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The following is an excerpt from a 10-K SEC Filing, filed by COMMODORE ENVIRONMENTAL SERVICES INC /DE/ on 4/7/1998.
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COMMODORE ENVIRONMENTAL SERVICES INC /DE/ - 10-K - 19980407 - AUDITORS_OPINION

Report of Independent Accountants

To the Board of Directors and Shareholders of Commodore Environmental Services, Inc.

In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, of stockholders' equity and of cash flows present fairly, in all material respects, the financial position of Commodore Environmental Services, Inc. and its subsidiaries at December 31, 1997 and 1996, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP

Philadelphia, Pennsylvania
March 30, 1998

F-1

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of Commodore Environmental Services, Inc.

We have audited the accompanying statements of operations and stockholders' equity and cash flows for the year ended December 31, 1995 of Commodore Environmental Services, Inc. and subsidiaries. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Commodore Environmental Services, Inc. and subsidiaries for the year ended December 31, 1995, in conformity with generally accepted accounting principles.

TANNER + CO.

Salt Lake City, Utah
February 6, 1996

F-1A


Commodore Environmental Services, Inc.
and Subsidiaries
Consolidated Balance Sheet
December 31, 1997 and 1996
(Dollars in thousands)

                                            Assets                                          1997                    1996
Current assets:
 Cash and cash equivalents (Note 2)                                                       $13,542                  $15,280
 Accounts receivable, net (Note 2 and 5)                                                    3,064                    7,149
 Notes and advances to related parties                                                      3,866                    3,034
 Restricted cash and certificates of deposit (Note 2)                                         310                      670
 Inventory                                                                                    360                        -
 Prepaid assets and other current receivables                                                 402                      582
                                                                                          -------                  -------
  Total current assets                                                                     21,544                   26,715
Certificates of deposit and restricted cash (Note 2)                                            -                    1,145
Other receivables (Note 5)                                                                    516                      384
Investments and advances (Note 7)                                                             911                    1,015
Property and equipment, net (Notes 2 and 8)                                                 2,498                    2,044
Non-performing notes receivable (Note 6)                                                      912                      912
Other assets (Notes 2):
 Deferred financing costs, net of accumulated amortization of $384 and $288, respectively      96                      192
 Patents and completed technology, net of accumulated amortization of
  $238 and $140, respectively                                                               1,150                    1,004
 Goodwill, net of accumulated amortization of $320 and $113, respectively                   7,353                    7,560
 Other                                                                                         36                      142
                                                                                          -------                  -------
                                                                                            8,635                    8,898
                                                                                          -------                  -------
   Total Assets                                                                           $35,016                  $41,113
                                                                                          =======                  =======

                                      Liabilities and Stockholders' Equity
Current liabilities:
 Accounts payables                                                                        $ 2,150                  $ 3,801
 Line of credit and current portion of long-term debt (Notes 10 and 11)                     1,226                    7,131
 Other accrued liabilities (Note 9)                                                         4,960                    2,941
                                                                                          -------                  -------
   Total current liabilities                                                                8,336                   13,873
Insurance loss reserve (Notes 2 and 17)                                                         -                    1,275
Bonds payable and other long-term debt (Note 11)                                            4,019                    4,029
Deferred gain                                                                                 656                      690
Promissory note to related party (Note 4)                                                   2,250                    2,250
                                                                                          -------                  -------
   Total Liabilities                                                                       15,261                   22,117

Minority interests in consolidated subsidiaries                                            12,558                    6,165
Commitments and contingencies (Note 17)                                                         -                        -
Redeemable Preferred Stock (Note 13)
 Series D Preferred Stock, par value $0.01 per share, 7% annual cumulative dividends
  46,800 shares outstanding                                                                 3,557                        -
Stockholders' equity (Note 14):
 Preferred Stock, par value $0.01 per share, authorized 10,000,000 shares,
  issued and outstanding 4,309,577 shares and 4,649,917 shares                                 43                       46
 Common Stock, par value $0.01 per share, authorized 100,000,000 shares,
  issued 59,233,583 shares and 57,924,368 shares                                              592                      579
 Additional paid-in capital                                                                46,074                   41,768
 Accumulated deficit                                                                      (43,044)                 (29,537)
                                                                                          -------                  -------
                                                                                            3,665                   12,856
 Less 506,329 common shares of treasury stock, at cost                                        (25)                     (25)
                                                                                          -------                  -------
   Total Stockholders' Equity                                                               3,640                   12,831
                                                                                          -------                  -------
   Total Liabilities and Stockholders' Equity                                             $35,016                  $41,113
                                                                                          =======                  =======

The accompanying notes are an integral part of these consolidated financial statements.

F-2

Commodore Environmental Services, Inc.
and Subsidiaries
Consolidated Statement of Operations
Years Ended December 31, 1997, 1996 and 1995
(Dollars in Thousands, Except Per Share Data)

                                                                             1997           1996           1995
Revenues:
 Contract revenues (Note 2)                                                $ 19,493       $ 5,123        $     -
 Income from commercial real estate activities (Notes 2 and 6)                    -             -          1,041
 Other operating income                                                           -           130              3
                                                                           --------       -------        -------
   Total revenues                                                            19,493         5,253          1,044

Costs and expenses:
 Cost of sales                                                               16,325         4,291              -
 Research and development (Note 2)                                            3,074         2,997          1,990
 General and administrative                                                  17,058         6,064          1,518
 Depreciation and amortization (Note 2)                                       1,282           561              -
 In-process technology acquired                                                   -            78              -
                                                                           --------       -------        -------
 Total costs and expenses                                                    37,739        13,991          3,508
                                                                           --------       -------        -------

Loss before interest, taxes and equity in affiliate
 losses and minority interests                                              (18,246)       (8,738)        (2,464)

Interest income                                                               1,004           621             45
Gain on sale of subsidiary stock                                              1,896             -              -
Interest expense                                                             (1,052)         (808)          (550)
Income tax expense (Note 12)                                                      -             -              -
                                                                           --------       -------        -------
Net loss before affiliate losses                                            (16,398)       (8,925)        (2,969)


Equity in losses of unconsolidated affiliate                                 (1,827)         (495)             -
                                                                           --------       -------        -------
Loss before minority interests                                              (18,225)       (9,420)        (2,969)

Minority interests in consolidated subsidiaries                               4,718         1,109              -
                                                                           --------       -------        -------

 Net loss                                                                  $(13,507)      $(8,311)       $(2,969)
                                                                           ========       =======        =======

 Net loss per share - basic and diluted (Note 3)                           $  (0.27)      $ (0.15)       $ (0.06)
                                                                           ========       =======        =======

 Number of weighted average shares outstanding (in thousands)                58,482        57,454         56,212
                                                                           ========       =======        =======

The accompanying notes are an integral part of these consolidated financial statements.

F-3

COMMODORE ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)

                                           PREFERRED STOCK            COMMON STOCK       ADDITIONAL                       COMMON
                                       -----------------------  -----------------------    PAID IN      ACCUMULATED     STOCK HELD
                                        SHARES       AMOUNT       SHARES      AMOUNT       CAPITAL        DEFICIT      IN TREASURY
                                       ---------   -----------  ----------  -----------  ----------     -----------     -----------
BALANCE, JANUARY 31, 1995              4,434,709        $44     56,406,687     $564        $19,387        $(18,257)         $(25)
Issuance of Series AA Preferred Stock    100,000          1              -        -             99               -             -
Issuance of Common Stock - exercise
 of options and warrants                       -          -        362,266        4             20               -             -
Dividends on Preferred Stock                   -          -              -        -           (297)              -             -
Net loss                                       -          -              -        -              -          (2,969)            -
                                       ---------       ----     ----------     ----        -------        --------          ----
BALANCE, DECEMBER 31, 1995             4,534,709         45     56,768,953      568         19,209         (21,226)          (25)

Sale of Common Stock                           -          -        200,000        2             66               -             -
Issuance of Common Stock - exercise
 of options and warrants                       -          -        955,415        9             86               -             -
Issuance of Common Stock options               -          -              -        -             59
Sale of Series C Preferred Stock         115,208          1              -        -            105               -             -
Dividend on Preferred Stock                    -          -              -        -           (300)              -             -
Equity gains on changes of interest
 in consolidated subsidiaries                  -          -              -        -         22,543               -             -
Net loss                                       -          -              -        -              -          (8,311)            -
                                       ---------       ----     ----------     ----        -------        --------          ----
BALANCE, DECEMBER 31, 1996             4,649,917         46     57,924,368      579         41,768         (29,537)          (25)

Issuance of Common Stock for services          -          -        500,000        5            308               -             -
Issuance of Common Stock - exercise
 of options and warrants                       -          -        512,435        5             44               -             -
Issuance of Common Stock -
  conversion of Preferred Stock         (340,340)        (3)       296,780        3              -               -             -
Issuance of stock options for services         -          -              -        -            650               -             -
Dividends on Preferred Stock                   -          -              -        -         (1,766)              -             -
Equity gains on changes of interest
 in consolidated subsidiaries                  -          -              -        -          3,517               -             -
Beneficial conversion feature on
 Series D Preferred Stock                      -          -              -        -          1,553               -             -
Net loss                                       -          -              -        -              -         (13,507)            -
                                       ---------       ----     ----------     ----        -------        --------          ----
BALANCE, DECEMBER 31, 1997             4,309,577        $43     59,233,583     $592        $46,074        $(43,044)         $(25)
                                       =========       ====     ==========     ====        =======        ========          ====

The accompanying notes are an integral part of these consolidated financial statements.

F-4

COMMODORE ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)

                                                                              DECEMBER 31,
                                                              ---------------------------------------
                                                                      1997        1996          1995
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                                          $(13,507)    $(8,311)      $(2,969)
 Adjustments to reconcile net loss to net cash
  used in operating activities:
    Minority interests in losses of subsidiaries                     (4,718)     (1,109)           --
    Depreciation and amortization                                     1,282         561           106
    Equity in losses of unconsolidated subsidiary                     1,827         495            --
    Provision for (recovery of) related party bad debt                1,043          --          (573)
    Provision for investment in related party                         2,000          --            --
    Gain on sale of subsidiary stock                                 (1,896)         --            --
    Issuance of Common Stock and stock options for services             936          59            --
    Other non-cash charges                                              197         150            96
Changes in assets and liabilities, net of acquisition:
    Accounts receivable                                               4,085      (2,326)           --
    Other receivables                                                  (132)        (81)           --
    Patents                                                            (401)       (213)         (137)
    Inventory                                                          (360)         --            --
    Restricted cash                                                   1,505         179        (1,501)
    Prepaid and other assets                                            180        (225)          (78)
    Other assets                                                        106        (108)           --
    Accounts payables                                                (1,651)        567            --
    Insurance loss reserve                                           (1,275)        281            --
    Other accrued liabilities                                          (196)        154          (369)
                                                                   --------     -------       -------
      Net cash used in operating activities                         (10,975)     (9,927)       (5,425)
                                                                   --------     -------       -------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Payments on notes receivables                                           --          --         3,242
 Increase in related party receivables                               (1,875)     (2,902)            1
 Purchase of property and equipment                                  (1,409)       (881)         (387)
 Increase in investments and advances                                (1,723)     (1,153)           --
 Investment in related party                                         (2,000)         --            --
 Cash acquired in subsidiary's acquisition                               --         199            --
 Purchase of minority interest in subsidiary                             --        (750)           --
                                                                   --------     -------       -------
      Net cash provided by (used in) investing activities            (7,007)     (5,487)        2,856
                                                                   --------     -------       -------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from subsidiaries' sale of common and preferred stock      15,097      30,551            --
 Proceeds from exercise of options and warrants                          49          95            24
 Proceeds from the sale of redeemable preferred stock                 7,612         106           100
 Borrowings under (repayments on) line of credit                     (5,843)      1,361            --
 Payments on long-term debt                                             (72)       (255)          (24)
 Preferred stock cash dividends                                        (289)       (300)         (297)
 Preferred stock dividends paid by subsidiary                          (438)         --            --
 Borrowings from (repayments to) related parties                        128        (900)         (209)
                                                                   --------     -------       -------
      Net cash provided by (used in) financing activities            16,244      30,658          (406)
                                                                   --------     -------       -------
Increase (decrease) in cash                                          (1,738)     15,244        (2,975)
Cash, beginning of period                                            15,280          36         3,011
                                                                   --------     -------       -------
Cash, end of period                                                $ 13,542     $15,280       $    36
                                                                   ========     =======       =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 Interest paid                                                     $    972     $   169       $   454
                                                                   --------     -------       -------
 Taxes paid                                                        $     --     $    53       $    81
                                                                   --------     -------       -------

The accompanying notes are an integral part of these consolidated financial statements

F-5

Commodore Environmental Services, Inc.
And Subsidiaries

Notes to Consolidated Financial Statements
(Dollars in Thousands except per share data)

1. Background

Commodore Environmental Services, Inc. and subsidiaries ("Commodore"), from January 1, 1991 to December 31, 1995 had been engaged primarily in real estate operations. Since then, Commodore has been engaged in the destruction and neutralization of hazardous waste and the separation of hazardous waste from other materials. Commodore owns technologies related to the separation and destruction of polychlorinated biphenyls (PCBs) and chlorofluorocarbons (CFCs).

Commodore is currently working on the commercialization of these technologies through various development effects, licensing arrangements and joint ventures. Through Commodore Advanced Sciences, Inc. ("ASI"), a subsidiary acquired on October 1, 1996, Commodore has contracts with various government agencies and private companies in the United States and abroad. As some government contracts are funded in one year increments, there is a possibility for cutbacks. As these contracts constitute a major portion of the ASI's revenues, such a reduction would materially affect its operations. However, management believes the subsidiary's existing client relationships will allow Commodore to obtain new contracts in the future.

2. Summary of Significant Accounting Policies

Principles of Consolidation
The consolidated financial statements include the accounts of Commodore and its majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. The investment in Teledyne-Commodore, LLC, a 50% owned joint venture with Teledyne Environmental, Inc., has been accounted for under the equity method since Commodore does not have a controlling interest in the venture.

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

Revenue Recognition
Real Estate. Revenues are recognized from sales of real estate under the installment method of accounting.

Interest Income. Commodore recognizes interest income on notes receivable when earned (see Note 5). The recognition of interest income on notes receivable is discontinued when management determines that the continuing accrual of interest may exceed the net realizable value of the receivable (see Note 6).

Contracts. Substantially all of Commodore's revenues are derived from ASI, consisting of engineering and scientific services performed for the U.S. Government and prime contractors that serve the Federal Government under a variety of contracts, most of which provide for reimbursement of costs plus fixed fees. Revenue under cost-reimbursement contracts is recorded using the percentage of completion

F-6

Commodore Environmental Services, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands except per share data)

method as costs are incurred and include estimated fees in the proportion that costs incurred to date bear to total estimated costs.

Anticipated losses on contracts are provided for by a charge to expense during the period such losses are first identified. Changes in job performance, job conditions, estimated profitability (including those arising from contract penalty provision) and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

Direct and indirect contract costs are subject to audit by the Defense Contract Audit Agency ("DCAA"). Management does not expect these amounts to materially affect the financial statements and has established appropriate allowances to cover potential audit disallowances. Contract revenues have been recorded in amounts which are expected to be realized upon final settlement. The DCAA has audited ASI contracts through September 30, 1995. An allowance for doubtful accounts and potential disallowances has been established based upon the portion of billed and unbilled receivables that management believes may be uncollectible.

Commodore had revenues from one significant contract representing 65% of total contract revenues for the year ended December 31, 1997. This contract is scheduled to end on September 30, 1998, but has two one-year renewal options.

Cash and Cash Equivalents
Commodore considers cash and highly liquid debt instruments with original maturities of three months or less to be cash equivalents. Commodore's investments in cash equivalents are diversified among securities with high ratings in accordance with Commodore's investment policy.

Restricted Cash and Certificates of Deposit Restricted cash at December 31, 1997 and 1996 consisted of $260 and $670, respectively, held in an interest bearing deposit accounts as collateral for the line of credit, as collateral for a performance bond, and as deposits on certain leased property. At December 31, 1996, the Company held certificates of deposit totalling $1,095 pursuant to the Harvest American Insurance Company settlement agreement (see Note 17). In addition, Commodore maintained $50 in certificates of deposit as security on a line of credit at December 31, 1997 and 1996, respectively. Restricted cash and certificates of deposit are classified according to the term of their restriction.

Concentration of Credit Risk
Commodore maintains cash in bank deposit accounts which, at times, may exceed federally insured limits. Commodore has not experienced any losses in such accounts. Commodore believes it is not exposed to any significant credit risk on cash and cash equivalents.

Realization Allowance
Mortgage receivables are recorded net of allowances for the difference between the original mortgage notes receivable with the accrued interest and the estimated fair market value of the underlying collateral.

F-7

Commodore Environmental Services, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands except per share data)

Property and Equipment
Property and equipment are recorded at cost. Improvements which substantially increase the useful lives of assets are capitalized. Maintenance and repairs are expensed as incurred. Upon retirement or disposal, the related cost and accumulated depreciation are removed from the respective accounts and any gain or loss is recorded. Depreciation and amortization are computed on the straight-line method based on the estimated useful lives of assets, which range from 2-10 years.

Other Assets
Goodwill represents the fair value of securities issued plus the fair value of net liabilities assumed in connection with the acquisition of ASI (see Note 4). Goodwill is being amortized on a straight line basis over its estimated 30 year life. Completed technology represents certain technology and related patents acquired in connection with the purchase of third-party interests in consolidated subsidiaries. Completed technology and patents are being amortized on a straight-line basis over their estimated 7 and 17 year lives, respectively. Commodore annually evaluates the existence of impairment on the basis of whether the goodwill, patents and completed technology are fully recoverable from the projected undiscounted cash flows of the assets to which they relate.

Deferred financing costs are being amortized over 5 years.

Income Taxes
Commodore provides for deferred income taxes based on estimated future tax effects of temporary differences between financial statement carrying amounts and the tax bases of existing assets and liabilities. Provision is made to reduce deferred tax assets to their estimated net realizable value.

Research and Development
Research and development expenditures are charged to operations as incurred.

Fair Value of Financial Instruments The fair value of financial instruments is determined by reference to various market data and other valuation techniques as appropriate. Convertible bonds, accounts receivable, notes receivables, long-term debt and line of credit are financial instruments that are subject to possible material market variations from the recorded book value. There are no material differences between the fair value of these financial instruments and the recorded book value as of December 31, 1997 and 1996.

Segment Reporting
Commodore currently has one principal business line in environmental technologies. In 1995 and prior, Commodore's principal activity was real estate. Commodore and its subsidiaries operate primarily in the United States.

Reclassifications
Certain prior year amounts have been reclassified to conform with the current year presentation.

F-8

Commodore Environmental Services, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands except per share data)

New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued its Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting on Comprehensive Income," effective for fiscal years beginning after December 15, 1997. SFAS 130 requires that an enterprise (a) classify items of other comprehensive income by their nature in the financial statements and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in-capital on the balance sheet.

Also in June 1997, the FASB issued SFAS 131, "Disclosures About Segments of an Enterprise and Related Information," effective for fiscal years beginning after December 15, 1997.

Commodore is currently analyzing the effect these standards will have upon the disclosure in the financial statements and notes thereto.

In 1997, the FASB also issued SFAS 128, "Earnings Per Share" and SFAS 129, "Disclosure of Information About Capital Structure." Both statements are effective for periods ending after December 15, 1997 and neither has had a material impact on the financial position or results of operations of Commodore.

3. Earnings Per Share

All earnings per share amounts reflect the implementation of SFAS 128. SFAS 128 established new standards for computing and presenting earnings per share and requires all prior period earnings per share data be restated to conform with the provisions of the statement. Basic earnings per share are computed by dividing net income available to common shareholders, by the weighted average number of shares outstanding during the period, as restated for shares issued in business combinations accounted for as poolings-of-interests and stock dividends. Diluted earnings per share are computed using the weighted average number of shares determined for the basic computations plus the number of shares of Common Stock that would be issued assuming all contingently issuable shares having a dilutive effect on earnings per share were outstanding for the period.

F-9

Commodore Environmental Services, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands except per share data)

                                                                                   Year Ended December 31,
                                                                      ------------------------------------------------
                                                                          1997              1996              1995
                                                                        (Dollars in thousands, except per share data)

Net loss                                                              $    (13,507)     $     (8,311)     $     (2,969)
Preferred stock dividends                                                   (1,766)             (300)             (297)
Dividends on Series D preferred stock (not declared)                          (232)               --                --
                                                                      ------------      ------------      ------------
Net loss applicable to shareholders                                   $    (15,505)     $     (8,611)     $     (3,266)
                                                                      ============      ============      ============
Weighted average common shares outstanding (basic)                      58,482,000        57,454,000        56,212,000
Employee stock options (Note 15)                                               (*)               (*)               (*)
Series AA convertible preferred stock (Note 14)                                (*)               (*)               (*)
Series B convertible preferred stock  (Note 14)                                (*)               (*)               (*)
Series C convertible preferred stock  (Note 14)                                (*)               (*)               --
Warrants issued in connection with various transactions (Note 15)              (*)               (*)               (*)
                                                                      ------------      ------------      ------------
Weighted average common shares outstanding (diluted)                    58,482,000        57,454,000        56,212,000

Loss per share (basic)                                                $      (0.27)     $      (0.15)     $      (0.06)
                                                                      ------------      ------------      ------------
Loss per share (diluted)                                              $      (0.27)     $      (0.15)     $      (0.06)
                                                                      ------------      ------------      ------------

(*) Due to Commodore's loss from continuing operations in 1997, 1996 and 1995, the incremental shares issuable in connection with these instruments are anti-dilutive and accordingly not considered in the calculation.

4. Consolidated Subsidiaries

Commodore Applied Technologies, Inc. At December 31, 1997 and 1996, Commodore owned 56% and 69%, respectively, of the Common stock outstanding of its consolidated subsidiary, Commodore Applied Technologies, Inc. ("Applied"). Commodore capitalized Applied in March 1996 by exchanging the capital stock of other consolidated subsidiaries; rights, titles, assets and properties related to certain proprietary technology; and a promissory note for all 15,000,000 newly issued shares of Applied.

In June 1996, Applied made a public offering of 5,750,000 shares of its $.001 par value Common Stock for $6.00 per share. Along with each share was one detachable warrant valued at $.10, which entitles its owner to purchase one share of Applied stock at the price of $8.40 per share for the period from June 28, 1997 until June 28, 2001. These warrants are redeemable by Applied for $.01 per share if the average trading price of Applied stock for any 20 day period is greater than or equal to $18.00 per share. Net proceeds from the offering were $30,551. Commodore's $21,641 gain on this transaction was recorded as a direct increase in Commodore's paid-in capital because of Applied's early stage of development.

F-10

Commodore Environmental Services, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands except per share data)

In July 1996, Commodore acquired the remaining minority interests in another consolidated subsidiary and contributed its investment to Applied. The excess of Commodore's purchase price of $3,000 over the $2,294 fair value of the net assets acquired has been recorded as completed technology and is being amortized over 7 years.

In August 1997, Applied sold 18,000 shares of its Series A Preferred Stock for an aggregate purchase price of $1,800. The Series A Preferred Stock has a liquidation preference of $100 per share plus accumulated and unpaid dividends and pays a 7% annual cumulative dividend. The Series A Preferred Stock is convertible at the option of investors into Applied Common Stock and also contains certain mandatory redemption features.

In December 1997, stockholders owning 8,400 shares of Applied's Series A Preferred Stock elected to convert their shares to Applied Common Stock. Commodore's $376 gain on these conversions was recorded as a direct increase in paid-in capital. No cash dividends were paid on the Applied Series A Preferred Stock in 1997.

In September 1997, Commodore provided a $4,000, 8% convertible unsecured loan to Applied. Unless converted into Common Stock, interest on the convertible loan is payable quarterly and the unpaid principal is payable on August 31, 2002. Commodore has the right to convert the loan into shares of Applied Common Stock at a conversion price of $3.89 per share, a 16% discount from the market price at the date of closing, subject to adjustment based on a number of factors. As of December 31, 1997, the conversion price on the convertible loan remained $3.89 per share. In connection with the $4,000 loan, Applied issued Commodore a five-year warrant to purchase 1,000,000 shares of Common Stock at an exercise price of $5.03 per share, 109% of the market price on the date of closing.

In October 1997, Applied sold 700,000 shares of Common Stock for net proceeds of approximately $2,344. Commodore's $420 gain on this transaction was recorded as a direct increase in paid-in capital. The sales agreement related to these shares specified certain price reset provisions. At December 31, 1997, the aggregate price reset amount was $1,198 which has been accrued by Applied as a liability.

Commodore Separation Technologies, Inc.

On December 2, 1996 Applied purchased three wholly-owned subsidiaries of Commodore, including Commodore Separation Technologies Inc. ("Separation"), for $5,400, consisting of $3,000 in cash and warrants to purchase 7,500,000 shares of Applied's Common Stock at an exercise price of $15.00 per share and with termination date of December 2, 2003. These warrants were amended in February 1998 (see Note 18). The acquisition was accounted for as a transaction between entities under common control (carryover basis).

In April 1997, Separation completed an initial public offering of its Common and Preferred equity securities from which it received net proceeds of approximately $6,109 and $4,978, respectively. This offering reduced Applied's equity ownership in Separation from 100 percent to 87 percent.

F-11

Commodore Environmental Services, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands except per share data)

Commodore's $2,721 gain on this transaction was recorded as a direct increase in Commodore's paid-in capital because Separation is a development stage company.

Minority interests in Separation at December 31, 1997 consist of the Separation Preferred Stock and warrants to purchase Separation Common Stock, both of which were sold in Separation's initial public offering. By December 31, 1997, all other minority interests in Separation's Common Equity had been reduced to zero, resulting in 100% of the losses of Separation being absorbed by Commodore. The face value and liquidation value of the Separation Preferred Stock is $6,000. The non-cumulative dividend rate on the Separation Preferred Stock is 10%. For the year ended December 31, 1997, Separation paid dividends to its Preferred shareholders of $438.

Advanced Sciences, Inc.
On October 1, 1996, Applied acquired all of the outstanding voting common stock of ASI and A.S. Environmental, Inc. ("ASE"). The acquisition was recorded using the purchase method of accounting. Accordingly, the results of operations of ASI have been included in the consolidated results of Commodore for the period subsequent to the date of acquisition.

In consideration for the ASI and ASE stock, Applied issued 900,000 shares of Common Stock to ASI and ASE shareholders with a fair value of $2,250. The fair value of the underlying net liabilities of ASI totaled $5,423, resulting in $7,673 of goodwill associated with the acquisition. Commodore's $902 gain on this transaction was recorded as a direct increase in paid-in capital.

The unaudited pro forma combined results of operations of Commodore for the year ended December 31, 1996, as if the acquisition had occurred on January 1, 1996, are as follows:

                                           1996
                                           ----
Revenues                                $ 26,779
Net loss                                 (12,529)
Net loss per share                         (0.22)

Minority Interests in Consolidated Subsidiaries Minority interests in Applied at December 31, 1997 consist of the minority interests in Separation previously discussed, Applied Redeemable Preferred Stock, warrants outstanding to purchase shares of Applied Common Stock, and minority shareholders of Applied Common Stock. See Note 18 regarding changes in ownership interests subsequent to December 31, 1997.

F-12

Commodore Environmental Services, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands except per share data)

5. Receivables The components of Commodore's trade receivable are as follows as at December 31, 1997 and 1996:

                                                     December 31,
                                                --------------------
                                                1997          1996
                                                ----          ----
Contract receivables:
   Amount billed                               $ 3,285      $ 7,060
   Retainages                                      168          128
   Unrecovered costs and estimated profits
     subject to future negoitiation
     - not billed                                  (52)          71
                                               -------      -------
                                                 3,401        7,259
Less: Allowance for doubtful accounts
  and potential disallowances                     (416)        (300)
                                               -------      -------
Contract receivables - net                       2,985        6,959
Other receivables, net of allowance
  of $45 and $306, respectively                     79          190
                                               -------      -------
Total receivables - net                        $ 3,064      $ 7,149
                                               =======      =======

The balances billed but not paid by customers pursuant to retainage provisions are due upon completion and acceptance of the contracts.

Unbilled receivables include current and prior year costs and fees billable upon specified events (including settlement of prior years' government audits). All such amounts have been classified as current assets although certain amounts may not be collected within one year depending on when the conditions are satisfied.

Substantially all trade receivables are pledged to secure the ASI line of credit (see Note 10).

Commodore was the holder of certain notes receivable and other related receivables at December 31, 1997, 1996 and 1995, which arose through the sale of real estate properties.

On December 30, 1994, Commodore entered into an agreement with one of its debtors whereby the debtor would pay to Commodore all future proceeds from a note which the debtor received as proceeds from the sale of the property. Management has adjusted the realization allowance to reflect its estimate of the net realizable value of the receivable. Payments have been made in accordance with the agreement on the remaining receivable. Receivables comprise the following:

                                                          December 31,
                                                     ------------------
                                                     1997          1996
                                                     ----          ----
Note receivable, with interest at 10%,
  in various installments through 2002, unsecured    $240          $261
Other receivables                                     276           123
                                                    -----         -----
Total notes and other receivables
  net of realization allowance                       $516          $384
                                                     ====          ====

F-13

Commodore Environmental Services, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands except per share data)

6. Non-Performing Receivables

Commodore holds a mortgage note receivable and other receivables of $2,715 and $2,514 at December 31, 1997 and 1996, respectively. Because the note and receivables are non-performing according to their terms, Commodore has recorded realization allowances of $1,803 and $1,602 at December 31, 1997 and 1996, respectively, in order to reduce the net book value of the receivables to $912 at each date. Commodore is in a second position on the real estate securing the mortgage note receivable. The realization allowances are based upon the estimated recoverability of the receivables and the underlying value of the real estate. Commodore is not recognizing interest income on the receivables and is applying all payments received as a reduction of accrued interest receivable. Commodore received no payments relating to the non-performing assets for the years ended December 31, 1997 and 1996, respectively.

F-14

Commodore Environmental Services, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands except per share data)

7. Other Investments

In 1994, Commodore obtained an interest in an oil and gas field located in Louisiana. The Louisiana property is approximately 10,000 acres and contains a number of oil producing wells. Remedial work and other minor repairs are being completed to bring some of its wells on line. Geological and geophysical studies on the Louisiana property have been performed and new drilling locations have been identified. The investment, aggregating $357, is accounted for under the equity method. Condensed financial information is not presented as the investment and its operations are immaterial to Commodore.

On August 6, 1996, Applied and Teledyne Environmental, Inc. formed a joint venture named Teledyne-Commodore, LLC ("the LLC") and signed a licensing agreement for one of Applied's patented remediation technologies. The LLC was funded by a capital contribution of $1,000 in cash from each Teledyne and Applied on October 1, 1996. Further capital contributions are required only when the Board of Members determines additional contributions are necessary or advisable. In February 1997 and pursuant to the agreement, Applied contributed an additional $1,000 to the LLC. This investment is accounted for under the equity method. Summarized information of the LLC results of operations is as follows at December 31, 1997 and 1996:

                                           1997              1996
                                           ----              ----
Revenues                                 $   510           $    16
Expenses                                   4,163             1,006
                                         -------           -------
Net loss                                  (3,653)             (990)
                                         -------           -------
Applied equity in net loss (50%)         $(1,827)          $  (495)
                                         =======           =======
Investment in and advances to LLC:
  Opening balance                        $   658           $  --
  Capital contribution                     1,000             1,000
  Advances to LLC                            723               153
  Equity in net loss                      (1,827)             (495)
                                         -------           -------
  Net amount                             $   554           $   658
                                         =======           =======

F-15

Commodore Environmental Services, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands except per share data)

8. Property and Equipment

Property and equipment consist of the following:

                                                 Average         December 31,
                                              Useful Life      1997      1996
                                              -----------      ----      ----

     Machinery and equipment                        10        $2,438    $1,772
     Furniture and fixtures                          5           277       427
     Computer equipment                              4           503       210
     Leasehold improvements                          5           258        43
                                                              ------    ------
                                                               3,476     2,452
     Less: accumulated depreciation and
       amortization                                              978       408
                                                              ------    ------
        Total property and equipment                          $2,498    $2,044
                                                              ======    ======


9.   Other Accrued Liabilities

Other accrued liabilities consist of the following:

                                                           1997     1996
                                                          ------    ------
Price reset feature of Applied Common Stock (Note 4)      $1,198    $ --
Warrant for purchase of Applied Common Stock (Note 13)       923      --
State taxes                                                   94       308
Compensation and employee benefits                         1,897     1,183
Other                                                        848     1,450
                                                          ------    ------
                                                          $4,960    $2,941
                                                          ======    ======

10. Line of Credit

At December 31, 1997 and 1996, ASI had a $1,199 and $7,042 outstanding balance, respectively, on a revolving line of credit with a current limit of $6,000, due March 31, 1998 with interest payable monthly at prime plus 1 percent (9.5 percent as of December 31, 1997). The credit line is secured by $153 of restricted cash and the receivables of ASI and contains certain financial covenants and restrictions. ASI was not in compliance with the covenants at December 31, 1996. On January 17, 1997, ASI entered into a revised line of credit agreement and received a waiver and forbearance of amounts due related to their previous covenant violations. ASI was in compliance with the covenants at December 31, 1997.

11. Long-Term Debt

Bonds Payable
In 1993 and 1994, Commodore issued $4,000 of convertible bonds which carry an interest rate of

F-16

Commodore Environmental Services, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands except per share data)

8.5%, payable quarterly, and mature on December 3, 1998. The bonds have detachable warrants for the purchase of 500,000 shares of Common Stock, exercisable at $.10 per share (see Note 15). The bonds are secured by 8,000,000 unissued shares of Commodore's Common Stock. The bonds are convertible at any time into Common Stock of Commodore at the rate of one share per $1.00 of bond principal. Commodore paid an aggregate commission of $480 in cash plus 5 year warrants to purchase 2,233,332 shares of Common Stock at $.10 per share. The bonds are redeemable at Commodore's option at the face amount thereof plus accrued interest when the bid price of Commodore's Common Stock exceeds $1.25 per share. In 1995, as consideration to modify the collateral agreement, Commodore issued warrants to the lender for the purchase of 2,000,000 shares of Common Stock at a price of $.68 per share through December 31, 2000 (see Note 15).

Capital Lease Obligations
Commodore has capital lease obligations of $46, net of imputed interest at rates ranging from 8 to 12 percent of which $27 is recorded as a current liability and $19 is due through 1999.

12. Income Taxes

Commodore provides for deferred income taxes on temporary differences which represent tax effects of transactions reported for tax purposes in periods different than for book purposes. The difference between the income tax benefit at statutory rates for 1997, 1996 and 1995 and the amount presented in the financial statements is due to the increase in the tax valuation allowance which offsets the income tax benefit of the operating loss. The components of the net deferred income tax as of December 31, are as follows:

                                                                        1997           1996           1995
                                                                        ----           ----           ----
Components of current deferred taxes, net:
 Reserve for uncollectible receivables and potential disallowances    $  2,104       $  1,689       $  3,376
 Insurance loss reserve                                                      -            540            412
 In-process technology                                                     969            969            969
 Net operating loss carryforward                                        16,356         10,079          5,471
                                                                      --------       --------       --------
   Total                                                                19,429         13,277         10,228
Less: Valuation allowance                                              (19,429)       (13,277)       (10,228)
                                                                      --------       --------       --------
   Total                                                              $      -       $      -       $      -
                                                                      ========       ========       ========

Commodore conducts a periodic assessment of its valuation allowance. Factors considered in the evaluation include recent and expected future earnings and Commodore's liquidity and equity positions. As of December 1997 and 1996, Commodore has established a valuation allowance for the entire amount of net deferred tax assets.

F-17

Commodore Environmental Services, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands except per share data)

Commodore has net operating loss ("NOL") carryforwards at December 31, 1997 of approximately $40,900 which expire in the years 1998 through 2012. Of the total amount of NOL carryforwards at December 31, 1997, approximately $28,000 and $2,600 are limited to use against future taxable income of Applied and ASI, respectively. If a substantial change in Commodore's ownership should occur, there would be an annual limitation of the amount of NOL carryforwards which could be utilized.

13. Redeemable Preferred Stock

In May and August 1997, Commodore sold an aggregate of 88,000 shares of its Series D Preferred Stock for net proceeds of $7,612 after transaction costs of $968. The Series D Preferred Stock is convertible into shares of Applied Common Stock held by Commodore at a conversion price equal to approximately 85% of the Applied Common Stock market price, subject to certain floors.

Because the redeemable Preferred Stock had a conversion rate less than the market price of Applied Common Stock on the date of issue (a beneficial conversion feature), the intrinsic value of the difference, $1,553, was recorded as a direct increase in paid-in capital. This amount was to be recorded as a non-cash Preferred dividend over the earliest possible conversion period (five months). Because of the early conversions discussed in the following paragraphs, only $1,477 of the total amount was required to be recorded as a preferred dividend.

The purchasers of the Series D Preferred Stock also received five-year warrants to purchase an aggregate of 1,175,000 shares of Applied Common Stock held by Commodore at exercise prices ranging from $5.15 per share to $7.14 per share. Such exercise prices are subject to reset on August 18, 1998 to an exercise price equal to approximately 110% of the market price of Applied Common Stock on August 17, 1998, if such price is less than the original exercise price. In addition, if Applied Common Stock trades at less than 50% of the August 17, 1998 closing bid price for any 10 consecutive trading days, the exercise price is subject to further reset (on one occasion only) to 50% of such August 17, 1998 closing bid price. The warrants were valued at $850 and were recorded as a liability until such time as the warrants are either exercised or expire. Affiliates of the placement agent received warrants to purchase an aggregate of 85,000 shares of Applied Common Stock held by Commodore at exercise prices ranging from $5.15 per share to $7.14 per share, valued at $73. The placement agent warrants were also recorded as a liability at the time of issuance.

As of December 31, 1997, 41,200 shares of Series D Preferred Stock have been converted into an aggregate of 2,294,960 shares of Applied Common Stock, based upon conversion prices ranging from $1.50 per share to $2.60 per share. These conversions resulted in a net gain of $1,896 during the year ended December 31, 1997.

Because the Series D Preferred Stock is convertible into a security other than Common Stock of Commodore, the Series D Preferred Stock is classified as Redeemable Preferred Stock, excluded from stockholder's equity. As of December 31, 1997, the 46,800 shares of Series D Preferred Stock have an aggregate liquidation value (upon which the conversion ratio is based) of approximately $4,912.

F-18

Commodore Environmental Services, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands except per share data)

14. Stockholders' Equity

Common Stock
Commodore has authorized 100,000,000 shares of Common Stock, of which 59,233,583 and 57,924,368 shares were issued at December 31, 1997 and 1996, respectively. Of the total shares issued, 506,329 were held in treasury at December 31, 1997 and 1996.

In 1996, Commodore issued 200,000 shares of Common Stock valued at $68 in order to purchase technologies related to the separation and remediation process. In 1997, Commodore issued 500,000 shares of Common Stock valued at $313 in exchange for services. Common Stock issued through the exercise of options and warrants is described in Note 15.

Preferred Stock
Commodore has authorized 3,000,000 shares of Series AA Preferred Stock, par value $.01 per share. The Series AA Preferred Stock pays non-cumulative annual dividends from current earnings of $.10 per share and has a liquidation value of $1.00 per share. The Series AA Preferred Stock is redeemable by Commodore for $1.00 per share at any time the bid price of Commodore's Common Stock equals or exceeds $1.25 per share and is convertible into shares of Commodore Common Stock at a 1 to 1 ratio. In 1997, 275,000 shares of Series AA Preferred Stock were converted into 275,000 shares of Commodore Common Stock. The Series AA Preferred shares carry detachable warrants to purchase 6,000,000 shares of Commodore Common Stock at an exercise price of $.10 per share (see Note 15). At December 31, 1997, 2,725,000 shares of Series AA Preferred Stock remained outstanding.

Commodore has authorized 1,600,000 shares of Series B Preferred Stock, par value $.01 per share. The Series B Preferred Stock pays non-cumulative annual dividends from current earnings of $.08 per share (commencing in 1998) and has a liquidation value of $1.00 per share. The Series B Preferred Stock is redeemable by Commodore at any time at a redemption price of $1.10 per share and is convertible to Commodore Common Stock at a ratio of 3 shares of Series B Preferred Stock to 1 share of Common Stock. In 1997, 65,340 shares of Series B Preferred Stock were converted into 21,780 shares of Commodore Common Stock. At December 31, 1997, 1,469,369 shares of Series B Preferred Stock remained outstanding.

Commodore has authorized 1,500,000 shares of Series C Preferred Stock, par value of $.01 per share. The Series C Preferred Stock does not pay dividends. In 1996, Commodore issued 115,208 shares of Series C Preferred Stock. In January, 1998, the Series C Preferred Stock was converted into Commodore Common Stock at a ratio based on the market value of the Common Stock at that time compared to an assumed value of Series C Preferred Stock of $1.00 per share. The market value used in this conversion was approximately $.51 per share. The total amount of Commodore's Common Stock issued in connection with this conversion was 2,244,361 shares.

15. Stock Options and Stock Warrants

Commodore has adopted the intrinsic value method of accounting for stock options and warrants under

F-19

Commodore Environmental Services, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands except per share data)

APB 25 with footnote disclosures of the pro forma effects as if the FAS 123 fair value method had been adopted.

Had compensation expense for Commodore's employee stock options been determined based on the fair value at the grant date for awards in 1997, 1996 and 1995 consistent with the provisions of FAS 123, Commodore's net loss per share would have been increased to the pro forma amounts indicated below:

December 31,                         1997           1996           1995
------------                         ----           ----           ----

Net loss - as reported             $(13,507)      $(8,311)       $(2,969)
Net loss - pro forma               $(17,733)      $(9,858)       $(3,538)
Loss per share - as reported       $   (.27)      $  (.15)       $  (.06)
Loss per share - pro forma         $   (.34)      $  (.18)       $  (.07)

FAS 123 requires stock options to be valued using an approach such as the Black-Scholes option pricing model. The Black-Scholes model calculates the fair value of the grant based upon certain assumptions about the underlying stock. The expected dividend yield of the stock is zero, the expected volatility is 60-65 percent, the expected life of the options is equal to their term, and the expected risk-free rate of return is calculated as the rate offered on U.S. Government securities with the same term as the expected life of the options.

Compensation expense under APB 25 of $650 and $59 has been recognized for the stock options issued to employees and directors 1997 and in 1996, respectively.

Stock Options
The following table presents the outstanding options (vested and non vested) at December 31, 1997, 1996 and 1995.

                                                       1997                          1996                       1995
                                              ----------------------        ----------------------     ----------------------
                                                            Weighted                      Weighted                   Weighted
                                                             Average                       Average                    Average
                                                             Exercise                     Exercise                   Exercise
                                                Shares        Price          Shares         Price       Shares         Price

Options outstanding - beginning of year        8,585,000      $0.86         2,200,000      $0.18       1,720,000      $0.09
Granted                                        6,155,000       0.85         7,005,000       1.00         480,000       0.50
Exercised                                       (190,000)      0.10          (320,000)      0.14               -
Forfeited                                       (240,000)      0.50          (300,000)      0.10               -
Rescinded                                     (5,645,000)      1.07                 -                          -
                                              ----------                    ---------                  ---------

Options outstanding - end of year              8,665,000      $0.78         8,585,000      $0.86       2,200,000      $0.18
                                              ==========                    =========                  =========
Options exercisable - end of year              5,400,000                    2,745,000                  1,010,000
Weighted average fair value of options        ==========                    =========                  =========
 granted during the period                                    $0.70                        $0.58                      $0.26

F-20

Commodore Environmental Services, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands except per share data)

The following table summarizes information about employee stock options outstanding at December 31, 1997.

                                       Options Outstanding                    Options Exercisable
                        ------------------------------------------      ------------------------------
                                         Weighted
                                         Average        Weighted                             Weighted
            Range of                    Remaining       Average                              Average
           Exercisable     Number      Contractual      Exercise             Number          Exercise
             Prices      Outstanding       Life          Price             Exercisable        Price
           ------------  -----------   -----------     -----------      ---------------    -----------
           $.10-$ .29    1,750,000     4.38 years       $  .18            1,550,000         $  .19
           $.37-$ .60    1,505,000     5.00 years       $  .52            1,060,000         $  .54
           $.84-$1.12    5,410,000     8.93 years       $  .87            2,790,000         $  .90
------------------------------------------------------------------------------------------------------
Total      $.10-$1.12    8,665,000     7.33 years       $  .78            5,400,000         $  .62
------------------------------------------------------------------------------------------------------

Stock Warrants
In 1997 and 1996, warrants for the purchase of 322,435 and 635,415 shares of Common Stock were exercised resulting in net proceeds to Commodore of $31 and $30, respectively.

Outstanding warrants at December 31, 1997 and 1996 are as follows:

 Number of          Number of
 Warrants           Warrants         Exercise           Expiration
   1997               1996            Price               Date
   ----               ----            -----               ----

 2,639,884         2,662,319           .05             July 1998
 1,000,000         1,000,000          1.00             September 1998
 8,983,332         9,283,332           .10             December 1998
   200,000           200,000           .14             October 1999
 2,000,000         2,000,000           .68             December 2000
----------        ----------
14,823,216        15,145,651
==========        ==========

As of December 31, 1997, all stock warrants were currently exercisable.

16. Related Party Transactions

Commodore was allocated rental charges of $104, $89 and $58 for the years ended December 31, 1997, 1996 and 1995, respectively by an entity owned by Commodore's principal shareholder and chairman.

At December 31, 1997 Commodore and Applied held notes receivable of $3,000 and $1,500, respectively, from Lanxide Performance Materials, Inc. ("LPM"), a wholly-owned subsidiary of Lanxide Corp. Lanxide is related to Commodore by significant common ownership and by the transactions described below. The notes became due on February 28, 1998. In 1997,

F-21

Commodore Environmental Services, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands except per share data)

a reserve in the amount of $669 was recorded, reducing the net carrying amount of Commodore's aggregate receivable to $3,831. The notes were collateralized by the assets of LPM and guaranteed by Lanxide Corp. on behalf of its subsidiary.

In March 1998, Applied transferred their note receivable from LPM and $500 cash to Commodore as a payment on amounts due under the September 1997 intercompany note (see Note 4). Also in March 1998, Commodore exchanged its notes receivable from LPM, including the note recently acquired from Applied, along with $500 cash for a license and trademark to a technology called CERASET(TM) owned by Lanxide. Commodore recorded the license at the carrying value of the notes receivable plus the cash exchanged.

In July 1997, Commodore obtained effective control of Lanxide pursuant to a voting agreement (the "Voting Agreement") among certain Lanxide stockholders. Pursuant to the Voting Agreement, stockholders of Lanxide owning 50.1% of the outstanding shares of the Lanxide Common Stock granted proxies to members of Commodore's Board of Directors to vote all shares of Lanxide Common Stock held by each such stockholder until December 31, 1998. Also in July 1997, Commodore purchased 20,000 shares of Lanxide Series G Preferred Stock for $2,000. The terms of this transaction would have allowed Commodore to make additional investments in Lanxide, effectively acquiring a majority ownership of Lanxide. On August 27, 1997, Commodore informed Lanxide that it would not make additional investments in Lanxide. As of December 31, 1997, Commodore had provided a reserve against its entire $2,000 investment in Lanxide. In January 1998, the Voting Agreement was rescinded.

In connection with the transactions with Lanxide, Commodore and its subsidiaries advanced a total of $374 to Lanxide related to certain fees and expenses incurred by Lanxide. At December 31, 1997, a $374 reserve had been established against these receivables.

17. Commitments and Contingencies

Operating Leases
Commodore and its subsidiaries are committed under non cancelable operating leases for office space and other equipment. Future obligations under the leases for the next five years are as follows:

1998                                       $  566
1999                                          485
2000                                          339
2001                                          248
2002                                           15
                                           ------
                                           $1,653
                                           ======

Rent expense approximated $847, $318, and $127 in 1997, 1996 and 1995, respectively.

F-22

Commodore Environmental Services, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands except per share data)

Employment Agreements
Commodore and its subsidiaries have employment agreements with 10 executives and key personnel. Aggregate minimum payments under the employment agreements for the following five years are as follows:

1998                                       $2,128
1999                                        1,806
2000                                          279
2001                                           85
                                           ------
Total                                      $4,298
                                           ======

Commodore and its subsidiaries accrued $678 of executive bonuses in 1997. These bonuses were paid in 1998.

Self Insurance
Harvest American. In July 1987, Commodore established Harvest American Insurance Company, a wholly-owned licensed "captive" insurance company subsidiary. Harvest issued insurance policies exclusively to Commodore's former asbestos abatement subsidiaries. The policies were in effect from July 1987 through January 1989. The maximum exposure under policies is $5,000 in the aggregate.

In December, 1994, the governing insurance regulators and Commodore entered into a settlement agreement which required Commodore to deposit $750 into an interest bearing account as a capital contribution to Harvest. As of September 30, 1997, Harvest had capital of $1,141 in an interest bearing account and a $4,238 intercompany demand note from Commodore.

An independent actuary determined that the loss reserve required in connection with the policies issued by Harvest as of December 31, 1994 was $994. In October 1997, Harvest transferred 100% of its risk to two insurance companies ("Assuming Insurers") for a total cost of $1,275, acceptable to the appropriate regulatory agencies. Commodore funded the additional $134 required. The insurance commissioner, in accordance with the settlement agreement, released all cash to Harvest for payment to the Assuming Insurers.

Benefit Plan. During 1996 and 1997, Commodore operated a health benefit plan for certain employees under which it is partially self-insured. The maximum liability is limited to $65 per individual per year. Claims in excess of Commodore's maximum liability are insured by a health insurance carrier. Effective April 1, 1997, Commodore became fully insured through an outside health insurance carrier.

F-23

Commodore Environmental Services, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements - Continued
(Dollars in Thousands except per share data)

Litigation
Commodore has matters of litigation arising in the ordinary course of its business which, in the opinion of management, will not have a material adverse effect on the financial condition or results of operation.

18. Subsequent Events

In February 1998, Commodore sold (i) 1,381,692 shares of Applied Common Stock and (ii) three-year warrants to purchase an aggregate of 150,000 shares of Applied Common Stock at an exercise price equal to $6.00 per share, for an aggregate purchase price of $6,000. As a result of this transaction, Commodore owned approximately 43% of the outstanding shares of Applied Common Stock. Pursuant to the terms of this transaction, Commodore may be required to issue up to a maximum of 1,618,308 additional shares of Applied Common Stock to the investors for no additional consideration, based upon the market price of Applied Common Stock. Commodore will, for a certain period of time, have the right and option (but not the obligation) to require the investors to purchase additional shares of Applied Common Stock and Commodore may be required to transfer additional shares of Applied Common Stock to the investors for no additional consideration as a part of this transaction. The Applied Common Stock sold in the February 1998 transaction as well as those that may be sold under the second transaction have certain price reset features in effect for a specified period of time.

In February 1998, Commodore provided a $5,450 unsecured loan to Applied, evidenced by Applied's 8% non-convertible note. In connection with the loan, Applied amended and restated in its entirety a five-year warrant to purchase 7,500,000 shares of Applied Common Stock issued to Commodore on December 2, 1996 to, among other things, reduce the exercise price of the warrant from $15.00 per share to $10.00 per share. In addition, Applied issued to Commodore an additional five-year warrant to purchase 1,500,000 shares of Applied Common Stock at an exercise price of $10.00 per share.

In January 1998, and pursuant to agreement by the Board of Members, Applied advanced an additional $1,000 payment to the Teledyne - Commodore joint venture (see Note 7).

F-24

EXHIBIT INDEX

Exhibits No.         Description
------------         -----------
    3.1              Certificate of Incorporation of Commodore Environmental Services, Inc. (1)

    3.2              Certificate of Stock Designation of Commodore Environmental Services, Inc. (6)

    3.3              By-Laws of Commodore Environmental Services, Inc. (1)

    10.1             Certificate from the State of Vermont for Harvest American Insurance Company. (1)

    10.2             Letter Agreement, dated March 18, 1991 with Ameritech Oil Gas Corporation with respect to
                     Oklahoma Oil & Gas Field. (3)

    10.3             Operating Agreement, dated March 22, 1991 with Ameritech Oil and Gas Corporation with respect
                     to Oklahoma Oil & Gas Field. (3)

    10.4             Assumption Agreement, dated April 11, 1991 by and between Commodore Environmental Services,
                     Inc. and Harvest American Insurance Company. (3)

    10.5             Option Agreement, dated March 15, 1993, and among Commodore Environmental Services, Inc. and
                     the Principal Shareholders and Board of Directors of A.L. Sandpiper Corporation and CFC
                     Technologies, Inc. (4)

    10.6             Option Agreement, dated March 15, 1993, by and among Commodore Environmental Services, Inc.
                     and Paul Hannesson. (4)

    10.7             Option Agreement, dated March 15, 1993, by and among Commodore Environmental Services, Inc.
                     and the Principal Shareholders and Board of Directors of A.L. Sandpiper Corporation and CFC
                     Technologies, Inc. (4)

    10.8             Agreement and Plan of Merger dated as of June 24, 1993 between the Company, Sandpiper, its
                     principal shareholders and ALS Acquisition Corp. (5)

    10.9             License Agreement between Sandpiper and the Company. (5)

    10.10            Employment Agreements between Sandpiper and Abel and Augur, respectively. (5)

    10.11            Non-competition Agreements between Sandpiper and Abel and Augur. (5)

    10.12            Form of the Company's Warrant. (5)

    10.13            Stock Option Agreements between the Company and Abel and Augur, respectively. (5)

    10.14            Security Agreement between Sandpiper and the Company. (5)

    10.15            Escrow Agreement between the Company, Sandpiper, its principal shareholders and counsel to the
                     parties. (5)

    10.16            $125,000 Non-Recourse, Non-Negotiable, secured Promissory Note from Albert and Connie Abel to
                     the Company. (5)

    10.17            Tax and loan Indemnity Agreement between the Company and Albert Abel and Connie Abel. (5)

    10.18            Agreement and Plan of Merger dated July 28, 1993 between the Company, CFC, Abel, Augur and CFC
                     Acquisition Corp. (5)

    10.19            Sublicense Agreement between the Company and CFC Technologies, Inc. (5)

    10.20            Escrow Agreement between the Company, CFC Technologies, Inc., Abel, Augur and counsel to the
                     parties. (5)

    10.21            Securities Purchase Agreement by and between Commodore Environmental Services, Inc. and
                     purchasers of Series "AA" Preferred Stock. (6)

    10.22            Bond Purchase Agreement by and between Commodore Environmental Services, Inc. and purchasers
                     of Convertible Bonds. (6)

    10.23            Stock Option Agreement, dated November 22, 1993, by and between Commodore Environmental
                     Services, Inc. and Jim DeAngelis. (6)

    10.24            Employment Agreement, dated January 1, 1994, by and between Commodore Environmental Services,
                     Inc. and Jim DeAngelis. (6)

    10.25            Employment Agreement, dated October 3, 1994, by and between Commodore Environmental Services,
                     Inc. and Vincent Valeri. (7)

    10.26            Warrant, dated October 3, 1994, by and between Commodore Environmental Services, Inc. and
                     Vincent Valeri. (7)

    10.27            Employment Agreement, dated June 1, 1995, by and between Commodore Environmental Services,
                     Inc. and Neil Drobny. (7)

    10.28            Stock Option Agreement, dated June 1, 1995, by and between Commodore Environmental Services,
                     Inc. and Neil Drobny. (7)


Exhibits No.         Description
------------         -----------
    10.29            Employment Agreement, dated August 31, 1995, by and between Commodore Environmental Services,
                     Inc. and Carl Magnell. (7)

    10.30            Stock Option Agreement, dated August 31, 1995, by and between Commodore Environmental
                     Services, Inc. and Carl Magnell. (7)

    10.31            Assignment of Technology Agreement, dated December, 1995, by and between Commodore Membrane
                     Technologies, Inc. and Sri Kilambi. (7)

    10.32            Stock Option Agreement, dated as of February 16, 1996, by and between Commodore Environmental
                     Services, Inc. and Paul E. Hannesson. (7)

    10.33            Employment Agreement, dated as of October 31, 1996, by and between the Company and Edwin L.
                     Harper, Ph.D. (8)

    10.34            Form of Employment Agreement by and between the Company and Paul E. Hannesson.*

    10.35            Agreement and Plan of Merger, dated November 13, 1996, by and among the Company, Lanxide
                     Corporation and COES Acquisition Corp. (9)

    10.36            Line of Credit Agreement, dated November 13, 1996, by and between the Company and LPM. (9)

    10.37            Line of Credit Promissory Note, dated November 13, 1996, by LPM in favor of the Company. (9)

    10.38            Security Agreement, dated November 13, 1996, by and between the Company and LPM. (9)

    10.39            Guarantee, dated November 13, 1996, by Lanxide Corporation in favor of the Company. (9)

   *10.40            Warrant, dated March 5, 1998, issued by Lanxide Corporation to the Company.

   *10.41            Settlement and Release Agreement, dated March 5, 1998, by and among Lanxide Corporation,
                     Lanxide Performance Materials, Inc., Marc S. Newkirk, the Company and Applied.

   *10.42            Amendment to Securities Purchase Agreement, dated March 5,
                     1998, by and between the Company and Lanxide Corporation.

   *10.43            License Agreement, dated as of March 5, 1998, by and among Commodore Polymer Technologies,
                     Inc., Lanxide Corporation and Lanxide Technology Company L.P.

   *21.1             Subsidiaries of the registrant.

   *27.1             Financial Data Schedule.


* Filed herewith.

(1) Incorporated by reference to Exhibit 10 in the Registrant's Form 10-K dated April 14, 1988.

(2) Incorporated by reference to Exhibits 10.1 through 10.13 to the Registrant's Form 10-Q for the quarter ended June 30, 1990.

(3) Incorporated by reference to Exhibit 10 in the Registrant's Form 10-K dated April 30, 1992.

(4) Incorporated by reference to Exhibit 10 in the Registrant's Form 10-K dated March 23, 1993.

(5) Incorporated by reference to Exhibit 10 in the Registrant's Form 8-K dated August 10, 1993.

(6) Incorporated by reference to Exhibit 10 in the Registrant's Form 10-K dated April 14,1994.

(7) Incorporated by reference to Exhibit 10 in the Registrant's Form 10-K for the fiscal year ended December 31, 1995 filed with the Commission on April 12, 1996.

(8) Incorporated by reference to Exhibit 10.12 to Amendment No. 3 to Separation's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on January 23, 1997 (File No. 333-11813).

(9) Incorporated by reference to Exhibits 1, 3, 4, 5 and 6 in the Registrant's Form 8-K dated November 13, 1996.


EXHIBIT "A"

NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THE WARRANTS NOR SUCH SHARES MAY BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT, OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT.

LANXIDE CORPORATION

WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK

No.

270,000 Shares

THIS CERTIFIES that, for value received, Commodore Environmental Services, Inc. (the "Holder"), is entitled to subscribe for and purchase from Lanxide Corporation, a Delaware corporation (the "Company"), upon the terms and conditions set forth herein, at any time and from time to time after December 31, 1998 and before 5:00 P.M. (New York City time) on March 1, 2001, New York time (the "Exercise Period"), Two Hundred and Seventy Thousand (270,000) shares of common stock, par value .01 per share, of the Company (the "Common Stock"), at an exercise price of $7.41 per share (the "Exercise Price"). This Warrant is issued in connection with the sale to the Holder of 20,000 shares of the Company's non-voting, nonconvertible Series G Preferred Stock, $.01 par value per share, of the Company (the "Series G Preferred Stock") pursuant to a Securities Purchase Agreement, dated July 3, 1997 (the "Securities Purchase Agreement"), as amended by an Amendment to Securities Purchase Agreement dated March 5, 1998 (the "Amendment"), by and between the Holder and the Company, the sale of which has already occurred. In accordance with the Amendment, the Company and the Holder have exchanged all of the shares of Series G Preferred Stock purchased by the Holder pursuant to the Securities Purchase Agreement for a like number of shares of the Company's Preferred Stock, Series H (the "Series H Preferred Stock"). This Warrant is issued in substitution of the Warrant issued on July 3, 1997 which July 3, 1997 Warrant has been cancelled. As used herein the term "this Warrant" shall mean and include this Warrant and any Warrant or Warrants hereafter issued as a consequence of the exercise or transfer of this Warrant in whole or in part.

The number of shares of Common Stock issuable upon exercise of the Warrants (the "Warrant Shares") and the Exercise Price may be adjusted from time to time as hereinafter set forth.

1. This Warrant may be exercised during the Exercise Period, as to the whole or any lesser number of the respective whole Warrant Shares, by the surrender of this Warrant (with the election at the end hereof duly executed) to the Company at its office as set forth in


the form of election attached hereto, or at such other place as is designated in writing by the Company, together with a certified or bank cashier's check payable to the order of the Company in an amount equal to the Exercise Price multiplied by the number of respective Warrant Shares for which this Warrant is being exercised. Notwithstanding the foregoing, or any other provision of this Warrant to the contrary, to the extent that the Holder shall have acquired shares of Series H Preferred Stock of the Company, this Warrant may be exercised by the Holder during the Exercise Period and the Exercise Price for one or more Warrant Shares may be paid by the Holder's surrender for cancellation of one or more shares of Series H Preferred Stock. Upon such Holder's delivery of such share(s) of Series H Preferred Stock, duly endorsed in blank for transfer, the Company shall simultaneously deliver to the Holder of this Warrant that number of Warrant Shares equal to the quotient obtained by dividing (a) the product of
(i) the number of shares of Series H Preferred Stock so surrendered for cancellation and (ii) $100.00 by (b) $7.41. Upon issuance of such Warrant Shares, the Corporation shall cancel the shares of Series H Preferred Stock so surrendered by the Holder. In the event and to the extent that all shares of Series H Preferred Stock acquired by the Holder pursuant to the Amendment shall have been so surrendered for cancellation and Warrant Shares issued therefor, the Exercise Price for all remaining Warrant Shares issuable pursuant to this Warrant shall be paid in accordance with the first sentence of this Section 1.

2. Upon each exercise of the Holder's rights to purchase Warrant Shares and payment of the Exercise Price, the Holder shall be deemed to be the holder of record of the Warrant Shares issuable upon such exercise, notwithstanding that the transfer books of the Company shall then be closed or certificates representing such Warrant Shares shall not then have been actually delivered to the Holder. As soon as practicable after each such exercise of this Warrant and payment by the Holder, the Company shall issue and cause to be delivered a certificate or certificates for the Warrant Shares issuable upon such exercise, registered in the name of the Holder or its designee. If the Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the Warrant Shares (or portions thereof) subject to purchase hereunder.

3. Any Warrants issued upon the transfer or exercise in part of this Warrant shall be numbered and shall be registered in a Warrant Register as they are issued. The Company shall be entitled to treat the registered holder of any Warrant on the Warrant Register as the Owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person, and shall not be liable for any registration or transfer of Warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. This Warrant shall be transferable only on the books of the Company upon delivery thereof duly endorsed by the Holder or by his duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment, or authority to transfer. In all cases of transfer by an attorney, executor, administrator, guardian, or other legal representative, duly authenticated evidence of his or its authority shall be produced. Upon any registration of transfer, the Company shall deliver a new Warrant or Warrants to the person entitled thereto. This Warrant may be exchanged, at the option of the Holder thereof, for another Warrant, or other Warrants of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Warrant Shares (or portions thereof), upon surrender to the Company or its duly authorized agent. Notwithstanding the foregoing,


the Company shall have no obligation to cause Warrants to be transferred on its books to any person if, in the opinion of counsel to the Company, such transfer does not comply with the provisions of the Securities Act of 1933, as amended (the "Act"), and the rules and regulations promulgated thereunder.

4. The Company shall at all times reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of providing for the exercise of the rights to purchase all Warrant Shares granted pursuant to the Warrants, such number of shares of Common Stock as shall, from time to time, be sufficient therefor. The Company covenants that all shares of Common Stock issuable upon exercise of this Warrant, upon receipt by the Company of the full Exercise Price therefor, shall be validly issued, fully paid, nonassessable, and free of preemptive rights.

5. (a) In case the Company shall at any time after the date the Warrants were first issued (i) declare a dividend on the outstanding Common Stock payable in shares of its capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock by reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then, in each case, the Exercise Price, and the number of Warrant Shares issuable upon exercise of this Warrant, in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination, or reclassification, shall be proportionately adjusted so that the Holder after such time shall be entitled to receive the aggregate number and kind of shares which, if such Warrant had been exercised immediately prior to such time, he or it would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination, or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur.

(b) In case the Company shall issue or fix a record date for the issuance to all holders of Common Stock of rights, options, or warrants to subscribe for or purchase Common Stock (or securities convertible into or exchangeable for Common Stock) at a price per share (or having a conversion or exchange price per share, if a security convertible into or exchangeable for Common Stock) less than the Exercise Price per share of Common Stock on such record date, then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so to be offered (or the aggregate initial conversion or exchange price of the convertible or exchangeable securities so to be offered) would purchase at such current Exercise Price and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock to be offered for subscription or purchase (or into which the convertible or exchangeable securities so to be offered are initially convertible or exchangeable). Such adjustment shall become effective at the close of business on such record date; provided, however, that, to the extent the shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) are not delivered, the Exercise Price shall be readjusted after the expiration of such rights, options, or warrants (but only with respect to Warrants exercised after such


expiration), to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights, options, or warrants been made upon the basis of delivery of only the number of shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) actually issued. In case any subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the board of directors of the Company, whose determination shall be conclusive absent manifest error. Shares of Common Stock owned by or held for the account of the Company or any majority-owned subsidiary shall not be deemed outstanding for the purpose of any such computation.

(c) In case the Company shall distribute to all holders of Common Stock (including any such distribution made to the stockholders of the Company in connection with a consolidation or merger in which the Company is the continuing corporation) evidences of its indebtedness or assets (other than cash dividends or distributions and dividends payable in shares of Common Stock), or rights, options, or warrants to subscribe for or purchase Common Stock, or securities convertible into or exchangeable for shares of Common Stock (excluding those with respect to the issuance of which an adjustment of the Exercise Price is provided pursuant to Section 5(b) hereof), then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date for the determination of stockholders entitled to receive such distribution by a fraction, the numerator of which shall be the Exercise Price per share of Common Stock on such record date, less the fair market value (as determined in good faith by the board of directors of the Company, whose determination shall be conclusive absent manifest error) of the portion of the evidences of indebtedness or assets so to be distributed, or of such rights, options, or warrants or convertible or exchangeable securities, applicable to one share, and the denominator of which shall be such current Exercise Price per share of Common Stock. Such adjustment shall be made whenever any such distribution is made, and shall become effective on the record date for the determination of shareholders entitled to receive such distribution.

(d) In case the Company shall issue shares of Common Stock or rights, options, or warrants to subscribe for or purchase Common Stock, or securities convertible into or exchangeable for Common Stock (excluding only shares, rights, options, warrants, or convertible or exchangeable securities issued or issuable (i) in any of the transactions with respect to which an adjustment of the Exercise Price is provided pursuant to Sections 5(a), 5(b) or 5(c) above, (ii) upon exercise, in whole or in part, of the Warrants or (iii) to management or employees of the Company of authorized shares of Common Stock), at a price per share (determined, in the case of such rights, options, warrants, or convertible or exchangeable securities, by dividing (x) the total amount received or receivable by the Company in consideration of the sale and issuance of such rights, options, warrants, or convertible or exchangeable securities, plus the minimum aggregate consideration payable to the Company upon exercise, conversion, or exchange thereof, by (y) the maximum number of shares covered by such -rights, options, warrants, or convertible or exchangeable securities) lower than the Exercise Price per share of Common Stock in effect immediately prior to such issuance, then the Exercise Price shall be reduced on the date of such issuance to a price (calculated to the nearest cent) determined by multiplying the Exercise Price in effect immediately prior to such issuance by a fraction, (i) the numerator of which


shall be an amount equal to the sum of (A) the number of shares of Common Stock outstanding immediately prior to such issuance plus (B) the quotient obtained by dividing the consideration received by the Company upon such issuance by such current Exercise Price, and (ii) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such issuance. For the purposes of such adjustments, the maximum number of shares which the holders of any such rights, options, warrants, or convertible or exchangeable securities shall be entitled to initially subscribe for or purchase or convert or exchange such securities into shall be deemed to be issued and outstanding as of the date of such issuance, and the consideration received by the Company therefor shall be deemed to be the consideration received by the Company for such rights, options, warrants, or convertible or exchangeable securities, plus the minimum aggregate consideration or premiums stated in such rights, options, warrants, or convertible or exchangeable securities to be paid for the shares covered thereby. No further adjustment of the Exercise Price shall be made as a result of the actual issuance of shares of Common Stock on exercise of such rights, options, or warrants or on conversion or exchange of such convertible or exchangeable securities. On the expiration or the termination of such rights, options, or warrants, or the termination of such right to convert or exchange, the Exercise Price shall be readjusted (but only with respect to Warrants exercised after such expiration or termination) to such Exercise Price as would have obtained had the adjustments made upon the issuance of such rights, options, warrants, or convertible or exchangeable securities been made upon the basis of the delivery of only the number of shares of Common Stock actually delivered upon the exercise of such rights, options, or warrants or upon the conversion or exchange of any such securities; and on any change of the number of shares of Common Stock deliverable upon the exercise of any such rights, options, or warrants or conversion or exchange of such convertible or exchangeable securities or any change in the consideration to be received by the Company upon such exercise, conversion, or exchange, including, but not limited to, a change resulting from the antidilution provisions thereof, the Exercise Price, as then in effect, shall forthwith be readjusted (but only with respect to Warrants exercised after such change) to such Exercise Price as would have been obtained had an adjustment been made upon the issuance of such rights, options, or warrants not exercised prior to such change, or securities not converted or exchanged prior to such change, on the basis of such change. In case the Company shall issue shares of Common Stock or any such rights, options, warrants, or convertible or exchangeable securities for a consideration consisting, in whole or in part, of property other than cash or its equivalent, then the "price per share" and the "consideration received by the Company" for purposes of the first sentence of this Section 5(d) shall be as determined in good faith by the board of directors of the Company, whose determination shall be conclusive absent manifest error. Shares of Common Stock owned by or held for the account of the Company or any majority-owned subsidiary shall not be deemed outstanding for the purpose of any such computation.

(e) No adjustment in the Exercise Price shall be required if such adjustment is less than $0.10; provided however, that any adjustments which by reason of this Section 5 are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 5 shall be made to the nearest cent or to the nearest one-thousandth of a share, as the case may be.


(f) In any case in which this Section 5 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer, until the occurrence of such event, issuing to the Holder, if the Holder exercised this Warrant after such record date, the shares of Common Stock, if any, issuable upon such exercise over and above the shares of Common Stock, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided, however, that the Company shall deliver to the Holder a due bill or other appropriate instrument evidencing the Holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment.

(g) Upon each adjustment of the Exercise Price as a result of the calculations made in Sections 5(b), 5(c) or 5(d) hereof, this Warrant shall thereafter evidence the right to purchase, at the adjusted Exercise Price, that number of shares (calculated to the nearest thousandth) obtained by dividing (A) the product obtained by multiplying the number of shares purchasable upon exercise of this Warrant prior to adjustment of the number of shares by the Exercise Price in effect prior to adjustment of the Exercise Price by (B) the Exercise Price in effect after such adjustment of the Exercise Price.

(h) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall promptly cause written notice thereof to be sent by registered mail, postage prepaid, to the Holder, at its address as it shall appear in the Warrant Register, which notice shall be accompanied by an officer's certificate setting forth the number of Warrant Shares purchasable upon the exercise of this Warrant and the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment and the computation thereof, which officer's certificate shall be conclusive evidence of the correctness of any such adjustment absent manifest error.

(i) The foregoing provisions of this Section 5 notwithstanding, no adjustments shall be made under this Section 5 in respect of any shares of Common Stock issued or issuable pursuant to a stock option plan anticipated to be approved by Lanxide on or before March 31, 1998
(i) pursuant to which certain employees of Lanxide will be given five year options to acquire shares of Common Stock for an exercise price anticipated to be $1.00 per share and (ii) under which the aggregate number of shares to be reserved for issuance is not to exceed twenty-five percent (25%)of the issued and outstanding shares of Common Stock as of the date hereof on a fully diluted basis, including the Warrant Shares.

6. (a) In case of any consolidation with or merger of the Company with or into another corporation (other than a merger or consolidation in which the Company is the surviving or continuing corporation), or in case of any sale, lease, or conveyance to another corporation of the property and assets of any nature of the Company as an entirety or substantially as an entirety, such successor, leasing, or purchasing corporation, as the case may be, shall (i) execute with the Holder an agreement providing that the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof receivable upon such consolidation, merger, sale, lease, or conveyance by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such consolidation,


merger, sale, lease, or conveyance and (ii) make effective provision in its certificate of incorporation or otherwise, if necessary, to effect such agreement. Such agreement shall provide for adjustments which shall be as nearly equivalent as practicable to the adjustments in Section 5.

(b) In case of any reclassification or change of the shares of Common Stock issuable upon exercise of this Warrant (other than a change in par value or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), or in case of any consolidation or merger of another corporation into the Company in which the Company is the surviving or continuing corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (other than a change in par value, or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof receivable upon such reclassification, change, consolidation, or merger by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such reclassification, change, consolidation, or merger. Thereafter, appropriate provision shall be made for adjustments which shall be as nearly equivalent as practicable to the adjustments in
Section 5.

(c) The above provisions of this Section 6 shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, sales, leases, or conveyances.

7. In case at any time the Company shall propose

(a) to pay any dividend or make any distribution on shares of Common Stock in shares of Common Stock or make any other distribution (other than regularly scheduled cash dividends which are not in a greater amount per share than the most recent such cash dividend) to all holders of Common Stock; or

(b) to issue any rights, warrants, or other securities to all holders of Common Stock entitling them to purchase any additional shares of Common Stock or any other rights, warrants, or other securities; or

(c) to effect any reclassification or change of outstanding shares of Common Stock, or any consolidation, merger, sale, lease, or conveyance of property, described in Section 6; or

(d) to effect any liquidation, dissolution, or winding-up of the Company; or

(e) to take any other action which would cause an adjustment to the Exercise Price;

then, and in any one or more of such cases, the Company shall give written notice thereof, by registered mail, postage prepaid, to the Holder at the Holder's address as it shall appear in the


Warrant Register, mailed at least 10 days prior to (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such dividend, distribution, rights, warrants, or other securities are to be determined, (ii) the date on which any such reclassification, change of outstanding shares of Common Stock, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up is expected to become effective, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange their shares for securities or other property, if any, deliverable upon such reclassification, change of outstanding shares, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up, or (iii) the date of such action which would require an adjustment to the Exercise Price.

8. The issuance of any shares or other securities upon the exercise of this Warrant, and the delivery of certificates or other instruments representing such shares or other securities, shall be made without charge to the Holder for any tax or other charge in respect of such issuance. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of any certificate in a name other than that of the Holder and the Company shall not be required to issue or deliver any such certificate unless and until the person or persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

9. Certificates evidencing the Warrant Shares issued upon exercise of the Warrants shall bear the following legend:

"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT, OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT."

10. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction, or mutilation of any Warrant (and upon surrender of any Warrant if mutilated) and a certificate executed by the Holder and provided by the Company pursuant to which the Holder agrees to indemnify the Company for any claims, losses or liability the Company may suffer on account of the issuance of a new certificate, and upon reimbursement of the Company's reasonable incidental expenses, the Company shall execute and deliver to the Holder thereof a new Warrant of like date, tenor, and denomination.

11. The Holder of any Warrant shall not have, solely on account of such status, any rights of a stockholder of the Company, either at law or in equity, or to any notice of meetings of stockholders or of any other proceedings of the Company, except as provided in this Warrant.

12. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be mailed by certified mail, return receipt requested or sent by Federal Express, Express Mail, or similar overnight delivery or courier service or delivered (in person or by telecopy, telex, or similar telecommunications equipment) against receipt to the party to whom it is to be given, if sent to the Company, at: 150 East 58th Street, Suite 3400,


New York, New York 10155, Attention: The Chairman or the Chief Executive Officer; or if sent to the Holder, at the Holder's address as it shall appear on the Warrant Register, or to such other address as the party shall have furnished in writing in accordance with the provisions of this Section 14. Any notice or other communication given by certified mail shall be deemed given at the time of certification thereof, except for a notice changing a party's address which will be deemed given at the time of receipt thereof. Any notice given by other means permitted by this Section 14 shall be deemed given at the time of receipt thereof.

13. This Warrant shall be binding upon the Company and its successors and assigns and shall inure to the benefit of the Holder and its successors and assigns.

14. This Warrant shall be construed in accordance with the laws of the State of New York applicable to contracts made and performed within such State, without regard to principles of conflicts of law.

15. The Company irrevocably consents to the jurisdiction of the courts of the State of New York and of any federal court located in such State in connection with any action or proceeding arising out of or relating to this Warrant, any document or instrument delivered pursuant to, in connection with or simultaneously with this Warrant, or a breach of this Warrant or any such document or instrument. In any such action or proceeding, the Company waives personal service of any summons, complaint or other process.

IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Warrant on the date and year first set forth below.

Dated: March 5, 1998

LANXIDE CORPORATION

____________________     By: /s/ Marc S. Newkirk
                            ---------------------
                         Name: Marc S. Newkirk
____________________     Title: President

[SEAL]

FORM OF ASSIGNMENT

(To be executed by the registered holder if such holder desires to transfer the attached Warrant.)

FOR VALUE RECEIVED, ______________________________ hereby sells, assigns, and transfers unto ___________________________ a Warrant to purchase shares of Common Stock, par value .01 per share, of Lanxide Corporation (the "Company"), together with all right, title, and interest therein, and does hereby irrevocably constitute and appoint _____________________________ attorney to transfer such Warrant on the books of the Company, with full power of substitution.

Dated:__________________

Signature

NOTICE

The signature on the foregoing Assignment must correspond to the name as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever.


To: Lanxide Corporation
1300 Marrows Road
Newark, Delaware 19714-6077
Attn: Marc S. Newkirk, President

ELECTION TO EXERCISE

The undersigned hereby exercises its rights to purchase Warrant Shares covered by the within warrant and tenders payment herewith in the amount of $ , or by delivery of shares of Lanxide Corporation's Series H Preferred Stock, all in accordance with the terms thereof, and requests that certificates for such securities be issued in the name of, and delivered to:




(Print Name, Address and Social Security or Tax Identification Number)

and, if such number of Warrant Shares shall not be all the Warrant Shares covered by the within Warrant, that a new Warrant for the balance of the Warrant Shares covered by the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below

Dated:                                       Name
      ---------------------------------          -----------------
                                        (Print)

Address:
        ----------------------------------------------------------

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


                                           (Signature)


SETTLEMENT AND RELEASE AGREEMENT

This Settlement and Release Agreement ("This Agreement") is made and entered into this 5th day of March, 1998, by and among LANXIDE CORPORATION, a Delaware corporation ("Lanxide"), LANXIDE PERFORMANCE MATERIALS, INC., a Delaware Corporation ("Lanxide Performance"), MARC S. NEWKIRK, an individual residing in Delaware, COMMODORE ENVIRONMENTAL SERVICES, INC., a Delaware corporation ("COES"), COMMODORE APPLIED TECHNOLOGIES, INC., a Delaware corporation ("Commodore Applied") and other individuals and companies for whose benefit and on whose behalf this Agreement is made, as more fully set forth hereinafter.

RECITALS:

WHEREAS, Lanxide's subsidiary, Lanxide Performance, is a party to and borrower under (i) a Line of Credit Agreement with Commodore Applied, as Lender, dated August 30, 1996 in the amount of $1.5 Million (the "$1.5 Million Credit Agreement"), (ii) a Line of Credit Promissory Note dated August 30, 1996 in the amount of $1.5 Million (the "$1.5 Million Note"), and (iii) a Security Agreement dated August 30, 1996 in the amount of $1.5 Million (the "$1.5 Million Security Agreement"); Lanxide is a guarantor of the aforementioned $1.5 Million Credit Agreement and $1.5 Million Note (the "$1.5 Million Guaranty"); the $1.5 Million Credit Agreement, Note, Security Agreement and Guaranty Agreement are hereinafter collectively referred to as the "Lanxide Performance $1.5 Million Loan Documents");

WHEREAS, Lanxide Performance is a party to and borrower under a certain Line of Credit Agreement with COES, as Lender, dated November 13, 1996 in the amount of $3 Million (the "$3 Million Credit Agreement"), a Line of Credit Promissory Note dated November 13, 1996 (the "$3 Million Note"), a corresponding Security Agreement dated November 13, 1996 (the "$3 Million Security Agreement"); Lanxide guaranteed the aforementioned $3 Million Credit Agreement, the $3 Million Note and $3 Million Security Agreement (the "$3 Million Guaranty"); the aforementioned $3 Million Credit Agreement, the $3 Million Note, the $3 Million Security Agreement and the $3 Million Guaranty are hereinafter collectively referred to as the "Lanxide Performance $3 Million Loan Documents");

WHEREAS, Lanxide and COES are parties to a Securities Purchase Agreement dated the third day of July, 1997 (the "Securities Purchase Agreement") pursuant to which, inter alia, Lanxide granted to COES a warrant entitling COES or the holder to purchase up to 250,000 shares of Lanxide Series F Preferred Stock at an exercise price of $100 per warrant (the "Original Warrant");

WHEREAS, certain individual stockholders of Lanxide (the "Subject Lanxide Stockholders") entered into a "Voting Agreement" with Bentley J. Blum ("Blum"), Paul E. Hannesson ("Hannesson"), David Mitchell ("Mitchell"), Herbert Cohen ("Cohen") and Kenneth Adelman ("Adelman") (collectively the "Proxy Holders") pursuant to which the Subject Lanxide Stockholders granted a proxy to the Proxy Holders to vote their shares in Lanxide;


WHEREAS, the parties hereto and the parties for and on whose behalf this Agreement is made desire to settle certain disputes which have arisen relating to the Lanxide Performance $1.5 Million Loan Documents, the Lanxide Performance $3 Million Loan Documents, the Securities Purchase Agreement, the Voting Agreement and other miscellaneous agreements, and those same parties desire to release each other from claims arising out of the foregoing agreements;

NOW, THEREFORE, in consideration of the foregoing Recitals and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, it is hereby agreed as follows:

1. Voting Trust Agreement. The parties hereto acknowledge and agree that the Voting Agreement was terminated on February 5, 1998 and that from and after that date, was no longer and is no longer of any force or effect whatsoever.

2. Amendment to Securities Purchase Agreement. Lanxide and COES hereby agree to amend the Securities Purchase Agreement and agree that they shall, contemporaneously herewith, execute and deliver an AMENDMENT TO SECURITIES PURCHASE AGREEMENT in the form of Exhibit A annexed hereto and made a part hereof.

3. The $3 Million Loan. COES hereby agrees that any and all obligations and liabilities of Lanxide Performance and/or Lanxide arising under or related to the Lanxide Performance $3 Million Loan Documents, including, but not limited to, the liability of Lanxide Performance to make any payment pursuant to, or to repay any amount of money which it borrowed (including any interest thereon) in respect to the Lanxide Performance $3 Million Loan Documents, and any duty of Lanxide to guarantee that repayment (including any interest thereon) or make that repayment (including any interest thereon), are hereby terminated. Contemporaneously with the execution and delivery of this Agreement and as consideration for this Agreement (including the releases herein contained) and the License Agreement (as such term is defined in paragraph 5 hereof), COES will return to Lanxide Performance and Lanxide the original $3 Million Note and $3 Million Guaranty marked cancelled.

4. The $1.5 Million Loan. COES hereby agrees that any and all obligations and liabilities of Lanxide Performance and/or Lanxide arising under or related to the Lanxide Performance $1.5 Million Loan Documents, including, but not limited to, the liability of Lanxide Performance to make any payment pursuant to or to repay any amount of money which it borrowed (including any interest thereon) in respect to the Lanxide Performance $1.5 Million Loan Documents, and any duty of Lanxide to guarantee that repayment (including any interest thereon) or make that repayment (including any interest thereon), are hereby terminated. Contemporaneously with the execution and delivery of this Agreement and as consideration for this Agreement (including the releases herein contained) and the License Agreement, Commodore Applied will return to Lanxide Performance and Lanxide the original $1.5 Million Note and $1.5 Million Guaranty marked cancelled.

5. The Ceraset(TM) Business, Trademark and License. Lanxide shall cause its subsidiary, Lanxide Technology Company, L.P., contemporaneously herewith, to execute and deliver to Commodore Polymer Technologies, Inc., a Delaware corporation and an affiliate of

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Commodore Applied and COES ("Polymer"), a license agreement (the "License") to use Lanxide Technology Company, L.P.'s Ceraset(TM) technology and trademark, which license agreement shall be in the form of Exhibit "B" annexed hereto and made a part hereof (the "License Agreement"). Lanxide hereby agrees to transfer to Polymer all aspects of Lanxide's Ceraset business that relate to the License, including but not limited to customer lists, prospective contracts, and names and addresses of former employees (whom Polymer is authorized to attempt to hire). Lanxide further agrees to assign any agreements that it has that relate exclusively to the rights being granted in the license to Polymer. In the event of any conflict between the provisions of this paragraph 5 and the License Agreement, the provisions of the License Agreement shall control.

6. Release.

A. Lanxide, for itself and all of its subsidiaries, including, without limitation, Lanxide Performance, and Marc S. Newkirk (collectively the "Lanxide Releasors") for and on behalf of themselves and their respective heirs, administrators, executors, predecessors, successors and assigns hereby unconditionally and forever fully release, remise, quit claim, settle and discharge any and all claims, demands, liabilities, actions, choses-in-action, causes-in-action, whether known or unknown, legal or equitable, absolute, contingent or vested, which any or all of the Lanxide Releasors may have had, have or may hereafter acquire against (i) COES and any of its subsidiaries or affiliates, including without limitation, Commodore Applied, and their respective past or present Board members and corporate officers (the "Commodore Group"), (ii) the Lanxide stockholders identified on Schedule A to the Voting Agreement, to wit, Bentley J. Blum, Laura Utley, Samuel Blum, Suzanne Hannesson, Paul E. Hannesson, Marc S. Newkirk and Jon Paul Hannesson (the "Subject Lanxide Shareholders"), (iii) the Proxy Holders identified in the Voting Agreement, to wit, Bentley J. Blum, Paul E. Hannesson, David Mitchell, Herbert Cohen and Kenneth Adelman (the "Lanxide Proxy Holders"), and (iv) those former members of the Lanxide Board of Directors, to wit, Michael D. Fullwood, Esquire and William R. Toller (the "Former Lanxide Directors"), and all of their respective heirs, administrators, executors, predecessors, successors, assigns, privies, and attorneys-at-law or other legal or financial advisors, which relate to, or arise from, actions taken or agreements made prior to the date hereof. Without in any way intending to limit the generality of the foregoing, the Lanxide Releasors hereby, releases COES, Commodore Applied, the Subject Lanxide Shareholders and the Proxy Holders, and Former Lanxide Directors, and their respective heirs, administrators, executors, predecessors, successors and assigns from any and all claims the Lanxide Releasors may have had or have as of the date hereof arising out of the Voting Agreement including any vote of Lanxide shares undertaken by or omitted by the Proxy Holders and for any breaches by COES under the Securities Purchase Agreement.

B. COES and Commodore Applied, for and on behalf of themselves and all of their subsidiaries (collectively, the "Commodore Releasors") and their respective predecessors, successors and assigns, hereby unconditionally and forever fully, release, remise, quit claim, settle and discharge any and all claims, demands, liabilities, actions, choses-in-action, causes-in-action, whether known or unknown, legal or equitable, absolute, contingent or vested, which any or all of the Commodore Releasors may have had, have or may hereafter acquire against the Lanxide Releasors and all of their respective past or present board members, and corporate officers, heirs, administrators, executors, predecessors, successors,

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assigns, privies, and attorneys-at-law or other legal or financial advisors, which relate to, or arise from, actions taken or agreements made prior to the date hereof. Without intending to limit the generality of the foregoing, each of the Commodore Releasors hereby releases the Lanxide Releasors and all of their respective past or present board members, and corporate officers, heirs, administrators, executors, predecessors, successors, assigns, privies, and attorneys-at-law or other legal or financial advisors, from and against any and all liabilities and obligations arising under or related to the Lanxide Performance $1.5 Million Loan Documents, the Lanxide Performance $3 Million Loan Documents and the Securities Purchase Agreement.

C. Nothing in this section is intended to release any party hereto from any breach or default under this Agreement, the Amendment to Securities Purchase Agreement or the License Agreement from and after the date hereof

7. Representation and Warranties.

Each party hereto represents and warrants to each other party as follows:

7.1 Corporate Organization, Standing. It is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.

7.2 Authorization of Agreement. This Agreement has been duly authorized, executed and delivered by it and, subject to the due authorization, execution and delivery by the other parties hereto, constitutes a legal, valid and binding obligation of it, enforceable in accordance with its terms, except that (i) the enforceability hereof may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and (ii) the remedy of specific performance and injunctive and other terms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. The execution and delivery of this Agreement, the consummation of the transactions contemplated hereto and the fulfillment and compliance with the terms and conditions hereof do not and will not after the giving or notice, or the lapsed of time, or otherwise: (a) violate any provisions of any judicial or administrative order, award, judgment or decree applicable to it, or (b) conflict with any of the provisions of the Articles or Certificate of Incorporation or By-Laws of it, or (c) conflict with, result in a breach of or constitute a default under any agreement or instrument to which it, is a party or by which it is bound, except for any of the foregoing that, individually or in the aggregate, would not have a material adverse effect on the financial condition, operations or businesses of such party and its subsidiaries, taken as a whole.

7.3 Disclosure. No representation, warranty or covenant in this Agreement nor any Schedule, statement, list or certificate furnished or to be furnished to Sellers pursuant thereto, or in connection with the transactions contemplated hereby, contains any untrue statement of a material fact, or omits to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading.

8.1 Notices. All notices, requests, demands and other communications under or in respect of this Agreement or any transactions hereunder shall be in writing (which may include telegraphic or telecopied commununication) and shall be personally delivered, sent by

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overnight courier, mailed (registered or certified mail, return receipt requested), telegraphed or telecopied by facsimile transmission to the applicable party at its address or telecopier number indicated below.

If to COES:

Commodore Environmental Services, Inc.

150 East 58th Street
Suite 3410
New York, New York 10155

Atten: Michael D. Fullwood, Esquire Senior Vice President and General Counsel Chief Financial and Administrative Officer

Telecopier No.: (212) 753-0731

If to Commodore Applied:

Commodore Applied Technologies, Inc.

150 East 58th Street
Suite 3410
New York, New York 10155

Atten: Michael D. Fullwood, Esquire Senior Vice President and General Counsel Chief Financial and Administrative Officer

Telecopier No.: (212) 753-0731

If to the Lanxide Companies:

Lanxide Corporation
1300 Marrows Road
Newark, Delaware 19714-6077

Atten: Mr. Marc S. Newkirk, President

Telecopier No.: (302) 454-1714

8.2 Entire Agreement. This Agreement (including the Exhibits and Schedules) contains the entire agreement among the parties with respect to the subject matter contained herein and supersedes all prior arrangements or understandings, written or oral, with respect thereto.

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8.3 Amendments. Any term or condition of this Agreement may be amended or modified in whole or in part at any time, to the extent authorized by applicable law, by an agreement in writing, authorized and executed in the same manner as this Agreement by the parties hereto. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power of privilege hereunder, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies which any party may otherwise have at law or in equity. The rights and remedies of any party arising out of or otherwise in respect of any inaccuracy in or breach of any representation, warranty, covenant or agreement contained in this Agreement shall in no way be limited by the fact that the act, omission, occurrence or breach may also be the subject matter of any other representation, warranty, covenant or agreement contained in this Agreement (or in any other agreement between the parties) as to which there is no inaccuracy or breach.

8.4 Severability. If any provision of this Agreement is held invalid or unenforceable, either in its entirety or by virtue of its scope or application to given circumstances, such provision shall thereupon be deemed modified only to the extent necessary to render same valid, or not applicable to given circumstances, or excised from this Agreement, as the situation may require, and this Agreement shall be construed and enforced as if such provision had been included herein as so modified in scope or application, or had not been included herein, as the case may be.

8.5 Execution and Delivery. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of a counterpart shall be deemed effective upon receipt by the other party of telefaxed signature page to this Agreement, provided that such party shall nonetheless transmit its original executed signature page to the other party.

8.6 Exhibits. The Exhibits and other documents attached to or delivered herewith are hereby incorporated and made a part of this Agreement as if set forth in full herein.

8.7 Drafting. No presumption shall operate in favor of or against any party in the construction or interpretation of this Agreement as a consequence of a party's responsibility for drafting this Agreement.

8.8 Recitals. The recital clauses of this Agreement are incorporated herein to the body as though set forth at length.

8.9 Attorney and Professional Fees. Each party will pay his/her own attorney or professional fees in connection with this Agreement or settlement discussions leading to this Agreement.

8.10 Captions. The captions of Sections hereof are for convenience only and shall not control or affect the meaning or construction of any of the provisions of this Agreement.

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8.11 Controlling Law. The parties hereto agree that this Agreement shall be governed and construed by the internal, substantive laws of the State of New York (without regard to that state's choice of law rules or doctrines) and, if applicable, the substantive law (statutory, administrative or common law) of the United States (without regard to its choice of law, rules or doctrines) Sellers hereby consent to personal jurisdiction in the State of New York for the purposes of any matter of or related to this Agreement or any other agreement between the parties hereto executed and delivered on or about the date hereof, including for purposes of any amendments hereto or thereto. The parties hereto further agree that venue for any dispute arising under this Agreement or for any other agreement between the parties hereto which are executed on or about the date hereof shall be proper in the United States District Court for the Southern District of New York. The parties also expressly waive trial by jury and the right to request a transfer of venue.

8.12 Binding Effect. This Agreement shall be binding and inure to the benefit of the named parties hereto, all of their wholly or partially-owned subsidiaries, the parties on whose behalf and for whose benefit it is made and their respective heirs, administrators, executors, successors and assigns.

8.13 Confirmation of Effectiveness of Earlier Granted Licenses. Nothing contained herein shall affect in any manner any license granted by Lanxide or any of its affiliates to Commodore Applied or any of its affiliates as consideration in whole or in part for and in connection with the loans made pursuant to the Lanxide Performance $1.5 Million Loan Documents and the Lanxide Performance $3 Million Loan Documents, including without limitation that certain License Agreement dated as of August 29, 1996 by and among Lanxide Technology Company L.P., Commodore Applied and Lanxide, a copy of which is attached hereto as Exhibit D.

(remainder of page intentionally left blank]

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IN WITNESS WHEREOF, and intending to be legally bound, the parties have hereto executed this Agreement on the day and date first above written,

Attest:                           LANXIDE CORPORATION


                                  By: /s/ Marc S. Newkirk
-------------------------            -----------------------------
                                     Marc S. Newkirk, its President

                                  LANXIDE PERFORMANCE MATERIALS, INC.


                                  By: /s/ Marc S. Newkirk
-------------------------            -----------------------------
                                     Marc S. Newkirk, its President

                                  COMMODORE ENVIRONMENTAL SERVICES, INC.


/s/ Michael D. Fullwood           By: /s/ Paul E. Hannesson
-------------------------            -----------------------------
                                     Paul E. Hannesson, its President


                                  COMMODORE APPLIED TECHNOLOGIES, INC.


/s/ Michael D. Fullwood           By: /s/ Paul E. Hannesson
-------------------------            -----------------------------
                                     Paul E. Hannesson, its CEO

                                     /s/ Marc S. Newkirk
-------------------------            -----------------------------
                                     Marc S. Newkirk

[Signature page to Settlement and Release Agreement]

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                               Exhibit List

Exhibit

Amendment to Securities Purchase Agreement              A

License Agreement                                       B

List of Third Party Ceraset(TM) Licenses                C

August 29, 1996 License Agreement                       D


AMENDMENT TO SECURITIES PURCHASE AGREEMENT

This Amended Securities Purchase Agreement (this "Agreement") is entered into this 5th day of March, 1998, by and between LANXIDE CORPORATION, a Delaware corporation ("Lanxide") and COMMODORE ENVIRONMENTAL SERVICES, INC., a Delaware corporation, ("COES").

RECITALS:

WHEREAS, Lanxide's subsidiary, Lanxide Performance, is a party to and borrower under (i) a Line of Credit Agreement with Commodore Applied Technologies, Inc., Lender, dated August 30, 1996 in the amount of $1.5 Million (the "$1.5 Million Credit Agreement"), (ii) a Line of Credit Promissory Note dated August 30, 1996 in the amount of $1.5 Million (the "$1.5 Million Note"), and (iii) a Security Agreement dated August 30, 1996 in the amount of $1.5 Million (the "$1.5 Million Security Agreement"); Lanxide is a guarantor of the aforementioned $1.5 Million Credit Agreement and $1.5 Million Note; the $1.5 Million Credit Agreement, Note, Security Agreement and Guaranty Agreement are hereinafter collectively referred to as the "Lanxide Performance $1.5 Million Loan Documents");

WHEREAS, Lanxide Performance is a party to and borrower under a certain Line of Credit Agreement with COES dated November 13, 1996 in the amount of $3 Million (the $3 Million Credit Agreement"), a Line of Credit Promissory Note dated November 13, 1996 (the $3 Million Note"), a corresponding Security Agreement dated November 13, 1996 (the $3 Million Security Agreement"); Lanxide guaranteed the aforementioned $3 Million Credit Agreement, the $3 Million Note and $3 Million Security Agreement (the "Lanxide $3 Million Guaranty"); the aforementioned $3 Million Credit Agreement, the $3 Million Note, the $3 Million Security Agreement and the $3 Million Lanxide Guaranty are hereinafter collectively referred to as the "Lanxide Performance $3 Million Loan Documents");

WHEREAS, Lanxide and COES are parties to a Securities Purchase Agreement dated the third day of July, 1997 (the "Securities Purchase Agreement") pursuant to which, inter alia, Lanxide granted to COES a warrant entitling COES or the holder to purchase up to 250,000 shares of Lanxide Series F Preferred Stock (the "Series F Preferred Stock") at an exercise price of $100 per warrant (the "Original Warrant"); and

WHEREAS, certain individual stockholders of Lanxide entered into a "Voting Agreement" with Bentley J. Blum ("Blum"), Paul E. Hannesson ("Hannesson"), David Mitchell ("Mitchell"), Herbert Cohen ("Cohen") and Kenneth Adelman ("Adelman")


(collectively the "Proxy Holders") pursuant to which said Lanxide stockholders granted a proxy to the Proxy Holders to vote their shares in Lanxide.

NOW, THEREFORE, in consideration of the foregoing Recitals and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, it is hereby agreed as follows:

1. Definitions. "Common Stock Warrant" shall mean the three (3) year warrant issued to COES on the execution and delivery date hereof entitling the holder to purchase up to 270,000 shares of Lanxide common stock, at an exercise price of $7.41 per warrant share, in substantially the form of Exhibit "A" annexed hereto.

2. Cancellation of Share Purchase Right. The parties hereto acknowledge and agree that COES's right to purchase any additional shares of Series G Preferred Stock of Lanxide (the "Series G Preferred Stock"), as provided in
Section 2.2(c) and (d) of the Securities Purchase Agreement is hereby cancelled.

3. Cancellation of Warrant. The parties hereto hereby agree that the Warrant which Lanxide issued to COES for the right to purchase any shares of preferred stock, as set forth in Section 2.3 of the Securities Purchase Agreement, is hereby cancelled.

4. Board Action for Series F Preferred Stock; Consent to Employee Stock Option Plan; Consent to Landlord Warrant Modifications. Lanxide hereby covenants and agrees not to issue any shares of Series F Preferred Stock and shall take all necessary action as soon as practicable to cancel all Series F Preferred Stock, and COES hereby consents to such cancellation.

COES hereby consents to the adoption by Lanxide of a stock option plan anticipated to be approved by Lanxide on or before March 31, 1998 (i) pursuant to which certain employees of Lanxide will be given five year options to acquire shares of Common Stock for an exercise price anticipated to be $1.00 per share and (ii) under which the aggregate number of shares to be reserved for issuance is not to exceed twenty-five percent (25%)of the issued and outstanding shares of Common Stock as of the date hereof on a fully diluted basis, including shares of Common Stock issuable under the Common Stock Warrant.

COES hereby consents to Lanxide's modifications to an outstanding Warrant to acquire shares of Common Stock registered in the name of W.P. Carey & Co., Inc., or an affiliate thereof, which entity is Lanxide's landlord for its principal place of business, provided that such modifications do not (i) reduce the exercise price under such modified Warrant below $1.00 per share of Common Stock issuable upon exercise of such Warrant or (ii) increase the maximum number of shares of Common Stock issuable upon a exercise of such modified Warrant to a number that is greater than 31,000 shares.

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5. Post-Closing Financing and Consummation. The parties hereto hereby acknowledge and agree that COES's duty to seek or obtain post-closing financing and/or to consumunate any of the transactions contemplated in the Securities Purchase Agreement not already consummated prior to the execution date hereof are hereby cancelled.

6. Exchange of Shares of Series G Preferred Stock; Board Action for Series G Preferred Stock: Common Stock Warrant. Lanxide, in consideration for
(a) the terms and conditions of this Agreement, (b) other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, shall (i) upon surrender to Lanxide of the share certificates representing COES' ownership of all shares of Series G Preferred Stock, issue share certificate(s), in such denominations and registered in such names as COES may reasonably request, representing ownership of a like number of shares of Lanxide's Preferred Stock, Series H, having terms and conditions set forth on Exhibit B hereto (the "Series H Preferred Stock"), (ii) following COES' surrender of the certificates representing its ownership of Series G Preferred Stock, cause its Board to cancel all Series G Preferred Stock, and COES hereby consents to such cancellation; and (iii) issue to COES (in such denominations as may reasonably be requested by COES) the Common Stock Warrant.

7. Registration Rights. The following provisions replace the provisions set forth in Section 11 of the Securities Purchase Agreement:

7.1 Piggyback Rights. If at any time following the date hereof, Lanxide shall file a registration statement (other than a registration statement on Form S-4, Form S-8, or any successor form) with the SEC while any Registrable Securities (as hereinafter defined) are outstanding, Lanxide shall give all the then holders of any Registrable Securities or securities which are convertible into or exercisable for Registrable Securities, including for this purpose, holders of the Registrable Securities (the "Eligible Holders") at least 30 days prior written notice of the filing of such registration statement. If requested by any Eligible Holder in. writing within 15 days after receipt of any such notice, Lanxide shall, at Lanxide's sole expense (other than the fees and disbursements of counsel for the Eligible Holders and the underwriting discounts or commissions, if any, payable in respect of the Registrable Securities sold by any Eligible Holder), register or qualify all or, at each Eligible Holder's option, any portion of the Registrable Securities of any Eligible Holders who shall have made such request, concurrently with the registration of such other securities, all to the extent requisite to permit the public offering and sale of the Registrable Securities through the facilities of all appropriate securities exchanges and the over-the-counter market, and will use its best efforts through its officers, directors, auditors, and counsel to cause such registration statement to become effective as promptly as practicable. Notwithstanding the foregoing, if the managing underwriter of any such offering shall advise Lanxide in writing that, in its opinion, the distribution of all or a portion of the Registrable Securities requested to be included in the registration concurrently with the securities being registered by Lanxide would adversely affect the distribution of such securities by Lanxide for its own account, then the underwriters shall have the right to exclude any or all of the securities that the Eligible Holders or other prospective seller requested to be included in such public offering; provided,

3

however, that such exclusion shall be made pro rata among the Eligible Holders and the other stockholders of Lanxide that have registration rights or have otherwise requested to participate on a piggyback basis in such public offering in proportion to the respective number of shares of securities which were requested to be included in such public offering. As used herein, "Registrable Securities" shall mean the shares of Lanxide Common Stock issuable upon full or partial exercise of the Warrant, which have not been previously sold pursuant to a registration statement or Rule 144 promulgated under the 1933 Act.

7.2 If at any time following COES's completion of its purchase and payment for any of the 270,000 Shares of Common Stock, Lanxide shall receive a written request, from Eligible Holders who in the aggregate own (or upon exercise of all Warrants then outstanding or issuable would own) at least 50% of the Registrable Securities then included (or upon such exercises would be included) in the Registrable Securities (the "Majority Holders"), to register the sale of all or part of such Registrable Securities, Lanxide shall, as soon as reasonably practicable, but in any event within 180 days of Lanxide's receipt of a written request from the Eligible Holders, prepare and file with the SEC a registration statement sufficient to permit the public offering and sale of the Registrable Securities through the facilities of all appropriate securities exchanges and the over-the-counter market, and will use its best efforts through its officers, directors, auditors and counsel to cause such registration statement to become effective within such 180 day time period; provided, however, that the Eligible Holders shall bear all expenses, fees (including Lanxide's reasonable attorney's fees) and disbursements incurred in connection with such registration. Lanxide shall not be obligated to effect any registration of its securities pursuant to this Section 7.2 within six months after the effective date of a previous registration statement prepared and filed in accordance with Sections 7.1 or 7.2. Within seven (7) business days after receiving any request contemplated by this Section 7.2, Lanxide shall give written notice to all the other Eligible Holders, advising each of them that Lanxide is proceeding with such registration and offering to include therein all or any portion of any such other Eligible Holder's Registrable Securities, provided that Lanxide receives a written request to do so from such Eligible Holder within fifteen (15) days after receipt by him or it of Lanxide's notice. Provided, however, that the Eligible Holders may not make such a request or demand provided for in this Section 7.2 before January 1, 2000.

7.3 Blue Sky Matters. In the event of a registration pursuant to the provisions of this Section 7, Lanxide shall use its best efforts to cause the Registrable Securities so registered to be registered or qualified for sale under the securities or blue sky laws of such jurisdictions as the Eligible Holder or such holders may reasonably request; provided, however, that Lanxide shall not be required to qualify to do business in any state by reason of this
Section 7.3 in which it is not otherwise required to qualify to do business.

7.4 Period During Which Registration Statement to Remain Effective. Lanxide shall keep effective any registration or qualification contemplated by this Section 7 and shall from time to time amend or supplement each applicable registration statement, preliminary prospectus, final prospectus, application, document, and communication for such period of time as shall be

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required to permit the Eligible Holders to complete the offer and sale of the Registrable Securities covered thereby. Lanxide shall in no event be required to keep any such registration or qualification in effect for a period in excess of nine months from the date on which the Eligible Holders are first free to sell such Registrable Securities; provided, however, that, if Lanxide is required to keep any such registration or qualification in effect with respect to securities other than the Registrable Securities beyond such period, Lanxide shall keep such registration or qualification in effect as it relates to the Registrable Securities for so long as such registration or qualification remains or is required to remain in effect in respect of such other securities.

7.5 Copies of Documents. In the event of a registration pursuant to the provisions of this Section 7, Lanxide shall furnish to each Eligible Holder such number of copies of the registration statement and of each amendment and supplement thereto (in each case, including all exhibits), such reasonable number of copies of each prospectus contained in such registration statement and each supplement or amendment thereto (including each preliminary prospectus), all of which shall conform to the requirements of the 1933 Act and the rules and regulations thereunder, and such other documents, as any Eligible Holder may reasonably request to facilitate the disposition of the Registrable Securities included in such registration.

7.6 Opinion of Counsel to Lanxide. In the event of a registration pursuant to the provisions of this Section 7, Lanxide shall furnish each Eligible Holder of any Registrable Securities so registered with an opinion of its counsel (reasonably acceptable to the Eligible Holders) to the general effect that (i) the registration statement has become effective under the 1933 Act and no order suspending the effectiveness of the registration statement, preventing or suspending the use of the registration statement, any preliminary prospectus, any final prospectus, or any amendment or supplement thereto has been issued nor has the SEC or any securities or blue sky authority of any jurisdiction instituted or threatened to institute any proceedings with respect to such an order, (ii) the registration statement and each prospectus forming a part thereof (including each preliminary prospectus), and any amendment or supplement thereto, complies as to form with the 1933 Act and the rules and regulations thereunder, and (iii) such counsel has no knowledge of any material misstatement or omission in such registration statement or any prospectus, as amended or supplemented.

7.7 Terms of Underwriting Agreement. In the event of a registration pursuant to the provision of this Section 7, Lanxide shall enter into a cross-indemnity agreement and a contribution agreement, each in customary form, with each underwriter, if any, and, if requested, enter into an underwriting agreement containing conventional representations, warranties, allocation of expenses, and customary closing conditions, including, but not limited to, opinions of counsel and accountants' cold comfort letters, with any underwriter who acquires any Registrable Securities.

7.8 Undertakings of Eligible Holders. In the event of a registration pursuant to the provisions of this Section 7:

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(a) each Eligible Holder shall furnish to Lanxide in writing such appropriate information (relating to such Eligible Holder and the intention of such Eligible Holder as to proposed methods of sale or other disposition of their Shares) and the identity of and compensation to be paid to any proposed underwriters to be employed in connection therewith as Lanxide, any underwriter, or the SEC or any other regulatory authority may request;

(b) the Eligible Holders shall enter into the usual and customary form of underwriting agreement agreed to by Lanxide and any underwriter with respect to any such offering, if required, and such underwriting agreement shall contain the customary rights of indemnity between Lanxide, the underwriters, and such Eligible Holders;

(c) each Eligible Holder shall agree that he shall execute, deliver and/or file with or supply Lanxide, any underwriters, the SEC and/or any state or other regulatory authority such information, documents, representations, undertakings and/or agreements necessary to carry out the provisions of the registration covenants contained in this Section 7 and/or to effect the registration or qualification of his or its Registrable Securities under the 1933 Act and/or any of the laws and regulations of any state or governmental instrumentality;

(d) Lanxide's obligation to include any Registrable Securities in a registration statement shall be subject to the written agreement of each holder thereof to offer such securities in the same manner and on the same terms and conditions as the other securities of the same class are being offered pursuant to the registration statement, if such shares are being underwritten;

(e) in the event that all the Registrable Securities have not been sold on or prior to the expiration of the period specified in Section 7.4 above, Lanxide may de-register by post-effective amendment any Registrable Securities covered by the registration statement, but not sold on or prior to such date. Lanxide agrees that it will notify each holder of Registrable Securities of the filing and effective date of such post-effective amendment; and

(f) each Eligible Holder agrees that upon notification by Lanxide that the prospectus in respect to any public offering covered by the provisions hereof is in need of revision, such Eligible Holder shall immediately upon receipt of such notification (i) cease to offer or sell any securities of Lanxide which must be accompanied by such prospectus, (ii) return all such prospectuses in such Eligible Holder's hands to Lanxide, and (iii) not offer or sell any securities of Lanxide until such Holder has been provided with a current prospectus and Lanxide has given such Eligible Holder notification permitting such Eligible Holder to resume offers and sales.

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7.9 Covenant Regarding Current Information. Lanxide agrees that until all the Registrable Securities have been sold under a registration statement or pursuant to Rule 144 under the 1933 Act, it shall use its best efforts to keep current in filing all reports, statements and other materials required to be filed with the SEC to permit holders of the Registrable Securities to sell such securities under Rule 144.

7.10 Negative Covenant Regarding Future Registration Rights. Except for
(i) rights granted to holders of the Warrants, and (ii) rights granted by Lanxide to other security holders of Lanxide prior to the date hereof, Lanxide will not, without the written consent of the Majority Holders, grant to any persons the right to request Lanxide to register any securities of Lanxide, provided that Lanxide may grant such registration rights to other persons so long as such rights are subordinate or pari passu to the rights of the Eligible Holders.

7.11 Definitions. Wherever the term "Warrant" is used in this Article it means and refers to the Common Stock Warrant defined in Section I hereof

8. Series H Preferred Stock. Lanxide covenants and agrees that, within seven (7) business days following the execution and delivery of this Agreement, it will take all necessary action to fix the rights, preferences and limitations of the Series H Preferred Stock in the manner set forth on Exhibit B hereto. Lanxide shall deliver to COES a fully executed Certificate of Stock Designation for the Series H Preferred Stock promptly following the filing of such certificate.

9. Partys' Representations and Warranties. Each of the parties hereby represents and warrants to the other party hereto as follows:

9.1 Corporate Organization, Standing. It is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.

9.2 Authorization of Agreement. This Agreement has been duly authorized, executed and delivered by it and, subject to the due authorization, execution and delivery by such other party, constitutes a legal, valid and binding obligation of it, enforceable in accordance with its terms, except that
(i) the enforceability hereof may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and (ii) the remedy of specific performance and injunctive and other terms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. The execution and delivery of this Agreement, the consummation of the transactions contemplated hereto and the fulfillment and compliance with the terms and conditions hereof do not and will not after the giving or notice, or the lapse of time, or otherwise: (a) violate any provisions of any judicial or administrative order, award, judgment or decree applicable to it, or (b) conflict with any of the provisions of the Certificate of Incorporation or By-Laws of it, or (c) conflict with, result in a breach of or constitute a default under any agreement or instrument to which it is a party or by which it is bound, except for any of the foregoing that, individually or in the aggregate, would not have a material adverse effect

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on the financial condition, operations or businesses of such party and its subsidiaries, taken as a whole.

10. Indemnification. The indemnification provision set forth in Sections 12.1 through 12.3 of the Securities Purchase Agreement are incorporated herein by reference as though set forth at length and apply with equal force with respect to the Common Stock Warrant and stock purchases as a result of any exercise thereof.

11. Miscellaneous.

11.1 Notices. All notices, requests, demands and other communications under or in respect of this Agreement or any transactions hereunder shall be in writing (which may include telegraphic or telecopied communication) and shall be personally delivered, sent by overnight courier, mailed (registered or certified mail, return receipt requested), telegraphed or telecopied by facsimile transmission to the applicable party at its address or telecopier number indicated below.

If to COES:

Commodore Environmental Services, Inc.

150 East 58th Street
Suite 3410
New York, New York 10155

Atten: Michael D. Fullwood, Esquire Senior Vice President and General Counsel Chief Financial and Administrative Officer

Telecopier No.: (212)753-0731

Commodore Applied Technologies, Inc. 150 East 58th Street
Suite 3410
New York, New York 10155

Atten: Michael D. Fullwood, Esquire Senior Vice President and General Counsel Chief Financial and Administrative Officer

Telecopier No.: (212)753-0731

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If to the Lanxide Companies:

Lanxide Corporation
1300 Marrows Road
Newark, Delaware 19714-6077

Atten: Mr. Marc S. Newkirk, President

Telecopier No.: (302) 454-1714

11.2 Entire Agreement. This Agreement (including the Exhibits and Schedules) contains the entire agreement among the parties with respect to the purchase of the Purchased Shares and related transactions and supersedes all prior arrangements or understandings, written or oral, with respect thereto.

11.3 Amendments. Any term or condition of this Agreement may be amended or modified in whole or in part at any time, to the extent authorized by applicable law, by an agreement in writing, authorized and executed in the same manner as this Agreement by the parties hereto. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power of privilege hereunder, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies which any party may otherwise have at law or in equity. The rights and remedies of any party arising out of or otherwise in respect of any inaccuracy in or breach of any representation, warranty, covenant or agreement contained in this Agreement shall in no way be limited by the fact that the act, omission, occurrence or breach is based may also be the subject matter of any other representation, warranty, covenant or agreement contained in this Agreement (or in any other agreement between the parties) as to which there is no inaccuracy, or breach.

11.4 Severability. If any provision of This Agreement is held invalid or unenforceable, either in its entirety or by virtue of its scope or application to given circumstances, such provision shall thereupon be deemed modified only to the extent necessary to render same valid, or not applicable to given circumstances, or excised from this Agreement, as the situation may require, and this Agreement shall be construed and enforced as if such provision had been included herein as so modified in scope or application, or had not been included herein, as the case may be.

11.5 Execution and Delivery. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of a counterpart shall be deemed effective upon receipt by the other party of telefaxed signature page to this Agreement, provided that such party shall nonetheless transmit its original executed signature page to the other party.

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11.6 Exhibits and Schedules. The Exhibits and Schedules and other documents attached to or delivered herewith are hereby incorporated and made a part of this Agreement as if set forth in full herein.

11.7 Drafting. No presumption shall operate in favor of or against any party in the construction or interpretation of this Agreement as a consequence of a party's responsibility for drafting this Agreement.

11.8 Recitals. The recital clauses of this Agreement are incorporated herein to the body as though set forth at length.

11.9 Attorney and Professional Fees. Each party will pay his/her own attorney or professional fees in connection with this Agreement or settlement discussions leading to this Agreement.

11.10 Captions. The captions of Sections hereof are for convenience only and shall not control or affect the meaning or construction of any of the provisions of this Agreement.

11.11 Controlling Law. The parties hereto agree that this Agreement shall be governed and construed by the internal, substantive laws of the State of New York (without regard to that state's choice of law rules or doctrines) and, if applicable, the substantive law (statutory, administrative or common law) of the United States (without regard to its choice of law, rules or doctrines) Sellers hereby consent to personal jurisdiction in the State of New York for the purposes of any matter of or related to this Agreement or any other agreement between the parties hereto executed and delivered on or about the date hereof, including for purposes of any amendments hereto or thereto. The parties hereto further agree that venue for any dispute arising under this Agreement or for any other agreement between the parties hereto which are executed on or about the date hereof shall be proper in the United States District Court for the Southern District of New York. The parties also expressly waive trial by jury and the right to request a transfer of venue.

11.12 Binding Effect. This Agreement shall be binding and inure to the benefit of the named parties hereto, all of their wholly or partially-owned subsidiaries, the parties on whose behalf and for whose benefit it is made and their respective heirs, administrators, executors, successors and assigns.

11.13 Survival. The Securities Purchase Agreement, as amended by the Amendment, shall survive and remain valid, binding and enforceable according to its terms.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, and intending to be legally bound, the parties have hereto executed this Agreement on the day and date first above written.

Attest:                        LANXIDE CORPORATION


                                By: /s/ Marc S. Newkirk
--------------------------         --------------------------------
                                   Marc S. Newkirk, its President

                                   COMMODORE ENVIRONMENTAL SERVICES, INC.


/s/ Michael D. Fullwood         By: /s/ Paul E. Hannesson
--------------------------         --------------------------------
                                   Paul E. Hannesson, its President

Signature page to Amendment to Securities Purchase Agreement


LICENSE AGREEMENT

This License Agreement ("Agreement"), dated as of March 5, 1998 (the "Effective Date"), is made among

1. Lanxide Technology Company L.P. of 1300 Marrows Road, P.O. Box 6077, Newark, Delaware 19714-6077, U.S.A. a Delaware limited partnership ("LTC"),

2. Commodore Polymer Technologies, Inc. of 150 East 58th Street, Suite 3400, New York, New York 10155, a Delaware corporation ("Licensee") and

3. Lanxide Corporation of 1300 Marrows Road, P.O. Box 6077, Newark, Delaware 19714-6077, U.S.A., a Delaware corporation ("Lanxide").

WHEREAS, LTC and Lanxide Performance Materials, Inc. ("LPM") are wholly owned and controlled by Lanxide; and

WHEREAS, LTC holds rights in certain valuable Technology and Lanxide owns certain valuable trademarks and has licensed certain of those rights to Lanxide K.K. in Japan; and

WHEREAS, Licensee wishes to enter into the transactions contemplated herein; and

WHEREAS, Licensee wishes to license certain of such rights for the purposes defined herein; and

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto hereby agree as follows:

I. DEFINITIONS

Terms used with initial capital letters in this Agreement shall have the meaning set forth below

1.1 "Affiliate(s)" of a corporation or other entity means a person or entity that, directly or indirectly through one or more intermediaries controls, is controlled by, or is

1.2 "CMC and/or MMC Materials" shall mean composite materials that comprise a reinforcing material contained within a ceramic and/or metal matrix.

1.3 "Government Entity" shall mean any sovereign, state or political subdivision thereof, whether foreign or domestic.


1.4 "Government Regulations" shall mean and include any and all terms, conditions and provisions of: (a) any law, regulation, order, statute, decree, rule, writ, injunction, determination or award of any court or Governmental Entity; and (b) any contract for research, development and/or manufacturing between LTC and any department or agency of the United States government but only to the extent such contracts reflect provisions required by clause (a) above to be included therein.

1.5 "Licensed Technology" shall mean Technology which is now or hereafter owned by LTC, and all other Technology licensed to LTC without restriction upon the grant of sublicenses including improvements and modifications thereto, that is relevant to the manufacture of Polymer Materials and Products but excluding Technology, the transfer or license of which, or an interest in which, would be expressly prohibited, either generally or specifically, by Government Regulations or contracts with third parties which are further described in Schedule 1.5 hereto.

1.6 "Person" shall mean any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

1.7 "Polymer Materials" shall mean CERASET(TM) polyureasilazane polymers for use in the manufacture of Products.

1.8 "Products" shall mean any and all products that contain Polymer Materials except for the following: (a) products that contain CMC and/or MMC Materials, (b) Polymer Materials supplied by LTC or Lanxide to the Licensees set forth in Schedule 2.1 in accordance with currently existing contractual rights, obligations, or commitments of LTC or Lanxide, and (c) products produced by the Licensees set forth in
Section 2.1 in accordance with the terms of their currently existing licenses from LTC or Lanxide.

1.9 "Technology" shall mean technical information, know-how, data, techniques, patents, patent applications and trade secrets.

1.10 "Territory" shall mean the world excluding only the country of Japan.

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II. GRANT OF TECHNOLOGY LICENSES: TRADEMARK ASSIGNMENT

2.1 License to Licensed Technology. Except as otherwise hereinafter provided, subject to Government Regulations and the provisions of this Agreement, LTC hereby grants to Licensee a sole and exclusive license to use the Licensed Technology to make, use, sell and offer for sale Polymer Materials and Products in the Territory.

2.2 Rights Outside the Territory. The license granted under this Section 2 shall not include any rights to use the Licensed Technology for the manufacture of Polymer Materials or Products outside the Territory and such license shall not include any right to export Polymer Materials or Products from the Territory.

2.3 Sublicensing Rights. The Licenses granted under this Section 2 shall include the right to grant sublicenses, provided that any such sublicenses shall not exceed the scope of this license.

2.4 Reservation of Rights. No rights are granted under the Licensed Technology except as expressly set forth in this Section 2 and all rights not expressly granted are reserved.

2.5 Provision of Technnology. Subject to applicable Government Regulations, including obtaining any necessary licenses prior to disclosure, LTC or Lanxide shall preserve and make available in the English language and U.S. units of measurement to Licensee at Licensee's request, any technical information, formulae, data, analyses, know-how, and information with respect to the Licensed Technology, Polymer Materials and Products and all related confidential know-how for the Licensee's use for the purposes set out in this Agreement. Additional technical support shall be made available by LTC or Lanxide to Licensee on a basis of cost and availability no less favorable to Licensee than that afforded to any other licensee of the Licensed Technology.

2.6 Protection of Technology. Licensee shall not use and shall not permit its authorized sublicensees to use the Licensed Technology for any purpose other than to manufacture, use and sell Polymer Materials and/or Products as provided in this Agreement. Licensee shall take no action in respect of Licensed Technology which is inconsistent with the terms of the licenses granted under this Agreement.

2.7 Acknowledgment of Rights; Patent Marking. Licensee acknowledges that Licensee's right to use the Licensed Technology arises only out of the licenses granted under this Agreement. All containers of Polymer Materials and/or Products manufactured under issued patents of LTC shall bear a patent notice as may be necessary or desirable under the laws of the applicable Government Entities.

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III. TRADEMARK LICENSE, INDEMNITY AND INSURANCE.

3.1 Trademark License. Subject to Government Regulations and the provisions of this Agreement, Lanxide hereby grants to Licensee an exclusive right to use the trademark CERASET(TM) (the "Trademark") in connection with the marketing and sale in the Territory of Polymer Materials and Products made using the Licensed Technology. Licensee shall have the right but not the obligation to use the Trademark in connection with the marketing and sale of Polymer Materials and Products, providing the requirements of Section 3.5 hereof shall be met. This provision does not restrict Licensee from using any other trademark(s) in connection with Polymer Materials or Products.

3.2 Registration. Registration of the Trademark shall only be made in the name of LTC or its designee. Licensee shall provide such assistance as LTC or its designee may require in relation to such registration in the Territory at LTC's expense, including the execution of all documents necessary or desirable for obtaining and maintaining such registration. In addition, Licensee shall cooperate with LTC in seeking the registration of this License Agreement or of an executed registered user agreement as may be necessary or desirable under the laws of the Territory to record the trademark license granted under this Agreement with LTC to bear any associated expense.

3.3 Acknowledgment of Rights. As between the parties, Licensee acknowledges that the Trademark and the goodwill associated with the trademark are the property of Lanxide and that, except to the extent of the license rights granted hereunder, Licensee shall not acquire any rights in such Trademark or in any registration of the Trademark. Licensee acknowledges that Licensee's right to use the Trademark arises only out of the licenses granted under this Agreement. Licensee shall neither challenge nor dispute the rights of Lanxide with respect to use or ownership of the Trademark. However, Lanxide makes no warranty that the Trademark will be successfully registered in any countries in the Territory.

3.4 Use of Trademark; Quality Control. Licensee shall only use the Trademark in connection with Products manufactured using the Licensed Technology or as otherwise agreed to in writing by LTC or Lanxide from time to time. The standards of manufacture of such Products shall be at least equal to the standards of quality required by LTC and Lanxide in relation to their other manufacturing or licensing activities. Licensee shall follow all reasonable instruction in relation to the quality of manufacture of Products communicated to it by any representative of LTC or Lanxide. In no event shall Licensee manufacture any Products which are not in accordance with applicable Government Regulations relating to safety and product quality.

3.5 Indemnity and Insurance. Licensee shall indemnify and hold harmless LTC, Lanxide, their Affiliates and their respective directors, officers and employees from and against any losses, claims and damages including reasonable attorney's fees arising out of manufacture, use or sale of Polymer Materials and/or Products by Licensee. During the term of this

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Agreement and until the last applicable statute of limitations expires, but only from and after the time Licensee or its permitted assigns or sublicensees first begin to make, use, sell, or offer for sale Products based on the Licensed Technology, Licensee will procure and maintain, at its own cost and expense, product liability insurance written on an occurrence basis from an insurance company rated A or above by A. M. Bests' providing protection against liability for any alleged damage or injury arising out of any alleged defect in material or workmanship in such Polymer Materials and/or Products in the primary amount of 1 million U.S. dollars with respect to any one accident or occurrence, and 1 million U.S. dollars in the aggregate. From and after the time Licensee or its permitted assigns or sublicensees first begin to make, use, sell, or offer for sale Products based on the Licensed Technology, Licensee shall also procure and maintain, at its own expense, excess liability insurance in the amount of 10 million U.S. dollars in the aggregate. The insurance policy shall name LTC as an additional insured and shall be endorsed to provide for written notification to LTC by insurer not less than 30 days prior to cancellation. Licensee shall provide LTC with a certificate of insurance evidencing such coverage within 45 business days after such initial activity and annually thereafter.

3.6 Inspection and Approval Rights. The Trademark shall only be used in accordance with the license granted by this License Agreement. Licensee shall provide to Lanxide upon request samples of Products manufactured by Licensee and its sublicensees as well as advertising and other publicity materials bearing the Trademark proposed to be use by its authorized sublicensees, together with an English language translation if necessary. Licensee shall allow and cause any of its sublicensees to permit Lanxide or its representatives at all reasonable times to inspect any facility where Products which will be sold under the Trademark are manufactured.

3.7 Reservation of Rights. No rights are granted under the Trademark except as expressly set forth in this Section 3. Without limitation, Licensee acknowledges the rights of Lanxide and its Affiliates to use the Trademark themselves in connection with the manufacture, or use of products or polymer materials which have not otherwise been licensed to Licensee by this License Agreement. Lanxide expressly reserves the right to assign its entire right, title, and interest in and to the Trademark to LTC, in which event LTC shall assume Lanxide's rights and obligations under this Agreement.

IV. FEE AND ROYALTY

4.1 Fee Payment and Amount. Licensee shall pay to LTC alicense fee in accordance with the following (the "Fee"):

1. The sum of five hundred thousand dollars ($500,000) in wired funds on the Effective Date, wired to the account of Lanxide identified in instructions delivered to Licensee contemporaneously with the execution and delivery hereof,

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2. cancellation of the notes from LPM to Commodore Environmental Services, Inc., and Commodore Applied Technologies, Inc., each an Affiliate of Licensee, in the amounts of $3 million and $1.5 million respectively in addition to cancellation of any accrued interest thereon.

4.2 Royalty Payment and Amount. Licensee shall pay to LTC a royalty equal to 4% of the Net Sales Price of all Products sold by Licensee and any of its sublicensees, which are manufactured using the Licensed Technology until the aggregate royalty payments shall equal $4,000,000. Thereafter perpetually Licensee shall pay to LTC a royalty equal to 2% of the Net Sales Price of all Products sold by Licensee and its sublicensees, which are manufactured using the Licensed Technology. Licensee shall pay the royalty to LTC so long as Licensee or any subcontract manufacturer or other sublicensee of Licensee shall use the Licensed Technology. This license shall remain in force and effect unless Licensee shall cease or suspend payment of royalties due to non-use of the Licensed Technology. For purposes of this Agreement, the term "non-use" shall mean (i) the failure of the Licensee to make any sales of Polymer Materials or Products licensed hereunder for any consecutive three (3) year period beginning from and after the date hereof and (ii) after any such three (3) year period, the Licensee continues to fail for a period of six (6) consecutive months after receipt of written notice from LTC to make any such sales hereunder. In the event of such non-use, the license granted hereby shall terminate.

4.3 Net Sales Price. The "Net Sales Price" referred to in Section 4.1 shall mean the invoiced price for a Product less insurance, transport, bona fide rebates and allowances to the extent identified on the invoice, and less returns. The "Net Sales Price" applicable to transfers to entities affiliated with Licensee will be the price at which such Products would be sold at the time in question on an arms-length basis to a third party.

4.4 Third Party Royalties. In any case where use of Licensed Technology requires or required LTC to pay a royalty to a third party (whether lump-sum or payable by reference to sales), then in the event that Licensee determines to use such Technology, Licensee may offset the amount of such third party royalty against the royalty specified in
Section 4.1.

4.5 Tax Withholdng. Licensee may withhold taxes from royalties payable hereunder only to the extent that such withholding is required under any applicable law and to the extent that Licensee provides copies of all documents required by LTC hereunder to claim credit for such tax payment.

4.6 Payment and Accounting. Royalties due under this Agreement shall be paid in U.S. dollars to the bank account specified by LTC within 45 days after each of December 31, March 31, June 30, and September 30, in relation to the period of three (3) calendar months (or less in the case of the first such period ) ending on such date. At the same time as payment of royalties is made, Licensee shall provide to LTC a statement setting out the sales of products manufactured using the Licensed Technology made during the period to which such royalties

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relate, the type and description of product in question, the applicable Net Sales Price, the amount of royalties payable and the amount of any tax withheld. Overdue payments shall bear interest at the annual rate of two percent (2%) above the prime rate of Citibank, in New York.

4.7 Books and Records. Licensee shall keep proper books and records showing the description and price of products sold, and such records shall be open at all reasonable times to inspection by Lanxide or its representatives, who shall be entitled to take copies of such books and records.

4.8 Currency Conversion. For the purpose of converting into U.S. dollars the currency in which royalties may arise, the rate of exchange to be applied shall be the rate of exchange for the purchase of U.S. dollars with the currency quoted by Citibank, in New York as at the close of business on the last business day of the quarterly period to which a payment shall relate.

V. TERM AND TERNUNATION

5.1 Effective Date. This Agreement shall come into effect upon the Effective Date set forth in the first page hereof. This Agreement shall thereafter be perpetual and non-cancelable, subject to earlier termination as provided herein.

5.2 Events of Termination. This Agreement may be terminated upon the happening of any of the following events:

(i) Upon written notice from LTC or Lanxide, in the event that Licensee is in material breach of any of its obligations under this Agreement, and fails to remedy that breach within 30 days after receipt of written notice from LTC or Lanxide, requiring it to remedy that breach;

(ii) Upon 180 days prior written notice by LTC, in the event that any Government Entity or court requires substantial modifications to the provisions of this Agreement;

(iii) Upon written notice by Licensee to LTC;

(iv) As provided elsewhere in this Agreement.

5.3 Effects of Termination. On termination of this Agreement for any reason, the following provisions shall have effect:

(i) All licenses and rights granted to Licensee by Licensor shall forthwith cease and Licensee shall cooperate in canceling any registration of such licenses.

(ii) Licensee shall, except as otherwise agreed with LTC or Lanxide, as applicable, forthwith cease all use of the Licensed Technology and the Trademarks.

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(iii) Termination of this Agreement shall not affect the continued enforceability of Section 3.7 and Section 8 and the continued existence of the license from Licensee to Licensor under Section 7.1 hereunder of improvements and inventions made up to the date of termination.

(iv) Licensee shall promptly deliver all Proprietary Information in all forms to LTC or to its authorized representatives.

VI. GOVERNMENT REGULATIONS, ETC.

6.1 Compliance with Government Regulations. Licensee agrees to obtain and maintain any necessary governmental consents or licenses. LTC represents and warrants that, except for governmental licenses required in connection with manufacturing the chemicals used to produce Polymer Materials, to the best of LTC's knowledge, no other consents or licenses are required. Licensee shall comply with all Government Regulations governing export of goods and information from the Territory and between the various countries of the Territory, including without limitation the Export Administration Regulations of the United States (15 C.F.R. 730 et seq.) as such may be amended from time to time, and the terms of any licenses or consents obtained.

VII. PATENTS AND IMPROVEMENTS

7.1 LTC's Rights in Inventions. Licensee shall promptly disclose to LTC any inventions or improvements which relate solely to the Licensed Technology that are made by Licensee's employees or by the employees of any sublicensee without the participation of any of the employees of LTC or its Affiliates and Licensee shall obtain the right to grant, and grant, to LTC a full world-wide, royalty-free, perpetual, irrevocable, non-exclusive license to make, use, sell and offer for sale such improvements or inventions related to Products that contain CMC and/or MMC Materials with full right by LTC to grant sublicenses of such improvements or inventions which themselves include the right to sublicense.

The provisions of this Section 7.1 shall not affect the ownership of inventions or improvements made by employees of LTC or its Affiliates (with or without the participation of the employees of the Licensee or any sublicensee) which inventions and improvements shall be the property of LTC or its Affiliates, but subject to the licenses granted under this Agreement.

7.2 Licensee's Rights in Inventions. LTC shall promptly disclose to Licensee any inventions or improvements which relate solely to the Licensed Technology and Products that are made by LTC's employees or by the employees of any sublicensee without the participation of any of the employees of Licensee or its Affiliates and LTC shall obtain the right to grant, and grant, to Licensee to make, use, sell and offer for sale such improvements or inventions in any manner not prevented by the terms of any other existing license by which LTC is bound, with full right by Licensee to grant sublicenses of such improvements or inventions which themselves include the right to sublicense.

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7.3 Prosecution and Registration. Licensee shall not seek any patent or other intellectual property registration in relation to the Licensed Technology in its own name, other than improvements and inventions relating to the Licensed Technology made by Licensee's employees with or without the participation of employees of authorized sublicensees or contract manufacturers. Licensee will cooperate with LTC as reasonably requested by LTC in relation to obtaining and prosecuting patents in the name of LTC. LTC and Lanxide covenant and agree to fully and timely pay all patent maintenance fees for all patents on which the Licensed Technology is based. However, Licensee shall have the right but not the obligation to maintain, at Licensees expense, patents and patents pending of LTC that directly relate to Licensed Technology but only in the event that LTC and Lanxide are unable to do so.

7.4 Actions and Claims Against Third Parties. If, during the term of this Agreement, Licensee learns of any infringement, unfair competition or misappropriation ("Infringement") by a third party of any Licensed Technology licensed to Licensee, Licensee shall promptly and fully notify LTC in writing.

7.5 Infringement Claims by Third Parties. If, during the term of this Agreement, any claim or action is threatened or commenced by a third party alleging Infringement of third party rights by practice of Licensed Technology by Licensee, Licensee shall promptly and fully notify LTC in writing.

7.6 Procedure, LTC shall have the right, but not the obligation, to take all reasonable steps to prosecute or defend any such claim or action relating to the matter set forth in Sections 7.3 or 7.4, and may institute, defend, or settle claims, actions or proceedings at its expense. Licensee, at LTC's request shall render all reasonable assistance and cooperation at LTC's expense. If LTC refuses or fails to take or defend such actions within six (6) months after receipt of the notice described above (or such shorter period as shall be reasonable in the circumstances), then Licensee shall have the right (but not the obligation), after first notifying LTC in writing, to institute, defend or settle such actions or claims or proceedings, which shall be at Licensee's expense. In such case LTC, at Licensee's request, shall render all reasonable assistance and cooperation at Licensee's expense, and LTC shall have the right to participate in such proceedings through LTC's own counsel. In no event shall LTC bear any expense of any claims, actions, or proceedings not instituted or defended by LTC unless their written consent is obtained prior to the institution or defense of such claims, actions, or proceedings.

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VII. CONFIDENTIALITY, RESTRICTED DISCLOSURE AND LIMIITED USE COMMITMENTS

8.1 Confidentialfty Undertaking. The parties hereto shall (i) treat as confidential all Proprietary Information (as hereinafter defined) which is obtained by a receiving party directly or indirectly from a disclosing party in connection with this Agreement, and (ii) not disclose the same to any third party nor use the same, except as provided herein. The provisions of this Section shall apply, without limitation, to all information learned by the parties in the course of implementing this Agreement concerning the business, assets, customers, processes or methods of Lanxide, LTC, or Licensee, or their Affiliates. The provisions of Section 8 shall remain in effect during the term of this Agreement and for a period of five (5) years after termination or expiration of the Agreement.

8.2 Proprietary information. As used herein, "Proprietary Information" means any information of Lanxide, LTC, Licensee, or their Affiliates that might reasonably be considered proprietary, sensitive or private, including but not limited to the following:

(i) Technical information, know-how, data, techniques, discoveries, inventions, ideas, unpublished patent applications, proprietary information, formulae, analyses, laboratory reports, other reports, financial information, studies, findings, or other information relating to Lanxide, LTC, Licensee, or their Affiliates, or the Licensed Technology or methods or techniques used by Lanxide, LTC, Licensee, or their Affiliates, whether or not contained in samples, documents, sketches, photographs, drawings, lists, and the like;

(ii) Data and other information employed in connection with the marketing of the products of Lanxide, LTC, Licensee, or their Affiliates including cost information, business policies and procedures, revenues and markets, distributors and customers, and similar items of information whether or not contained in documents or other tangible materials; and

(iii) Any other information obtained by the parties to this Agreement during the term hereof, that is not generally known to, and not readily ascertainable by proper means by, third parties.

8.3 Precautions. The parties hereto shall take all appropriate steps to prevent unauthorized disclosure of any Proprietary Information by their employees, which steps include the execution or acceptance by all such persons of written agreements containing obligations of confidentiality, restricted disclosure and limited use relative thereto consistent with this Section 8 prior to disclosure of Proprietary Information to them. The parties shall not permit access to Proprietary Information by their employees, except on a need-to-know basis. The parties shall further take all appropriate steps to protect the Proprietary Information against espionage, misuse, loss or theft.

8.4 Exclusions. The provisions of Section 8 shall not apply to any Proprietary Information after (i) it has become generally available to the public through no fault of the receiving party or its employees,
(ii) the receiving party can prove by clear and convincing documentary evidence that it was in its possession before disclosure hereunder and did not come directly or indirectly from the disclosing party or (iii) it becomes known to the receiving party through lawful disclosure from a third party that is not subject to a confidentiality agreement with any disclosing party or Affiliate.

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8.5 Permitted Disclosure. Proprietary Information may not be disclosed by the receiving party without the prior written consent of the disclosing party, except that:

(i) Any party hereto, as appropriate, may disclose such Proprietary Information to their employees on a need-to-know basis for the purposes of this Agreement in accordance with Section 8.3.

(ii) Any party hereto may disclose Licensee's Proprietary Information to its Affiliates or its other licensees or sublicensees of the Licensed Technology, provided that prior to disclosure of the Proprietary Information, such Persons execute written agreements containing obligations of confidentiality consistent with this Section 8.

(iii) In the event that a third party wishes to evaluate the Licensed Technology in connection with a business transaction, Lanxide may disclose as much of Licensee's Proprietary Information to that third party as is necessary to conduct such evaluation, provided that prior to disclosure such third party executes a written agreement prohibiting use of the Proprietary Information for any reason other than evaluation of this technology and containing obligations of confidentiality consistent with this Section 8.

8.6 Government Regulations. The provisions of this Section 8 shall not be deemed to obligate either party to do or refrain from doing any act, the doing or not doing of which would cause or reasonably be expected to cause either party to fail to fulfill or comply with any obligation or requirement imposed by any Governmental Regulation, provided that, any disclosures of Proprietary Information made to fulfill or comply with any such Regulation shall be made (i) only after notice to the other party, and (ii) under conditions invoking all confidentiality protections as are available by law or regulation.

IX. MISCELLANEOUS

9.1 Warranties. Except as otherwise expressly set forth in Section 9.2 hereof, LTC and Lanxide make no warranty or representation with respect to the Trademarks the Licensed Technology or other assistance furnished under this Agreement, or with respect to the Trademarks, nor are LTC or Lanxide in any way responsible for the accuracy, utility or completeness of any Licensed Technology or other assistance furnished under this Agreement. LTC AND LANXIDE HEREBY EXPRESSLY DISCLAIM ANY AND ALL WARRANTIES AND REPRESENTATIONS, EXPRESS OR IMPLIED, ARISING BY LAW OR CUSTOM, WITH RESPECT TO THE TRADEMARKS OR THE LICENSED TECHNOLOGY, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF NON-INFRINGEMENT, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE. LTC AND LANXIDE DO NOT IN ANY WAY PROMISE THAT THE LICENSED TECHNOLOGY WILL PRODUCE ANY PARTICULAR RESULTS, PRODUCTS OR PROFITABILITY.

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9.2 Representations and Warranties. LTC and Lanxide represent and warrant, jointly, and severally, to Licensee as follows:

(a) LTC owns free and clear of all liens and encumbrances, all right, title and interest in and to all patents, patent applications, trademarks (if any), and trademark applications that relate to the Licensed Technology described on Schedule 9.2 hereto, Schedule 9.2 sets forth accurate information with respect to the filing dates of all such items, and the existing registrations for any issued patents and trademarks included therein are in good standing.

(b) all maintenance fees for the patents described on Schedule 9.2 hereto have been paid up through and including the date of this Agreement;

(c) the trademarks described on Schedule 9.2 which are registered with the U.S. Patent & Trademark Office, or for which applications for registration with the U.S. Patent & Trademark Office have been filed, were first used in interstate commerce on the dates specified in the respective applications filed with the U.S. Patent & Trademark Office, and have been continuously used in the interstate commerce since that date.

(d) neither LTC nor Lanxide has knowledge nor has either of them received any notice of (i) the invalidity or conflict of any patent or trademark described on Schedule 9.2 hereto or (ii) asserted rights of others in or to any patent or trademark described on Schedule 9.2 hereto;

(e) To the knowledge of LTC and Lanxide, within the past five (5) years, no claim is pending, is threatened or has been made with respect to the Licensed Technology, Polymer Materials or Products;

(f) no claim has been made within the past five (5) years or is now pending nor, to the knowledge of LTC and Lanxide, is or has been threatened, within the past five (5) years, for interference, opposition, re-examination or cancellation of the patents described on Schedule 9.2 hereto;

(g) the execution and delivery of this Agreement will not conflict with, alter or impair the rights in or to, or the validity of any other agreement to which either of them are a party;

(h) to the knowledge of LTC and Lanxide, the Licensed Technology hereby licensed does not infringe on or misapply any other technology licensed by Lanxide;

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(i) the use of the Licensed Technology as permitted under this License Agreement does not infringe on, misapply or interfere with agreements that LTC or Lanxide has with any other person, and,

(j) to the knowledge of LTC and Lanxide, no other party has been infringing on or misapplying the Licensed Technology described on Schedule 9.2 hereto.

9.3 Force Majeure. Neither party shall be liable for failure to perform its obligations hereunder for so long as that failure may be the result of any event beyond its reasonable control (a "force majeure" event), provided that such party uses all reasonable efforts to comply with the terms of this Agreement to the extent that it is able to do so.

9.4 Waivers. The failure at any time of either party to require performance by the other party of any obligation required by this Agreement shall in no way affect the first party's right to require such performance at any time thereafter, nor shall the waiver by either party of a breach of any provision of this Agreement by the other party constitute a waiver of any other breach of the same or any other provision or constitute a waiver of the obligation itself.

9.5 Amendment. This Agreement may be amended only by an instrument in writing duly executed by the parties hereto.

9.6 Assignabilily. This Agreement shall be binding upon and inure to the benefit of the permitted successors and assigns of each party hereto. Neither this Agreement nor any right or obligation hereunder may be assigned or delegated in whole or in part by any party without the prior written consent of the other parties which consent shall not be unreasonably withheld, except that either party shall have the right to transfer its rights and obligations to an Affiliate.

9.7 Notices. In any case where any notice or other communication is required or permitted to be given hereunder (including, without limitation, any change in the information set forth in this Section 9.6) such notice or communication (i) shall be in writing and in the English language, (ii) shall be sent to the parties set out below, and
(iii) shall be (A) personally delivered, (B) sent by postage prepaid registered airmail, (C) transmitted by telecopy receipt of which is confirmed, (D) sent by courier service requiring signature on receipt, as follows:

If to LTC, to:


Lanxide Technology Company, L.P.
c/o Lanxide Corporation, General Partner
1300 Marrows Road
P.O. Box 6077
Newark, DE 19714-6077
U.S.A.

Attention: President

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If to Lanxide. to:

Lanxide Corporation
1300 Marrows Road
P.O. Box 6077
Newark, Delaware 19714-6077
U.S.A.

Attention: President

If to Licensee, to:

Commodore Polymer Technologies, Inc.
150 East 58th Street, Suite 3400
New York, New York 10155

Attention: President

All such notices or other communications shall be deemed to have been given or received (i) upon receipt if personally delivered, or if by courier, (ii) on the tenth business day following posting if by postage prepaid registered airmail, or (iii) when sent with confirmed answer back if sent by telecopy.

9.8 Choice of Law. This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, United States of America.

9.9 Forum Jurisdiction, Venue and Service. The Licensee hereby irrevocably and unconditionally:

(i) agrees that any action, suit or proceeding by any person arising from or relating to this Agreement or any statement, course of conduct, act, omission, or event occurring in connection herewith (collectively, "Related Litigation") may be brought in any state or federal court of competent jurisdiction sitting in the State of Delaware, submits to the jurisdiction of such courts, and to the fullest extent permitted by law agrees that it will not bring any Related Litigation in any other forum;

(ii) waives any objection which it may have at any time to the laying of venue of any Related Litigation brought in any such court, waives any claim that any such Related Litigation has been brought in an inconvenient forum, and waives any right to object, with respect to any Related Litigation brought in any such court, that such court does not have jurisdiction over the Licensee; and

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(iii) consents and agrees to service of any summons, complaint or other legal process in any Related Litigation by registered or certified U.S. mail, postage prepaid, to the Licensee at the address for notices described in Section 9.6 hereof, and consents and agrees that such service shall constitute in every respect valid and effective service (but nothing herein shall affect the validity or effectiveness of process served in any other manner permitted by law).

9.10 Interpretation. The headings of the sections and Sections in this Agreement are provided for convenience of reference only and shall not be deemed to constitute a part hereof. The Agreement is executed in the English language.

9.11 Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter of this Agreement and supersedes all prior agreements and understandings, oral and written, if any, among the parties hereto with respect to the subject matter of this Agreement.

9.12 Severability. Should any provision of this Agreement be deemed in contradiction with the laws of any jurisdiction in which it is to be performed or unenforceable for any reason, such provision shall be deemed null and void, but, except as provided in Section 5.2, this Agreement shall remain in force in all other respects.

9.13 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[remainder of page intentionally left blank]

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

LANXIDE TECHNOLOGY COMPANY, L.P. LANXIDE CORPORATION

   BY: LANXIDE CORPORATION          BY: /s/ Marc S. Newkirk
       General Partner                  ------------------------------

   BY: /s/ Marc S. Newkirk        NAME:     Marc S. Newkirk
      --------------------              -------------------------------
 NAME:     Marc S. Newkirk       TITLE: ______________________________
      --------------------
TITLE: __________________

COMMODORE POLYMER TECHNOLOGIES, INC.

   BY: /s/ Paul E. Hannesson
       ----------------------
 NAME:     Paul E. Hannesson
       ----------------------

TITLE: __________________

Signature Page to License Agreement

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SCHEDULE-1.5

Technology which is, or may in the future be

(i) provided to Lanxide or its Affiliates under Non Disclosure Agreements and is identified as the proprietary information of the disclosing party.

(ii) designated as classified by a government agency.

(iii) controlled by the export regulations of the United States.

(iv) Provided under license to Lanxide or its Affiliates with limits on its use or transfer.

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SCHEDULE 2.3
LIST OF EXISTING LICENSES

18

EXHIBIT 21.1

SUBSIDIARIES OF THE COMPANY

Name of Subsidiary                  State of Incorporation    Percentage Owned
------------------                  ----------------------    ----------------

Harvest American Corp.                    Delaware                100%


Commodore Polymer Technologies, Inc.      Delaware                100%


Commodore Oil & Gas Corporation           Delaware                100%


ARTICLE 5
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FORM 10-K
MULTIPLIER: 1,000


PERIOD TYPE YEAR
FISCAL YEAR END DEC 31 1997
PERIOD START JAN 01 1997
PERIOD END DEC 31 1997
CASH 13,542
SECURITIES 0
RECEIVABLES 3,525
ALLOWANCES (461)
INVENTORY 360
CURRENT ASSETS 21,544
PP&E 3,476
DEPRECIATION (978)
TOTAL ASSETS 35,016
CURRENT LIABILITIES 8,336
BONDS 6,269
PREFERRED MANDATORY 0
PREFERRED 43
COMMON 592
OTHER SE 3,005
TOTAL LIABILITY AND EQUITY 35,016
SALES 0
TOTAL REVENUES 19,493
CGS 0
TOTAL COSTS 16,325
OTHER EXPENSES 21,414
LOSS PROVISION 0
INTEREST EXPENSE 1,052
INCOME PRETAX (13,507)
INCOME TAX 0
INCOME CONTINUING (13,507)
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET INCOME (13,507)
EPS PRIMARY (.27)
EPS DILUTED (.27)
BROKERAGE PARTNERS