addition, if
Sublicensee settles an infringement action referred to in paragraph 8(b) hereof,
after obtaining the prior written consent of ECC (which shall not be
unreasonably withheld), and pursuant to such settlement Sublicensee obtains a
license under any patent not licensed hereunder, to convert materials into,
use or sell the Products in any manner contemplated by this Agreement, and
agrees to pay a royalty under such license, and the infringement of such patent
cannot reasonably be avoided by Sublicensee, the Royalty shall thereafter be
reduced by an amount equal to 100% of the sum payable by Sublicensee pursuant to
such settlement as long as the settlement was for claims of infringement due to
the Technology licensed hereunder.

9. PRODUCT LIABILITY INDEMNIFICATION.

<PAGE>

indemnify and hold ECC and its licensor of the Technology harmless from and
against, and hereby assumes liability for the payment of any and all loss,
liability or damage, and for all costs and expenses (including reasonable costs
of investigations and reasonable attorneys, accountants, and expert witness
fees) that may be imposed upon, suffered or incurred by, or successfully
asserted against ECC or its licensor of the Technology as a consequence of or in
connection with any liability relating to any Product which is converted, used
or sold by Sublicensee, except to the extent that the liability arises from the
negligence of ECC or from the Technology licensed hereunder. In the event any
action, suit or proceeding is brought against ECC or its licensor of the
Technology with respect to which there may be indemnity pursuant to this
paragraph 9, the defense of such action, suit or proceeding (including all
settlements and arbitrations, trials, appeals or other proceedings) shall be
conducted by Sublicensee at its sole cost and expense through legal counsel
selected by Sublicensee. ECC and its licensor of the Technology shall have the
right to participate in such defense at their own expense through legal counsel
of their choice. If Sublicensee fails to defend any such action, suit or
proceedings, for any reason, such failure shall constitute a material breach of
this Agreement by Sublicensee and ECC or its licensor of the Technology may
undertake defense of such action, suit or proceeding, through legal counsel of
their choice, at the sole cost and expense of Sublicensee. The parties shall
make available to one another, their legal counsel and accountants, all
information and documents reasonably available to them which relate to such
action, suit or proceeding and shall render such other assistance as they may
reasonably require of one another in order to insure the proper and adequate
defense of any such action, suit or proceeding.

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<PAGE>

(b) In addition to the indemnification provided by paragraph 9(a)
hereof, Sublicensee shall obtain, and shall maintain during the entire term of
this Agreement, a product liability insurance policy with a reputable insurance
carrier reasonably acceptable to ECC. Such policy shall provide Sublicensee
product liability coverage in an amount typical for the industry, for Products
which are converted, used or sold by Sublicensee. Such product liability
insurance policy shall name ECC and its licensor of the Technology as additional
insureds and shall provide that ECC will be given thirty (30) days prior written
notice of any termination or cancellation of the policy. Upon ECC's request,
Sublicensee shall provide ECC with a copy of such policy and of all amendments
or modifications thereto. Sublicensee shall be required to obtain and maintain
the product liability insurance policy called for by the foregoing provisions of
this paragraph 9(b) only from and after the date of the first commercial sale of
a Product by Sublicensee, or the first public testing of a Product by
Sublicensee. Notwithstanding the foregoing, due to Sublicensee's substantial
net worth, Sublicensee shall not be required to obtain and maintain the product
liability insurance required in paragraph 9(b) hereof, however, Sublicensee
shall be required to reimburse ECC or its licensor for any loss suffered by ECC
or its licensor which would have been covered under the product liability
insurance policy Sublicensee otherwise would have been required to obtain under
this paragraph 9(b) which would have listed ECC and its licensor of the
Technology as additional insureds.

10. ADDITIONAL DUTIES OF THE SUBLICENSEE. In addition to, and not in
limitation of, the other duties and obligations of Sublicensee, as set forth in
this Agreement, Sublicensee shall:

<PAGE>

(a) Use all reasonable commercial efforts to diligently exploit
the Sublicense by developing a commercial converting capacity for the Products
and by actively converting, marketing, advertising and selling the Products
within the Territory.

(b) Prominently display and utilize the principal Trademark or
Trademarks (whether owned by or licensed to ECC), as designated by ECC from time
to time, in connection with the advertisement, marketing, distribution and sale
of the Products. The right to use such designated Trademark or Trademarks will
automatically be included within the Sublicense herein granted. Sublicensee,
unless waived by ECC, shall use its best efforts to cause each Product converted
by Sublicensee to bear at least one of the Trademarks designated by ECC. The
specific placement, size, and detail of the Trademark on each Product must be
approved by ECC, but shall not be required to be placed on a Product in such a
size, placement, detail or configuration so as to impair the marketability of
the Product. In connection with the use of such licensed marks, Sublicensee
shall not in any manner represent that it has any ownership interest therein.
Sublicensee acknowledges that use of the Trademarks shall not create in its own
favor any right, title, or interest in or to the Trademarks, but that all uses
of these marks by Sublicensee shall inure to the benefit of ECC or its licensor
of the Trademarks. Sublicensee shall cooperate with ECC or its licensor of the
Trademarks in the execution of any appropriate and necessary documents in
connection with the registration of any Trademarks. Upon termination of this
Agreement, Sublicensee shall cease and desist from use of the Trademarks in any
way, including any word or phrase that is similar to or likely to be confused
with such marks. However, in the event of termination, Sublicensee shall have
the right to sell existing stock and inventory of converted

22
<PAGE>

Products for a period of one hundred and eighty days and thereafter shall
deliver to ECC or its duly authorized representative all materials upon which
the Trademarks appear.

(c) Not challenge or impugn the validity or ownership of the
Trademarks.
(d) Continue to make all required payments under this Agreement
to ECC during any challenge of the validity of any of the patents (or claims
thereof) issued in connection with the Technology. In the event Sublicensee
terminates such payments based upon or in connection with such a challenge, ECC
may at its option terminate this Agreement upon written notice to Sublicensee.

(e) If Sublicensee is a publicly traded corporation or is
otherwise required to publicly disseminate its financial statements, Sublicensee
shall provide ECC with annual financial reports of Sublicensee which are
published and detail Sublicensee's annual earnings and statement of net worth
for the preceding calendar or fiscal year. If there are no published reports,
then Sublicensee shall provide special reports of sales of Products and Gross
Sales Price of the same. If Sublicensee is required to file financial reports
with the S.E.C., then Sublicensee may provide ECC with copies of those financial
reports required to be filed with the SEC in lieu of the foregoing.

11. REPRESENTATIONS AND WARRANTIES of ECC. ECC hereby represents and
warrants to Sublicensee that:

(a) ECC is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. ECC has all requisite
power and authority to own, operate and lease its properties and to carry on its
business as now being conducted, and is duly qualified to do business in every
jurisdiction wherein the nature of the business

<PAGE>

conducted or the assets owned or leased by it make such qualification material
to the conduct of its business.

(b) ECC has all requisite power and authority to enter into
this Agreement and to perform its obligations hereunder including but not
limited to the right to sublicense the Technology. This Agreement has been duly
and validly authorized, executed and delivered by ECC and assuming the due
authorization, execution and delivery by Sublicensee is the legal, valid and
binding obligation of ECC, enforceable against it in accordance with its terms,
subject only to bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights generally and to general
principles of equity.

(c) ECC has made no assignments, grants, licenses, encumbrances,
obligations or agreements which are in conflict with this Agreement.

(d) To the best knowledge of ECC, no person, firm or entity has
made any claims or threatened, in writing or otherwise, that ECC is in violation
of or has infringed any patent, patent license, trade name, trademark, service
mark, brand mark, brand name, copyright, know-how, formula or other proprietary
or trade rights of such third party as they relate to the Technology. ECC is
not now in possession of and at no time has received any information which would
render any claims essential to the commercial utilization of the Technology
invalid and/or unenforceable. To the best of ECC's present knowledge and
belief, the use of the Technology in the conversion of materials into the
Products pursuant to the terms of this Agreement will not constitute
infringement of the proprietary rights of any third party.

<PAGE>

(e) The execution, delivery and performance of this Agreement by
ECC and the consummation by it of the transactions contemplated hereunder, do
not and will not conflict with or result in a breach or termination of any term
or provision of, or constitute a default under any other agreement, or result in
the creation of any lien, charge or encumbrance upon any of its properties or
assets pursuant to any corporate charter, bylaw, mortgage, deed of trust,
indenture or other agreement or instrument, or any order, judgment, decree or
like restriction, statute or regulation by which it or any of its assets and
properties may be bound. The representation and warranty given in this
paragraph 11(e) shall not be deemed or construed to expand or modify the
representation and warranty given by ECC in paragraph 11(d) hereof.

(f) The execution, delivery and performance of this Agreement by
ECC and the consummation by it of the transactions contemplated hereby will not
(i) constitute a violation (with or without the giving of notice or lapse of
time) of any provision of applicable law, (ii) require any consent, approval or
authorization of any person or governmental authority, (iii) result in a default
under, acceleration or termination of, or the creation in any party of the right
to accelerate, terminate, modify or cancel any agreement, lease, franchise,
permit, note or other restriction, encumbrance, obligation or liability to which
ECC is a party or by which it is bound or to which any of its assets are
subject, (iv) result in the creation of any lien or encumbrance upon ECC's
assets, (v) conflict with or result in the breach of or constitute a default
under any provision of ECC's certificate of incorporation or bylaws, or (vi)
conflict with, result in a tortious interference as a result of such conflict
with, or otherwise violate, any contract or arrangement between ECC and any
other person.

<PAGE>

The representation and warranty given in this paragraph 11(f), shall not be
deemed or construed to expand or modify the representation and warranty given by
ECC in paragraph 11(d) hereof.

(g) Neither ECC, nor anyone acting on its behalf, has taken any
action relating to any broker, finder, consultant or other expert which could
result in the imposition upon the Sublicensee of any obligation to pay a fee to
any broker, finder, consultant or similar expert in connection with the
transactions contemplated hereby.

(h) ECC has the full right and power to grant to Sublicensee
this sublicense to use the Technology in the conversion of materials into
Products and the sale and distribution of the Products.

12. REPRESENTATIONS AND WARRANTIES OF SUBLICENSEE. Sublicensee hereby
represents and warrant to ECC that:

(a) Sublicensee is a Corporation duly organized, validly
existing and in good standing under the laws of the State of New York.
Sublicensee has all requisite power and authority to own, operate and lease its
properties and to carry on its business as now being conducted, and is duly
qualified to do business in every jurisdiction wherein the nature of the
business conducted or the assets owned or leased by it make such qualification
material to the conduct of its business.

26
<PAGE>

enforceable against it in accordance with its terms, subject only to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or affecting
creditors' rights generally and to general principles of equity.

(c) The execution, delivery and performance of this Agreement
by Sublicensee, and the consummation by it of the transactions contemplated
hereunder, do not and will not conflict with or result in a breach or
termination of any term or provision of, or constitute a default under, any
other agreement, or result in the creation of any lien, charge or encumbrance
upon any of its properties or assets pursuant to any charter or similar
document, mortgage, deed of trust, indenture or other agreement or
instrument, or any order, judgment, decree or like restriction, statute or
regulation by which it or any of its assets and properties may be bound.

(d) The execution, delivery and performance of this Agreement by
Sublicensee and the consummation by it of the transactions contemplated hereby
will not (i) constitute a violation (with or without the giving of notice or
lapse of time) of any provision of applicable law, (ii) require any consent,
approval or authorization of any person or governmental authority, (iii) result
in a default under, acceleration or termination of, or the creation in any party
of the right to accelerate, terminate, modify or cancel, any agreement, lease,
franchise, permit, note or other restriction, encumbrance, obligation or
liability to which Sublicensee is a party or by which it is bound or to which
any of its assets are subject, (iv) result in the creation of any lien or
encumbrance upon Sublicensee assets, (v) conflict with or result in the breach
of or constitute a default under any provision of Sublicensee's charter
documents, or (vi) conflict with, result in tortious interference as a result of
such conflict

27
<PAGE>

with, or otherwise violate, any contract or arrangement between ECC and any
other person.

(e) Neither Sublicensee, nor anyone acting on its behalf, has
taken any action relating to any broker, finder, consultant or other expert
which could result in the imposition upon ECC of any obligation to pay a fee to
any broker, finder, consultant or similar expert in connection with the
transactions contemplated hereby.

13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the parties, as set forth herein, shall be true and accurate
as of the effective date of this Agreement, and shall survive the execution of
this Agreement

14. INDEMNIFICATION. In addition to the indemnification provisions
provided elsewhere in this Agreement:

(a) ECC will indemnify and hold Sublicensee harmless from and
against, and hereby assumes liability for, the payment of any loss, liability or
damage, and for all costs and expenses (including reasonable costs of
investigation and reasonable attorneys, accountants and expert witness fees)
(collectively "Losses") of whatsoever kind and nature that may be imposed upon,
suffered or incurred by or successfully asserted against Sublicensee as a
consequence of or in connection with any misrepresentation or breach of any
warranty, covenant or agreement of ECC contained in this Agreement. However,
ECC's liability to Sublicensee for (i) any matter arising under this Agreement,
or (ii) any claims asserted against Sublicensee which relate, in whole or in
part, to the Technology, shall be limited to the total amount of all Royalties
paid to ECC by Sublicensee under this Agreement.

(b) Sublicensee will indemnify and hold ECC harmless from and
against, and hereby assumes liability for, the payment of all Losses of
whatsoever kind and nature

<PAGE>

that may be imposed upon, suffered or incurred by or successfully asserted
against ECC as a consequence of or in connection with any misrepresentation or
breach of any warranty, covenant or agreement of Sublicensee contained in this
Agreement. However, Sublicensee's liability to ECC under this paragraph 14(b)
shall be limited to the total amount of all Royalties paid to ECC by Sublicensee
under this Agreement.

(c) Neither party shall have any liability to the other party
pursuant to an indemnity provided by this paragraph 14 unless and until the
aggregate amount of all indemnified Losses suffered or incurred by such
indemnified party after the effective date hereof equals or exceeds $100,000, at
which time the indemnifying party shall be obligated to pay the indemnified
party the full amount of all indemnified Losses, including such initial $100,000
in Losses. The amount of indemnity payable pursuant to this paragraph 14 shall
be calculated after giving effect to any insurance proceeds actually received by
the indemnified party provided that neither party shall subrogate to any
insurance carrier any rights or claims which it may have against the other
party.
15. CONFIDENTIALITY.

(a) Sublicensee acknowledges that ECC claims that the
Technology, as it may exist from time to time as well as the other confidential
or propriety information (including business and financial information) of ECC
(whether owned by ECC or acquired by license from third parties) are and shall
remain the valuable, special, unique and proprietary assets of ECC, and shall
constitute "Confidential Information" hereunder. In order for any information
other than the Technology to be deemed to be "Confidential Information"
hereunder, whether disclosed orally or in writing, it must be identified, orally
or in writing,

<PAGE>

to Sublicensee as "Confidential Information" at time of disclosure, or
reasonably thereafter, or be reasonably understood by Sublicensee to be
"Confidential Information." Additionally, as used herein, "Confidential
Information" shall not include any information or data which Sublicensee can
show: (i) is in, or becomes a part of, the public domain by any means other than
the failure by Sublicensee to fulfill its obligations hereunder; or (ii) is
rightfully known to Sublicensee at the time of disclosure by ECC; or (iii) is,
at any time, disclosed to Sublicensee by a third party who has received and
disclosed such information without the breach of any obligation of
confidentiality to ECC or to any third party assignor of such Confidential
Information. For purposes of this paragraph 15(a), information shall not be
deemed to be part of the public domain or in Sublicensee's knowledge merely
because it may be embraced in a more general disclosure or simply because it may
be derived from combinations of disclosures or information generally available
to the public or within Sublicensee's knowledge. The parties acknowledge that
disclosure to Sublicensee of Confidential Information will be necessary in order
to enable Sublicensee to utilize the Sublicense in the manner contemplated by
this Agreement, and ECC will make such disclosures of the Confidential
Information to Sublicensee as is necessary, required or appropriate in that
regard. To the extent that the disclosure of such Confidential Information is
deemed to be a transfer of the Technology licensed hereunder, such Technology
transfer shall be carried out pursuant to the provisions of paragraph 31 hereof.
The parties acknowledge that they have a confidential relationship with one
another and accordingly Sublicensee shall maintain all Confidential Information
disclosed to it pursuant to this Agreement in confidence and shall not disclose
the same to any third party (with the exception

30
<PAGE>

of its employees, accountants, attorneys and other agents and professional
advisors) either during or after the term of this Agreement unless required to
do so by court order or by law, in which case Sublicensee shall notify ECC, in
writing, prior to making such disclosure and shall cooperate with ECC to
preserve and protect the confidentiality of the Confidential Information in
question to the fullest extent possible. Additionally, except as specifically
contemplated by this Agreement, Sublicensee shall not utilize any Confidential
Information for its own benefit or for the benefit of any third party. Prior to
making any permitted disclosure of any Confidential Information to its
employees, accountants, attorneys and other agents and professional advisors,
Sublicensee shall require such persons, firms, or entities to execute and
deliver written disclosure agreements which shall obligate such persons, firms
and entities to comply with the same obligations of confidentiality and non-use
as imposed upon Sublicensee in this paragraph 15(a). The obligation of
confidentiality as it relates to the Confidential Information shall survive the
termination of this Agreement.

(b) From time to time during the term of this Agreement,
Sublicensee may disclose to ECC certain information which Sublicensee deems to
be proprietary and confidential, including but not limited to business plans,
marketing plans, financial information, and process technology (the "Sublicensee
Confidential Information"). The definition of "Sublicensee Confidential
Information," and ECC's use and disclosure thereof, shall be governed by terms
and conditions identical to those which govern Confidential Information, as set
forth in paragraph 15(a) hereof; provided that ECC shall have the right to
disclose Sublicensee Confidential Information to ECC's licensor of the
Technology subject to its accepting and treating it as Confidential Information.

<PAGE>

16. TERM AND TERMINATION.

(a) The term of this Agreement shall commence upon the effective
date hereof. Unless sooner terminated as hereinafter provided, this Agreement
shall continue in full force and effect until the expiration of the last
material and substantial United States patent covering the Technology which is
utilized by Sublicensee, or for so long as Sublicensee produces a Product which
utilizes material and substantial proprietary information or a material and
substantial Trade Secret of ECC. Provided, however, that upon the expiration of
the last aforementioned patent, if Sublicensee desires to continue the Agreement
in force, it will be subject to an appropriate negotiated adjustment to the
Royalty Payments or License Fee. Any dispute as to the term of this Agreement
shall be resolved by arbitration pursuant to paragraph 26 of this Agreement.

(b) The Sublicense may be terminated, at any time, by the mutual
written consent of the parties hereto.

(c) Sublicensee may terminate this Agreement, at any time, with
or without cause, upon sixty (60) days' prior written notice of such termination
to ECC.

(d) If Sublicensee or ECC is in breach of any of its material
obligations hereunder, then the non-breaching party may give the breaching party
written notice of such breach. If such breach is not cured within ninety (90)
days from the date such written notice is delivered, or if such default can not
be cured within such ninety day period but the breaching party has taken action
to cure such default then if the default is not cured within one hundred eighty
(180) days from the date of the original notice, the non-breaching party

<PAGE>

shall have the right to immediately terminate the Sublicense by written notice
to the breaching party.

(e) If a bankruptcy reorganization proceeding, not including a
voluntary proceeding under Chapter 7 of the U.S. Bankruptcy Code, shall be
commenced by or an involuntary proceeding be commenced against the Sublicensee,
this Sublicense shall terminate effective as of the date of such filing, unless
the Sublicensee shall assume such Sublicense in accordance with the provisions
of the U.S. Bankruptcy Code, including, but not limited to, Section 11 U.S.C.
365, and any applicable court order.

(f) Subject to the provisions of paragraph 27 (force majeure)
ECC shall have the right, at its sole discretion, to terminate the Sublicense,
upon thirty (30) days written notice to Sublicensee, in the event that the
amount of the Royalty payment for any calendar year is not at least 50% of the
Royalty payment amount for the preceding calendar year.

17. EFFECT OF TERMINATION OR TERMINATION.

(a) From and after the effective date of the expiration of the
term of this Agreement or the termination of the Sublicense pursuant to
paragraph 16 hereof Sublicensee shall have no right, whatsoever, to utilize the
Technology, (except for Improvements to which Sublicensee has the right to
continued use as provided in paragraph 6) or the Trademarks pertinent to this
Agreement, and shall return to ECC all copies of Confidential Information which
is then in the possession of Sublicensee or provide satisfactory assurances of
the destruction of all Confidential Information. Provided, however, that
nothing contained herein shall or shall be deemed to restrict the Sublicensee's
ability or right to use, free of Royalty, any Technology, trade name, know-how
or confidential information which is or has come

<PAGE>

into the Public Domain through no fault of Sublicensee and is not otherwise
deemed Confidential Information. ECC shall also be required to return to
Sublicensee all copies of Confidential Information of Sublicensee which is then
in the possession of ECC or provide satisfactory assurances of the destruction
of all Confidential Information.

(b) The obligation of Sublicensee to pay to ECC the Royalty for
all Products actually sold by Sublicensee prior to the effective date of the
expiration or termination of this Agreement, as well as the obligations
concerning product liability set forth in paragraph 9 hereof and of
confidentiality set forth in paragraph 15 hereof, shall survive the expiration
or termination of the Sublicense and of this Agreement

18. MARKING AND UNITED STATES EXPORT CONTROL.

(a) Sublicensee shall mark all of the Products and related
documents with the applicable United States patent numbers, as required by
applicable law, or as instructed by ECC.

(b) Sublicensee shall comply with all applicable laws, rules and
regulations of the United States, including but not limited to the Export
Regulations of the United States Department of Commerce, in connection with
Technology or Products. Sublicensee acknowledges that ECC has not made and does
not make any representation that any license is or is not required in connection
with such export or, if required, that such license will be issued by the United
States Department of Commerce, provided, however, that ECC shall apply for all
licenses required or necessary to enable the Sublicensee to export the Products
or Technology within the Territory without imposing any additional Royalty.

<PAGE>

19. SPECIAL TAX PROVISIONS. Sublicensee or its agents shall be
solely responsible for the payment and discharge of any taxes, duties, or
withholdings relating to any transaction of Sublicensee or its agents in
connection with the conversion, use, sale or commercialization of the Technology
or the Products; except that ECC shall be responsible for taxes, duties or
withholding relating to the payment to ECC of any Royalty payment under this
Agreement and Sublicensee shall be permitted to perform any withholding with
respect to such payments and fees required by law or regulation.

20. RELATIONSHIP OF THE PARTIES. This Agreement shall not create any
partnership, joint venture or similar relationship between the parties hereto
(or ECC's Affiliates) and no representation to the contrary shall be made by
either party. Neither party shall have any authority to act for or on behalf of
or to bind the other party in any fashion, and no representation to the contrary
shall be made by either party.

21. NOTICES. Any notice which is required or permitted to be given
to ECC or Sublicensee pursuant to this Agreement shall be deemed to have been
given only if such notice is reduced to writing and delivered personally, or by
United States mail with postage prepaid and return receipt requested, or by
telecopier (FAX) transmission, confirmed by letter United States mail with
postage prepaid and return receipt requested, or by reputable overnight courier
(pursuant to instructions requiring next-day delivery) to the person in question
as set forth below:

ECC: EarthShell Container Corporation
800 Miramonte Drive
Santa Barbara, California 93109-1419
Attention: Mark A. Koob
Fax: (805) 897-2298

<PAGE>

Sublicensee: International Paper Company
6400 Poplar Avenue
Memphis, TN 38197
Attention: Dennis J. Colley
Fax: (901) 763-6048

ECC or Sublicensee may change its address by giving notice of such change in the
manner set forth herein. If delivered personally, a notice shall be deemed
delivered when actually received at the address specified herein. Any notice
given by mail shall be deemed delivered three (3) days following the date upon
which it is deposited in the mail, with postage prepaid and return receipt
requested. Any notice given by FAX shall be deemed delivered on the date it is
actually transmitted to the person in question at the FAX number specified
above. Any notice given by overnight courier shall be deemed delivered on the
next business day following the date it is placed in the possession of such
courier.

22. ENTIRE AGREEMENT. This Agreement supersedes any prior
understandings or agreements, whether written or oral, and any contemporaneous
oral agreements, between the parties hereto in regard to the subject matter
hereof and contains the entire agreement between the parties in regard to the
subject matter hereof. This Agreement may not be changed or modified orally,
but only by an agreement, in writing, signed by both the parties hereto.
Nothing contained in this Agreement shall be deemed or construed to supersede,
modify or amend the License Agreement.

<PAGE>

parts or provisions hereof, and the remaining parts and provisions of this
Agreement shall remain in full force and effect.

24. WAIVER. Neither the failure or delay on the part of either party
to exercise any right, power or privilege hereunder shall operate as a wavier
thereof, nor shall any single or partial exercise of any such right or privilege
preclude any other or further exercise thereof or of any other right or
privilege.

25. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, without giving effect to
the choice of law rules thereof.

26. RESOLUTION OF DISPUTES.

(a) In the event of a breach of this Agreement, or a dispute as
to the meaning of this Agreement, or any of its terms which the parties cannot
resolve by themselves amicably, the parties agree to submit such dispute to
resolution in the manner hereinafter described. First, the parties shall
endeavor to resolve the dispute through the use of an acceptable alternative
dispute resolution procedure. If within 30 days after one party notifies the
other in writing of the existence of a dispute which it desires to be resolved
under this paragraph the parties have not agreed upon an acceptable alternative
dispute resolution procedure, then the matter shall be resolved by arbitration
as set forth below and according to the rules of the American Arbitration
Association except as herein modified by the parties. Unless otherwise agreed
to in writing, all alternative dispute resolutions or arbitration hearings will
be held in Santa Barbara, California.

(b) Within 10 days after the failure to agree to an acceptable
alternative dispute resolution procedure, each party will select an arbitrator,
and notify the other party

<PAGE>

of its selection. Within 15 days after such notice, the respective arbitrators
will select a third arbitrator as Chairman of the panel. A hearing by the
arbitration panel must be held within 30 days after the selection of the
Chairman and a majority decision and resolution must be reached within 30 days
of such hearing. Decisions of the panel must be in writing and will be final
and binding on the parties, and judgment may be entered thereon by any court
having jurisdiction of the parties.

(c) Each party shall bear its own cost of presenting its case in
an alternative dispute resolution procedure, or arbitration, as the case may be.

27. FORCE MAJEURE.

(a) The failure of either party to perform its obligations under this
Agreement (except the obligation to make payments) shall not subject such party
to any liability to the other or subject this Agreement to termination if such
failure is caused by acts such as, but not limited to, acts of God, work-
stoppage or slow-downs, fire, earthquake, explosion, flood, drought, war, riot,
sabotage, embargo, compliance with any order or regulation of any governmental
entity acting with color of right, intervention or delays created by any
regulatory authority, or by any other cause beyond the reasonable control of the
parties. The party so affected shall promptly notify the other party of the
event of force majeure, and shall use all reasonable efforts to remove such
event as soon as reasonably practicable.

28. TIME OF ESSENCE. The parties acknowledge that time is of the
essence in regard to every provision of this Agreement.

<PAGE>

29. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

30. TERMINOLOGY. As used in this Agreement, the singular shall
include the plural and the plural shall include the singular. Titles of
sections and paragraphs in this Agreement are for convenience only, and neither
limit or amplify the provisions of the Agreement, and all references in this
Agreement to a section or paragraph shall refer to the corresponding section or
paragraph of this Agreement unless specific reference is made to the sections of
another document or instrument. The term Sublicensee shall include the
Sublicensee or its permitted Assignee(s) as applicable.

31. TECHNOLOGY TRANSFER, PRODUCT DESIGN AND QUALITY CONTROL.

(a) It is contemplated that within six (6) months from the
execution of this Agreement, ECC and Sublicensee shall enter into a mutually
agreeable Technology Transfer Agreement to provide for the transfer of the
Technology license hereunder. The Technology Transfer Agreement shall also
provide for Quality Control Audits, as defined and agreed to in the Technology
Transfer Agreement, to be periodically performed by ECC or its agents. If ECC
approves the internal professional staff of Sublicensee to carry out the
transfer of Technology and to supervise the required quality control procedures,
this will be set forth in the Technology Transfer Agreement between ECC and
Sublicensee. If for any reason a mutually agreeable Technology Transfer
Agreement is not entered into within the six (6) month period, either party may
terminate this Agreement upon written notice within 30 days after the expiration
of the six (6) month period and the parties shall have no further liability or
obligation hereunder (including but not limited to any liability on the part of
ECC to

<PAGE>

reimburse Sublicensee for any moneys, resources, or damages incurred or expended
before or after the execution of this Agreement), except that both parties shall
have a continuing duty and remain liable for damages related to the ongoing duty
regarding Confidential Information.

(b) Contemporaneous with the execution of the Technology
Transfer Agreement, ECC shall deliver a disclosure sufficient to teach one of
ordinary skill in the art how to use the Technology in order to convert
materials in the form of paper stock manufactured from the Technology into the
Products. It is contemplated that this disclosure shall include the procedures
and research data necessary to implement the Technology for the conversion of
materials incorporating the Technology into the Products.

32. MATERIALS SUPPLY. Within six (6) months following the execution
of this Agreement but not before execution of the Technology Transfer Agreement,
ECC will submit to Sublicensee a list of approved manufacturers of the Aliite
paper analog material, which manufacturers shall supply the material in the size
and dimensions satisfactory to Sublicensee. If Sublicensee desires to have
other manufacturers added to this list, Sublicensee shall submit the same to ECC
who in turn will verify that such manufacturer or manufacturers have the
capability to furnish such Aliite paper analog materials meeting ECC's
specifications, and if said Manufacturer or manufacturers are able to do so,
then they will be added to the approved list. If for any reason this
information is not sufficient to satisfy Sublicensee's need to establish
acceptable sources of the Aliite paper analog materials, Sublicensee may
terminate this Agreement and neither party will have any further liability or
obligation hereunder except for the ongoing duty regarding Confidential
Information.

<PAGE>

33. MCDONALD'S CORPORATION. Because of work jointly undertaken by
ECC and McDonald's Corporation ("McDonald's") (as used herein the term
"McDonald's" shall include franchisees thereof) with regards to studies of
market potential and Food Package design, it has been agreed that McDonald's is
to have a "lead time" or "priority" with regard to the distribution of certain
Products that are ordered by it and covered by this Sublicense Agreement. Prior
to the execution of the Technology Transfer Agreement, ECC will deliver to
Sublicensee a list of these priority Products. In compliance with this
arrangement, it is expressly understood and agreed that, for a period of two (2)
years from the date hereof, the license hereby granted is subject to Sublicensee
agreeing not to fill orders from, or deliver any priority Products to, on a
region by region basis, any entity in the food service or fast food industry
other than McDonald's until such time as all such priority Products ordered for
McDonald's in a specific region have been converted, shipped or otherwise set
aside for delivery to McDonald's by the Sublicensee. A region shall be that
geographical area which is serviced by a specific "distribution center" which
supplies products solely or primarily to McDonald's in that geographical area.

34. SUBLICENSES. ECC agrees that all sublicenses (within the
Territory) granted by it will contain substantially the same terms and
conditions so that no sublicensee will gain a material advantage over another
sublicensee by virtue of the sublicense agreement including any letter
agreements or letter of clarification issued or entered into in connection with
any such sublicense.

35. PRODUCT DEFECTS. Should any Products converted, sold or
otherwise commercialized by Sublicensee contain any material defect in its
appearance or function,

<PAGE>

Sublicensee shall cease any further conversion, sale or other commercialization
of such Products containing such material defect. Unless Sublicensee corrects
such defect within a reasonable time following its discovery by or disclosure to
Sublicensee, Sublicensee shall be in breach of a material obligation of this
Agreement.

36. INTELLECTUAL PROPERTY RIGHTS. In the absence of an express
written understanding to the contrary between Sublicensee and ECC, and other
than expressly as provided for in this Agreement, Sublicensee and ECC each shall
retain all property, trademarks, and other intellectual property rights which
each respective party may now posses or own, or for which each respective party
has made application, with respect to its businesses, and neither party shall
acquire any right, title, interest, or license in any of the rights or
properties belonging to the other as a result of this Agreement, or as a result
of any dealings between the parties pursuant to this Agreement.

IN WITNESS WHEREOF, the parties have caused this Sublicense Agreement
to be executed and delivered by their duly authorized representatives upon the
date first herein written.

ECC: SUBLICENSEE:
EarthShell Container Corporation International Paper Company

By: /s/ Mark A. Koob By: /s/ Dennis J. Colley
------------------------- -------------------------
Mark A. Koob Dennis J. Colley

Its: President Its: General Manager
Folding Carton Division

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EXHIBIT A

I. TECHNOLOGY

The term "Technology" as defined in paragraph 1(f), includes the
technology within the scope of the following issued patents and patent
applications which have been filed as of the execution date of this Agreement,
but only to the extent that such technology has been licensed to ECC and is
directly utilized in the "Field of Use". The patents and patent applications
identified in this Exhibit "A" are merely to identify the proprietary technology
reference in paragraph 1(f); nothing in this Exhibit "A" is otherwise intended
to expand the scope of the definition of "Technology" as defined in paragraph
1(f).

ISSUED UNITED STATES LETTERS PATENTS

1. U.S. Letters Patent No. 4,225,247 issued September 30, 1980, and
entitled "mixing and Agitating Device."

2. U.S. Patent No. 4,552,463 issued November 12, 1983, and entitled
"Methods and Apparatus for Producing a Colloidal Mixture."

3. U.S. Letters Patent No. 4,889,428 issued December 26, 1989, and
entitled "Rotary Mill for Increasing the Degree of Hydration."

4. U.S. Letters Patent No. 4,944,595 issued July 31, 1990, and entitled
"Apparatus for Producing Cement Building Material."

5. U.S. Letters Patent No. 5,061,319 issued October 29, 1991, and
entitled "The Process for Producing Cement Building Material."

6. U.S. Letters Patent No. 5,169,566 issued December 8, 1992, and
entitled "Engineered Cementitious Contaminant Barriers and Their
Method of Manufacture."

2. PENDING UNITED STATES PATENT APPLICATIONS

7. U.S. Patent Application Serial No. 07/418,027 filed October 10, 1989,
and entitled "Process for Producing Improved Building Material and
Product Thereof."

8. U.S. Patent Application Serial No. 08/050,705 filed April 21, 1993,
and entitled "Methods of Manufacture and Use For Low Density
Hydraulically Bonded Cement Compositions."

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9. U.S. Patent Application Serial No. 07/929,898 filed August 11, 1992,
and entitled "Cementitious Food and Beverage Storage, Dispensing, and
Packaging Containers and the Methods of Manufacturing Same."

10. U.S. Patent Application Serial No. 07/981,615 filed November 25, 1992,
and entitled "Methods of Manufacture and Use For Hydraulically Bonded
Cement."

11. U.S. Patent Application Serial No. 07/982,383 filed November 25, 1992,
and entitled "Food and Beverage Containers Made from Inorganic
Aggregates and Polysaccharide, Protein, or Synthetic Organic Binders,
and the Methods of Manufacturing Such Containers."

12. U.S. Patent Application Serial No. 08/019,151 filed February 17, 1993,
and entitled "Cementitious Materials for Use in Packaging Containers
and their Methods of Manufacture."

13. U.S. Patent Application Serial No. 08/018,773 filed February 17, 1993,
and entitled "Cementitious Materials--for Use in Cushioning, Spacing,
Partitioning, Portioning or Wrapping Objects and the Methods of
Manufacturing Such Materials."

14. U.S. Patent Application Serial No. 08/027,451 filed March 8, 1993, and
entitled "Laminate Insulation Barriers Having a Cementitious
Structural Matrix and Methods for Their Manufacturing."

15. U.S. Patent Application Serial No. 08/027,404 filed March 8, 1993, and
entitled "Highly Insulative Cementitious Matrices and Method For
Their Manufacture."

16. U.S. Patent Application Serial No. 08/095,662 filed July 21, 1993, and
entitled "Hydraulically Settable Containers and other Articles for
Storing, Dispensing, and Packaging Food and Beverages and Methods for
their Manufacture."

II. TRADE SECRETS

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right to grant licenses thereon during the term of this Agreement and which
relates in whole or in part to any of the following:

1. The compositions, including the variable and preferred parameters
for each component, used in Food Packages or the Technology based
on hydraulically reacting materials.

2. The processing steps, including the variable and preferred
parameters for each step, used in the Technology.

3. The equipment and apparatus used in the manufacture of the
Technology.

4. Quality control, testing and research and development data,
reports, and information, including patent applications in
preparation.

5. Customers and suppliers of the components and equipment of the
Technology, including any agreements.

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EXHIBIT B

PRODUCTS

For purposes of paragraph 1(e) of this Agreement, the term "Products" shall mean
those Food Packages in Sublicensee's present product lines, or Food Packages
substantially similar in nature, as follows:

cups
trays
plates and bowls
2-piece containers
hinged containers
single service milk/juice cartons
french fry scoops
hinge cover packages such as "Happy Meal" packages
cones
tube style packaging
tuck style packages
hinged containers such as clamshell designed packages
dessert containers such as pie containers
hash brown containers

Notwithstanding paragraph 2(e) of the Agreement, the term "Products" shall also
include Food Packages outside of Sublicensee's present product lines upon ECC's
prior written approval, which approval shall not be unreasonably withheld.
Sublicensee shall notify ECC of the specific Products Sublicensee intends to
produce and provide to ECC the specifications of each Product. The foregoing
notice and product specifications shall be delivered to ECC no later than
thirty (30) days prior to commercial production of a Product. Sublicensee shall
use reasonable efforts, to the extent of information available to Sublicensee,
to identify and report to ECC the end use of each Product.

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THIS AGREEMENT is made upon and shall be effective as of ____________,
199_, by and between EARTHSHELL CONTAINER CORPORATION, a Delaware corporation
("ECC"), and MOBIL CHEMICAL COMPANY, an unincorporated division of MOBIL OIL
CORPORATION, a Corporation formed and existing under the laws of New York
("Sublicensee").

RECITALS:

A. Pursuant to that certain License Agreement, dated February 24,
1993, (the "License Agreement") between E. Khashoggi Industries, a California
general partnership ("EKI") and ECC, ECC has the exclusive right to utilize
specified technology to manufacture and sell within a specified field of use
certain containers made from hydraulically reacting materials for the
packaging, storage, portioning, dispensing, carrying, presenting, serving and
consumption of food and beverages.

B. ECC has the right and authority to grant sublicenses which will
permit selected entities to utilize such technology in order to manufacture
and sell certain food and beverage containers made from hydraulically
reacting materials.

C. Sublicensee desires to obtain from ECC a sublicense to utilize such
technology in order to manufacture and sell certain designated food and
beverage containers made from hydraulically reacting materials within a
designated geographical area.

D. ECC has engaged in discussions and made certain representations to
the Sublicensee; based upon Sublicensee's independent evaluation, Sublicensee
is willing to acquire necessary equipment and construct a pilot production
line to use the Technology in the commercial manufacture of the Products
(such production line is herein referred to as the "Pilot Production Line").

E. The construction of this Pilot Production Line will benefit ECC as
well as the Sublicenses, but will be constructed at the cost and expense of
the Sublicensee.

EXHIBIT 10.18

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F. In light of the capital commitment of the Sublicensee pursuant to
the terms of this Sublicense Agreement, ECC has granted the Sublicensee all
rights and licenses necessary for the production of the Products utilizing the
Technology.

G. ECC is willing to grant a sublicense to Sublicensee upon the terms
and conditions set forth herein.

AGREEMENT:

NOW, THEREFORE, in consideration of the foregoing Recitals and the
covenants and agreements set forth herein, together with other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:

1. DEFINITIONS. The capitalized terms used herein shall have the
meanings set forth below, or the meanings assigned to them elsewhere herein:

(a) The term "Affiliate" shall mean, with respect to any given
entity (which includes without limitation any company, organization, or
person), any other entity directly or indirectly controlling, controlled by,
or under direct or indirect common control with such given entity. For
purposes of this definition, the ownership of a twenty-five percent (25%) or
greater equity interest in an entity shall be deemed control of such entity,
and the ownership of less than a twenty-five percent (25%) equity interest in
an entity (absent any other exercise of control) shall be deemed not to be
control of such entity.

(b) The term "Field of Use" shall mean the use and sale of Food
Packages in the food service or fast-food and restaurant industry. As used
herein, the term "food service" or "fast-food and restaurant industry" is
intended to include any facility (whether commercial, nonprofit,
governmental, or other) where food and beverages are (i) sold or provided for
consumption on the premises or (ii) packaged in single portions, or multiple
portions, intended for immediate consumption. The term "Field of Use" shall
also include the use and sale of Food Packages in other retail establishments
selling food or beverages or Food Packages (e.g., grocery stores, convenience
stores, and food warehouses-hereinafter the "retail food selling industry"),
but only with respect to Food Packages which are the

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same or substantially similar to any Food Package which has been introduced
into the fast-food and restaurant industry or the retail food selling
industry by an entity (including any Affiliates) that operates retail
establishments in the fast-food and restaurant industry in at least six
locations. The sale of Food Packages to distributors and wholesalers for
resale and use in the food service or fast food and restaurant industry is
included within the Field of Use. Notwithstanding the foregoing, the parties
agree, as set forth in paragraph 1(e), that certain items shall not be within
the definition of Field of Use.

(c) The term "Food Packages" shall mean any product, apparatus,
device, or equipment for packaging, storage, portioning, dispensing,
carrying, presenting, serving or consumption of food or beverages.

(d) The term "Gross Sales Price" shall mean the gross invoice
price charged by Sublicensee in the sale of a Product to a non-Affiliate
reduced by i) any credit allowed by Sublicensee for the return of Product;
ii) customary trade, quantity and cash discounts allowed by Sublicensee; iii)
excise, value added and sales taxes actually paid by Sublicensee on the
Product; (iv) freight charges actually paid by Sublicensee for the shipment and
delivery of the Product; and (v) bad debts or uncollected accounts. In the
case of non-cash consideration, "Gross Sales Price" shall be the fair market
value of all non-cash consideration actually received by Sublicensee or its
Affiliate for such Product. The "Gross Sales Price" of Products sold or
transferred to an Affiliate shall be deemed to be the price then charged to
unrelated parties in arms-length transactions for such Products in similar
quantities and under similar terms of sale.

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term storage of liquids whether for single or multiple portions (e.g., soft
drink cans, milk cartons, sealed juice or drink containers), or boxes or
sealed containers for the long term storage of single or multiple servings of
foods (e.g., dry cereals, egg cartons, and meat and deli trays) - the right to
license such items has been retained by EKI.

(f) The term "Technology" shall mean all of the proprietary
technology involving hydraulically reacting materials which is (i) described
or claimed in any United States patent or patent application set forth in
Exhibit "A", attached hereto and incorporated herein, including without
limitation, any continuations, divisionals or continuations-in-part, reissues
and extensions thereto, and any patents issued therefrom, and (ii) the
subject of any future United States patents or patent applications to the
extent that such patents or patent applications are licensed to ECC and
directly utilized in the manufacture, use or sale of Food Packages by the
Sublicensee. The Technology, to the extent it exists upon the execution date
of this Agreement, is further described on Exhibit "A". The term Technology
shall also include the proprietary information of ECC, or licensed to ECC,
that is related to the Technology which is described on Exhibit "A" as "Trade
Secrets" and any other proprietary information of ECC, or licensed to ECC,
which is delivered, orally or in writing, to the Sublicensee and designated,
orally or in writing, as "Confidential".

(g) The term "Territory" shall mean all fifty states of the United
States of America and any territories or possessions of the United States.
The term "Territory" also shall include Canada, Mexico, Central America, and
the Caribbean islands and nations, subject to any foreign territory being
removed, all or in part, at ECC's option, if Sublicensee has not commenced
commercial production or sales of Products in such foreign territory prior to
January 1, 1996.

(h) If Sublicensee conducts business and wants to sell Products
outside of the Territory, ECC agrees that it will negotiate in good faith with
Sublicensee for a

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separate non-exclusive sublicense covering a specified geographic area
outside of the Territory.

2. THE SUBLICENSE.

(a) ECC hereby grants to Sublicensee a non-exclusive,
royalty-bearing sublicense (the "Sublicense") to make, use, sell and
otherwise commercialize the Products solely within the Territory and solely
within the Field of Use. The Sublicense shall be irrevocable except as
specifically provided in this Agreement.

(c) Sublicensee shall not have the right to further sublicense,
assign or transfer the Technology, or any interest in or rights under the
Sublicense (i) except to an Affiliate or (ii) except with the prior written
consent of ECC, which consent will not unreasonably be withheld (such
assignee referred to herein as a "Proper Assignee"). Any such purported
sublicense or transfer shall be void and shall constitute a breach of a
material obligations of Sublicensee within the meaning of paragraph 16,
hereof. The merger or consolidation of Sublicensee or a Proper Assignee with
or the sale of substantially all of Sublicensee's or a Proper Assignees'
assets or equity interest to, any other entity that is not, prior to such
merger, consolidation or sale, an Affiliate of Sublicensee, whether occurring
by operation of law or otherwise, shall not be deemed to be an assignment of
the Technology and is expressly permitted under the terms of this Agreement.

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(collectively the "Trademarks") which are designated by ECC to Sublicensee
prior to commercial production of a Product by Sublicensee or from time to
time thereafter.

(e) From time to time during the term of this Agreement, the parties
may, by written agreement, amend Exhibit "B" hereto in order to add thereto
one or more additional Products or range of Products. No amendment of
Exhibit "B" shall be effective unless it is in writing and signed by both of
the parties. The manufacture or sale of any Product not licensed hereunder
shall be a breach of a material obligation of Sublicensee within the meaning
of paragraph 16 hereof. If Sublicensee requests that Exhibit "B" be amended
in order to add an additional Product or range of Products, ECC shall meet
with representatives of Sublicensee at reasonable times and at mutually
agreeable locations and shall discuss, in good faith, the amendment of
Exhibit "B" requested by Sublicensee. ECC shall have no obligation to amend
Exhibit "B" hereto in accordance with any request by Sublicensee unless the
terms and conditions of the proposed amendment are satisfactory to ECC.

(f) Sublicensee shall not market, distribute or sell any Product
to any person, firm or entity outside the Territory, or to any person, firm
or entity within the Territory if Sublicensee knows or has reason to believe
that such person, firm or entity intends to use the Product in question
outside the Territory. The sale or distribution of a Product outside the
Territory by Sublicensee shall constitute a breach of a material obligation
of Sublicensee within the meaning of paragraph 16 hereof.

3. ROYALTIES.

(a) As consideration for the grant of the Sublicense, Sublicensee
shall pay to ECC a royalty (the "Royalty") of twenty percent (20%) of the
Gross Sales Price for each Product which is sold by Sublicensee during the
term of this Agreement.

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limited to any Affiliate of Sublicensee. Provided, however, that the
Sublicensee shall be entitled to a credit for all bad debt or uncollected
accounts associated with the computation of Royalty for a given period.

(c) No Royalty shall be payable on Products which are used by
Sublicensee to manufacture other Products which are sold and for which a
Royalty is paid to ECC. No multiple Royalties shall be payable because a
Product is covered by more than one patent within the scope of the
Technology. No Royalty shall be due, owing or payable on Products
manufactured on the Pilot Production Line which Products are used exclusively
for demonstration or market testing purposes.

(d) Failure to make payment when due of any Royalty hereunder is a
breach of a material obligation of Sublicensee and may result in the
termination of this Agreement pursuant to paragraph 16 hereof.

4. PAYMENT OF THE ROYALTY.

(a) Within thirty (30) days of the final day of each calendar
quarter (or fiscal quarter if Sublicensee is reporting on a fiscal basis)
which occurs during the term of this Agreement (a "Quarter"), Sublicensee
shall pay to ECC the Royalty earned on all Products sold by Sublicensee
during such Quarter. Each Royalty payment shall be accompanied by a written
report (the "Royalty Report") prepared by Sublicensee and certified as
accurate by the principal financial officer of Sublicensee. Each Royalty
Report shall set forth, for the Quarter covered by the Royalty Report, (i)
the number of each of the Products sold by the Sublicensee, (ii) the gross
invoice price for each of such Products, and (iii) reductions to the gross
invoice price for applicable returns, discounts, freight charges, bad
debts/uncollected accounts and taxes with respect to Products sold.

(b) All payments called for by this Agreement shall be paid by
Sublicensee in United States dollars.

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5. RIGHT TO AUDIT.

(a) Sublicensee shall keep and maintain complete and accurate
records concerning all aspects of the manufacture and sale of the Products.
ECC or its designee (the "Representative") shall have the right, at ECC's
expense, periodically to review those records and operations of Sublicensee
which deal with the design, manufacture, shipment and sale of Products. Such
reviews may take place only during the normal business hours of Sublicensee
and only upon written notice to Sublicensee given at least three (3) business
days prior to such review. The Representative conducting such review shall
be required to execute a confidentiality agreement pursuant to which the
Representative shall agree that it will not disclose or use the information
obtained pursuant to such review to or for the benefit of any person or
entity except ECC unless required to do so in connection with the resolution
of any dispute concerning any payment required by this Agreement.

(b) If any such review reveals, in the opinion of ECC, that
Sublicensee has not paid to ECC the full amount of any payment due hereunder
for the period covered by such review, ECC shall give the Sublicensee written
notice (the "Review Notice") of such discrepancy. The Review Notice shall be
accompanied by a written report prepared by ECC or the Representative setting
forth, in reasonable detail, the basis of the alleged underpayment. If
Sublicensee does not notify ECC that Sublicensee disputes the findings set
forth in such report, it shall pay to ECC the full amount of the underpayment
in question within 15 days of the date of receipt of the Review Notice. All
underpaid amounts shall bear interest from the date upon which the payment in
question should have been made until it is actually paid at the lending
interest rate of prime (as published in the Wall Street Journal on the last
previous business day). Additionally, if Sublicensee agrees to make the
underpayment specified in the Review Notice, Sublicensee shall also reimburse
ECC for the actual costs of the review if the underpayment amount is 5% or
more of the Royalty payment due during the period in question and such
underpayment exceeds $100,000 in amount. In all other cases, ECC shall pay
all expenses and fees of the review,

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including all out-of-pocket expenses actually and reasonably incurred by
Sublicensee in connection therewith.

(c) If Sublicensee disputes the findings set forth in the Review
Notice, it shall so notify ECC in writing ("Dispute Notice") within fifteen
(15) days of the receipt of the Review Notice. Representatives of ECC and
Sublicensee shall meet and, in good faith, seek to resolve the dispute
through negotiation; provided, however, that if such dispute is not resolved
within ten (10) days of the Dispute Notice, ECC and Sublicensee shall jointly
agree to either (i) immediately retain a nationally-recognized independent
accounting firm (other than the firm which prepared the report which
accompanied the Review Notice), which is acceptable to both parties, to
conduct an additional review of the payments due to ECC, or (h) submit the
dispute to arbitration or mediation in accordance with the provisions of
paragraph 26 hereof. In the event that ECC and Sublicensee are unable to so
jointly agree, the matter will be submitted to arbitration pursuant to clause
(ii) of the preceding sentence. Sublicensee and ECC shall not unreasonably
withhold their approval of the accounting firm selected by either party
pursuant to clause (i) above. The determination of such accountants or
arbitrators (or mediators) in regard to the accuracy of the payments made to
ECC shall be final and binding upon the parties, shall not be subject to
appeal or review by any court or governmental agency and shall be enforceable
in the appropriate United States state and federal courts. If such review
reveals that Sublicensee has failed to pay to ECC the full amount of a
Royalty payment actually due, Sublicensee shall pay the full amount of such
discrepancy to ECC within three (3) days of the date of the report of such
accountants or the decision of the arbitrators, as the case may be. The full
amount of such underpayment shall bear interest at the lending interest rate
of prime (as published by the Wall Street Journal on the date of the Dispute
Notice or next business day) from the date the payment in question should
have been made until it is actually made. Additionally, if it is determined
by the review conducted pursuant to this paragraph 5(c) that Sublicensee
underpaid ECC by 5% or more of the Royalty payment

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due during the period in question, and such underpayment exceeds $100,000 in
amount, Sublicensee shall pay all fees and expenses of the reviews and
arbitration (or mediation) conducted pursuant to paragraphs 5(b) and (c).
In all other cases, ECC shall pay all expenses and fees of both reviews and
arbitration, including all out-of-pocket expenses actually and reasonably
incurred by Sublicensee in connection therewith.

(d) The second failure within any two-year period by Sublicensee
to make timely payment of the correct Royalty amount due under this Agreement
as finally determined under paragraph 5(c) shall constitute a breach of a
material obligation of Sublicensee and may result in the termination of this
Agreement pursuant to paragraph 16 hereof, unless Sublicensee has cured such
failure within sixty (60) days from the date notice of such failure is
delivered to Sublicensee.

6. IMPROVEMENTS TO TECHNOLOGY

(a) If, while the Sublicense remains in effect, Sublicensee should
develop any improvement, refinement or change, whether patentable or
unpatentable, relating in whole or in part to any portion of the Technology
or the Products (such improvement hereinafter referred to as an
"Improvement"), to the extent that the Improvement is directed to a
composition, formulation or the material (i.e., other than a method of
manufacture, handling or processing of Food Packages) Sublicensee shall
notify ECC of such Improvement within a reasonable time of and in no event
more than ninety (90) days after its development and shall provide ECC with
access to all information concerning such improvement as ECC shall reasonably
request: provided, however, that all such information shall be confidential
and shall be subject to all restriction on disclosure as set forth in this
Agreement or otherwise arising. Sublicensee (i) shall assign the
non-exclusive right to make, use, sell, sublicense and otherwise
commercialize the Improvement (A) outside of the Territory and (B) within the
Field of Use, within the Territory to ECC for an assignment fee of $1,000.00
and (ii) shall retain a non-exclusive perpetual (i.e., to the fullest extent
it is legally empowered) license to make, use, sell or otherwise
commercialize the

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Improvement both within and outside of the Field of Use and within and
outside the Territory. If ECC (i) obtains rights in and to an Improvement
from another sublicensee of the Technology, in whole or in part, or otherwise
or (ii) develops such Improvement, it shall within a reasonable time of and
in no event more than ninety (90) days after it obtains such rights inform
the Sublicensee of such Improvement and at the request of the Sublicensee
grant the Sublicensee a non-exclusive perpetual (i.e., to the fullest extent
it is legally empowered) license to make, use, sell or assign (pursuant to
the terms of this Sublicense Agreement) the Improvement within the Field of
Use within the Territory. No additional Royalty will be due by virtue of the
addition of an Improvement to the Technology.

(b) ECC, or the Assignee in case of a subsequent assignment, shall
have the right to (i) affirmatively seek patent protection for the
Improvement at ECC's or Assignee's sole cost and expense or (ii) maintain the
Improvement as a Trade Secret.

(c) In the event that Sublicensee does not seek patent protection
for the Improvement ECC or Assignee may elect to seek patent protection
either in the United States or in any foreign jurisdiction. Sublicensee
shall provide ECC or Assignee with such assistance as may be reasonably
requested, from time to time, in connection with such efforts, including the
execution of any documents necessary to obtain and maintain such patent
protection; provided, however, that ECC or Assignee will reimburse
Sublicensee for any out-of-pocket fees and expenses reasonably incurred by
Sublicensee in providing such assistance. ECC or Assignee shall keep the
Sublicensee informed of the status of the prosecution of each patent
application which it elects to pursue and shall consult with Sublicensee on
all material aspects of the prosecution of such application, although all
final decisions in regard to such patent application shall remain within the
sole discretion of ECC or Assignee.

(d) If the Improvement is directed to a method of manufacture,
handling, or processing of Food Packages, and if such manufacturing,
handling, or processing Improvement has a substantial use with composition,
formulation, and materials within the

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scope of this Sublicense, then Sublicensee will notify (within a reasonable
time not to exceed ninety (90) days) ECC of the development of the
Improvement and grant to ECC the exclusive right to negotiate, for a period
of ninety (90) days after delivery of such notice, for a license which will
authorize ECC to use, license or otherwise commercialize such Improvement.
Sublicensee will negotiate in good faith the terms of the license for the
Improvement. Failure of ECC and Sublicensee to agree on a license agreement
shall not give rise to any right on the part of either party to seek to
resolve the impasse (i) through arbitration under this Sublicense Agreement
or (ii) otherwise. It is expressly understood by the parties hereto, that an
Improvement in the manufacturing process is the sole and exclusive right and
property of the Sublicensee; disclosure of such information is subject to the
confidentiality provisions of this Sublicensee Agreement or as may otherwise
apply; and the licensing of the same to ECC is subject to negotiation of an
agreement on terms mutually acceptable to ECC and Sublicensee.

7. "NEW USE" PRODUCTS.

If, during the term of this Agreement, Sublicensee determines that
there exists a commercially feasible use, application, function, or purpose
for the compositions, formulations, or materials which are in whole or in
part disclosed (even though not claimed) in the Technology, whether
patentable or unpatentable, and which have no substantial use as Food
Packages (hereinafter "New Use"), Sublicensee shall give written notice, of
such New Use to ECC (the "New Use Notice") within a reasonable time not to
exceed ninety (90) days of such a determination. If ECC, or its Affiliates,
does not have any existing intellectual property protection (whether in the
form of a patent application, a trade secret, or the subject of previous or
continuing research and development) relating to the New Use, then ECC, or
its assignee, shall have the exclusive right to negotiate, for a period of
ninety (90) days after the New Use Notice, with the entity identified in the
New Use Notice for a license which will authorize ECC, or its assignee, to
manufacture, sell, and commercialize the New Use so long as the New Use
relates to materials, formulations, or

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compositions. In any event Sublicensee shall have the right to incorporate
the New Use into Products licensed hereunder and no additional Royalty will
be due by virtue of the incorporation of the New Use into Products licensed
hereunder. However, if the New Use relates to machinery and equipment, the
Sublicensee shall have the option to negotiate, or to not negotiate, with
ECC, or its assigns, for a license to manufacture, sale and commercialize the
New Use relating to machinery and equipment. However, if Sublicensee desires
to sell the licensing rights of such New Use relating to machinery and
equipment, Sublicensee shall provide a first right of refusal to ECC to
acquire the such licensing rights on the same terms and conditions as agreed
to by a third party. Sublicensee will negotiate in good faith the terms of
the license for the New Use. In the event that ECC, or its Affiliates, is
seeking or has been granted patent protection on the compositions,
formulations, or materials to be incorporated into the New Use, ECC, or its
Affiliates in good faith negotiate to grant Sublicensee a license to
incorporate such compositions, formulations or materials into the New Use.
Failure of ECC and Sublicensee to agree on a license agreement shall not give
rise to any right on the part of either party to seek to resolve the impasse
(i) through arbitration under this Sublicense Agreement or (ii) otherwise.
It is expressly understood by the parties hereto, that an Improvement in the
manufacturing process is the sole and exclusive right and property of the
Sublicensee; disclosure of such information is subject to the confidentiality
provisions of this Sublicensee Agreement or as may otherwise apply; and the
licensing of the same to ECC is subject to negotiation of an agreement on
terms mutually acceptable to ECC and Sublicensee.

8. INFRINGEMENT MATTERS.

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expense, bring suit to enjoin such infringement and to recover damages
therefor. In any action brought by ECC pursuant to paragraph 8(a) hereof,
ECC shall select and control counsel for the prosecution of such suit.
Sublicensee shall (i) have the right to receive, from time to time, full and
complete information from ECC concerning the status of such suit, (ii) have
the right, at Sublicensee's own expense, to be represented therein by counsel
in an advisory or consultative capacity, and (iii) cooperate fully with ECC
and provide whatever assistance is reasonably requested by ECC in connection
with such suit including the preparation and signing of documents. If ECC
decides not to bring suit to enjoin an alleged infringement either because it
is deemed inadvisable or de minimis, no such action will be required.

(b) The parties shall notify (within 30 days) each other of any
claim by any person that the use of the Technology with respect to any
Product by Sublicensee in the Fields of Use infringes the rights of such
person and of the commencement of any lawsuit against ECC, Sublicensee, or
any customers of the foregoing, as the result of such alleged infringement.
ECC shall assume and control the defense of any such lawsuit, at its sole
cost and expense, irrespective of whether ECC is named as a defendant in such
litigation. Sublicensee will assist ECC in the defense of such suit or action
by providing information and fact witnesses as needed; provided, however,
that ECC shall reimburse Sublicensee for all out-of-pocket costs incurred by
Sublicensee in connection with such action by allowing a credit or offset
against the Royalty due hereunder. Sublicensee shall have the right to be
represented in such suit or action by their own legal counsel, at their own
expense, provided that such legal counsel will act only in an advisory
capacity. If ECC decides to not assume the defense of any infringement
lawsuit described in this paragraph 8(b), Sublicensee shall have the right,
but not the obligation, to assume the defense of such lawsuit utilizing legal
counsel of its choice. Additionally, Sublicensee will indemnify and hold ECC
and its licensor of the Technology harmless from and against, and hereby
assumes liability for the payment of any and all loss, liability or damage,
and for all costs

<PAGE>

and expenses, including reasonable costs of investigation and reasonable
attorneys, accountants and expert witness fees (collectively "Losses") that
may be imposed upon, suffered or incurred by ECC and its licensor of the
Technology as a consequence of or in connection with any lawsuit described in
this paragraph 8(b), but only to the extent that such lawsuit and resulting
liability is based on matters other than the Technology licensed hereunder.

(c) If, as the result of any lawsuit referred to in paragraph 8(b)
hereof, Sublicensee is required by final court order from which no appeal can
be taken (or by a court order which ECC's legal counsel believes has no
reasonable likelihood of success for modification on appeal) to obtain a
license under any third party's patent not licensed hereunder in order to
continue with Sublicensee's activities as contemplated by this Agreement, and
to pay a royalty under such license, and the infringement of such patent
cannot reasonably be avoided by Sublicensee, the future payment of the
Royalty shall thereafter be reduced by an amount equal to 100% of any fee or
royalty payable by Sublicensee under such additional license (including all
payments under such agreement whether for periods prior to such agreement or
order) as long as the infringement was due to the Technology licensed
hereunder. In addition, if Sublicensee settles an infringement action
referred to in paragraph 8(b) hereof, after obtaining the prior written
consent of ECC (which shall not be unreasonably withheld), and pursuant to
such settlement Sublicensee obtains a license under any patent not licensed
hereunder, to make, use or sell the Products in any manner contemplated by
this Agreement, and agrees to pay a royalty under such license, and the
infringement of such patent cannot reasonably be avoided by Sublicensee, the
Royalty shall thereafter be reduced by an amount equal to 100% of the sum
payable by Sublicensee pursuant to such settlement as long as the settlement
was for claims of infringement due to the Technology licensed hereunder.

<PAGE>

9. PRODUCT LIABILITY INDEMNIFICATION.

(a) NEITHER ECC NOR ITS LICENSOR OF THE TECHNOLOGY MAKE OR GIVE,
AND THEY HEREBY EXPRESSLY DISCLAIM ANY AND ALL WARRANTIES, WHETHER EXPRESS OR
IMPLIED, WRITTEN OR ORAL, INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF
MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR PURPOSE, IN REGARD TO ANY
PRODUCTS WHICH MAY BE MANUFACTURED, USED OR SOLD BY SUBLICENSEE AND WHICH ARE
BASED UPON OR UTILIZE THE TECHNOLOGY. Sublicensee acknowledges and agrees
that neither ECC nor its licensor of the Technology have previously made or
presently make any of the foregoing warranties or representations.
Sublicensee will indemnify and hold ECC and its licensor of the Technology
harmless from and against, and hereby assumes liability for the payment of
any and all loss, liability or damage, and for all costs and expenses
(including reasonable costs of investigations and reasonable attorneys,
accountants, and expert witness fees) that may be imposed upon, suffered or
incurred by, or asserted against ECC or its licensor of the Technology as a
consequence of or in connection with any liability relating to any Product
which is manufactured, used or sold by Sublicensee, except to the extent that
the liability arises from the Technology licensed hereunder. In the event
any action, suit or proceeding is brought against ECC or its licensor of the
Technology with respect to which there may be indemnity pursuant to this
paragraph 9, the defense of such action, suit or proceeding (including all
settlements and arbitrations, trials, appeals or other proceedings) shall be
conducted by Sublicensee at its sole cost and expense through legal counsel
selected by Sublicensee. ECC and its licensor of the Technology shall have
the right to participate in such defense at their own expense through legal
counsel of their choice. If Sublicensee fails to defend any such action,
suit or proceedings, for any reason, such failure shall constitute a material
breach of this Agreement by Sublicensee and ECC or its licensor of

<PAGE>
the Technology may undertake defense of such action, suit or proceeding,
through legal counsel of their choice, at the sole cost and expense or
Sublicensee. The parties shall make available to one another, their legal
counsel and accountants, all information and documents reasonably available
to them which relate to such action, suit or proceeding and shall render such
other assistance as they may reasonably require of one another in order to
insure the proper and adequate defense of any such action, suit or proceeding.

10. ADDITIONAL DUTIES OF THE SUBLICENSEE. In addition to, and not
in limitation of, the other duties and obligations of Sublicensee, as set
forth in this Agreement, Sublicensee shall:

<PAGE>

(b) Prominently display and utilize the principal Trademark or
Trademarks (whether owned by or licensed to ECC), as designated by ECC from
time to time, in connection with the advertisement, marketing, distribution
and sale of the Products. The right to use such designated Trademark or
Trademarks will automatically be included within the Sublicense herein
granted. "Sublicensee, unless waived by ECC, shall use its best efforts to
cause each Product manufactured by Sublicensee to bear at least one of the
Trademarks designated by ECC. The specific placement, size, and detail of
the Trademark on each Product must be approved by ECC, but shall not be
required to be placed on a Product in such a size, placement, detail or
configuration so as to impair the marketability of the Product. In
connection with the use of such licensed marks, Sublicensee shall not in any
manner represent that it has any ownership interest therein. Sublicensee
acknowledges that use of the Trademarks shall not create in its own favor any
right, title, or interest in or to the Trademarks, but that all uses of these
marks by Sublicensee shall inure to the benefit of ECC or its licensor of the
Trademarks. Sublicensee shall cooperate with ECC or its licensor of the
Trademarks in the execution of any appropriate and necessary documents in
connection with the registration of any Trademarks. Upon termination of this
Agreement, Sublicensee shall cease and desist from use of the Trademarks in
any way, including any word or phrase that is similar to or likely to be
confused with such marks. However, in the event of termination, Sublicensee
shall have the right to sell existing stock and inventory of manufactured
Products for a period of one hundred and eighty days and thereafter shall
deliver to ECC or its duly authorized representative all materials upon which
the Trademarks appear.

(d) Continue to make all required payments under this Agreement to
ECC during any challenge of the validity of any of the patents (or claims
thereof) issued in connection with the Technology. In the event Sublicensee
terminates such payments based

<PAGE>
upon or in connection with such a challenge, ECC may at its option terminate
this Agreement upon written notice to Sublicensee.

11. REPRESENTATIONS AND WARRANTIES OF ECC. ECC hereby represents and
warrants to Sublicensee that:

(a) ECC is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. ECC has all requisite
power and authority to own, operate and lease its properties and to carry on
its business as now being conducted, and is duly qualified to do business in
every jurisdiction wherein the nature of the business conducted or the assets
owned or leased by it make such qualification material to the conduct of its
business.

(b) ECC has all requisite power and authority to enter into this
Agreement and to perform its obligations hereunder including but not limited
to the right to sublicense the Technology. This Agreement has been duly and
validly authorized, executed and delivered by ECC and assuming the due
authorization, execution and delivery by Sublicensee is the legal, valid and
binding obligation of ECC, enforceable against it in accordance with its
terms, subject only to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights generally and to
general principles of equity.

(c) ECC has made no assignments, grants, licenses, encumbrances,
obligations or agreements which are in conflict with this Agreement.

<PAGE>

(d) To the best knowledge of ECC, no person, firm or entity has made
any claims or threatened, in writing, or otherwise, that ECC is in violation of
or has infringed any patent, patent license, trade name, trademark, service mark
brand mark, brand name, copyright, know-how, formula or other proprietary or
trade rights of such third party as they relate to the Technology. ECC is not
now in possession of and at no time has received any information which would
render any claims essential to the commercial utilization of the Technology
invalid and/or unenforceable. To the best of ECC's present knowledge and
belief, the use of the Technology in the manufacture of the Products pursuant to
the terms of this Agreement will not constitute infringement of the proprietary
rights of any third party.

(e) The execution, delivery and performance of this Agreement by ECC
and the consummation by it of the transactions contemplated hereunder, do not
and will not conflict with or result in a breach or termination of any term or
provision of, or constitute a default under any other agreement, or result in
the creation of any lien, charge or encumbrance upon any of its properties or
assets pursuant to any corporate charter, bylaw, mortgage, deed of trust,
indenture or other agreement or instrument, or any order, judgment, decree or
like restriction, statute or regulation by which it or any of its assets and
properties may be bound. The representation and warranty given in this
paragraph 11(e) shall not be deemed or construed to expand or modify the
representation and warranty given by ECC in paragraph 11(d) hereof.

<PAGE>

which ECC is a party or by which it is bound or to which any of its assets are
subject, (iv) result in the creation of any lien or encumbrance upon ECC's
assets, (v) conflict with or result in the breach of or constitute a default
under any provision of ECC's certificate of incorporation or bylaws, or (vi)
conflict with, result in a tortious interference as a result of such conflict
with, or otherwise violate, any contract or arrangement between ECC and any
other person. The representation and warranty given in this paragraph 11(f),
shall not be deemed or construed to expand or modify the representation and
warranty given by ECC in paragraph 11(d) hereof.

(h) ECC has the full right and power to grant to Sublicensee this
sublicense to use the Technology in the manufacture, sale and distribution of
the Products.

12. REPRESENTATIONS AND WARRANTIES OF SUBLICENSEE. Sublicensee hereby
represents and warrant to ECC that:

(a) Sublicensee is a Corporation duly organized, validly existing and
in good standing under the laws of the State of New York. Sublicensee has all
requisite power and authority to own, operate and lease its properties and to
carry on its business as now being conducted, and is duly qualified to do
business in every jurisdiction wherein the nature of the business conducted or
the assets owned or leased by it make such qualification material to the conduct
of its business.

(b) Sublicensee has all requisite power and authority to enter into
this Agreement and to perform its obligations hereunder. This Agreement has
been duly and validly authorized, executed and delivered by Sublicensee and
assuming the due authorization, execution and delivery by ECC, is a legal, valid
and binding obligation of Sublicensee, enforceable against it in accordance with
its terms, subject only to bankruptcy, insolvency,

<PAGE>

reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and to general principles of equity.

(c) The execution, delivery and performance of this Agreement by
Sublicensee, and the consummation by it of the transactions contemplated
hereunder, do not and will not conflict with or result in a breach or
termination of any term or provision of, or constitute a default under, any
other agreement, or result in the creation of any lien, charge or encumbrance
upon any of its properties or assets pursuant to any charter or similar
document, mortgage, deed of trust, indenture or other agreement or
instrument, or any order, judgment, decree or like restriction, statute or
regulation by which it or any of its assets and properties may be bound.

(d) The execution, delivery and performance of this Agreement by
Sublicensee and the consummation by it of the transactions contemplated
hereby will not (i) constitute a violation (with or without the giving of
notice or lapse of time) of any provision of applicable law, (ii) require any
consent, approval or authorization of any person or governmental authority,
(iii) result in a default under, acceleration or termination of, or the
creation in any party of the right to accelerate, terminate, modify or cancel,
any agreement, lease, franchise, permit, note or other restriction,
encumbrance, obligation or liability to which Sublicensee is a party or by
which it is bound or to which any of its assets are subject, (iv) result in
the creation of any lien or encumbrance upon Sublicensee assets, (v) conflict
with or result in the breach of or constitute a default under any provision
of Sublicensee's charter documents, or (vi) conflict with, result in tortious
interference as a result of such conflict with, or otherwise violate, any
contract or arrangement between ECC and any other person. ECC is not now in
possession of and at no time has received any information which should render
any claims essential to the commercial utilization of the Technology invalid
and/or unenforceable. To the best of ECC's present knowledge and belief the
use of the Technology in the manufacture of the

<PAGE>

Products pursuant to the terms of this Agreement will not constitute
infringement of the proprietary rights of any third party.

(e) Neither Sublicensee, nor anyone acting on its behalf, has taken
any action relating to any broker, finder, consultant or other expert which
could result in the imposition upon ECC of any obligation to pay a fee to any
broker, finder, consultant or similar expert in connection with the
transactions contemplated hereby.

13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the parties, as set forth herein, shall be true and
accurate as of the effective date of this Agreement, and shall survive the
execution of this Agreement.

14. INDEMNIFICATION. In addition to the indemnification provisions
provided elsewhere in this Agreement:

(b) Sublicensee will indemnify and hold ECC harmless from and
against, and hereby assumes liability for, the payment of all Losses of
whatsoever kind and nature that may be imposed upon, suffered or incurred by
or asserted against ECC as a consequence of or in connection with any
misrepresentation or breach of any warranty, covenant or agreement of
Sublicensee contained in this Agreement.

<PAGE>

to pay the indemnified party the full amount of all indemnified Losses,
including such initial $100,000 in Losses. The amount of indemnity payable
pursuant to this paragraph 14 shall be calculated after giving effect to any
insurance proceeds actually received by the indemnified party; provided that
neither party shall subrogate to any insurance carrier any rights or claims
which it may have against the other party.

15. CONFIDENTIALITY.

(a) Sublicensee acknowledges that ECC claims that the Technology,
as it may exist from time to time as well as the other confidential or
proprietary information (including business and financial information) of ECC
(whether owned by ECC or acquired by license from third parties) are and
shall remain the valuable, special, unique and proprietary assets of ECC, and
shall constitute "Confidential Information" hereunder. In order for any
information other than the Technology to be deemed to be "Confidential
Information" hereunder, whether disclosed orally or in writing, it must be
identified, orally or in writing, to Sublicensee as "Confidential
Information" at time of disclosure, or reasonably thereafter, or be
reasonably understood by Sublicensee to be "Confidential Information."
Additionally, as used herein, "Confidential Information" shall not include
any information or data which Sublicensee can show: (i) is in, or becomes a
part of, the public domain by any means other than the failure by Sublicensee
to fulfill its obligations hereunder, or (ii) is rightfully known to
Sublicensee at the time of disclosure by ECC; or (iii) is, at any time,
disclosed to Sublicensee by a third party who has received and disclosed such
information without the breach of any obligation of confidentiality to ECC or
to any third party assignor of such Confidential Information. For purposes
of this paragraph 15(a), information shall not be deemed to be part of the
public domain or in Sublicensee's knowledge merely because it may be embraced
in a more general disclosure or simply because it may be derived from
combinations of disclosures or information generally available to the public
or within Sublicensee's knowledge. The parties acknowledge that disclosure
to Sublicensee of Confidential Information will be necessary in order to
enable

<PAGE>

Sublicensee to utilize the Sublicense in the manner contemplated by this
Agreement, and ECC will make such disclosures of the Confidential Information
to Sublicensee as is necessary, required or appropriate in that regard. To
the extent that the disclosure of such Confidential Information is deemed to
be a transfer of the Technology licensed hereunder, such Technology transfer
shall be carried out pursuant to the provisions of paragraph 31 hereof. The
parties acknowledge that they have a confidential relationship with one
another and accordingly Sublicensee shall maintain all Confidential
Information disclosed to it pursuant to this Agreement in confidence and
shall not disclose the same to any third party (with the exception of its
employees, accountants, attorneys and other agents and professional advisors)
either during or after the term of this Agreement unless required to do so by
court order or by law, in which case Sublicensee shall notify ECC, in
writing, prior to making such disclosure and shall cooperate with ECC to
preserve and protect the confidentiality of the Confidential Information in
question to the fullest extent possible. Additionally, except as specifically
contemplated by this Agreement, Sublicensee shall not utilize any
Confidential Information for its own benefit or for the benefit of any third
party. Prior to making any permitted disclosure of any Confidential
Information to its employees, accountants, attorneys and other agents and
professional advisors, Sublicensee shall require such persons, firms, or
entities to execute and deliver written disclosure agreements which shall
obligate such persons, firms and entities to comply with the same obligations
of confidentiality and non-use as imposed upon Sublicensee in this paragraph
15(a).

<PAGE>

Confidential Information, as set forth in paragraph 15(a) hereof; provided
that ECC shall have the right to disclose Sublicensee Confidential
Information to ECC's licensor of the Technology subject to its accepting and
treating it as Confidential Information.

(c) Each party specifically acknowledges that it would be
difficult to fully compensate the other party in damages for the breach of
the obligations of confidentiality set forth in paragraph 15(a) or 15(b)
hereof and, accordingly, each party consents that the other party may obtain
temporary and permanent injunctive relief to enforce confidentiality
obligations and that such relief may be granted without the necessity of
proving actual damages or irreparable harm. The provisions of the paragraph
15(c) with respect to injunctive relief shall not, however, diminish the
right of the non-breaching party to claim and recover damages in any
proceeding initiated pursuant to paragraph 26 hereof.

16. TERM AND TERMINATION.

(a) The term of this Agreement shall commence upon the effective
date hereof. Unless sooner terminated as hereinafter provided, this
Agreement shall continue in full force and effect until the expiration of the
last material and substantial United States patent covering the Technology
which is utilized by Sublicensee, or for so long as Sublicensee produces a
Product which utilizes material and substantial proprietary information or a
material and substantial Trade Secret of ECC. Any dispute as to the term of
this Agreement shall be resolved by arbitration pursuant to paragraph 26 of
this Agreement.

(b) The Sublicense may be terminated, at any time, by the mutual
written consent of the parties hereto.

(c) Sublicensee may terminate this Agreement, at any time, upon
sixty (60) days' prior written notice of such termination to ECC.

(d) If Sublicensee is in breach of any of its material obligations
hereunder, then ECC may give Sublicensee written notice of such breach. If
such breach is

<PAGE>

not cured within ninety (90) days from the date such written notice is
delivered, or if such default can not be cured within such ninety day period
but the Sublicensee has taken action to cure such default then if the default
is not cured within one year from the date of such notice, ECC shall have the
right to immediately terminate the Sublicense by written notice to the
Sublicensee.

(e) If a bankruptcy reorganization proceeding, not including a
voluntary proceeding under Chapter 7 of the U.S. Bankruptcy Code, shall be
commenced by or an involuntary proceeding be commenced against the
Sublicensee, this Sublicense shall terminate effective as of the date of such
filing, unless the Sublicensee shall assume such Sublicense in accordance
with the provisions of the U.S. Bankruptcy Code, including, but not limited
to, Section 11 U.S.C. 365, and any applicable court order.

(f) Subject to the provisions of paragraph 27 (force majeure) ECC
shall have the right, at its sole discretion, to terminate the Sublicense,
upon thirty (30) days written notice to Sublicensee, in the event that the
amount of the Royalty payment for any calendar year is not at least 50% of
the Royalty payment amount for the preceding calendar year.

17. EFFECT OF EXPIRATION OR TERMINATION.

(a) From and after the effective date of the expiration of the
term of this Agreement or the termination of the Sublicense pursuant to
paragraph 16 hereof, Sublicensee shall have no right, whatsoever, to utilize
the Technology, (except for Improvements to which Sublicensee has the right
to continued use as provided in paragraph 6) or the Trademarks pertinent to
this Agreement, and shall return to ECC all copies of Confidential
Information which is then in the possession of Sublicensee. Provided,
however, that nothing contained herein shall or shall be deemed to restrict
the Sublicensee's ability or right to use, free of Royalty, any Technology,
trade name, know-how or confidential information which is or has come into
the Public Domain through no fault of Sublicensee and is not otherwise deemed
Confidential Information.

<PAGE>

(b) The obligation of Sublicensee to pay to ECC the Royalty for
all Products actually sold by Sublicensee prior to the effective date of
the expiration or termination of this Agreement, as well as the obligations
concerning product liability set forth in paragraph 9 hereof and of
confidentiality set forth in paragraph 15 hereof, shall survive the
expiration or termination of the Sublicense and of this Agreement.

18. MARKING AND UNITED STATES EXPORT CONTROL.

(a) Sublicensee shall mark all of the Products and related
documents with the applicable United States patent numbers, as required by
applicable law, or as instructed by ECC; provided, however, that nothing
contained herein shall prohibit or restrict the Sublicensee's right by
administrative proceeding or otherwise to limit the inclusion of such patent
numbers.

(b) Sublicensee shall comply with all applicable laws, rules and
regulations of the United States, including but not limited to the Export
Regulations of the United States Department of Commerce, in connection with
the direct or indirect export of any of the Technology or Products.
Sublicensee acknowledges that ECC has not made and does not make any
representation that any license is or is not required in connection with such
export or, if required, that such license will be issued by the United States
Department of Commerce, provided, however, that ECC shall apply for all
licenses required or necessary to enable the Sublicensee to export the
Products or Technology within the Territory without imposing any additional
Royalty.

19. SPECIAL TAX PROVISIONS. Sublicensee or its agents shall be solely
responsible for the payment and discharge of any taxes, duties, or
withholdings relating to any transaction of Sublicensee or its agents in
connection with the manufacture, use, sale or commercialization of the
Technology or the Products; except that ECC shall be responsible for taxes,
duties or withholding relating to the payment to ECC of any Royalty payment
under this Agreement and Sublicensee shall be permitted to perform any
withholding with respect to such payments and fees required by law or
regulation.

<PAGE>

20. RELATIONSHIP OF THE PARTIES. This Agreement shall not create any
partnership, joint venture or similar relationship between the parties hereto
(or ECC's Affiliates) and no representation to the contrary shall be made by
either party. Neither party shall have any authority to act for or on behalf
of or to bind the other party in any fashion, and no representation to the
contrary shall be made by either party.

21. NOTICES. Any notice which is required or permitted to be given to
ECC or Sublicensee pursuant to this Agreement shall be deemed to have been
given only if such notice is reduced to writing and delivered personally, or
by United States mail with postage prepaid and return receipt requested, or
by telecopier (FAX) transmission, confirmed by letter United States mail with
postage prepaid and return receipt requested, or by reputable overnight
courier (pursuant to instructions requiring next-day delivery) to the person
in question as set forth below:

ECC: EarthShell Container Corporation
800 Miramonte Drive
Santa Barbara, California 93109-1419
Attention: Mark A. Koob
Fax: (805) 897-2298

Sublicensee: Mobil Chemical Company
1159 Pittsford-Victor Road
Pittsford, New York 14534-3876
Attention: D. M. Davies
Fax: (716) 248-1309

ECC or Sublicensee may change its address by giving notice of such change in
the manner set forth herein. If delivered personally, a notice shall be
deemed delivered when actually received at the address specified herein. Any
notice given by mail shall be deemed delivered three (3) days following the
date upon which it is deposited in the mail, with postage prepaid and return
receipt requested. Any notice given by FAX shall be deemed delivered on the
date it is actually transmitted to the person in question at the FAX number

<PAGE>

specified above. Any notice given by overnight courier shall be deemed
delivered on the next business day following the date it is placed in the
possession of such courier.

23. SAVINGS CLAUSE. Should any part or provision of this Agreement be
rendered or declared invalid by reason of any law or by decree of a court of
competent jurisdiction, the invalidation of such part or provision of this
Agreement shall not invalidate the remaining parts or provisions hereof, and
the remaining parts and provisions of this Agreement shall remain in full
force and effect.

24. WAIVER. Neither the failure or delay on the part of either party
to exercise any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or
privilege preclude any other or further exercise thereof or of any other
right or privilege.

25. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, without giving
effect to the choice of law rules thereof.

26. ARBITRATION. Except as otherwise provided in paragraphs 5(c) or
15, any dispute or controversy which shall arise under or in connection with
any aspect of this Agreement, including but not limited to any aspect of the
Sublicense, the performance or nonperformance of any obligation set forth
herein, or the interpretation hereof shall be resolved through binding
arbitration conducted in accordance with the commercial arbitration rules of
the American Arbitration Association, although the parties may, by

<PAGE>

agreement, elect to have such proceeding conducted by or through an entity or
individuals other than the American Arbitration Association itself. Such
arbitration shall be conducted in Santa Barbara, California before a panel
of three arbitrators. The decision of the arbitrators shall be final and
binding upon the parties, shall not be subject to appeal or review by any
court or governmental agency and shall be enforceable in the appropriate
United States state and federal courts. The arbitrators in any arbitration
proceeding shall have the right, in addition to any award of damages, to
award the prevailing party all costs and expenses, including reasonable
attorneys' fees and reasonable investigation costs, incurred by such party in
connection with such arbitration and all aspects of the dispute which is the
subject of such arbitration. If at the time any dispute arises the parties
agree to submit the dispute to binding mediation rather than arbitration they
may do so.

27. FORCE MAJEURE.

(a) The failure of either party to perform its obligations under
this Agreement (except the obligation to make payments) shall not subject
such party to any liability to the other or subject this Agreement to
termination if such failure is caused by acts such as, but not limited to,
acts of God, strikes, fire, earthquake, explosion, flood, drought, war, riot,
sabotage, embargo, compliance with any order or regulation of any
governmental entity acting with color of right, intervention or delays
created by any regulatory authority, or by any other cause beyond the
reasonable control of the parties. The party so affected shall promptly
notify the other party of the event of force majeure, and shall use all
reasonable efforts to remove such event as soon as reasonably practicable.

28. TIME OF ESSENCE. The parties acknowledge that time is of the essence
in regard to every provision of this Agreement.

29. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

<PAGE>

30. TERMINOLOGY. As used in this Agreement, the singular shall
include the plural and the plural shall include the singular. Titles of
sections and paragraphs in this Agreement are for convenience only, and
neither limit or amplify the provisions of the Agreement, and all references
in this Agreement to a section or paragraph shall refer to the
corresponding section or paragraph of this Agreement unless specific
reference is made to the sections of another document or instrument. The
term Sublicensee shall include the Sublicensee or its permitted Assignee(s)
as applicable.

31. TECHNOLOGY TRANSFER, PRODUCT DESIGN AND QUALITY CONTROL.

(a) To further promote the transfer of Technology licensed
hereunder, Arthur D. Little, Inc. ("ADL") has agreed to act as an independent
contractor and consultant to work with Sublicensee in implementing the
transfer of the licensed Technology, assisting Sublicensee with the
installation and modification of the requisite processing equipment and
assisting Sublicensee with product design and quality control matters. In
all these areas Sublicensee may work directly with and through ADL. In lieu
of the foregoing, Sublicensee may use its internal professional staff, or
another outside consultant, subject to the prior approval of ECC, which
approval shall not be unreasonably withheld; provided, however, that any such
outside consultant shall be required to execute a confidentiality agreement
substantially as contemplated under paragraph 15 hereof with respect to any
disclosed Technology or other proprietary information of ECC. The specific
scope, terms and conditions of the support services to be provided by ADL as
contemplated hereunder shall be set forth in a Technology Transfer Agreement
to be entered into within one hundred eighty (180) days following the date of
execution of this Agreement by and between ECC, ADL and Sublicensee. The
Technology Transfer Agreement shall also provide for Quality Control Audits,
as defined and agreed to in the Technology Transfer Agreement, to be
periodically performed by ADL. If ECC approves the internal professional
staff of Sublicensee to carry out the transfer of Technology and to supervise
the required quality control procedures, this will be set forth in the
Technology Transfer Agreement between

<PAGE>

ECC and Sublicensee. If for any reason a mutually agreeable Technology
Transfer Agreement is not entered into within this period, either party may
terminate this Agreement upon written notice within 30 days after the
expiration of the 180-day period and the parties shall have no further
liability or obligation hereunder (including but not limited to any liability
on the part of ECC to reimburse Sublicensee for any moneys, resources, or
damages incurred or expended before or after the execution of this
Agreement), except that both parties shall have a continuing duty and remain
liable for damages related to the ongoing duty regarding Confidential
Information.

(b) Within one hundred eighty (180) days after the execution of
this Agreement, but not before execution of the Technology Transfer
Agreement, ECC shall prepare a disclosure sufficient to teach one of ordinary
skill in the art how to use the Technology in order to manufacture the
Products. It is contemplated that this disclosure shall include the
formulas, procedures and research data necessary to implement the Technology
for the manufacture of the Products.

32. MATERIALS SUPPLY. Within one hundred eighty (180) days following
the execution of this Agreement, but not before execution of the Technology
Transfer Agreement, ECC will submit to Sublicensee either a list of approved
suppliers of the requisite materials or a list of one or more approved
suppliers of prepackaged materials for use in the production of the licensed
Products. If Sublicensee desires to have other suppliers added to this list,
Sublicensee shall submit the same to ECC who in turn will verify that such
supplier or suppliers have the capability to furnish materials meeting ECC's
specifications, and if said supplier or suppliers are able to do so, then
they will be added to the approved list. If for any reason this information
is not sufficient to satisfy Sublicensee's need to establish acceptable
sources of the requisite materials, Sublicensee may terminate this Agreement
and neither party will have any further liability or obligation hereunder
except for the ongoing duty regarding Confidential Information.

<PAGE>

33. MCDONALD'S CORPORATION. Because of work jointly undertaken by ECC
and McDonald's Corporation ("McDonald's") (as used herein the term
"McDonald's" shall include franchisees thereof) with regards to studies of
market potential and Food Package design, it has been agreed that McDonald's
is to have a "lead time" or "priority" with regard to the distribution of
certain Products that are ordered by it and covered by this Sublicense
Agreement. Prior to the execution of the Technology Transfer Agreement, ECC
will deliver to Sublicensee a list of these priority Products. In compliance
with this arrangement, it is expressly understood and agreed that, for a
period of two (2) years from the date hereof, the license hereby granted is
subject to Sublicensee agreeing not to fill orders from, or deliver any
priority Products to, on a region by region basis, any entity in the food
service or fast food industry other than McDonald's until such time as all
such priority Products ordered for McDonald's in a specific region have been
manufactured, shipped or otherwise set aside for delivery to McDonald's by
the Sublicensee. A region shall be that geographical area which is
serviced by a specific "distribution center" which supplies products solely
or primarily to McDonald's in that geographical area.

34. DOMESTIC SUBLICENSES. ECC agrees that all domestic sublicenses
(within the United States of America) granted by it will contain
substantially the same terms and conditions so that no domestic sublicensee
will gain a material advantage over another domestic sublicensee by virtue of
the sublicense agreement including any letter agreements or letter of
clarification issued or entered into in connection with any such sublicense.

35. PRODUCT DEFECTS. Should any Products manufactured, sold or
otherwise commercialized by Sublicensee contain any material defect in its
appearance or function, Sublicensee shall cease any further manufacture, sale
or other commercialization of such Products containing such material defect.
Unless Sublicensee corrects such defect within a reasonable time following
its discovery by or disclosure to Sublicensee, Sublicensee shall be in breach
of a material obligation of this Agreement.

<PAGE>

IN WITNESS WHEREOF, the parties have caused this Sublicense Agreement
to be executed and delivered by their duly authorized representatives upon
the date first herein written.

ECC: SUBLICENSEE:

EarthShell Container Corporation Mobil Chemical Company

By: /s/ Mark A. Koob By: /s/ D. M. Davies 10/4/93
---------------------------------- -----------------------------
Mark A. Koob D. M. Davies

Its: President Its: V.P. New Business Development,
-----------------------------
Resin and Environmental

<PAGE>

EXHIBIT A

I. TECHNOLOGY.

The term "Technology" as defined in paragraph 1(f), includes the
technology within the scope of the following issued patents and patent
applications which have been filed as of the execution date of this
Agreement, but only to the extent that such technology has been licensed to
ECC and is directly utilized in the "Field of Use". The patents and patent
applications identified in this Exhibit "A" are merely to identify the
proprietary technology reference in paragraph 1(f); nothing in this Exhibit
"A" is otherwise intended to expand the scope of the definition of
"Technology" as defined in paragraph 1(f).

1. ISSUED UNITED STATES LETTERS PATENTS

1. U.S. Letters Patent No. 4,225,247 issued September 30, 1980, and entitled
"mixing and Agitating Device."

2. U.S. Patent No. 4,552,463 issued November 12, 1983, and entitled "Methods
and Apparatus for Producing a Colloidal Mixture."

3. U.S. Letters Patent No. 4,889,428 issued December 26, 1989, and entitled
"Rotary Mill for Increasing the Degree of Hydration."

4. U.S. Letters Patent No. 4,944,595 issued July 31, 1990, and entitled
"Apparatus for Producing Cement Building Material."

5. U.S. Letters Patent No. 5,061,319 issued October 29, 1991, and entitled
"The Process for Producing Cement Building Material."

6. U.S. Letters Patent No. 5,169,566 issued December 8, 1992, and entitled
"Engineered Cementitious Contaminant Barriers and Their Method of
Manufacture."

<PAGE>

2. PENDING UNITED STATES PATENT APPLICATIONS

7. U.S. Patent Application Serial No.07/418,027 filed October 10, 1989, and
entitled "Process for Producing Improved Building Material and Product
Thereof."

8. U.S. Patent Application Serial No. 08/050,705 filed April 21, 1993, and
entitled "Methods of Manufacture and Use For Low Density Hydraulically
Bonded Cement Compositions."

9. U.S. Patent Application Serial No. 07/929,898 filed August 11, 1992, and
entitled "Cementitious Food and Beverage Storage, Dispensing, and Packaging
Containers and the Methods of Manufacturing Same."

10. U.S. Patent Application Serial No. 07/981,615 filed November 25, 1992, and
entitled "Methods of Manufacture and Use For Hydraulically Bonded Cement."

11. U.S. Patent Application Serial No. 07/982,383 filed November 25, 1992, and
entitled "Food and Beverage Containers Made from Inorganic Aggregates and
Polysaccharide, Protein, or Synthetic Organic Binders, and the Methods of
Manufacturing Such Containers."

12. U.S. Patent Application Serial No. 08/019,151 filed February 17, 1993, and
entitled "Cementitious Materials for Use in Packaging Containers and their
Methods of Manufacture."

13. U.S. Patent Application Serial No. 08/018,773 filed February 17, 1993, and
entitled "Cementitious Materials for Use in Cushioning, Spacing,
Partitioning, Portioning or Wrapping Objects and the Methods of
Manufacturing Such Materials."

14. U.S. Patent Application Serial No. 08/027,451 filed March 8, 1993, and
entitled "Laminate Insulation Barriers Having a Cementitious Structural
Matrix and Methods for Their Manufacturing."

15. U.S. Patent Application Serial No. 08/027,404 filed March 8, 1993, and
entitled "Highly Insulative Cementitious Matrices and Method For Their
Manufacture."

16. U.S. Patent Application Serial No. 08/095,662 filed July 21, 1993, and
entitled "Hydraulically Settable Containers and other Articles for Storing,
Dispensing, and Packaging Food and Beverages and Methods for their
Manufacture."

17. U.S. Patent Application Serial No. 08/101,500 filed August 3, 1993, and
entitled "Methods and Apparatus for Manufacturing Moldable Hydraulically
Settable Sheets Used in Making Containers, Printed Materials, and Other
Objects."

<PAGE>

18. U.S. Patent Application Serial No. 08/105,352 filed August 10, 1993 and
entitled "Methods and Systems for Manufacturing Containers and other
Articles of Manufacture from Hydraulically Settable Mixtures."

II. TRADE SECRETS

The term "Trade Secrets" as used in this Agreement shall include any
technical or business information, any invention, equipment or apparatus,
method or process, technology, know-how, trade secret, drawing, data,
evaluation, specifications, quality and inspection standards, sales
literature, report, business plan, memorandum, market study, customer lists,
training materials, computer program or software (including both source and
object code), or any other document or thing which is in whole or in part
confidential, proprietary, or secret and which is owned or controlled by,
licensed or assigned to ECC or for which ECC has the right to grant licenses
thereon during the term of this Agreement and which relates in whole or in
part to any of the following:

1. The compositions, including the variable and preferred parameters for each
component, used in Food Packages or the Technology based on hydraulically
reacting materials.

2. The processing steps, including the variable and preferred parameters for
each step, used in the Technology.

3. The equipment and apparatus used in the manufacture of the Technology.

4. Quality control, testing and research and development data, reports, and
information, including patent applications in preparation.

5. Customers and suppliers of the components and equipment of the Technology,
including any agreements.

<PAGE>

EXHIBIT B

PRODUCT

PRIORITY PRODUCTS

1. One and two-piece sandwich containers ("clam shells")

<PAGE>
CANCELLED
DEMAND NOTE

$2,000,000.00 OAK BROOK, ILLINOIS
DECEMBER 21, 1994

FOR VALUE RECEIVED, the undersigned EarthShell Container Corporation, 800
Miramonte Drive, Santa Barbara, California 93109 ("Payor"), promises to pay to
the order of McDonald's Corporation, One McDonald's Plaza, Oak Brook, Illinois
60521 ("Holder"), on demand, at Oak Brook, Illinois the principal amount of Two
Million Dollars ($2,000,000.00) together with interest on the unpaid principal
amount from December 21, 1994, at the rate of eight percent (8%) per annum.
Interest shall be computed on the basis of a year of 365 days and actual days
elapsed and shall be payable on the first day of each month beginning February
1, 1995 and on demand.

If default is made in the payment when due of any principal or interest, then
the whole sum of principal and interest shall become immediately due and payable
at the option of the Holder, without notice.

In the event the Holder shall institute any action for the enforcement of any
amount due on this Note, Payor agrees to pay all costs and expenses of
collection and enforcement, including reasonable attorneys' fees.

All payments of principal, interest or other amounts payable on or in respect of
this Note shall be made in lawful currency of the United States of America in
immediately available funds, to the Holder at the address set forth above,
unless otherwise directed in writing by Holder.

This Note may be prepaid at any time in whole or in part without premium or
penalty; provided that the amount of any prepayment shall be applied first to
unpaid and accrued interest and second to principal.

Any waiver of any payment due hereunder or the acceptance by the Holder of
partial payments hereunder shall not, at any other time, be taken to be a waiver
of the terms of this Note or any other agreement between the Payor and the
Holder.

The Payor authorizes, irrevocably, any attorney of any court of record to appear
for the Payor in such court if any payment under this Note is not paid when due,
and at any time thereafter, while principal of or interest on this Note shall
remain unpaid, to confess judgment without process in favor of the Holder of
this Note for such amount as may appear to be due and unpaid hereon, together
with reasonable costs of collection, including reasonable attorney's fees, and
to waive and release all errors which may intervene in any such proceedings, and
consent to immediate execution upon such judgment, and does ratify and confirm
all that that attorney may do by virtue thereof.

<PAGE>

This Note shall be governed by and interpreted in accordance with the internal
laws of the State of Illinois.

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

EARTHSHELL CONTAINER CORPORATION

By: /s/ Richard K. Hulme
--------------------------------

Its: PRESIDENT
--------------------------------

CANCELLED

ATTEST

By: /s/ Scott Houston
--------------------------------

Its: CEO
--------------------------------

<PAGE>

EARTHSHELL CONTAINER CORPORATION

1994 STOCK OPTION PLAN

1. PURPOSES OF THE PLAN. The purpose of this 1994 Stock Option Plan is
to provide incentive for key Employees and Consultants to pursue actions that
will create shareholder value and promote the overall success of the Company and
to attract and retain key talent for positions of substantial responsibility.
Options granted under the Plan maybe incentive stock options (as defined under
Section 422 of the Code) or non-statutory stock options, as determined by the
Administrator at the time of grant of an option and subject to the applicable
provisions of Section 422 of the Code, as amended, and the regulations
promulgated thereunder.

2. DEFINITIONS. As used herein, the following definitions shall apply:

(a) "ADMINISTRATOR" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.

(b) "BOARD" means the Board of Directors of the Company.

(d) "COMMITTEE" means a Committee appointed by the Board of Directors
in accordance with Section 4 of the Plan.

(e) "COMMON STOCK" means the Common Stock of the Company.

(f) "COMPANY" means EarthShell Container Corporation, a Delaware
corporation.

(g) "CONSULTANT" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not provided that if and in the event the
Company resisters any class of any equity security pursuant to the Exchange Act,
the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the Company.

(h) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means that the
employment or consulting relationship is not interrupted or terminated by the
Company, any Parent or Subsidiary. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of: (i) any leave of
absence approved by the Company, including, sick leave, military leave, or any
other personal leave: provided, however, that for purposes of Incentive Stock
Options, any such leave may not exceed ninety (90) days, unless reemployment
upon the expiration of such leave is guaranteed by contract (including certain
Company

EXHIBIT 10.20
<PAGE>

policies) or statute; or (ii) transfers between locations of the Company or
between the Company, its Parent, its Subsidiaries or its successor.

(i) "EMPLOYEE" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.

(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

(k) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:

(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported, as quoted
on such exchange or system for the last market trading day prior to the time of
determination) as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;

(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
or;

(iii)In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

(l) "INCENTIVE STOCK OPTION" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.

(m) "NET INCOME" means, as to any fiscal period, the amount shown in
the corresponding line item in the Company's statement of operations for such
fiscal period, as determined in accordance with generally accepted accounting
principles.

(n) "NET REVENUE" means, as to any fiscal period, the amount shown in
the corresponding line item in the Company's statement of operations for such
fiscal period, as determined in accordance with generally accepted accounting
principles.

(o) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.

(p) "OPTION" means a stock option granted pursuant to the Plan.

(q) "OPTIONED STOCK" means the Common Stock subject to an Option.

-2-

<PAGE>

(r) "OPTIONEE" means an Employee or Consultant who receives an
Option.

(s) "PARENT" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.

(t) "Plan" means this 1994 Stock Option Man.

(u) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 11 below.

(v) "SUBSIDIARY" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.

3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 17,500 shares of Common Stock. The shares may be authorized,
but unissued or reacquired Common Stock.

If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan.

4. ADMINISTRATION OF THE PLAN.

(a) INITIAL PLAN PROCEDURE. Prior to the date, if any, upon which
the Company becomes subject to the Exchange Act. the Plan shall be administered
by the Board or a committee appointed by the Board.

(b) PLAN PROCEDURE AFTER THE DATE, IF ANY, UPON WHICH THE COMPANY
BECOMES SUBJECT TO THE EXCHANGE ACT.

(i) ADMINISTRATION WITH RESPECT TO DIRECTORS AND OFFICERS.
With respect to grants of Options to Employees who are also officers or
directors of the Company, the Plan shall be administered by (A) the Board if the
Board may administer the Plan in compliance with Rule 16b-3 promulgated under
the Exchange Act or any successor thereto ("Rule 16b-3") with respect to a plan
intended to qualify thereunder as a discretionary plan, or (B) a committee
designated by the Board to administer the Plan, which committee shall be
constituted in such a manner as to permit the Plan to com ply with Rule 16b-3
with respect to a plan intended to qualify thereunder as a discretionary plan.
Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan.

-3-

<PAGE>

(ii) MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule 16b-3,
the Plan may be administered by different bodies with respect to directors, non-
director officers and Employees who are neither directors nor officers.

(iii)ADMINISTRATION WITH RESPECT TO CONSULTANTS AND OTHER
EMPLOYEES. With respect to grants of Options to Employees or Consultants who
are neither directors nor officers of the Company, the Plan shall be
administered by (A) the Board or (B) a committee designated by the Board, which
committee shall be constituted in such a manner as to satisfy the legal
requirements relating to the administration of incentive stock option plans, if
any, of California corporate and securities laws, of the Code, and of any
applicable stock exchange (the "Applicable Laws"). Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.

(c) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority, in its discretion:

(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;

(ii) to select the Consultants and Employees to whom Options may
from time to time be granted hereunder;

(iii)to determine whether and to what extent Options are granted
hereunder;

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

(v) to approve forms of agreement for use under the Plan;

(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder;

(vii)to determine whether and under what circumstances an Option
may be settled in cash under subsection 9(f) instead of Common Stock;

-4-

<PAGE>

(viii)to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted; and

(ix) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.

(d) EFFECT OF ADMINISTRATOR'S DECISION. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.

5. ELIGIBILITY.

(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options.

(b) Each Option shall be designated in the written option agreement
as either an incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options sha11 be treated as Nonstatutory Stock Options.

(c) For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.

(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.

6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.

7. TERM OF OPTION. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than
ten (10) years from the date of grant thereof. However, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or

-5-

<PAGE>

Subsidiary, the term, of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the Option Agreement.

8. OPTION EXERCISE PRICE AND CONSIDERATION.

(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:

(i) In the case of an Incentive Stock Option

(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.

(B) granted to any Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.

(ii) In the case of a Nonstatutory Stock Option the per share
exercise price shall be as is determined by the Board.

(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price, or
(6) any combination of the foregoing methods of payment. In making its
determination as to the type of consideration to accept, the Board shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.

9. EXERCISE OF OPTION.

(a) PROCEDURE FOR EXERCISE: RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance criteria with
respect to the Company and/or the Optionee, and as shall be permissible under
the terms of the Plan.

-6-

<PAGE>

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.

Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

(b) TERMINATION OF EMPLOYMENT. In the event of termination of an
Optionee's Continuous Status as an Employee or Consultant with the Company, such
Optionee may, but only within such period of time as is determined by the
Administrator, of at least thirty (30) days, with such determination in the case
of an Incentive Stock Option not exceeding three (3) months after the date of
such termination (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise his or her Option to
the extent that Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the
Option at the date of such termination, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate. Any unpurchased shares subject to an Option which terminates
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan.

(c) DISABILITY OF OPTIONEE. Notwithstanding the provisions of
Section 9(b) above, in the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of his total and permanent
disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only
within twelve (12) months from the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee was
not entitled to exercise the Option at the date of termination, or if Optionee
does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.

(d) DEATH OF OPTIONEE. In the event of termination of an Optionee's
Continuous Status as an Employee or Consultant as a result of the death of an
Optionee,

-7-

<PAGE>

the Option may be exercised, at any time within twelve (12) months following the
date of death (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. To the extent that Optionee was not entitled to
exercise the Option at the date of death, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate.

(e) RULE 16b-3. Options granted to persons subject to Section 16(b)
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.

(f) BUYOUT PROVISIONS. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.

10. NON-TRANSFERABILITY OF OPTIONS. Options may not be sold, pledged,
assigned hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.

11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.

(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.

(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days

-8-

<PAGE>

prior to such proposed action. To the extent it has not been previously
exercised, the Option will terminate immediately prior to the consummation of
such proposed action.

(c) MERGER. In the event of a merger of the Company with or into
another corporation, the Option shall be assumed or an equivalent option shall
be substituted by such successor corporation or a parent or subsidiary of such
successor corporation. If, in such event, the Option is not assumed or
substituted, the Option shall terminate as of the date of the closing of the
merger. For the purposes of this paragraph, the Option shall be considered
assumed if, following the merger, the option confers the right to purchase, for
each Share of Optioned Stock subject to the Option immediately prior to the
merger, the consideration (whether stock, cash, or other securities or property)
received in the merger by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger was not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation and
the participant, provide for the consideration to be received upon the exercise
of the Option, for each Share of Optioned Stock subject to the Option, to be
solely common stock of the successor corporation or its Parent equal in fair
market value to the per share consideration received by holders of Common Stock
in the merger.

12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.

13. AMENDMENT AND TERMINATION OF THE PLAN.

(a) AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.

(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.

-9-

<PAGE>

14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.

As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.

15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.

16. AGREEMENTS. Options shall be evidenced by written agreements in such
form as the Board shall approve from time to time.

17. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.

18. INFORMATION TO OPTIONEES AND PURCHASERS. The Company shall provide to
each Optionee and to each individual who acquired Shares pursuant to the Plan,
during the period such Optionee or purchaser has one or more Options
outstanding, and, in the case of an individual who acquired Shares Pursuant to
the Plan, during the period such individual owns such Shares, copies of annual
financial statements. The Company shall not be required to provide such
statements to key employees whose duties in connection with the Company assure
their access to equivalent information.

-10-

<PAGE>
EARTHSHELL CONTAINER CORPORATION
1995 STOCK INCENTIVE PLAN

Section 1. PURPOSE OF PLAN

The purpose of this 1995 Stock Incentive Plan (the "Plan") of
EarthShell Container Corporation, a Delaware corporation (the "Company"), is to
enable the Company to attract, retain and motivate its employees, directors and
consultants by providing for or increasing the proprietary interests of such
persons in the Company.

Section 2. PERSONS ELIGIBLE UNDER PLAN

Each of the following persons (each, a "Participant") shall be
eligible to be considered for the grant of Awards (as hereinafter defined)
hereunder: (1) any employee of the Company or any of its subsidiaries, including
any director who is also such an employee (an "Employee"), (2) any consultant of
the Company or any of its subsidiaries and (3) any director of the Company.
Each director of the Company shall automatically receive director options
pursuant to Section 4 hereof ("Director Options"), but any director serving on
the Committee (as hereinafter defined) shall not otherwise participate in this
Plan.

Section 3. AWARDS

(a) The Committee (as hereinafter defined), on behalf of the Company,
is authorized under this Plan to enter into any type of arrangement with a
Participant that is not inconsistent with the provisions of this Plan and that,
by its terms, involves or might involve the issuance of (i) shares of common
stock, par value $0.01, of the Company (the "Common Shares") or (ii) a
Derivative Security (as such term is defined in Rule 16a-1 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as such rule
may be amended from time to time) with an exercise or conversion privilege at a
price related to the Common Shares or with a value derived from the value of the
Common Shares. The entering into of any such arrangement is referred to herein
as the "grant" of an "Award."

(b) Awards are not restricted to any specified form or structure and
may include, without limitation, sales or bonuses of stock, restricted stock,
stock options, reload stock options, stock purchase warrants, other rights to
acquire stock, securities convertible into or redeemable for stock, stock
appreciation rights, phantom stock, dividend equivalents, performance units or
performance shares, and an Award may consist

EXHIBIT 10.21
<PAGE>

of one such security or benefit, or two or more of them in tandem or in the
alternative.

(c) Awards may be issued, and Common Shares may be issued pursuant to
an Award, for any lawful consideration as determined by the Committee,
including, without limitation, services rendered by the recipient of such Award.

(d) Subject to the provisions of this Plan, the Committee, in its
sole and absolute discretion, shall determine all of the terms and conditions of
each Award granted under this Plan, which terms and conditions may include,
among other things:

(i) a provision permitting the recipient of such Award, including any
recipient who is a director or officer of the Company, to pay the purchase
price of the Common Shares or other property issuable pursuant to such
Award, or such recipient's tax withholding obligation with respect to such
issuance, in whole or in part, by any one or more of the following:

(A) the delivery of cash;

(B) the delivery of other property deemed acceptable by the
Committee;

(C) the delivery of previously owned shares of capital stock of
the Company or other property, provided that such shares of capital
stock shall have been owned for at least six months; or

(D) the delivery of a promissory note, the terms and conditions
of which shall be determined by the Committee;

(ii) a provision conditioning or accelerating the receipt of benefits
pursuant to such Award, either automatically or in the discretion of the
Committee, upon the occurrence of specified events, including, without
limitation, a change of control of the Company (as defined by the
Committee), an acquisition of a specified percentage of the voting power of
the company, the dissolution or liquidation of the Company, a sale of
substantially all of the property and assets of the Company or an event of
the type described in Section 8 hereof; or

(iii) a provision required in order for such Award to qualify as an
incentive stock option (an "Incentive Stock Option") under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"); PROVIDED,
HOWEVER, that no Award issued to any person who is not an Employee of the

<PAGE>

Company or any of its subsidiaries may qualify as an Incentive Stock
Option.

Section 4. DIRECTOR OPTIONS.

(a) On the effective date of this Plan (as provided in Section 10
hereof), each director then serving in such capacity shall be granted a Director
Option to purchase 20 Common Shares at an exercise price of $2,000 per share.
Such Director Option shall become exercisable with respect to all of such shares
on the date one year following the effective date of this Plan

(b) Each director who has served as a director for at least the
preceding six months shall, on the day following the date of each annual meeting
of the stockholders of the Company held on or after January 1, 1996,
automatically be granted a Director Option to purchase 20 Common Shares.

(c) Notwithstanding the foregoing, if, on any date upon which
Director Options are to be granted hereunder, the number of Common Shares
remaining available for issuance under this Plan is insufficient for the grant
of Director Options to purchase the total number of Common Shares specified in
Section 4(a) and (b) hereof, then Director Options to purchase a proportionate
amount of the available number of Common Shares (rounded down to the greatest
number of whole shares) shall be granted to each director entitled to receive a
Director Option on such date.

(d) Each Director Option granted under this Plan shall expire upon
the first to occur of the following:

(i) The first anniversary of the date upon which the optionee
shall cease to be a Director as a result of death or total disability;

(ii) The 90th day after the date upon which the optionee shall
cease to be a Director for any reason other than death or total disability
(or in the case of Director Options granted pursuant to Section 4(a) above,
one year after the date upon which the Optionee shall cease to be a
Director); or

(iii) The fifth anniversary of the date of grant of such Director
Option.

(e) Each Director Option (other than those granted pursuant to
Section 4(a) above) shall have an exercise price equal to the greater of (i) the
aggregate Fair Market Value (as defined below) on the date of grant of such
option of the Common

<PAGE>

Shares subject thereto and (ii) the aggregate par value of such Common Shares on
such date.

(f) Payment of the exercise price of any Director Option granted
under this Plan shall be made in full in cash concurrently with the exercise of
such Director Option; provided, however, that, in the discretion of the Board of
Directors of the Company (the "Board"), the payment of such exercise price may
instead be made in whole or in part, with Common Shares delivered concurrently
with such exercise (such shares to be valued on the basis of the Fair Market
Value of such shares on the date of such exercise), provided that the Company is
not then prohibited from purchasing or acquiring Common Shares and such Common
Shares so delivered have been owned for at least six months;

(g) For purposes of this Section 4, the "Fair Market Value" of a
Common Share or other security on any date (the "Determination Date") shall be
equal to the closing price per Common Share or unit of such other security on
the business day immediately preceding the Determination Date, as reported in
The Wall Street Journal, Western Edition, or, if no closing price was so
reported for such immediately preceding business day, the closing price for the
next preceding business day for which a closing price was so reported, or, if no
closing price was so reported for any of the 30 business days immediately
preceding the Determination Date, the average of the high bid and low asked
prices per Common Share or unit of such other security on the business day
immediately preceding the Determination Date in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ") or such other system then in use, or, if the Common
Shares or such other security were not quoted by any such organization on such
immediately preceding business day, the average of the closing bid and asked
prices on such day as furnished by a professional market maker making a market
in the Common Shares or such other security selected by the Board.

(h) All outstanding Director Options theretofore granted under this
Plan shall become fully exercisable upon the first to occur of the following:

(i) the date of dissemination to the stockholders of the
Company of a proxy statement seeking stockholder approval of a
reorganization, merger or consolidation of the

<PAGE>

Company as a result of which the outstanding securities of the class then
subject to this Plan are exchanged for or converted into cash, property
and/or securities not issued by the Company, unless such reorganization,
merger or consolidation shall have been affirmatively recommended to the
stockholders of the Company by the Board;

(ii) the first date upon which the directors of the Company who
were last nominated by the Board for election as directors shall cease to
constitute a majority of the authorized number of directors of the Company;
or

(ii) the date of dissemination to the stockholders of the
Company of a proxy statement disclosing a change of control (as defined by
the Company) of the Company.

(i) All outstanding Director Options theretofore granted under this
Plan shall terminate upon the first to occur of the following:

(i) the dissolution or liquidation of the Company;

(ii) a reorganization, merger or consolidation of the Company as
a result of which the outstanding securities of the class then subject to
such outstanding Director Options are exchanged for or converted into cash,
property and/or securities not issued by the Company, which reorganization,
merger or consolidation shall have been affirmatively recommended to the
shareholders of the Company by the Board; or

(iii) the sale of substantially all of the property and assets of
the Company.

(j) Each Director Option shall be nontransferable by the optionee
other than by will or the laws of descent and distribution, and shall be
exercisable during the optionee's lifetime only by the optionee or the
optionee's guardian or legal representative.

(k) Director Options are not intended to qualify as Incentive Stock
Options.

<PAGE>

Section 5. STOCK SUBJECT TO PLAN

(a) Subject to adjustment as provided in Section 8 hereof, the
aggregate number of Common Shares that may be issued pursuant to all Incentive
Stock Options granted under this Plan and under the Company's 1994 Stock
Incentive Plan shall not exceed 17,500. Such maximum number does not include
the number of Common Shares subject to the unexercised portion of any Incentive
Stock Option granted under this Plan or under the Company's 1994 Stock Incentive
Plan, that expires or is terminated.

(b) The aggregate number of Common Shares subject to Awards granted
during any calendar year to any one Employee (including the number of shares
involved In Awards having a value derived from the value of Common Shares) shall
not exceed 1,500; provided, however, that the limitation set forth in this
Section 5(b) shall not apply if such provision is not required in order for
Awards to qualify as "performance based compensation" under Section 162(m) of
the Code. Further, such, aggregate number of shares shall be subject to
adjustment under Section 8 only to the extent permitted by Section 162(m) of the
Code.

(c) Subject to adjustment as provided in Section 8 hereof, at any
time, the aggregate number of Common Shares issued and issuable pursuant to all
Awards (including all Incentive Stock Options) granted under this Plan and under
the Company's 1994 Stock Incentive Plan shall not exceed 17,500.

(d) For purposes of Section 5(c) hereof, the aggregate number of
Common Shares issued and issuable pursuant to Awards granted under this Plan
shall at any time be deemed to be equal to the sum of the following:

(i) the number of Common Shares that were issued prior to such time
pursuant to Awards granted under this Plan, other than Common Shares
that were subsequently reacquired by the Company pursuant to the terms
and conditions of such Awards and with respect to which the holder
thereof received no benefits of ownership such as dividends; plus

(ii) the maximum number of Common Shares that are or may be issuable
at or after such time pursuant to Awards granted under this Plan prior
to such time.

Section 6. DURATI0N OF PLAN

No Awards shall be made under this Plan after November 26, 2005
Although Common Shares may be issued after November 26, 2005 pursuant to Awards
made on or prior to such date, no Common Shares shall be issued under this Plan
on or after November 26, 2015.

<PAGE>

Section 7. ADMINISTRATION OF PLAN

(a) This Plan shall be administered by a committee (the "Committee")
of the Board of Directors of the Company (the "Board") consisting of two or more
directors, each of whom: (i) is a "disinterested person" (as such term is
defined in Rule 16b-3 promulgated under the Exchange Act as such Rule may be
amended from time to time), and (ii) is an "outside director" within the meaning
of Section 162(m) of the Code. Notwithstanding the foregoing, however, prior to
the registration of the Common Shares under Section 12 of the Securities
Exchange Act of 1934, grants of Awards may, in the absence of action by the
Committee, be made by the entire Board.

(b) Subject to the provisions of this Plan, the Committee shall be
authorized and empowered to do all things necessary or desirable in connection
with the administration of this Plan, including, without limitation, the
following:

(i) adopt, amend and rescind rules and regulations relating to this
Plan;

(ii) determine which persons are Participants and to which of such
Participants, if any, Awards shall be granted hereunder;

(iii) grant Awards to Participants and determine the terms and
conditions thereof, including the number of Common Shares issuable pursuant
thereto;

(iv) determine the terms and conditions of the Director Options that
are automatically granted hereunder, other than the terms and conditions
specified in Section 4 hereof;

(v) determine whether, and the extent to which adjustments are
required pursuant to Section 8 hereof; and

(vi) interpret and construe this Plan and the terms and conditions of
any Award granted hereunder.

<PAGE>
Section 8. ADJUSTMENTS

If the outstanding securities of the class then subject to this Plan
are increased, decreased or exchanged for or converted into cash, property or a
different number or kind of securities, or if cash, property or securities are
distributed in respect of such outstanding securities, in either case as a
result of a reorganization, merger, consolidation, recapitalization,
restructuring, reclassification, dividend (other than a regular, quarterly cash
dividend) or other distribution, stock split, reverse stock split or the like,
or if substantially all of the property and assets of the Company are sold,
then, unless the terms of such transaction shall provide otherwise, the
Committee shall make appropriate and proportionate adjustments in (a) the number
and type of shares or other securities or cash or other property that may be
acquired pursuant to Incentive Stock options and other Awards theretofore
granted under this Plan, (b) the maximum number and type of shares or other
securities that may be issued Pursuant to incentive Stock Options and other
Awards (including Director Options) thereafter granted under this Plan, and (c)
to the extent permitted under Section 5(b) hereof, the maximum number of Common
Shares for which options may be granted during any one calendar year, provided,
however, that no adjustment shall be made to the number of Common Shares that
may be acquired pursuant to outstanding Incentive Stock Options or the maximum
number of Common Shares with respect to which Incentive Stock Options may be
granted under this Plan to the extent such adjustment would result in such
options being treated as other than Incentive Stock Options; provided further
that no such adjustment shall be made to the extent the Committee determines
that such adjustment would result in the disallowance of a federal income tax
deduction for compensation attributable to Awards hereunder by causing such
compensation to be other than "performance-based compensation" under Section
162(m) of the Code.

Section 9. AMENDMENT AND TERMINATION OF PLAN

The Board may amend or terminate this Plan at any time and in any
manner, subject to this Plan at any time and in any manner, subject to the
following limitations:

(a) no such amendment or termination shall deprive the recipient of
any Award theretofore granted under this Plan, without the consent of such
recipient, of any of his or her rights thereunder or with respect thereto;

(b) Section 4 hereof shall not be amended more than once every six
months, other than to comply with changes in the Code, the Employee Retirement
income Security Act ("ERISA") or the rules and regulations thereunder; and

<PAGE>

(c) if an amendment to the Plan would (i) increase the maximum number
of Common Shares that may be issued pursuant to (A) all Awards, including
Director Options, granted under this Plan, (B) all Incentive Stock Options
granted under this Plan, and (C) Awards granted under this Plan during any
calendar year to any one Employee, (ii) change the class of persons eligible to
receive Awards, including Director Options, under the Plan, (iii) otherwise
materially increase the benefits hereunder accruing to participants who are
subject to Section 16 of the Exchange Act in a manner not specifically
contemplated herein, or (iv) affect the Plan's compliance with Rule 16b-3 or
applicable provisions of the Code, as amended from time to time, the amendment
shall be approved by the Company's stockholders to the extent required to comply
with Rule 16b-3, Sections 422 and 162(m) of the Code, and other applicable
provisions of or rules under the Code, as amended from time to time.

Section 10. EFFECTIVE DATE OF PLAN

This Plan shall be effective as of November 27, 1995, the date upon which it was
approved by the Board; PROVIDED, HOWEVER, that no Common Shares may be issued
under this Plan until it has been approved, directly or indirectly, by the
affirmative votes of the holders of a majority of the securities of the Company
present, or represented, and entitled to vote at a meeting duly held in
accordance with the laws of the State of Delaware.

<PAGE>

EARTHSHELL CONTAINER CORPORATION

1994 STOCK OPTION PLAN

STOCK OPTION AGREEMENT

Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.

I. NOTICE OF STOCK OPTION GRANT

[optionee's name and address[cad 179]

_____________________________

You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:

Grant Number ______________________________

Date of Grant ______________________________

Exercise Price per Share $______________________________

Total Number of Shares Granted ___________________________________________

Total Exercise Price $______________________________

Type of Option: ___ Incentive Stock Option

___ Nonstatutory Stock Option

Term/Expiration Date: ______________________________________________

VESTING SCHEDULE:

This Option shall become exercisable in one or more installments, in the
percentages and on the dates set forth below:

(a) If the Company meets certain net revenue or net income goals, as
described in the schedule below (the "Performance Goals"), then on the business
day following the date on which the Company's quarterly financial statements are
approved by the Company's chief accounting officer (as may be determined by the
Administrator), a percentage of the Optioned Stock, as indicated in the schedule
below, shall vest.

EXHIBIT 10.22
<PAGE>

% of Optioned
Performance Goal Stock Exercisable
------------------------------------------ ----------------------
1. When the Company recognizes Net Reve- 20%
nue of at least $28.2 million in any
four consecutive fiscal quarters.

2. When the Company recognizes Net Income 30%
of at least $100 million in any four
consecutive fiscal quarters.

3. When the Company recognizes Net Income 50%
of at least $400 million in any four
consecutive fiscal quarters.

Total 100%
----
----

(b) For purposes of this Agreement, net revenue and net income will be
determined based on the Company's quarterly financial statements, prepared in
accordance with generally accepted accounting practices, consistently applied.

(c) Notwithstanding the foregoing paragraph (a), if the Company has not
achieved any or all of the Performance Goals, any or all of the Optioned Stock
subject to this Option Agreement shall vest no later than [month/day], 1998
(nine years from the date of grant).

TERMINATION PERIOD:

This Option may be exercised for [three months] after termination of
employment or consulting relationship, or such longer period as may be
applicable upon death or Disability of Optionee as provided in the Plan, but in
no event later than the Term/Expiration Date as provided above.

II. AGREEMENT

1. GRANT OF OPTION. EarthShell Container Corporation, a Delaware
corporation (the "Company"), hereby grants to the Optionee named in the Notice
of Grant (the "Optionee"), an option (the "Option") to purchase a total number
of shares of Common Stock (the "Shares") set forth in the Notice of Grant, at
the exercise price per share set forth in the Notice of Grant (the "Exercise
Price") subject to the terms, definitions and provisions of the 1994 Stock
Option Plan (the "Plan") adopted by the Company, which is incorporated herein by
reference. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option.

-2-

<PAGE>

If designated in the Notice of Grant as an Incentive Stock Option, this
Option is intended to qualify as an Incentive Stock Option as defined in Section
422 of the Code.

2. EXERCISE OF OPTION. This Option shall be exercisable during its term
in accordance with the Exercise Schedule set out in the Notice of Grant and with
the provisions of Section 9 of the Plan as follows:

(i) RIGHT TO EXERCISE.

(a) This Option may not be exercised for a fraction of a share.

(b) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 6, 7 and 8 below, subject to the limitation contained in subsection
2(i)(c).

(c) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the Notice of Grant.

(ii) METHOD OF EXERCISE. This Option shall be exercisable by written
notice (in the form attached as Exhibit A) which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as may be
required by the Company pursuant to the provisions of the Plan. Such written
notice shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Secretary of the Company. The written notice shall be
accompanied by payment of the Exercise Price. This Option shall be deemed to be
exercised upon receipt by the Company of such written notice accompanied by the
Exercise Price.

No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.

3. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company his Investment
Representation Statement in the form attached hereto as Exhibit B, and shall
read the applicable rules of the Commissioner of Corporations attached to such
Investment Representation Statement.

4. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee:

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<PAGE>

(i) cash; or

(ii) check; or

(iii) promissory note (as agreed to by the Administrator); or

(iv) surrender of other shares of Common Stock of the Company
which (A) in the case of Shares acquired pursuant to the exercise of a Company
option, have been owned by the Optionee for more than six (6) months on the date
of surrender, and (B) have a fair market value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised.

5. RESTRICTIONS ON EXERCISE. This Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of
this Option, the Company may require Optionee to make any representation and
warranty to the Company as may be required by any applicable law or regulation.

6. TERMINATION OF RELATIONSHIP. In the event of termination of
Optionee's Continuous Status as an Employee or Consultant, Optionee may, to the
extent otherwise so entitled at the date of such termination (the "Termination
Date"), exercise this Option during the Termination Period set out in the Notice
of Grant. To the extent that Optionee was not entitled to exercise this Option
at the date of such termination, or if Optionee does not exercise this Option
within the time specified herein, the Option shall terminate.

7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 6
above, in the event of termination of Optionee's Continuous Status as an
Employee or Consultant as a result of total and permanent disability (as
defined in Section 22(e)(3) of the Code), Optionee may, but only within
twelve (12) months from the date of termination of employment (but in no
event later than the date of expiration of the term of this Option as set
forth in Section 10 below), exercise the Option to the extent otherwise so
entitled at the date of such termination. To the extent that Optionee was
not entitled to exercise the Option at the date of termination, or if
Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.

8. DEATH OF OPTIONEE. In the event of termination of Optionee's
Continuous Status as an Employee or Consultant as a result of the death of
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the date of expiration
of the term of this Option as set forth in Section 10 below), by Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee could exercise the Option at
the date of death.

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<PAGE>

9. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by him. The terms of this
Option shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.

10. TERM OF OPTION. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 7 of the Plan regarding Options designated as Incentive Stock Options
and Options granted to more than ten percent (10%) shareholders shall apply to
this Option.

11. TAXATION UPON EXERCISE OF OPTION. Optionee understands that, upon
exercising a nonstatutory Option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then fair market value of the
Shares over the exercise price. However, the timing of this income recognition
may be deferred for up to six months if Optionee is subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). If the
Optionee is an employee, the Company will be required to withhold from
Optionee's compensation, or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income.
Additionally, the Optionee may at some point be required to satisfy tax
withholding obligations with respect to the disqualifying disposition of an
Incentive Stock Option. The Optionee shall satisfy his or her tax withholding
obligation arising upon the exercise of this Option out of Optionee's
compensation or by payment to the Company.

12. TAX CONSEQUENCES. Set forth below is a brief summary as of the date
of this Option of some of the federal and California tax consequences of
exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING
OF THE SHARES.

(i) EXERCISE OF ISO. If this Option qualifies as an ISO, there will
be no regular federal income tax liability or California income tax liability
upon the exercise of the Option, although the excess, if any, of the fair market
value of the Shares on the date of exercise over the Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax purposes
and may subject the Optionee to the alternative minimum tax in the year of
exercise.

(ii) EXERCISE OF NONSTATUTORY STOCK OPTION. If this Option does not
qualify as an ISO, there may be a regular federal income tax liability and
California income tax liability upon the exercise of the option. The Optionee
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the fair market value of the
Shares on the date of exercise over the Exercise Price. If Optionee is an
employee, the Company will be required to withhold from Optionee's compensation

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<PAGE>

or collect from optionee and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income at the time of exercise.

(iii) DISPOSITION OF SHARES. In the case of an NSO, if Shares are held
for at least one year, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal and California income tax
purposes. In the case of an ISO, if Shares transferred pursuant to the Option
are held for at least one year after exercise and are disposed of at least two
years after the Date of Grant, any gain realized on disposition of the Shares
will also be treated as long-term capital gain for federal and California income
tax purposes. If Shares purchased under an ISO are disposed of within such one-
year period or within two-years after the Date of Grant, any gain realized on
such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the difference between the Exercise Price and the
lesser of (1) the fair market value of the Shares on the date of exercise, or
(2) the sale price of the Shares.

(iv) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the Option
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise. the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.

EarthShell Container Corporation.
a Delaware corporation

By: _______________________________________

OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.

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<PAGE>

Optionee acknowledges receipt of a copy of the Plan and represents that he
is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.

Dated:___________________________ _________________________________________
Optionee

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<PAGE>

EXHIBIT A

1994 STOCK OPTION PLAN

EXERCISE NOTICE

EarthShell Container Corporation

__________________________________________

__________________________________________
Attention: Chief Financial Officer

1. EXERCISE OF OPTION. Effective as of today, ____________, 19 __, the
undersigned ("Optionee) hereby elects to exercise Optionee's option to purchase
__________ shares of the Common Stock (the "SHARES".) of EarthShell Container
Corporation (the "COMPANY") under and pursuant to the 1994 Stock Option Plan, as
amended (the "PLAN") and the [ ] Incentive [ ] Nonstatutory Stock Option
Agreement dated __________ (the "OPTION AGREEMENT").

REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.

3. RIGHTS AS SHAREHOLDER. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 12 of the Plan.

Optionee shall enjoy rights as a shareholder until such time as Optionee
disposes of the Shares or the Company and/or its assignee(s) exercises the Right
of First Refusal hereunder. Upon such exercise. Optionee shall have no further
rights as a holder of the Shares so purchased except the right to receive
payment for the Shares so purchased in accordance with the provisions of this
Agreement, and Optionee shall forthwith cause the certificate(s) evidencing the
Shares so purchased to be surrendered to the Company for transfer or
cancellation.

4. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Shares held by Optionee
or any transferee (either being sometimes referred to herein as the "HOLDER")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"RIGHT OF FIRST REFUSAL").

(a) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (1) the Holder's
bona fide intention

<PAGE>

to sell or otherwise transfer such Shares, (ii) the name of each proposed
purchaser or other transferee ("PROPOSED TRANSFEREE") (iii) the number of Shares
to be transferred to each Proposed Transferee; and (iv) the bona fide cash price
or other consideration for which the Holder proposes to transfer the Shares (the
"Offered Price"), and the Holder shall offer the Shares at the Offered Price to
the Company or its assignee(s).

(b) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within thirty
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.

(c) PURCHASE PRICE. The purchase price ("PURCHASE PRICE") for the
Shares purchased by the Company or its assignee(s) under this Section shall
be the Offered Price. If the Offered Price includes consideration other than
cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.

(d) PAYMENT. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.

(e) HOLDER'S RIGHT TO TRANSFER. If all of the Shares proposed in the
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section, then the Holder may
sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice and provided further
that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are
not transferred to the Proposed Transferee within such period, a new Notice
shall be given to the Company, and the Company and/or its assignees shall again
be offered the Right of First Refusal before any Shares held by the Holder may
be sold or otherwise transferred.

(f) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the contrary
contained in this Section notwithstanding the transfer of any or all of the
Shares during the Optionee's lifetime or on the Optionee's death by will or
intestacy to the Optionee's immediate family or a trust for the benefit of the
Optionee's immediate family shall be exempt from the provisions of this Section.
"IMMEDIATE FAMILY" as used herein shall mean spouse, lineal descendant or
antecedent. father. mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of

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<PAGE>

this Section, and there shall be no further transfer of such Shares except in
accordance with the terms of this Section.

(g) TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First
Refusal shall terminate as to any Shares 90 days after the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the 1933 Act.

5. TAX CONSULTATION. Optionee understands that Optionee may suffer adverse
tax consequences as a result of Optionee's purchase or disposition of the
Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.

6. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.

(a) LEGENDS. Optionee understands and agrees that the Company shall
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by state or federal securities laws:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR,
IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE
THEREWITH.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL
OPTIONS HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH
IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL
HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT
THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON
TRANSFEREES OF THESE SHARES.

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<PAGE>

IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.

Optionee understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to Exhibit B, the Investment Representation Statement.

(b) STOP-TRANSFER NOTICES. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.

(c) REFUSAL TO TRANSFER. The Company shall not be required (1) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.

7. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.

8. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof the administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.

9. GOVERNING LAW; SEVERABILITY. This Agreement shall be governed by and
construed in accordance with the laws of the State of California excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.

10. NOTICES. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party

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<PAGE>

at its address as shown below beneath its signature, or to such other address as
such party may designate in writing from time to time to the other party.

11. FURTHER INSTRUMENTS. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.

12. DELIVERY OF PAYMENT. Optionee herewith delivers to the Company the
full Exercise Price for the Shares.

13. ENTIRE AGREEMENT. The Plan and Notice of Grant/Option Agreement are
incorporated herein by reference. This Agreement, the Plan, the Option
Agreement and the Investment Representation Statement constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof, and is governed by California law except for that body of law pertaining
to conflict of laws.

SUBMITTED BY: ACCEPTED BY:

OPTIONEE: EarthShell Container Corporation

_______________________________________ By: ________________________________
(Signature)
Its: _______________________________

ADDRESS: ADDRESS:

_______________________________________ ____________________________________

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<PAGE>

EXHIBIT B

INVESTMENT REPRESENTATION STATEMENT

OPTIONEE :

COMPANY : EarthShell Container Corporation

SECURITY : COMMON STOCK

AMOUNT :

DATE :

In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:

(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the securities. Optionee is
acquiring these securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").

(b) Optionee acknowledges and understands that the securities constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Optionee's
investment intent as expressed herein. In this connection, Optionee
understands that, in the view of the Securities and Exchange Commission, the
statutory basis for such exemption may be unavailable if Optionee's
representation was predicated solely upon a present intention to hold these
Securities for the minimum capital gains period specified under tax statutes,
for a deferred sale, for or until an increase or decrease in the market price of
the Securities, or for a period of one year or any other fixed period in the
future. Optionee further understands that the Securities must be held
indefinitely unless they are subsequently registered under the Securities Act or
an exemption from such registration is available. Optionee further acknowledges
and understands that the Company is under no obligation to register the
securities. Optionee understands that the certificate evidencing the securities
will be imprinted with a legend which prohibits the transfer of the Securities
unless they are registered or such registration is not required in the opinion
of counsel satisfactory to the Company[, a legend prohibiting their transfer
without the consent of the Commissioner of Corporations of the State of
California] and any other legend required under applicable state securities
laws.

(c) Optionee is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of

<PAGE>

"restricted securities" acquired, directly or indirectly from the issuer
thereof, in a non-public offering subject to the satisfaction of certain
conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at
the time of the grant of the Option to the Optionee, the exercise will be exempt
from registration under the Security Act. In the event the Company becomes
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, ninety (90) days thereafter (or such longer period as
any market stand-off agreement may require) the securities exempt under Rule
701 may be resold, subject to the satisfaction of certain of the conditions
specified by Rule 144, including: (1) the resale being made through a broker in
an unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934);
and, in the case of an affiliate, (2) the availability of certain public
information about the Company, (3) the amount of securities being sold during
any three month period not exceeding the limitations specified in Rule 144(e),
and (4) the timely filing of a Form 144, if applicable.

In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option then the securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the
resale to occur not less than two years after the party has purchased, and
made full payment for, within the meaning of Rule 144, the securities to be
sold; and, in the case of an affiliate, or of a non-affiliate who has held
the securities less than three years, the satisfaction of the conditions set
forth in sections (1), (2), (3) and (4) of the paragraph immediately above.

(d) Optionee hereby agrees that if so requested by the Company or any
representative of the underwriters in connection with any registration of the
offering of any securities of the Company under the 1933 Act, Optionee shall
not sell or otherwise transfer any Shares or other securities of the Company
during the 180-day period following the effective date of a registration
statement of the Company filed under the 1933 Act; provided, however, that
such restriction shall only apply to the first registration statement of the
Company to become effective under the 1933 Act which include securities to be
sold on behalf of the Company to the public in an underwritten public offering
under the 1933 Act. The Company may impose stop-transfer instructions with
respect to securities subject to the foregoing restrictions until the end of
such 180-day period.

(e) Optionee further understands that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange
Commission has expressed its opinion that persons proposing to sell private
placement securities other than in a registered offering and otherwise than
pursuant to Rules 144 or 701 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers
or sales, and that such persons and their respective brokers who participate
in such transactions do so at their own risk. Optionee understands that no
assurances can be given that any such other registration exemption will be
available in such event.

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<PAGE>

(f) Optionee understands that the certificate evidencing the Securities
will be imprinted with a legend which prohibits the transfer of the Securities
without the consent of the Commissioner of Corporations in California. Optionee
has read the applicable Commissioner's Rules with respect to such restriction, a
copy of which is attached.

Signature of Optionee:

_____________________________________

Date: ________________________, 19___

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<PAGE>

ATTACHMENT 1
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
Title 10. Investment - Chapter 3. Commissioner of Corporations

260.141.11: RESTRICTION ON TRANSFER. (a) The issuer of any security upon
which a restriction on transfer has been imposed pursuant to Sections
260.102.6, 2.141.10 or 260.5 shall cause a copy of this section to be
delivered to each issuee or transferee of such security at the time the
certificate evidencing the security is delivered to the issuee or transferee.

(b) It is unlawful for the holder of any such security to consummate
a sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:

(1) to the issuer;

(2) pursuant to the order or process of any court;

(3) to any person described in Subdivision (i) of Section 25102
of the Code or Section 260.105.14 of these rules;

(4) to the transferror's ancestors, descendants or spouse, or
any custodian or trustee for the account of the transferrer or the
transferror's ancestors, descendants, or spouse; or to a transferee by a
trustee or custodian for the account of the transferee or the transferee's
ancestors, descendants or spouse;

(5) to holders of securities of the same class of the same
issuer;

(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code
(either acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the
knowledge of the broker-dealer, nor actually present in this state if the
sale of such securities is not in violation of any securities law of the
foreign state, territory or country concerned;

(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;

(9) if the interest sold or transferred is a pledge or other
lien given by the purchaser to the seller upon a sale of the security for
which the Commissioner's written consent is obtained or under this rule not
required;

(10) by way of a sale qualified under Sections 25111, 25112,
25113 or 25121 of the Code, of the securities to be transferred, provided
that no order under Section 25140 or subdivision (a) of Section 25143 is in
effect with respect to such qualification;

(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;

(12) by way of an exchange qualified under Section 25111, 25112
or 25113 of the Code, provided that no order under Section 25140 or
subdivision (a) of section 25143 is in effect with respect to such
qualification;

(13) between residents of foreign states, territories or
countries who are neither domiciled nor actually present in this state;

(14) to the State Controller pursuant to the Unclaimed Property
Law or to the administrator of the unclaimed property law of another state;
or

(15) by the State Controller pursuant to the Unclaimed Property
Law or by the administrator of the unclaimed property law of another state
if, in either such case, such person (i) discloses to potential purchasers
at the sale that transfer of the securities is restricted under this rule,
(ii) delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;

(16) by a trustee to a successor trustee when such transfer does
not involve a change in the beneficial ownership of the securities;

(17) by way of an offer and sate of outstanding securities in an
issuer transaction that is subject to the qualification requirement of
Section 25110 of the Code but exempt from that qualification requirement by
subdivision (f) of Section 25102;

provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the Legend
required by this section.

(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a Legend, prominently stamped or printed
thereon in capital Letters of not less than 10-point size, reading as follows:

"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."

<PAGE>

EARTHSHELL CONTAINER CORPORATION

NON-QUALIFIED STOCK OPTION AGREEMENT

This Non-Qualified Stock Option Agreement ("Agreement") is made and
entered into as of the Date of Grant indicated below by and between EarthShell
Container Corporation, a Delaware corporation (the "Company"), and the person
named below as Optionee.

WHEREAS, Optionee is a director of the Company; and

WHEREAS, pursuant to the Company's 1995 Stock Incentive Plan (the
"Plan"), Optionee has been automatically granted an option to purchase shares of
the common stock of the Company (the "Common Stock"), on the terms and
conditions set forth in the Plan and herein;

NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants set forth herein, the parties hereto hereby agree as follows:

1. GRANT OF OPTION; CERTAIN TERMS AND CONDITIONS.

(a) Pursuant to Section 4 of the Plan, the Company hereby grants to
Optionee, and Optionee hereby accepts, as of the Date of Grant, an option to
purchase the number of shares of Common Stock indicated below (the "Option
Shares") at the Exercise Price per share indicated below, which option shall
expire at 5:00 o'clock p.m., California time, on the Expiration Date indicated
below and shall be subject to all of the terms and conditions set forth in this
Agreement (the "Option"). The Option shall vest immediately and shall become
exercisable on the first anniversary of the Date of Grant (subject to Section 3)
to purchase that number of Option Shares indicated below.

Optionee: ________________________

Date of Grant:

Number of shares purchasable:

Exercise Price per share: $

The Option is not intended to qualify as an incentive stock option under Section
422 of the Internal Revenue Code (an "Incentive Stock Option").

(b) Unless earlier terminated pursuant to Section 2(b) of this
Agreement, this Option shall expire upon the first to occur of the following
(the "Expiration Date"):

(i) The first anniversary of the date upon which Optionee
shall cease to be a director of the Company for any reason; or

EXHIBIT 10.23

<PAGE>

(ii) The fifth anniversary of the Date of Grant.

2. ACCELERATION AND TERMINATION OF OPTION.

(a) ACCELERATION OF OPTION. This Option shall become fully
exercisable upon the first to occur of the following:

(i) The date of dissemination to the stockholders of the
Company of a proxy statement seeking stockholder approval of a
reorganization, merger or consolidation of the Company as a result of which
the outstanding securities of the class then subject to the Plan are
exchanged for or converted into cash, property and/or securities not issued
by the Company, unless such reorganization, merger or consolidation shall
have been affirmatively recommended to the stockholders of the Company by
the Board of Directors;

(ii) The first date upon which the directors of the Company
who were last nominated by the Board of Directors for election as directors
shall cease to constitute a majority of the authorized number of directors
of the Company; or

(iii) The date of dissemination to the stockholders of the
Company of a proxy statement disclosing a change of control (as defined by
the Company) of the Company.

(b) TERMINATION OF OPTION. This Option shall terminate on the first
to occur of the following:

(i) The dissolution or liquidation of the Company;

(ii) A reorganization, merger or consolidation of the
Company as a result of which the outstanding securities of the class then
subject to this Option are exchanged for or converted into cash, property
and/or securities not issued by the Company, which reorganization, merger
or consolidation shall have been affirmatively recommended to the
stockholders of the Company by the Board of Directors; or

(iii) The sale of substantially all of the property and
assets of the Company.

3. EXERCISE. Notwithstanding the foregoing provisions of this
Agreement, Optionee and the Company hereby acknowledge and agree that the Option
shall not be exercised with respect to the Option Shares until the date that is
180 days after the completion of the Company's initial public offering pursuant
to a registration statement under the Securities Act of 1933, as amended, in
which the Company registers for its account an aggregate of at least $35,000,000
of its Common Stock. The Option shall be exercisable during Optionee's lifetime
only by Optionee or by his or her guardian or legal representative, and after
Optionee's death only by the person or entity entitled to do so under Optionee's
last

<PAGE>

will and testament or applicable intestate law. The Option only be exercised by
the delivery to the Company of a written notice of such exercise (the "Exercise
Notice"), which notice shall specify the number of Option Shares to be purchased
(the "Purchased Shares") and the aggregate Exercise Price for such shares,
together with payment in full of such aggregate Exercise Price in cash or by
check payable to the Company; PROVIDED, HOWEVER, that, in the discretion of the
Board of Directors of the Company, payment of such aggregate Exercise Price may
instead be made, in whole or in part, by the delivery to the Company of a
certificate or certificates representing shares of Common Stock, duly endorsed
or accompanied by duly executed stock powers, which delivery effectively
transfers to the Company good and valid title to such shares, free and clear
of any pledge, commitment, lien, claim or other encumbrance (such shares to
be valued on the basis of the aggregate Fair Market Value (as defined in the
Plan) thereof on the date of such exercise), provided that the Company is not
then prohibited from purchasing or acquiring such shares of Common Stock and
such shares so delivered have been owned by Optionee for at least six months.

5. PAYMENT OF WITHHOLDING TAXES. If the Company becomes obligated
to withhold an amount on account of any tax imposed as a result of the exercise
of the Option, including, without limitation, any federal, state, local or other
income tax, or any F.I.C.A., state disability insurance tax or other employment
tax, then Optionee shall, on the first day upon which the Company becomes
obligated to pay such amount to the appropriate taxing authority, pay such
amount to the Company in cash or by check payable to the Company. The Company
may, in its sole discretion, offset any amounts owed by the Company to Optionee
in order to satisfy Optionee's obligations under this Section 5.

6. NOTICES. All notices and other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be deemed given on the day delivered if delivered personally (or one day after
mailing by reputable overnight courier) or five days after mailing if by
certified or registered mail, postage prepaid, return receipt requested, to the
Company at 800 Miramonte Drive, Santa Barbara, California 93109, Attention:
Chief Financial Officer, or to Optionee at the address set forth beneath his or
her signature on the signature page hereto, or at such other addresses as each
may designate by written notice in the manner aforesaid.

7. STOCK EXCHANGE REQUIREMENTS; APPLICABLE LAWS. Notwithstanding
anything to the contrary in this Agreement, no shares of stock purchased upon
exercise of the Option, and no certificate representing all or any part of such
shares, shall be issued or delivered if (a) such shares have not been admitted
to listing upon official notice of issuance on each stock exchange upon which
shares of that class are then listed or (b) in the opinion of counsel to the
Company, such issuance or delivery would cause the Company to be in violation of
or to incur liability under any federal, state or other securities law, or any
requirement of any stock exchange listing agreement to which the Company is a
party, or any other requirement of law or of any administrative or regulatory
body having jurisdiction over the Company.

<PAGE>

8. NONTRANSFERABILITY. Neither the Option nor any interest therein
may be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise
transferred in any manner other than by will or the laws of descent and
distribution.

9. PLAN. The Option is granted pursuant to the Plan, as in effect
on the Date of Grant, and is subject to all the terms and conditions of the
Plan, as the same may be amended from time to time; PROVIDED, HOWEVER, that no
such amendment shall deprive Optionee, without his or her consent, of the Option
or of any of Optionee's rights under this Agreement. The interpretation and
construction by the Board of Directors, or the duly appointed committee thereof,
of the Plan, this Agreement, the Option and such rules and regulations as may be
adopted by the Board of Directors or such committee for the purpose of
administering the Plan shall be final and binding upon Optionee. Until the
Option shall expire, terminate or be exercised in full, the Company shall, upon
written request therefor, send a copy of the Plan, in its then-current form, to
Optionee or any other person or entity then entitled to exercise the Option.

10. STOCKHOLDER RIGHTS. No person or entity shall be entitled to
vote, receive dividends or be deemed for any purpose the holder of any Option
Shares until the Option shall have been duly exercised to purchase such Option
Shares in accordance with the provisions of this Agreement.

11. GOVERNING LAW. This Agreement and the Option granted hereunder
shall be governed by and construed and enforced in accordance with the laws of
the State of California without reference to choice or conflict of law
principles.

<PAGE>

IN WITNESS WHEREOF, the Company and Optionee have duly executed this
Agreement as of the Date of Grant.

EARTHSHELL CONTAINER CORPORATION

By: ____________________________________

Title: _________________________________

OPTIONEE

________________________________________
Signature

________________________________________
Street Address

________________________________________
City, State and Zip Code

________________________________________
Social Security Number

<PAGE>

EXHIBIT 10.25

[LOGO]
IMPERIAL BANK
MEMBER FDIC

NOTE

$ 4,500,000.00 Inglewood, California, July 5, 1996

On May 30, 1997, and as hereinafter provided, for value received, the
undersigned promises to pay to IMPERIAL BANK ("Bank"), a California banking
corporation, or order, at its Los Angeles Airport Regional office, the
principal sum of $4,500,000.00 MAXIMUM or such sums up to the maximum if so
stated, as the Bank may now or hereafter advance to or for the benefit of the
undersigned in accordance with the terms hereof, together with interest from
date of disbursement or N/A, whichever is later, on the unpaid principal
balance / / at the rate of , per year /X/ at the rate of
1.000% per year in excess of the rate of interest which Bank has announced as
its prime lending rate (the "Prime Rate"), which shall vary concurrently with
any change in such Prime Rate, or $250.00, whichever is greater. Interest
shall be computed at the above rate on the basis of the actual number of days
during which the principal balance is outstanding, divided by 360, which
shall for interest computation purposes, be considered one year.

Interest shall be payable /X/ monthly / / quarterly / / included with
principal / / in addition to principal / / beginning July 30, 1996, and if
not so paid shall become a part of the principal. All payments shall be
applied first to interest, and the remainder, if any, on principal. / / (if
checked), Principal shall be payable in installments of $ ,
or more, each installment on the day of each
, beginning . Advances not to exceed any unpaid
balance owing at any one time equal to the maximum amount specified above,
may be made at the option of Bank.

Any partial prepayment shall be applied to the installments, if any, in
inverse order of maturity. Should default be made in the payment of
principal or interest when due, or in the performance or observance, when
due, of any item, covenant or condition of any deed of trust, security
agreement or other agreement (including amendments or extensions thereof)
securing or pertaining to this note, at the option of the holder hereof and
without notice or demand, the entire balance of principal and accrued
interest then remaining unpaid shall (a) become immediately due and payable,
and (b) thereafter bear interest, until paid in full, at the increased rate
of 5% per year in excess of the rate provided for above, as it may vary from
time to time.

Defaults shall include, but not be limited to, the failure of the makers
to pay principal or interest when due; the filing as to each person obligated
hereon, whether as maker, co-maker, endorser or guarantor (individually or
collectively referred to as the "Obligor") of a voluntary or involuntary
petition under the provisions of the Federal Bankruptcy Act; the issuance of
any attachment or execution against any asset of any Obligor; the death of
any Obligor; or any deterioration of the financial condition of any Obligor
which results in the holder hereof considering itself, in good faith,
insecure.

/X/ If any installment payment or principal balance payment due hereunder is
delinquent ten or more days, Obligor agrees to pay a late charge in the
amount of 5% of the payment so due and unpaid, in addition to the payment;
but nothing in this paragraph is to be construed as any obligation on the
part of the holder of this note to accept payment of any installment past due
or less than the total unpaid principal balance after maturity.

If this note is not paid when due, each Obligor promises to pay all
costs and expenses of collection and reasonable attorney's fees incurred by
the holder hereof on account of such collection, plus interest at the rate
applicable to principal, whether or not suit is filed hereon. Each Obligor
shall be jointly and severally liable hereon and consents to renewals,
replacements and extensions of time for payment hereof, before, at, or after
maturity; consents to the acceptance, release or substitution of security for
this note; and waives demand and protest and the right to assert any statute
or limitations. Any married person who signs this note agrees that recourse
may be had against separate property for any obligations hereunder. The
indebtedness evidenced hereby shall be payable in lawful money of the United
States. In any action brought under or arising out of this note, each
Obligor, including successor(s) or assign(s) hereby consents to the
application of California law, to the jurisdiction of any competent court
within the State of California, and to service of process by any means
authorized by California law.

No single or partial exercise of any power hereunder, or under any deed
of trust, security agreement or other agreement in connection herewith shall
preclude other or further exercises thereof or the exercise of any other such
power. The holder hereof shall at all times have the right to proceed
against any portion of the security for this note in such order and in such
manner as such holder may consider appropriate, without waiving any rights
with respect to any of the security. Any delay or omission on the part of
the holder hereof in exercising any right hereunder, or under any deed of
trust, security agreement or other agreement, shall not operate as a waiver
of such right, or of any other right, under this note or any deed of trust,
security agreement or other agreement in connection herewith.

EARTHSHELL CONTAINER CORPORATION
- ----------------------------------- ----------------------------------------
BY /s/ Scott Houston
- ----------------------------------- ----------------------------------------

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

<PAGE>

EXHIBIT 10.26

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR
THE LAWS OF ANY STATE AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT AND LAWS OR AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE UNDER SUCH ACT AND LAWS.

WARRANT TO PURCHASE STOCK

Corporation: Earthsell Container Corporation, a Delaware corporation
Number of Shares: Equal to $150,000 divided by the Initial Exercise Price
Class of Stock: Common
Initial Exercise Price: Equal to the price per share of the initial public
offering.
Issue Date: July 2, 1996
Expiration Date: July 2, 2001 (subject to Article 4.1)

THIS WARRANT CERTIFIES THAT, in consideration of the payment of $1.00 and
for other good and valuable consideration, IMPERIAL BANK ("Holder") is entitled
to purchase the number of fully paid and nonassessable shares of the class of
securities (the "Shares") of the corporation (the "Company") at the initial
exercise price per Share (the "Warrant Price") all as set forth above and as
adjusted pursuant to Article 2 of this Warrant, subject to the provisions and
upon the terms and conditions set forth of this Warrant.

ARTICLE 1. EXERCISE

1.1 METHOD OF EXERCISE. At any time following the Company's initial
public offering of its common stock (the "IPO"), but prior to the Expiration
Date, Holder may exercise this Warrant by delivering this Warrant and a duly
executed Notice of Exercise in substantially the form attached as Appendix 1 to
the principal office of the Company. Unless Holder is exercising the conversion
right set forth in Section 1.2, Holder shall also deliver to the Company a check
for the aggregate Warrant Price for the Shares being purchased.

1.2 CONVERSION RIGHT. In lieu of exercising this Warrant as specified in
Section 1.1, Holder may from time to time following the IPO, convert this
Warrant, in whole or in part, into a number of Shares determined by dividing (a)
the aggregate fair market value of the Shares issuable upon exercise of this
Warrant minus the aggregate

<PAGE>

Warrant Price of such Shares by (b) the fair market value of one Share. The fair
market value of the Shares shall be determined pursuant to Section 1.3.

1.3 FAIR MARKET VALUE. If the Shares are traded on a public market, the
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded on a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder advises
the Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking firm to undertake such valuation. If the valuation of such investment
banking firm is greater than that determined by the Board of Directors, then all
fees and expenses of such investment banking firm shall be paid by the Company.
In all other circumstances, such fees and expenses shall be paid by Holder.

1.4 DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.

1.5 REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, upon surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.

1.6 REPURCHASE ON SALE, MERGER, OR CONSOLIDATION OF THE COMPANY.

1.6.1. "ACQUISITION". For the purpose of this Warrant, "Acquisition"
means any sale, or other disposition of all or substantially all of the assets
(including intellectual property) of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.

1.6.2. ASSUMPTION OF WARRANT. If upon the closing of any Acquisition
the successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price and the number and type of
securities subject to the

<PAGE>

Warrant shall be adjusted accordingly. The Company shall use reasonable efforts
to cause the surviving corporation to assume the obligations of this Warrant.

1.6.3. NONASSUMPTION. If upon the closing of any Acquisition the
successor entity does not assume the obligations of this Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the acquisition on the
same terms as other holders of the same class of securities of the Company.

ARTICLE 2. ADJUSTMENTS TO THE SHARES.

2.1 STOCK DIVIDENDS, SPLITS, ETC. If the Company declares or pays a
dividend to holders of its common stock payable in common stock, or other
securtities, subdivides the outstanding common stock into a greater amount of
common stock, or subdivides the Shares in a transaction that increases the
amount of common stock into which the Shares are convertible, then upon exercise
of this Warrant, for each Share acquired, Holder shall receive, without cost to
Holder, the total number and kind of securities to which Holder would have been
entitled had Holder owned the Shares of record as of the date the dividend or
subdivision occurred.

2.2 RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 2 including, without
limitation, adjustments to the Warrant Price and to the number of securities or
property issuable upon exercise of the new Warrant. The provisions of this
Section 2.2 shall similarly apply to successive reclassifications, exchanges,
substitutions, or other events.

2.3 ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased and the number
of Shares subject to the Warrant share be proportionately decreased.

2.4 NO IMPAIRMENT. The Company shall not, by amendment of its Articles of
Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying

<PAGE>

out all the provisions of this Article 2 and in taking all such action as may be
necessary or appropriate to protect Holder's rights under this Article against
impairment.

2.5 CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment of the Warrant
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.

2.6 NO RIGHTS AS SHAREHOLDERS. This Warrant does not entitle Holder to any
voting rights or other rights as a stockholder of the Company prior to the
exercise of the Holder's rights to acquire Shares as provided herein.

ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY

3.1 REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Holder that all Shares which may be issued upon the exercise of
the purchase right represented by this Warrant, and all securtities, if any,
issuable upon conversion of the Shares, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws.

3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any time (a) to
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the Company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (a) at least 7 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to
in (c) and (d) above at least 7 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.

<PAGE>

3.3 INFORMATION RIGHTS. So long as the Holder holds this Warrant and/or
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all communiques to the shareholders of the Company, (b)
within ninety (90) days after the end of each fiscal year of the Company, the
annual audited financial statements of the Company certified by independent
public accountants of recognized standing and (c) within forty-five (45) days
after the end of each of the first three quarters of each fiscal year, the
Company's quarterly, unaudited financial statements.

3.4 REPURCHASE OBLIGATION. The Holder is not being granted any
registration rights with respect to the Shares. However, if a registration
statement for shares of the Company's common stock is declared effective under
the Securities Act of 1933, as amended, (other than (i) in connection with the
IPO, (ii) pursuant to a Registration Statement on Form S-4 or S-8 or any
successor forms, (iii) otherwise in connection with any exchange offer, merger,
sale of substantially all of the assets or other reorganization or
recapitalization of the Company or (iv) otherwise in connection with the
issuance of securities pursuant to employee stock options, stock awards or
other employee benefit plans) and the Company does not provide Holder the
opportunity to sell the Shares to be acquired upon exercise of the Warrant in
such public offering on substantially the same terms as the other selling
shareholders (or if there are no selling shareholders, on such terms as are
required by the managing underwriter of such offering), then the Holder shall
have the right for a period of ten days following the closing of such public
offering to require the Company to purchase the Warrant at a price equal to the
number of Shares that would have been acquired upon exercise of the Warrant
times the price per share at which the shares of common stock were sold in such
public offering, less the Warrant Price with respect to such Shares.

ARTICLE 4. MISCELLANEOUS.

4.1 TERM: NOTICE OF EXPIRATION. This Warrant is exercisable, in whole
or in part, at any time and from time to time on or before the Expiration Date
set forth above. The Company shall give Holder written notice of Holder's right
to exercise this Warrant in the form attached as Appendix 2 not more than 90
days and not less than 30 days before the Expiration Date. If the notice is not
so given, the Expiration Date shall automatically be extended until 30 days
after the date the Company delivers the notice to Holder.

4.2 LEGENDS. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED
OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT

<PAGE>

AND LAWS OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE UNDER SUCH ACT
OR LAWS.

4.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and the
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company). The Company
shall not require an opinion(s) of counsel if, in its reasonable determination,
there is no material question as to the availability of an exemption from the
registration and qualification requirements of the Securities Act of 1933 and
applicable state securities laws as to the transfer.

4.4 TRANSFER PROCEDURE. Subject to the provisions of Sections 4.2 and
4.3, Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee(s) (and Holder, if applicable).
Unless the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.

4.5 NOTICES. All notices and other communications from the Company to the
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such Holder from time
to time.

4.6 WAIVER. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.

4.7 ATTORNEYS' FEES. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.

4.8 GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.

<PAGE>

4.9 HOLDER'S INTENT. This Warrant has been entered into by the Company in
reliance upon the following representation of Holder, which by its acceptance
hereof the Holder hereby confirms: The right to acquire Shares will be acquired
for investment and not with a view to the sale or distribution of any part
thereof, and the Holder has no present intention of selling or engaging in any
public distribution of the same except pursuant to a registration or exemption.

"COMPANY"

EARTHSHELL CONTAINER CORPORATION

By /s/ Simon K. Hodson
--------------------------------------
Simon K. Hodson
Chief Executive Officer

By /s/ Scott Houston
--------------------------------------
Scott Houston
Chief Financial Officer

<PAGE>

APPENDIX 1

NOTICE OF EXERCISE

1. The undersigned hereby elects to purchase __________ shares of the
Common Stock of __________ pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full.

1. The undersigned hereby elects to convert the attached Warrant into
Shares in the manner specified in the Warrant. This conversion is exercised
with respect to _________ of the Shares covered by the Warrant.

[Strike paragraph that does not apply.]

2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:

-------------------------
(Name)

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

-------------------------
(Address)

3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.

------------------------------
(Signature)

- -------------------------
(Date)

<PAGE>

APPENDIX 2

NOTICE THAT WARRANT IS ABOUT TO EXPIRE

----------

(Name of Holder)

(Address of Holder)

Attn: Chief Financial Officer

Dear __________:

This is to advise you that the Warrant issued to you described below will
expire on __________, 19__.

Issuer:

Issue Date:

Class of Security Issuable:

Exercise Price Per Share:

Number of Shares Issuable:

Procedure for Exercise:

Please contact [name of contact person at (phone number)] with any
questions you may have concerning exercise of the Warrant. This is your only
notice of pending expiration.

(Name of Issuer)

Its

<PAGE>

EXHIBIT 10.27

CREDIT AGREEMENT

This Agreement is made by and between Earthshell Container Corporation,
A Delaware Corporation ("Borrower") and Imperial Bank, a California banking
corporation, ("Bank").

In consideration of mutual covenants and conditions hereof, the parties
hereto agree as follows:

1. REPRESENTATIONS OF BORROWER

Borrower represents and warrants that, as of the date hereof,

1.01 EXISTENCE AND RIGHTS. Borrower is a Corporation duly organized and
existing and in good standing under the laws of Delaware, without limit as to
the duration of its existence and is authorized and in good standing to do
business in the State of California; Borrower has corporate powers and
adequate authority, rights and franchises to own its property and to carry on
its business as now conducted, and is duly qualified and in good standing in
each State in which the character of the properties owned by it therein or
the conduct of its business makes such qualification necessary; and Borrower
has the power and adequate authority to make and carry out this Agreement.
Borrower has no investment in any other business entity.

1.02 AGREEMENT AUTHORIZED. The execution, delivery and performance of
this Agreement are duly authorized and do not require the consent or approval
of any governmental body or other regulatory authority; are not in
contravention of or in conflict with any law or regulation or any term or
provision of Borrower's Articles of Incorporation, by-laws, as the case may
be, and this Agreement is the valid, binding and legally enforceable
obligation of Borrower in accordance with its terms; subject only to
bankruptcy, insolvency or similar laws affecting creditors rights generally.

1.03 NO CONFLICT. The execution, delivery and performance of this
Agreement are not in contravention of or in conflict with any agreement,
indenture or undertaking to which Borrower is a party or by which it or any
of its property may be bound or affected, and do not cause any lien, charge
or other encumbrance to be created or imposed upon any such property by
reason thereof.

1.04 LITIGATION. There is no litigation or other proceeding pending or
threatened against or affecting Borrower which if determined adversely to
Borrower or its interest would have a material adverse effect on the
financial condition of Borrower, and Borrower is not in default with respect
to any order, writ, injunction, decree or demand of any court or other
governmental or regulatory authority.

1
<PAGE>

1.05 FINANCIAL CONDITION. The balance sheet of Borrower as of December
31, 1995, a copy of which has heretofore been delivered to Bank by Borrower,
and all other statements and data submitted in writing by Borrower to Bank in
connection with this request for credit are true and correct, and said
balance sheet truly presents the financial condition of Borrower as of the
date thereof, and has been prepared in accordance with generally accepted
accounting principles on a basis consistently maintained. Since such date,
there have been no material adverse changes in the ordinary course of
business. Borrower has no knowledge of any liabilities, contingent or
otherwise, at such date not reflected in said balance sheet, and Borrower has
not entered into any special commitments or substantial contracts which are
not reflected in said balance sheet, other than in the ordinary and normal
course of its business, which may have a materially adverse effect upon its
financial condition, operations or business as now conducted.

1.06 TITLE TO ASSETS. Borrower has good title to its assets, and the
same are not subject to any liens or encumbrances other than those permitted
by Section 3.03 hereof.

1.07 TAX STATUS. Borrower has no liability for any delinquent state,
local or federal taxes, and, if Borrower has contracted with any government
agency, Borrower has no liability for renegotiation of profits.

1.08 TRADEMARKS, PATENTS. Borrower, as of the date hereof, possesses all
necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with the valid trademarks, trade names, copyrights, patents and license
rights of others that would have a material adverse affect on the financial
condition of Borrower.

1.09 REGULATION U. The proceeds of the Loan shall not be used to
purchase or carry margin stock (as defined within Regulation U of the Board
of Governors of the Federal Reserve system).

2. AFFIRMATIVE COVENANTS OF BORROWER

Borrower agrees that so long as it is indebted to Bank, under that
certain promissory note in the face amount of $3,000,000, dated June 7, 1996
(the "Indebtedness"), it will, unless Bank shall otherwise consent in writing:

2.01 RIGHTS AND FACILITIES. Maintain and preserve all rights, franchises
and other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct its
business in an orderly manner without voluntary interruption and, if a
corporation or partnership, maintain and preserve its existence.

2.02 INSURANCE. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against
fire and other hazards with responsible insurance carriers to the extent
usually maintained by similar businesses and/or in the exercise of good
business judgment.

2
<PAGE>

2.03 TAXES AND OTHER LIABILITIES. Pay and discharge, before the same
become delinquent and before penalties accrue thereon, all taxes, assessments
and governmental charges upon or against it or any of its properties, and all
its other liabilities at any time existing, except to the extent and so long
as:

a. The same are being contested in good faith and by appropriate
proceedings in such manner as not to cause any materially adverse
effect upon its financial condition or the loss of any right of
redemption from any sale thereunder; and

b. It shall have set aside on its books reserves (segregated to
the extent required by generally accepted accounting practice)
deemed by it adequate with respect thereto.

2.04 RECORDS AND REPORTS. Maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles on a
basis consistently maintained; permit Bank's representatives to have access
to, and to examine its properties, books and records at all reasonable times
and upon reasonable notice during normal business hours; and furnish Bank:

a. QUARTERLY FINANCIAL STATEMENT. Within forty five (45) days
after the close of each quarter of each fiscal year of Borrower,
commencing with the quarter next ending, a balance sheet, profit
and loss statement and reconciliation of Borrower's capital
accounts as of the close of such period and covering operations for
the portion of Borrower's fiscal year ending on the last day of
such period, all in reasonable detail, prepared in accordance with
generally accepted accounting principles on a basis consistently
maintained by Borrower and certified by an appropriate officer of
Borrower;

b. ANNUAL FINANCIAL STATEMENT. As soon as available, and in any
event within ninety (90) days after the close of each fiscal year
of Borrower, a report of audit of Company as of the close of and
for such fiscal year, all in reasonable detail, prepared on an
audited basis by an independent certified public accountant
selected by Borrower and reasonably acceptable to Bank, in
accordance with generally accepted accounting principles on a basis
consistently maintained by Borrower;

c. Upon request, within ninety (90) days after the end of the
fiscal year ended of Borrower, a certificate of the chief financial
officer of Borrower, stating that Borrower has performed and
observed each and every covenant contained in this Agreement to be
performed by it and that no event has occurred and no condition
then exists which constitutes an event of default hereunder or
would constitute such an event of default upon the lapse of time or
upon the giving of notice and the lapse of time specified herein;
or, if any such event has occurred or any such condition exists,
specifying the nature thereof;

3
<PAGE>

d. Promptly after the receipt thereof by Borrower, copies of any
detailed audit reports submitted to Borrower by independent
accountants in connection with each annual or interim audit of the
accounts of Borrower made by such accountants;

e. Such other information relating to the affairs of Borrower as
the Bank reasonably may request from time to time;

f. In connection with each fiscal year end financial statements
furnished to Bank hereunder, any management letter of Borrower's
independent certified public accountant.

3. NEGATIVE COVENANTS OF BORROWER

Borrower agrees that so long as it is indebted to Bank in
connection with the Indebtedness, it will not, without Bank's written consent:

3.01 TYPE OF BUSINESS; MANAGEMENT. Make any substantial change in the
character of its business.

3.02 OUTSIDE INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness for borrowed moneys, other than loans from the Bank, except
obligations now existing as shown in the financial statement dated December
31, 1995, and obligations owed to E. Khashoggi Industries and to equipment
vendors and excluding those obligations being refinanced by Bank, or sell or
transfer, either with or without recourse, any accounts or notes receivable
or any moneys due to become due.

3.03 LIENS AND ENCUMBRANCES. Create, incur, or assume any mortgage,
pledge, encumbrance, lien or charge of any kind upon any asset now owned,
other than liens for taxes not delinquent and liens in Bank's favor, except
for those already existing as of December 31, 1995 and a lien for purchase
money indebtedness on equipment.

3.04 LOANS, INVESTMENTS, SECONDARY LIABILITIES. Make any loans or
advances to any person or other entity other than in the ordinary and normal
course of its business as now conducted or make any investment in the
securities of any person or other entity (excluding investments in joint
ventures or limited liability companies in the course of its business) other
than the United States Government; or guarantee or otherwise become liable
upon the obligation of any person or other entity, except by endorsement of
negotiable instruments for deposit or collection in the ordinary and normal
course of its business.

<PAGE>

3.05 ACQUISITION OR SALE OF BUSINESS; MERGER OR CONSOLIDATION. Purchase
or otherwise acquire the assets or business of any person or other entity; or
liquidate, dissolve, merge or consolidate, or commence any proceedings
therefor; or sell any assets except in the ordinary and normal course of its
business as now conducted; or sell, lease, assign, or transfer any
substantial part of its business or fixed assets, (excluding the leasing or
contributions of equipment to venture partners) or any property or other
assets necessary for the continuance of its business as now conducted (other
than the sublicensing of Borrower's technology), including without limitation
the selling of any dividends, property or other asset accompanied by the
leasing back of the same.

3.06 CAPITAL EXPENDITURES. Make or incur obligations for capital
expenditures, which includes purchase money indebtedness or capital lease
obligations, in excess of $10,000,000 in fiscal year ending December 31, 1996
and in any fiscal year thereafter.

3.07 LEASE LIABILITY. Make or incur additional liability for payments
of rent under leases of real or personal property in excess of $500,000 in
fiscal year ending December 31, 1996 and in any fiscal year thereafter.

4. EVENTS OF DEFAULT

The occurrence of any of the following events of default shall, at
Bank's option, terminate Bank's commitment to lend and make all sums of
principal and interest then remaining unpaid on all Borrower's Indebtedness
to Bank immediately due and payable, all without demand, presentment or
notice, all of which are hereby expressly waived:

4.01 FAILURE TO PAY NOTE. Failure to pay any installment of principal
or interest on the Indebtedness.

4.02 BREACH OF COVENANT. Failure of Borrower to perform any other term
or condition of this Agreement binding upon Borrower.

4.03 BREACH OF WARRANTY. Any of Borrower's representations or
warranties made herein or any statement or certificate at any time given in
writing pursuant hereto or in connection herewith shall be false or
misleading in any respect.

4.04 INSOLVENCY; RECEIVER OR TRUSTEE. Borrower shall become insolvent;
or admit its inability to pay its debts as they mature; or make an assignment
for the benefit of creditors; or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business.

4.05 JUDGMENTS, ATTACHMENTS. Any money judgment, writ or warrant of
attachment, or similar process shall be entered or filed against Borrower or
any of its assets and shall remain unvacated, unbonded or unstayed for a
period later than five days prior to the date of any proposed sale thereunder.

<PAGE>

4.06 BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any
law for the relief of debtors shall be instituted by or against Borrower and,
if instituted against it, shall be consented to.

5. MISCELLANEOUS PROVISIONS

5.01 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part
of Bank or any holder of Note issued hereunder, in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege.
All rights and remedies existing under this Agreement or the Note issued in
connection with the Indebtedness that Bank may make hereunder, are cumulative
to, and not exclusive of, any rights or remedies otherwise available.

5.02 NOTICE OF DEFAULT. Borrower shall promptly notify Bank in writing
of the occurrence of any event of default hereunder or any event which upon
notice and lapse of time would be an event of default.

5.03 OPERATING ACCOUNTS. Borrower shall maintain primary accounts and
banking relationship with Bank during the term of the Indebtedness. Borrower
shall maintain, or cause to be maintained, on deposit with Imperial Bank,
non-interest bearing demand deposit balances sufficient to compensate Bank for
all services provided by Bank. Balances shall be calculated after reduction
for the reserve requirement of the Federal Reserve Board and uncollected
funds. Any deficiencies shall be charged directly to the Borrower on a
monthly basis.

5.04 ATTORNEY'S FEES. Borrower will pay promptly to Bank without demand
after notice, with interest thereon from the date of expenditure at the rate
applicable to the Indebtedness, reasonable attorneys' fees and all costs and
expenses paid or incurred by Bank in collecting or compromising the
Indebtedness after the occurrence of an event of default, whether or not suit
is filed. If suit is brought to enforce any provision of this Agreement, the
prevailing party shall be entitled to recover its reasonable attorneys' fees
and court costs in addition to any other remedy or recovery awarded by the
court.

5.05 ADDITIONAL REMEDIES. The rights, powers and remedies given to Bank
hereunder shall be cumulative and not alternative and shall be in addition to
all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or
banker's lien.

5.06 INUREMENT. The benefits of this Agreement shall inure to the
successors and assigns of Bank and the permitted successors and assigns of
Borrower.

<PAGE>

5.07 APPLICABLE LAW. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the State of California, to the
jurisdiction of whose courts the parties hereby agree to submit.

5.08 OFFSET. In addition to an not in limitation of all rights of offset
that Bank or other holder of the Note evidencing the Indebtedness may have
under applicable law, Bank or other holder of the Note shall, upon the
occurrence of any Event of Default or any event which the passage of time or
notice would constitute such an Event of Default, have the right to
appropriate and apply to the payment of the Note any and all balances,
credits, deposits, accounts or monies of Borrower then or thereafter with
Bank or other holder, within ten (10) days after the Event of Default, and
notice of the occurrence of any Event of Default by Bank to Borrower.

5.09 SEVERABILITY. Should any one or more provisions of the Agreement
be determined to be illegal or unenforceable, all other provisions
nevertheless shall be effective.

5.10 TIME OF THE ESSENCE. Time is hereby declared to be of the essence
of this Agreement and of every part hereof.

5.11 INTEGRATION CLAUSES. Except for documents and instruments
specifically referenced herein, the Agreement constitutes the entire
agreement between Bank and Borrower regarding the Indebtedness, and all prior
communications verbal or written between Borrower and Bank shall be of no
further effect of evidentiary value. In the event of a conflict or
inconsistency among any other documents and instruments and this Agreement,
the provisions of this Agreement shall prevail.

5.12 ACCOUNTING. All accounting terms shall have the meanings applied
under generally accepted accounting principles unless otherwise specified.

5.13 This Agreement may be modified only by a writing signed by both
parties hereto.

Dated: June 7, 1996
------------

IMPERIAL BANK ("BANK")

By: /s/ Richard H. Myers, Jr.
---------------------------
Richard H. Myers, Jr.
Senior Vice President

EARTHSHELL CONTAINER CORPORATION ("BORROWER")

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

<PAGE>

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS
OR THE LAWS OF ANY STATE AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT AND LAWS
OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE UNDER SUCH ACT AND LAWS.

WARRANT TO PURCHASE STOCK

Corporation: Earthshell Container Corporation, a Delaware corporation
Number of Shares: Equal to $150,000 divided by the Initial Exercise Price
Class of Stock: Common
Initial Exercise Price: Equal to the price per share of the initial public
offering.
Issue Date: June 7, 1996
Expiration Date: June 7, 2001 (subject to Article 4.1)

THIS WARRANT CERTIFIES THAT, in consideration of the payment of $1.00
and for other good and valuable consideration, IMPERIAL BANK ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the "Warrant Price") all as set forth above
and as adjusted pursuant to Article 2 of this Warrant, subject to the
provisions and upon the terms and conditions set forth of this Warrant.

ARTICLE 1. EXERCISE

1.1 METHOD OF EXERCISE. At any time following the Company's initial
public offering of its common stock (the "IPO"), but prior to the Expiration
Date. Holder may exercise this Warrant by delivering this Warrant and a duly
executed Notice of Exercise in substantially the form attached as Appendix 1
to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.

1.2 CONVERSION RIGHT. In lieu of exercising this Warrant as specified
in Section 1.1, Holder may from time to time following the IPO, convert this
Warrant, in whole or in part, into a number of Shares determined by dividing
(a) the aggregate fair market value of the Shares issuable upon exercise of
this Warrant minus the aggregate Warrant Price of

<PAGE>

such Shares by (b) the fair market value of one Share. The fair market value
of the Shares shall be determined pursuant to Section 1.3.

1.3 FAIR MARKET VALUE. If the Shares are traded on a public market,
the fair market value of the Shares shall be the closing price of the Shares
(or the closing price of the Company's stock into which the Shares are
convertible) reported for the business day immediately before Holder delivers
its Notice of Exercise to the Company. If the Shares are not traded on a
public market, the Board of Directors of the Company shall determine fair
market value in its reasonable good faith judgment. The foregoing
notwithstanding, if Holder advises the Board of Directors in writing that
Holder disagrees with such determination, then the Company and Holder shall
promptly agree upon a reputable investment banking firm to undertake such
valuation. If the valuation of such investment banking firm is greater than
that determined by the Board of Directors, then all fees and expenses of such
investment banking firm shall be paid by the Company. In all other
circumstances, such fees and expenses shall be paid by Holder.

1.5 REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation
of this Warrant and, in the case of loss, theft or destruction, on delivery
of an indemnity agreement reasonably satisfactory in form and amount to the
Company or, in the case of mutilation, upon surrender and
cancellation of this Warrant, the Company at its expense shall execute and
deliver, in lieu of this Warrant, a new warrant of like tenor.

1.6 REPURCHASE ON SALE, MERGER, OR CONSOLIDATION OF THE COMPANY.

1.6.1 "ACQUISITION". For the purpose of this Warrant,
"Acquisition" means any sale, or other disposition of all or substantially
all of the assets (including intellectual property) of the Company, or any
reorganization, consolidation, or merger of the Company where the holders of
the Company's securities before the transaction beneficially own less than
50% of the outstanding voting securities of the surviving entity after the
transaction.

1.6.2 ASSUMPTION OF WARRANT. If upon the closing of any
Acquisition the successor entity assumes the obligations of this Warrant,
then this Warrant shall be exercisable for the same securities, cash, and
property as would be payable for the Shares issuable upon exercise of the
unexercised portion of this Warrant as if such Shares were outstanding on
the record date for the Acquisitions and subsequent closing. The Warrant Price
and the number and type of securities subject to the Warrant shall be adjusted
accordingly. The Company shall use reasonable efforts to cause the surviving
corporation to assume the obligations of this Warrant.

<PAGE>

1.6.3 NONASSUMPTION. If upon the closing of any Acquisition the
successor entity does not assume the obligations of this Warrant and Holder
has not otherwise exercised this Warrant in full, then the unexercised
portion of this Warrant shall be deemed to have been automatically converted
pursuant to Section 1.2 and thereafter Holder shall participate in the
acquisition on the same terms as other holders of the same class of
securities of the Company.

ARTICLE 2. ADJUSTMENTS TO THE SHARES.

2.1 STOCK DIVIDENDS, SPLITS, ETC. If the Company declares or pays a
dividend to holders of its common stock payable in common stock, or other
securities, subdivides the outstanding common stock into a greater amount of
common stock, or subdivides the Shares in a transaction that increases the
amount of common stock into which the Shares are convertible, then upon
exercise of this Warrant, for each Share acquired, Holder shall receive,
without cost to Holder, the total number and kind of securities to which
Holder would have been entitled had Holder owned the Shares of record as of
the date the dividend or subdivision occurred.

2.2 RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon
exercise or conversion of this Warrant, the number and kind of securities and
property that Holder would have received for the Shares if this Warrant had
been exercised immediately before such reclassification, exchange,
substitution, or other event. The Company or its successor shall promptly
issue to Holder a new Warrant for such new securities or other property. The
new Warrant shall provide for adjustments which shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Article 2
including, without limitation, adjustments to the Warrant Price and to the
number of securities or property issuable upon exercise of the new Warrant.
The provisions of this Section 2.2 shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events.

2.3 ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser
number of shares, the Warrant Price shall be proportionately increased and
the number of Shares subject to the Warrant share be proportionately
decreased.

2.4 NO IMPAIRMENT. The Company shall not, by amendment of its Articles
of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed under this Warrant by the Company,
but shall at all times in good faith assist in carrying out all the
provisions of this Article 2 and in taking all such action as may be
necessary or appropriate to protect Holder's rights under this Article
against impairment.

<PAGE>

2.5 CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment of the Warrant
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting
forth such adjustment and the facts upon which such adjustment is based. The
Company shall, upon written request, furnish Holder a certificate setting
forth the Warrant Price in effect upon the date thereof and the series of
adjustments leading to such Warrant Price.

2.6 NO RIGHTS AS SHAREHOLDERS. This Warrant does not entitle Holder to
any voting rights or other rights as a stockholder of the Company prior to the
exercise of the Holder's rights to acquire Shares as provided herein.

ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.

3.1 REPRESENTATION AND WARRANTIES. The Company hereby represents
and warrants to the Holder that all Shares which may be issued upon the
exercise of the purchase right represented by this Warrant, and all
securities, if any, issuable upon conversion of the Shares, shall, upon
issuance, be duly authorized, validly issued, fully paid and nonassessable,
and free of any liens and encumbrances except for restrictions on transfer
provided for herein or under applicable federal and state securities laws.

3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any time (a)
to declare any dividend or distribution upon its common stock, whether in
cash, property, stock, or other securities and whether or not a regular cash
dividend; (b) to offer for subscription pro rata to the holders of any class
or series of its stock any additional shares of stock of any class or series
or other rights; (c) to effect any reclassification or recapitalization of
common stock; (d) to merge or consolidate with or into any other corporation,
or sell, lease, license, or convey all or substantially all of its assets,
or to liquidate, dissolve or wind up; or (e) offer holders of registration
rights the opportunity to participate in an underwritten public offering of
the Company's securities for cash, then, in connection with each such event,
the Company shall give Holder (a) at least 7 days prior written notice of the
date on which a record will be taken for such dividend, distribution, or
subscription rights (and specifying the date on which the holders of common
stock will be entitled thereto) or for determining rights to vote, if any, in
respect of the matters referred to in (c) and (d) above; (2) in the case of
the matters referred to in (c) and (d) above at least 7 days prior written
notice of the date when the same will take place (and specifying the date on
which the holders of common stock will be entitled to exchange their common
stock for securities or other property deliverable upon the occurrence of
such event); and (3) in the case of the matter referred to in (e) above, the
same notice as is given to the holders of such registration rights.

<PAGE>

within forty-five (45) days after the end of each of the first three quarters
of each fiscal year, the Company's quarterly, unaudited financial statements.

3.4 REPURCHASE OBLIGATION. The Holder is not being granted any
registration rights with respect to the Shares. However, if a registration
statement for shares of the Company's common stock is declared effective
under the Securities Act of 1933, as amended, (other than (i) in connection
with the IPO, (ii) pursuant to a Registration Statement on Form S-4, S-8 or
any successor forms, (iii) otherwise in connection with any exchange offer,
merger, sale of substantially all of the assets or other reorganization or
recapitalization of the Company or (iv) otherwise in connection with the
issuance of securities pursuant to employee stock options, stock awards or
other employee benefit plans) and the Company does not provide Holder the
opportunity to sell the Shares to be acquired upon exercise of the Warrant in
such public offering on substantially the same terms as the other selling
shareholders (or if there are no selling shareholders, on such terms as are
required by the managing underwriter of such offering), then the Holder shall
have the right for a period of ten days following the closing of such public
offering to require the Company to purchase the Warrant at a price equal to
the number of Shares that would have been acquired upon exercise of the
Warrant times the price per share at which the shares of common stock were
sold in such public offering, less the Warrant Price with respect to such
Shares.

ARTICLE 4. MISCELLANEOUS.

4.1 TERM: NOTICE OF EXPIRATION. The Warrant is exercisable, in whole
or in part, at any time and from time to time on or before the Expiration
Date set forth above. The Company shall give Holder written notice of
Holder's right to exercise this Warrant in the form attached as Appendix 2
not more than 90 days and not less than 30 days before the Expiration Date.
If the notice is not so given, the Expiration Date shall automatically be
extended until 30 days after the date the Company delivers the notice to
Holder.

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF
UNDER SUCH ACT AND LAWS OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE
UNDER SUCH ACT OR LAWS.

<PAGE>

the transferee (including, without limitation, the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company). The Company shall not require an opinion(s) of counsel if, in its
reasonable determination, there is no material question as to the
availability of an exemption from the registration and qualification
requirements of the Securities Act of 1933 and applicable state securities
laws as to the transfer.

4.4 TRANSFER PROCEDURE. Subject to the provisions of Sections 4.2 and
4.3, Holder may transfer all or part of this Warrant or the Shares issuable
upon exercise of this Warrant (or the securities issuable, directly or
indirectly, upon conversion of the Shares, if any) by giving the Company
notice of the portion of the Warrant being transferred setting forth the
name, address and taxpayer identification number of the transferee and
surrendering this Warrant to the Company for reissuance to the transferee(s)
(and Holder, if applicable). Unless the Company is filing financial information
with the SEC pursuant to the Securities Exchange Act of 1934, the Company
shall have the right to refuse to transfer any portion of this Warrant to any
person who directly competes with the Company.

4.5 NOTICES. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such Holder from
time to time.

4.7 ATTORNEY'S FEES. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.

4.8 GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.

<PAGE>

4.9 HOLDER'S INTENT. This Warrant has been entered into by the Company
in reliance upon the following representation of Holder, which by its
acceptance hereof the Holder hereby confirms: The right to acquire Shares
will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Holder has no present intention of
selling or engaging in any public distribution of the same except pursuant
to a registration or exemption.

"COMPANY"

EARTHSHELL CONTAINER CORPORATION

By /s/Simon K. Hodson
---------------------------------
Simon K. Hodson
Chief Executive Officer

By /s/Scott Houston
---------------------------------
Scott Houston
Chief Financial Officer

<PAGE>

APPENDIX 1

NOTICE OF EXERCISE

1. The undersigned hereby elects to purchase _____________shares of
the Common Stock of ____________________pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.

1. The undersigned hereby elects to convert the attached Warrant into
Shares in the manner specified in the Warrant. This conversion is exercised
with respect to of the Shares covered by the Warrant.

[Strike paragraph that does not apply]

2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name as is specified
below:

-------------------------------------------
(Name)

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

-------------------------------------------
(Address)

3. The undersigned represents it is acquiring the shares solely for
its own account and not as a nominee for any other party and not with a view
toward the resale or distribution thereof except in compliance with
applicable securities laws.

------------------------------------
(Signature)

- ------------------------------------
(Date)

<PAGE>

APPENDIX 2

NOTICE THAT WARRANT IS ABOUT TO EXPIRE

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

(Name of Holder)

(Address of Holder)

Attn: Chief Financial Officer

Dear_______________

This is to advise you that the Warrant issued to you described below
will expire on , 19__.

Issuer:

Issue Date:

Class of Security Issuable:

Exercise Price Per Share:

Number of Shares Issuable:

Procedure for Exercise:

Please contact [name of contact person at (phone number)] with any
questions you may have concerning exercise of the Warrant. This is your only
notice of pending expiration.

(Name of Issuer)

Its

<PAGE>

EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of EarthShell Container
Corporation on Form S-1 of our report (which report contains an explanatory
paragraph related to the Company's ability to continue as a going concern)
dated February 2, 1996 appearing in the Prospectus which is a part of the
Registration Statement and to the references to us under the headings
"Selected Financial Data" and "Experts" in such Prospectus.

Deliotte & Touche LLP

Los Angeles, California

September 26, 1996

<PAGE>
<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 61,497
<SECURITIES> 0
<RECEIVABLES> 35,385
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 96,882
<PP&E> 2,665,708
<DEPRECIATION> 164,350
<TOTAL-ASSETS> 2,598,240
<CURRENT-LIABILITIES> 22,745,425
<BONDS> 0
267
0
<COMMON> 3,150
<OTHER-SE> (20,150,602)
<TOTAL-LIABILITY-AND-EQUITY> 2,598,240
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,296,028
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 647,256
<INCOME-PRETAX> (7,943,284)
<INCOME-TAX> 800
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,944,084)
<EPS-PRIMARY> .06
<EPS-DILUTED> .06

</TABLE>