Unassociated Document


    

      
        	 
	
                LIQUID
                  STONE MANUFACTURING, INC.

                 

                EXCLUSIVE
                  OEM & LICENSE
                  AGREEMENT

              


      

      


      Contract
        No. ______________

       

      THIS
        EXCLUSIVE OEM & LICENSE AGREEMENT ("Agreement") is made by and between
        Special Stone Surfaces, Es3 Inc., a Nevada corporation, having its principal
        place of business at 6330 Nancy Ridge Drive, Suite 108, San Diego, CA 92121,
        on
        behalf of itself and its affiliates, including but not limited to, its parent,
        subsidiaries, and successors and any entity merged into or with Special Stone
        Surfaces, Es3 Inc. (hereinafter referred to as "OEM") and Liquid Stone
        Manufacturing, Inc., a Nevada corporation, having its principal place of
        business at 2346 E. Russell Road, Las Vegas, NV 89119 (hereinafter referred
        to
        as "Licensor"). This Agreement shall be effective as of the last date written
        below ("Effective Date").

       

      WHEREAS,
        the parties desire that OEM acquire from Licensor the right to manufacture,
        develop, license, sublicense and distribute and integrate with other products,
        the "Technology" (as defined herein below), on the terms and conditions set
        forth herein. This Agreement consists of: 

       

      
        	·  	
                this
                  signature page

              


      

      
        	·  	
                the
                  attached Terms and Conditions

              


      

      
        	·  	
                Exhibit
                  A (Technology)

              


      

      
        	·  	
                Exhibit
                  B (Royalties and Minimum Fees)

              


      

      
        	·  	
                Exhibit
                  C (Licensed Trademarks)

              


      

      
        	·  	
                Exhibit
                  D (Confidentiality Agreement)

              


      

      
        	·  	
                Exhibit
                  E (Warrant Agreement)

              


      

      
        	·  	
                Exhibit
                  F (Buy Out Option)

              


      

       

      OEM
        and
        Licensor have read, understand and agree to the terms of this Agreement and
        the
        undersigned represents that he or she is duly authorized to sign this Agreement
        on behalf of their respective party.

      
        
          	 	 	 
	Special
                  Stone
                  Surfaces, Es3 Inc. 	 	Liquid
                  Stone
                  Manufacturing, Inc 
	 	 	 
	June
                  15, 2005 	 	June
                  15, 2005 
	Date 	 	Date 
	 	 	 
	/s/
                  ROSS LYNDON-JAMES 	 	/s/
                  ROSS LYNDON-JAMES 
	Signature 	 	Signature 
	 	 	 
	Ross
                  Lyndon-James	 	Ross
                  Lyndon-James 
	Print
                  Name 	 	Print
                  Name 
	 	 	 
	President 	 	President 
	Title 	 	Title 
	 	 	 
	
                  Telecopier 

                	 	
                  Telecopier 

                


        

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      EXCLUSIVE
        OEM & LICENSE AGREEMENT

      TERMS
        AND CONDITIONS

       

      1.  DEFINITIONS

       

      1.1  "Affiliate" of
        a
        party shall mean any entity which controls, is controlled by, or is under
        common
        control with that party, where control means ownership or control, direct
        or
        indirect, of more than fifty percent (50%) of the stock or other equity interest
        entitled to vote for the election of directors or equivalent governing body
        of
        the entity. 

       

      1.2  "Confidential
        Information" shall
        have the meaning specified in Exhibit D attached hereto.

       

      1.3  "Distributor" shall
        mean any third party distributors, resellers or other intermediaries through
        whom OEM distributes Products utilizing the Technology.

       

      1.4  "Documentation" shall
        mean the written materials related to the Technology to be provided to end
        user
        customers purchasing Products.

       

      1.5  "Effective
        Date" shall
        mean the date of execution of this Agreement (including any counterpart
        original), as indicated on the signature page.

       

      1.6  "Product" shall
        mean each product that OEM develops using the Technology.

       

      1.7  "Technology" shall
        mean Licensor's technology, information, trade-secrets, other intellectual
        property and products related thereto set forth on Exhibit A attached hereto
        as
        amended from time to time and shall include all improvements, enhancements,
        upgrades, modifications and developments relating directly or indirectly
        thereto.

       

      1.8  "Trademarks"
        shall mean Licensor's trademarks, servicemarks or tradenames.

       

      2.  LICENSE
        GRANT

       

      2.1  License.
        Subject
        to the terms, conditions and restrictions of this Agreement, including the
        provisions of Exhibit B, Licensor hereby grants to OEM an exclusive,
        sub-licensable, assignable, terminable, royalty bearing, non-transferable
        license in North America, Central America and South America (the "Territory")
        only during the term of this Agreement:

       

      (a)  to
        use
        the Technology to manufacture, support and maintain Products.

       

      (b)  to
        distribute Products in the Territory; and

       

      (c)  to
        use,
        copy and distribute the Documentation in connection with distribution of
        Products.

       

      2.2  Distribution
        Channels.
        This
        license is sublicensable and OEM shall be entitled to distribute Products
        directly to end users, through Distributors or via retail channels, or other
        commercially reasonable means.

       

      2.3  No
        Rights to Derivative Works or Improvements so long as this Agreement is in
        Effect.

       

      (a)  OEM
        shall
        have no rights, other than the license rights set forth herein, with respect
        to
        the Technology and agrees not to reverse engineer the Technology or to reverse
        assemble, decompile, or otherwise attempt to derive the composition of the
        Technology. No right to modify or otherwise prepare derivative works of the
        Technology is granted.

       

      (b)  Any
        unauthorized modifications, derivative works, or any other intellectual
        property, or prospective jointly owned intellectual property, created directly
        or indirectly using or referring to the Technology, or components thereof,
        or
        enhancements of the Technology, shall belong exclusively to Licensor and
        OEM
        hereby assigns all rights in them (including without limitation, moral rights)
        to Licensor. OEM agrees to promptly enter into any further documentation
        required by Licensor in its sole discretion to legally or commercially effect
        such assignment, including, without limitation, ensuring that its employees
        and/or contractors do the same. OEM hereby expressly waives any rights it
        may
        obtain which are inconsistent with the foregoing. 

       

      2.4  Ownership.
        Subject
        only to the limited rights and licenses expressly granted to OEM in this
        Agreement, Licensor shall retain and own all right, title and interest in
        the
        Technology and Documentation, and each copy thereof and all intellectual
        property rights with respect thereto. 

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

         

      

      3.  USE
        OF Licensor's
        TRADEMARKS

       

      3.1  Limited
        Rights.
        OEM
        shall not acquire ownership of any Trademarks and shall not use such property
        or
        rights in any manner, except as herein permitted.

       

      3.2  License.
        Licensor hereby grants OEM an exclusive, transferable, sub-licensable, except
        as
        expressly provided in this Agreement, non-assignable, terminable, license
        in the
        Territory to use only those Trademarks identified in Exhibit D to this Agreement
        and those additional Trademarks approved by Licensor in writing from time
        to
        time ("Licensed Trademarks"), for the authorized uses specified herein.


       

      3.3  Control.
        OEM
        acknowledges and agrees that any and all use of the Licensed Trademarks by
        OEM
        inures solely to the benefit of Licensor and that Licensor reserves the right
        in
        its sole discretion to control the nature and quality of the goods sold or
        services rendered by OEM utilizing the Licensed Trademarks.

       

      3.4  Ownership
        by Licensor.
        OEM
        acknowledges and agrees that Licensor holds all right, title and interest
        in the
        Licensed Trademarks. Any and all goodwill arising from OEM's use of the Licensed
        Trademarks shall inure solely to the benefit of Licensor, and neither during
        nor
        after the termination of this Agreement and the license granted hereunder
        shall
        OEM assert any claim to the Licensed Trademarks (or any confusingly similar
        mark) or such goodwill. OEM shall not directly or indirectly, during the
        term of
        this Agreement or thereafter, through itself or third parties, challenge
        Licensor's rights in the Licensed Trademarks. In no event shall OEM seek
        to
        register any Licensed Trademark or any other mark used by Licensor in any
        country, state or territory thereof. In the event that the laws, regulations
        or
        practices of any legal jurisdiction convey any right in any Licensed Trademark
        used by Licensor to OEM, OEM hereby assigns such right or interest to Licensor
        and agrees to enter into any further documentation required by Licensor,
        in its
        sole discretion, to perfect ownership of such right or interest in Licensor.
        OEM
        agrees to ensure that its successors, assigns and affiliated companies, if
        any,
        comply with the terms of this provision.

       

      4.  FEES

       

      4.1  Prices.
        OEM
        shall pay to Licensor the applicable royalties and all other related fees
        as set
        forth in Exhibit B for the Technology and other exclusive rights provided
        pursuant to this Agreement. 

       

      4.2  Payments.
        OEM
        will report its sales of Products to Licensor quarterly within thirty (30)
        days
        of the end of each calendar quarter. The report will include the information
        reasonably necessary to calculate the royalties due hereunder. At the time
        of
        furnishing the report, OEM will pay to Licensor all unpaid royalties that
        accrued during the prior calendar quarter.

       

      4.3  Interest.
        OEM
        shall pay to Licensor interest on overdue payments at an annual rate of 18
        percent, compounded monthly, or, if lower, the maximum rate permitted by
        law.

       

      4.4  Taxes.
        All
        payments to Licensor hereunder shall be net of all VAT, customs duties, sales,
        use and other taxes or charges that may be imposed upon such payments. If
        OEM
        shall be obliged to deduct any withholding tax from the royalties to be paid
        pursuant to this Agreement in accordance with any applicable tax law, OEM
        shall
        (i) pay such additional amounts as are necessary to ensure that the net amount
        actually received by Licensor, free and clear of all such taxes, will equal
        the
        full amount that Licensor would have received had no such taxes been levied,
        and
        (ii) promptly provide Licensor with the necessary certificate required by
        any
        applicable tax law showing, inter alia, that such deductions have been made.
        Licensor shall, at the request of OEM, apply for, and use reasonable endeavors
        to obtain, an exemption certificate or direction to pay gross in relation
        to
        withholding taxes on royalties under any applicable tax law.

       

      4.5  Warrants.
        As
        additional compensation to Licensor under this Agreement, OEM shall issue
        to
        Licensor warrants pursuant to a warrant agreement attached as substantially
        in
        the form of Exhibit E. 

       

      5.  TECHNICAL
        SUPPORT
        

       

      5.1  OEM
        will
        provide direct, technical support to OEM's customers or other end users of
        Products. OEM shall at all times maintain competent and sufficient technical
        and
        sales personnel to satisfy OEM's support obligation with respect to any Products
        or Technology. OEM's technical support function shall at a minimum include,
        but
        not necessarily be limited to: using OEM's best efforts to answer Product
        and
        Technology use questions, diagnose problems, if any, and provide solutions
        to
        problems.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      5.2  OEM
        will
        designate one of its employees as the Licensor contact person to whom Licensor
        shall provide second level technical support for Licensor Technology by
        telephone, facsimile or electronic mail. Licensor shall use commercially
        reasonable efforts to provide solutions to reported problems. Licensor shall
        have no obligation to provide consultation with OEM's Distributors or end
        users.


       

      6.  SALES
        SUPPORT

       

      6.1  Marketing
        and Sales.
        During
        the term of this Agreement, at OEM's request and subject to availability
        and
        scheduling, Licensor will provide to OEM reasonable trade show support and
        joint
        sales calls on key customers, with respect to the Products and Technology.
        In
        addition, the parties will provide to each other reasonable cooperation in
        promoting the Technology and Products in regions in which OEM (or its
        Distributors) are marketing Products.

       

      7.  TERM
        AND TERMINATION

       

      7.1  Term.
        This
        Agreement shall continue for an initial term of thirty (30) years (commencing
        on
        the Effective Date, unless sooner terminated in accordance herewith). The
        parties may extend the term or enter into a new agreement only by their formal,
        mutual consent expressed in writing. Nothing set forth in this Agreement,
        no
        course of conduct, and no oral statements shall be deemed to constitute such
        consent. In the event that through application of law or otherwise, OEM is
        provided rights to compensation or to extend the term of this Agreement,
        OEM
        expressly waives any and all such rights as part of the consideration for
        Licensor entering into this Agreement.

       

      7.2  Default.
        

       

      (a)  If
        OEM
        fails to comply with any material undisputed payment obligation under this
        Agreement, and such failure is not remedied by OEM within 60 days following
        written notice from Licensor, Licensor may terminate this Agreement. For
        all
        other breaches, Licensor shall have no right to terminate this Agreement
        as it
        relates to OEM's right to sell the Products, and Licensor must rely solely
        on
        the recovery of damages and/or injunctive relief as appropriate in response
        to
        acts by OEM which are inconsistent with the rights granted hereunder.


       

      (b)  In
        the
        event of default by OEM for reason of non-payment only, Licensor in addition
        shall be entitled, on written notice to OEM, to require that OEM immediately
        cease all use and distribution of the Technology or Products until this default
        has been fully cured.

       

      7.3  Insolvency.
        This
        Agreement may be terminated by either party, upon 30 days prior written
        notice:

       

      (a)  upon
        the
        institution by the other party of insolvency, receivership or bankruptcy
        proceedings or any other proceedings for the settlement of its
        debts;

       

      (b)  upon
        the
        institution of such proceedings against the other party, which are not dismissed
        or otherwise resolved in its favor within sixty (60) days
        thereafter;

       

      (c)  upon
        the
        other party's making a general assignment for the benefit of creditors,
        or

       

      (d)  upon
        the
        other party's dissolution or ceasing to conduct business in the normal
        course.

       

      7.4  Survival.

       

      (a)  Except
        as
        otherwise set forth herein, the parties' rights and obligations pursuant
        to
        Sections 8 and 9 shall survive any termination or expiration of this Agreement.
        

       

      (b)  If
        this
        Agreement is terminated or expires, then all of OEM's rights and licenses
        with
        respect to the Technology shall terminate, provided that, OEM shall be entitled
        to dispose of Products in its possession on the termination date, in accordance
        with OEM's royalty and other obligations pursuant to this Agreement.


       

      8.  WARRANTY

       

      8.1  Warranty.
        Licensor warrants that it owns the Technology or has all rights necessary
        to
        convey the licenses granted under this Agreement. Licensor warrants that
        Products manufactured by OEM in accordance with the specifications of the
        Technology will meet the applicable product specifications and be free of
        defects in materials and workmanship for a warranty period equal to twelve
        (12)
        months from the date that the materials are received by a customer as a Product.
        This warranty is provided to OEM only and does not apply to defects caused
        by
        misuse, abuse or any other use than the normal intended use of the materials
        or
        Products. OEM's exclusive remedy, and Licensor's sole liability, arising
        out of
        this warranty shall be for Licensor to repair any defect in the Technology
        and
        to provide replacement materials to OEM for defective materials returned
        by OEM
        to Licensor during the warranty period.

       

      
        
          
          

        

        
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      8.2  DISCLAIMER.
        EXCEPT
        AS EXPRESSLY SET FORTH IN THIS AGREEMENT, AND TO THE MAXIMUM EXTENT PERMITTED
        BY
        APPLICABLE LAW, LICENSOR MAKES NO REPRESENTATIONS, WARRANTIES, CONDITIONS
        OR
        GUARANTEES, EITHER EXPRESS, IMPLIED, STATUTORY, ORAL, WRITTEN OR OTHERWISE,
        WITH
        RESPECT TO THE SERVICES OR GOODS COVERED BY OR FURNISHED PURSUANT TO THIS
        AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY (i) OF
        SATISFACTORY QUALITY, (ii) OF FITNESS FOR A PARTICULAR PURPOSE, OR (iii)
        ARISING
        FROM COURSE OF PERFORMANCE, COURSE OF DEALING, OR USAGE OF TRADE.

       

      8.3  LIMITATION
        OF LIABILITY.
        TO THE
        MAXIMUM EXTENT PERMITTED UNDER APPLICABLE LAW, EXCEPT AS EXPRESSLY PROVIDED
        TO
        THE CONTRARY IN THIS AGREEMENT, THE LIABILITY OF LICENSOR AND ITS AFFILIATES
        UNDER THIS AGREEMENT TO OEM, REGARDLESS OF THE BASIS OF LIABILITY OR THE
        FORM OF
        ACTION, SHALL IN NO EVENT EXCEED THE TOTAL FEES PAID TO LICENSOR BY OEM,
        NET OF
        ALL DISCOUNTS, REBATES, AND
        REFUNDS,
        FOR THE SERVICES OR GOODS DIRECTLY CAUSING THE LIABILITY. IN NO EVENT SHALL
        LICENSOR OR ITS AFFILIATES BE LIABLE FOR INDIRECT, SPECIAL, INCIDENTAL,
        PUNITIVE, CONSEQUENTIAL OR OTHER DAMAGES HOWEVER CAUSED, WHETHER FOR BREACH
        OF
        CONTRACT, NEGLIGENCE OR OTHERWISE, AND WHETHER OR NOT THEY HAVE BEEN ADVISED
        OF
        THE POSSIBILITY OF SUCH DAMAGES. THE ESSENTIAL PURPOSE OF THIS SECTION IS
        TO
        LIMIT THE POTENTIAL LIABILITY OF LICENSOR AND ITS AFFILIATES ARISING OUT
        OF THIS
        AGREEMENT.

       

      9.  CONFIDENTIALITY

       

      9.1  Confidential
        Information.
        In
        connection with the transactions contemplated by this Agreement, the parties
        may
        become exposed to Confidential Information of the other. Accordingly, the
        parties shall be bound by the terms of the Confidentiality Agreement attached
        hereto as Exhibit D. 

       

      10.  GENERAL

       

      10.1  Governing
        Law.
        OEM
        acknowledges that OEM is based in the State of California, U.S.A. and requires
        uniformity and consistency in the laws under which it deals with all its
        domestic and international Licensors, and the services which are the subject
        matter of this Agreement are being provided in California. Accordingly, this
        Agreement shall be governed and construed in accordance with the laws of
        California, U.S.A., without regard to any conflicts of law
        principles.

       

      10.2  Forum
        Selection.
        All
        disputes arising out of this Agreement shall be subject to the exclusive
        jurisdiction of the state or federal courts in the County of San Diego, State
        of
        California; and the parties agree and submit to the personal and exclusive
        jurisdiction and venue of these courts. OEM hereby waives any and all rights
        it
        may have in and to any other forum or any other applicable law.

       

      10.3  Government
        Requirements.
        OEM
        shall obtain and maintain all permits, licenses and government registrations
        necessary or appropriate to facilitate OEM's performance hereunder and for
        OEM
        to perform hereunder and shall make all filings with governmental authorities
        required of this Agreement by applicable law.

       

      10.4  Severability.
        If any
        provision, or part thereof, of this Agreement is judicially declared invalid,
        void or unenforceable, each and every other provision, or part thereof,
        nevertheless shall continue in full force and effect, and the unenforceable
        provision shall be changed or interpreted so as best to accomplish the
        objectives and intent of such provision within the limits of applicable
        law.

       

      10.5  Independent
        Contractor.
        The
        relationship of Licensor and OEM established by this Agreement is that of
        independent contractor. This Agreement does not give either party the power
        to
        direct and control the day to day activities of the other, and they shall
        take
        no action to directly or indirectly hold themselves out as legal partners,
        joint
        venturers, co-owners, principal agent, or otherwise participants in a joint
        or
        common undertaking, or allow either party to create or assume any obligation
        on
        behalf of the other party for any purpose whatsoever.

       

      
        
          
          

        

        
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      10.6  Entire
        Agreement Modification.
        This
        Agreement constitutes the entire agreement between the parties regarding
        the
        subject matter hereof and supersedes all prior or contemporaneous understandings
        or agreements, whether oral or written regarding the subject matter hereof.
        This
        Agreement shall be modified or amended only by a writing signed by both OEM
        and
        Licensor.

       

      10.7  Executory
        Contract.
        OEM and
        Licensor agree that this Agreement is an executory contract.

       

      10.8  Waiver.
        The
        failure of either party to enforce any of its rights hereunder or at law
        shall
        not be deemed a waiver or a continuing waiver of any of its rights or remedies
        against the other party, unless such failure or waiver is in
        writing.

       

      10.9  Assignment.
        

       

      (a)  By
        Licensor.
        This
        Agreement may be assigned by Licensor in its sole discretion without notice
        to
        any entity which assumes its obligations and acquires ownership of or the
        right
        to use, sell, distribute and license the Technology as herein contemplated.
        

       

      (b)  By
        OEM.
        Licensor makes this Agreement in reliance upon the reputation of OEM and
        its
        management, and accordingly this Agreement may not be assigned or encumbered
        by
        OEM without Licensor's prior written consent, which consent shall be in its
        sole
        discretion. 

       

      10.10  Notices.
        All
        notices, requests or other communications under this Agreement shall be in
        writing, and shall be sent to the parties at their addresses listed on page
        1
        above, and shall be deemed to have been duly given on the date of service
        if
        sent by facsimile (provided a hard copy is sent in one of the manners specified
        below), or on the day following service if sent by overnight air courier
        service
        with next day delivery and with written confirmation of delivery, or five
        (5)
        days after mailing if sent by first class, registered or certified mail,
        return
        receipt requested. Each party is required to notify the other party in the
        above
        manner of any change of address or change of project manager

       

      10.11  Force
        Majeure.
        Licensor shall not be liable for any delay or non-performance due to acts
        of
        God, natural casualties, war, trade embargoes, government regulations, strikes,
        power outages, material shortages, software viruses and/or bugs, civil unrest
        and/or other causes beyond its reasonable control (a "Force Majeure Event").
        If
        a Force Majeure Event occurs, Licensor shall give OEM written notice within
        ten
        (10) days of such occurrence, detailing the circumstances of the Force Majeure
        Event and an estimate of the anticipated delay in performance. Licensor shall
        use commercially reasonable efforts to develop a mutually acceptable work-around
        plan in an attempt to minimize the impact of the Force Majeure Event.
        Performance shall be resumed upon termination of the Force Majeure Event.
        If the
        Force Majeure Event is expected to continue for more than six (6) months,
        the
        parties shall discuss whether to terminate this agreement. 

       

      10.12  No
        Third Party Beneficiaries.
        Unless
        otherwise expressly provided, no provisions of this Agreement are intended
        or
        shall be construed to confer upon or give to any person or entity other than
        Licensor and OEM any rights, remedies or other benefits under or by reason
        of
        this Agreement.

       

      10.13  Compliance
        with Laws.
        OEM
        shall comply and instruct its Distributors to comply with all applicable
        laws
        and regulations applicable to its or their activities under this
        Agreement.

       

      10.14  Government
        Approvals.
        OEM
        represents and warrants that no consent or approval with any governmental
        authority is required in connection with the valid execution and performance
        of
        this Agreement. OEM shall be responsible for any required filings of this
        Agreement with any government agencies.

       

      10.15  English
        Language.
        English
        shall be used as the authoritative text of this Agreement, regardless of
        the
        existence of counterparts translated into another language, and all
        communications, arbitrations and other adjudications hereunder shall be made
        and
        conducted in English.

       

      10.16  Currency.
        All
        dollar amounts specified herein are in U.S. dollars, and all payments pursuant
        to this Agreement shall be in U.S. dollars. 

       

      10.17  Attorney's
        Fees.
        In the
        event a dispute arises regarding this Agreement, the prevailing party shall
        be
        entitled to its reasonable attorney's fees and expenses incurred in addition
        to
        any other relief to which it is entitled.

       

      10.18  Buy
        Out Option.
        All
        Technology and related intellectual property under this agreement may be
        purchased by OEM at its option at any time in accordance with the formula
        established in Exhibit F. 

       

      
        
          
          

        

        
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      EXHIBIT
        A

       

      Technology

       

      Technology:        
        Formulas
        for:

       

      Liquid
        Stone Acrylic Binder

       

      Flagstaff
        Liquid Sandstone

       

      White
        Liquid Sandstone

       

      Liquid
        Limestone

       

      Pebble
        Render Production Sheet

       

       

      Deliverables:      
        Not
        Applicable

       

      Type
        of
        License                
        Exclusive
        30 year right to manufacture, market and distribute Liquid Stone
        products 

      


      Territory   North
        America, Central America and South America

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
        B

       

      Royalties
        and Minimum Fees

       

      1.           
        ROYALTIES.

       

      OEM
        shall
        pay to Licensor a royalty for the license on the Technology in an amount
        equal
        to OEM's net sales of Products based on the following scale:

      
        	 	 
	Total sales:	Royalty 
	 	 
	$0 to $50 million 	7% 
	 	 
	$50 million to $150 million  	6% 
	 	 
	$150 million to $300 million  	5% 
	 	 
	$300 million to $600 million  	4% 
	 	 
	Over $600 million 	3% 


      

       

      For
        these
        purposes, "net sales" means the amount of revenue generated from the sale
        of
        Products, net of shipping, discounts, rebates, credits and returns

       

      2.            
        MINIMUM
        ANNUAL FEES

       

      As
        a
        condition of retaining its rights under this Agreement, OEM must pay royalties
        to Licensor in the minimum annual amount of US $200,000 for sales made during
        the first full calendar year of this Agreement. Thereafter the minimum annual
        royalty shall increase at the rate of twenty percent (20%) per annum for
        each
        year that this Agreement is in effect.

      


      
        
          
          

        

        
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      EXHIBIT
        C

       

      LICENSED
        TRADEMARKS

       

      None

       

      
        
          
          

        

        
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      EXHIBIT
        D

      

        
          	 
	
                   

                   

                  CONFIDENTIALITY
                    AGREEMENT

                


        

         

      

      Contract
        No. ______________

      


      THIS
        CONFIDENTIALITY AGREEMENT ("Agreement") is made by and between Special Stone
        Surfaces, Es3 Inc., a Nevada corporation, having its principal place of business
        at 6330 Nancy Ridge Drive, Suite 108, San Diego, CA 92121, on behalf of itself
        and its affiliates, including but not limited to, its parent, subsidiaries,
        and
        successors and any entity merged into or with Special Stone Surfaces, Es3
        Inc.
        and Liquid Stone Manufacturing, Inc., a Nevada corporation, having its principal
        place of business at 2346 E. Russell Road, Las Vegas, NV 89119. This Agreement
        is mutual and each party disclosing Confidential Information is referred
        to in
        this Agreement as "Disclosing Party", while the receiving party is referred
        to
        as "Receiving Party". This Agreement shall be effective as of the last date
        written below ("Effective Date").

       

      This
        Agreement consists of:

      


      
        	·  	
                this
                  signature page

              


      

      
        	·  	
                the
                  attached Terms and Conditions

              


      

      


      Each
        party has read, understands and agrees to the terms of this Agreement and
        the
        undersigned represents that he or she is duly authorized to sign this Agreement
        on behalf of each.

      
        
          
            	 	 	 
	Special
                    Stone
                    Surfaces, Es3 Inc. 	 	Liquid
                    Stone
                    Manufacturing, Inc 
	 	 	 
	June
                    15, 2005 	 	June
                    15, 2005 
	Date 	 	Date 
	 	 	 
	                                        
                    	 	 
	Signature 	 	Signature 
	 	 	 
	Ross
                    Lyndon-James	 	Ross
                    Lyndon-James 
	Print
                    Name 	 	Print
                    Name 
	 	 	 
	President 	 	President 
	Title 	 	Title 
	 	 	 
	
                    Telecopier 

                  	 	
                    Telecopier 

                  


          

        

         

        
          
            
            

          

          
            10

            
              

            

          

          
            
            

          

        

CONFIDENTIALITY
        AGREEMENT

      TERMS
        AND CONDITIONS

      


      1.   
        The
        purpose of Disclosing Party disclosing Confidential Information to Receiving
        Party shall only be for Receiving Party to perform its obligations to carry
        out
        the terms of a license arrangement between the parties and for no other purpose.
        Receiving Party shall not use such Confidential Information for any other
        purpose, for its own benefit or for the benefit of any third party. This
        Agreement is not a license or assignment of any ownership interest in any
        Confidential Information, as defined below, or any other rights of Disclosing
        Party

       

      2.   
        "Confidential
        Information" means any and all information and material relating directly
        or
        indirectly to Disclosing Party's past, present or future research, development,
        technology or business activities or contemplated business activities whether
        or
        not disclosed in writing, orally or in any other form and whether reduced
        to
        writing or other tangible form. Confidential Information includes, but is
        not
        limited to, all of the following: technical data, designs, drawings,
        specifications, systems, techniques, models, business data, documentation,
        computer software programs, manuals, source code, object code, diagrams,
        flow
        charts, research, development, processes, procedures, "know-how," new product
        or
        new technology information, product prototypes, information capable of being
        embodied in a patent application or copyright application or any international
        equivalents thereof, product copies, quantity of products and kind of products
        licensed, product returns, unannounced products, white papers, manufacturing,
        development or marketing techniques and materials, development or marketing
        timetables, strategies and development plans, including trade names, trademarks,
        customer, supplier or personal names and other information related to customers,
        suppliers or personnel, pricing policies and financial information, other
        confidential reports and lists of and information relating to suppliers,
        customers and prospects, and other information of a similar nature, and any
        other trade secrets or non-public business information disclosed by Disclosing
        Party to Receiving Party before or after the execution of this Agreement.
        Confidential Information does not include information that Receiving Party
        establishes: (a) is generally known to the public at the date of disclosure;
        (b)
        enters the public domain during the term of this Agreement through no fault,
        action or inaction of Receiving Party; or (c) was rightfully in its possession
        prior to disclosure by Receiving Party as evidenced by Disclosing Party's
        written records in which Disclosing Party hereby grants an unrestricted license
        to the same company. Disclosing Party further acknowledges that any information
        and materials received by Receiving Party from third parties in confidence
        shall
        be deemed to be and shall be included in the definition of Confidential
        Information. 

       

      3.   
        Receiving
        Party will not copy, modify, reverse engineer, photograph, photocopy, map,
        alter, disassemble, mirror, decompile, enhance, or make derivative works,
        translations, or compilations or portions, or in any manner use or reproduce
        any
        materials containing or constituting Confidential Information or constituting
        Disclosing Party's intellectual property without the express prior written
        consent of the Disclosing Party, and will return all such materials, together
        with any copies thereof, promptly after the purposes for which they were
        furnished have been accomplished, or upon the request of Disclosing Party.
        Any
        authorized or unauthorized modifications, derivative works, translations,
        or any
        other intellectual property, or prospective jointly owned intellectual property,
        created directly or indirectly using or referring to the Confidential
        Information, or components thereof, or enhancements using the Confidential
        Information, shall belong exclusively to Disclosing Party and Receiving Party
        hereby assigns all rights in them (including without limitation moral rights)
        to
        the Disclosing Party. Receiving Party agrees to promptly enter into any further
        documentation required by Disclosing Party in its sole discretion to legally
        or
        commercially affect such assignment, including, without limitation, ensuring
        that its employees and/or contractors do the same. Receiving Party hereby
        expressly waives any rights it may obtain inconsistent with the foregoing
        through application of the law of another state, country or otherwise.
        Additionally, upon request of Disclosing Party, Receiving Party will destroy
        materials received or prepared by Disclosing Party that contain Confidential
        Information.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

         

      

      4.   
        Disclosure
        of Confidential Information is not precluded if such disclosure is in response
        to a valid order of a court or other governmental body of the United States
        or
        any political subdivision thereof; provided that Receiving Party first give
        notice to Disclosing Party and make a reasonable effort to obtain a protective
        order requiring that the Confidential Information be disclosed only for limited
        purposes for which the order was issued.

       

      5.   
        Receiving
        Party shall use the Confidential Information only for the purpose for which
        it
        was disclosed. Receiving Party shall not disclose Confidential Information
        to
        any third party (including, without limitation, subcontractors) without first
        obtaining Disclosing Party's written consent and shall disclose Confidential
        Information only to its own employees having a need to know and who agree
        to be
        similarly bound by the terms and conditions contained herein and have signed
        employee work for hire and confidentiality agreements with Receiving Party.
        Receiving Party shall promptly notify Disclosing Party of any items of
        Confidential Information prematurely disclosed. Additionally, Receiving Party
        agrees to use at least the same degree of care, but no less than a reasonable
        degree of care, to avoid unauthorized disclosure or use of the Confidential
        Information as Receiving Party employs with respect to its own proprietary
        information of like importance.

       

      6.   
        Notwithstanding
        the fact that Confidential Information may be disclosed to Receiving Party
        subject to this Agreement, Receiving Party understands and agrees that all
        such
        Confidential Information shall remain the exclusive property of Disclosing
        Party. 

       

      7.   
        Receiving
        Party agrees that Disclosing Party shall solely own and have exclusive worldwide
        right, title and interest in and to all proprietary technology and
        functionality, training ideas, data, processes, procedures and materials,
        including, without limitation, works of expression, all copyrights, all patent
        rights, know-how and all trade secret rights comprising or relating directly
        or
        indirectly to the Confidential Information (collectively, "IP Rights") in
        such
        works that are received, developed, written, or conceived by Receiving Party
        under and during the term of any agreement between the parties and any and
        all
        derivatives thereof and hereby assigns all right, title, and interest in
        and to
        the same to Disclosing Party. Accordingly, Receiving Party agrees to promptly
        disclose, deliver and enter into (and to cause its employees or employed
        subcontractors to do the same) any further documents Disclosing Party deems
        necessary in its sole discretion to assign to Disclosing Party all such
        patentable inventions, discoveries, and improvements, trade secrets, and
        all
        works subject to copyright. Receiving Party agrees, without the necessity
        of
        further consideration, but without expense to the Receiving Party, to execute
        all documents, patent applications and arrangements which Disclosing Party
        deems
        necessary in its sole discretion to further document ownership and/or assignment
        and to take whatever steps may be needed to give Disclosing Party the full
        benefit of them in the United States and internationally. Receiving Party
        specifically agrees that all copyrightable material whether derivative works,
        composite works or otherwise which is generated or developed under any agreement
        between the parties, including but not limited to all source code, object
        code,
        data, processes, procedures, software, models, specifications mechanical
        drawings (whether drawn by hand or CAD), computer programs and documentations,
        shall be considered works made for hire under the copyright laws of the United
        States and that they shall, upon creation, be owned exclusively by Disclosing
        Party. To the extent that any such materials, under applicable law, may not
        be
        considered works made for hire, Receiving Party hereby irrevocably assigns
        and
        conveys, and shall cause its employees or employed subcontractors similarly
        to
        assign and convey, to Disclosing Party the ownership of all copyrights or
        other
        proprietary rights of any nature whatsoever in such materials without the
        necessity of any further consideration, and Disclosing Party shall be entitled
        to register and hold in its own name all copyrights or other proprietary
        rights
        of any nature whatsoever in respect of such materials. Receiving Party shall
        not, directly or indirectly through itself or any third party, challenge,
        contest or otherwise impair Disclosing Party's ownership of the IP rights.
        

       

      8.   
        Each
        party understands and acknowledges that the Confidential Information has
        been
        developed or obtained by Disclosing Party by the investment of significant
        time,
        effort and expense and provides Disclosing Party with a significant competitive
        advantage in its business. If Receiving Party fails to comply with any
        obligations hereunder, Disclosing Party will suffer immediate, irreparable
        harm
        for which monetary damages will provide inadequate compensation. Accordingly,
        the parties hereto agree that the Disclosing Party will be entitled, in addition
        to any other remedies available to it, at law or in equity, to injunctive
        relief
        to specifically enforce the terms of this Agreement.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

         

      

      9.   
        Receiving
        Party acknowledges that Disclosing Party is based in the State of California,
        U.S.A. and requires uniformity and consistency in the laws under which it
        deals
        with all domestic and international businesses and the subject matter of
        this
        agreement is based in California. Accordingly, this Agreement will be governed
        by and construed in accordance with the laws of the State of California without
        reference to its choice of law rules and as if executed, delivered, and
        wholly-performed within the State of California. Any litigation regarding
        the
        interpretation, breach or enforcement of this Agreement will be filed in
        and
        heard only by the state or federal courts with jurisdiction to hear such
        disputes in San Diego County, California, or any other court that the Disclosing
        Party in its sole discretion as owner of the intellectual property licensed
        hereunder selects; and the parties hereby expressly submit to the jurisdiction
        of such courts. Receiving Party hereby waives any right it may have to any
        other
        forum or to any other applicable law.

       

      10.   
        If
        any
        judicial or other proceeding is brought by either party regarding the
        interpretation or enforcement of this Agreement, the prevailing party will
        recover from the other all costs, attorneys' fees and other expenses incurred
        by
        the prevailing party with regard to that proceeding, and the right to such
        costs, attorneys' fees and other expenses shall be deemed to have accrued
        upon
        the commencement of said proceeding and shall be enforceable whether or not
        said
        proceeding is prosecuted to judgment.

       

      11.   
        No
        rights
        or obligations other than those expressly recited herein are to be implied
        from
        this Agreement. No license is hereby granted, directly or indirectly, to
        any of
        the Confidential Information.

       

      12.   
        If
        at any
        time the Disclosing Party determines in its sole discretion that the laws
        or
        policies of any state or country are or become materially insufficient to
        protect its intellectual or proprietary rights in the Confidential Information,
        the Disclosing Party may restrict or terminate Receiving Party's right to
        use or
        bundle or distribute Confidential Information in or to that state or country,
        upon written notice to Receiving Party without giving rise to any claim or
        liability for damages or costs. Receiving Party shall take all actions
        reasonably necessary to comply with and enforce any such restriction or
        termination.

       

      13.   
        If
        any
        provision of this Agreement is held, in a final and non-appealable decision
        by
        an arbitrator or court of competent jurisdiction, not to comply with any
        applicable law, now existing or hereafter enacted, such provision shall to
        the
        extent possible be interpreted so as to comply with such law or condition
        or, if
        such interpretation is not possible, it shall be deemed amended to satisfy
        the
        requirements thereof. Any provision hereof deemed invalid or unenforceable,
        in a
        final and non-appealable decision by an arbitrator or court of competent
        jurisdiction, shall be severed from this Agreement, the balance of which
        shall
        remain enforceable. Any severed or altered provision shall be automatically
        replaced by another provision resulting in the same economic position to
        the
        parties as if the severed provision had not been severed.

       

      14.   
        This
        Agreement is entered into in connection with an Exclusive OEM & License
        Agreement and may be assigned by the parties only in connection with an
        assignment of that Exclusive OEM & License Agreement.

       

      15.   
        This
        Agreement is binding upon successors, assigns and legal representatives of
        Receiving Party and protects the Confidential Information of any successors
        or
        assigns of the Disclosing Party.

       

      16.   
        English
        is the authoritative text of this Agreement, regardless of the existence
        of
        counterparts translated into another language, and all communications,
        arbitrations, and other adjudications hereunder shall be made and conducted
        in
        English. 

       

      17.   
        This
        Agreement constitutes the entire agreement of the parties, supersedes any
        prior
        and contemporaneous oral or written understanding as to the subject matter
        hereof, and excludes all implied representations, conditions, warranties,
        and
        other terms. Each party acknowledges that it is entering into this Agreement
        as
        a result of its own independent investigation and not as a result of any
        representation of the other party not contained herein.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      


      EXHIBIT
        E

       

      WARRANT
        AGREEMENT

       

      THIS
        WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
        HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
        ANY
        STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE
        OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
        IN
        THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER
        SAID
        ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
        SATISFACTORY TO SPECIAL STONE SURFACES, Es3 INC. THAT SUCH REGISTRATION IS
        NOT
        REQUIRED.

       

      Right
        to
        Purchase up to 600,000 Shares of Common Stock of

      Special
        Stone Surfaces, Es3 Inc. 

      (subject
        to adjustment as provided herein)

       

      COMMON
        STOCK PURCHASE WARRANT

       

      
        	
                No.
                  05-LSM-01

              	
                Issue
                  Date: _________, 2005

              


      

      


      SPECIAL
        STONE SURFACES, Es3 INC., a Nevada corporation, hereby certifies that, for
        value
        received, Liquid Stone Manufacturing, Inc., a Nevada corporation, or assigns
        (the "Holder"), is entitled, subject to the terms set forth below, to purchase
        from the Company (as defined herein) from and after the Issue Date of this
        Warrant and at any time or from time to time before 5:00 p.m., San Diego
        time,
        through the close of business _____________, 2010 (the "Expiration Date"),
        up to
        600,000 fully paid and nonassessable shares of Common Stock (as hereinafter
        defined), at the price per share of $0.70 (the "Exercise Price"). The number
        and
        character of such shares of Common Stock and the applicable Exercise Price
        per
        share are subject to adjustment as provided herein.

       

      As
        used
        herein the following terms, unless the context otherwise requires, have the
        following respective meanings: 

       

      (a)  The
        term
        "Company" shall include Special Stone Surfaces, Es3 Inc. and any corporation
        which shall succeed, or assume the obligations of, Special Stone Surfaces,
        Es3
        Inc. hereunder.

       

      (b)  The
        term
        "Common Stock" includes (i) the Company's common stock, par value $0.01 per
        share; and (ii) any other securities into which or for which any of the
        securities described in (i) may be converted or exchanged pursuant to a plan
        of
        recapitalization, reorganization, merger, sale of assets or
        otherwise.

       

      (c)  The
        term
        "Other Securities" refers to any stock (other than Common Stock) and other
        securities of the Company or any other person (corporate or otherwise) which
        the
        holder of the Warrant at any time shall be entitled to receive, or shall
        have
        received, on the exercise of the Warrant, in lieu of or in addition to Common
        Stock, or which at any time shall be issuable or shall have been issued in
        exchange for or in replacement of Common Stock or Other Securities pursuant
        to
        Section 4 or otherwise. 

       

      1.  EXERCISE
        OF WARRANT. 

       

      1.1  Number
        of Shares Issuable upon Exercise.
        From
        and after the date hereof through and including the Expiration Date, the
        Holder
        shall be entitled to receive, upon exercise of this Warrant in whole or in
        part,
        by delivery of an original or fax copy of an exercise notice in the form
        attached hereto as Exhibit A (the "Exercise Notice"), shares of Common Stock
        of
        the Company, subject to adjustment pursuant to Section 3 and 4.

       

      
        
          
          

        

        
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      1.2  Fair
        Market Value.
        For
        purposes hereof, the "Fair Market Value" of a share of Common Stock as of
        a
        particular date (the "Determination Date") shall mean: 

       

      (a)  If
        the
        Company's Common Stock is traded on the American Stock Exchange or another
        national exchange or is quoted on the National or SmallCap Market of The
        Nasdaq
        Stock Market, Inc. ("Nasdaq"), then the closing or last sale price,
        respectively, reported for the last business day immediately preceding the
        Determination Date.

       

      (b)  If
        the
        Company's Common Stock is not traded on the American Stock Exchange or another
        national exchange or on the Nasdaq but is traded on the NASD OTC Bulletin
        Board,
        then the mean of the average of the closing bid and asked prices reported
        for
        the last business day immediately preceding the Determination Date.

       

      (c)  Except
        as
        provided in clause (d) below, if the Company's Common Stock is not publicly
        traded, then as the Holder and the Company agree or in the absence of agreement
        by arbitration in accordance with the rules then in effect of the American
        Arbitration Association, before a single arbitrator to be chosen from a panel
        of
        persons qualified by education and training to pass on the matter to be
        decided.

       

      (d)  If
        the
        Determination Date is the date of a liquidation, dissolution or winding up,
        or
        any event deemed to be a liquidation, dissolution or winding up pursuant
        to the
        Company's charter, then all amounts to be payable per share to holders of
        the
        Common Stock pursuant to the charter in the event of such liquidation,
        dissolution or winding up, plus all other amounts to be payable per share
        in
        respect of the Common Stock in liquidation under the charter, assuming for
        the
        purposes of this clause (d) that all of the shares of Common Stock then issuable
        upon exercise of the Warrant are outstanding at the Determination
        Date.

       

      1.3  Company
        Acknowledgment.
        The
        Company will, at the time of the exercise of the Warrant, upon the request
        of
        the Holder hereof acknowledge in writing its continuing obligation to afford
        to
        such Holder any rights to which such Holder shall continue to be entitled
        after
        such exercise in accordance with the provisions of this Warrant. If the Holder
        shall fail to make any such request, such failure shall not affect the
        continuing obligation of the Company to afford to such holder any such rights.
        

       

      2.  PROCEDURE
        FOR EXERCISE.

       

      2.1  Delivery
        of Stock Certificates, Etc., on Exercise.
        The
        Company agrees that the shares of Common Stock purchased upon exercise of
        this
        Warrant shall be deemed to be issued to the Holder as the record owner of
        such
        shares as of the close of business on the date on which this Warrant shall
        have
        been surrendered and payment made for such shares in accordance herewith.
        As
        soon as practicable after the exercise of this Warrant in full or in part,
        and
        in any event within three (3) business days thereafter, the Company at its
        expense (including the payment by it of any applicable issue taxes) will
        cause
        to be issued in the name of and delivered to the Holder, or as such Holder
        (upon
        payment by such Holder of any applicable transfer taxes) may direct in
        compliance with applicable securities laws, a certificate or certificates
        for
        the number of duly and validly issued, fully paid and nonassessable shares
        of
        Common Stock (or Other Securities) to which such Holder shall be entitled
        on
        such exercise, plus, in lieu of any fractional share to which such holder
        would
        otherwise be entitled, cash equal to such fraction multiplied by the then
        Fair
        Market Value of one full share, together with any other stock or other
        securities and property (including cash, where applicable) to which such
        Holder
        is entitled upon such exercise pursuant to Section 1 or otherwise.

       

      2.2  Exercise.
        Payment
        shall be made in cash or by certified or official bank check payable to the
        order of the Company equal to the applicable aggregate Exercise Price for
        the
        number of Common Shares specified in such Exercise Notice (as such exercise
        number shall be adjusted to reflect any adjustment in the total number of
        shares
        of Common Stock issuable to the Holder per the terms of this Warrant) and
        the
        Holder shall thereupon be entitled to receive the number of duly authorized,
        validly issued, fully-paid and non-assessable shares of Common Stock (or
        Other
        Securities) determined as provided herein. 

       

      
        
          
          

        

        
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      3.  EFFECT
        OF REORGANIZATION, ETC.; ADJUSTMENT OF EXERCISE PRICE.

       

      3.1  Reorganization,
        Consolidation, Merger, Etc.
        In case
        at any time or from time to time, the Company shall (a) effect a reorganization,
        (b) consolidate with or merge into any other person, or (c) transfer all
        or
        substantially all of its properties or assets to any other person under any
        plan
        or arrangement contemplating the dissolution of the Company, then, in each
        such
        case, as a condition to the consummation of such a transaction, proper and
        adequate provision shall be made by the Company whereby the Holder of this
        Warrant, on the exercise hereof as provided in Section 1 at any time after
        the
        consummation of such reorganization, consolidation or merger or the effective
        date of such dissolution, as the case may be, shall receive, in lieu of the
        Common Stock (or Other Securities) issuable on such exercise prior to such
        consummation or such effective date, the stock and other securities and property
        (including cash) to which such Holder would have been entitled upon such
        consummation or in connection with such dissolution, as the case may be,
        if such
        Holder had so exercised this Warrant, immediately prior thereto, all subject
        to
        further adjustment thereafter as provided in Section 4.

       

      3.2  Dissolution.
        In the
        event of any dissolution of the Company following the transfer of all or
        substantially all of its properties or assets, the Company, concurrently
        with
        any distributions made to holders of its Common Stock, shall at its expense
        deliver or cause to be delivered to the Holder the stock and other securities
        and property (including cash, where applicable) receivable by the Holder
        of the
        Warrant pursuant to Section 3.1.

       

      3.3  Continuation
        of Terms.
        Upon
        any reorganization, consolidation, merger or transfer (and any dissolution
        following any transfer) referred to in this Section 3, this Warrant shall
        continue in full force and effect and the terms hereof shall be applicable
        to
        the shares of stock and other securities and property receivable on the exercise
        of this Warrant after the consummation of such reorganization, consolidation
        or
        merger or the effective date of dissolution following any such transfer,
        as the
        case may be, and shall be binding upon the issuer of any such stock or other
        securities, including, in the case of any such transfer, the person acquiring
        all or substantially all of the properties or assets of the Company, whether
        or
        not such person shall have expressly assumed the terms of this Warrant as
        provided in Section 4. In the event this Warrant does not continue in full
        force
        and effect after the consummation of the transactions described in this Section
        3, then the Company's securities and property (including cash, where applicable)
        receivable by the Holders of the Warrant will be delivered to the Holder
        as
        contemplated by Section 3.2.

       

      4.  EXTRAORDINARY
        EVENTS REGARDING COMMON STOCK.
        In
        the
        event that the Company shall (a) issue additional shares of the Common Stock
        as
        a dividend or other distribution on outstanding Common Stock, (b) subdivide
        its
        outstanding shares of Common Stock, or (c) combine its outstanding shares
        of the
        Common Stock into a smaller number of shares of the Common Stock, then, in
        each
        such event, the Exercise Price shall, simultaneously with the happening of
        such
        event, be adjusted by multiplying the then Exercise Price by a fraction,
        the
        numerator of which shall be the number of shares of Common Stock outstanding
        immediately prior to such event and the denominator of which shall be the
        number
        of shares of Common Stock outstanding immediately after such event, and the
        product so obtained shall thereafter be the Exercise Price then in effect.
        The
        Exercise Price, as so adjusted, shall be readjusted in the same manner upon
        the
        happening of any successive event or events described herein in this Section
        4.
        The number of shares of Common Stock that the holder of this Warrant shall
        thereafter, on the exercise hereof as provided in Section 1, be entitled
        to
        receive shall be increased to a number determined by multiplying the number
        of
        shares of Common Stock that would otherwise (but for the provisions of this
        Section 4) be issuable on such exercise by a fraction of which (a) the numerator
        is the Exercise Price that would otherwise (but for the provisions of this
        Section 4) be in effect, and (b) the denominator is the Exercise Price in
        effect
        on the date of such exercise.

       

      5.  Certificate
        as to Adjustments.
        In
        each
        case of any adjustment or readjustment in the shares of Common Stock (or
        Other
        Securities) issuable on the exercise of the Warrant, the Company at its expense
        will promptly cause its Chief Financial Officer or other appropriate designee
        to
        compute such adjustment or readjustment in accordance with the terms of the
        Warrant and prepare a certificate setting forth such adjustment or readjustment
        and showing in detail the facts upon which such adjustment or readjustment
        is
        based, including a statement of (a) the consideration received or receivable
        by
        the Company for any additional shares of Common Stock (or Other Securities)
        issued or sold or deemed to have been issued or sold, (b) the number of shares
        of Common Stock (or Other Securities) outstanding or deemed to be outstanding,
        and (c) the Exercise Price and the number of shares of Common Stock to be
        received upon exercise of this Warrant, in effect immediately prior to such
        adjustment or readjustment and as adjusted or readjusted as provided in this
        Warrant. The Company will forthwith mail a copy of each such certificate
        to the
        holder of the Warrant and any Warrant agent of the Company (appointed pursuant
        to Section 11 hereof).

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

         

      

      6.  Reservation
        of Stock, Etc., Issuable on Exercise of Warrant.
        The
        Company will at all times reserve and keep available, solely for issuance
        and
        delivery on the exercise of the Warrant, shares of Common Stock (or Other
        Securities) from time to time issuable on the exercise of the
        Warrant.

       

      7.  Assignment;
        Exchange of Warrant.
        Subject
        to compliance with applicable securities laws, this Warrant, and the rights
        evidenced hereby, may be transferred by any registered holder hereof (a
        "Transferor") in whole or in part. On the surrender for exchange of this
        Warrant, with the Transferor's endorsement in the form of Exhibit B attached
        hereto (the "Transferor Endorsement Form") and together with evidence reasonably
        satisfactory to the Company demonstrating compliance with applicable securities
        laws, which shall include, without limitation, the provision of a legal opinion
        from the Transferor's counsel (at the Company's expense) that such transfer
        is
        exempt from the registration requirements of applicable securities laws,
        and
        with payment by the Transferor of any applicable transfer taxes) will issue
        and
        deliver to or on the order of the Transferor thereof a new Warrant of like
        tenor, in the name of the Transferor and/or the transferee(s) specified in
        such
        Transferor Endorsement Form (each a "Transferee"), calling in the aggregate
        on
        the face or faces thereof for the number of shares of Common Stock called
        for on
        the face or faces of the Warrant so surrendered by the Transferor.

       

      8.  Replacement
        of Warrant.
        On
        receipt of evidence reasonably satisfactory to the Company of the loss, theft,
        destruction or mutilation of this Warrant and, in the case of any such loss,
        theft or destruction of this Warrant, on delivery of an indemnity agreement
        or
        security reasonably satisfactory in form and amount to the Company or, in
        the
        case of any such mutilation, on surrender and cancellation of this Warrant,
        the
        Company at its expense will execute and deliver, in lieu thereof, a new Warrant
        of like tenor.

       

      9.  Warrant
        Agent.
        The
        Company may, by written notice to each Holder of the Warrant, appoint an
        agent
        for the purpose of issuing Common Stock (or Other Securities) on the exercise
        of
        this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section
        7, and replacing this Warrant pursuant to Section 8, or any of the foregoing,
        and thereafter any such issuance, exchange or replacement, as the case may
        be,
        shall be made at such office by such agent.

       

      10.  Transfer
        on the Company's Books.
        Until
        this Warrant is transferred on the books of the Company, the Company may
        treat
        the registered holder hereof as the absolute owner hereof for all purposes,
        notwithstanding any notice to the contrary.

       

      11.  Notices,
        Etc.
        All
        notices and other communications from the Company to the Holder of this Warrant
        shall be mailed by first class registered or certified mail, postage prepaid,
        at
        such address as may have been furnished to the Company in writing by such
        Holder
        or, until any such Holder furnishes to the Company an address, then to, and
        at
        the address of, the last Holder of this Warrant who has so furnished an address
        to the Company.

       

      12.  Miscellaneous.
        This
        Warrant and any term hereof may be changed, waived, discharged or terminated
        only by an instrument in writing signed by the party against which enforcement
        of such change, waiver, discharge or termination is sought. This Warrant
        shall
        be governed by and construed in accordance with the laws of State of California
        without regard to principles of conflicts of laws. Any action brought concerning
        the transactions contemplated by this Warrant shall be brought only in the
        California state courts located in San Diego County, California or in the
        United
        States District Court for the Southern District of California. The individuals
        executing this Warrant on behalf of the Company agree to submit to the
        jurisdiction of such courts and waive trial by jury. The prevailing party
        shall
        be entitled to recover from the other party its reasonable attorney's fees
        and
        costs. In the event that any provision of this Warrant is invalid or
        unenforceable under any applicable statute or rule of law, then such provision
        shall be deemed inoperative to the extent that it may conflict therewith
        and
        shall be deemed modified to conform with such statute or rule of law. Any
        such
        provision which may prove invalid or unenforceable under any law shall not
        affect the validity or enforceability of any other provision of this Warrant.
        The headings in this Warrant are for purposes of reference only, and shall
        not
        limit or otherwise affect any of the terms hereof. The invalidity or
        unenforceability of any provision hereof shall in no way affect the validity
        or
        enforceability of any other provision hereof. The Company acknowledges that
        legal counsel participated in the preparation of this Warrant and, therefore,
        stipulates that the rule of construction that ambiguities are to be resolved
        against the drafting party shall not be applied in the interpretation of
        this
        Warrant to favor any party against the other party.

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF, the Company has executed this Warrant as of the date first
        written above. 

       

      
        	 	 	
                Special
                  Stone Surfaces, Es3 Inc. 

              
	 	 	 
	 	 	 
	 	 	
                By:

              	 
	 	 	
                Name:

              	 
	 	 	
                Title:

              	 


      

      
 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      EXHIBIT
        A

       

      FORM
        OF SUBSCRIPTION

       

      (To
        Be
        Signed Only On Exercise Of Warrant)

       

      TO:    
        Special
        Stone Surfaces, Es3 Inc. 

       

      Attention:           
        Chief
        Financial Officer

       

      The
        undersigned, pursuant to the provisions set forth in the attached Warrant
        (No.____), hereby irrevocably elects to purchase (check applicable
        box):

       

      
        	 	 	
                ________
                  shares of the Common Stock covered by such Warrant; or

              
	 	 	 
	 	 	
                the
                  maximum number of shares of Common Stock covered by such Warrant
                  pursuant
                  to the cashless exercise procedure set forth in Section
                  2.

              
	 


      

      


      The
        undersigned herewith makes payment of the full Exercise Price for such shares
        at
        the price per share provided for in such Warrant, which is $___________.
        Such
        payment takes the form of (check applicable box or boxes):

       

      
        	 	 	
                $__________
                  in lawful money of the United States; and/or

              
	 	 	 
	 	 	
                the
                  cancellation of such portion of the attached Warrant as is exercisable
                  for
                  a total of _______ shares of Common Stock (using a Fair Market
                  Value of
                  $_______ per share for purposes of this calculation);
                  and/or

              
	 
	 	 	 
	 	 	
                the
                  cancellation of such number of shares of Common Stock as is necessary,
                  in
                  accordance with the formula set forth in Section 2.2, to exercise
                  this
                  Warrant with respect to the maximum number of shares of Common
                  Stock
                  purchasable pursuant to the cashless exercise procedure set forth
                  in
                  Section 2.

              
	 
	 


      

      


      The
        undersigned requests that the certificates for such shares be issued in the
        name
        of, and delivered to ___________________ whose address is
        ___________________

      ____________________________________________________________________________________________________________________________________________

       

      The
        undersigned represents and warrants that all offers and sales by the undersigned
        of the securities issuable upon exercise of the within Warrant shall be made
        pursuant to registration of the Common Stock under the Securities Act of
        1933,
        as amended (the "Securities Act") or pursuant to an exemption from registration
        under the Securities Act.

       

      
        	
                Dated:

              	 	 	 
	 	 	
                (Signature
                  must conform to name of holder as specified on the face of the
                  Warrant)

              
	 	 	 
	 	 	
                Address:

              	 
	 	 	 	 


      

      


       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
        B

       

      FORM
        OF TRANSFEROR ENDORSEMENT

       

      (To
        Be
        Signed Only On Transfer Of Warrant)

       

      For
        value
        received, the undersigned hereby sells, assigns, and transfers unto the
        person(s) named below under the heading "Transferees" the right represented
        by
        the within Warrant to purchase the percentage and number of shares of Common
        Stock of Special Stone Surfaces, Es3 Inc. into which the within Warrant relates
        specified under the headings "Percentage Transferred" and "Number Transferred,"
        respectively, opposite the name(s) of such person(s) and appoints each such
        person Attorney to transfer its respective right on the books of Special
        Stone
        Surfaces, Es3 Inc. with full power of substitution in the premises.

       

      
        	
                 

                Transferees

              	 	
                 

                Address

              	 	
                Percentage

                Transferred

              	 	
                Number

                Transferred

              
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 


      

      


      


      
        	
                Dated:

              	 	 	 
	 	 	
                (Signature
                  must conform to name of holder as specified on the face of the
                  Warrant)

              
	 	 	 
	 	 	
                Address:

              	 
	 	 	 	 


      

      


      


      
        	
                 

              	
                SIGNED
                  IN THE PRESENCE OF:

              
	 	 
	 	 
	 	
                (Name)

              
	 	 
	
                ACCEPTED
                  AND AGREED:

              	 
	
                [TRANSFEREE]

              	 
	 	 
	 	 
	
                (Name)

              	 


      

      
 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Exhibit
        F

       

      BUY
        OUT OPTION

       

      During
        the term of this Agreement, OEM shall have the option and right to acquire
        all
        of Licensor's right, title and interest in the Technology and the Products
        in
        exchange for the cash payment set forth on the schedule below:

      


      Date       
Payment

      After
        the
        first anniversary of the Effective
        Date:                 
        $2
        million 

      After
        the
        second anniversary of the Effective
        Date:           
        $4
        million 

      After
        the
        third anniversary of the Effective
        Date:               
        $8
        million 

       

      Royalty
        payments made during the term of the Agreement shall not be applied to the
        Buy
        Out Option. 

       

      OEM
        shall
        exercise the Buy Out Option by delivery of a written notice to Licensor.
        

       

      Licensor
        shall have 10 days from the date of OEM's Buy Out Option notice to demand
        payment in registered, freely tradeable shares of the Common Stock of OEM,
        at an
        effective price of $.75 per share, in lieu of payment in cash. 

       

      The
        closing of the Boy Out Option, whether through payment of cash or Common
        Stock,
        shall take place at the offices of the OEM 30 days following the date of
        OEM's
        Buy Out Option notice.

       

      
        
          
          

        

        21