EARTHSHELL CORP, DEF 14A, 1999-04-22

EARTHSHELL CORP
DEF 14A, 1999-04-22
PAPERBOARD CONTAINERS & BOXES

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12

EARTHSHELL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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<PAGE>
EARTHSHELL CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 14, 1999

The 1999 Annual Meeting of Stockholders of EarthShell Corporation (the
"Company") will be held at the Harbor Court Hotel, 550 Light Street, Baltimore,
MD 21202 on May 14, 1999 at 10:00 a.m. Eastern Daylight Time, for the purposes
of:

(1) electing nine directors to serve until the 2000 annual meeting of
stockholders and until their successors are elected and have qualified;

(2) considering and acting upon a proposal to ratify the selection of the
Company's independent auditors;

(3) considering and acting upon a proposal to amend the Company's 1995 Stock
Incentive Plan; and

(4) transacting such other business as may properly come before the meeting and
at any adjournment or postponement thereof.

Only stockholders whose names appear of record on the books of the Company
at the close of business on April 2, 1999 are entitled to notice of, and to vote
at, such Annual Meeting or any adjournment or adjournments thereof.

You are cordially invited to attend the meeting in person. WHETHER OR NOT
YOU EXPECT TO ATTEND THIS MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND
RETURN IT AS PROMPTLY AS POSSIBLE IN THE ENCLOSED SELF-ADDRESSED,
POSTAGE-PREPAID ENVELOPE. If you attend the Annual Meeting and wish to vote in
person, your proxy will not be used as long as, in accordance with the Company's
Bylaws, you have notified the Secretary in writing of your intention to revoke
your proxy before your proxy has been voted.

By Order of the Board of Directors

[/S/ JOHN DAOUD]

John Daoud
Secretary

Baltimore, Maryland
April 23, 1999
<PAGE>
EARTHSHELL CORPORATION

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

PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
MAY 14, 1999

This Proxy Statement is furnished to the stockholders of EarthShell
Corporation, a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
1999 Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
Harbor Court Hotel, 550 Light Street, Baltimore, MD 21202 at 10:00 a.m., Eastern
Daylight Time, on May 14, 1999, and at any and all adjournments or postponements
thereof. This Proxy Statement and the form of proxy were mailed on or about
April 23, 1999 to all stockholders entitled to vote at the Annual Meeting.

The cost of the solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, directors and officers of the Company, without
receiving any additional compensation, may solicit proxies personally or by
telephone or telegraph. The Company will request brokerage houses, banks, and
other custodians or nominees holding stock in their names for others to forward
proxy materials to their customers or principals who are the beneficial owners
of shares and will reimburse them for their expenses in doing so. The Company
has retained the services of U.S. Stock Transfer Corporation to assist in the
solicitation of proxies from brokerage houses, banks and other custodians or
nominees holding stock in their names for others.

On April 2, 1999, the record date for the determination of stockholders
entitled to notice of, and to vote at, the Annual Meeting, the Company had
100,045,166 shares of common stock, par value $.01 per share (the "Common
Stock"), outstanding. Each such share of Common Stock is entitled to one vote on
all matters properly brought before the meeting. The vote of a plurality of the
shares cast in person or by proxy is required to elect a nominee for director.
With respect to the election of each director at the Annual Meeting, each holder
of Common Stock is entitled to vote the number of shares owned by such
stockholder. The nominees who receive the greater number of votes, up to the
number of directors then to be elected, shall be the persons then elected.
Stockholders are not permitted to cumulate their shares of Common Stock for the
purpose of electing directors or otherwise. The vote of a majority of shares
present in person or by proxy and entitled to vote is required to approve the
Proposals set forth below.

Presence at the Annual Meeting, in person or by proxy, of a majority of the
outstanding shares of Common Stock will constitute a quorum for the transaction
of business at the Annual Meeting or any adjournment thereof. Abstentions or
broker non-votes are counted for purposes of determining the presence of a
quorum for transaction of business. With regard to the election of directors,
votes may be cast in favor or withheld; votes that are withheld will be excluded
entirely from the vote and will have no effect. Abstentions may be specified on
proposals other than the election of directors and will be counted as present
for purposes of the item on which the abstention is noted, and therefore counted
in the tabulation of the votes cast on a proposal with the effect of a negative
vote. Broker non-votes are shares which are represented at the Annual Meeting
which a broker or nominee has indicated it does not have discretionary authority
to vote on with respect to a particular matter. A broker non-vote will generally
have the effect of a negative vote.

Simon K. Hodson and William F. McLaughlin, the persons named as proxies on
the proxy card accompanying this Proxy Statement, were selected by the Board of
Directors to serve in such capacity. Messrs. Hodson and McLaughlin are each
directors of the Company.

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UNLESS CONTRARY INSTRUCTIONS ARE INDICATED ON THE PROXY, ALL SHARES OF
COMMON STOCK REPRESENTED BY VALID PROXIES RECEIVED PURSUANT TO THIS SOLICITATION
(AND NOT REVOKED IN WRITING BEFORE THEY ARE VOTED) WILL BE VOTED AT THE ANNUAL
MEETING FOR THE NOMINEES NAMED BELOW FOR ELECTION AS DIRECTORS AND FOR THE
PROPOSALS DESCRIBED HEREIN. With respect to any other business which may
properly come before the Annual Meeting and be submitted to a vote of
stockholders, proxies received by the Board of Directors will be voted in
accordance with the best judgment of the designated proxy holders. Under the
Company's Bylaws, stockholder proposals may be made at the Annual Meeting only
pursuant to a timely notice in writing delivered or mailed to the Secretary of
the Company. To be timely, a stockholder's written notice must be delivered or
mailed to the Secretary at the Company's principal executive offices at 111 S.
Calvert Street, Suite 1950, Baltimore, Maryland 21202 not more than the tenth
day following the first public announcement of the Annual Meeting. A stockholder
may revoke his or her proxy at any time before exercise by delivering to the
Secretary of the Company a written notice of such revocation, by filing with the
Secretary of the Company a duly executed proxy bearing a later date, or by
voting in person at the Annual Meeting, provided, however, that, in accordance
with the Company's Bylaws, the stockholder has delivered to the Secretary a
written notice of the stockholder's intention to revoke the proxy and vote in
person prior to the voting of the proxy.

PROPOSAL ONE
ELECTION OF DIRECTORS

The Board of Directors of the Company is currently comprised of nine
members. All directors are elected each year at the annual meeting of
stockholders.

In the absence of instructions to the contrary, the persons named as proxy
holders in the accompanying proxy intend to vote in favor of the election of the
nominees designated below to serve until the next annual meeting of stockholders
and until their respective successors shall have been elected and qualified. The
Board of Directors expects that each of the nominees will be available to serve
as a director, but if any such nominee should become unavailable for election,
the shares of Common Stock represented by the enclosed proxy may (unless such
proxy contains instructions to the contrary) be voted for such other person or
persons as may be determined by the holders of such proxies.

Under the Company's Bylaws, nominations of persons for election to the
Board, other than those made by or at the direction of the Board, may be made at
the Annual Meeting only pursuant to a timely notice delivered or mailed to the
Secretary of the Company. To be timely, a stockholder's written notice must be
delivered or mailed to the Secretary at the Company's principal executive
offices at 111 S. Calvert Street, Suite 1950, Baltimore, Maryland 21202 not more
than the tenth day following the first public announcement of the Annual
Meeting.

The following table sets forth the name and age of each director, the year
the director was first elected and his or her position with the Company.

<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
- --------------------------------------- --- -------------------------------------------------------- -----------
<S> <C> <C> <C>
Essam Khashoggi........................ 59 Chairman of the Board 1992
Simon K. Hodson (1).................... 44 Vice Chairman of the Board and Chief Executive Officer 1992
William F. McLaughlin (1).............. 50 Director, President and Chief Operating Officer 1999
John Daoud............................. 63 Director and Secretary 1992
Ellis B. Jones......................... 45 Director 1995
Layla Khashoggi........................ 41 Director 1992
William A. Marquard.................... 79 Director 1994
Jerold H. Rubinstein................... 60 Director 1994
Howard J. Marsh........................ 74 Director 1999
</TABLE>

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

(1) Mr. Hodson will serve as Chief Executive Officer of the Company until the
commencement of the Annual Meeting. Pursuant to a resolution adopted by the
Board of Directors at a Board meeting held on February 4-5, 1999, the Board
appointed Mr. McLaughlin to serve as the Chief Executive Officer of the
Company effective upon the commencement of the Annual Meeting. Mr. Hodson
will remain actively involved on the Board of Directors as Vice Chairman and
a member of the Executive Committee, and as the Company's senior science
officer. He will continue to play a key leadership role in ensuring the
successful ramp-up of the Company's first production facility. In addition,
as President of E. Khashoggi Industries, LLC, the Company's parent company
and primary resource for scientific and technical services, he will be
directly involved in the commercial development of the next tier of the
Company's products and manufacturing technology.

The following is a biographical summary of the experience of the nominees
for director of the Company.

ESSAM KHASHOGGI has served as Chairman of the Board of the Company since
its organization in November 1992. Mr. Khashoggi also served as Chairman of the
Management Committee and Chief Executive Officer of E. Khashoggi Industries, LLC
("EKI") and its predecessor entity, E. Khashoggi Industries, since their
organization in October 1997 and June 1991, respectively. Mr. Khashoggi has
served as a director and officer of a number of domestic and foreign companies
engaged in licensing, manufacturing, real estate marketing, and design and has
served as a Trustee for 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 in November 1992, and as
President of the Company from December 1995 until May 1996. Mr. Hodson has also
served as President and Vice Chairman of EKI and its predecessor entity since
their organization in October 1997 and June 1991, respectively, and as President
and Vice Chairman of Concrete Technology Corporation since August 1987. Mr.
Hodson was President of National Cement & Ceramics Laboratories, Inc., a company
previously engaged in materials science research, from June 1990 through 1995.
He is a co-inventor of 74 issued U.S. patents and 38 issued foreign patents, as
of March 24, 1999, all belonging to EKI.

WILLIAM F. MCLAUGHLIN has served as President and Chief Operating Officer
of the Company since April 1998. He was appointed a Director of the Company in
February 1999. From 1994 to 1998, Mr. McLaughlin served as President and Chief
Executive Officer of Sweetheart Cup Company Inc. ("Sweetheart"), a leading food
service packaging company based in Owings Mills, Maryland. Sweetheart is a
licensee and joint venture partner of the Company with respect to the production
of hinged-lid containers for McDonald's Corporation. Prior to joining
Sweetheart, Mr. McLaughlin served as Executive Vice President of Nestle Food
Service Company in Glendale, California.

JOHN DAOUD has served as a Director of the Company since its organization in
November 1992. Mr. Daoud served as the Assistant Secretary of the Company from
June 1993 until October 1996, when he became the Company's Secretary. Mr. Daoud
also served as the Chief Financial Officer and Secretary of EKI and its
predecessor entity since their organization in October 1997 and June 1991,
respectively. Mr. Daoud has also served as the President of Condas International
since 1987 and, in such capacity and in his individual capacity, has advised Mr.
Khashoggi and his affiliated entities on certain financial matters 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, where he is also a Managing Director of Wasserstein Perella
Merchant Banking. 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.

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<PAGE>
LAYLA KHASHOGGI has served as a Director of the Company since its
organization in November 1992. Ms. Khashoggi has also been a member of the Board
of Managers of EKI since its organization in October 1997 and a Director of CTC
for the past five years. Ms. Khashoggi has served as an Executive Committee
member of the Laguna Blanca School Board, Chairman of the Development Committee
of Laguna Blanca School, Site Council Member of San Marcos High School,
Co-Chairman of the Budget Committee of San Marcos High School, Executive
Committee member of the Santa Barbara Zoo Board and Chairman of the Marketing
Committee of the Santa Barbara Zoo Board. Ms. Khashoggi is Essam Khashoggi's
spouse.

WILLIAM A. 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.

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 music network using new technologies and new presentations of music
listening, from 1986 through 1997. 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 currently Chairman of Xtra Music Services, Inc., a provider of
digital music throughout Europe, the Middle East and Russia. Mr. Rubinstein is a
Director of U.S. Global Investors, Inc., Santa Barbara Bowl Foundation and
Laguna Blanca School.

HOWARD J. MARSH served as Secretary of the Company from its inception
through October 1996 and served as a full-time consultant of EKI from 1989
through 1993. Mr. Marsh was appointed a Director of the Company in April 1999.
In 1989, Mr. Marsh joined Concrete Technology Corporation as a consultant. Prior
to joining the Company, Mr. Marsh served for several years as an attorney and
subsequently, as a shareholder and member of the Board of Directors of Parsons,
Behle & Latimer. From 1970 to 1973, Mr. Marsh was President of Kona-Post
Corporation. From 1960 to 1969, Mr. Marsh served as General Counsel for Harvest
Queen Mill & Elevator Co. and affiliated companies and started his own private
law practice. Mr. Marsh also served for several years in government service,
including service as a Special Agent in the FBI. Mr. Marsh is presently the
President of Tippyune, Inc., a family owned corporation.

COMMITTEES OF THE BOARD OF DIRECTORS

The Executive Committee of the Board of Directors consists of Messrs.
Khashoggi, Hodson, McLaughlin and Daoud. The Audit Committee consists of Messrs.
Khashoggi, Jones, Rubinstein and Marquard. The Compensation Committee consists
of Messrs. Khashoggi, Jones and Rubinstein. The Stock Option Committee is
comprised of Messrs. Khashoggi, Jones and Rubinstein. The Conflicts Committee is
comprised of Messrs. Jones and Rubinstein. The Company does not have a
nominating committee.

The Executive Committee held three meetings in 1998. The primary function of
the Executive Committee is to perform all of the duties otherwise vested in the
Board of Directors when the Board is not in session, except for the following
matters which have not been delegated to the Executive Committee:

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(1) declaring cash or stock dividends or distributions to stockholders of the
Company; (2) taking action on matters otherwise specifically delegated to other
committees of the Board of Directors; (3) amending or repealing the Certificate
of Incorporation or Bylaws of the Company or adopting new ones; (4) approving a
plan of merger, acquisition or divestiture or sale, lease or exchange of
substantially all of the business, properties or assets of the Company; (5)
authorizing or approving the issuance or sale of shares of stock of the Company;
(6) authorizing the Company to perform or make a contract or commitment that is
not contemplated by, or that exceeds the applicable amount budgeted under the
operating budget or capital budget approved by the Board by certain amounts and
(7) electing or removing officers or directors or members of any committee of
the Board of Directors.

The Compensation Committee held one meeting in 1998. The functions of the
Compensation Committee include: (1) reviewing and recommending to the Board of
Directors the annual base salary, bonus and other benefits for the senior
executive officers of the Company; (2) reviewing and commenting upon new
executive compensation programs that the Company proposes to adopt; (3)
periodically reviewing the results of the Company's executive compensation and
perquisite programs to ensure that they are properly coordinated to yield
payments and benefits that are reasonably related to executive performance; (4)
ensuring that a significant portion of executive compensation is reasonably
related to the long-term interests of the stockholders; (5) participating in the
preparation of certain portions of the Company's annual proxy statement; (6) if
necessary, hiring a compensation expert to provide independent advice on
compensation levels and (7) ensuring that the Company undertakes appropriate
planning for management succession and advancement.

The Audit Committee did not meet in 1998 but did conduct business by
unanimous written consent of the members of the committee. The functions of the
Audit Committee include: (1) recommending the engagement of an accounting firm
to act as the Company's independent external auditor (the "Auditor"); (2)
reviewing the Auditor's compensation, the proposed terms of its engagement, its
independence and its performance during each year of its engagement; (3)
reviewing the Company's annual financial statements and any significant disputes
between management and the Auditor that arise in connection with the preparation
of those financial statements; (4) reviewing the results of each external audit;
(5) reviewing the procedures employed by the Company in preparing published
quarterly financial statements and related management commentaries; (6)
reviewing any major changes proposed to be made in auditing and accounting
principles and practices in connection with the Company's financial statements;
(7) reviewing the adequacy of the Company's internal financial controls and (8)
if the Company has appointed a Director of Internal Audit, meeting periodically
with the individual to evaluate compliance with the foregoing duties.

The Stock Option Committee held one meeting in 1998. The Stock Option
Committee is responsible for administering the Company's 1994 Stock Option Plan
and 1995 Stock Incentive Plan (the "Plans") including, without limitation, the
following: (1) adopting, amending and rescinding rules relating to the Plans;
(2) determining who may participate in the Plans and what awards may be granted
to such participants; (3) granting awards to participants and determining the
terms and conditions thereof, including the number of shares of Common Stock
issuable pursuant to the awards; (4) determining the terms and conditions of
options automatically granted to directors pursuant to the Plans; (5)
determining whether and the extent to which adjustments are required pursuant to
the anti-dilution provisions of the Plans and (6) interpreting and construing
the Plans and the terms and conditions of any awards granted thereunder.

The Conflicts Committee held two meetings in 1998. The functions of the
Conflicts Committee include: (1) reviewing proposed transactions between the
Company and (a) interested directors, (b) a controlling stockholder, (c) the
parent of the Company or (d) other similar transactions that involve possible
questions of conflicts or self-dealing; (2) reviewing transactions or conduct
involving the Company and an "interested" director to determine whether the
transaction is on at least as favorable terms to the Company as might be
available from other third parties; (3) reviewing the fairness of a transaction
having

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<PAGE>
self-dealing elements to determine whether it is reasonably likely to further
the Company's business activities; (4) reviewing the fairness of a transaction
having self-dealing elements to determine whether the process by which the
decision was approved or ratified is fair; (5) ensuring that minority public
stockholders that are affected by a proposal receive fair treatment; (6)
ensuring that all conflict-of-interest transactions are disclosed in the Company
filings with the Securities and Exchange Commission and (7) if necessary,
retaining an independent expert to determine the advisability of the Company's
entering into a transaction involving a possible conflict of interest and to
determine fair terms for such a proposed transaction.

BOARD AND COMMITTEE ATTENDANCE AND COMPENSATION

In 1998 the Board of Directors held four regular meetings. All directors
attended at least 75% of the aggregate of Board and committee meetings (for
committees on which each served) held in 1998.

COMPENSATION OF DIRECTORS

Until recently, the Company had never paid any cash compensation for the
directors' services as directors, other than reimbursement for out of pocket
expenses incurred in connection with attendance at such meetings. Based on a
study conducted by SCA Consulting LLC, the Board recently approved a plan to pay
to each non-employee director an annual retainer fee of $20,000, payable
quarterly, plus a fee of $1,000 for attending regular meetings and $500 for each
additional day of committee meetings attended. The annual retainer fee was made
retroactive to 1998 for non-employee directors who were directors at fiscal
year-end 1998. These non-employee directors have been paid the retainer fee for
services rendered in 1998. Messrs. Khashoggi, Jones, Marquard, Rubinstein and
Marsh and Ms. Khashoggi are currently considered to be non-employee directors of
the Company. Mr. Marsh did not receive the retainer fee for 1998 as his services
as a director commenced in 1999.

The 1995 Stock Incentive Plan, as amended, currently provides that each
director elected at an annual meeting of stockholders held on or after January
1, 1996 shall, on the day following the date of such annual meeting,
automatically be granted a director option to purchase 5,240 shares of Common
Stock. The director option vests and becomes exercisable on the day prior to the
next annual meeting of stockholders, if the director is then in office. The
exercise price of the options is fixed at the fair market value of the
underlying shares on the date of grant. Each individual who served as a director
of the Company on the day following the previous Annual Stockholders Meeting
received an option to purchase 5,240 shares of the Company's common stock at a
price of $15.20 per share, and such options shall vest and become exercisable
for each director who continues to serve in such capacity through the day
immediately preceding this Annual Meeting.

Based on a study conducted by SCA Consulting LLC, the Board recently
approved an amendment to the Company's 1995 Stock Incentive Plan which provides
that each non-employee director who is elected at each annual meeting of
stockholders held on or after January 1, 1999, will automatically be granted a
director option, effective at the conclusion of such meeting which (i) will
immediately vest, (ii) will have a value at the time of grant of $120,000 based
on the Black-Scholes option pricing model, (iii) in the case of the grant to be
made at the Annual Meeting, will have an exercise price equal to $21.00 per
share and (iv) in the case of grants in subsequent years, will have an exercise
price equal to the average of the midpoint of the closing bid and closing asked
prices for shares of the Company's Common Stock for the three consecutive
trading days ending on the business day immediately preceding the date of grant.
In addition, pursuant to the amendment, employee directors will no longer be
eligible to receive director options. This proposed amendment is subject to
Common Stockholder approval at the Annual Meeting pursuant to Proposal Three
contained in this Proxy Statement.

YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL ONE.

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<PAGE>
PROPOSAL TWO
RATIFICATION OF SELECTION OF AUDITORS

Subject to ratification by the Common Stockholders, the Board of Directors
has appointed Deloitte & Touche LLP, certified public accountants, as the
independent auditors of the Company for the fiscal year ending December 31,
1999. Deloitte & Touche LLP has served as the Company's independent auditors
since the Company's formation in November 1992. Deloitte & Touche LLP has
advised the Company that it has no direct or indirect financial interest in the
Company or any of its subsidiaries, and that it has had, since the Company's
organization, no connection with the Company or any of its affiliates other than
as independent auditors and related activities.

The financial statements of the Company for the period ended December 31,
1998, and report of the auditors thereon, will be presented at the Annual
Meeting. Deloitte & Touche LLP will have a representative present at the meeting
who will have an opportunity to make a statement if he or she so desires and to
respond to appropriate questions. In addition, Deloitte & Touche has issued its
report, included in the Company's Annual Report on Form 10-K, on the financial
statements of the Company for the fiscal year ended December 31, 1998.

YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL TWO.

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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information with respect to the
beneficial ownership of each class of the Company's voting securities as of
April 2, 1999, by (i) each person or company known by the Company to be the
beneficial owner of more than 5% of the Company's outstanding shares, (ii) each
director and director nominee of the Company, (iii) each Named Executive Officer
and (iv) all directors and executive officers of the Company as a group.

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
OF
NUMBER OF SHARES OF COMMON STOCK
NAME AND ADDRESS (1) COMMON STOCK OUTSTANDING
- --------------------------------------------------------------------- ------------------- ---------------------
<S> <C> <C>
Essam Khashoggi (2) (3).............................................. 73,346,719 73.3%
Simon K. Hodson (3).................................................. 20,960 *
William F. McLaughlin (4)............................................ 50,000 *
John Daoud (5)....................................................... 72,160 *
Ellis B. Jones (6)................................................... 21,320 *
Layla Khashoggi (3).................................................. 20,960 *
William A. Marquard (3).............................................. 50,891 *
Jerold H. Rubinstein (3)............................................. 20,960 *
Howard J. Marsh...................................................... 0 0
William F. Spengler (7).............................................. 25,000 *
D. Scott Houston (8)................................................. 231,084 *
Vincent J. Truant (9)................................................ 18,750 *
Richard Hulme (10)................................................... 262,000 *
Directors and Executive Officers as a group (12 persons)............. 73,909,720 73.9%
E. Khashoggi Industries, LLC......................................... 63,745,035 63.7%
</TABLE>

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

* Indicates ownership of less than 1%.

(1) The address of all individuals, entities and shareholder groups listed in
the table is c/o EarthShell Corporation, 111 S. Calvert Street, Suite 1950,
Baltimore, MD.

(2) Includes 63,745,035 shares held by E. Khashoggi Industries, LLC ("EKI"), of
which Mr. Khashoggi is the controlling owner. Also includes 9,601,684 shares
held by other entities, including Concrete Technology Corporation ("CTC"),
in which Mr. Khashoggi also has a controlling ownership interest. Mr.
Khashoggi has sole voting and dispositive power with respect to all such
73,346,719 shares and is therefore deemed to be the beneficial owner of such
shares.

(3) Represents options to purchase 20,960 shares of Common Stock issued under
the 1995 Stock Incentive Plan, which are fully vested and exercisable. For
Mr. Hodson, does not include any of the shares held by EKI or the 810,366
shares held by CTC, in each of which Mr. Hodson holds a minority ownership
interest.

(4) Represents options to purchase 50,000 shares of Common Stock issued under
the 1995 Stock Incentive Plan, which are exercisable within 60 days of April
23, 1999. The exercise price of all options granted to Mr. McLaughlin is
$21.00 per share.

(5) Represents options to purchase 25,000 shares of Common Stock issued to Mr.
Daoud in his capacity as an officer of EKI and options to purchase 47,160
shares of Common Stock issued under the 1995 Stock Incentive Plan, which are
fully vested and exercisable immediately.

(6) Includes options to purchase 15,720 shares of Common Stock issued under the
1995 Stock Incentive Plan, which are fully vested and exercisable.

(7) Represents options to purchase 25,000 shares of Common Stock issued under
the 1995 Stock Incentive Plan, which are exercisable within 60 days of April
23, 1999. The exercise price of all options granted to Mr. Spengler is
$21.00 per share.

8
<PAGE>
(8) Represents options to purchase 137,550 shares of Common Stock issued under
the 1994 Stock Option Plan and options to purchase 93,534 shares of Common
Stock issued under the 1995 Stock Incentive Plan, which are fully vested and
exercisable.

(9) Represents options to purchase 18,750 shares of Common Stock issued under
the 1995 Stock Incentive Plan, which are exercisable within 60 days of April
23, 1999. The exercise price of all options granted to Mr. Truant is $21.00
per share.

(10) Represents options to purchase 262,000 shares of Common Stock issued under
the 1994 Stock Option Plan, which are fully vested and exercisable.

9
<PAGE>
EXECUTIVE OFFICERS

The following table sets forth the names, ages and positions of each of the
Company's executive officers. Subject to rights pursuant to any employment
agreements, officers of the Company serve at the pleasure of the Board of
Directors.

<TABLE>
<CAPTION>
OFFICER
NAME AGE POSITION SINCE
- -------------------------------------------------- --- -------------------------------------------------- -----------
<S> <C> <C> <C>

Simon K. Hodson (1)............................... 44 Chief Executive Officer and Vice Chairman of the 1992
Board

William F. McLaughlin (1)......................... 50 President, Chief Operating Officer and Director 1998

William F. Spengler............................... 44 Chief Financial Officer and Senior Vice President 1998

D. Scott Houston.................................. 44 Senior Vice President of Corporate Planning and 1992
Assistant Secretary

Vincent J. Truant................................. 51 Vice President, Marketing, Environmental Affairs 1998
and Public Relations

Michael M. Hagerty................................ 53 Vice President and Chief Technology Officer 1998

John Daoud........................................ 63 Secretary and Director 1992
</TABLE>

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

The following is a biographical summary of the experience of the executive
officers (other than those officers who are also directors) of the Company.

WILLIAM F. SPENGLER served as Senior Vice President of Corporate Planning
and Business Development from April 1998 until January 1999 when he assumed his
position as Senior Vice President and Chief Financial Officer of the Company.
From 1997 to April 1998, Mr. Spengler was the Chief Financial Officer of
Sweetheart Cup Company Inc. ("Sweetheart"). Prior to joining Sweetheart, Mr.
Spengler was the Vice President of Finance for three divisions of Black &
Decker--International, Worldwide Accessories and North American Power Tools.
Prior to joining Black & Decker, Mr. Spengler held significant positions in
finance, planning and business development in the international operations of
Bristol-Myers Squibb.

MICHAEL M. HAGERTY has served as Vice President and Chief Technology Officer
of the Company, including manufacturing process development, new product
development and construction management, since July 1998. Prior to joining the
Company, Mr. Hagerty was Chief Executive Officer of Easco Corporation from 1993
to 1996. From 1996 to June 1998, Mr. Hagerty was involved in management
consulting, venture capital and business acquisitions. Prior to this, Mr.
Hagerty worked for seventeen years in production and operations management with
Martin Marietta Corporation.

10
<PAGE>
VINCENT J. TRUANT has served as Vice President, Marketing, Environmental
Affairs and Public Relations for the Company since May 1998. During a prior
14-year tenure at Sweetheart, Mr. Truant most recently served as Vice President
and General Manager for the National Accounts Group and the McDonald's
Corporation Strategic Business Units. Before joining Sweetheart, Mr. Truant was
engaged in both domestic and international marketing assignments for Philip
Morris Inc. and its subsidiaries. Before joining Philip Morris Inc., Mr. Truant
held key marketing and sales positions with both Miller Brewing Company and Eli
Lilly & Company.

D. SCOTT HOUSTON has served as Senior Vice President of Corporate Planning
and Assistant Secretary for the Company since January 1999. From July 1993 until
January 1999, Mr. Houston served as Chief Financial Officer of the Company. From
August 1986 until joining the Company, he served EKI and its affiliates in
various positions, including as Chief Financial Officer and Vice President of
CTC from 1986 to 1990. Prior to August 1986, Mr. Houston operated Houston &
Associates, a consulting firm working with start-up and troubled companies. 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.

11
<PAGE>
EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth certain information with respect to the Chief
Executive Officer of the Company and each of the executive officers of the
Company whose cash compensation exceeded $100,000 during the fiscal year ended
December 31, 1998 (collectively, the "Named Executive Officers"). The Company
did not grant any restricted stock awards or stock appreciation rights or make
any long-term incentive plan payouts during such period.

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------------
AWARDS
ANNUAL COMPENSATION -------------------
-------------------------------------------- SECURITIES
FISCAL YEAR ENDED OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION DECEMBER 31 SALARY($)* BONUS($) COMPENSATION ($) OPTIONS(#)
- ---------------------------------- ------------------- ------------ ------------ ---------------- -------------------
<S> <C> <C> <C> <C> <C>

Simon K. Hodson...................
Chief Executive Officer 1998 $ 520,834(2) $ 500,000(4) $ 625(5) $ --
and Vice Chairman 1997 125,000(3) -- 28,745(6) 15,720
of the Board (1) 1996 -- -- -- --

William F. McLaughlin............. 1998 323,922(7) -- -- 200,000
President, Chief Operating 1997 -- -- -- --
Officer and Director (1) 1996 -- -- -- --

William F. Spengler............... 1998 252,414(8) -- -- 100,000
Senior Vice President and 1997 -- -- -- --
Chief Financial Officer 1996 -- -- -- --

D. Scott Houston..................
Senior Vice President of 1998 254,167 180,000 1,050(5) --
Corporate Planning and 1997 180,000 -- -- --
Assistant Secretary 1996 180,000 -- -- 124,450

Vincent J. Truant.................
Vice President, Marketing, 1998 150,000(9) 50,000 1,125(5) 75,000
Environmental Affairs and 1997 -- -- -- --
Public Relations 1996 -- -- -- --

Richard Hulme (10)................
Former Executive Vice 1998 $ 229,167 -- -- --
President and 1997 220,000 -- -- --
Chief Operating Officer 1996 220,000 -- -- --
</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.

(2) The $20,834 paid to Mr. Hodson in 1998 over and above his $500,000 annual
salary, resulted from a change in the Company's payroll providers and a
related change in the timing of salary payments.

12
<PAGE>
(3) Mr. Hodson was an employee of and was paid a salary by EKI until October 1,
1997 when Mr. Hodson entered into an employment agreement with the Company.
Mr. Hodson did not receive any compensation directly from the Company from
its inception in November 1992 through the first nine months of 1997 and
this amount is the actual amount that the Company paid Mr. Hodson in 1997.

(4) Represents the only bonus ever paid to Mr. Hodson by the Company since its
inception.

(5) Reflects payments under the Company's 401(k) plan.

(6) Reflects the Company's assumption of the remaining principal balance for an
automobile loan on Mr. Hodson's behalf.

(7) Reflects actual compensation paid to Mr. McLaughlin from the commencement of
his employment with the Company on April 13, 1998 through December 31, 1998.
Mr. McLaughlin's annual salary is $450,000.

(8) Reflects actual compensation paid to Mr. Spengler from the commencement of
his employment with the Company on April 20, 1998 through December 31, 1998.
Mr. Spengler's annual salary is $360,000.

(9) Reflects actual compensation paid to Mr. Truant from the commencement of his
employment with the Company on May 1, 1998 through December 31, 1998. Mr.
Truant's annual salary is $225,000.

(10) Mr. Hulme was replaced as Chief Operating Officer by action of the Board of
Directors on May 19, 1998 when the Board appointed Mr. McLaughlin to serve
as Chief Operating Officer. Mr. Hulme resigned as an executive officer of
the Company effective as of July 1, 1998. On March 2, 1999, Mr. Hulme
resigned as an employee of the Company, effective as of June 30, 1999.

STOCK OPTION GRANTS IN 1998

The following table sets forth information with respect to options to
purchase shares of the Company's Common Stock granted in 1998 to the Chief
Executive Officer and Named Executive Officers, excluding options granted in the
officer's capacity as a director of the Company.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
INDIVIDUAL GRANTS AT
------------------------------------------------------------------ ASSUMED RATES OF STOCK
NUMBER OF % OF TOTAL APPRECIATION FOR OPTION
SHARES OPTIONS GRANTED TERM (1)
UNDERLYING TO EMPLOYEES IN EXERCISE PRICE EXPIRATION --------------------------
NAME OPTIONS GRANTED 1998 (2) (PER SHARE) DATE 5% 10%
- ----------------------- --------------- ------------------- --------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>

Simon Hodson........... -- -- $ -- -- $ -- $ --

William F.
McLaughlin........... 200,000 32.3 21.00 5/19/08 -- 2,567,604

William F. Spengler.... 100,000 16.1 21.00 5/19/08 -- 1,283,802

D. Scott Houston....... -- -- -- -- -- --

Vincent J. Truant...... 75,000 12.1 21.00 5/19/08 -- 962,851

Richard Hulme.......... -- -- -- -- -- --
</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. In each case, the
Company used the market price of the Common Stock on the date of grant to
compute the potential realizable values. The market price on the date of
grant was

13
<PAGE>
$12.50 per share for Messrs. McLaughlin, Spengler and Truant. Each of the
options listed in the table is presently out-of-the-money.

(2) Excludes options to acquire 50,000 shares which were granted in 1998 but
which have already expired due to the optionee resigning before they vested.

AGGREGATED OPTION EXERCISES IN 1998 AND 1998 YEAR-END OPTION VALUES

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.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-
FISCAL MONEY OPTIONS AT FISCAL
SHARES YEAR END 1998 YEAR END 1998(1)
ACQUIRED ON VALUE -------------------------- -------------------------
NAME AND PRINCIPAL POSITION EXERCISE REALIZED UNEXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE
- ---------------------------- ----------------- ------------- ------------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>

Simon Hodson................ -- -- -- 20,960 $ -- $ 22,584

William F. McLaughlin....... -- -- 200,000 -- -- --

William F. Spengler......... -- -- 100,000 -- -- --

D. Scott Houston............ -- -- 62,094 199,906 267,625 1,385,660

Vincent Truant.............. -- -- 75,000 -- -- --

Richard Hulme............... -- -- -- 262,000 -- 2,127,440
</TABLE>

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

(1) The closing price of the Common Stock on the NASDAQ Market on December 31,
1998 was $11.94.

EMPLOYMENT AGREEMENTS AND ARRANGEMENTS

Simon Hodson entered into an employment agreement with the Company that
expires on September 30, 1999, subject to the Company's option to extend the
agreement for an additional one-year term. The agreement provides for an annual
salary of $500,000, subject to annual review and increase at the discretion of
the Board of Directors. Mr. Hodson may also be entitled to receive (i) an annual
bonus, the amount of which shall be determined by the Compensation Committee of
the Board of Directors and (ii) options or other rights to acquire the Company's
Common Stock, under terms and conditions determined by the Stock Option
Committee of the Board of Directors. Pursuant to the terms of the employment
agreement, Mr. Hodson may be terminated at any time with or without cause upon
written notice.

D. Scott Houston entered into an employment agreement with the Company
effective October 15, 1993. 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. The Board of Directors increased Mr.
Houston's annual salary to $280,000, effective May 13, 1998. 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 with or without cause,
upon thirty (30) days written notice.

William F. McLaughlin entered into an employment agreement with the Company
with a commencement date of April 13, 1998. The agreement provides for an annual
salary of $450,000 and options to acquire 200,000 shares of the Company's Common
Stock at an exercise price equal to $21.00 per share, which is the price at
which the Company's Common Stock was first sold to the public in the Company's
initial public offering. Mr. McLaughlin may also be entitled to receive (i) an
annual bonus, the amount of which shall be determined by the Compensation
Committee of the Board of Directors and (ii) options or

14
<PAGE>
other rights to acquire the Company's Common Stock, under terms and conditions
determined by the Stock Option Committee of the Board of Directors. Pursuant to
the terms of the employment agreement, Mr. McLaughlin may be terminated at any
time with or without cause upon thirty (30) days written notice, provided that,
if the Company terminates Mr. McLaughlin's employment for other than cause, he
shall be entitled to severance pay equal to 100% of his annual base salary.

William F. Spengler entered into an employment agreement with the Company
with a commencement date of April 13, 1998. The agreement provides for an annual
salary of $360,000 and options to acquire 100,000 shares of the Company's Common
Stock at an exercise price equal to $21.00 per share, which is the price at
which the Company's Common Stock was first sold to the public in the Company's
initial public offering. Mr. Spengler may also be entitled to receive (i) an
annual bonus in an amount equal to one year's base salary, provided certain
financial and other milestones are met by Mr. Spengler and the Company, as
determined by Mr. Spengler and the Compensation Committee of the Board of
Directors and, in the event such milestones are not met, or are significantly
exceeded, such other lesser or greater bonus as the Compensation Committee shall
determine and (ii) options or other rights to acquire the Company's Common
Stock, under terms and conditions determined by the Stock Option Committee of
the Board of Directors. Pursuant to the terms of the employment agreement, Mr.
Spengler may be terminated at any time with or without cause upon thirty (30)
days written notice, provided that, if the Company terminates Mr. Spengler's
employment for other than cause, he shall be entitled to severance pay equal to
100% of his annual base salary.

Vincent J. Truant entered into an employment agreement with the Company with
a commencement date of May 1, 1998. The agreement provides for an annual salary
of $225,000 and options to acquire 75,000 shares of the Company's Common Stock
at an exercise price equal to $21.00 per share, which is the price at which the
Company's Common Stock was first sold to the public in the Company's initial
public offering. Pursuant to the agreement, Mr. Truant received a $50,000
signing bonus. Mr. Truant may also be entitled to receive (i) an annual bonus in
an amount equal to one year's base salary, provided certain financial and other
milestones are met by Mr. Truant and the Company, as determined by Mr. Truant
and the Compensation Committee of the Board of Directors and, in the event such
milestones are not met, or are significantly exceeded, such other lesser or
greater bonus as the Compensation Committee shall determine and (ii) options or
other rights to acquire the Company's Common Stock, under terms and conditions
determined by the Stock Option Committee of the Board of Directors. Pursuant to
the terms of the employment agreement, Mr. Truant may be terminated at any time
with or without cause upon thirty (30) days written notice, provided that, if
the Company terminates Mr. Truant's employment for other than cause, he shall be
entitled to severance pay equal to 100% of his annual base salary.

Richard Hulme entered into a Separation and General Release Agreement dated
March 2, 1999 pursuant to which Mr. Hulme resigned his employment with the
Company, effective June 30, 1999. The agreement provides that Mr. Hulme will
continue to provide such services as are requested by the Company, and to be
paid his base salary at its current rate, until the effective date. The
agreement also provides that Mr. Hulme will not receive any severance or
termination pay or similar compensation from the Company as a result of the
termination of his employment. Pursuant to the agreement, Mr. Hulme must
exercise his options to acquire 262,000 shares of the Company's Common Stock,
all of which are 100% vested, no later than three months following the
termination of his employment.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

All decisions relating to executive compensation during 1998 were made by
the Company's Compensation Committee, which was comprised of Messrs. Khashoggi,
Jones and Rubinstein. None of the members were officers of the Company in 1998.
Mr. Khashoggi is the controlling shareholder in EKI, the Company's principal
stockholder with which the Company has certain relationships and related
transactions described below. EKI owns a 63.7% beneficial ownership interest in
the Company.

15
<PAGE>
LICENSE AGREEMENT AND PATENT ALLOCATION AGREEMENT

Pursuant to an Amended and Restated License Agreement between the Company
and EKI (the "License Agreement"), the Company has been granted a world-wide,
exclusive, royalty-free license to utilize and sublicense others to utilize
EKI's propriety technology in manufacturing, selling, and otherwise commercially
developing EarthShell foodservice disposables. The License Agreement grants the
Company exclusive rights to issued patents, pending patents and trade secrets to
the extent that they relate to foodservice disposables produced from
inorganic-based materials. The Company also has certain business, reporting,
indemnification and confidentiality obligations under the License Agreement.

The Company and EKI entered into an Amended and Restated Agreement for
Allocation of Patent Costs (the "Patent Agreement"), effective October 1, 1997,
which supersedes certain provisions of the License Agreement and the Agreement
for Allocation of Patent Costs between the Company and EKI (the "Prior Patent
Agreement"), which terminated on September 30, 1997. Under the Patent Agreement,
until September 30, 1999, the Company will pay all costs associated with
prosecuting, filing, maintaining or acquiring patents and patent applications in
connection with patents and patent applications that are directly related to
foodservice disposables. After September 30, 1999, the Company will pay all
costs associated with prosecuting, filing, maintaining or acquiring patents and
patent applications in connection with technology that primarily benefits the
foodservice disposable applications licensed to the Company (as compared with
applications of such patents and patent applications outside the foodservice
disposables field of use). EKI will pay for all other patent related costs. EKI
and the Company will review, on a biennial basis, the comparative benefits of
each existing patent and patent application to determine whether the foodservice
disposables licensed to the Company derive the principal benefits from the
patent or patent application in question and will allocate the associated patent
costs for the ensuing two-year period accordingly. No party will have the right
to be reimbursed for any costs following notification in writing by the other
party that it does not desire to incur such costs. Under the Patent Agreement,
the Company paid legal fees amounting to $485,670 in 1998.

On February 16, 1998, EKI entered into a patent purchase agreement with a
third party for the purchase of certain technology that is applicable to
starch-based disposable packaging. Pursuant to the terms of the License
Agreement, EKI is licensing such technology to the Company. In connection with
this purchase, the Company entered an agreement to pay to EKI (for payment to
the seller of the technology) $3.5 million on or about December 31, 2003. The
Company's obligation will be reduced by 5% of the purchase price of any
equipment purchased by EKI, the Company or its licensees or joint ventures from
the seller of the technology. In addition, the Company is required to pay $3
million over the five year period commencing January 1, 2004 if EKI, the Company
or the Company's licensees or joint ventures have not purchased, by December 31,
2003, at least $35 million of equipment from the seller of the technology and
EKI, the Company or the Company's licensees or joint ventures actively use the
purchased technology.

TECHNICAL SERVICES AGREEMENT

In addition to the License Agreement and the Patent Agreement, effective
October 1, 1997, the Company and EKI entered into an Amended and Restated
Technical Services Agreement (the "Technical Services Agreement") which
superseded the prior technical services agreement (the "Prior Technical Services
Agreement") that was entered into between the Company and EKI on July 1, 1994
and which terminated on September 30, 1997. Pursuant to the Technical Services
Agreement, which expires on December 31, 2002, the Company has a first priority
right to the services of certain EKI technical personnel for technical services
specifically requested by the Company based on established hourly billing rates
and the Company reimburses EKI for out-of-pocket expenses related to specific
research projects. The hourly billing rates have been compared to a market rate
study prepared by an independent third party provider of similar services and
are within the range of average market rates for each job classification. In
addition, the Technical Services Agreement extends the sublease of the Company's
office

16
<PAGE>
space in Santa Barbara, comprising approximately 1,600 square feet, through
March 31, 2001, subject to the right of the Company to terminate the sublease on
30 days' written notice. In 1998, The Company paid or accrued $8.9 million in
costs for services performed under the Technical Services Agreement and $67,200
in sublease payments.

REGISTRATION RIGHTS

As additional consideration for EKI's services under the Prior Technical
Services Agreement, the Company entered into a Registration Rights Agreement
with EKI (the "Registration Rights Agreement"). The Registration Rights
Agreement provides certain registration rights for the 82,530,000 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 initial public 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 right to
participate in one demand registration upon a request by the holders of
20,632,500 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.

INDEBTEDNESS OWED TO EKI

Subsequent to December 31, 1994, and up to the time of the Company's public
offering in March 1998, the Company's operations were primarily funded with
loans from, and accounts payable owed to, EKI. As of December 31, 1997, the
indebtedness owed to EKI totaled $33.3 million, including a note payable in the
amount of $32.1 million, $636,068 in accrued interest and $622,090 in accrued
payables under the Prior Patent Agreement and Prior Technical Services
Agreement. The Company repaid the note payable plus accrued interest to EKI from
the proceeds of its initial public offering in March 1998. As of December 31,
1998, the indebtedness owed by the Company to EKI totaled $1,181,300 under the
Technical Services Agreement and the Patent Allocation Agreement.

GUARANTEES OF CREDIT

EKI, Mr. Khashoggi and a trust controlled by Mr. Khashoggi, guaranteed the
borrowings under a $14.0 million line of credit provided by Imperial Bank to the
Company. None of the guarantors received any compensation or other consideration
for their guaranties. The Imperial Bank credit facility was repaid in full upon
consummation of the Company's initial public offering in March 1998 and the
guaranty was released.

17
<PAGE>
COMPENSATION COMMITTEE REPORT

The Compensation Committee (the "Committee") of the Board of Directors of
EarthShell Corporation is pleased to present its annual report on executive
compensation. This report describes the function of the Compensation Committee,
the objectives of the Company's executive compensation program, the various
components of compensation, and explains the basis upon which 1998 compensation
determinations were made by the Committee with respect to the executive officers
of the Company, including the officers that are named in the compensation
tables.

COMPENSATION COMMITTEE CHARTER

The Committee is charged with the following responsibilities:

- reviewing and recommending to the Board of Directors the annual base
salary, bonus and other benefits for the senior executive officers of the
Company

- reviewing and commenting on new executive compensation programs that the
Company proposes to adopt

- periodically reviewing the results of the Company's executive compensation
and perquisite programs to ensure that they are properly coordinated to
yield payments and benefits that are reasonably related to executive
performance

- ensuring that a significant portion of executive compensation is
reasonably related to the long-term interests of the stockholders

- participating in the preparation of certain portions of the Company's
annual proxy statement

- if necessary, hiring a compensation expert to provide independent advice
on compensation levels

- ensuring that the Company undertakes appropriate planning for management
succession and advancement

COMPENSATION PHILOSOPHY

The primary objective of the Company's executive compensation program is to
help the Company to achieve its strategic business objectives and to create
value for the Company's stockholders by attracting, motivating and retaining
highly qualified employees with outstanding ability. In addition, the
compensation program is designed to promote teamwork, initiative and
resourcefulness on the part of key employees whose performance and
responsibilities directly affect Company profits. The compensation program
strives to align compensation methods with stockholder interests to achieve
desired results and, above all, to pay for performance.

COMPENSATION COMPONENTS

The Company's executive compensation program consists of a mixture of base
salary, cash bonuses and stock options. In determining the mix and total amount
of compensation for each executive officer, the Compensation Committee
subjectively considers the executive's overall value to the Company including
past and expected contributions by the officer to the Company's goals. In
addition, the Compensation Committee strives to balance short-term and long-term
incentive compensation to achieve desired results.

Shortly following the Company's initial public offering in March 1998,
anticipating that it would be hiring several new executives as part of its next
stage of development, the Company commissioned SCA Consulting LLC ("SCA"), a Los
Angeles based executive compensation consulting firm, to update its executive
compensation strategy and total pay structure. As part of its assignment, SCA
developed a study of the compensation practices of newly public, development
stage companies. The Compensation Committee will reference this study as it
administers each of the three components of its executive compensation program
to ensure that its compensation practices are competitive and that the overall
compensation package appropriately attracts, motivates, rewards, and retains key
employees with outstanding abilities.

18
<PAGE>
BASE SALARY. The Company has historically determined base salary for its
executives based on qualifications, job requirements and competitive market
salaries that such qualifications and job requirements command. As the Company
grows, it will rely more heavily on peer group competitive compensation
practices to remain consistent and competitive in its compensation practices.

Pursuant to an employment agreement effective October 15, 1993, Mr. D. Scott
Houston, Senior Vice President of Corporate Planning and Assistant Secretary,
received base compensation of $254,167, reflecting the effects of his mid-year
base salary increase from $180,000 to $280,000. The Company also entered into
four new employment agreements, effective March 23, 1998 through July 22, 1998,
with Mr. William McLaughlin, President and Chief Operating Officer, Mr. William
Spengler, Senior Vice President and Chief Financial Officer, Mr. Vincent Truant,
Vice President, Marketing, Environmental Affairs and Public Relations and Mr.
Michael Hagerty, Vice President and Chief Technology Officer. Messrs.
McLaughlin, Mr. Spengler, Truant and Hagerty received base compensation of
$323,922, $252,414, $150,000 and $141,684, respectively, for the portion of the
year that each of them was employed by the Company in 1998, reflecting that
portion of their respective base salaries of $450,000, $360,000, $225,000 and
$250,000.

Salaries for executives are reviewed by the Compensation Committee on an
annual basis and may be adjusted based upon its assessment of the individual's
contribution to and financial growth of the Company as well as competitive pay
levels. Based on the annual review of the Compensation Committee of the Board of
Directors, Mr. Houston was granted a base salary increase of 56% from $180,000
to $280,000, effective May 13, 1998. Mr. Houston had not had a salary increase
since 1995. This increase brought his base salary in line with the mid-point of
the Company's compensation peer group for chief financial officers. Mr. Hagerty
was granted a base salary increase of 20% from $250,000 to $300,000, effective
January 1, 1999, consistent with the terms agreed to at the time he was hired.

BONUS. Bonuses may be granted for a fiscal year after the financial results
for that fiscal year become available. The Compensation Committee meets to
consider annual bonuses for each executive based on individual performance as
well as overall financial results of the Company for the year. There is no plan
requiring that bonuses be paid. However, pursuant to their employment
agreements, certain executive officers may be entitled to receive an annual
bonus, the actual amount of which shall be determined in the sole discretion of
the Compensation Committee.

Based on the annual review of the Compensation Committee, on March 16, 1999
the Committee granted bonuses to only those executive officers who had completed
a full year of service with the Company, Messrs. Hodson, Houston and Daoud. Mr.
Hodson was granted a bonus of $500,000, Mr. Houston was granted a bonus of
$180,000 and Mr. Daoud was granted a bonus of $150,000.

During 1999, the Compensation Committee will meet to consider implementing a
more formal incentive program based on the accomplishment by the management team
of milestones tied to the 1999 strategic plan and operating budgets.

STOCK OPTIONS. The Company believes that significant equity interests in
the Company in the form of stock options held by the Company's management serve
to align the interests of the executive management team with shareholder
interests. The Stock Option Committee, comprised of members of the Board of
Directors, may grant stock options and restricted stock to executives and other
key employees of the Company pursuant to the 1995 Stock Incentive Plan. In 1998,
options to acquire 200,000, 100,000, 75,000 and 100,000 shares of the Company's
Common Stock were granted to Messrs. McLaughlin, Spengler, Truant and Hagerty,
respectively, at an exercise price of $21.00 per share which equals the price at
which the Company's stock was sold to the public in its initial public offering.

The Stock Option Committee is currently contemplating various methods to
provide additional incentives to management and employees of the Company,
including granting additional stock options. In determining the grants of stock
options and restricted stock, the Stock Option Committee will take into account,
among other things, the respective scope of responsibility and the anticipated
performance

19
<PAGE>
requirements and contributions to the Company of each proposed award recipient
as well as the amount of prior grants.

SPECIAL COMPENSATION TO CHIEF EXECUTIVE OFFICER IN 1998

Pursuant to an employment agreement effective October 15, 1997, Mr. Simon
Hodson, the Company's Chief Executive Officer, received base compensation of
$520,834 during 1998. In addition, based on the annual review of the
Compensation Committee of the Board of Directors, Mr. Hodson was granted a bonus
of $500,000 which was paid in 1999.

Mr. Hodson's base salary was initially established by the Board of Directors
prior to the formation of the Compensation Committee. It was based on the
Board's assessment that Mr. Hodson was uniquely qualified to lead the Company
through its early development stages. The Board determined that his vision for
the Company, both from a technical and business viewpoint, would be pivotal to
bringing the Company to the verge of commercializing its first product lines.
The bonus granted to Mr. Hodson in 1999 was due to the Company's successful
completion of a number of key milestones including:

- completion of the commercial prototype of the Company's initial product

- design of the initial commercial production facility

- completion of a net $206 million initial public offering to fund the
Company's next stage of development

- assembling additional key executives to manage the next stage of
commercialization

- construction of the first commercial manufacturing facility

A founder of the Company and co-innovator of the technology, Mr. Hodson has
been a driving force in making the Company--as a corporation and as a new
packaging concept--a reality. His concern for the environment, coupled with his
visionary leadership and commitment, has helped the Company achieve its current
state of development.

In keeping with the Company's initial plans, and pursuant to a resolution
adopted by the Board, Mr. Hodson will pass on his responsibilities as Chief
Executive Officer of the Company to William F. McLaughlin at the Annual Meeting.
Mr. Hodson will remain actively involved on the Board of Directors as Vice
Chairman and a member of the Executive Committee and as the Company's senior
science officer. He will continue to play a key leadership role in ensuring the
successful ramp-up of the Company's first production facility. In addition, as
President of E. Khashoggi Industries, LLC, the Company's parent company and
primary resource for scientific and technical services, he will be directly
involved in the commercial development of the next tier of the Company's
products and manufacturing technology.

DEDUCTIBILITY OF EXECUTIVE COMPENSATION

Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), limits the deductibility of compensation over $1 million to certain
executive officers unless, in general, the compensation is paid pursuant to a
plan which is performance related, non-discretionary and has been approved by
the Company's stockholders. The Company did not pay any compensation in 1998
that would be subject to Code Section 162(m). The Compensation Committee intends
to establish policies regarding qualification of compensation under Section
162(m) of the Code to the extent it considers such policies appropriate.

SUBMITTED BY THE COMPANY'S
COMPENSATION COMMITTEE

Essam Khashoggi
Ellis B. Jones
Jerold H. Rubinstein

20
<PAGE>
STOCK PERFORMANCE GRAPH

The graph below compares the cumulative total return of the Company, the S&P
500 Index and the Dow Jones Containers & Packaging Industry Group (USA). The
measurement period for the comparison of the cumulative total return is from
March 24, 1998, the first day of trading of the Common Stock on the National
Association of Securities Dealers Automated Quotation System National Market
(the "NASDAQ Market"), to December 31, 1998. The comparison assumes $100 was
invested on March 24, 1998 in the Company's Common Stock and the foregoing index
and assumes reinvestment of dividends before consideration of income taxes.

COMPARISON OF CUMULATIVE TOTAL SHAREHOLDER RETURN
SINCE MARCH 24, 1998

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
EarthShell S&P 500 Dow Jones
<S> <C> <C> <C>
Index Index CTR
3/24/98 100 100 100
4/30/98 62 101 98
5/31/98 48 99 97
6/30/98 41 103 87
7/31/98 37 102 83
8/31/98 23 87 68
9/30/98 31 93 61
10/31/98 39 100 70
11/30/98 58 106 76
12/31/98 51 112 77
</TABLE>

The stock performance depicted in the above graph is not necessarily
indicative of future performance. The Stock Performance Graph shall not be
deemed to be "soliciting material" or to be "filed" with the Securities and
Exchange Commission or subject to Regulations 14A or 14C or to the liabilities
of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act"),
except to the extent that the Company specifically requests that such
information be treated as soliciting material or specifically incorporates it by
reference into a filing under the Securities Act of 1933 or Exchange Act.

21
<PAGE>
PROPOSAL THREE
APPROVAL OF AMENDMENTS TO THE
1995 STOCK INCENTIVE PLAN

The stockholders are asked to consider and vote to approve amendments to the
Company's 1995 Stock Incentive Plan (the "1995 Plan"), as set forth in the
proposed Third Amendment and Fourth Amendment to the 1995 Stock Incentive Plan
of EarthShell Container Corporation (the "Third Amendment" and "Fourth
Amendment," respectively) attached hereto as part of Appendix A.

The Company has utilized stock options granted pursuant to the 1995 Plan,
and pursuant to the 1994 Stock Option Plan (the "1994 Plan"), to attract, retain
and motivate its employees, directors and consultants by providing for or
increasing their proprietary interests in the Company. Under the 1994 Plan,
every employee and consultant of the Company, or any of its subsidiaries, was
eligible to be considered for the grant of awards. The 1994 Plan authorized the
Stock Option Committee to award Incentive Stock Options ("ISOs") and
nonqualified stock options to employees. Awards may not be granted under the
1994 Plan on or after the tenth anniversary of its adoption. Options to acquire
666,790 shares of the Company's Common Stock were granted under the 1994 Plan.

The 1995 Plan effectively superseded the 1994 Plan for options issued on or
after the date of the 1995 Plan's adoption on November 27, 1995. As of April 2,
1999, 2,848,880 shares of the Common Stock remained available for issuance under
the 1995 Plan. All of the awards outstanding under the 1995 Plan are stock
options which are not transferable except in limited circumstances. The Company
does not have any other stock-based incentive compensation plan in which its
employees, directors or consultants are eligible to participate.

On February 4-5, 1999, the Board of Directors approved a Third Amendment to
the 1995 Plan, subject to the approval of the stockholders at the Annual
Meeting, to (i) increase the aggregate number of shares available for ISOs under
the 1995 Plan from 4,585,000 to 10,000,000, (ii) increase the aggregate number
of shares of Common Stock 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 the Common Stock) from 393,000 to 500,000, (iii)
increase the number of shares available for awards (including all ISOs) under
the 1995 Plan from 4,585,000 to 10,000,000, (iv) provide that the exercise price
of any awards granted under the Plan shall not be less than the fair market
value of the securities underlying the award on the date of grant and (v) change
the name of the 1995 Plan to reflect the previously adopted change in the
Company's name.

On March 16, 1999, the Board of Directors approved a Fourth Amendment to the
1995 Plan, subject to the approval of the stockholders at the Annual Meeting, to
provide that each non-employee director who is elected at each annual meeting of
stockholders held on or after January 1, 1999, will automatically be granted a
director option ("Director Option"), effective at the conclusion of such meeting
which (i) will immediately vest, (ii) will have a value at the time of grant of
$120,000 based on the Black-Scholes option pricing model, (iii) in the case of
the grant to be made at the Annual Meeting, will have an exercise price equal to
$21.00 per share and (iv) in the case of grants in subsequent years, will have
an exercise price equal to the average of the midpoint of the closing bid and
closing asked prices for shares of the Company's Common Stock for the three
consecutive trading days ending on the business day immediately preceding the
date of grant. In addition, pursuant to the Fourth Amendment, employee directors
will no longer be entitled to receive Director Options.

SUMMARY OF THE 1995 PLAN

The following description of the 1995 Plan is qualified in its entirety by
reference to the full text of the 1995 Plan, the previous two amendments to the
1995 Plan and the proposed Third and Fourth Amendments to the 1995 Plan being
submitted to the stockholders for approval at the Annual Meeting, a copy of each
of which is attached as part of Appendix A.

22
<PAGE>
The purpose of the 1995 Plan is to enable the Company to attract, retain and
motivate its employees and consultants by providing for or increasing the
proprietary interests of such employees and consultants in the Company and to
enable the Company to attract, retain and motivate its non-employee directors
and further align their interests with those of the Company's stockholders by
providing for or increasing the proprietary interest of such directors in the
Company.

Any person who is an employee of or consultant to the Company or any of its
subsidiaries, including any director who is also such an employee, is eligible
to be considered for the grant of awards under the 1995 Plan. The 1995 Plan also
currently provides for the automatic grant of options to both employee directors
and non-employee directors of the Company. The proposed Fourth Amendment amends
the 1995 Plan to provide for the automatic grant of options only to non-employee
directors of the Company as described below.

As of April 2, 1999, approximately 16 employees (including three employee
directors) and five non-employee directors were participating in the 1995 Plan.

The maximum number of shares of Common Stock that may currently be issued
pursuant to all awards (including ISOs) granted under the 1995 Plan is
4,585,000, subject to certain anti-dilution adjustments. The maximum number of
shares of Common Stock that may currently be issued pursuant to ISOs granted
under the 1995 Plan is also 4,580,000. Under the proposed Third Amendment to the
1995 Plan, the maximum number of shares that may be issued pursuant to awards
(including ISOs) granted under the 1995 Plan is 10,000,000, and the maximum
number of shares of Common Stock that may be issued pursuant to ISOs is
10,000,000.

No employee may currently be granted awards under the 1995 Plan with respect
to more than 393,000 shares of Common Stock during any calendar year, subject to
certain anti-dilution adjustments. Under the proposed Third Amendment to the
1995 Plan, employees will be entitled to be granted awards with respect to no
more than 500,000 shares of Common Stock during any calendar year. This
limitation is intended to satisfy the requirements of Section 162(m) of the Code
so that compensation attributable to awards under the 1995 Plan qualifies as
performance-based compensation under Section 162(m) of the Code. In addition,
all directors are currently entitled to receive automatic option grants to
purchase 5,240 shares of Common Stock on an annual basis. The proposed Fourth
Amendment limits the automatic grant of Director Options to only non-employee
directors of the Company.

The anti-dilution provisions of the 1995 Plan generally provide for
adjustments to the number of shares issuable pursuant to awards if the
outstanding securities subject to the 1995 Plan increases or decreases as a
result of certain events including, but not limited to, reorganization, merger,
consolidation, recapitalization, restructuring, reclassification, dividend or
other distribution.

The anti-dilution provisions of the 1995 Plan also generally provide that no
adjustment shall be made under the provisions of the 1995 Plan 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 that the Stock Option Committee
determines that such adjustment would result in the disallowance of federal
income tax deduction for compensation attributable to awards under the 1995 Plan
by causing such compensation to be treated as other than "performance-based
compensation" under Section 162(m) of the Internal Revenue Code. Awards may not
be granted under the 1995 Plan on or after the tenth anniversary of its
adoption.

The 1995 Plan currently does not specify a minimum exercise price or other
consideration that a recipient of an award must pay to obtain the benefit of an
award, and therefore the maximum compensation payable pursuant to the 1995 Plan,
during the term of the 1995 Plan and awards granted thereunder, is currently
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-statutory options, will
generally be the date of exercise of the options). Awards may be issued under
the 1995 Plan for any lawful consideration including services rendered by the
recipient of such award. Any exercise price or other consideration payable in
respect of any awards currently made

23
<PAGE>
under the 1995 Plan are to be determined by the Stock Option Committee and
included in the terms of such award. The proposed Fourth Amendment to the 1995
Plan, however, amends the 1995 Plan for Director Options, to provide that
Director Options will be granted to only non-employee directors at annual
meetings of stockholders held on or after January 1, 1999. The proposed Fourth
Amendment further provides that, in the case of grants made at the Annual
Meeting, the grants will have an exercise price equal to $21.00 per share and,
in the case of grants in subsequent years, the grants will have an exercise
price equal to the average of the midpoint of the closing bid and closing asked
prices for shares of the Company's Common Stock for the three consecutive
trading days ending on the business day immediately preceding the date of grant.

Subject to the provisions of the 1995 Plan, the Stock Option Committee is
authorized and empowered to administer the 1995 Plan, including, without
limitation: (i) adopting, amending and rescinding rules and regulations relating
to the 1995 Plan; (ii) determining which persons may participate in the 1995
Plan and to which of such participants, if any, awards shall be granted under
the 1995 Plan; (iii) granting awards to participants and determining the terms
and conditions of awards granted under the 1995 Plan, including the number of
shares of Common Stock issuable pursuant thereto; (iv) determining, with certain
exceptions, the terms and conditions of the Director Options that are
automatically granted under the 1995 Plan; (v) determining whether, and the
extent to which, anti-dilution adjustments are required and (vi) interpreting
and construing the 1995 Plan and the terms and conditions of any awards granted
under the 1995 Plan.

The 1995 Plan is not subject to any provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA") and is not required to be qualified under
Section 401(a) of the Code.

The Stock Option Committee is authorized 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 or 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 options granted to an employee may be an
ISO or a nonqualified stock option ("Nonqualified Stock Option").

Shares of Common Stock may be issued pursuant to an award for any lawful
consideration as determined by the Stock Option Committee, including, without
limitation, services rendered by the recipient of such award. The recipient of
an award, including directors or officers of the Company, may pay all or part of
the purchase price of the shares or other property issuable pursuant to an
award, or such recipient's tax withholding obligation with respect to such
issuance, by (a) delivering cash, (b) delivering other property deemed
acceptable by the Stock Option Committee, (c) delivering previously owned shares
of capital stock of the Company or other property, provided such shares have
been owned by the Company for at least six months or (d) delivering a promissory
note, the terms and conditions of which will be determined by the Stock Option
Committee.

An award may include a provision conditioning or accelerating the receipt of
benefits upon the occurrence of specified events, such as a change in control of
the Company (as defined by the Stock Option 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 other significant corporate transaction described in
the 1995 Plan.

The 1995 Plan provides that each person who becomes a Director of the
Company shall automatically be granted a Director Option to purchase 5,240
shares of Common Stock upon becoming a Director. In addition, the 1995 Plan
authorizes the grant of a Director Option to purchase 5,240 shares of Common

24
<PAGE>
Stock the day following the date of each annual meeting of stockholders at which
the Directors of the Company are elected. Each Director Option granted pursuant
to the 1995 Plan on or after January 1, 1996 currently vests and becomes
exercisable on the day immediately preceding the next annual meeting of
stockholders, if the Director is then in office. The proposed Fourth Amendment
to the 1995 Plan discussed below provides that Director Options will be granted
only to non-employee directors and will vest and be exercisable immediately upon
grant.

A Director Option granted under the 1995 Plan after the Company's initial
public offering currently has an exercise price equal to the greater of (i) the
Fair Market Value (as defined in the 1995 Plan) of the underlying shares subject
to such option on the date of its grant or (ii) the aggregate par value of such
shares of Common Stock on such date. The proposed Fourth Amendment to the 1995
Plan discussed below provides that, in the case of grants to be made at the
Annual Meeting, the Director Options will have an exercise price of $21.00 per
share and, in the case of grants in subsequent years, the Director Options will
have an exercise price equal to the average of the midpoint of the closing bid
and closing asked prices for shares of the Company's Common Stock for the three
consecutive trading days ending on the business day immediately preceding the
date of grant. Payment of the exercise price of any Director Option shall be
made in cash or, under certain circumstances and at the discretion of the Stock
Option Committee, in whole or in part, with shares of Common Stock that have
been owned for at least six months.

Each Director Option granted under the 1995 Plan expires upon the first to
occur of the following: (i) the first anniversary of the date upon which the
optionee ceases to be a Director as a result of death or total disability; (ii)
the 90th day after the date upon which the optionee ceases to be a Director for
any reason other than death or total disability or (iii) the fifth anniversary
of the date of grant of such Director Option.

All outstanding Director Options theretofore granted under this 1995 Plan
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 stockholders of the Company by the Board or (iii) the sale of
substantially all of the property and assets of the Company.

NEW 1995 PLAN BENEFITS

The following table discloses the number of shares subject to awards (all of
which have been stock options) that have been granted under the 1995 Plan as of
April 2, 1999 to the (i) Chief Executive Officer and the Named Executive
Officers, (ii) the Company's current executive officers as a group, (iii) all
current directors who are not executive officers as a group, (iv) all nominees
for director as a group, and (v) all employees, other than executive officers as
a group. The closing price of the Company's Common Stock on the NASDAQ Market
was $8.625 on April 1, 1999.

25
<PAGE>

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND POSITION UNDERLYING OPTIONS
- ---------------------------------------------------------------------------------------------- ------------------
<S> <C>

Simon Hodson
Chief Executive Officer and Vice Chairman of the Board...................................... 20,960

William F. McLaughlin
President and Chief Operating Officer....................................................... 200,000

William F. Spengler
Senior Vice President and Chief Financial Officer........................................... 100,000

D. Scott Houston Senior
Vice President of Corporate Planning and Assistant Secretary................................ 262,000

Vincent J. Truant
Vice President, Marketing and Environmental Affairs and Public Relations.................... 75,000

John Daoud
Secretary................................................................................... 47,160

Richard Hulme
Former Executive Vice President and Chief Operating Officer (1)............................. 262,000

Total for current executive officers, as a group (seven persons).............................. 805,120

Total for non-executive directors, as a group (five persons).................................. 99,560

Total for all nominees for director, as a group (nine persons)................................ 367,680

Total for all employees, other than executive officers, as a group (8 persons)................ 409,620
</TABLE>

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

(1) Mr. Hulme was replaced as Chief Operating Officer by action of the Board of
Directors on May 19, 1998 when the Board appointed Mr. McLaughlin to serve
as Chief Operating Officer. Mr. Hulme resigned as an executive officer of
the Company effective as of July 1, 1998. On March 2, 1999, Mr. Hulme
resigned as an employee of the Company, effective as of June 30, 1999.

1995 PLAN DURATION

The 1995 Plan became effective as of November 27, 1995. The proposed Third
and Fourth Amendments will become effective as of the date of the Annual
Meeting, after they have been approved by the Company's stockholders. Awards may
not be granted under the 1995 Plan after November 26, 2005. Although Common
Shares may be issued after that date pursuant to awards granted prior to such
date, no Common Shares may be issued under the 1995 Plan after November 26,
2015.

AMENDMENTS TO THE 1995 PLAN

The Board of Directors may amend or terminate the 1995 Plan at any time and
in any manner, provided that (i) no such action of the Board may deprive the
recipient of any award or Director Option previously granted under the 1995 Plan
of his or her rights with respect thereto without his or her consent; (ii) the
section of the 1995 Plan governing the terms of Director Options shall not be
amended more than once every six months, other than to comply with changes in
the Internal Revenue Code (the "Code"), ERISA, or the rules and regulations
thereunder and (iii) if an amendment to the 1995 Plan would (A) increase the
maximum number of shares of Common Stock that may be issued pursuant to (1) all
awards, including Director Options, granted under the 1995 Plan, (2) all ISOs
granted under the 1995 Plan and (3) awards granted under the 1995 Plan during
any calendar year to one Employee, (B) change the class of persons eligible to
receive awards, including Director Options, under the 1995 Plan, (C) otherwise
materially increase the benefits under the 1995 Plan to participants who are
subject to Section 16 of the Exchange Act in a manner not specifically
contemplated in the 1995 Plan or (D) affect the 1995 Plan's compliance with Rule
16b-3 or applicable provisions of the Code, as amended from time to time, the

26
<PAGE>
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.

SUMMARY OF FIRST AMENDMENT

The First Amendment to the 1995 Plan (the "First Amendment") became
effective as of January 1, 1997. The First Amendment provided that Director
Options granted for the 1996 fiscal year would have an exercise price equal to
80% of the price per share at which the Company's Common Stock was first sold to
the public pursuant to the Company's initial public offering. This amended the
1995 Plan, with respect only to fiscal year 1996, which provided that Directors
Options would have an exercise price equal to the greater of (i) the aggregate
Fair Market Value (as defined in the 1995 Plan) on the grant date of such
options and (ii) the aggregate par value of the Common Stock on the grant date.
The First Amendment is attached hereto as part of Appendix A.

SUMMARY OF SECOND AMENDMENT

The Second Amendment to the 1995 Plan (the "Second Amendment") became
effective as of November 3, 1997. The Second Amendment amended the 1995 Plan by
authorizing the grant of Director Options at each annual meeting at which the
Directors are elected to office, commencing with the 1997 fiscal year. Under the
Second Amendment, the Directors Options vest and become exercisable on the day
prior to the next annual meeting of stockholders, if the Director is then in
office. Prior to the Second Amendment, the 1995 Plan had provided that Director
Options were issued, on the day following the date of each annual meeting of the
stockholders of the Company held on or after January 1, 1996, to each Director
who had served as a director for at least the preceding six months. The Second
Amendment is attached hereto as part of Appendix A.

SUMMARY OF PROPOSED THIRD AMENDMENT

The Third Amendment to the 1995 Plan is being presented to the Company's
stockholders for approval at the Annual Meeting. The Board of Directors approved
the Third Amendment to the 1995 Plan on February 4-5, 1999, subject to the
approval of the stockholders at the Annual Meeting, to (i) increase the
aggregate number of shares available for ISOs under the 1995 Plan from 4,585,000
to 10,000,000, (ii) increase the aggregate number of shares of Common Stock
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 the Common Stock) from 393,000 to 500,000, (iii) increase the
number of shares available for awards (including all ISOs) under the 1995 Plan
from 4,585,000 to 10,000,000, (iv) provide that the exercise price of any awards
granted under the Plan shall not be less than the fair market value of the
securities underlying the award on the date of grant and (v) change the name of
the 1995 Plan to reflect the previously adopted change in the Company's name.
The proposed Third Amendment to the 1995 Plan is attached hereto as part of
Appendix A.

SUMMARY OF PROPOSED FOURTH AMENDMENT

The Fourth Amendment to the 1995 Plan is also being presented to the
Company's stockholders for approval at the Annual Meeting. The Board of
Directors approved the Fourth Amendment to the 1995 Plan on March 16, 1999,
subject to the approval of the stockholders at the Annual Meeting, to provide
that each non-employee director who is elected at each annual meeting of
stockholders held on or after January 1, 1999, will automatically be granted a
Director Option, effective at the conclusion of such meeting which (i) will
immediately vest, (ii) will have a value at the time of grant of $120,000 based
on the Black-Scholes option pricing model, (iii) in the case of the grant to be
made at the Annual Meeting, will have an exercise price equal to $21.00 per
share and (iv) in the case of grants in subsequent years, will have an exercise
price equal to the average of the midpoint of the closing bid and closing asked
prices for shares of the Company's Common Stock for the three consecutive
trading days ending on the business day

27
<PAGE>
immediately preceding the date of grant. In addition, pursuant to the Fourth
Amendment, employee directors will no longer be entitled to receive Director
Options. The proposed Fourth Amendment to the 1995 Plan is attached hereto as
part of Appendix A.

FEDERAL INCOME TAX TREATMENT UNDER THE 1995 PLAN

The following is a brief description of the federal income tax treatment
which will generally apply to awards made under the 1995 Plan, based on federal
income tax laws in effect on the date hereof. The exact federal income tax
treatment of awards will depend on the specific nature of the award. Such an
award may, depending on the conditions applicable to the award, be taxable as an
option, as restricted or unrestricted stock, as a cash payment, or otherwise.
Because the following is only a brief summary of the general federal income tax
rules, recipients of awards should not rely thereon for individual tax advice,
as each taxpayer's situation and the consequences of any particular transaction
will vary depending upon the specific facts and circumstances involved. Each
taxpayer is advised to consult with his or her own tax advisor for particular
federal, as well as state and local, income and any other tax advice.

INCENTIVE STOCK OPTION

Pursuant to the 1995 Plan, Employees may be granted options which are
intended to qualify as ISOs. Generally, the optionee is not taxed and the
Company is not entitled to a deduction on the grant or the exercise of an ISO.
However, the amount by which the fair market value of the shares acquired upon
the exercise of an ISO ("Option Shares") exceeds the exercise price will be
included as a positive adjustment in the calculation of an optionee's
"alternative minimum taxable income" in the year of exercise, and thus the
exercise of an ISO may give rise to alternative minimum tax liability in the
year of exercise.

If the optionee sells the Option Shares at any time within one year after
the date of transfer of shares to the optionee pursuant to the exercise of such
ISO or two years after the date of grant of such ISO, then (1) such optionee
will recognize ordinary income in an amount equal to the excess, if any, of the
lesser of the amount realized on the sale or the fair market value of the Option
Shares on the date of exercise, over the exercise price of such ISO, (2) such
optionee will recognize capital gain in an amount equal to the excess, if any,
of the amount realized on the sale over the fair market value of the Option
Shares on the date of exercise, (3) such optionee will recognize capital loss
equal to the excess, if any, of the exercise price of such ISO over the amount
realized on the sale, and (4) the Company will generally be entitled to a
deduction in an amount equal to the ordinary income recognized by such optionee.
If the optionee sells the Option Shares at any time after the optionee has held
the Option Shares for at least one year after the date of transfer of the Option
Shares to the optionee pursuant to the exercise of the ISO and two years after
the date of grant of the ISO, then the optionee will recognize capital gain or
loss equal to the difference between the sales price and the exercise price of
such ISO, and the Company will not be entitled to any deduction.

NONQUALIFIED OPTIONS

A Nonqualified Option, which is an option or other similar right to acquire
stock which does not qualify for treatment as an ISO, including a Director
Option granted to a non-employee director, is generally not a taxable event for
the optionee. Upon exercise of the option, the optionee will generally recognize
ordinary income in an amount equal to the excess of the fair market value of the
stock acquired upon exercise (determined as of the date of the exercise) over
the exercise price of such option, and the Company will be entitled to a tax
deduction equal to such amount. See "Special Rules for Awards Granted to
Insiders," below. A subsequent sale of the stock generally will give rise to
capital gain or loss equal to the difference between the amount realized on the
sale and the sum of the exercise price paid for such share plus the ordinary
income recognized with respect to such share.

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<PAGE>
SPECIAL RULES FOR AWARDS GRANTED TO INSIDERS

If an optionee is a director, officer or stockholder subject to Section 16
of the Exchange Act (an "Insider"), the determination of the amount and the
timing of income recognition in connection with the exercise of an option or the
receipt or vesting of other awards generally may be required to be deferred
until the expiration of any period during which the Insider would be restricted
from disposing of any stock received. Insiders should consult their tax advisors
to determine the tax consequences to them of exercising options granted to them
pursuant to the 1995 Plan.

RESTRICTED STOCK

Awards under the 1995 Plan may also include stock sales, stock bonuses or
other grants of restricted or unrestricted stock. As a general rule, a recipient
will recognize ordinary income (and the Company will be entitled to a deduction)
equal to the fair market value of the unrestricted shares of the Company's stock
that are transferred to the recipient for services. In the case of restricted
shares, however, unless the recipient makes an election under Section 83(b) of
the Code (an "83(b) Election") within thirty (30) days after the receipt of the
restricted shares, the recipient generally will not be taxed on the receipt of
the shares until the restrictions on such shares expire or are removed. When the
restrictions expire or are removed, the recipient will recognize ordinary income
(and the Company will be entitled to a deduction) in an amount equal to the
excess of the fair market value of the shares at that time over the purchase
price. However, if the recipient makes an 83(b) Election within thirty (30) days
of the transfer of restricted shares to the recipient, he or she will recognize
ordinary income (and the Company will be entitled to a deduction) equal to the
excess of the fair market value of the shares on the date of the transfer over
their purchase price. In the case of an Insider (as defined above), the timing
of income recognition (including the date used to compute the fair market value
of shares) with respect to restricted shares may be deferred, as described above
in "Special Rules for Awards Granted to Insiders," unless the Insider makes a
valid 83(b) Election.

MISCELLANEOUS TAX ISSUES

Awards may be granted under the 1995 Plan which do not fall clearly into the
categories described above. The federal income tax treatment of these awards
will depend upon the specific terms of such awards. Generally, the Company will
be required to make arrangements for withholding applicable taxes with respect
to any ordinary income recognized by an employee in connection with awards made
under the 1995 Plan.

The terms of the agreements pursuant to which specific awards are made to
employees under the 1995 Plan may provide for accelerated vesting or payment of
an award in connection with a change in ownership or control of the Company. In
that event and depending upon the individual circumstances of the recipient,
certain amounts with respect to such awards may constitute "excess parachute
payments" under the "golden parachute" provisions of the Code. Pursuant to these
provisions, a recipient will be subject to a non-deductible 20% excise tax on
any "excess parachute payments" and the Company will be denied any deduction
with respect to such payment. Recipients of awards should consult their tax
advisors as to whether accelerated vesting of an award in connection with a
change of ownership or control of the Company would give rise to an excess
parachute payment.

As stated above, the Company obtains a deduction generally equal to the
ordinary income recognized by an optionee in connection with an award. However,
the Company's deduction for compensation (including deductions arising from
awards) paid to certain corporate officers or other employees may be limited to
$1 million (per person) annually.

YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE THIRD AND
FOURTH AMENDMENTS TO THE 1995 STOCK INCENTIVE PLAN AS SET FORTH IN PROPOSAL
THREE.

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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

All relationships and related transactions reported in this Proxy Statement
are included under the caption "Compensation Committee Interlocks and Insider
Participation."

OTHER MATTERS

SUBMISSION OF STOCKHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL
MEETING. Stockholders interested in presenting a proposal for consideration at
the Company's 2000 annual meeting of stockholders may do so by following the
procedures prescribed by Rule 14a-8 under the Exchange Act and the Company's
Bylaws. To be eligible for inclusion in the proxy statement and proxy card,
stockholder proposals must be received by the Company's Secretary at the
Company's principal executive offices at 111 S. Calvert Street, Suite 1950,
Baltimore, Maryland 21202 no later than December 17, 1999. Stockholders who
intend to present a proposal at the 2000 annual meeting, without including such
proposal in the Company's proxy statement, must provide the Company's Secretary
with written notice of such proposal no later than March 2, 2000.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Based solely upon
a review of Securities and Exchange Commission Forms 3, 4 and 5 furnished to the
Company and certain written representations, the Company believes that all
reports required by Section 16(a) of the Exchange Act with respect to the
Company's fiscal year ended December 31, 1998 have been filed by its officers
and directors, except that Form 3 Statements of Beneficial Ownership of
Securities were inadvertently filed late by Messrs. Khashoggi, Hodson, Hulme,
Houston, Hagerty, Daoud, Argyropolous, Jones, Marquard, Phillips and Rubinstein
and Ms. Khashoggi and six transactions were inadvertently not timely reported on
Form 4 Statements of Beneficial Ownership that were filed by each of EKI, Mr.
Khashoggi and Ms. Khashoggi.

OTHER MATTERS. The Board of Directors of the Company knows of no matters to
be presented at the Annual Meeting other than those described in this proxy
statement. Other business may properly come before the meeting, and in that
event it is the intention of the persons named in the accompanying proxy to vote
in accordance with their judgment on such matters.

ANNUAL REPORT. The Company's Annual Report to Stockholders, including the
Company's audited financial statements for the year ended December 31, 1998, is
being mailed herewith to all stockholders of record. THE COMPANY WILL PROVIDE
WITHOUT CHARGE TO ANY PERSON SOLICITED HEREBY, UPON THE WRITTEN REQUEST OF ANY
SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K. SUCH REQUESTS
SHOULD BE DIRECTED TO CONTROLLER OF THE COMPANY AT 111 S. CALVERT STREET, SUITE
1950, BALTIMORE, MARYLAND 21202.

ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN AND RETURN THE ACCOMPANYING
PROXY CARD IN THE ENCLOSED ENVELOPE.

By Order of the Board of Directors

[/S/ JOHN DAOUD]

John Daoud
Secretary

Baltimore, Maryland
April 23, 1999

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<PAGE>
APPENDIX A
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"), and (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 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;

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(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

(E) 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
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 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

32
<PAGE>
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 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

(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.

(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.

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<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. DURATION 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.

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;

34
<PAGE>
(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.

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

(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.

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<PAGE>
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.

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<PAGE>
EARTHSHELL CONTAINER CORPORATION

FIRST AMENDMENT
TO
1995 STOCK INCENTIVE PLAN
OF
EARTHSHELL CONTAINER CORPORATION

The 1995 Stock Incentive Plan (the "Plan") of EarthShell Container
Corporation, a Delaware corporation (the "Company'), is hereby amended by adding
to Section 4(e) of the Plan the following sentence:

"Notwithstanding the foregoing, each Director Option granted for the 1996
fiscal year shall have an exercise price equal to 80% of the price per share at
which the Company's Common Shares are first sold to the public pursuant to the
initial public offering of the Company."

IN WITNESS WHEREOF, the Company has caused this First Amendment to be duly
executed as of this 1st day of May, 1997 and is effective as of January 8, 1997.

<TABLE>
<S> <C> <C>
EARTHSHELL CONTAINER CORPORATION,
a Delaware corporation

By: /s/ SIMON K. HODSON
-----------------------------------------
Simon K. Hodson,
Vice Chairman of the Board and
Chief Executive Officer
</TABLE>

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<PAGE>
SECOND AMENDMENT
TO
1995 STOCK INCENTIVE PLAN
OF
EARTHSHELL CONTAINER CORPORATION

The 1995 Stock Incentive Plan, as amended (the "Plan") of EarthShell
Container Corporation, a Delaware corporation (the "Company"), is hereby amended
as of November 3, 1997 as follows:

1. Section 4(b) of the Plan is amended and restated in its entirety and
the following new Section 4(b) is substituted therefor:

(b) Each director who has served as a director at an annual meeting
of the stockholders of the Company held on or after January 1, 1996
shall, on the day following the date of such meeting, automatically be
granted a Director Option to purchase 20 Common Shares for service as a
director for the forthcoming year. Such Director Option shall vest, and
become exercisable with respect to all of such Common Shares, on the day
immediately prior to the date of the next annual meeting of the
stockholders of the Company, assuming such director continues to serve as
a director of the Company through the day immediately prior to the date
of such next annual meeting.

2. Except as modified by this Second Amendment, the Plan shall remain
unchanged and shall remain in full force and effect.

3. This Amendment shall be governed by and construed in accordance with
the internal laws of the State of California.

IN WITNESS WHEREOF, the Company has caused this Second Amendment to be duly
executed as of the date first written above.

EARTHSHELL CONTAINER CORPORATION

By: /s/ SCOTT HOUSTON
-----------------------------------

Name: Scott Houston
Title: Chief Financial Officer

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<PAGE>
EARTHSHELL CORPORATION

THIRD AMENDMENT
TO
1995 STOCK INCENTIVE PLAN
OF
EARTHSHELL CONTAINER CORPORATION

The 1995 Stock Incentive Plan of EarthShell Container Corporation, a
Delaware corporation, as amended by the First Amendment to 1995 Stock Incentive
Plan of EarthShell Container Corporation and the Second Amendment to 1995 Stock
Incentive Plan of EarthShell Container Corporation (the "Plan"), subject to the
approval of the stockholders of EarthShell Corporation, a Delaware corporation,
is hereby amended as follows:

1. The reference in the title of the Plan and in the first sentence of
the Plan to "EarthShell Container Corporation" is hereby amended and
restated to be "EarthShell Corporation."

2. Section 5(a) of the Plan hereby amended to provide that the aggregate
number of Common Shares that may be issued pursuant to all Incentive Stock
Options granted under the Plans shall not exceed 10,000,000;

3. Section 5(b) of the Plan is hereby amended by increasing the maximum
aggregate number of Common Shares that may be 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)
from 393,000 to 500,000;

4. Section 5(c) of the Plan is hereby amended to provide that the
aggregate number of Common Shares issued and issuable pursuant to all Awards
(including all Incentive Stock Options) granted under the Plans shall not
exceed 10,000,000;

5. Notwithstanding any provision in the Plan to the contrary, in no
event shall the exercise price of any Awards granted under the Plan be less
than fair market value at the time of the grant.

Except as amended hereby, the Plan shall continue in full force and effect.

IN WITNESS WHEREOF, the Corporation has caused this Third Amendment to be
duly executed effective as of this 5th day of February, 1999.

EARTHSHELL CORPORATION,
a Delaware corporation

By: /s/ D. Scott Houston
--------------------------------------

39
<PAGE>
EARTHSHELL CORPORATION

FOURTH AMENDMENT
TO
1995 STOCK INCENTIVE PLAN
OF
EARTHSHELL CORPORATION

The 1995 Stock Incentive Plan of EarthShell Corporation, a Delaware
corporation, as amended by the First Amendment to 1995 Stock Incentive Plan of
EarthShell Container Corporation, the Second Amendment to 1995 Stock Incentive
Plan of EarthShell Container Corporation and the Third Amendment to 1995 Stock
Incentive Plan of EarthShell Container Corporation (the "Plan"), subject to the
approval of the stockholders of EarthShell Corporation, a Delaware corporation,
is hereby amended as follows:

1. Section 4(b) of the Plan is hereby deleted in its entirety and replaced
with the following:

(b) Each director who is not a paid employee of EarthShell and who is
elected to serve as a director at an annual meeting of the stockholders of
the Company held on or after January 1, 1999 shall, on the date of such
meeting and immediately following the conclusion of such meeting,
automatically be granted a Director Option having a value at the time of
grant equal to $120,000 based on the Black-Scholes option pricing model.
Such Director Option shall immediately vest, and become exercisable with
respect to all of the Common Shares to which such Director Option relates on
the date of grant and, in the case of the grant to be made at the 1999
Annual Meeting of Stockholders, will have an exercise price of $21.00 per
share and, in the case of grants that are made in subsequent years, will
have an exercise price equal to the average of the midpoint of the closing
bid and closing asked prices for shares of the Corporation's Common Stock
for the three consecutive trading days ending on the business day
immediately preceding the date of the grant.

Except as amended hereby, the Plan shall continue in full force and effect.

IN WITNESS WHEREOF, the Corporation has caused this Fourth Amendment to be
duly executed effective as of this 16th day of March, 1999.

EARTHSHELL CORPORATION,
a Delaware corporation

By: /s/ D. Scott Houston
--------------------------------------

40
<PAGE>
EARTHSHELL CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS

The undersigned stockholder of EarthShell Corporation, a Delaware
corporation, acting under the Delaware General Corporation Law, hereby
constitutes and appoints Simon K. Hodson and William F. McLaughlin, and each of
them, the attorneys and proxies of the undersigned, each with the power of
substitution, to attend and act for the undersigned at the Annual Meeting of
Stockholders of said corporation to be held on May 14, 1999, at 10:00 A.M., at
the Harbor Court Hotel, 550 Light Street, Baltimore, Maryland, and at any
adjournments thereof in connection therewith to vote and represent all of the
shares of common stock of said corporation which the undersigned would be
entitled to vote, as follows:

<TABLE>
<S> <C> <C>
(1) ELECTION OF DIRECTORS
/ / FOR the nominees listed below / / WITHHOLD AUTHORITY to vote for the nominees listed below
If you wish to withhold authority to vote for any individual nominee, strike a line through the nominee's name in the
list below:
ESSAM KHASHOGGI LAYLA KHASHOGGI
SIMON K. HODSON WILLIAM A. MARQUARD
WILLIAM F. McLAUGHLIN JEROLD H. RUBINSTEIN
JOHN DAOUD HOWARD J. MARSH
ELLIS B. JONES
(2) PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS
/ / Approve / / Disapprove / / Abstain
(3) PROPOSAL TO AMEND THE COMPANY'S 1995 STOCK INCENTIVE PLAN
/ / Approve / / Disapprove / / Abstain
(4) OTHER BUSINESS: In their discretion the proxies are authorized to vote upon such other business as may properly come
before the meeting or any adjournment thereof.
</TABLE>

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
EARTHSHELL CORPORATION
<PAGE>
Each of the above-named proxies present at said meeting, either in person or
by substitute, shall have and exercise all the powers of said proxies hereunder.
This proxy will be voted in accordance with the choices specified by the
undersigned on the other side of this proxy. IF NO INSTRUCTIONS TO THE CONTRARY
ARE INDICATED HEREON, THIS PROXY WILL BE TREATED AS A GRANT OF AUTHORITY TO VOTE
FOR THE ELECTION OF THE NOMINEES FOR THE BOARD OF DIRECTORS NAMED ON THE OTHER
SIDE HEREOF AND AS A GRANT OF AUTHORITY TO VOTE FOR THE OTHER PROPOSALS STATED
ON THE OTHER SIDE HEREOF.

The undersigned acknowledges receipt of a copy of the Notice of Annual
Meeting and Proxy Statement relating to the meeting.

----------------------------------
Signature

----------------------------------
Signature (if held jointly)

Date:
----------------------------------

Please sign your name exactly as
it appears on this Proxy. When
signing as an attorney, executor,
administrator, trustee or
guardian, please give your full
title as such.

WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE SIGN, DATE
AND RETURN YOUR PROXY PROMPTLY IN THE POSTAGE PREPAID ENVELOPE PROVIDED.
I/we plan / / do not plan / / to attend the stockholders meeting.