IMATEC LTD, SB-2, 1996-05-13

IMATEC LTD
SB-2, 1996-05-13

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<PAGE>

As filed with the Securities and Exchange Commission on May 13, 1996
Registration No.33-
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

----------

FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

----------

IMATEC, LTD.
(Name of small business issuer in its charter)

Delaware 3861 11-3289398
- ------------------------- ---------------------------- -------------------
(State or other juris- (Primary Standard Industrial (I.R.S. Employer
diction of organization) Classification Code No.) Identification No.)

150 E. 58th Street
New York, NY 10155
(212) 826-0440
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)

150 E. 58th Street
New York, NY 10155
(212) 826-0440
(Address, including zip code, and telephone number, including area code,
of registrant's principal place of business or intended place of business)

Hanoch Shalit
Chief Executive Officer
150 E. 58th Street
New York, NY 10155
(212) 826-0440

(Name, address, including zip code, and telephone number, including area
code, of agent for service)

Copies to:
Clifford A. Brandeis, Esq. Lawrence B. Fisher, Esq.
Zukerman Gore & Brandeis, LLP Orrick, Herrington & Sutcliffe
900 Third Avenue 666 Fifth Avenue
New York, New York 10022 New York, NY 10103
(212) 223-6700 (212) 506-5000

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

If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis, pursuant to Rule 415 under the
Securities Act of 1933, check the following box: | X | [check if necessary]

If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: | |

(Continued Overleaf)

<PAGE>

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

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

<PAGE>

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

CALCULATION OF REGISTRATION FEE

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

Proposed
maximum
offering
price per
share
of Common
Stock and Proposed
Redeemable maximum
Common aggregate
Amount Stock offering Amount of
Title of each class of to be Purchase price per registra-
securities to be registered registered Warrant(1) Unit(1) tion fee
- --------------------------- ---------- ---------- ------- --------
Common Stock,
par value $.0001
per share (2) 1,150,000 $5.00 $ 5,750,000 $ 1,982.76

Class A Redeemable
Common Stock Purchase
Warrants (3) 4,600,000 $ .25 $ 1,150,000 $ 396.55

Common Stock,
par value $.0001
per share (4)(5) 4,600,000 $6.50 $29,900,000 $10,310.34

Class A Redeemable
Common Stock
Purchase Warrants(6) 4,000,000 $ .25 $ 1,000,000 $ 344.83

Common Stock,
par value $.0001
per share(5)(7) 4,000,000 $6.50 $26,000,000 $ 8,965.52

Class B Redeemable
Common Stock
Purchase Warrants(3)(4) 4,600,000 $1.00 $ 4,600,000 $ 1,586.21

Common Stock,
par value $.0001
per share(4)(5) 4,600,000 $5.50 $25,300,000 $ 8,724.14

Underwriter's Warrants --- $.0001 $ --- ---

Common Stock, par
value $.0001
per share (8) 100,000 $6.00 $ 600,000 $ 206.90

<PAGE>

Class A Redeemable
Common Stock Purchase
Warrants (8) 400,000 $ .30 $ 120,000 $ 41.38

Common Stock, $.0001
par value per
share (5)(9) 400,000 $7.80 $ 3,120,000 $ 1,075.86

Class B Redeemable
Common Stock
Purchase Warrants(8) 400,000 $1.20 $ 480,000 $ 165.52

Common Stock,
par value $.0001
per share (5)(9) 400,000 $6.60 $ 2,640,000 $ 910.34

Common Stock (10),
$.0001 par value
per share 551,785 $5.00 $ 2,758,925 $ 951.35

Common Stock, $.001
par value per share (11) 2,210,000 $5.00 $11,050,000 $ 3,810.34

TOTAL $39,472.04
==========

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

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.

(2) Includes shares of Common Stock included in the underwriter's
over-allotment option.

(3) Includes Redeemable Common Stock Purchase Warrants included in
underwriter's over-allotment option.

(4) Issuable upon exercise of the Redeemable Common Stock Purchase Warrants,
including the Redeemable Common Stock Purchase Warrants included in the
underwriter's over-allotment option.

(5) Pursuant to Rule 416, this Registration Statement also covers such
indeterminable additional shares of Common Stock as may become issuable as
a result of anti-dilution provisions of the Redeemable Warrants.

(6) Represents Redeemable Common Stock Purchase Warrants being registered on
behalf of lenders who have provided interim financing to the Company.

(7) Issuable upon exercise of the Redeemable Common Stock Purchase Warrants

<PAGE>

being registered on behalf of lenders who have provided interim financing
to the Company.

(8) Reserved for issuance upon exercise of the Underwriter's Warrants.

(9) Issuable upon exercise of the Redeemable Common Stock Purchase Warrants
included in the Underwriter's Warrants.

(10) Represent Common Stock being registered on behalf of lenders who have
provided interim financing to the Company.

(11) Represents shares of Common Stock being registered on behalf of the
founding stockholders of the Company.

The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

iii

<PAGE>

IMATEC, LTD.

CROSS REFERENCE SHEET
(Showing Location in the Prospectus of Information Required by Items 1
through 23, Part I, of Form SB-2)

Item in Form SB-2 Prospectus Caption
----------------- ------------------

1. Front of Registration
Statement and Outside Front
Cover of Prospectus................ Facing Page of Registration
Statement; Outside Front
Page of Prospectus

2. Inside Front and Outside Back
Cover Pages of Prospectus.......... Inside Front Cover Page of
Prospectus; Outside Back Cover
Page of Prospectus

3. Summary Information and Risk
Factors............................ Prospectus Summary; Risk Factors

4. Use of Proceeds.................... Use of Proceeds

5. Determination of Offering Price.... Outside Front Cover Page of
Prospectus; Underwriting;
Risk Factors

6. Dilution........................... Dilution; Risk Factors

7. Selling Security Holders........... Outside Front Cover Page of
Prospectus; Concurrent Offering

8. Plan of Distribution............... Outside Front Cover Page of
Prospectus; Risk Factors;
Underwriting

9. Legal Proceedings.................. Business - Legal Proceedings

10. Directors, Executive Officers,
Promoters and Control Persons...... Management

11. Security Ownership of Certain
Beneficial Owners and Management... Principal Security Holders

12. Description of Securities.......... Description of Securities;
Underwriting

<PAGE>

Item in Form SB-2 Prospectus Caption
----------------- ------------------

13. Interest of Named Experts and
Counsel............................ Experts; Legal Matters

14. Disclosure of Commission Position
on Indemnification for
Securities Act Liabilities......... Inside Front Cover Page of
Prospectus; Underwriting

15. Organization Within Last 5 Years... Prospectus Summary; The Company;
Business; Certain Transactions

16. Description of Business............ Business; Risk Factors

17. Management's Discussion and Analysis
or Plan of Operation............... Plan of Operations

18. Description of Property............ Business - Properties

19. Certain Relationships and
Related Transactions............... Certain Transactions

20. Market for Common Equity and
Related Stockholder Matters........ Outside Front Cover Page of
Prospectus; Prospectus Summary;
Description of Securities;
Underwriting

21. Executive Compensation............. Management - Executive
Compensation

22. Financial Statements............... Selected Financial Information;
Financial Statements

23. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosures.......... Change in Accountants

<PAGE>

PROSPECTUS
SUBJECT TO COMPLETION, DATED MAY 13, 1996

IMATEC, LTD. [LOGO]

1,000,000 Shares of Common Stock,
4,000,000 Class A Redeemable Warrants and
4,000,000 Class B Redeemable Warrants

Imatec, Ltd. (the "Company") hereby offers 1,000,000 shares (the
"Shares") of common stock, par value $.0001 per share (the "Common Stock"),
4,000,000 Class A redeemable Common Stock purchase warrants (the "Class A
Redeemable Warrants") and 4,000,000 Class B redeemable Common Stock purchase
warrants (the "Class B Redeemable Warrants"). The Class A Redeemable Warrants
and Class B Redeemable Warrants are collectively referred to as the "Redeemable
Warrants." The Shares and the Redeemable Warrants (collectively, the
"Securities") may be purchased separately and will be separately tradeable
immediately upon issuance. It is currently anticipated that the initial public
offering prices of the Common Stock, the Class A Redeemable Warrants and the
Class B Redeemable Warrants will be $5.00, $.25 and $1.00, respectively. Each
Class A Redeemable Warrant and each Class B Redeemable Warrant entitles the
registered holder thereof to purchase one share of Common Stock at an exercise
price of $6.50 and $5.50, respectively, subject to adjustment, commencing on the
date of this Prospectus until _________, 1998 [24 months from the date of this
Prospectus] and _______, 2001 [60 months from the date of this Prospectus],
respectively, at which time the Redeemable Warrants shall expire. Upon the prior
written consent of A.S. Goldmen & Co., Inc. (the "Underwriter"), each Class A
Redeemable Warrant and each Class B Redeemable Warrant is redeemable by the
Company at any time after ________, 1997, [9 months from the date of this
Prospectus] and [ _______, 1997, [12 months from the date of this Prospectus],
respectively, at a redemption price of $.10 per Redeemable Warrant, on 30 days'
prior written notice, provided that the average closing bid price of the Common
Stock, as reported on the Nasdaq SmallCap Market ("Nasdaq") shall equal or
exceed $7.50 and $9.00, respectively, for any 20 trading days within a period of
30 consecutive trading days ending on the fifth trading day prior to the date of
notice of redemption. See "Risk Factors," "Description of Securities" and
"Underwriting."

Prior to this Offering, there has been no public market for the
Securities, and no assurance can be given that such a market will develop upon
completion of this Offering, or if developed, that it will be sustained. The
initial public offering prices of the Securities and the exercise price and
other terms and conditions of the Redeemable Warrants have been arbitrarily
determined by negotiations between the Company and the Underwriter and do not
necessarily bear any relationship to the Company's assets, book value, results
of operations or other generally accepted criteria of value. Application has

<PAGE>

been made for listing of the Common Stock, the Class A Redeemable Warrants and
the Class B Redeemable Warrants on Nasdaq under the symbols IMEC, IMECW and
IMECZ, respectively. See "Risk Factors" and "Underwriting."

This Prospectus also relates to the registration by the Company, at its
expense, (a) for the account of the Company of 8,000,000 shares of Common Stock
issuable by the Company upon the exercise of 8,000,000 Redeemable Warrants to be
issued in the Offering, (b) for the account of various security holders who
provided interim bridge financing (the "Bridge Financing") to the Company
(collectively, the "Bridge Selling Security Holders"), of an aggregate of (i)
551,785 shares of Common Stock, (ii) 4,000,000 Class A Redeemable Warrants, and
(iii) 4,000,000 shares of Common Stock issuable by the Company upon the exercise
of the 4,000,000 Class A Redeemable Warrants issued to the Bridge Selling
Security Holders, and (c) for the account of the founding stockholders of the
Company (the "Founding Selling Security Holders") of an aggregate of 2,210,000
shares of Common Stock. Except with respect to 150,000 shares of Common Stock
being registered on behalf of certain of the Founding Selling Security Holders,
including 50,000 shares for Dr. Hanoch Shalit, the Company's President and Chief
Executive Officer, the Bridge Selling Security Holders and the Founding Selling
Security Holders have agreed with the Underwriter not to effect any sales of the
securities issued to them until 18 months after the date of this Prospectus
without the prior written consent of the Underwriter. The Bridge Selling
Security Holders and the Founding Selling Security Holders are sometimes
hereinafter referred to collectively as the "Selling Security Holders," and all
of the securities offered for sale by the Selling Security Holders are
hereinafter referred to as the "Selling Security Holders' Securities." See
"Prospectus Summary - The Offering," "Selling Security Holders," and
"Description of Securities."

The sale of the Selling Security Holders' Securities may be effected
from time to time in transactions (which may include block transactions by or
for the account of the Selling Security Holders) in the over-the-counter market
or in negotiated transactions, through the writing of options on the Selling
Security Holders' Securities, through a combination of such methods of sale, or
otherwise. Sales may be made at fixed prices which may be changed, at market
prices prevailing at the time of sale, or at negotiated prices. If any Selling
Security Holder sells his, her or its Securities, or options thereon, pursuant
to this Prospectus at a fixed price or at a negotiated price which is, in either
case, other than the prevailing market price or in a block transaction to a
purchaser who resells, or if any Selling Security Holder pays compensation to a
broker-dealer that is other than the usual and customary discounts, concessions
or commissions, or if there are any arrangements either individually or in the
aggregate that would constitute a distribution of the Selling Security Holders'
Securities, a post-effective amendment to the Registration Statement of which

<PAGE>

this Prospectus is a part, would need to be filed and declared effective by the
Securities and Exchange Commission before such Selling Security Holders could
make such sale, pay such compensation or make such a distribution. The Company
is under no obligation to file a post-effective amendment to the Registration
Statement of which this Prospectus is a part under such circumstances.

THE SECURITIES OFFERED HEREBY INVOLVE A
HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 AND "DILUTION."

----------

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

<PAGE>

- -----------------------------------------------------------------
| | Price | | Proceeds |
| | to | Underwriting | to |
| | Public | Discount (1) | Company (2)|
- -----------------------------------------------------------------
|Per share | | | |
| of Common | | | |
| Stock........ | $ | $ | $ |
---- ------ ---------
- -----------------------------------------------------------------
|Per Class A | | | |
| Redeemable | | | |
| Warrant...... | $ | $ | $ |
---- ------ ---------
- -----------------------------------------------------------------
|Per Class B | | | |
| Redeemable | | | |
| Warrant...... | $ | $ | $ |
---- ------ ---------
- -----------------------------------------------------------------
|Total (3)..... |$ |$ |$ |
-------- ---------- -----------
| | | | |
- -----------------------------------------------------------------

- ----------

(1) Does not include additional compensation to the Underwriter in the form of
a non-accountable expense allowance equal to 3% of the gross proceeds of
this offering (the "Offering"). For indemnification arrangements with, and
additional compensation payable to, the Underwriter, see "Underwriting."

(2) Before deducting estimated expenses of the Offering payable by the Company
of $500,000, including the non-accountable expense allowance payable to the
Underwriter.

(3) The Company has granted to the Underwriter a 45 day option, to purchase up
to an additional 150,000 shares of Common Stock and/or 600,000 Class A
Redeemable Warrants and/or 600,000 Class B Redeemable Warrants on the same
terms and conditions as set forth above solely to cover over-allotments, if
any. If such over-allotment option is exercised in full, the total Price to
Public, Underwriting Discount and Proceeds to Company will be $ _________,
$ ________ and $ _________,respectively. See "Underwriting."

<PAGE>

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

The Securities are being offered by the Underwriter, subject to prior
sale when, as and if delivered to and accepted by the Underwriter, and subject
to the approval of certain legal matters by its counsel and certain other
conditions. The Underwriter reserves the right to withdraw, cancel or modify the
Offering and to reject any order in whole or in part. It is expected that the
delivery of the certificates representing the Securities and payment therefor
will be made at the offices of the Underwriter at 99 Wood Avenue South, Iselin,
New Jersey 08830, or its counsel on or about , 1996.

A.S. GOLDMEN & CO., INC.

The date of this Prospectus is _________________, 1996

<PAGE>

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

The Company intends to furnish its stockholders with annual reports
containing audited financial statements after the close of each fiscal year.

IN CONNECTION WITH THE OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK AND/OR THE REDEEMABLE WARRANTS OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.

<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified by, and must be read in conjunction
with, the more detailed information and financial statements set forth elsewhere
in this Prospectus. Unless otherwise indicated herein, all share and per share
information does not give effect to (i) the exercise of the Underwriter's
over-allotment option to purchase up to an additional 150,000 shares of Common
Stock and/or 600,000 Class A Redeemable Warrants and/or 600,000 Class B
Redeemable Warrants and the issuance of up to 1,200,000 shares of Common Stock
upon exercise of the Redeemable Warrants included in the Underwriter's
over-allotment option; (ii) the issuance of 12,000,000 shares of Common Stock
issuable upon exercise of the Redeemable Warrants, including the Redeemable
Warrants offered by the Bridge Selling Security Holders; (iii) the issuance upon
exercise of warrants granted to the Underwriter (the "Underwriter's Warrants")
of up to 100,000 shares of Common Stock, 400,000 Class A Redeemable Warrants,
400,000 Class B Redeemable Warrants and the underlying 800,000 shares of Common
Stock issuable upon exercise of the Redeemable Warrants contained in the
Underwriter's Warrants; and (iv) 500,000 shares of Common Stock reserved for
issuance upon the exercise of stock options that may be granted pursuant to the
Company's stock option plan. See "Management - Stock Option Plan" and
"Underwriting." Unless otherwise indicated herein, all share and per share
information gives effect to (i) a 1-for-4 stock split effected in May 1995 and
(ii) a 22,100-for-1 stock split effected in October 1995.

THE COMPANY

Imatec, Ltd. (the "Company") was formed in 1988 to develop, design,
market and license its Imatec 20/20 system ("Imatec 20/20(TM)"), which enhances
image reproduction by reducing distortion that normally occurs in the imaging
process. Based on the results of extensive testing by the Company, the Imatec
20/20(TM) system is capable of improving the quality of film reproduction of
images taken by medical imaging devices such as Magnetic Resonance Imaging
machines ("MRI"), Computer Topography machines ("CT") and Ultrasound machines.
In addition, the Imatec 20/20(TM) system achieves this goal regardless of the
type of the medical imaging film used and as a consequence, may result in cost
savings to the user. The Company also recently developed the Imatec 20/20(TM)
system to improve the quality of images in the medical imaging field of
teleradiology; which is the viewing of the same image on different monitor
screens in separate locations. The Company believes that, in addition to the
medical imaging field, the Imatec 20/20(TM) system can be used in markets such
as graphic arts, computers and video display.

<PAGE>

distortion. Current imaging systems create reproductions that have distortions
and are compensated for by subjective adjustments during the reproduction
process. Aspects of the Imatec 20/20(TM) system are set forth in three United
States patents (the "Patents") which have been licensed by the Company from Dr.
Hanoch Shalit, the Company's President and Chief Executive Officer. The Company
has designed, built and tested a prototype of a device incorporating the Imatec
20/20(TM) system that can be used with MRI, CT and Ultrasound machines.

In 1995, U.S. sales of MRI, CT and Ultrasound machines were
approximately $1.59 billion, representing sales of approximately 9,775 units. In
addition, approximately $238 million was spent in 1994 in connection with
upgrading and improving these medical imaging devices either to extend the life
of the machines or to add on technical improvements. At the end of 1995, there
were approximately 96,680 MRI, CT and Ultrasound machines operating in the
United States. Based on industry statistics, the U.S. market for medical imaging
devices represents approximately 50% of the worldwide market. See "Business -
The Company - The Medical Imaging Market."

The Company is a development stage company and was incorporated in the
State of New York on November 17, 1988 and reincorporated in the State of
Delaware on October 20, 1995. The Company maintains its offices at 150 E. 58th
Street, New York, NY 10155 and its telephone number is (212) 826-0440.

<PAGE>

THE OFFERING

Securities Offered...................... 1,000,000 shares of Common Stock,
4,000,000 Class A Redeemable
Warrants and 4,000,000 Class B
Redeemable Warrants. See
"Description of Securities."

Securities Registered for
the Selling Security Holders............ An aggregate of 551,785 shares of
Common Stock and 4,000,000 Class A
Redeemable Warrants are being
registered hereby and may be sold by
the Bridge Selling Security Holders.
An additional 150,000 shares of
Common Stock are being registered
and may be sold by the Founding
Selling Security Holders. None of
the Selling Security Holders'
Securities are being underwritten in
the Offering and the Company will
not receive any proceeds from their
sale although it will receive the
exercise price of $6.50 per share in
the event that any Class A
Redeemable Warrants are exercised.
See "Selling Security Holders".

Terms of Redeemable
Warrants................................ Each Class A Redeemable Warrant and
Class B Redeemable Warrant entitles
the holder thereof to purchase one
share of Common Stock at an exercise
price of $6.50 and $5.50 per share,
respectively, at any time commencing
on the date of this Prospectus until
________, 1998 [24 months after the
date of this Prospectus] and
________, 2001 [60 months from the
date of this Prospectus],
respectively, subject to adjustment
in certain circumstances. Each Class
A Redeemable Warrant and each Class B
Redeemable Warrant, is redeemable by
the Company commencing ________, 1997
[9 months after the date of this
Prospectus] and _______, 1997 [12
months after the date of this
Prospectus] respectively. The Class A
Redeemable Warrants and the Class B
Redeemable Warrants are redeemable by
the Company with the consent of the

<PAGE>

Underwriter and will be subject to
redemption at a redemption price of
$.10 per Class A Redeemable Warrant
and per Class B Redeemable Warrant
provided that the average closing bid
price of the Common Stock as reported
by Nasdaq equals or exceeds $7.50 and
$9.00 per share, respectively, for
any 20 trading days within a period
of 30 consecutive trading days ending
on the fifth trading day prior to the
date of the notice of redemption. See
"Description of Securities."

Common Stock Outstanding:
Prior to the Offering................ 2,761,785 shares
After the Offering................... 3,761,785 shares

Use of Proceeds........................ Repayment of indebtedness, marketing
and licensing, research and
development and working capital
purposes. See "Use of Proceeds."

Risk Factors........................... The Securities offered hereby involve
a high degree of risk and immediate
and substantial dilution. See "Risk
Factors" and "Dilution."

Proposed Nasdaq SmallCap
Symbols (1):
Common Stock......... IMEC
Class A Redeemable
Warrants............ IMECW
Class B Redeemable
Warrants............ IMECZ

- ----------
(1) Application has been made for quotation of the Common Stock and the
Redeemable Warrants on Nasdaq. See "Risk Factors - No Assurance of Public
Trading Market or Continued Nasdaq SmallCap Market Inclusion, Risk of
Low-Priced Securities."

<PAGE>

RISK FACTORS

Development Stage Company; Lack of Revenues; Accumulated Deficit;
Continued Losses for the Foreseeable Future; No Assurance of Profitability;
Auditor's Report with Going Concern Disclosure. The Company is in the
development stage and, to date, has only earned nominal revenues from
operations. Since inception in November 1988, the Company's principal activities
have been (i) research and development related to the development of the Imatec
20/20(TM) system, (ii) testing of the Imatec 20/20(TM) system, and (iii) the
filing of, and other activities related to obtaining, the Patents. Primarily as
a result of expenses incurred in connection with research and development and
related activities, as of December 31, 1995 the Company had an accumulated
deficit of $1,268,682. The Company has continued to incur losses since December
31, 1995. Potential investors should be aware of the problems, delays, expenses,
difficulties and risks encountered by a company in the development stage, many
of which may be beyond the Company's control. Such risks may include, but are
not limited to, unanticipated problems relating to developing, testing and
marketing new technologies. In addition, the Company will also face a number of
risks specific to entities attempting to introduce new technologies, including,
but not limited to, the existence or development of competing technologies, the
existence or development of new technologies that are incompatible with the
Imatec 20/20(TM) system, the inability of the Company to respond in a timely
manner to changing technologies, the potential obsolescence of the Imatec
20/20(TM) system as a result of changing technologies, and the failure of a
market to develop for the Imatec 20/20(TM) system. The Company expects to
continue to incur losses until such time, if ever, as the Company's revenues
exceed its expenses. There can be no assurance that the application of the
Imatec 20/20(TM) system to the medical imaging field, or to any other fields,
will be successful, or that the Company will be able to successfully license or
otherwise exploit the Imatec 20/20(TM) system. There can be no assurance that
the Company will ever achieve profitability. The Company's independent auditor's
report on the Company's financial statements includes an explanatory paragraph
that states that the Company has suffered recurring losses from operations which
raises substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty. See "Business," "Plan of
Operations" and Financial Statements.

Significant Capital Requirements; Dependence on Proceeds of this
Offering; Possible Need for Additional Financing. The Company's cash
requirements are significant. The Company is dependent on the net proceeds of
this Offering to repay $4,000,000 of indebtedness plus interest that it incurred
in an interim financing that was completed in April, 1996 and to implement its
current business plan. The Company intends to substantially increase its level
of business activities following the consummation of this Offering and, in

<PAGE>

connection therewith, will incur significant expenses without the guarantee of
any revenues. Although the Company anticipates that the net proceeds of the
Offering will be sufficient to finance its activities for at least the 12 months
following the date of this Prospectus, there is no assurance that the Company
will not require additional financing and if required, that such additional
financing will be available to the Company on acceptable terms, or at all.
Factors that may lead to a need for additional financing include delays in
market acceptance, changes in technologies or the need for the Company to
directly engage in the manufacture, sales, distribution and service of products
based on the Imatec 20/20(TM) system. There can be no assurance that the Company
will not suffer from these or any other problems, which may have a material
adverse effect on the Company. See "Plan of Operations" and "Use of Proceeds."

Uncertainty of Market Acceptance. Although the Company has successfully
tested the Imatec 20/20(TM) system with respect to the medical imaging field,
the Company is unknown in the marketplace and there can be no assurance that a
market for products that incorporate the Imatec 20/20(TM) system will develop.
Consequently, although the Company will seek to license the Imatec 20/20(TM)
system to third parties in the medical imaging field, there can be no assurance
that the Company will be successful in generating any licensing income. In
addition, part of the Company's strategy is to continue its research and
development activities with respect to the use of the Imatec 20/20(TM) system
for other applications in the medical imaging field and in other imaging fields,
such as graphic arts, computers and video display. There can be no assurance,
however, that the Company will be able to apply the Imatec 20/20(TM) system to
any other markets or that a market will develop for any products incorporating
the Imatec 20/20(TM) system in the medical imaging field or any other field, or
that any product incorporating the Imatec 20/20(TM) system will ever receive
acceptance from any intended users.

Technological Change and Competition. The image enhancement field is
subject to rapid and significant technological change that may render the Imatec
20/20(TM) system obsolete or products that incorporate the Imatec 20/20(TM)
system obsolete or incompatible with the machines they are intended to
complement. In addition, such rapid changes may impose additional, unforeseen
costs on the Company in that the Company may be required to modify its Imatec
20/20(TM) system to adapt to such changes. There can be no assurance that the
Company will be able to successfully modify or upgrade its Imatec 20/20(TM)
system as may be necessary in a timely manner, or at all.

While the Company is not aware of any entities that build image
enhancement devices that compete with the Imatec 20/20(TM) system, there are a
number of entities that are engaged in the research and development of image
enhancement products. These entities may in the future develop technologies or

<PAGE>

products that compete with the Imatec 20/20(TM) system. Potential competitors of
the Company include independent companies, universities and public and private
research organizations, most of which are well established and have
substantially greater marketing, financial, technological and other resources
than the Company. In addition, the medical imaging field in particular is
dominated by large, well established corporations. There can be no assurance
that competitors will not succeed in securing patents and/or developing
technologies or products that are more effective than the Imatec 20/20(TM)
system, as a result of which the Imatec 20/20(TM) system may become obsolete or
non-competitive.

Dependence on Third Parties; No Manufacturing Capabilities; Limited
Marketing Capabilities. The Company does not presently intend to engage in the
manufacturing process or the accompanying sales, distribution and technical
services support functions. The Company will be dependent on licensees of its
Imatec 20/20(TM) system and other third parties with which it will attempt to
establish commercial relationships in connection with the manufacturing,
distribution and service of products that incorporate its Imatec 20/20(TM)
system. The manufacturing, sales, distribution and service of products are
capital and labor intensive, and beyond the Company's current capabilities.
Similarly, the Company has, and will continue to have for the foreseeable
future, limited marketing and licensing capabilities. The Company's marketing
and licensing strategy will rely on unaffiliated licensees and other third
parties to successfully manufacture and effect sales of products which
incorporate the Imatec 20/20(TM) system as well as provide the necessary
service, repair and technical support. There can be no assurance that the
Company will be able to rely on unaffiliated licensees and third parties to
successfully effect the manufacture, sales and service of products incorporating
the Imatec 20/20(TM) system, or that the Company will not have to make
significant additional capital expenditures in the event that it cannot rely on
such licensees and third parties. Moreover, any such additional capital
expenditures are beyond the Company's current means, and may also include the
employment of additional personnel, in order to successfully effect the
manufacture, sales, distribution or service of products incorporating the Imatec
20/20(TM) system.

Intellectual Property Rights. The Company is the exclusive licensee of
the Patents. The owner and licensor of the Patents is Dr. Hanoch Shalit, the
Company's President and Chief Executive Officer. Notwithstanding the Company's
exclusive license with respect to the Patents, there can be no assurance that
others will not independently develop similar technologies, or design around the
Patents. If others are able to design around the Patents, the Company's business
will be materially adversely affected. Further, the Company will have very
limited, if any, protection of its proprietary rights in those jurisdictions
where it has not effected any patent filings or where it fails to obtain patent
protection despite filing therefor.

<PAGE>

Even though the Patents have been issued by the United States Patent
and Trademark Office, challenges may be instituted by third parties as to the
validity and enforceability of the Patents. There also can be no assurance that
third parties will not be able to successfully assert a claim with regard to the
Patents and/or the Imatec 20/20(TM) system under their own intellectual property
rights. The Company is not presently aware of any challenges to the Patents.
Similarly, the Company may also have to institute legal actions in order to
protect infringement of its Patents by third parties. The Company is not
presently aware of any such infringements. The costs of litigation or settlement
in connection with the defense of any third party challenges relative to the
validity and enforceability of its Patents and/or to prevent any infringement of
the Patents by third parties, which pursuant to the License Agreement are the
Company's responsibilities, could be substantial. Moreover, in the event that
the Company was unsuccessful in any such litigation, the Company could be
materially adversely affected.

In certain instances, for business reasons, the Company may choose not
to seek patent protection for all of its innovations. In such instances, the
Company may rely on trade secrets and know-how to protect its innovations. There
can be no assurance that protectable trade secrets or know-how will be
established or, if established, that they will remain protected, or that others
will not independently and lawfully develop similar or superior innovations. The
Company requires all employees to sign non-disclosure, non-competition,
confidentiality and invention assignment agreements. Similarly, all directors,
consultants and other parties to whom confidential information has been or will
be disclosed contain confidentiality provisions and covenants not to compete.
There can be no assurance, however, that any such confidentiality or non-compete
provisions will be complied with or will be enforceable. See "Intellectual
Property" and "Management - Executive Compensation."

Broad Discretion in Use of Proceeds; Benefit to Insiders. Although the
Company intends to apply the net proceeds from the sale of the Common Stock and
Redeemable Warrants in the manner described under "Use of Proceeds," it has
broad discretion within such proposed uses as to the precise allocation of the
net proceeds, the timing of expenditures and all other aspects of the use
thereof. Further, approximately 28% of the net proceeds of this Offering are
allocated to working capital, which is a general category that gives management
a significant degree of latitude as to the expenditure thereof. See "Use of
Proceeds."

Dependence Upon Key Personnel. The Company's success depends upon the
continued involvement of Dr. Hanoch Shalit, the Company's President and Chief
Executive Officer. The loss or unavailability of Dr. Shalit could materially

<PAGE>

adversely affect the Company. On July 1, 1995, the Company entered into a
five-year employment agreement with Dr. Shalit. The Company is the sole
beneficiary of a "key man" life insurance policy on the life of Dr. Shalit in
the principal amount of $1,000,000. See "Management" and "Certain Transactions."

Limited Experience of Management; Need for Additional Personnel. Since
its inception in 1988, the Company has primarily engaged in research and
development activities and the manufacture of research and production
prototypes. Dr. Hanoch Shalit, the Company's President and Chief Executive
Officer does not have any experience in operating a business engaged in the
licensing of intellectual property. The Company's ability to implement its
business plan, the essential elements of which are licensing, marketing and
research and development activities, will depend upon the Company's ability to
hire and retain senior level, highly-skilled personnel experienced in the
operation of certain aspects of the Company's business, such as accounting,
management, licensing and marketing. Competition for such personnel is intense
and there can be no assurance that the Company will be successful in attracting
and retaining personnel. The Company's failure to attract and retain such
additional personnel would have a material adverse effect on the Company. See
"Management."

No Product Liability Insurance. The Company's business could expose the
Company to product liability claims. The Company currently has no product
liability insurance, although it intends to obtain such insurance before any of
its products are sold commercially. There can be no assurance that the Company
will be able to obtain such insurance on acceptable terms or that such
insurance, if obtained, will provide adequate coverage against potential
liabilities.

Control by Officers and Directors. Upon completion of the Offering, the
Company's current officers and directors will own approximately 26.4% of the
issued and outstanding shares of Common Stock. Accordingly, although not
representing a majority of the Company's voting securities, the current
management of the Company will nevertheless be able to significantly influence
the election of the Company's directors and generally direct the affairs of the
Company. See "Management," "Principal Stockholders" and "Description of
Securities-Common Stock."

Immediate Substantial Dilution. Upon completion of the Offering,
purchasers of the Common Stock offered hereby will experience immediate and
substantial dilution of the net tangible book value of their investment in the
Company of $3.02 per share, or approximately 60%. See "Dilution."

No Dividends. The Company has never paid any dividends with respect to
its Common Stock and does not anticipate paying dividends on its Common Stock in

<PAGE>

the foreseeable future. Any earnings which the Company may realize in the
foreseeable future will be retained to finance the growth of the Company. See
"Description of Securities" and "Dividend Policy."

Anti-Takeover Provisions; Issuance of Preferred Stock. The Company's
Board of Directors has the authority to issue up to 2,000,000 shares of
preferred stock in one or more series and to determine the number of shares in
each series, as well as the designations, preferences, rights and qualifications
or restrictions of those shares without any further vote or action by the
stockholders. The rights of the holders of Common Stock will be subject to, and
may be adversely affected by, the rights of the holders of any preferred stock
that may be issued in the future. The issuance of preferred stock could have the
effect of making it more difficult for a third party to acquire a majority of
the outstanding voting stock of the Company. The Company has no present plans to
issue shares of preferred stock. In addition, the Company is subject to the
anti-takeover provisions of Section 203 of the Delaware General Corporation Law.
In general, this statute prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. See "Description of Securities - Preferred Stock."

Speculative Nature of Redeemable Warrants; Adverse Effect of Possible
Redemption of Redeemable Warrants. The Redeemable Warrants do not confer any
rights of Common Stock ownership on its holders, such as voting rights or the
right to receive dividends, but rather, merely represent the right to acquire
shares of Common Stock at a fixed price for a limited period of time.
Specifically, commencing on the date of this Prospectus, holders of the Class A
Redeemable Warrants and Class B Redeemable Warrants may exercise their right to
acquire the Common Stock and pay an exercise price of $5.50 or $6.50 per share,
respectively, subject to adjustment, prior to ___________, 1998 [24 months after
the date of this Prospectus] or ________, 2001 [60 months after the date of this
Prospectus], respectively, after which date any unexercised Redeemable Warrants
will expire and have no further value. Moreover, following this Offering, the
market value of the Redeemable Warrants is uncertain and there can be no
assurance that the market value of the Redeemable Warrants will equal or exceed
their initial public offering prices. There can be no assurance that the market
price of the Common Stock will ever equal or exceed the exercise price of the
Redeemable Warrants, and consequently, whether it will ever be profitable for
the holders of the Redeemable Warrants to exercise their Redeemable Warrants.

In addition, the Class A Redeemable Warrants and the Class B Redeemable
Warrants are subject to redemption by the Company, subject to the approval of

<PAGE>

the Underwriter, commencing _____, 1997 [nine (9) months after the date of this
Prospectus] and ______, 1997 [twelve (12) months after the date of this
Prospectus], respectively, on 30 days' prior written notice, at a price of $.10
per Redeemable Warrant if the average closing bid price for the Common Stock
equals or exceeds $7.50 and $9.00 per share, respectively, for any 20 trading
days within a period of 30 consecutive trading days ending on the fifth trading
day prior to the date of the notice of redemption. In the event that the
Redeemable Warrants are redeemed by the Company, holders of the Redeemable
Warrants will lose their right to exercise their Redeemable Warrants after the
30 day notice period. Upon receipt of notice of redemption, holders of
Redeemable Warrants would be required to: (i) exercise the Redeemable Warrants
and pay the exercise price at a time when it may be disadvantageous for them to
do so; (ii) sell the Redeemable Warrants at the then market price, if any, when
they might otherwise wish to hold the Redeemable Warrants; or (iii) accept the
redemption price, which is likely to be substantially less than the market value
of the Redeemable Warrants at the time of redemption. In the event that holders
of the Redeemable Warrants elect not to exercise their Redeemable Warrants upon
notice of redemption, the unexercised Redeemable Warrants will be redeemed prior
to exercise, and the holders thereof will lose the benefit of the appreciated
market price of the Redeemable Warrants, if any, and/or the difference between
the market price of the underlying Common Stock as of such date and the exercise
price of such Warrants, as well as any possible future price appreciation in the
Common Stock. See "Description of Securities--Redeemable Warrants."

Current Prospectus and State Registration Required to Exercise
Warrants. The Redeemable Warrants are not exercisable unless, at the time of
exercise, the Company has a current prospectus covering the shares of Common
Stock issuable upon exercise of the Redeemable Warrants and such shares have
been registered, qualified or deemed to be exempt under the securities or "blue
sky" laws of the state or residence of the exercising holder of the Redeemable
Warrants. In addition, in the event that any holder of the Redeemable Warrants
attempts to exercise any Redeemable Warrants at any time after nine months from
the date of this Prospectus, the Company will be required to file a
post-effective amendment to the Registration Statement of which this Prospectus
is a part and deliver a current prospectus before the Redeemable Warrants may be
exercised. Although the Company has undertaken to use its best efforts to have
all of the shares of Common Stock issuable upon exercise of the Redeemable
Warrants registered or qualified on or before the exercise date and to maintain
a current prospectus relating thereto until the expiration of the Redeemable
Warrants, there is no assurance that it will be able to do so. The value of the
Redeemable Warrants may be greatly reduced if a current prospectus covering the
Common Stock issuable upon the exercise of the Redeemable Warrants is not kept
effective or if such Common Stock is not qualified or exempt from qualification

<PAGE>

in the States in which the holders of the Redeemable Warrants then reside. The
Redeemable Warrants will be separately tradeable immediately upon issuance and
may be purchased separately from the Common Stock. Although the Redeemable
Warrants will not knowingly be sold to purchasers in jurisdictions in which the
Redeemable Warrants are not registered or otherwise qualified for sale,
investors may purchase the Redeemable Warrants in the secondary market or may
move to jurisdictions in which the shares underlying the Redeemable Warrants are
not registered or qualified during the period that the Redeemable Warrants are
exercisable. In such event, the Company will be unable to issue shares to those
persons desiring to exercise their Redeemable Warrants unless and until the
shares are qualified for sale in jurisdictions in which such purchasers reside,
or an exemption from such qualification exists in such jurisdictions, and
holders of the Redeemable Warrants would have no choice but to attempt to sell
the Redeemable Warrants in a jurisdiction where such sale is permissible or
allow them to expire unexercised. See "Description of Securities--Redeemable
Warrants."

Shares Eligible for Future Sale. Upon consummation of the Offering,
there will be 3,761,785 shares of Common Stock outstanding (3,911,785 if the
Underwriter's over-allotment option is exercised in full). Prior to the Offering
there were 2,761,785 shares of Common Stock issued and outstanding. Of such
shares, 551,785 are being registered on behalf of the Bridge Selling Security
Holders and 2,210,000 shares of Common Stock are being registered on behalf of
the Founding Selling Security Holders pursuant to the registration statement of
which this Prospectus is a part. Except with respect to 150,000 shares of Common
Stock being registered on behalf of certain of the Founding Selling Security
Holders, including 50,000 shares for Dr. Hanoch Shalit, the Chief Executive
Officer and President of the Company, all of the Selling Security Holders have
agreed not to directly or indirectly offer, sell, transfer, or otherwise
encumber or dispose of any of the Company's securities, whether or not presently
owned, for a period of 18 months after the date of this Prospectus unless
otherwise permitted by the Underwriter. Possible or actual sales of the
Company's outstanding Common Stock by certain of the present stockholders may,
in the future, have a depressive effect on the price of the Common Stock should
a public market develop for such shares. See "Shares Available for Future Sale,"
"Management--Stock Option Plan," "Principal Stockholders," "Underwriting" and
"Certain Transactions--Escrow Agreement."

The 4,000,000 Class A Redeemable Warrants being offered by the Company
and the 4,000,000 Class A Redeemable Warrants being registered for the account
of the Bridge Selling Security Holders entitle the holders thereof to purchase
up to an aggregate of 8,000,000 shares of Common Stock any time during the
period commencing on the date of this Prospectus and expiring 24 months from the
date of this Prospectus. The 4,000,000 Class B Redeemable Warrants being offered

<PAGE>

by the Company entitle the holders thereof to purchase up to an aggregate of
4,000,000 shares of Common Stock at any time during the period commencing on the
date of this Prospectus and expiring 60 months from the date of this Prospectus.
Sales of either the Redeemable Warrants or the underlying shares of Common
Stock, or even the existence of the Redeemable Warrants, may depress the price
of the Common Stock or the Redeemable Warrants in any markets that may develop
for such Securities. See "Selling Security Holders," "Plan of
Operations--Liquidity and Capital Resources," "Shares Eligible for Future Sale"
and "Underwriting."

No Assurance of Public Trading Market or Continued Nasdaq Inclusion;
Risk of Low-Priced Securities. Prior to this Offering, there has been no public
market for the Securities, and there can be no assurance that an active public
market for the Common Stock or Redeemable Warrants will develop after the
completion of this Offering, or if developed, be sustained. To qualify for
initial listing on Nasdaq, the Company must have, among other criteria,
$4,000,000 in total assets and $2,000,000 in total capital and surplus, at least
300 stockholders, and a minimum bid price of $3.00. In order to qualify for
continued listing on Nasdaq, a company, among other things, must have $2,000,000
in total assets, $1,000,000 in capital and surplus and a minimum bid price of
$1,00 per share. If the Company is unable to satisfy the maintenance
requirements for quotation on Nasdaq, of which there can be no assurance, it is
anticipated that the Securities would be quoted in the over-the-counter market
National Quotation Bureau ("NQB") "pink sheets" or on the NASD OTC Electronic
Bulletin Board. As a result, an investor may find it more difficult to dispose
of, or obtain, accurate quotations as to the market price of the Securities,
which may materially adversely affect the liquidity of the market for the
Securities. In addition, if the Securities are delisted from Nasdaq they might
be subject to the low-priced security or so-called "penny stock" rules that
impose additional sales practice requirements on broker-dealers who sell such
securities. For any transaction involving a penny stock the rules require, among
other things, the delivery, prior to the transaction, of a disclosure schedule
required by the Securities and Exchange Commission (the "Commission") relating
to the penny stock market. The broker-dealer also must disclose the commission
payable to both the broker-dealer and the registered representative and current
quotations for the securities. Finally, monthly statements must be sent
disclosing recent price information for the penny stocks held in the customer's
account. It is presently expected that the Underwriter will be the principal
market maker in the Securities. Such market making activity may be discontinued
at any time. The prices and liquidity of the Securities may be materially
adversely affected if such market making activity were discontinued for any
reason.

Although the Company believes that the Securities will not be defined
as a penny stock due to their anticipated continued listing on Nasdaq, in the

<PAGE>

event the Securities subsequently become characterized as a penny stock, the
market for and liquidity of the Securities could be severely affected. In such
an event, the regulations relating to penny stocks could limit the ability of
broker-dealers to sell the Securities and, thus, the ability of purchasers in
the Offering to sell their Securities in the secondary market.

<PAGE>

DILUTION

After giving effect to the Second Closing of the Company's Bridge
Financing (as such terms are defined in "Plan of Operations--Liquidity and
Capital Resources"), the Company had a pro forma negative net tangible book
value of $190,797 or ($.07) per share as of December 31, 1995. Net tangible book
value per share is determined by dividing the net tangible book value of the
Company (total tangible assets less total liabilities) by the number of
outstanding shares of Common Stock. After giving effect to the receipt of the
net proceeds from the sale of the Securities offered hereby (after deducting the
underwriting discount and estimated offering expenses) and the initial
application of the net proceeds therefrom, the pro forma net tangible book value
of the Company at December 31, 1995 would have been $7,440,618 or $1.98 per
share, representing an immediate dilution of $3.02 (or approximately 60%) per
share to the public investors as illustrated by the following table:

Assumed initial public offering price per
share of Common Stock.................. $5.00

Pro forma negative net tangible book
value per share before Offering........ ($ .07)

Increase in net tangible book
value per share of Common Stock
attributable to public investors....... 2.05
-----

Pro forma net tangible book value
per share after the Offering........... 1.98
-----

Dilution per share to public
investors(1)........................... $3.02
====

- ----------
(1) In the event that the Underwriter exercises its over-allotment option in
full, the pro forma net tangible book value after this Offering would be
approximately $2.26 per share, which would result in immediate dilution in
net tangible book value to public investors of approximately $2.74 per
share.

The following table sets forth, as of the date of this Prospectus, the
number of shares of Common Stock purchased, the percentage of Common Stock
purchased, the total consideration paid, the percentage of total consideration
paid, and the average price per share paid, by the existing stockholders of the
Company and the investors in the Offering.

<PAGE>

Number of Percent Percent of
Shares of Total Total Consid- Total Consid- Average Price
Purchased Shares eration Paid eration Paid Per Share
--------- ------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
Present
Stockholders...... 2,761,785 73% 26% $1,719,104 $ .62

Public
Investors......... 1,000,000 27% 74% 5,000,000(1) $5.00
--------- --- --- ---------

Total............. 3,761,785 100% 100% $6,719,104
========= ==== === ==========
</TABLE>
- ----------
(1) Allocates no value to the Redeemable Warrants offered hereby.

The foregoing table assumes no exercise of the Redeemable Warrants or
any stock options, of which none are currently issued. To the extent that any
options issued by the Company in the future or the Redeemable Warrants are
exercised, there may be further dilution to the new investors in this Offering.

<PAGE>

USE OF PROCEEDS

The estimated net proceeds to the Company from the sale of the
Securities offered hereby, after deducting the underwriting discount and
estimated offering expenses, will be approximately $8,152,000, (or approximately
$9,432,000 if the Underwriter's over-allotment option is exercised in full). The
Company intends to allocate the net proceeds of the Offering approximately as
follows:

Approximate Approximate
Amount Percentage
------ ----------

Repayment of indebtedness(1) $4,141,585 50.8%

Research and development(2) 1,000,000 12.3%

Marketing and licensing(3) 750,000 9.2%

Working capital 2,260,415 27.7%
--------- -----

Total $8,152,000 100.0%
========== =====
- ----------
(1) Reflects outstanding principal of $4,000,000 and accrued interest thereon
at the rate of 10% per annum of approximately $141,585 through May 30,
1996. The Company used the principal amount (i) to make a one-time payment
of $350,000 to the Company's President and Chief Executive Officer, Dr.
Hanoch Shalit, pursuant to the License Agreement, (ii) for additional
research and development activities with respect to the Imatec
20/20(TM)system, and (iii) for marketing and working capital purposes.

(2) Consists of expenditures for equipment, materials and outside consultants
and in connection with research and development activities with respect to
the use of the Imatec 20/20(TM)system for other applications in the medical
imaging field and in other imaging fields such as the graphic arts,
computer and video display. In addition, the Company may also from time to
time purchase technologies related to or which may enhance the Imatec
20/20(TM)system, although the Company has no understandings or arrangements
to do so at this time

(3) Consists of expenditures in connection with participating in trade shows
(which includes constructing a booth for, and renting space at, trade
shows, preparation of special marketing materials, and travel to and
attendance at trade shows), preparation of marketing materials, hiring of
sales and marketing personnel and consultants, and general marketing and
licensing activities.

<PAGE>

The initial application for the use of proceeds represents management's
estimates based upon current business and economic conditions. Although the
Company does not contemplate material changes in the proposed use of proceeds,
to the extent the Company finds that adjustment is required by reason of
existing business conditions, the amounts shown may be adjusted among the uses
indicated above.

The Company believes that the net proceeds of this Offering will be
sufficient for the Company to sustain its operations and implement its business
plan for at least twelve (12) months after the date of this Prospectus, although
there can be no assurance that such net proceeds will be sufficient to finance
the Company's operations for such period.

To the extent that the Company's expenditures are less than projected
and/or the net proceeds of this Offering increase as a result of the exercise by
the Underwriter of its over-allotment option, the resulting balance will be
retained and used for general working capital purposes. The net proceeds of this
Offering that are not expended immediately shall be deposited in interest
bearing accounts, or invested in government obligations, certificates of deposit
or similar short-term, low risk investments.

<PAGE>

DIVIDEND POLICY

The Company has never paid cash or other dividends and does not expect
to pay any cash or other dividends in the foreseeable future with respect to its
Common Stock. The Company's future dividend policy will depend upon the
Company's earnings, capital requirements, financial condition and other factors
considered relevant by the Company's Board of Directors. The Company presently
intends to retain any earnings which the Company may realize in the foreseeable
future to finance the growth of the Company.

<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company (i) at
December 31, 1995, (ii) on a pro forma basis to give effect to the Second
Closing of the Bridge Financing on April 12, 1996, and (iii) on a pro forma as
adjusted basis to give effect to the sale of the Common Stock, Class A
Redeemable Warrants and Class B Redeemable Warrants in this Offering at assumed
initial public offering prices of $5.00, $.25 and $1.00, respectively, and the
initial application of the net proceeds therefrom.
<TABLE>
<CAPTION>

December 31, 1995
-----------------

Pro Forma
Actual Pro Forma As Adjusted
--------- ----------- -------------
<S> <C> <C> <C>
Current Liabilities $ 4,012,735 $ 4,012,735 $ 4,012,735

Long term notes payable 1,460,763(1) 2,931,375(2) 0
---------- ---------- -----------

Total Liabilities 1,873,498 3,344,110 412,735
--------- --------- -----------

STOCKHOLDERS' (DEFICIT) EQUITY

Preferred Stock, par value
$.0001 per share,
2,000,000 shares
authorized, no shares
issued and outstanding 0 0 0

Common Stock, par value
$.0001, 20,000,000 shares
authorized, 2,472,091 shares
issued and outstanding
actual, 2,761,785 pro forma,
and 3,761,785 pro forma
as adjusted 247 276 376

Additional paid-in capital 1,038,920 1,537,537 10,237,437

Deficit accumulated during the
development stage (1,268,682) (1,268,682) ( 2,785,768)(3)
--------- --------- ----------

Total stockholders'
(deficit) equity ( 229,515) ( 269,131) 7,452,045
--------- --------- ----------

Total liabilities and
stockholders (deficit)
equity $ 1,643,983 $ 3,613,241 $ 7,864,780
========== ========== ===========
</TABLE>

<PAGE>

- ----------

(1) Net of $489,237 of unamortized original issue discount.

(2) Net of $1,068,625 of unamortized original issue discount.

(3) Includes non-recurring interest expense of $1,571,086 for the unamortized
original issue discount and deferred debt issuance costs upon repayment of
the Bridge Financing.

<PAGE>

SELECTED FINANCIAL DATA

The following selected financial data has been derived from the audited
financial statements of the Company which have been audited by Most Horowitz &
Company, LLP. In the opinion of the Company's management, all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly the
information set forth therein have been made. The selected financial data should
be read in conjunction with the Financial Statements and related notes thereto,
which are included elsewhere in this Prospectus.

November 17, 1988
(inception) to
December 31, 1995
Year Ended December 31 (Cumulative)
---------------------- -----------------
1994 1995
-------- ---------
Income $ 1,960 --- $ 133,973

Royalties --- $ 420,000 $ 420,000

Research and
development 17,881 --- 325,616

General and
administrative 99,243 164,028 598,959

Interest expense
(net) --- ($ 67,139) $ 58,080

Net loss ($115,164) ($651,167) ($1,268,682)

Net loss per
share $ (.05) $ (.29) $ (.57)

Weighted average 2,210,000 2,232,978 2,213,243
number of shares
outstanding

<PAGE>

December 31, 1995
-------------------------------------------------
Pro forma as
Balance Sheet Data: Actual Proforma (1) adjusted (2)
------ ------------ ------------
Working capital
(deficit) $ 978,983 $2,740,618 $7,440,618

Total assets $ 1,643,983 $3,613,241 $7,864,780

Total liabilities $ 1,873,498 $3,344,110 $ 412,735

Stockholders' equity ($ 229,515) $ 296,131 $7,452,045
(deficit)

- ----------
(1) Gives effect to the Second Closing of the Bridge Financing on April 12,
1996.

(2) As adjusted to give effect to the sale by the Company and issuance of the
Securities offered hereby assuming initial public offering prices of $5.00,
$.25 and $1.00, respectively, and the initial application of the net
proceeds therefrom. See "Use of Proceeds."

<PAGE>

PLAN OF OPERATIONS

The Company was organized on November 17, 1988 and is in the
development stage. To date, the Company's activities have primarily consisted of
research and development activities with respect to developing the Imatec
20/20(TM) system. During this time, the Company has received only minimal
revenues from limited non-recurring consulting activities. The Company believes
that the net proceeds of this Offering will be sufficient for the Company to (i)
engage in licensing the Imatec 20/20(TM) system to manufacturers of medical
imaging products such as scanners and cameras, (ii) engage in marketing
activities to facilitate the licensing of the Imatec 20/20(TM) system, (iii)
continue research and development activities with respect to use of the Imatec
20/20(TM) system for other applications in the medical imaging field and in
other imaging fields, such as graphic arts, computers and video display, and
(iv) otherwise conduct its operations for at least the twelve (12) month period
following the date of this Prospectus.

Liquidity and Capital Resources

The Company is in the development stage, and primarily as a consequence
of expenses incurred in connection with research and development activities, at
December 31, 1995 the Company had an accumulated stockholders' deficit of
$1,268,682. The Company has continued to incur losses since December 31, 1995.

To date, the Company has financed its operations principally from the
sale of securities and loans. In 1991, the Company issued an aggregate of 55,250
shares of Common Stock to an investor for aggregate gross proceeds of $500,000.
In 1994, the Company issued an aggregate of 12,615 shares of Common Stock to two
investors for aggregate gross proceeds of $114,224.

In the second and third quarters of 1995 the Company borrowed an
aggregate of $175,000 from five non-affiliated, accredited investors pursuant to
one (1) year promissory notes. All of these investors converted their respective
loans into Units in the Bridge Financing described immediately below.

On November 30, 1995, the Company effected the initial closing (the
"First Closing") of a private placement (the "Bridge Financing") pursuant to
which it sold an aggregate of 37 units (the "Units") to non-affiliated,
accredited investors, each Unit consisting of (i) a $50,000 10% promissory note
due the earlier of fifteen (15) months from the date of issuance and the
Company's receipt of gross proceeds of at least $8,000,000 from a public or
private sale of its securities (the "Note"), (ii) 6,897 shares of Common Stock,
and (iii) 50,000 warrants (the "Bridge Warrants") exercisable at $1.00 per
share. See "Description of Securities." The Company received gross proceeds from
the sale of the 37 Units in the First Closing of $1,850,000, pursuant to which
it issued an aggregate of 255,194 shares of Common Stock and 1,850,000 Bridge

<PAGE>

Warrants. On April 12, 1996 the Company effected a second closing of the Bridge
Financing (the "Second Closing") pursuant to which it received an additional
$2,150,000 in gross proceeds for which it issued an aggregate of 43 Units,
296,591 shares of Common Stock and 2,150,000 Bridge Warrants. The net proceeds
from the Bridge Financing were approximately $3,220,000 (after commissions and
expenses) and in connection therewith the Company issued an aggregate of 551,785
shares of Common Stock and 4,000,000 warrants. The Company issued an additional
25 shares of Common Stock in the Bridge Financing as a consequence of rounding
to the nearest whole share in connection with the purchase of fractional Units.

In connection with the issuance of Notes with a face amount of
$4,000,000, 551,785 shares of Common Stock, and 4,000,000 Bridge Warrants in the
Bridge Financing, the Company recorded an original issue discount of $489,237
based upon the allocating of the relative fair market value of the Notes and the
Common Stock on the date of issuance. No value was allocated to the Bridge
Warrants. The Company incurred approximately $650,000 of offering costs related
to the Bridge Financing, of which $474,319 was recorded as deferred debt
issuance costs with the remainder recorded as a reduction to the paid-in capital
of the Common Stock and Bridge Warrants issued therewith. The original issue
discount is to be amortized over the term of the Notes as interest expense. Upon
the closing of this Offering, all of the Notes will be repaid with a portion of
the net proceeds of this Offering at which time, assuming a May 31, 1996
closing, the Company will take a non-recurring charge to interest expense in an
amount equal to the then remaining unamortized portion of the original issue
discount and deferred debt issuance costs, of approximately $1,250,000. See "Use
of Proceeds."

Net Operating Loss Carryforwards

As of December 31, 1995, the Company had net operating loss
carryforwards under Section 172 of the Internal Revenue Code, as amended (the
"Code"), of approximately $900,000 for Federal income tax purposes which may be
used to offset future taxable income. The Federal income tax carryforward will
expire as follows: $130,000 in the year 2008; $75,000 in the year 2009; $94,000
in the year 2010; and $601,000 in the year 2011.

<PAGE>

BUSINESS

The Company

The Company was formed in 1988 to develop, design, market and license
its Imatec 20/20(TM) system, which enhances image reproduction by reducing
distortion that normally occurs in the imaging process. Based on the results of
extensive testing by the Company, the Imatec 20/20(TM) system is capable of
improving the quality of film reproduction of images taken by medical imaging
devices such as MRI, CT and Ultrasound machines. In addition, the Imatec
20/20(TM) system achieves this goal regardless of the type of the medical
imaging film used which may result in cost savings to the user. The Company also
developed the Imatec 20/20(TM) system to improve the quality of images in the
medical imaging field of teleradiology; which is the viewing of the same image
on different monitor screens in separate locations. The Company believes that,
in addition to the medical imaging field, the Imatec 20/20(TM) system can be
used in markets such as graphic arts, computers and video display.

The Imatec 20/20(TM) system is designed to measure the image
characteristics of an original image and compare it to its reproduction,
computing the existing distortion between the two images and correcting such
distortion. Current imaging systems create reproductions that have distortions
and are compensated for by subjective adjustments during the reproduction
process. Aspects of the Imatec 20/20(TM) system is set forth in three United
States patents which have been licensed by the Company from Dr. Hanoch Shalit,
the Company's President and Chief Executive Officer.

The Company has designed, built and tested a prototype of a device
incorporating the Imatec 20/20(TM) system which can be used with MRI, CT and
Ultrasound machines.

The Medical Imaging Market.

In 1995, U.S. sales of MRI, CT and Ultrasound machines were
approximately $1.59 billion, representing sales of approximately 9,775 units. In
addition, approximately $238 million was spent in 1994 in connection with the
upgrading and improving these medical imaging devices either to extend the life
of the machines or to add on technical improvements. At year end 1995, there
were approximately 3,680, 730 and 92,270 MRI, CT and Ultrasound machines,
respectively, operating in the United States. Based on industry statistics, the
U.S. market for medical imaging devices represents approximately 50% of the
worldwide market.

<PAGE>

The Imatec 20/20(TM) System.

The Imatec 20/20(TM) system is designed to improve a reproduced image
so that it more closely resembles the original image. Presently, the image
reproduction process is a manual, subjective process. The individual taking the
image adjusts the imaging taking device (i.e. the camera) by adjusting the light
intensity, exposure time, etc. The adjusting of these variables is based on the
operator's subjective perceptions. In the medical imaging process, however, a
number of variables, in addition to the subjective perceptions of the operator,
influence the fidelity of the final image as compared to the original image.
Such variables include lighting conditions, photographic materials used,
particular equipment characteristics, calibration, and equipment age. The Imatec
20/20(TM) system enables an objective rather than subjective method of image
reproduction that adjusts for these variables.

When used in connection with an MRI, CT or Ultrasound machine, the
Imatec 20/20(TM) system uses a photometer (an instrument that measures
properties relating to light, especially luminous intensity) to measure the
image and tone characteristics that appear on the screen of the medical imaging
device via a test pattern representing such image. Thereafter, a densitometer
(an instrument that measures the optical density of a film) measures the image
and tone characteristics of the same image as reproduced on film via a test
pattern that represents the image as it appears on the film. Thereafter, the
characteristic of the screen image and the film image are transferred to a
computer which calculates the distortion function between the two images and the
required correction function. This computed correction function is automatically
transferred to a digital signal processor system that modifies the film image
reproduction signal on a pixel-by-pixel basis to create an image reproduced on
the film that more closely resembles the image and tone characteristics as set
forth on the screen.

This so-called closed loop system, which measures and compares the
image and tone characteristics set forth on the screen and the image and tone
characteristics reproduced on the film, adjusting for those variables that
influence the reproduced image, can take one of two forms. The Imatec 20/20(TM)
system can be an add on to MRI, CT and Ultrasound machines. In such instances,
the operator of the medical images device will be required to make adjustments
each time a variable that influences the final picture is altered, such as a
change in lighting conditions or the changing of the film. Alternatively, the
Imatec 20/20(TM) system can also be incorporated inside MRI, CT and Ultrasound
machines, in which event the Imatec 20/20(TM) system can automatically adjust
for any change in these variables. The diagram below illustrates the position of
the Imatec 20/20(TM) system in the image reproduction system in those instances
where the Imatec 20/20(TM) system is an add-on to an existing medical imaging
device.

<PAGE>

[Diagram of Imatec 20/20(TM) system]

<PAGE>

Strategy

The Company's strategy is to (i) license the Imatec 20/20(TM) system to
manufacturers of medical imaging products such as scanners and cameras, (ii)
engage in marketing activities to facilitate the licensing of the Imatec
20/20(TM) system, and (ii) continue its research and development activities with
respect to the application of the Imatec 20/20(TM) system for additional uses in
the medical imaging field and for other imaging fields, such as graphic arts,
computers and video display. The precise scope and length of any license granted
by the Company will be dependent upon the overall nature of the license
agreement and the remuneration to be received by the Company. The Company will
simultaneously seek to license the Imatec 20/20(TM) system both as an add-on
device for new and existing MRI, CT and Ultrasound machines and as an
enhancement to be included inside new MRI, CT and Ultrasound machines. The
Company does not presently intend to manufacture, sell or distribute any
products incorporating the Imatec 20/20(TM) system, or provide technical service
in connection therewith. The Company will assist a licensee in preparing a
technical manual for any product that incorporates the Company's Imatec
20/20(TM) system, but will not engage in providing the actual technical
assistance to end-users of any such product. In the event that the Company is
unable to effectively license the Imatec 20/20(TM) system the Company may have
to engage in manufacturing of products incorporating the Imatec 20/20(TM)
system. See "Risk Factors-Dependence on Third Parties; No Manufacturing
Capabilities; Limited Marketing Capabilities".

Marketing

The Company intends to market its Imatec 20/20(TM) system in a number
of ways, all of which are intended to facilitate the licensing of the Imatec
20/20(TM) system. The Company will attend industry trade shows in the United
States where it believes it will gain additional exposure to potential licensees
for the Imatec 20/20(TM) system. The Company also will seek to obtain awareness
of the Imatec 20/20(TM) system through the publishing of articles by Dr. Shalit,
the first of which is expected to be a series of articles commencing in June of
1996 in Medical Imaging, a trade magazine. The Company also intends to gain
exposure as well as keep current of emerging and changing imaging standards by
joining certain industry trade associations and where feasible, having
representatives of the Company serve on various standards committees in the
imaging field. The Company recently became a member of the National Electronic
Manufacturers Association ("NEMA") which is an industry trade association for
the medical imaging industry. In addition, Dr. Shalit is currently a visiting
member, and expects to become a full member in the near future, of the Digital
Imaging Communication in Medicine Committee ("DICOM"), a committee under the
auspices of NEMA and the American College of Radiology that is responsible for
creating standards in the image communication business. The Company also intends

<PAGE>

to engage in general advertising in trade publications in order to gain
recognition of the Company and the Imatec 20/20(TM) system. The Company has
hired a vice president of marketing to coordinate all of the Company's marketing
activities and intends to hire additional marketing personnel and consultants
subsequent to this Offering.

Research and Development

In applying the Imatec 20/20(TM) system to other aspects of the medical
imaging field, as well as in connection with seeking application of the Imatec
20/20(TM) system to other fields, the Company intends to engage consultants and
independent contractors from to time to conduct research and development
activities. The Company, in discreet instances, may acquire certain technologies
that the Company believes either enhance the Company's Imatec 20/20(TM) system
or further the application of the Imatec 20/20(TM) system to other imaging
fields, although it will only effect such acquisitions in those instances where
the Company believes that acquisition of such technologies is more economical
and efficient than engaging in the research and development itself. The Company
does not have any current arrangements or understandings at the present time to
acquire any such technologies.

The Company incurred $17,881 and $0 in research and development
activities in 1994 and 1995, respectively.

Competition

The image enhancement field is subject to rapid and significant
technological change that may render the Company's Imatec 20/20(TM) system
obsolete or products that incorporate the Company's Imatec 20/20(TM) system
obsolete or incompatible with the machines they are intended to complement. In
addition, such rapid changes may impose additional, unforeseen costs on the
Company in that the Company may be required to modify its Imatec 20/20(TM)
system to adapt to such changes. There can be no assurance that the Company will
be able to successfully modify or upgrade its Imatec 20/20(TM) system as may be
necessary in a timely fashion, or at all.

While the Company is not aware of any entities that build image
enhancement devices that compete with the Company's Imatec 20/20(TM) system,
there are a number of entities that are engaged in the research and development
of image enhancement products. These entities may in the future develop
technologies or products that compete with the Company's Imatec 20/20(TM)
system. Potential competitors of the Company include independent companies,
universities and public and private research organizations, most of which are
well established and have substantially greater marketing, financial,
technological and other resources than the Company. In addition, the medical
imaging field in particular is dominated by large, well established

<PAGE>

corporations. There can be no assurance that competitors will not succeed in
securing patents and/or developing technologies or products that are more
effective than the Company's Imatec 20/20(TM) system, as a result of which the
Company's Imatec 20/20(TM) system may become obsolete or noncompetitive.

The License Agreement

The Company entered into the License Agreement as of June 25, 1995 with
Dr. Hanoch Shalit, the Company's President and Chief Executive Officer. The
License Agreement grants the Company the exclusive right to make, use, sell and
sublicense "Patentable Image Technology," which is defined in the License
Agreement as the three United States Patents and certain foreign patent
applications. Under the terms of the License Agreement, Dr. Shalit received from
the Company a one-time $350,000 payment in January 1996 subsequent to the First
Closing of the Bridge Financing. Dr. Shalit is also entitled to receive a flat
royalty fee of $140,000 per annum, payable in monthly installments of $11,667,
for so long as the Company and any successor of the Company is in existence (the
"Annual Royalty"); provided, however, that in the event that Dr. Shalit is no
longer President, Chief Executive Officer and Chairman of the Company for any
reason whatsoever, but the Company or any successor of the Company continues in
existence, the Annual Royalty shall automatically be increased to $250,000 per
annum. Pursuant to the terms of the License Agreement, the Annual Royalty shall
increase by 5% every year as long as the Company or any successor of the Company
is in existence. The License Agreement also grants to the Company the exclusive
right as to inventions made by Dr. Shalit in the course of his employment under
his employment agreement with the Company. The Company's obligations to pay the
Annual Royalty shall continue until the expiration of the License Agreement. The
term of the License Agreement expires when the last licensed patent expires,
whether in the United States or abroad. Under the License Agreement, the Company
is obligated to use its reasonable best efforts to make, use, sell and
sublicense to others the Patentable Image Technology.

Intellectual Property

The Company presently intends to make all appropriate filings and
registrations, or take all other actions the Company believes to be necessary,
to obtain and protect all Patents, trademarks, copyrights, tradenames, trade
dress and all other intellectual property rights, if any, relating to the
Company, although there can be no assurances that the Company will be able to
effectively do so. In the event the Company is able to fully establish
intellectual property rights with respect to the technology used by the Company,
of which there can be no assurance, third parties may attempt to exercise
alleged rights in any of their patents, trademarks, copyrights or other
intellectual property or appropriate any patents, trademarks, copyrights, or

<PAGE>

other intellectual property rights obtained by the Company, and the Company's
failure or inability to adequately protect any of its intellectual property
rights, may have a material adverse effect on the Company. In addition, there
can be no assurance that third parties will not be able to successfully assert a
claim with regard to the Patents and/or the Imatec 20/20(TM) system under their
own intellectual property rights.

The Company also requires all employees to sign non-disclosure,
non-competition, confidentiality and invention assignment agreements.

Under the License Agreement, the Company has an exclusive, worldwide
license from Dr. Hanoch Shalit, the Company's founder, principal stockholder and
Chief Executive Officer, to make, use, sell and sublicense to others the
Patentable Image Technology.

Subsequent to this Offering, the Company will seek to broaden its
patent protection and the application of the Patents to other industries.
Typically, when seeking to apply the Patents to other industries, the Company
will first design a research prototype to test the technology in the laboratory.
Thereafter, a production prototype will be constructed for testing at a beta, or
third party, site. After successful beta testing, the Company will then seek to
market the product and/or license the underlying technology.

Employees

As of April 15, 1996, the Company had 3 full-time employees, Dr. Hanoch
Shalit, who serves as the Company's President and Chief Executive Officer, and
Lawrence P. Kollender, who serves as the Company's Vice President of Sales and
Marketing and one administrative assistant. The Company also employs 2 part-time
employees, consisting of 1 computer programmer and 1 electronic engineer. The
Company believes that its relations with its employees are good.

Properties

On January 31, 1996, the Company entered into a three (3) year lease
for approximately 2,048 square feet for its principal executive offices at 150
East 58th Street, NY, NY 10155 pursuant to which the Company pays rent of
approximately $5,600 per month. Dr. Hanoch Shalit, the Company's President and
Chief Executive Officer, has personally guaranteed the payments to be made under
such lease.

<PAGE>

Legal Proceedings

There are no legal proceedings to which the Company is a party.

<PAGE>

MANAGEMENT

Directors and Executive Officers

The names and ages of the directors and executive officers of the
Company are set forth below.

Name Age Position Held
---- --- -------------

Dr. Hanoch Shalit 42 President, Chief
Executive Officer and
Director

Steven Ai 41 Director

Neal Factor 44 Director

Lawrence P. Kollender 55 Vice President - Marketing
and Sales

- ----------

The Company has agreed with Dr. Shalit that he shall be entitled to a
nominee on the Board of Directors until the expiration date of the last of the
three Patents. The Company has also agreed with the Underwriter that, for a
period of five years after the date of this Prospectus that it will use its best
efforts to cause one individual designated by the Underwriter and acceptable to
the Company to be elected to the Board of Directors, which individual may be a
director, officer, employee or affiliate of the Underwriter. It is anticipated
that directors will serve until the next annual meeting of stockholders and the
election and qualification of their successors. Directors will not receive any
compensation for serving on the Board of Directors. The officers are elected by
the directors and serve at the discretion of the Board of Directors.

Background of Executive Officers and Directors

Dr. Hanoch Shalit founded the Company in November 1988 and has been its
Chief Executive Officer, President, and a director since inception. From
September 1982 until June 1987 Dr. Shalit was employed as a senior chemist with
Chemco Photo Products, a private imaging company. From June 1987 until the
beginning of November 1988, Dr. Shalit was employed by the FONAR Corporation, a
public imaging company where he was the President of the Photographic Sciences
Division in charge of production, sales and service for the FONAR Corporation's
photographic products. Dr. Shalit earned a B.S. (Honors) in the Sciences of
Photography from the Polytechnic of Central London (now know as University of
Westminster) in Great Britain in 1978 and a PhD in Physics from the University
of London in 1981.

<PAGE>

Mr. Steven Ai has been a director of the Company since November 30,
1995. Since 1992, Mr. Ai has been the President of City Mill Co., Ltd., a
private company located in Honolulu, Hawaii, which owns and operates a chain of
retail home product stores. Prior to 1992, Mr. Ai was a manager with the public
accounting firm of KPMG Peat Marwick.

Mr. Neal Factor, who has been a director of the Company since November
30, 1995, has maintained a private law practice in New York City principally in
the areas of corporate and commercial law since 1979.

Mr. Lawrence P. Kollender, has been the Company's Vice President -
Marketing and Sales since January 2, 1996. Since January 1995, Mr. Kollender has
also been the President of LPK Unlimited, a private consulting firm to companies
in the software, electronics and service industries. From 1989 through December
1994, Mr. Kollender was the director of international defense programs at the
Grumman Corporation, which was a public company until it was acquired by the
Northrop Corporation.

<PAGE>

Executive Compensation

The following table sets forth the cash compensation paid by the
Company to executive officers of the Company for the years ended December 31,
1993, 1994 and 1995.
<TABLE>
<CAPTION>

SUMMARY COMPENSATION TABLE
--------------------------

Long-Term Compensation
----------------------------
Annual Compensation Awards Payouts
------------------- ------ -------

Restricted
Name and Other Annual Stock LTIP All Other
Principal Position Year Salary($) Bonus($) Compensation ($) Awards($) Options/SARs(#) Payouts($) Compensation ($)
------------------ ---- --------- -------- ---------------- --------- --------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dr. Hanoch Shalit, 1995 $60,000(1) $ - 0 -(2) $ - 0 - $ - 0 - - 0 - $ - 0 - $- 0 -
Chief Executive
Officer, President
and Director
1994 $24,258 $ - 0 - $ - 0 - $ - 0 - - 0 - $ - 0 - $- 0 -
1993 $42,000 $ - 0 - $ - 0 - $ - 0 - - 0 - $ - 0 - $- 0 -

</TABLE>

- -------------
(1) Pursuant to his employment agreement, Dr. Shalit's salary is payable at the
rate of $60,000 per calendar year. However, for the fiscal year ending
1995, Dr. Shalit received less than $60,000 because his employment
agreement did not become effective until July 1, 1995. See "Management -
Employment Agreements."

(2) Pursuant to his employment agreement, Dr. Shalit is entitled to receive a
bonus equal to $10,000 for every $1,000,000 of gross annual sales received
by the Company. See "Management - Employment Agreements."

<PAGE>

Employment Agreements

Effective July 1, 1995, the Company entered into a five-year employment
agreement with Dr. Hanoch Shalit. Under his employment agreement, Dr. Shalit is
to serve as the Company's President, Chief Executive Officer and Chairman of the
Board of Directors and receive an annual base salary of $60,000, which shall
increase at the rate of 5% per annum, plus benefits. Dr. Shalit is also entitled
to receive a bonus of $10,000 for every $1,000,000 of gross annual sales
received by the Company. In addition, Dr. Shalit's employment agreement provides
that, during the term of such employment agreement, he shall not compete with
the Company or disclose, without the Company's consent, confidential information
that has been or will be disclosed to him by the Company. Dr. Shalit's
employment with the Company shall terminate upon his death or disability, the
Company no longer being involved in the imaging technology business, the
bankruptcy of the Company or the Company having been merged into or acquired by
another company. Furthermore, Dr. Shalit's employment may be terminated by the
Company for "cause," which is defined as either dishonesty detrimental to the
best interests of the Company or wilful disloyalty to the Company.

Effective January 3, 1996, the Company entered into a one-year
employment agreement with Mr. Lawrence P. Kollender. Under his employment
agreement, Mr. Kollender is to serve as the Company's Vice President of
Marketing and Sales and receive an annual base salary of $100,000, plus
benefits. Mr. Kollender is also entitled to receive a commission equal to 4% of
the Company's annual gross revenues in excess of $2.5 million. In addition, Mr.
Kollender's employment agreement provides that, during the term of such
employment agreement and for three years thereafter, he shall not compete with
the Company or disclose, without the Company's consent, confidential information
that has been or will be disclosed to him by the Company. Mr. Kollender's
employment agreement shall terminate if he suffers a disability, the Company is
no longer involved in the imaging technology business, or may be terminated by
the Company for any cause.

The Company is the sole beneficiary of a "key man" life insurance
policy on the life of Dr. Hanoch Shalit in the amount of $1 million.

There are no family relationships among any Directors or executive
officers.

Directors Committees

Subsequent to this Offering, the Company intends to seek to add at
least two (2) individuals to the Board of Directors to form an Audit Committee
and Compensation Committee. The Audit Committee will review the engagement of
the independent accountants, review and approve the scope of the annual audit

<PAGE>

undertaken by the independent accountants and review the independence of the
accounting firm. The Audit Committee will also review the audit and non-audit
fees of the independent accountants and the adequacy of the Company's internal
control procedures. The Compensation Committee will review executive
compensation issues.

Indemnification Agreements

The Company intends to enter into an Indemnification Agreement with
each of its Directors and any officer, employee, agent or fiduciary designated
by the Board of Directors (the "Indemnified Party") which provides that the
Company indemnify the Director or other party thereto to the fullest extent
permitted by applicable law. The agreement includes indemnification, to the
extent permitted by applicable law, against expenses, including reasonable
attorneys' fees, judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by the Indemnified Party in connection with any
civil or criminal action or administrative proceeding arising out of the
Indemnified Party's performance of his duties as a Director or officer of the
Company. Such indemnification is available if the Indemnified Party acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Company, and, with respect to any criminal action, had
no reasonable cause to believe his conduct was unlawful.

Under the Indemnification Agreement, the entitlement of an Indemnified
Party to indemnification will be determined by a majority vote of a quorum of
disinterested Directors, or if such quorum is not obtainable, either by
independent counsel or by the stockholders of the Company, as determined by such
disinterested Directors. If a change of control of the Company has occurred, the
entitlement of such Indemnified Party shall be determined by independent counsel
to the Company, unless such Indemnified Party requests that either the Board or
the stockholders make such determination.

Each Indemnification Agreement will require the Company to advance
litigation expenses at the request of the Indemnified Party who is a party
thereto whether prior to or after final resolution of a proceeding, provided
that he undertakes to repay such advances if it is ultimately determined that he
is not entitled to indemnification for his expense. The advance of litigation
expenses will therefore be mandatory upon satisfaction of certain conditions by
the Indemnified Party.

Provided that it can do so at a reasonable expense, the Company intends
to obtain officers' and directors' liability insurance from the net proceeds
hereof allocated to working capital which insurance would provide for a maximum
of $10,000,000 of coverage, subject to a $100,000 corporate reimbursement per

<PAGE>

occurrence payable by the Company. There can be no assurance, however, that such
insurance, or any similar coverage, will be available to the Company, or if
available, will be on terms and conditions acceptable to the Company. Any
payments made by the Company under an Indemnification Agreement which are not
covered by the insurance policy may have an adverse impact on the Company's
earnings. See "Description of Securities - Limitation on Liability of
Directors."

Stock Option Plan

Incentive Stock Option Plan - In February 1996, the Board of Directors
of the Company adopted and the stockholders of the Company approved, the
adoption of the Company's 1996 Stock Option and Plan ("Stock Option Plan"). The
purpose of the Stock Option Plan is to enable the Company to encourage key
employees, officers, Directors and consultants to contribute to the success of
the Company by granting such individuals and Directors nonqualified "stock
options" within the meaning of Section 422 of The Internal Revenue Code of 1986,
as amended ("ISOs").

The Stock Option Plan will be administered by the Board of Directors or
a committee appointed by the Board of Directors (the "Committee") which will
determine, in its discretion, among other things, the recipients and vesting of
grants and the number of shares to be subject to such options.

The Stock Option Plan provides for the granting of options to purchase
Common Stock at an exercise price to be determined by the Board of Directors or
the Committee. Notwithstanding the foregoing, the Company has agreed with the
Underwriter that for a period of 18 months after the date of this Prospectus,
the Company will not grant any stock option having an exercise price less than
the greater of the fair market value of the Common Stock on the date of the
grant or the initial public offering price per share of Common Stock.

The total number of shares with respect to which options may be granted
under the Stock Option Plan is 500,000.

Upon the exercise of an option, the holder must make payment of the
full exercise price. Such payment may be made in cash or in shares of Common
Stock, or in a combination of both. The Company may lend to the holder of an
option funds sufficient to pay the exercise price, subject to certain
limitations.

The Stock Option Plan may be terminated or amended at any time by the
Board of Directors, except that, without stockholder approval, the Stock Option
Plan may not be amended to increase the number of shares subject to the Stock
Option Plan, change the class of persons eligible to receive options under the
Stock Option Plan or materially increase the benefits of participants.

<PAGE>

As of the date of this Prospectus, no options have been granted under
the Stock Option Plan. No determinations have been made regarding the persons to
whom options will be granted in the future, the number of shares which will be
subject to such options or the exercise prices to be fixed with respect to any
option.

<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth information as of May 10, 1996, with
respect to the beneficial ownership of shares of Common Stock by (i) each person
known by the Company to be the owner of more than 5% of the outstanding shares
of Common Stock, (ii) each officer, director and director-nominee, and (iii) all
officers and directors as a group.

Percentage
Amount and Percentage of Shares
Nature of of Shares Owned
Name and Address of Beneficial Currently After the
Beneficial Owner Ownership(1)(2) Owned Offering
- ------------------- --------------- --------- --------
Dr. Hanoch Shalit 991,825(3) 35.9% 26.4%(4)
c/o Imatec, Ltd.
150 E. 58th Street
New York, NY 10155

Lawrence P. Kollender -0- -0- -0-
c/o Imatec, Ltd.
150 E. 58th Street
New York, NY 10155

Carmello Cotrino 663,000 24.0% 17.6%
8 Homsted Circle
Marlboro, NJ 07746

Louis Raneri 171,000 6.2% 4.5%
1266 41st Street
Brooklyn, NY 11218

Thomas Dunn 171,000 6.2% 4.5%
600 Hylan Boulevard
Staten Island, NY
10305

Steven Ai -0- -0- -0-
c/o City Mill Co.,
Ltd.
600 Nimits Highway
Honolulu, HI 96817

Neal Factor -0- -0- -0-
35 W. 44th Street,
Suite 1111
New York, NY 10036

<PAGE>

Officers and 991,825 35.9% 26.4%
directors as a group
(4 persons)
- ----------
(1) The shares of Common Stock owned by each person or by the group, and the
shares included in the total number of shares of Common Stock outstanding,
have been adjusted in accordance with Rule 13d-3 under the Securities
Exchange Act of 1934, as amended, to reflect the ownership of shares
issuable upon exercise of outstanding options, warrants or other common
stock equivalents which are exercisable within 60 days. As provided in such
Rule, such shares issuable to any holder are deemed outstanding for the
purpose of calculating such holder's beneficial ownership but not any other
holder's beneficial ownership.

(2) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
stock beneficially owned by them.

(3) The share ownership of Dr. Hanoch Shalit includes 12,615 shares of Common
Stock, consisting of 2,818 shares of Common Stock held by Richard Carey and
9,797 shares of Common Stock held by Mr. Jim Jaeger, each a founding
stockholder of the Company, pursuant to an agreement dated November 9, 1993
among Dr. Shalit and Messrs. Carey and Jaeger in which Messrs. Carey and
Jaeger assigned the voting rights of such 12,615 shares of Common Stock to
Dr. Shalit. Accordingly, Dr. Shalit may be deemed to beneficially own such
12,615 shares of Common Stock, although Dr. Shalit is not entitled to
receive any dividends with respect to such shares of Common Stock and has
no power of disposition over such shares of Common Stock, or the right to
any proceeds from any disposition of such shares of Common Stock.

(4) Does not give effect to the registration and sale of 50,000 shares of
Common Stock by Dr. Shalit. See "Selling Security Holders."

<PAGE>

SELLING SECURITY HOLDERS

The registration statement, of which this Prospectus forms a part, also
relates to the registration of (i) 551,785 shares of Common stock and 4,000,000
Redeemable Warrants issued by the Company to the Bridge Selling Security Holders
who provided an aggregate of $4,000,000 in interim financing to the Company in a
financing that was consummated in April, 1996, (ii) an aggregate of 2,210,000
shares of Common Stock owned by the Founding Selling Security Holders. The
Selling Security Holders' Securities are not being underwritten by the
Underwriter in connection with this Offering. Except with respect to 150,000
shares of Common Stock being registered on behalf of certain of the Founding
Selling Security Holders, including 50,000 shares of Common Stock owned by Dr.
Hanoch Shalit, the Chief Executive Officer and President of the Company, each of
the Selling Security Holders have agreed not to directly or indirectly offer,
sell, transfer or otherwise encumber or dispose of any of these securities for a
period of eighteen (18) months after the date of this Prospectus unless
otherwise permitted by the Underwriter and the Company. See "Principal
Stockholders" and "Underwriting."

The sale of the Selling Security Holders' Securities by the Selling
Security Holders may be effected from time to time in transactions (which may
include block transactions by or for the account of the Selling Security
Holders) in the over-the-counter market or in negotiated transactions, or
through the writing of options on the Selling Security Holders' Securities, a
combination of such methods of sale, or otherwise. Sales may be made at fixed
prices which may be changed, at market prices prevailing at the time of sale, or
at negotiated prices.

The Selling Security Holders may effect such transactions by selling
the Selling Security Holders' Securities directly to purchasers, through
broker-dealers acting as agents for the Selling Security Holders or to
broker-dealers who may purchase shares as principals and thereafter sell the
Selling Security Holders' Securities from time to time in the over-the-counter
market, in negotiated transactions, or otherwise. Such broker-dealers, if any,
may receive compensation in the form of discounts, concessions or commissions
from the Selling Security Holders and/or the purchasers for whom such
broker-dealers may act as agents or to whom they may sell as principals or both
(which compensation as to a particular broker-dealer may be in excess of
customary commissions).

The Selling Security Holders and broker-dealers, if any, acting in
connection with such sales, might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act and any commission received by
them and any profit upon the resale of such securities might be deemed to be
underwriting discounts and commissions under the Securities Act.

<PAGE>

Sales of any shares of Common Stock or Class A Redeemable Warrants by
the Selling Security Holders, or even the existence of the right to exercise the
Class A Redeemable Warrants, may depress the price of the Common Stock or the
Class A Redeemable Warrants in any market that may develop for the Securities.

The following table sets forth certain information with respect to
Selling Security Holders for whom the Company is registering shares of Common
Stock and Class A Redeemable Warrants for resale to the public. Other than Dr.
Hanoch Shalit, who is the President and Chief Executive Officer of the Company,
and Mr. David Ai whose son is a member of the Board of Directors of the Company,
none of the Selling Security Holders has had any position with, held any office,
or had any other material relationship with the Company.

Certain Selling Security Holders in the table below may not sell or
otherwise transfer their Securities for a period of 18 months from the date of
this Prospectus without the consent of the Underwriter. In the event such
Selling Security Holder received such consent, the sale shall be effected
through the Underwriter who shall be compensated in accordance with its
customary practices for such transactions. Unless otherwise indicated, ownership
refers to ownership of shares of Common Stock. See "Shares Eligible for Future
Sale" and "Underwriting."

Amount of Amount of Percent of
Amount of Securities Securities Securities
Securities Being Owned After Owned After
Name Owned Registered Offering(1) Offering(1)
- ---- ----- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Richard W. Ahrens*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

David Ai**
Common Stock....................... 55,250 55,250 -0- -0-
Class A Redeemable Warrants........ -0- -0- -0- -0-

Lelio J. Andreoli*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Alfred Angrisani*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

Jay Bernath*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

</TABLE>

<PAGE>

<S> <C> <C> <C> <C>
Robert H. Binns*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Michael Bio*
Common Stock....................... 13,794 13,794 -0- -0-
Class A Redeemable Warrants........ 100,000 100,000 -0- -0-

Cynthia Blum*
Common Stock....................... 13,794 13,794 -0- -0-
Class A Redeemable Warrants........ 100,000 100,000 -0- -0-

John Bogin*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Edward C. Brookins*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Joel Brownstein**
Common Stock....................... 5,525 5,525 -0- -0-
Class A Redeemable Warrants........ -0- -0- -0- -0-

Richard Carey**
Common Stock....................... 2,818 2,818 -0- -0-
Class A Redeemable Warrants........ -0- -0- -0- -0-

Nancy Carrieri*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Nicole Cassino*
Common Stock....................... 13,794 13,794 -0- -0-
Class A Redeemable Warrants........ 100,000 100,000 -0- -0-

John Catania*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Maria Cid*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

Bruce Cohen*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Craig Cohen*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

</TABLE>

<PAGE>

<S> <C> <C> <C> <C>
Carmello Cotrino*
Common Stock....................... 663,000 663,000 -0- -0-
Class A Redeemable Warrants........ -0- -0- -0- -0-

Joseph DeAngelis*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Ronald and Emelia DeSena, JTWROS*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Janice DeSimone*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Brett Diamond*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Amelia DiDomenico*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

D.J.'s Company*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

Thomas Dunn*
Common Stock....................... 171,000 171,000 -0- -0-
Class A Redeemable Warrants........ -0- -0- -0- -0-

Boris Dyskin*
Common Stock....................... 20,691 20,691 -0- -0-
Class A Redeemable Warrants........ 150,000 150,000 -0- -0-

Dolores Esposito*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Walter S. Farr*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

Edward J. Farrell, Jr.*
Common Stock....................... 3,449 34,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Ivan Feng**
Common Stock....................... 22,100 22,100 -0- -0-
Class A Redeemable Warrants........ -0- -0- -0- -0-
</TABLE>

<PAGE>

<S> <C> <C> <C> <C>
Robert A. Foise*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

Richard Forte*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

Marc Foscolo*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Ian Freeman*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

Frank Fronda*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Melissa Galindez*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Kenneth Gantz*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

Andrew P. Geiss*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Paul Geraci*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Angelo Giamboi*
Common Stock....................... 10,346 10,346 -0- -0-
Class A Redeemable Warrants........ 75,000 75,000 -0- -0-

Barry J. Gordon*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

Stacy Gozlan*
Common Stock....................... 6,897 3,449 -0- -0-
Class A Redeemable Warrants........ 50,000 25,000 -0- -0-

Richard Guerriero*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-
</TABLE>

<PAGE>

<S> <C> <C> <C> <C>
Douglas R. Hellstrom*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Logan L. Hurst*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Jim Jaeger**
Common Stock....................... 9,797 9,797 -0- -0-
Class A Redeemable Warrants........ -0- -0- -0- -0-

Emma M. Job*
Common Stock....................... 3,449 34,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Paul E. Judd*
Common Stock....................... 13,794 13,794 -0- -0-
Class A Redeemable Warrants........ 100,000 100,000 -0- -0-

Steven Kessler*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

Marc H. Klee*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

Daniel E. Koshland, Jr.*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Robert C. Lannert*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

Donald L. Leonard*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Laura A. Lihach*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

Angela LoPresto*
Common Stock....................... 103,449 103,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Frances LoPresto*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-
</TABLE>

<PAGE>

<S> <C> <C> <C> <C>
Carol Lundrigan*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Charles T. Maguire*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Louis Martelli*
Common Stock....................... 13,794 13,794 -0- -0-
Class A Redeemable Warrants........ 100,000 100,000 -0- -0-

Kathleen F. & Arthur R. Medici,
Joint Tenants with Right of
Survivorship*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

Jeffrey Michelson*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

Silvio Minici*
Common Stock....................... 20,691 20,691 -0- -0-
Class A Redeemable Warrants........ 150,000 150,000 -0- -0-

Al Moschetto*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Donald A. Nader*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Mohamed Omar Nawar*
Common Stock....................... 10,346 10,346 -0- -0-
Class A Redeemable Warrants........ 75,000 75,000 -0- -0-

Arnold H. Neustadt and
Francene Neustadt, JTWROS*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

New Vision*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

S. Edwin Noffel, IRA*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-
</TABLE>

<PAGE>

<S> <C> <C> <C> <C>
Ralph Notaro*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

Diane Paribello*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Joseph Perri*
Common Stock....................... 13,794 13,794 -0- -0-
Class A Redeemable Warrants........ 100,000 100,000 -0- -0-

Arthur Pidgeon*
Common Stock....................... 20,691 20,691 -0- -0-
Class A Redeemable Warrants........ 150,000 150,000 -0- -0-

Michael Pressberg*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Provence Business*
Consultants, Inc.
Common Stock....................... 13,794 13,794 -0- -0-
Class A Redeemable Warrants........ 100,000 100,000 -0- -0-

Michael Pugliese*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

Louis Raneri*
Common Stock....................... 171,000 171,000 -0- -0-
Class A Redeemable Warrants........ -0- -0- -0- -0-

Scott Roberts*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Louis C. Rose*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

James D. Sauer*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Jack Schnitzer*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

</TABLE>

<PAGE>

<S> <C> <C> <C>
Dr. Hanoch Shalit**
Common Stock....................... 1,009,510 1,009,510 -0- -0-
Class A Redeemable Warrants........ -0- -0- -0- -0-

Allan Sherman*
Common Stock....................... 10,346 10,346 -0- -0-
Class A Redeemable Warrants........ 75,000 75,000 -0- -0-

David Smith*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Anthony Stropoli*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Lorenzo Don Starling and
Virginia Starling, Joint Tenants
with Right of Survivorship*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

Paul and Teresa Tarantino,
Joint Tenants with Right of
Survivorship*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

John M. Thompson*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

William M. Thompson*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

Frank Tricarico*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Tri Ventures*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

Neil Vaccaro*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

James W. Venezia*
Common Stock....................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants........ 50,000 50,000 -0- -0-

</TABLE>

<PAGE>

<S> <C> <C> <C> <C>
Robert and Christine
Vitamante, JTWROS*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Samir R. Wahby*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Donald R. Waldrip*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Frederick B. Winston*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-

Yoram Yosifov**
Common Stock....................... 30,300 30,300 -0- -0-
Redeemable Warrants................ -0- -0- -0- -0-

Joseph and Jacqueline Zambito,
Joint Tenants with Right of
Survivorship*
Common Stock....................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants........ 25,000 25,000 -0- -0-
</TABLE>

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

* Holders who have agreed not to sell or otherwise transfer their Securities
for 18 months from the date of this Prospectus without the consent of the
Underwriter.

** Holders who have agreed not to sell or otherwise transfer only a portion of
their Securities for eighteen (18) months from the date of this Prospectus
without the consent of the Underwriter.

(1) Assumes sale of all Securities registered hereby.

<PAGE>

CERTAIN TRANSACTIONS

Payments to Directors

Mr. Neal Factor, a director of the Company and an attorney who has
represented the Company since inception, charged the Company legal fees of
approximately $31,000 in 1995.

License Agreement

<PAGE>

DESCRIPTION OF SECURITIES

The authorized capital of the Company consists of (i) 20,000,000 shares
of Common Stock, par value $.0001 per share, 2,761,785 of which are currently
issued and outstanding, and (ii) 2,000,000 shares of preferred stock, par value
$.0001 per share ("Preferred Stock"), none of which are currently issued and
outstanding. There will be 2,761,785 shares of Common Stock issued and
outstanding after giving effect to the sale of the Common Stock offered hereby.

Common Stock

Each share of Common Stock is entitled to one vote, either in person or
by proxy, on all matters that may be voted upon by the owners thereof at a
meeting of the stockholders, including the election of directors. The holders of
Common Stock (i) have equal, ratable rights to dividends from funds legally
available therefor, when as and if declared by the Board of Directors of the
Company; (ii) are entitled to share ratably in all of the assets of the Company
available for distribution to holders of Common Stock upon liquidation,
dissolution or winding up of the affairs of the Company; (iii) do not have
pre-emptive or redemption provisions applicable thereto; and (iv) are entitled
to one non-cumulative vote per share on all matters on which stockholders may
vote at all meetings of stockholders.

All shares of Common Stock issued and outstanding are, and those
offered hereby, when issued, will be fully-paid and non-assessable, with no
personal liability attaching to the ownership thereof.

Redeemable Warrants

The Redeemable Warrants will be issued pursuant to a Warrant Agreement
(the "Warrant Agreement") between the Company and Continental Stock Transfer &
Trust Company, as Warrant Agent (the "Warrant Agent"). The following discussion
of certain terms and provisions of the Redeemable Warrants is qualified in its
entirety by reference to the detailed provisions of the Redeemable Warrants and
of the Warrant Agreement, the forms of which have been filed as exhibits to the
Registration Statement, of which this Prospectus forms a part. See "Additional
Information."

Each Class A Redeemable Warrant and Class B Redeemable Warrant entitles
the holder thereof to purchase one share of Common Stock at an exercise price of
$6.50 and $5.50 per share, respectively, at any time commencing on the date of
this Prospectus until _______, 1998 [24 months after the date of this
Prospectus] and ________, 2001 [60 months from the date of this Prospectus],
respectively, subject to adjustment in certain circumstances. Each Class A
Redeemable Warrant and each Class B Redeemable Warrant, commencing
___________________, 1997 [9 months after the date of this Prospectus] and ____,

<PAGE>

1997 [12 months after the date of this Prospectus] respectively. Each Class A
Redeemable Warrant and each Class B Redeemable Warrant is redeemable by the
Company with the consent of the Underwriter and will be subject to redemption at
a redemption price of $.10 per Redeemable Warrant provided that the average
closing bid price of the Common Stock as reported by Nasdaq equals or exceeds
$7.50 and $9.00 per share, respectively, for any 20 trading days within a period
of 30 consecutive trading days ending on the fifth trading day prior to the date
of the notice of redemption.

To exercise a Redeemable Warrant, the holder must send the certificate
evidencing the Redeemable Warrant (the "Warrant Certificate") to the Warrant
Agent, together with an election to exercise, setting forth the number of shares
to be purchased and payment by certified check or money order for the total
exercise price of the shares to be purchased. The Warrant Agent will return a
certificate evidencing the number of shares of Common Stock issued upon exercise
of the Redeemable Warrant.

The Redeemable Warrants contain anti-dilution provisions regarding
certain events, including but not limited to, stock dividends, stock splits, and
reclassifications. The holders of Redeemable Warrants, as such, have no right to
vote on matters submitted to the stockholders of the Company or to receive
dividends and are not entitled to share in the assets of the Company in the
event of liquidation, dissolution or the winding-up of the Company's affairs.
However, upon the exercise of the Redeemable Warrants and issuance of shares of
Common Stock to the holder, such shares of Common Stock shall have rights
identical to all other shares of Common Stock.

The Company is required to have a current Registration Statement on
file with the Commission and to effect appropriate qualifications under the laws
and regulations of the states in which the holders of the Redeemable Warrants
reside in order to comply with applicable laws in connection with such exercise.
The Company has agreed to register and to qualify such issuable shares of Common
Stock. There can be no assurance that the Company will be able to cause such
registration statement to become effective and remain current or to effect
appropriate qualification under applicable state securities laws, the failure of
which may result in the exercise of the Redeemable Warrants and the resale or
other disposition of Common Stock issued upon such exercise becoming unlawful.

The exercise prices of the Redeemable Warrants bear no relation to any
objective criteria of value and should in no event be regarded as an indication
of any future market price of the securities offered thereby.

<PAGE>

Preferred Stock

The Company's Certificate of Incorporation provides for 2,000,000
shares of Preferred Stock, whereby the Board of Directors of the Company shall
have the authority, without further action by the holders of the outstanding
Common Stock, to issue up to 2,000,000 shares of Preferred Stock from time to
time in one or more classes or series, to fix the number of shares constituting
any class or series and the stated value thereof, if different from the par
value, and to fix the terms of any such series or class, including dividend
rights, dividend rates, conversion or exchange rights, voting rights, rights and
terms of redemption (including sinking fund provisions), the redemption price
and the liquidation preference of such class or series. Consequently, the
issuance of Preferred Stock may be used as an "anti-takeover" device without
further action on the part of the stockholders. Issuance of Preferred Stock,
which may be accomplished through a public offering or a private placement to
parties favorable to current management, may dilute the voting power of holders
of Common Stock (such as by issuing Preferred Stock with super voting rights)
and may render more difficult the removal of current management, even if such
removal may be in the stockholders' best interests. Further, the Company's stock
option plans provide for the immediate acceleration of, and removal of
restrictions from, options and other awards under the plans upon a "change of
control" (as defined therein). Such provisions may also have the result of
discouraging acquisitions of the Company. See "Risk Factors - Barriers to
Takeover." The Company presently has no shares of Preferred Stock outstanding
and has no present intention to issue any Preferred Stock. The designations,
rights and preferences of any Preferred Stock would be set forth in a
Certificate of Designation which would be filed with the Secretary of State of
Delaware.

Limitation on Liability of Directors

The Company's Certificate of Incorporation provides that a director of
the Company will not be personally liable to the Company or its stockholders for
monetary damages for breach of the fiduciary duty of care as a director,
including breaches which constitute gross negligence. By its terms and in
accordance with the Delaware General Corporation Law, however, this provision
does not eliminate or limit the liability of a director of the Company (i) for
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law (relating to unlawful payments or dividends or
unlawful stock repurchases or redemptions), (iv) for any improper benefit or (v)
for breaches of a director's responsibilities under the Federal securities laws.
The Company also intends to enter into an Indemnification Agreement with each of
its Directors and any officer, employee, agent or fiduciary designated by the
Board of Directors which provides that the Company indemnify the Director or

<PAGE>

other parties thereto to the fullest extent permitted by applicable law. See
"Business - Indemnification Agreements."

Transfer Agent and Warrant Agent

The transfer agent and registrar for the Common Stock and warrant agent
for the Redeemable Warrants is Continental Stock Transfer & Trust Company,
located at 2 Broadway, New York, New York 10004.

<PAGE>

SHARES AVAILABLE FOR FUTURE SALE

Upon completion of this Offering, there will be 3,761,785 shares of
Common Stock outstanding, (3,911,785 shares of Common Stock if the Underwriter's
over-allotment option is exercised in full). All of these shares will be
registered, although except for 150,000 shares of Common Stock being registered
on behalf of certain of the Founding Selling Security Holders, including 50,000
shares for Dr. Hanoch Shalit, the Chief Executive Officer and President of the
Company, all of the Selling Security Holders have agreed not to directly or
indirectly offer, sell, transfer or otherwise encumber or dispose of any such
shares for a period of eighteen (18) months from the date of this Prospectus
unless otherwise permitted by the Underwriter.

Prior to this Offering, there has been no market for the Securities.
The Underwriter intends to make a market in the shares of Common Stock and
Redeemable Warrants after completion of this Offering. No predictions can be
made as to the effect, if any, that the availability of shares for sale will
have on the market, if any, prevailing from time to time. Sales of substantial
amounts of the Common Stock that are subject to the prior approval of the
Underwriter may adversely affect the market price of the Common Stock or the
Redeemable Warrants offered hereby.

<PAGE>

UNDERWRITING

A.S. Goldmen & Co., Inc. (the "Underwriter") has entered into an
Underwriting Agreement with the Company pursuant to which, and subject to the
terms and conditions thereof, it has agreed to purchase all of the shares of
Common Stock and Redeemable Warrants offered by the Company hereby.

The Underwriter has advised the Company that it proposes to offer the
shares of Common Stock and Redeemable Warrants to the public at the public
offering prices set forth on the cover page of this Prospectus and that the
Underwriter may allow to certain dealers who are members of the National
Association of Securities Dealers, Inc (the "NASD") concessions of not in excess
of $ _______ per share of Common Stock and $_____ per Redeemable Warrant, of
which amount a sum not in excess of $ ______ per share of Common Stock may in
turn be reallowed by such dealers to other dealers. After the commencement of
the Offering, the public offering price, the concessions and the reallowances
may be changed. The Underwriter has informed the Company that it does not expect
sales to discretionary accounts by the Underwriter to exceed 5% of the total
number of securities offered by the Company hereby.

The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Act. The Company has agreed to pay
to the Underwriter a non-accountable expense allowance equal to 3% percent of
the gross proceeds derived from the sale of the shares of Common Stock and
Redeemable Warrants underwritten, $25,000 of which as been paid to date.

The Underwriting Agreement provides that the Underwriter has a right of
first refusal for a period of three years from the date of this Prospectus with
respect to any sale of securities made by the Company, its affiliates or
subsidiaries. The Company has also agreed to retain the Underwriter as the
Company's financial consultant for a period of 24 months from the date of this
Prospectus and to pay the Underwriter $2,000 per month in connection therewith,
the total amount of which ($48,000) is due upon consummation of the Offering.
The Company has agreed that, at the request of the Underwriter, for five years
after the date of this Prospectus, that it will use its best efforts to cause
one individual designated by the Underwriter and acceptable to the Company to be
elected to the Company's Board of Directors, which individual may be a director,
officer, employee or affiliate of the Underwriter.

Upon the exercise of any Redeemable Warrants more than one year after
the date of this Prospectus, which exercise was solicited by the Underwriter,
and to the extent not inconsistent with the guidelines of the NASD and the Rules
and Regulations of the Commission, the Company has agreed to pay the Underwriter
a commission of four percent of the aggregate exercise price of such

<PAGE>

Redeemable Warrants. However, no compensation will be paid to the Underwriter in
connection with the exercise of the Redeemable Warrants if (a) the market price
of the Common Stock is lower than the exercise price, (b) the Redeemable
Warrants are held in a discretionary account, or (c) the Redeemable Warrants are
exercised in an unsolicited transaction where the holder of the Redeemable
Warrants has not stated in writing that the transaction was solicited and has
not designated in writing the Underwriter as the Soliciting agent. Unless
granted an exemption by the Commission from Rule 10b-6 under the Securities
Exchange Act of 1934, as amended, the Underwriter and any soliciting
broker-dealers are prohibited from engaging in any market-making activities or
solicited brokerage activities with regard to the Company's securities during
the periods prescribed by exemption (xi) to Rule 10b-6 before the solicitation
of the exercise of any Warrants until the later of the termination of such
solicitation activity or the termination (by waiver or otherwise) of any right
that the Underwriter and any soliciting broker-dealers may have to receive a fee
for the exercise of the Redeemable Warrants following such solicitation. As a
result, the Underwriter and any soliciting broker-dealers will be required to
continue to provide a market for the Company's Securities during certain periods
while the Redeemable Warrants are exercisable. If the Underwriter has engaged in
any of the activities prohibited by Rule 10b-6 during the periods described
above, the Underwriter undertakes to waive unconditionally its right to receive
a commission on the exercise of such Redeemable Warrants.

Each director and officer of the Company, the majority of all present
holders of the shares of Common Stock, and all holders of any options, warrants
or other securities convertible, exercisable or exchangeable for shares of
Common Stock have agreed not to, directly or indirectly, offer, sell, transfer,
pledge, assign, hypothecate or otherwise encumber or dispose of any of the
Company's securities, whether or not presently owned, for a period of eighteen
(18) months after the date of this Prospectus without the prior consent of the
Company and the Underwriter. An appropriate legend shall be marked on the back
of stock certificates representing all such securities.

The Company has granted to the Underwriter an option exercisable during
the forty-five (45) day period commencing on the date of this Prospectus to
purchase from the Company, at the offering price less underwriting discount, up
to an aggregate of 100,000 additional shares of Common Stock and/or an
additional 600,000 Class A Redeemable Warrants and/or 600,000 Class B Redeemable
Warrants, for the sole purpose of covering over-allotments, if any.

In connection with this Offering, the Company has agreed to sell to the
Underwriter or its designees, for nominal consideration, warrants to purchase
from the Company 100,000 shares of Common Stock, 400,000 Class A Redeemable

<PAGE>

Warrants and 400,000 Class B Redeemable Warrants (the "Underwriter's Warrants").
The Underwriter's Warrants are initially exercisable at a price of $ ______ per
share of Common Stock [120% of the initial offering price per share of Common
Stock] and $____ per Class A Redeemable Warrant [120% of the initial offering
price per Class A Redeemable Warrant] for a period of one (1) year commencing
one (1) year from the date of this Prospectus and $____ per Class B Redeemable
Warrant [120% of the initial offering price per Class B Redeemable Warrant] for
a period of four (4) years commencing one (1) year from the date of this
Prospectus. The Underwriter's Warrants provide for adjustment of the type of
securities issuable upon exercise of the Underwriter's Warrants to reflect
certain subdivisions and combinations of the Common Stock. The Underwriter's
Warrants grant to the holders thereof certain rights of registration for the
securities issuable upon exercise of the Underwriter's Warrants.

Prior to this Offering, there has been no public market for any of the
Company's securities. Accordingly, the offering prices of the Shares and the
Redeemable Warrants and the terms of the Redeemable Warrants were determined by
negotiation between the Company and the Underwriter. Factors considered in
determining such price and terms, in addition to prevailing market conditions,
included the prospects for the industry in which the Company competes, an
assessment of the Company's management, the prospects of the Company, its
capital structure and such other factors which were deemed relevant.

The foregoing is a summary of certain terms of the Underwriting
Agreement, copies of which were filed with the Commission as an exhibit to the
Registration Statement of which this Prospectus is a part. Reference is hereby
made to such exhibit for a detailed description of the provisions thereof as
summarized above. See "Additional Information."

LEGAL MATTERS

The validity of the shares of Common Stock and Redeemable Warrants
offered hereby will be passed upon for the Company by Zukerman, Gore & Brandeis,
New York, New York. Certain matters regarding intellectual property rights shall
be passed upon for the Company by Wyatt, Gerber, Burke & Badie, LLP. Orrick,
Herrington & Sutcliffe, New York, New York has acted as counsel for the
Underwriter in connection with this Offering.

EXPERTS

The financial statements of the Company included in this Prospectus and
elsewhere in the Registration Statement, to the extent and for the periods
indicated in their reports, have been examined by Most Horowitz & Company, LLP
independent certified public accountants, whose reports thereon appear elsewhere

<PAGE>

herein and in the Registration Statement. Such financial statements have been
included in reliance upon the reports of Most Horowitz & Company, given upon
their authority as experts in accounting and auditing.

CHANGE IN ACCOUNTANTS

On March 14, 1996, the Company replaced its independent accountants,
Present, Cohen, Smallowitz & Glassman ("Present, Cohen") with Most Horowitz &
Company, LLP ("Most Horowitz") to act as its independent accountants from and
after March 14, 1996. All of the financial statements of the Company included in
the prospectus and registration statement of which this prospectus forms a part
were examined by Most Horowitz. The Company believes, and has been advised by
Present, Cohen, that it never had any disagreements with Present, Cohen
regarding accounting principles or practices, financial statement disclosure, or
auditing scope or procedure.

The decision to replace Present, Cohen with Most Horowitz was approved
by the Company's Board of Directors and was made as a result of the Company's
desire to engage an accounting firm more experienced in auditing public
companies.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 under the Securities Act of
1933, as amended (the "Securities Act") with respect to the Securities offered
hereby. This Prospectus filed as a part of the Registration Statement does not
contain certain information set forth in or annexed as exhibits to the
Registration Statement certain parts of which are omitted in accordance with the
rules and regulations of the Commission. For further information with respect to
the Company and the Securities offered hereby, reference is made to the
Registration Statement and to the exhibits filed as part thereof, which may be
inspected at the office of the Commission without charge, or copies thereof may
be obtained therefrom upon payment of a fee prescribed by the Commission.
Statements contained in this Prospectus as to the contents of any contract or
other document are not necessarily complete, and where the contract or other
document has been filed as an exhibit to the Registration Statement, each
statement is qualified in all respects by reference to the applicable document
filed with the Commission.

The Registration Statement and such exhibits and schedules may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington D.C. 20549, and at
the Regional Offices of the Commission located at 7 World Trade Center, 13th
Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material may be

<PAGE>

obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Room 1025, Washington, D.C. 20549, at prescribed rates.

<PAGE>

IMATEC, LTD

(A DEVELOPMENT STAGE ENTERPRISE)

FINANCIAL STATEMENTS

INDEX
<TABLE>
<CAPTION>

<S> <C>
INDEPENDENT AUDITORS' REPORT 1

BALANCE SHEET - December 31, 1995 and 1994 2

STATEMENT OF OPERATIONS - Inception to December 31, 1995 (Unaudited) and years
ended December 31, 1994 and 1995 3

STATEMENT OF STOCKHOLDERS' (DEFICIT) -
Inception to December 31, 1995 4

STATEMENT OF CASH FLOWS - Inception to December 31, 1995 (Unaudited) and years
ended December 31, 1994 and 1995 5

NOTES TO FINANCIAL STATEMENTS 6 - 11

</TABLE>

F-0

<PAGE>

April 29, 1996

INDEPENDENT AUDITORS' REPORT
----------------------------

Stockholders and Board of Directors
Imatec, Ltd.
New York, New York

We have audited the accompanying balance sheet of Imatec, Ltd. (A
Development Stage Enterprise) as of December 31, 1995 and 1994, and the related
statements of operations, stockholders' (deficit) and cash flows for the years
ended December 31, 1995 and 1994. 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 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 financial statements referred to above present fairly,
in all material respects, the financial position of Imatec, Ltd., as of December
31, 1995 and 1994, and the results of its operations and its cash flows for the
periods then ended in conformity with generally accepted accounting principles.

/s/ Most Horowitz & Company, LLP
-------------------------------------
Most Horowitz & Company, LLP

<PAGE>

IMATEC, LTD.
------------
(A DEVELOPMENT STAGE ENTERPRISE)
--------------------------------
BALANCE SHEET
-------------
ASSETS
------

December 31
---------------------------
1994 1995
------ -------

CURRENT ASSETS
Cash $1,897 $ 31,151
Marketable securities (Note 3) 1,350,852
Other current assets 9,715
------ ----------

TOTAL CURRENT ASSETS 1,897 1,391,718

DEFERRED DEBT ISSUANCE COSTS (Note 2) 240,838
PATENTS (Note 7) 11,427
------ ----------

TOTAL ASSETS $1,897 $1,643,983
====== ==========

LIABILITIES AND STOCKHOLDERS' (DEFICIT)
---------------------------------------

December 31
------------------------------
1994 1995
-------- -------

CURRENT LIABILITIES
Accrued expenses (Note 7) $ 4,188 $ 412,735

BRIDGE NOTES PAYABLE (Note 2) 1,410,763
OTHER NOTES PAYABLE (Note 4) 50,000
-------- ----------

TOTAL LIABILITIES 4,188 1,873,498
-------- ----------

COMMITMENTS (Notes 7, 8 and 9)

STOCKHOLDERS' (DEFICIT) (Notes 2 and 9)
Preferred stock, $.0001 par value;
authorized - 2,000,000 shares;
issued and outstanding - none
Common stock, $.0001 par value;
authorized - 20,000,000 shares;
issued and outstanding - 1,105,000
in 1994 and 2,472,091 in 1995 111 247
Additional paid-in capital 615,113 1,038,920
Deficit accumulated during the
development stage ( 617,515) ( 1,268,682)
-------- ----------

TOTAL STOCKHOLDERS' (DEFICIT) ( 2,291) ( 229,515)
-------- ----------

TOTAL LIABILITIES AND
STOCKHOLDERS' (DEFICIT) $ 1,897 $1,643,983
======== ==========

See notes to financial statements
- 2 -

<PAGE>

IMATEC, LTD.
------------
(A DEVELOPMENT STAGE ENTERPRISE)
--------------------------------
STATEMENT OF OPERATIONS
-----------------------
<TABLE>
<CAPTION>

Cumulative
from
Inception
Years Ended to
December 31, December 31,
----------------------------- 1995
1994 1995 (Unaudited)
-------- -------- ----------

<S> <C> <C> <C>
INCOME - consulting fees $ 1,960 $ 133,973
-------- ----------

EXPENSES
Royalties (Note 7) $420,000 420,000
Research and development 17,881 325,616
General and
administrative 99,243 164,028 598,959
-------- -------- ----------

TOTAL EXPENSES 117,124 584,028 1,344,575
-------- -------- ----------

LOSS FROM OPERATIONS ( 115,164) ( 584,028) ( 1,210,602)

INTEREST EXPENSE AND
AMORTIZATION OF DEBT
ISSUANCE COSTS (72,596) ( 72,596)

INTEREST INCOME 5,457 14,516
-------- -------- ----------

NET LOSS ($115,164) ($651,167) ($1,268,682)
======== ======== ==========

AVERAGE NUMBER OF
SHARES OUTSTANDING (Note 2) 2,210,000 2,232,978 2,213,243
========= ========= =========

NET LOSS PER COMMON SHARE ($.05) ($.29) ($.57)
==== ==== ====

</TABLE>

See notes to financial statements
- 3 -

<PAGE>

IMATEC, LTD.
------------
(A DEVELOPMENT STAGE ENTERPRISE)
--------------------------------
STATEMENT OF STOCKHOLDERS' (DEFICIT)
------------------------------------
INCEPTION TO DECEMBER 31, 1995
------------------------------
(NOTE 2)
--------

Deficit
Accumulated
Common Stock (Note 9) Additional During the
-------------------------- Paid-In Development
Shares Amount Capital Stage Total
---------- --------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Issuance of shares 1,105,000 $111 $ 889 $ 1,000
Contribution of shares ( 82,875) ( 8) 8
Issuance of shares 55,250 5 499,995 500,000
Issuance of shares 27,625 3 ( 3)
Net loss for the period inception to
December 31, 1993 (unaudited) ($ 502,351) ( 502,351)
---------- ---- ---------- ------------ ---------
Balance - December 31, 1993 (unaudited) 1,105,000 111 500,889 ( 502,351) ( 1,351)
Contribution of shares ( 12,615) ( 1) 1
Issuance of shares 12,615 1 114,223 114,224
Net loss for the year ended December 31, 1994 ( 115,164) ( 115,164)
---------- ---- ---------- ----------- ---------
Balance - December 31, 1994 1,105,000 111 615,113 ( 617,515) ( 2,291)
Issuance of shares 1,105,000 110 110
Issuance of shares under private placement 262,091 26 524,156 524,182
Expenses of private placement ( 100,349) ( 100,349)
Net loss for the year ended December 31, 1995 ( 651,167) ( 651,167)
---------- ---- ---------- ------------ ---------
Balance - December 31, 1995 2,472,091 $247 $1,038,920 ($1,268,682) ($229,515)
========== ==== ========== ============ =========

</TABLE>

See notes to financial statements
- 4 -

<PAGE>

IMATEC, LTD.
------------
(A DEVELOPMENT STAGE ENTERPRISE)
--------------------------------
STATEMENT OF CASH FLOWS
-----------------------

Years Ended Cumulative from
December 31, Inception to
-------------------------------- December 31,
1994 1995 (Unaudited)
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($115,164) ($ 651,167) ($1,268,682)
Adjustments to reconcile net loss to net
cash used in operating activities
Amortization of discount and debt issuance costs 52,147 52,147
Depreciation and other amortization 346 1,203
Increase (decrease) in cash flows from
Other current assets ( 9,715) ( 9,715)
Accrued expenses 1,948 408,547 412,735
--------- ---------- ---------

NET CASH USED IN OPERATING ACTIVITIES ( 113,216) ( 199,842) ( 812,312)
--------- ---------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of marketable securities 50,000 50,000
Investment in marketable securities ( 1,400,852) ( 1,400,852)
Increase in patents ( 11,773) ( 11,773)
Purchases of fixed assets ( 612)
---------- ---------

NET CASH USED IN INVESTING ACTIVITIES ( 1,362,625) ( 1,363,237)
---------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from private placement (net of expenses of
$358,389 and exchanges of notes payable of $125,000) 1,416,611 1,416,611
Proceeds from issuance of common stock 94,224 110 615,334
Decrease in due to/from stockholder 15,971
Proceeds from other notes payable 175,000 175,000
Payments of organization costs ( 245)
--------- ---------- ---------

NET CASH PROVIDED BY FINANCING ACTIVITIES 110,195 1,591,721 2,206,700
--------- ---------- ---------

INCREASE (DECREASE) IN CASH ( 3,021) 29,254 31,151

CASH - beginning 4,918 1,897
--------- ---------- ---------

CASH - ending $ 1,897 $ 31,151 $ 31,151
========= ========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes $812 $1,000 $3,744
==== ====== ======
Cash paid for interest NONE $3,315 $3,315
==== ====== ======
NONCASH TRANSACTIONS
In 1994, a loan payable was capitalized (Note 2).
</TABLE>

See notes to financial statements
- 5 -
<PAGE>

IMATEC, LTD.
------------
(A DEVELOPMENT STAGE ENTERPRISE)
--------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Line of Business

Imatec, Ltd. (Company) was incorporated in November 1988 to develop, market
and license image reproduction and enhancement products. The Company has been in
the development stage since its inception.

Use of Estimates

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

Debt Issuance Costs and Discounts

Debt issuance costs on the Bridge Notes (Note 2) have been capitalized and
are being amortized on the straight-line method over the term of the notes
payable.

Discounts on the Bridge Notes are being amortized on the interest method
over the term of the notes payable.

Patents

Patent costs incurred prior January 1, 1995 were charged to expense as
incurred as their realizability was uncertain and were included in research and
development expenses. Subsequently, patent costs were capitalized and are being
amortized over the lives of the patents.

Research and Development Costs and Royalty Expenses

Research and development costs and royalty expenses (Note 7) have been
charged to operations as incurred.

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<PAGE>

Loss Per Share

Loss per share was computed based on the weighted average number of common
shares and common share equivalents outstanding during the year, as restated for
the stock slit (Note 2). Warrants were not considered because they are
anti-dilutive. 1,105,000 shares issued in May 1995 have been treated as
outstanding for all periods in calculating loss per common share because such
shares were issued at prices below the proposed public offering price (Note 9)

Fully-dilutive loss per common share has not been presented because it was
anti-dilutive.

2. CAPITALIZATION

Issuance of common stock

On December 1, 1988, the Company issued 1,105,000 shares for $1,000. On
September 20, 1991, a stockholder contributed 82,875 shares to the Company and
the Company reissued 55,250 shares of common stock for $500,000 and 27,625
shares in exchange for assistance with raising equity. Also on September 20,
1991, the stockholder gave 30,300 shares of common stock of the Company for
assistance with raising equity for the Company. The Company valued the 27,625
and 30,300 shares at $25,000 and $27,421, respectively, the values of the
consulting services and charged additional paid-in-capital.

During 1994, a stockholder contributed 12,615 shares to the Company and the
Company reissued the shares for $114,224, including the capitalization of a loan
payable.

On May 30, 1995, the Company issued 1,105,000 shares of common stock in
exchange for $110.

Reverse Stock Split

On May 2, 1995, the Company had a four-for-one reverse stock split.

Reincorporation

On September 20, 1995, the Company reincorporated in Delaware, authorizing
20,000,000 shares of $.0001 par value common stock and 2,000,000 shares of
$.0001 par value preferred stock.

Stock Split

On October 19, 1995, the Company authorized a 22,100 for 1 stock split and
issued 2,210,000 shares of new common stock in exchange for 100 shares of old
common stock. All shares and per share amounts have been retroactively restated
to reflect the stock split.

- 7 -
<PAGE>

Private Placement

On November 30, 1995 and April 12, 1996, the Company had closings under a
private placement. Under the private placement, the Company issued 10%
promissory notes in the aggregate principal amount of $1,900,000 and $2,100,000
(Bridge Notes), 262,091 and 289,694 shares of common stock and warrants to
purchase 1,900,000 and 2,100,000 shares of common stock (Bridge Warrants),
respectively. The Company has allocated $2, per share, of the proceeds of the
private placement to the common stock.

In February, 1996, an investor in one unit of the first closing was
refunded $50,000 and the unit was cancelled. The cancellation has been included
net in the second closing amounts.

The Company received net proceeds from the private placement of $1,517,834
and $1,811,635, respectively, after disbursements of:

November 30 April 12
1995 1996
---------- ---------
Commission $190,000 $210,000
Non-accountable expense allowance 57,000 63,000
Other expenses of placement agent 10,166 15,365
Exchanges of notes payable 125,000 50,000
-------- --------

$382,166 $338,365
======== ========

In addition, the Company incurred additional expenses of $101,223. Total
expenses of the private placement have been allocated between the Bridge Notes
and common stock.

The Bridge Notes are payable upon the earlier of: (1) a public or other
private financing by the placement agent of $8,000,000, (2) any other public or
private placement of $4,500,000 or (3) 15 months from issuance.

Each Bridge Warrant is exercisable at $1, per warrant, commencing a year
from closing for a period of five years.

Reserved Shares

As of December 31, 1995, the Company has reserved the following shares of
common stock:

Bridge warrants 4,050,000
Placement agent warrants 4,000,000
---------

8,050,000
=========

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<PAGE>

3. MARKETABLE SECURITIES

As of December 31, 1995, marketable securities, which are classified as
available for sale, were as follows:

U.S. Treasury Bill $ 494,800
U.S. Government Money Market Fund 856,052
----------

$1,350,852
==========
4. OTHER NOTES PAYABLE

During August, September and October 1995, the Company borrowed, with
interest at 10 %, per annum, $175,000 from customers of the placement agent,
which were exchanged for units under the closings of the private placement
(Note 2).

5. INCOME TAXES

As of December 31, 1995 and 1994, the tax effects of timing differences
between financial statement and income tax reporting were as follows:

December 31,
--------------------------------
1994 1995
--------- --------
Research and development expenses $130,000 $130,000
Net operating loss carryforward 120,000 360,000
-------- --------
250,000 490,000
Valuation allowance ( 250,000) ( 490,000)
-------- --------

NONE NONE
======== ========

The Company has net operating loss carryforwards available to reduce future
taxable income of approximately $900,000, expiring through 2011.

6. RELATED PARTY TRANSACTIONS

During 1995, the Company borrowed $21,152 from a stockholder/officer on
demand, without interest, and it was repaid in December 1995.

During 1995 and 1994, a director was paid attorney's fees of $31,000 and
$1,000, respectively.

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<PAGE>

7. LICENSE AGREEMENT

On June 25, 1995, the Company was granted a license from a stockholder/
officer of the Company to make, use, sell and otherwise exploit certain
technologies under patents, including future technologies. The Company is
required to pay the stockholder/officer a non-refundable advance royalty of
$350,000, which was paid in January 1996, and, commencing July 1, 1995, an
annual royalty of $140,000. If the stockholder/officer ceases to be employed by
the Company, the annual royalty increases to $250,000. The annual royalty shall
increase at the rate of 5%, per annum. The license agreement shall end when the
last patent expires.

8. EMPLOYMENT AGREEMENT

On July 1, 1995, the Company entered into an employment agreement with a
stockholder to be President, Chief Executive Officer and Chairman of the Board
of Directors expiring on the earlier of July 1, 2000, the Company being no
longer involved in the technology business or a bankruptcy, merger or
reorganization of the Company. Compensation under the agreement shall be
$60,000, per year, 5% annual increases and a bonus equal to 1% of annual sales.
In addition, the employee shall receive director's and officer's insurance, an
automobile lease up to $8,400, per year, disability insurance for 60% of salary
through age 65, Company paid disability of 40% of salary for one year and a life
insurance policy of $1,000,000.

9. SUBSEQUENT EVENTS

Employment Agreement (Unaudited)

Effective January 3, 1996, the Company entered into an employment agreement
with a vice president of marketing expiring in one year. The agreement provides
for an annual compensation of $100,000, plus a commission equal to 4% of
revenues in excess of $2,500,000.

Lease

Effective February 1996, the Company entered into a noncancellable lease
for office space through January 1999. The lease requires minimum annual rent
and additional rent for increases in real estate taxes and operating expenses.

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<PAGE>

Minimum annual rent under the lease will be as follows:

Year Ending
December 31,
------------
1996 $ 61,952
1997 69,461
1998 71,510
1999 5,973
--------

$208,896
========
Stock Option Plan

In February, 1996, the Company adopted a nonqualified stock option plan
under which it may grant up to 500,000 shares of common stock. The Company may
not grant any options with a purchase price of less than fair market value of
the common stock as of the date of the grant. Through April 29, 1996, the
Company had not granted any options under the Plan.

Proposed Public Offering (Unaudited)

The Company anticipates a public offering in mid 1996 of 1,000,000 shares
of common stock, 4,000,000 Class A redeemable warrants and 4,000,000 Class B
redeemable warrants, at prices not yet determined. Each warrantholder will be
entitled to purchase one share of common stock at $6.50, per share, and $5.50,
per share, respectively, and will be exercisable for periods of two years and
five years from the date of the offering. The Class A and Class B warrants will
be redeemable by the Company, under certain circumstances, at $.10, per warrant,
commencing nine months and one year, respectively, from the date of offering.
The Company will also grant the underwriter an overallotment option for 45 days
from the date of the offering to purchase up to an additional 150,000 shares of
common stock, an additional 600,000 Class A warrants and 600,000 Class B
redeemable warrants.

The underwriter of the public offering will receive a discount of 10% and a
non-accountable expense allowance equal to 3% of the gross proceeds of the
public offering. The Company will also retain the underwriter as a financial
consultant for a period of two years for $48,000, payable upon closing of the
public offering. In addition, the Company has agreed to sell to the underwriter,
for nominal consideration, warrants to purchase, 100,000 shares of common stock,
400,000 Class A redeemable warrants, and 400,000 Class B redeemable warrants.
The shares and warrants under the Underwriter's Warrants will be exercisable at
prices not yet determined for a period of five years from the date the offering.

- 11 -
<PAGE>
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained in this Prospectus and
if given or made, such information or representations must not be relied upon as
having been authorized by the Company or any Underwriter. Neither the delivery
of this Prospectus nor any sale made hereunder shall, under any circumstances
create any implication that there has been no change in the affairs of the
Company since the date hereof or that information contained herein is correct as
of any date subsequent to the date hereof. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the securities
offered hereby by anyone in any jurisdiction in which such offer or solicitation
is not authorized or in which the persons making such offer or solicitation are
not qualified to do so or to anyone to whom it is unlawful to make such offer or
solicitation.

TABLE OF CONTENTS
Page
----
Prospectus Summary............ 7
The Company................... 7
The Offering.................. 9
Risk Factors.................. 11
Dilution...................... 21
Use of Proceeds............... 23
Dividend Policy............... 25
Capitalization................ 26
Selected Financial
Data......................... 28
Plan of Operations............ 30
Business...................... 32
Management.................... 40
Principal Stockholders........ 47
Selling Security Holders...... 49
Certain Transactions.......... 59
Description of
Securities................... 60
Shares Available for
Future Sale.................. 64
Underwriting.................. 65
Legal Matters................. 67
Experts....................... 67
Change in Accountants......... 68
Additional Information........ 69
Index to Financial Statements. F-0

Until _____, 1996, (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.

IMATEC, LTD. [LOGO]

1,000,000 Shares of Common Stock,
4,000,000 Class A Redeemable Warrants
and
4,000,000 Class B Redeemable Warrants

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

PROSPECTUS

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

A.S. Goldmen & Co., Inc.

____________________________ , 1996
<PAGE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification of Directors and Officers.

The Company's Certificate of Incorporation provides for indemnification
of personal liability of the Directors of the Corporation to the fullest extent
permitted by paragraph "7" of Subsection (b) of Section 102 of the General
Corporation Law of the State of Delaware.

Article VIII of the By-Laws of the Company ("By-Laws"), which is set
forth below in its entirety, provides for indemnification of officers,
directors, employees and agents substantially to the extent permitted under the
Delaware General Corporation Law.

Article VIII of the By-Laws provides as follows:

"ARTICLE VIII"

INDEMNIFICATION

The corporation shall indemnify, to the extent permitted by the General
Corporation Law of Delaware as amended from time to time, (a) each of its
present and former officers and directors, and (b) each of its present or former
officers, directors, agents or employees who are serving or have served at the
request of the corporation as an officer, director or partner (or in any similar
position) of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
any threatened, pending or completed action, suit or proceeding, whether by or
in the right of the corporation by a third party or otherwise, to which such
person is made a party or threatened to be made a party by reason of such office
in the corporation or in another corporation, partnership, joint venture, trust
or other enterprise. Such indemnification shall inure to the benefit of the
heirs, executors and administrators of any indemnified person. To the extent
permitted by the General Corporation Law of Delaware, under general or specific
authority granted by the Board of Directors, (a) the corporation by specific
action of the Board of Directors may furnish such indemnification to its agents
and employees with respect to their activities on behalf of the corporation; (b)
the corporation by specific action of the Board of Directors may furnish such
indemnification to each present or former officer, director, employee or agent
of a constituent corporation absorbed in a consolidation or merger with the
corporation and to each officer, director, agent or employee who is or was
serving at the request of such constituent corporation as an officer, director,
agent or employee of another corporation, partnership, joint venture, trust or
other enterprise; and (c) the corporation may purchase and maintain

II-1

<PAGE>

indemnification insurance on behalf of any of the officers, directors, agents or
employees whom it is required or permitted to indemnify as provided in this
Article.

Items 25. Other Expenses of Issuance and Distribution.

The estimated expenses in connection with this Offering are as follows:

SEC filing fee ................................... $ 39,472.04
NASD filing fee .................................. 11,946.89
Accounting fees and expenses* .................... 50,000.00
Legal fees and expenses* ......................... 150,000.00
Blue Sky fees and expenses* ...................... 35,000.00
Printing and engraving* .......................... 100,000.00
Transfer Agent's and Registrar fees* ............. 10,000.00
Miscellaneous expenses* .......................... 103,581.07

Total ............................................ $ 500,000.00

- ----------
* Estimated

Item 26. Recent Sales of Unregistered Securities.

In February 1994, the Company issued an aggregate of 12,615 shares of
Common Stock to two investors for aggregate gross proceeds of $114,244.00. Such
sale was made pursuant to Section 4(2) of the Securities Act.

In May 1995, the Company sold an aggregate of 1,105,000 shares of
Common Stock to four investors for aggregate gross proceeds of $110.50. Such
sale was made pursuant to Section 4(2) of the Securities Act.

In October 1995, the Company entered into a placement agent agreement
with the Underwriter, which was subsequently amended, to act as placement agent
with respect to a best efforts private placement for a minimum of $1,000,000 and
a maximum of $4,000,000 of the Company's securities. On April 12, 1996, the
Company concluded the private placement pursuant to which it sold an aggregate
of 80 units for aggregate gross proceeds of $4,000,000. Each unit consisted of
(i) a $50,000 unsecured promissory note bearing interest at the rate of 10% per
annum, (ii) 6,897 shares of Common Stock, and (iii) 50,000 Common Stock purchase
warrants exercisable at $1.00 per share. The private placement was made pursuant
to Section 4(2) of the Securities Act in compliance with Rule 506 of Regulation
D promulgated thereunder, and all of the purchasers were accredited investors,
and there was no general solicitation or advertising with respect thereto.

II-2

<PAGE>

Item 27. Exhibits.
- -------- ---------

* 1. 1 Form of Underwriting Agreement by and between the Company
and the Underwriter.

* 1. 2 Form of Underwriter's Warrant Agreement, including form
of Specimen Certificate for Underwriter's Warrant.

3. 1 Certificate of Incorporation of the Company.

3. 2 By-Laws of the Company.

* 4. 1 Specimen certificate for shares of Common Stock.

* 4. 2 Redeemable Warrant Agreement by and between the Company
and Continental Stock Transfer & Trust Company, including
a form of specimen certificate for the Redeemable
Warrants.

* 5 Opinion of Zukerman Gore & Brandeis, LLP.

* 10.1 Form of Financial Advisory and Consulting Agreement by
and between the Company and the Underwriter.

10.2 Employment Agreement by and between the Company and Dr.
Hanoch Shalit.

10.3 Form of Employment Agreement by and between the Company
and Lawrence Kollender.

10.4 License Agreement by and between the Company and Dr.
Hanoch Shalit.

* 10.5 Form of Indemnification Agreement to be entered into with
officers and directors.

10.6 Lease for the Company's principal offices located at 150
E. 58th Street, New York, NY 10155.

* 10.7 Form of Stock Option Plan.

16.1 Letter from Present, Cohen, Smallowitz & Glassman
regarding change in certifying accountants.

* 24 Consent of Zukerman Gore & Brandeis, LLP contained in
Exhibit 5.

24.1 Consent of Most Horowitz & Company.

* 24.2 Consent of Wyatt, Gerber, Burke & Badie, L.L.P.

- ----------
* To be filed by Amendment.

II-3

<PAGE>

Item 28. Undertakings.

The undersigned Registrant will provide to the Underwriter at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or controlling persons of
the Registrant pursuant to the provisions referred to in Item 24 of this
Registration Statement or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the form of a
prospectus filed by the small business issuer under Rule 424(b)(1) or (4) or
497(h) under the Securities Act as part of this Registration Statement as of the
time the Commission declared it effective.

(2) For any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
Registration Statement for the securities offered in the Registration Statement,
and that the offering of the securities at that time as the initial bona fide
offering of those securities.

Undertakings Required by Regulation S-B, Item 512(a):

The undersigned registrant hereby undertakes:

1. To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

II-4

<PAGE>

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information set forth in the registration statement;

2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.

3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.

II-5

<PAGE>

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of New York, State of New York on May 13, 1996.

IMATEC, LTD.

By:/s/ Hanoch Shalit
---------------------------------
Hanoch Shalit, President,
Chief Executive Officer,
Director and Principal
Accounting Officer

In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement was signed by the following persons in the
capacities and on the dates stated.

Signature Title Date
- --------- ----- ----

/s/ Dr. Hanoch Shalit President, Chief May 13, 1996
- ------------------------ Executive Officer,
Dr. Hanoch Shalit Director and Principal
Accounting Officer

/s/ Steven Ai Director May 13, 1996
- ------------------------
Steven Ai

/s/ Neal Factor Director May 13, 1996
- ------------------------
Neal Factor

II-6

<PAGE>

EXHIBIT INDEX

Item 27. Exhibits.
- -------- ---------

* 1.1 Form of Underwriting Agreement by and between the Company
and the Underwriter.

* 1.2 Form of Underwriter's Warrant Agreement, including form
of Specimen Certificate for Underwriter's Warrant.

3.1 Certificate of Incorporation of the Company.

3.2 By-Laws of the Company.

* 4.1 Specimen certificate for shares of Common Stock.

* 4.2 Redeemable Warrant Agreement by and between the Company
and Continental Stock Transfer & Trust Company, including
a form of specimen certificate for the Redeemable
Warrants.

* 5 Opinion of Zukerman Gore & Brandeis, LLP.

* 10.1 Form of Financial Advisory and Consulting Agreement by
and between the Company and the Underwriter.

10.2 Employment Agreement by and between the Company and Dr.
Hanoch Shalit.

10.3 Form of Employment Agreement by and between the Company
and Lawrence Kollender.

10.4 License Agreement by and between the Company and Dr.
Hanoch Shalit.

* 10.5 Form of Indemnification Agreement to be entered into with
officers and directors.

10.6 Lease for the Company's principal offices located at 150
E. 58th Street, New York, NY 10155.

* 10.7 Form of Stock Option Plan.

16.1 Letter from Present, Cohen, Smallowitz & Glassman
regarding change in certifying accountants.

* 24 Consent of Zukerman Gore & Brandeis, LLP contained in
Exhibit 5.

24.1 Consent of Most Horowitz & Company.

* 24.2 Consent of Wyatt, Gerber, Burke & Badie, L.L.P.

- ----------
* To be filed by Amendment.

<PAGE>

Form of Underwriting Agreement by and between the Company and the Underwriter.

TO COME

<PAGE>

Form of Underwriter's Warrant Agreement, including form of Specimen
Certificate for Underwriter's Warrant.

TO COME

<PAGE>

State of Delaware
Office of the Secretary of State

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

I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "IMATEC, LTD.", FILED IN THE OFFICE ON THE TWENTIETH DAY OF
SEPTEMBER, A.D. 1995, AT 9 O'CLOCK A.M.

A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS FOR RECORDING.

[SEAL OF THE STATE OF DELAWARE]

/s/ Edward J. Freel
----------------------------------------
Edward J. Freel, Secretary of State

2541134 8100 [SEAL OF SECRETARY'S OFFICE AUTHENTICATION: 7647534
OF THE STATE OF DELAWARE] DATE: 09-21-95

<PAGE>

CERTIFICATE OF INCORPORATION

IMATEC, LTD.

I, THE UNDERSIGNED, in order to form a corporation for the purposes
hereinafter stated, under and pursuant to the provisions of the General
Corporation Law of the State of Delaware, do hereby certify as follows:

FIRST: The name of the Corporation is Imatec, Ltd.

SECOND: The registered office of the Corporation in the State of Delaware
is to be located at 32 Loockerman Square, Suite L-100, Dover, Delaware 19901.
The registered office is in the county of Kent. The name of its registered agent
at that address is The Prentice-Hall Corporation System, Inc.

THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.

FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is Twenty-Two Million (22,000,000), Twenty Million
(20,000,000) of which shall be shares of common stock, the par value of each
such share is $.0001, and Two Million (2,000,000) shares of which shall be
shares of preferred stock, the par value of each such share is $.0001, all of
which preferred stock may be issued by the Board of Directors from time to time
in one or more series with such voting rights, terms of redemption, redemption
prices, liquidation preferences, and such other rights, designations and
preferences as may be determined from time to time by the Board of Directors all
without any further vote or action on the part of stockholders.

FIFTH: The name and the mailing address of the sole incorporator is:

Name Mailing Address
---- ---------------

Nancy Udolf, Esq. Zukerman Gore & Brandeis, LLP
900 Third Avenue
New York, New York 10022

SIXTH: Elections of directors need not be by ballot unless the by-laws of
the Corporation shall so provide.

SEVENTH: In furtherance and not in limitation of the powers conferred upon
the Board of Directors by law, the Board of Directors shall have power to make,
adopt, alter, amend and repeal from time to time by-laws of the Corporation,
subject to the right of the stockholders entitled to vote with respect thereto
to alter and repeal by-laws made by the Board of Directors.

EIGHTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.

NINTH: The Corporation reserves the right to amend, alter, change or repeal
any provisions contained in this certificate in the manner now or hereafter
prescribed by law, and all rights and powers conferred herein on shareholders,
directors and officers are granted subject to this reservation.

TENTH: The Corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of Delaware, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.

ELEVENTH: The personal liability of the directors of the Corporation is
hereby eliminated to the fullest extent permitted by paragraph (7) of
subsection b of Section 102 of the General Corporation Law of Delaware, as the
same may be amended and supplemented.

IN WITNESS WHEREOF, I have hereunto set my hand this 19th day of September,
1995.

/s/ Nancy Udolf
----------------------------
Nancy Udolf, Esq.

<PAGE>

BY-LAWS

of
Imatec, Ltd.

(A Delaware Corporation)

ARTICLE I

Stockholders

Section 1. Place of Meetings. Meetings of stockholders shall be held at
such place, either within or without the State of Delaware, as shall be
designated from time to time by the Board of Directors.

Section 2. Annual Meetings. Annual meetings of stockholders will be held at
such time as shall be designated from time to time by the Board of Directors. At
each annual meeting the stockholders shall elect a Board of Directors by
plurality vote and transact such other business as may properly be brought
before the meeting.

Section 3. Special Meetings. Special meetings of the stockholders may be
called by the Board of Directors, the President or any two officers of the
corporation.

Section 4. Notice of Meetings. Written notice of each meeting of the
stockholders stating the place, date and hour of the meeting shall be given by
or at the direction of the Board of Directors or such other person or persons
calling such meeting to each stockholder entitled to vote at the meeting at
least ten, but not more than sixty, days prior to the meeting. Notice of any
special meeting shall state in general terms the purpose or purposes for which
the meeting is called.

Section 5. Quorum; Adjournments of Meetings. The holder(s) of a majority
of the issued and outstanding shares of the capital stock of the corporation
entitled to vote at a meeting, present in person or represented by proxy, shall
constitute a quorum for the transaction of business at such meeting; but, if
there be less than a quorum, the holders of a majority of the stock so present
or represented may adjourn the meeting to another time, or place, from time to
time until a quorum shall be present, whereupon the meeting may be held, as
adjourned, without further notice, except as required by law, and any business
may be transacted thereat which might have been transacted at the meeting as
originally called.

Section 6. Voting. At any meeting of the stockholders every registered
owner of shares entitled to vote may vote in person or by proxy and, except as
otherwise provided by statute, in the Certificate of Incorporation or these
By-Laws, shall have one vote for each such share standing in his name on the
books of the corporation. Except as otherwise required by statute, the
Certificate of Incorporation or these By-Laws, all corporate action, other than
the election of directors, to be taken by vote of the stockholders shall be
authorized by a majority of the votes cast at such meeting by the holders of
shares entitled to vote thereon, a quorum being present.

Section 7. Inspectors of Election. The Board of Directors, or, if the Board
shall not have made the appointment, the Chairman presiding at any meeting of
stockholders, shall have the power to appoint one or more persons to act as
inspectors of election at the meeting or any adjournment thereof, but no
candidate for the office of director shall be appointed as an inspector at any
meeting for the election of directors.

Section 8. Chairman of Meetings. The Chairman of the Board, or if none, the
President, shall preside at all meetings of the stockholders. In the absence of
such officer, a majority of the members of the Board of Directors present in
person at such meeting may appoint any other officer or director to act as
Chairman of the meeting.

Section 9. Secretary of Meetings. The Secretary of the corporation shall
act as secretary of all meetings of the stockholders. In the absence of the
Secretary, the Chairman of the meeting shall appoint any other person to act as
secretary of the meeting.

ARTICLE II

Board of Directors

Section 1. Number of Directors. The number of directors which shall
constitute the Board of Directors shall be not less than one (1) nor more than
ten (10). The Board of Directors shall initially consist of one (1) member;
provided, however, that the number of directors may from time to time be
increased or decreased by the Board of Directors or by the stockholders.

Section 2. Vacancies. Whenever any vacancy shall occur in the Board of
Directors by reason of death, resignation, increase in the number of directors
or otherwise, it may be filled only by a majority of the directors then in
office, although less than a quorum, or by the sole remaining director, for the
balance of the term, or, if the Board has not filled such vacancy or if there
are no remaining directors, it may be filled by the stockholders.

Section 3. First Meeting. The first meeting of each newly elected Board of
Directors, of which no notice shall be necessary, shall be held immediately
following the annual meeting of stockholders or any adjournment thereof at the
place the annual meeting of stockholders was held at which such directors were
elected, or at such other place as a majority of the members of the newly
elected Board who are then present shall determine, for the election or
appointment of officers for the ensuing year and the transaction of such other
business as may be brought before such meeting.

Section 4. Regular Meetings. Regular meetings of the Board of Directors,
other than the first meeting, may be held without notice at such times and
places as the Board of Directors may from time to time determine.

Section 5. Special Meetings. Special meetings of the Board of Directors may
be called by order of the Chairman, the President or any two directors. Notice
of the time and place of each special meeting shall be given by or at the
direction of the person or persons calling the meeting or by telephoning,
telegraphing or delivering personally the same at least twenty-four hours before
the meeting to each director. Except as otherwise specified in the notice
thereof, or as required by statute, the certificate of Incorporation or these
By-Laws, any and all business may be transacted at any special meeting.

Section 6. Place of Conference Call Meeting. Any meeting at which one or
more of the members of the Board of Directors or of a committee designated by
the Board of Directors shall participate by means of conference telephone or
similar communications equipment shall be deemed to have been held at the place
designated for such meeting, provided that at least one member is at such place
while participating in the meeting.

Section 7. Organization. Every meeting of the Board of Directors shall be
presided over by the Chairman of the Board or the President. In the absence of
any of such officers, a presiding officer shall be chosen by a majority of the
directors present. The Secretary of the corporation shall act as secretary of
the meeting, but, in his absence, the presiding officer may appoint any person
to act as secretary of the meeting.

Section 8. Quorum; Vote. A majority of the directors then in office (but in
no event less than two-thirds of the total number of directors) shall constitute
a quorum for the transaction of business, but less than a quorum may adjourn any
meeting to another time or place from time to time until a quorum shall be
present, whereupon the meeting may be held, as adjourned, without further
notice. Except as otherwise required by statute, the Certificate of
Incorporation or these By-Laws, all matters coming before any meeting of the
Board of Directors shall be decided by the vote of a majority of the directors
present at the meeting, a quorum being present.

Section 9. Removal of Directors. Any one or more of the directors shall be
subject to removal with or without cause at any time by the stockholders.

Section 10. Committees of Directors. The Board of Directors may, by
resolution passed by a majority of the Board, designate one or more committees,
each committee to consist of one or more directors of the corporation. The Board
of Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member of the committee.
In the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all of the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the Certificate of Incorporation,
adopting an Agreement of Merger or Consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
By-laws of the corporation; and, unless the resolution or the Certificate of
Incorporation expressly so provides, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors. Each committee
shall keep regular minutes of its meetings and report the same to the Board of
Directors when required.

ARTICLE III

Notices

Section 1. General. Whenever, under the provisions of the statutes or of
the Certificate of Incorporation or of these By-laws, notice is required to be
given to any director or stockholder, it shall not be construed to mean personal
notice, but notice to such director or stockholder, at his address as it appears
on the records of the corporation, with postage thereon prepaid, and such notice

<PAGE>

shall be deemed to be given at the time when the same shall be deposited in the
United States mail or with an overnight courier service. Notice to directors may
also be given personally or by telephone, telegram, telex or facsimile.

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

ARTICLE IV

Officers

Section 1. General. The Board of Directors shall elect the officers of the
corporation, which shall include a President, a secretary and a treasurer and
such other or additional officers (including, without limitation, a Chairman of
the Board, one or more Managing Directors, one or more Vice-Chairmen of the
Board, a Chief Executive Officer, a Chief Operating Officer, Vice Presidents,
Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers) as
the Board of Directors may designate.

Section 2. Term of Office; Removal and Vacancy. Each officer shall hold his
office until the meeting of the Board of Directors following the next annual
meeting of stockholders and until his successor has been elected and qualified,
or until his earlier resignation or removal. Any officer of agent shall be
subject to removal with or without cause at any time by the Board of Directors.
Vacancies in any office, whether occurring by death, resignation, removal or
otherwise, may be filled by the Board of Directors.

Section 3. Powers and Duties. Each of the officers of the corporation
shall, unless otherwise ordered by the Board of Directors, have such powers and
duties as generally pertain to their respective offices as well as such powers
and duties as from time to time may be conferred upon him by the Board of
Directors. Unless otherwise ordered by the Board of Directors after the adoption
of these By-Laws, the Chairman, or if none, the President, shall be the chief
executive officer of the corporation.

Section 4. Power to Vote Stock. Unless otherwise ordered by the Board of
Directors, either the Chairman or President shall have full power and authority
on behalf of the corporation to attend and to vote at any meeting of
stockholders of any corporation in which the corporation may hold stock, and may
exercise on behalf of the corporation any and all of the rights and powers
incident to the ownership of such stock at any such meeting and shall have power
and authority to execute and deliver proxies, waivers and consents on behalf of
the corporation in connection with the exercise by the corporation of the rights
and powers incident to the ownership of such stock. The Board of Directors, from
time to time, may confer like powers upon any other person or persons.

ARTICLE V

Capital Stock

Section 1. Certificates of Stock. Certificates representing shares of stock
of the corporation shall be in such form complying with the statute as the Board
of Directors may from time to time prescribe and shall be signed by the Chairman
of the Board, or a Vice-Chairman of the Board or the President or a
Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary.

Section 2. Transfer of Stock. Shares of capital stock of the corporation
shall be transferable on the books of the corporation only by the holder of
record thereof, in person or by duly authorized attorney, upon surrender and
cancellation of certificates for a like number of shares, with an assignment or
power of transfer endorsed thereon or delivered therewith, duly executed, and
with such proof of the authenticity of the signature and of authority to
transfer, and of payment of transfer taxes, as the corporation or its agents may
require.

Section 3. Ownership of Stock. The corporation shall be entitled to treat
the holder of record of any share or shares of stock as the owner thereof in
fact and shall not be bound to recognize any equitable or other claim to or
interest in such shares on the part of any other person, whether or not
expressly provided by law.

ARTICLE VI

Miscellaneous

Section 1. Corporate Seal. The seal of the corporation shall be circular in
form and shall contain the name of the corporation and the year and State of
incorporation.

Section 2. Fiscal Year. The Board of Directors shall have power to fix, and
from time to time to change, the fiscal year of the corporation.

<PAGE>

ARTICLE VII

Amendment

The Board of Directors shall have the power to adopt, amend or repeal the
By-Laws of the corporation subject to the power of the stockholders to amend or
repeal the By-Laws made or altered by the Board of Directors.

ARTICLE VIII

Indemnification

The corporation shall indemnify, to the extent permitted by the General
Corporation Law of Delaware as amended from time to time, (a) each of its
present and former officers and directors, and (b) each of its present or former
officers, directors, agents or employees who are serving or have served at the
request of the corporation as an officer, director or partner (or in any similar
position) of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
any threatened, pending or completed action, suit or proceeding, whether by or
in the right of the corporation by a third party or otherwise, to which such
person is made a party or threatened to be made a party by reason of such office
in the corporation or in another corporation, partnership, joint venture, trust
or other enterprise. Such indemnification shall inure to the benefit of the
heirs, executors and administrators of any indemnified person. To the extent
permitted by the General Corporation Law of Delaware, under general or specific
authority granted by the Board of Directors, (a) the corporation by specific
action of the Board of Directors may furnish such indemnification to its agents
and employees with respect to their activities on behalf of the corporation; (b)
the corporation by specific action of the Board of Directors may furnish such
indemnification to each present or former officer, director, employee or agent
of a constituent corporation absorbed in a consolidation or merger with the
corporation and to each officer, director, agent or employee who is or was
serving at the request of such constituent corporation as an officer, director,
agent or employee of an other corporation, partnership, joint venture, trust or
other enterprise; and (c) the corporation may purchase and maintain
indemnification insurance on behalf of any of the officers, directors, agents or
employees whom it is required or permitted to indemnify as provided in this
Article.

<PAGE>
Exhibit 10.2

AGREEMENT

THIS AGREEMENT made as of this first day of July, 1995, by and between:

IMATEC Limited, a corporation of New York, (hereinafter called "Employer"
or "IMATEC") and Hanoch Shalit, Ph.D. (hereinafter called "Employee")

WITNESSETH

WHEREAS, the Employee possesses to knowledge, skills and experience
necessary to serve and advance the operations and business of the Employer in
the capacity designated in this Agreement; and

WHEREAS, Employer desires to employ the Employee to serve in the capacity
designated in this Agreement, and Employee is willing to accept employment as
such;

NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties intending to be legally bound agree as follows;

1. EMPLOYMENT:
The Employer hereby employs the Employee and the Employee hereby accepts
employment in the positions of President, CEO, and Chairman of the Board of
Directors, under and subject to the terms and conditions contained in this
Agreement

2. TERM OF EMPLOYMENT:
Subject to the provisions for termination of employment as hereinafter
provided, Employee's term of employment by Employer under this Agreement shall
commence on July 1st 1995 and terminate the earlier of (i) July 1, 2000; (ii)
IMATEC no longer involved in the imaging technology business; (iii) The
bankruptcy or merger of IMATEC or its acquisition by another.

3. EXTENT OF SERVICES:
Employee shall be a full-time employee, in the above named positions and
shall devote that amount of his ability, working time and energy to serve and
advance the operations and business of the Employer and to perform his duties in
a faithful and diligent manner hereunder. The duties of Employee in the capacity
of employment designated in this Agreement shall be those set forth from time to
time in the By-Laws of the Employer and any and all other duties which Employee
shall reasonably be directed to perform by the Board of Directors of the
Employer during the term of his employment.

1
<PAGE>

4. WORKING FACILITIES:
The Employee shall be furnished with a private office, stenographic help,
and such other facilities and services suitable to his position and adequate for
the performance of his duties.

5. COMPENSATION:
For all services performed by Employee in any capacity hereunder,
Employee shall receive remuneration as designated in Schedule 1. Employer may
authorize additional compensation by way of salary, bonus or otherwise, as it
deems appropriate.

The compensation to Employee for services provided according to paragraph
1 above, may be terminated following the termination procedure as outlined in
paragraphs 2, and 6. Upon termination, the compensation and benefits for the
above services will terminate as well. However, the payment amount of royalties
for the use of the patents as described in the Exclusive License Agreement will
change according to paragraph 6 below, and will continue to be paid to Employee,
regardless if the Employee is assigned a position or spends time on Employer's
business, and irrespective of Employee's status in the Company and/or Employee's
relationship with Employer, in accordance with the Exclusive License Agreement
of Employee with IMATEC.

6. TERMINATION:
Notwithstanding any other provision hereof, Employee's positions as
President and/or CEO, and/or Chairman of the Board, hereunder may be ended under
terms specified in Paragraph 2 above (Term of Employment). However, upon such
ending of positions, the payment of Royalties for the use of the patents (as
outlined in paragraph 5, Schedule 1, and the Exclusive License Agreement), will
increase to Two hundred and fifty thousands dollars ($250,000) per year or
twenty thousands eight hundred thirty three dollars per month, and will continue
as long as the Employer, its affiliates and/or successors, are in existence,
regardless if Employee is, or is not assigned another position by Employer,
since such compensation is governed by the Exclusive License Agreement which is
attached hereto.

2
<PAGE>

Employee's position as President and/or CEO, and/or Chairman of the
Board, hereunder may be ended immediately only under the following conditions:

A. Upon the death of the Employee or disability of Employee for a period
longer than one year, or Employee's change of position by Employer upon good and
sufficient cause.

B. "Good and sufficient cause" is limited to:

(i) Dishonesty detrimental to the best interests of Employer or
any of its affiliates;

(ii) Willful disloyalty to Employer or any of its affiliates.

7. BENEFITS:
Employee shall be entitled to receive all benefits generally made
available to employees of his class of Employees. These benefit currently
include but are not limited to those set forth in Schedule 2.

8. DISCLOSURE OF INFORMATION
A. Employee recognizes that by reason of employment with Employer, he has
engaged in and will engage in and has gained and will gain knowledge of
information, developments, research projects, manufacturing and trade secrets,
know-how and business confidences relating to, and concerned with, the past,
present and future business operations, products and policies of the Employer,
its affiliates, suppliers, customers and other persons. Employee hereby agrees
to hold as secret and confidential any and all such information that has been or
will be disclosed to him by Employer, or which he has learned or will learn of
by virtue of employment with Employer.

B. Employee hereby agrees not to use such information for his own benefit
or to disclose or to use such information for the benefit of others, during the
term of his employment, without the written consent of Employer, until such
information shall become public knowledge.

Employee acknowledges that all lists, books, records, literature,
products and any other materials owned by Employer or its affiliates or used by
them in connection with the conduct of their business, shall at all times
remain the property of Employer and its affiliates and that upon termination of
said termination, Employee hereby agrees to surrender to Employer and its
affiliates all such lists, books, records, literature, products and other
materials immediately thereupon.

3
<PAGE>

C. Employee agrees to communicate to Employer promptly, in writing, all
inventions, discoveries and improvements, whether or not patentable, which
Employee may conceive or make, either solely or jointly with others, in any
field and of any products, during the term of this employment.

D. Employee is the inventor and owner of the following patents:

o Method and System for Improved Tone and Color Reproduction of Electronic
Image on Hard Copy Using a Closed Loop Control, H. Shalit, US Patent number
5,345,315, issued: September 6, 1994

o Method and System In Video Image Reproduction, H. Shalit, US Patent number
5,115,229, Issued: May 19, 1992

o Method and System In Video Image Hard Copy Reproduction, H. Shalit, US
Patent number 4,939,581, issued: July 3, 1990

o Method and System in Video Image Hard Copy Reproduction, H. Shalit,
International Patent protection applied: June 25,1990

Under the Exclusive License Agreement Employee allows Employer to use and
sub-license these patents, and any other patent issued to Employee, royalties
paid, as long as the Employee receives the royalty and compensation therein, and
as long as the Employer, its affiliates and/or successors, are in existence. It
is understood by and between the parties that all necessary costs of obtaining
and securing and maintaining such patents shall be paid for solely by Employer.
Employee will also provide Employer with free consultation relating to these
patents as long as Employee's positions as defined in Paragraph 1, are not
terminated.

E. Employee hereby agrees to take whatever reasonable steps are requested
by Employer to secure patent or other legal protection on such inventions,
discoveries and improvements in any and all countries. The Employee will own the
patents, however, the Employer will have the right to use and sub-license such
patents as long as Employer, its affiliates and/or successors, are in existence,
in accordance with the Exclusive License Agreement. It is understood by and
between the parties that all necessary costs of making and securing such patents
shall be paid for solely by Employer.

4
<PAGE>

9. COVENANT NOT TO COMPETE:
A. Employee hereby agrees that he will not, during the term of his full
time employment by Employer, within the United States and Canada, engage in any
business or perform any service, directly or indirectly, in competition with the
business of Employer or any of its affiliates, or have any interest, whether as
proprietor, partner, major stockholder, principal, agent, director or officer in
any enterprise which shall so engage.

B. In furtherance of the foregoing, and not in limitation thereof,
Employee hereby agrees, during the period of non-competition referred to in
subparagraph A above, not to directly or indirectly solicit or service in any
way, on behalf of himself or on behalf of or in conjunction with others, for any
image technology product or service, any client or customer, or prospective
client or customer, who has been solicited or serviced by Employer or any
affiliate of Employer as long as Employer, its affiliates and/or successors, are
in existence.

C. If any court shall determine that the duration of geographical limits
of any restriction contained in this paragraph are unenforceable, it is the
intention of the parties that the restrictive covenant set forth herein shall
not thereby be terminated, but shall be deemed amended to the extent required to
render it valid and enforceable, such amendment to apply only with respect to
the operation of this paragraph in the jurisdiction of the court which has made
such adjudication.

10. REMEDIES OF EMPLOYER:
Employee acknowledges that the restrictions contained in paragraphs 8 and
9 of this Agreement are a reasonable and necessary protection of the legitimate
interests of Employer, that any violation of them would cause substantial injury
to Employer, and that Employer would not have entered into this Agreement with
Employee without receiving the additional consideration of Employee binding
himself to said restrictions. In the event of any violation of the said
restrictions, Employer shall be entitled, in addition to any other remedy, to
preliminary and permanent injunctive relief.

<PAGE>

11. IMPEDIMENT:
A. Employee hereby represents, warrants and agrees that his execution and
delivery of this Agreement and performance of his duties and obligations
hereunder will not violate the provisions of any employment trade secret,
patent, non-competition or other agreements, oral or written, court order or
instrument to which Employee is a party or is bound, or result in a breach of
or constitute a default under any of the same.

B. Employee hereby agrees to comply promptly with any reasonable requests
made from time to time by the Board of Directors of Employer for full disclosure
of any of such agreements, court orders or instruments described in subparagraph
A above and any consulting or other business activities engaged in by Employee
during the term of his employment hereunder.

12. DEFINITIONS:
The following definitions shall apply for the purposes of this Agreement
to the terms listed below:

A. "Business of Employer" shall mean the business of Employer, whether
presently conducted or hereafter engaged in by Employer at any time during the
term of this Agreement.

B. "Disability" shall mean the inability of Employee due to illness,
injury or other incapacitating cause to perform the usual duties required to be
performed by him pursuant hereto for a continuing period of four (4) months.

13. SEVERABILITY:
If any provision of this Agreement shall be held invalid or
unenforceable, the remainder of this Agreement shall, nevertheless, remain in
full force and effect. If any provision is held invalid or unenforceable with
respect to particular circumstances, it shall, nevertheless, remain in full
force and effect in all other circumstances.

14. Consent to Jurisdiction:
Each party irrevocably submits to the jurisdiction of any New York State
court seating in the borough of Manhattan. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York.

<PAGE>

15. MISCELLANEOUS:
A. In the event any suit or other action is commenced involving the
Employee, as a result of his connection with the Employer, the Employer will
bear all the costs associated with the action.

B. In the event any suit or other action is commenced with respect to the
interpretation or enforcement of any provision of this Agreement, the prevailing
party shall be entitled, in addition to any other sums to which such party may
be entitled, to recover from the other party the reasonable fees and
disbursements of counsel retained to investigate and pursue such matter.

C. Employee shall not be required by the Employer to relocate outside the
New York, NY area during the term of this Agreement.

16. NOTICE:
All notices required to be given under the terms of this Agreement shall
be in writing, shall be effective upon receipt, and shall be delivered to the
addressee in person or mailed by certified mail, return receipt requested:

If to Employer, addressed to:
IMATEC Ltd.
86 Edwards Street(2A)
Roslyn Heights, NY 11577
Attention: President

If to Hanoch Shalit (Ph.D.), addressed to:
86 Edwards Street (2A)
Roslyn Heights, NY 11577

or to such other address as a party shall have designated for notices to
be given to him or it by notice given in accordance with this paragraph.

17. BENEFIT:
This Agreement shall inure to and be binding upon the parties hereto, the
successors and assigns of Employer and the heirs and personal representatives of
Employee.

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<PAGE>

18. WAIVER:
The waiver by either party of any breach or violation of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach or violation hereof.

19. GOVERNING LAW:
This Agreement has been negotiated and executed in the State of New York
and the law of that state shall govern its construction and validity.

20. ENTIRE AGREEMENT:
This Agreement contains the entire Agreement between the parties hereto.
No change, addition or amendment shall be made except by written agreement
signed by the parties hereto.

IN WITNESS WHEREOF, the parties have hereunto executed this Agreement on
the day and year first above written.

By IMATEC Ltd. Hanoch Shalit Witnessed by: Michael Cohen
------------- -------------
Witnessed by: M. Sandelfin
-------------
By Hanoch Shalit, Ph.D. Hanoch Shalit Witnessed by: Michael Cohen
------------- -------------
Witnessed by: M. Sandelfin
-------------

<PAGE>

SCHEDULE 1.
COMPENSATION

Employee shall receive the following as long as Employee is an employee
of Employer in the positions described in paragraph 1 above:

I. An annual salary of $60,000, paid monthly, in advance, on the first
day of each month.

II. The above monies payable to Employee shall be increased at an annual
rate of five percent (5%).

III. Benefits as described in Schedule 2 below.

IV. In addition to the above payments the Employer, will pay to Employee
bonuses, on an annual basis, under the following conditions:
one percent (1%) for every $1,000,000 in annual sales achieved by
the Employer as long as Employee is a full time employee of the
Employer.

Note: Under an Exclusive License Agreement between Hanoch Shalit (Ph.D.)
and IMATEC Ltd., there is a minimum royalty of $11,666 per month, which (i) is
increased to $20,833 a month upon Employee ceasing to be employed by Employer,
and (ii) increased at an annual rate of five percent (5%).

<PAGE>

SCHEDULE 2.

BENEFITS

Employee shall receive from the Employer the following benefits, as long
as the Employee is a full time employee of Employer.

Paid health insurance,

Paid Director and Officer liability insurance,

The use of a company car, lease ranging from $600 to $700 per month, paid
by the Employer,

In case of death of the Employee, the above benefits will continue for
the beneficiaries for a period of 180 days.

Paid long term disability insurance for 60% of salary until the age of
65, and payment of 40% of salary for one year, paid by the Employer,

Paid personal life insurance coverage,

Paid twenty (20) vacation days per year, and the customary holidays in
New York City.

<PAGE>
Exhibit 10.3

AGREEMENT

THIS AGREEMENT made as of this 3rd day of January, 1996,
by and between IMATEC Limited, a corporation of Delaware, (hereinafter
called "Employer"or "IMATEC") and Lawrence P. Kollender (hereinafter
called Employee").

W I T N E S E T H

WHEREAS, the Employee possesses the knowledge, skills
and experience necessary to serve and advance the operations and
business of the Employer in the capacity designated in this Agreement;
and

WHEREAS, Employer desires to employ the Employee to
serve in the capacity designated in this Agreement, and Employee is
willing to accept employment as such; and

NOW, THEREFORE, in consideration of the mutual covenants
hereinafter contained, the parties intending to be legally bound agree
as follows,

1. EMPLOYMENT:

The Employer hereby employs the Employee and the
Employee hereby accepts employment in the positions of Vice President -
Marketing and Sales, under and subject to the terms and conditions
contained in this Agreement.

<PAGE>

2. TERM OF EMPLOYMENT:

Subject to the provisions for termination of employment
as hereinafter provided, Employee's term of employment by Employer
under this Agreement shall commence on January 1st 1996 and terminate
the earlier of (i) December 31, 1996; (ii) IMATEC is no longer involved
in the imaging technology business; (iii) Disability of Employee.

3. EXTENT OF SERVICES:

Employee shall be a full-time employee, in the above
named position and shall devote that amount of his ability, working
time and energy to serve and advance the operations and business of the
Employer and to perform his duties in a faithful and diligent manner
hereunder. The duties of Employee in the capacity of employment
designated in this Agreement shall be those set forth by the Employer
consistent with duties and responsibilities considered typical of the
above designated position. The employee will report directly to the
President of the Employer during the term of his employment.

4. COMPENSATION:

For all services performed by Employee in the described
capacity hereunder, Employee shall receive remuneration as designated
in Schedule 1.

The compensation to Employee for services provided according
to paragraph 1 above, may only be terminated following the termination
procedure as outlined in paragraphs 2, and 5. Upon termination, the
compensation and benefits for the above services will terminate as

<PAGE>

well. However, if the commission to Employee as described in Schedule 1,
exceeds the draw amount described in Schedule 1, at the time of
Termination, all sales invoices closed by the Employee by the date of
Termination will be honored, and the commission will be paid to the
Employee, provided that payment for these invoices is received by IMATEC
within a twelve (12) month period after Termination.

5. TERMINATION:

Notwithstanding any other provision hereof, Employee's
employment, hereunder may be ended at any time for any cause upon
written notice of thirty (30) days and no later than under terms
specified in Paragraph 2 above (Term of Employment). However, upon such
ending of employment:

A. The Draw and the Commission in excess of the draw
(defined in Schedule 1), and business expenses up to the time of
Termination will be paid in full.

B. If the commission to Employee as described in
Schedule 1, exceeds the draw amount described in Schedule 1, at the
time of Termination, Employee will be allowed to close outstanding
deals at his own expense. All sale invoices closed by the Employee, by
the date termination plus two months, will be honored, and the
commission will be paid to the Employee, provided that payment for
these invoices is received by IMATEC within a twelve (12) month period
after Termination.

C. Employee must provide Employer at least thirty (30)
days written notice prior to resignation.

<PAGE>

6. BENEFITS:

Employee shall be entitled to receive all benefits set
forth in Schedule 2.

7. WORKING FACILITIES:

The employee shall be furnished with an office,
administrative and stenographic help, and such other facilities,
services, and expense reimbursement suitable to his position and
adequate for the performance of his duties. The Employee will work at
the corporate headquarters with the exception of travel for business.

8. DISCLOSURE OF INFORMATION:

A. Employee recognizes that by reason of employment with
Employer, he has engaged in and will engage in and has gained and will
gain knowledge of information, developments, research projects,
manufacturing and trade secrets, know-how and business confidences
relating to, and concerned with, the past, present and future business
operations, products and policies of the Employer, its affiliates,
suppliers, customers and other persons. Employee hereby agrees to hold
as secret and confidential any and all proprietary trade secret
information that has been or will be disclosed to him by Employer, or
which he has learned or will learn of by virtue of employment with
Employer, excluding information which Employee can establish was
already known to him or which becomes public trough no fault of
Employee or which is obtained from another lawful source.

<PAGE>

B. Employee hereby agrees not to use such information
for his own benefit or to disclose or to use such information for the
benefit of others, during the term of his employment, and for a period
of three years after termination of employment, without the written
consent of Employer, until such information shall become public
knowledge.

Employee acknowledges that all lists, books, records,
literature, products and any other materials owned by Employer or its
affiliates or used by them in connection with the conduct of their
business, shall at all times remain the property of Employer and its
affiliates and that upon termination of Employee hereby agrees to
surrender to Employer and its affiliates all such lists, books,
records, literature, products and other materials immediately
thereupon.

C. Employee hereby agrees, for a period of three (3)
years following termination for any reason, not to solicit or endeavor
in any manner to entice away, any other person, who was an employee of
the employer during his period of service with Employer.

D. Employee agrees to communicate to Employer
promptly, in writing, all inventions,discoveries and improvements,
whether or not patentable, which Employee may conceive or make, either
solely or jointly with others, in the Employer's stated business fields
and related product areas, during the term of this employment.

E. Employee hereby agrees to take whatever reasonable
steps are requested by Employer to secure patent or other legal

<PAGE>

protection on such inventions, discoveries and improvements in any and
all countries. The Employer will own the patents. It is understood by
and between the parties that all necessary costs of making and securing
such patents shall be paid for solely by Employer.

9. COVENANT NOT TO COMPETE:

A. Employee hereby agrees that he will not, during the
term of his full time employment by Employer, and for a period of three
years after Termination of employment, engage in any business or
perform any service, directly or indirectly, in competition with the
business of Employer or any of its affiliates within the United States
and Canada, or have any interest, whether as proprietor, partner, major
stockholder(greater than 50%), principal, agent, director or officer in
any enterprise which shall so engage.

B. In furtherance of the foregoing, and not in
limitation thereof, Employee hereby agrees, during the period of
non-competition referred to in subparagraph A above, not to directly or
indirectly solicit or service in any way, on behalf of himself or on
behalf of or in conjunction with others, for any image technology
product or service, any client or customer, or prospective client or
customer, who has been solicited or serviced by Employer or any
affiliate of Employer as long as Employer, its affiliates and/or
successors, are in existence.

C. If any Court shall determine that the duration or
geographical limits or any restriction contained in this paragraph is
unenforceable, it is the intention of the parties that the restrictive
covenant set forth herein shall not thereby be terminated, and shall be
amended as determined by the Court to the extent required to render it
valid and enforceable.

<PAGE>

D. Employee acknowledges that he is being paid
additional consideration in the form of 4% on value-added revenues, in
excess of $2.5 million per annum received by the Company.

10. REMEDIES OF EMPLOYER:

Employee acknowledges that the restrictions contained in
paragraphs 8 and 9 of this Agreement are a reasonable and necessary
protection of the legitimate interests of Employer, that any violation
of them would cause substantial injury to Employer, and that Employer
would not have entered into this Agreement with Employee without
receiving the additional consideration of Employee binding himself to
said restrictions. In the event of any violation of the said
restrictions, Employer shall be entitled, in addition to any other
remedy,to preliminary and permanent injunctive relief.

11. IMPEDIMENT:

A. Employee hereby represents, warrants and agrees that
his execution and delivery of this Agreement and performance of his
duties and obligations hereunder will not violate the provisions of any
employment, trade secret, patent, non-competition or other agreements,
oral or written, court order or instrument to which Employee is a party
or is bound, or result in a breach of or constitutes a default under
any of the same.

<PAGE>

B. Employee hereby agrees to comply promptly with any
reasonable requests made from time to time by the Board of Directors or
President of Employer for full disclosure of any agreements, court
orders or instruments described in subparagraph A above and any other
business agreements relating to imaging technology by the Employee
activities engaged in by Employee during the term of his employment
hereunder, from the date this agreement becomes effective until its
expiration. Employee affirms that he is not aware of any previous
agreements which would contradict the terms of this contract.

12. DEFINITIONS:

The following definitions shall apply for the purposes of
this Agreement to the terms listed below

A. "Disability" shall mean the inability of Employee due to
illness, injury or other incapacitating cause to perform the usual
duties required to be performed by him for a period of four (4) months,
during any twelve (12) month period.

13. SEVERABILITY:

If any provision of this Agreement shall be detemined, by
a court of law or equity having jurisdiction, to be unenforceable,
void, or unreasonable, all other provisions of this Agreement shall be
complied with as if such unenforceable or void provision did not exist.

<PAGE>

14. CONSENT TO JURISDICTION:

In the event if Employee sues Imatec, the Employee
irrevocably submits to the jurisdiction of any New York State Court.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.

15. MISCELLANEOUS:

A. The Corporation shall indemnify the Employee in his
capacity as an Officer to the broadest extent allowable pursuant to
Federal, State and local law.

16. NOTICE:

All notices required to be given under the terms of this
Agreement shall be in writing, shall be effective upon receipt, and
shall be delivered to the addressee in person or mailed by certified
mail, return receipt requested.

If to Employer, addressed to:

IMATEC LTD.
150 East 58th Street
21st Floor
New York, NY 10155

If to Lawrence P. Kollender, addressed to.
40 Fox Ridge
Roslyn, New York 11576-2830

or to such other address as a party shall have designated for notices
to be given to him or it by notice given in accordance with this
paragraph.

<PAGE>

17. BENEFIT:

This Agreement shall inure to and be binding upon the
parties hereto, the successors and assigns of Employer and the heirs
and personal representatives of Employee.

18. WAIVER:

The waiver by either party of any breach or violation of
any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach or violation hereof.

19. GOVERNING LAW:

This Agreement has been negotiated and executed in the
State of New York and the law of that state shall govern its
construction and validity.

(DELIBERATELY LEFT BLANK)

<PAGE>

20. ENTIRE AGREEMENT:

This Agreement contains the entire Agreement between the
parties hereto. No change, addition or amendment shall be made except
by written agreement signed by the parties hereto.

IN WITNESS WHEREOF, the parties have hereunto executed
this Agreement on the day and year first above written.

By IMATEC, Ltd.

------------------
Dr. Hanoch Shalit
President

Witnessed by _________________ Date:________

- ------------------------
By Lawrence P. Kollender

Witnessed by _________________ Date:________

<PAGE>

SCHEDULE 1.

COMPENSATION

Employee shall receive the following as long as Employee
is an employee of Employer in the positions described in paragraph 1
above,

I. An annual salary of $100,000, paid monthly, on the
last day of each month.

II. The commission under paragraph 9.D are four percent
(4%) of value-added revenues received by the Employer above 2.5 million
dollars per annum. Value-added revenues are defined as the gross
revenues received on all IMATEC products and services, including but
not limited to IMAGE-RIGHT, IMAGE-RIGHT Ultra, subsequent new products,
license fees, royalty payments, consulting fees and the like, less only
the cost of goods purchased from outside sources e.g. films, work
stations and electronic components, purchased from an outside source.

III. The commission earned on sales over $2.5 million per
annum calculated in the manner stated in Paragraph II. above, will be
paid to Employee within 30 days of the end of each quarter. If at the
end of a calendar year it is established that there has been an
overpayment of commissions during earlier quarters, the excess
commissions that were paid will be returned pro rata by the Employee
within 30 days from notice of agreement on the calculation. No
reduction or refund shall be required however where such cancellation
or refund is due to inadequate or incomplete fulfillment of an order or
contract, or for other causes attributable to IMATEC, and Employee
shall have reasonable access to the records of all such contracts,
cancellations or refunds.

<PAGE>

SCHEDULE 2.

BENEFITS

In addition to applicable Federal and State mandatory
benefits (Social Security, Workman's Compensation, etc.) Employee shall
receive from the Employer the following benefits, as long as the
Employee is a full time employee of Employer: (I) Paid health insurance
premiums for Employee and spouse. (II) Paid Director and Officer
liability insurance. (III) Paid fifteen (15) vacation and personal days
per full year, and the customary holidays in New York City. Unused
vacation time, proportional to the duration of employment, will be
compensated for only in the event of early termination.

<PAGE>

EXCLUSIVE LICENSE AGREEMENT

This Agreement made as of June 25, 1995 by and between IMATEC, LTD., a
New York corporation with its principal place of business at 86 Edwards Street
(2A), Roslyn Heights, New York 11577 (hereinafter referred to as "Imatec") and
HANOCH SHALIT Ph.D., having his address at 86 Edwards Street (2A), Roslyn
Heights, New York 11577 (hereinafter referred to as "Shalit").

W I T N E S S E T H:

WHEREAS, Shalit has developed technologies for enhancing transmitted
image reproduction termed herein "Patentable Image Technology" and more fully
described in Par. 1.1; and

WHEREAS, Imatec desires to license the technologies described in
Par. 1.1 from Shalit in order to make, use and sell thereunder as well as to
enter into sublicensing agreements with others;

NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties intending to be legally bound hereby agree as
follows:

<PAGE>

1. Definitions.

1.1 Affiliate shall mean a corporation or other entity that controls,
is controlled by or is under common control with, the designated party.
"Control" shall mean the ownership, directly or indirectly, through one or more
intermediaries, of at least thirty percent (30%) of the shares of stock entitled
to vote for the election of directors in the case of a corporation, and at least
thirty percent (30%) of the interests in profits in the case of a business
entity other than a corporation.

1.2 Successor shall mean an affiliate or any other company or business
entity who assumes a substantial part of the business, rights or obligations of
Imatec or who otherwise continues the business or corporate form of Imatec.

1.3 Patentable Image Technology shall mean:

1. United States Patent 4,939,581 issued July 3, 1990

2. United States Patent 5,115,229 issued May 19, 1992

3. United States Patent 5,345,315 issued September 6, 1994

4. PCT - Japan - Application 02-511276

5. PCT - Europe - Application 90912055.2

6. Reissues, continuations, divisions and continuations-in-part
of the above-listed patents and patent applications; and

7. Inventions made by Shalit in the course of his employment
under his Employment Agreement with Imatec, provided that
the royalties and compensation payable to Shalit hereunder
shall have been timely and fully paid.

<PAGE>
2. Intellectual Property Rights.

2.1 Subject to the terms and conditions as hereinafter
set forth, Shalit hereby grants to Imatec, under the Patentable
Image Technology, the right throughout the world to make, use and
sell and sub-license to others the right thereunder to make, use
and sell and otherwise exploit to the fullest extent permissible
under the law. It is understood that the foregoing grant of
rights to Imatec is not a conveyance of title or ownership which
shall remain at all times with Shalit. The foregoing grant of
rights to Imatec shall be exclusive and shall preclude Shalit
from making, using or selling products incorporating the
Patentable Image Technology.

2.2 Shalit represents and warrants that he is the
owner of any and all title and interest to the Patentable Image
Technology. Shalit represents and warrants that to the best of
his present knowledge the Patentable Image Technology does not
incorporate or infringe upon any existing patent or other
intellectual property rights of any third party. Shalit
represents that he has not granted and will not grant any rights
or interests inconsistent with the rights and interests granted
by him under this Agreement, nor will Shalit encumber the
Patentable Image Technology without the express written consent
of Imatec.
<PAGE>

2.3 All rights granted Imatec under or pursuant to
this Agreement are, and shall otherwise be deemed to be, for
purposes of Section 365(n) of the United States Bankruptcy Code
("Code"), licenses of rights to "Intellectual Property" as
defined under Section 101(56) of the Code. The parties agree
that Shalit shall retain and may fully exercise all of its rights
and elections under the Code and shall be notified by Imatec of
all proceedings involving Imatec under the Code. The parties
further agree that in the event of the commencement of an
insolvency proceeding or reorganization by or against Imatec,
Shalit shall be entitled to complete access to the Patentable
Image Technology and all embodiments thereof. As this is a
personal agreement between Shalit and Imatec, if Imatec does not
continue as an independent business in the field of image
technology as a result of proceedings under the Code, then this
Exclusive License Agreement may be terminated, on fifteen (15)
days' notice, by Shalit.

3. Payment of Royalties By Imatec.

Imatec shall pay to Shalit three hundred and fifty
thousand dollars ($350,000) as a non-refundable advance royalty
payment upon the receipt of investment funds, of at least that
amount, to Imatec and a monthly royalty of eleven thousand six
hundred and sixty seven dollars ($11,667). That montly royalty
payment shall be paid starting July 1, 1995 and shall be paid, in
advance, by the 1st day of each month, i.e., by August 1 for the
August royalty. In case Shalit ceases to be an Employee of

<PAGE>

Imatec in the positions of President, CEO and Chairman of the
Board, the monthly royalty payment to Shalit will increase to
twenty thousand eight hundred thirty-three dollars ($20,833).
The royalty is a minimum royalty and not dependent on Imatec's
use of the Patentable Image Technology and the monthly royalty
shall be increased at the annual rate of five percent (5%), i.e.,
increase by seven thousand dollars ($7,000) if Shalit is an
Employee of Imatec or, the royalty will increase by twelve
thousand five hundred dollars ($12,500) if Shalit is not an
Imatec Employee, such royalty increase occurring every year, not
compounded, for each year covered by this Agreement, the first
increase occurring on June 25, 1996. Imatec's obligation to pay
the aforesaid royalty shall continue as long as Imatec, and its
successors, are in existence. In case of delay in making royalty
payments, interest at five percent over prime rate of Chemical
Bank, New York, assessed from the day payment is due and
compounded monthly, shall be due by Imatec without special
notice.

4. Other Responsibilities of Imatec.

4.1 Imatec will use its reasonable best efforts to
make, use and sell the Patentable Image Technology. Imatec will
promptly, and at least monthly, keep Shalit apprised of such
efforts and shall promptly (within 15 days of execution) provide
Shalit with copies of all executed license and sublicense
agreements.

<PAGE>

5. Term and Termination.

5.1 This Exclusive License Agreement shall remain in
full force and effect commencing on the date of this Agreement
and expiring on expiration of the life of the last patent or
patent application in a country where any patent has been granted
or any patent application is pending.

5.2 This Agreement may be terminated by either party
in the event of substantial non-performance or material breach
incapable of cure. This Agreement will then terminate upon the
expiration of ninety (90) days after receipt of written notice of
the substantial nonperformance or a material breach if such non-
performance or breach is capable of cure and has not been cured.

6. Miscellaneous.

6.1 Representations; Relationship. No party is
authorized on behalf of another party to make any statements,
claims, representations or warranties or to act on behalf of
another party except as specifically authorized by this Agreement
or in a writing signed by both parties. The relationship created
by this Agreement shall be that of licensor and licensee only.
Neither party shall be deemed an agent, representative or
employee of the other party. Except in connection with Imatec's
or Technogenesis' licensing activity, neither party shall have
the right to enter into any contracts or commitments or to make
any representations or warranties, whether express or implied, in
<PAGE>

the name of or on behalf of any other party, or to bind any other
party in any respect whatsoever, unless agreed to in writing or
expressly permitted in this Agreement.

6.2. Assigment; Binding Effect. No party to this
Agreement may assign all or any part of its rights and
obligations under this Agreement without the prior written
consent of the other parties; provided, however, that Imatec
shall have the right to assign this Agreement to any entity
affiliated with Imatec which entity shall succeed to the rights
and obligations of Imatec hereunder. Any purported assignment in
contravention ofthis paragraph shall, at the option of any non-
assigning party, be null and void and of no effect. Except as
otherwise provided above, this Agreement will be binding upon and
inure to the benefit of the successors, assigns and heirs of the
parties.

6.3 Notices. Any notice or other communication
required or permitted to be given to either party under this
Agreement shall be given in writing and shall be delivered by
hand or by registered mail, or by confirmed facsimile
transmission, postage prepaid and return receipt requested,
addressed to each party at the following addresses or such other
address as may be designated by such party by notice pursuant to
this Section:

<PAGE>

To Imatec: Imatec, Ltd.
86 Edwards Street (2A)
Roslyn Heights, NY 11577
Tel: 516-484-6997
Fax: 516-484-6997

To Shalit: Dr. Hanoch Shalit
86 Edwards Street (2A)
Roslyn Heights, NY 11577

Any notice or communication given in conformity with this Section
shall be deemed effective when received by the addressee if
delivered by hand or confirmed facsimile transmission, and seven
(7) business days after mailing, if only mailed.

6.5 Governing Law; submission to Jurisdiction
Arbitration. This Agreement shall be deemed to have been made in
and fully performed in the State of New York and shall be
governed and construed in accordance with the laws of the State
of New York, without regard to the conflicts of law rules
thereof.

Any conflict arising out of this Agreement or
related to it shall be subject to arbitration in accordance with
the rules, and under the auspices, of the American Arbitration
Association, New York City.

6.6 Execution of Additional Documents. Each party
hereto agrees to execute and deliver any such additional
documents or agreements necessary or desirable to implement the
provisions of this Agreement.
<PAGE>
6.7 Entire Agreement. This Agreement and the
Employment Agreement, of even date herewith, constitutes the
entire agreement between the parties with respect to the
technology transfers and licensing. All prior or contemporaneous
agreements, proposals, understandings, representations and
communications, whether written or oral, between or involving the
parties regarding technology transfers and licensing are
cancelled and superseded. This Agreement may be amended only in
a writing executed by both parties.

6.8 Severability. If any section of this Agreement is
held by a court of competent jurisdiction to be invalid, void or
unenforceable, any remaining sections of this Agreement shall
continue in full force without being impaired or invalidated in
any way, to the maximum extent possible consistent with the
intent of the parties in entering into this Agreement.

6.9 Survival. Notwithstanding anything herein
contained to the contrary, the following rights and obligations
shall survive the execution, termination or expiration of this
Agreement:

1. Each party's right to receive and the
other party's obligation to pay royalties accrued or accruable
for payment on the date of the termination or expiration of this
Agreement.
<PAGE>
2. Any cause of action or claim of Imatec
or Shalit, whether or not accrued, resulting from any breach or
default by Imatec or Shalit or from any error with respect to the
calculation and payment of royalties.

3. Any provision of this Agreement which by
its terms survives the execution, termination or expiration of
this Agreement.

4. Any obligation of either party for
payments to be made to the other.

6.10 Counterparts. This Agreement may be executed in
any number of identical counter parts, each of which when so
executed shall be deemed to be a original and all of which when
taken together shall constitute one and the same agreement.

6.11 No Waiver. No waiver of any right under this
Agreement shall be deemed effective unless contained in a writing
signed by the party charged with such waiver, and no waiver of
any breach or failure to perform shall be deemed to be a waiver
of any future breach or failure to perform or of any other
provisions of this Agreement.

<PAGE>

IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed as of the date first above written.

INATEC, LTD.

WITNESSED: By: /s/ Hanoch Shalit
-------------------------------
Hanoch Shalit, President
/s/ Michael Cohen
-----------------------------

/s/ Maria XXXXXX
-----------------------------

HANOCH SHALIT

By: /s/ Hanoch Shalt
-------------------------------
WITNESSED:

-----------------------------
/s/ Michael Cohen
-----------------------------

/s/ Maria XXXXXX
-----------------------------

<PAGE>
STANDARD FORM OF OFFICE LEASE
The Real Estate Board of New York, Inc.

AGREEMENT OF LEASE, made as of this 31st day of January 1996, between 150
E. 58th ST. PARTNERS, L.P., a New York Limited partnership, having an address
at 150 E. 58th Street, New York, New York 10155, party of the first part,
hereinafter referred to as OWNER, or LANDLORD, and IMATEC, LTD., a Delaware
Corporation having an address at 86 Edwards Street, Rosalyn Heights, New York
11577 party of the second part, hereinafter referred to as TENANT.

WITNESSETH: Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord a portion of the twenty-first (21st) floor, substantially as shown
on Exhibit A annexed hereto (the "Demised Premises") in the building known as
150 E. 58th Street (also known as 964 Third Avenue) in the Borough of
Manhattan, City of New York, (the "Building") for a term to commence on the
First (1st) Day of February 1996, and to the end on the Thirty First (31st)
Day of January 1999, or until such date as such term shall sooner cease and
expire as hereinafter provided (the "Expiration Date"), both dates inclusive,
at an annual rental rate (the "Base Annual Rent") as set forth in paragraph
51 hereof, which Tenant agrees to pay in lawful money of the United States
which shall be legal tender in payment of all debts and dues, public and
private, at the time of payment, in equal monthly installments in advance on
the first day of each month during said term, at the Office of Owner or such
other place as Owner may designate, without any set off or deduction
whatsoever, except that Tenant shall pay the first monthly installment(s) on
the execution hereof (unless this lease be a renewal).

In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner
pursuant to the terms of another lease with Owner or with Owner's predecessor
in interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder
and the same shall be payable to Owner as additional rent.

The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby
covenant as follows:

RENT:

1. Tenant shall pay the rent as above and as hereinafter provided.

OCCUPANCY:

2. Tenant shall use and occupy demised premises for General and Executive
offices and for no other purpose.

TENANT ALTERATIONS:

3. Tenant shall make no changes in or to the demised premises of any
nature without Owner's prior written consent. Subject to the prior written
consent to Owner, and to the provisions of this article, Tenant, at Tenant's
expense, may make alterations, installations, additions or improvements which
are non-structural and which do not affect utility services or plumbing and
electrical lines, in or to the interior of the demised premises by using
contractors or mechanics first approved in each instance by Owner. Tenant
shall, before making any alterations, additions, installations or
improvements, at its expense, obtain all permits, approvals and certificates
required by any government or quasi-governmental bodies and (upon completion)
certificates of final approval thereof and shall deliver promptly duplicates
of all such permits, approvals and certificates to Owner and Tenant agrees to
carry and will cause Tenant's contractors and sub-contractors to carry such
workman's compensation, general liability, personal and property damage
insurance as Owner may require. If any mechanic's lien is filed against the
demised premises, or the building of which the same forms a part, for work
claimed to have been done for, or materials furnished to, Tenant, whether or
not done pursuant to this article, the same shall be discharged by Tenant
within thirty days thereafter, at Tenant's expense, by payment or filing the
bond required by law. All fixtures and all paneling, partitions, railings and
like installations, installed in the premises at any time, either by Tenant
or by Owner on Tenant's behalf, shall, upon installation, become the property
of Owner and shall remain upon and be surrendered with the demised premises
unless Owner, by notice to Tenant no later than twenty days prior to the date
fixed as the termination of this lease, elects to relinquish Owner's right

<PAGE>

thereto and to have them removed by Tenant, in which event the same shall be
removed from the premises by Tenant prior to the expiration of the lease, at
Tenant's expense. Nothing in this Article shall be construed to give Owner title
to or to prevent Tenant's removal of trade fixtures, moveable office furniture
and equipment, but upon removal of any such from the premises or upon removal of
other installations as may be required by Owner, Tenant shall immediately and at
its expense, repair and restore the premises to the condition existing prior to
installation and repair any damage to the demised premises or the building due
to such removal. All property permitted or required to be removed, by Tenant at
the end of the term remaining in the premises after Tenant's removal shall be
deemed abandoned and may, at the election of Owner, either be retained as
Owner's property or may be removed from the premises by Owner, at Tenant's
expense.

MAINTENANCE AND REPAIRS:

4. Tenant shall, throughout the term of this lease, take good care of the
demised premises and the fixtures and apportenances therein. Tenant shall be
responsible for all damage or injury to the demised premises or any other
part of the building and the systems and equipment thereof, whether requiring
structural or nonstructural repairs caused by or resulting from carelessness,
omission, neglect or improper conduct of Tenant, Tenant's subtenants, agents,
employees, invitees or licensees, or which arise out of any work, labor,
service or equipment done for or supplied to Tenant or any subtenant or
arising out of the installation, use or operation of the property or
equipment of Tenant or any subtenant. Tenant shall also repair all damage to
the building and the demised premises caused by the moving of Tenant's
fixtures, furniture and equipment. Tenant shall promptly make, at Tenant's
expense, all repairs in and to the demised premises for which Tenant is
responsible, using only the contractor for the trade or trades in question,
selected from a list of at least two contractors per trade submitted by
Owner. Any other repairs in or to the building or the facilities and systems
thereof for which Tenant is responsible shall be performed by Owner at the
Tenant's expense. Owner shall maintain in good working order and repair the
exterior and the structural portions of the building, including the
structural portions of its demised premises, and the public portions of the
building interior and the building plumbing, electrical, heating and
ventilating systems (to the extent such systems presently exist) serving the
demised premises. Tenant agrees to give prompt notice of any defective
condition in the premises for which Owner may be responsible hereunder. There
shall be no allowance to Tenant for diminution of rental value and no
liability on the part of Owner by reason of inconvenience, annoyance or
injury to business arising from Owner or others making repairs, alterations,
additions or improvements in or to any portion of the building or the demised
premises or in and to the fixtures, appurtenances or equipment thereof. It is
specifically agreed that Tenant shall not be entitled to any setoff or
reduction of rent by reason of any failure of Owner to comply with the
covenants of this or any other article of this Lease. Tenant agrees that
Tenant's sole remedy at law in such instance will be by way of an action for
damages for breach of contract. The provisions of this Article 4 shall not
apply in the case of fire or other casualty which are dealt with in Article 9
hereof.

WINDOW CLEANING:

5. Tenant will not clean nor require, permit, suffer or allow any window
in the demised premises to be cleaned from the outside in violation of
Section 202 of the Labor Law or any other applicable law or of the Rules of
the Board of Standards and Appeals, or of any other Board or body having or
asserting jurisdiction.

REQUIREMENTS OF LAW, FIRE INSURANCE, FLOOR LOADS:

6. Prior to the commencement of the lease term, if Tenant is then in
possession, and at all times thereafter, Tenant, at Tenant's sole cost and
expense, shall promptly comply with all present and future laws, orders and
regulations of all state, federal, municipal and local governments,
departments, commissions and boards and any direction of any public officer
pursuant to law, and all orders, rules and regulations of the New York Board
of Fire Underwriters, Insurance Services Office, or any similar body
including, without limitation, The Americans with Disabilities Act, Public
Law 101-336, 42 U.S.C.A. sec.12101 et seq. (hereinafter called "ADA") which
shall impose any violation, order or duty upon Owner or Tenant with respect
to the demised premises, whether or not arising out of Tenant's use or manner
of use thereof, (including Tenant's permitted use) or, with respect to the
building if arising out of Tenant's use or manner of use of the premises or
the building (including the use permitted under the lease). Nothing herein
shall require Tenant to make structural repairs or alterations unless Tenant

<PAGE>

has, by its manner of use of the demised premises or method of operation
therein, violated any such laws, ordinances, orders, rules, regulations or
requirements with respect thereto. Tenant may, after securing Owner to Owner's
satisfaction against all damages, interest, penalties and expenses, including,
but not limited to, reasonable attorney's fees, by cash deposit or by surety
bond in an amount and in a company satisfactory to Owner, contest and appeal any
such laws, ordinances, orders, rules, regulations or requirements provided same
is done with all reasonable promptness and provided such appeal shall not
subject Owner to prosecution for a criminal offense or constitute a default
under any lease or mortgage under which Owner may be obligated, or cause the
demised premises or any part thereof to be condemned or vacated. Tenant shall
not do or permit any act or thing to be done in or to the demised premises which
is contrary to law, or which will invalidate or be in conflict with public
liability, fire or other policies of insurance at any time carried by or for the
benefit of Owner with respect to the demised premises or the building of which
the demised premises form a part, or which shall or might subject Owner to any
liability or responsibility to any person or for property damage. Tenant shall
not keep anything in the demised premises except as now or hereafter permitted
by the Fire Department, Board of Fire Underwriters, Fire Insurance Rating
Organization or other authority having jurisdiction, and then only in such
manner and such quantity so as not to increase the rate for fire insurance
applicable to the building, nor use the premises in a manner which will increase
the insurance rate for the building or any property located therein over that in
effect prior to the commencement of Tenant's occupancy. Tenant shall pay all
costs, expenses, fines, penalties, or damages, which may be imposed upon Owner
by reason of Tenant's failure to comply with the provisions of this article and
if by reason of such failure the fire insurance rate shall, at the beginning of
this lease or at any time thereafter, be higher than it otherwise would be, then
Tenant shall reimburse Owner, as additional rent hereunder, for that portion of
all fire insurance premiums thereafter paid by Owner which shall have been
charged because of such failure by Tenant. In any action or proceeding wherein
Owner and Tenant are parties, a schedule or "make-up" of rate for the building
or demised premises issued by the New York Fire Insurance Exchange, or other
body making fire insurance rates applicable to said premises shall be conclusive
evidence of the facts therein stated and of the several items and charges in the
fire insurance rates then applicable to said premises. Tenant shall not place a
load upon any floor of the demised premises exceeding the floor load per square
foot area which is was designed to carry and which is allowed by law, Owner
reserves the right to prescribe the weight and position of all safes, business
machines and mechanical equipment. Such installations shall be placed and
maintained by Tenant, at Tenant's expense, in settings sufficient, in Owner's
judgement, to absorb and prevent vibration, noise and annoyance.

SUBORDINATION:

7. This lease is subject and subordinate to all ground or underlying
leases and to all mortgages which may now or hereafter affect such leases or
the real property of which demised premises are a part and to all renewals,
modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self-operative and no
further instrument of subordination shall be required by any ground or
underlying lessor or by any mortgagee, affecting any lease or the real
property of which the demised premises are a part. In confirmation of such
subordination, Tenant shall from time to time execute promptly any
certificate that Owner may request.

PROPERTY LOSS, DAMAGE REIMBURSEMENT INDEMNITY:

8 Owner or its agents shall not be liable for any damage to property of
Tenant or of others entrusted to employees of the building, nor for loss of
or damage to any property of Tenant by theft or otherwise, nor for any injury
or damage to persons or property resulting from any cause of whatsoever
nature, unless caused by or due to the negligence of Owner, its agents,
servants or employees. Owner or its agents will not be liable for any such
damage caused by other tenants or persons in, upon or about said building or
caused by operations in construction of any private, public or quasi public
work. If at any time any windows of the demised premises are temporarily
closed, darkened or bricked up (or permanently closed, darkened or bricked
up, if required by law) for any reason whatsoever including, but not limited
to Owner's own acts, Owner shall not be liable for any damage Tenant may
sustain thereby and Tenant shall not be entitled to any compensation therefor
nor abatement or diminution of rent nor shall the same release Tenant from
its obligations hereunder nor constitute an eviction. Tenant shall indemnify
and save harmless Owner against and from all liabilities, obligations,
<PAGE>

damages, penal ties, claims, costs and expenses for which Owner shall not be
reimbursed by insurance, including reasonable attorneys fees, paid, suffered or
incurred as a result of any breach by Tenant, Tenant's agents, contractors,
employees, invitees, or licensees, of any covenant or condition of this lease,
or the carelessness, negligence or improper conduct of the Tenant, Tenant's
agents, contractors, employees, invitees or licensees. Tenant's liability under
this lease extends to the acts and omissions of any sub-tenant, and any agent,
contractor, employee, invitee or licensee of any sub-tenant. In case any action
or proceeding is brought against Owner by reason of any such claim, Tenant, upon
written notice from Owner, will, at Tenant's expense, resist or defend such
action or proceeding by counsel approved by Owner in writing, such approval not
to be unreasonably withheld.

DESTRUCTION, FIRE AND OTHER CASUALTY:

9. (a) If the demised premises or any part thereof shall be damaged by
fire or other casualty, Tenant shall give immediate notice thereof to Owner
and this lease shall continue in full force and effect except as hereinafter
set forth. (b) If the demised premises are partially damaged or rendered
partially unusable by fire or other casualty, the damages thereto shall be
repaired by and at the expense of Owner and the rent and other items of
additional rent, until such repair shall be substantially completed, shall be
apportioned from the day following the casualty according to the part of the
premises which is usable. (c) if the demised premises are totally damaged or
rendered wholly unusable by fire or other casualty, then the rent and other
items of additional rent as hereinafter expressly provided shall be
proportionately paid up to the time of the casualty and thenceforth shall
cease until the date when the premises shall have been repaired and restored
by Owner (or sooner reoccupied in part by Tenant then rent shall be
apportioned as provided in subsection (b) above), subject to Owner's right to
elect not to restore the same as hereinafter provided. (d) If the demised
premises are rendered wholly unusable or (whether or not the demised premises
are damaged in whole or in part) if the building shall be so damaged that
Owner shall decide to demolish it or to rebuild it, then, in any of such
events, Owner may elect to terminate this lease by written notice to Tenant,
given within 90 days after such fire or casualty, or 30 days after adjustment
of the insurance claim for such fire or casualty, whichever is sooner,
specifying a date for the expiration of the lease, which date shall not be
more than 60 days after the giving of such notice, and upon the date
specified in such notice the term of this lease shall expire as fully and
completely as if such date were the date set forth above for the termination
of this lease and Tenant shall forthwith quit, surrender and vacate the
premises without prejudice however, to Landlord's rights and remedies against
Tenant under the lease provisions in effect prior to such termination, and
any rent owing shall be paid up to such date and any payments of rent made by
Tenant which were on account of any period subsequent to such date shall be
returned to Tenant. Unless Owner shall serve a termination notice as provided
for herein, Owner shall make the repairs and restorations under the
conditions of (b) and (c) hereof, with all reasonable expedition, subject to
delays due to adjustment of insurance claims, labor troubles and causes
beyond Owner's control. After any such casualty, Tenant shall cooperate with
Owner's restoration by removing from the premises as promptly as reasonably
possible, all of Tenant's salvageable inventory and moveable equipment,
furniture, and other property. Tenant's liability for rent shall resume five
(5) days after written notice from Owner that the premises are substantially
ready for Tenant's occupancy. (e) Nothing contained hereinabove shall relieve
Tenant from liability that may exist as a result of damage from fire or other
casualty. Tenant acknowledges that Owner will not carry insurance on Tenant's
furniture and/or furnishings or any fixtures or equipment, improvements, or
appurtenances removable by Tenant and agrees that Owner will not be obligated
to repair any damage thereto or replace the same. (f) Tenant hereby waives
the provisions of Section 227 of the Real Property Law and agrees that the
provisions of this article shall govern and control in lieu thereof.

EMINENT DOMAIN:

10. If the whole or any part of the demised premises shall be acquired or
condemned by Eminent Domain for any public or quasi public use or purpose,
then and in that event, the term of this lease shall cease and terminate from
the date of title vesting in such proceeding and Tenant shall have no claim
for the value of any unexpired term of said lease and assigns to Owner,
Tenant's entire interest in any such award, Tenant shall have the right to
make an independent claim to the condemning authority for the value of
Tenant's moving expenses and personal property, trade fixtures and equipment,
provided Tenant is entitled pursuant to the terms of the lease to remove such
property, trade fixture and equipment at the end of the term and provided
further such claim does not reduce Owner's award.

<PAGE>
ASSIGNMENT, MORTGAGE, ETC.:

11. Tenant, for itself, its heirs, distributees, executors,
administrators, legal representative, successor and assigns, expressly
covenants that it shall not assign, mortgage or encumber this agreement, nor
underlet, or suffer or permit the demised premises or any part thereof to be
used by others, without the prior written consent of Owner in each instance.
Transfer of the majority of the stock of a corporate Tenant or a majority of
ownership of beneficial interest of Tenant if Tenant is an unincorporated
association or partnership, whether in one or a series of related or
unrelated transactions or otherwise, or the majority partnership interest of
a partnership Tenant shall be deemed an assignment. If this lease be
assigned, or if the demised premises or any part thereof be underlet or
occupied by anybody other than Tenant, Owner may, after default by Tenant,
collect rent from the assignee, under-tenant or occupant, and apply the net
amount collected to the rent herein reserved, but no such assignment,
underletting, occupancy or collection shall be deemed a waiver of this
covenant, or the acceptance of the assignee, under-tenant or occupant as
tenant, or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained. The consent by Owner to an
assignment or underletting shall not in any wise be construed to relieve
Tenant from obtaining the express consent in writing of Owner to any further
assignment or underletting.

ELECTRIC CURRENT:

12. Rates and conditions in respect to submetering or rent inclusion, as
the case may be, to be added in RIDER attached hereto. Tenant covenants and
agrees that at all times its use of electric current shall not exceed the
capacity of existing feeders to the building or the risers or wiring
installation and Tenant may not use any electrical equipment which, in
Owner's opinion, reasonably exercised, will overload such installations or
interfere with the use thereof by other tenants of the building. The change
at any time of the character of electric service shall in no wise make Owner
liable or responsible to Tenant, for any loss, damages or expenses which
Tenant may sustain.

ACCESS TO PREMISES:

13. Owner or Owner's agents shall have the right (but shall not be
obligated) to enter the demised premises in any emergency at any time, and,
at other reasonable times, to examine the same and to make such repairs,
replacements and improvements as Owner may deem necessary and reasonably
desirable to the demised premises or to any other portion of the building or
which Owner may elect to perform. Tenant shall permit Owner to use and
maintain and replace pipes and conduits in and through the demised premises
and to erect new pipes and conduits therein provided they are concealed
within the walls, floor, or ceiling. Owner may, during the progress of any
work in the demised premises, take all necessary materials and equipment into
said premises without the same constituting an eviction nor shall the Tenant
be entitled to any abatement of rent while such work is in progress nor to
any damages by reason of loss or interruption of business or otherwise.
Throughout the term hereof Owner shall have the right to enter the demised
premises at reasonable hours for the purpose of showing the same to
prospective purchasers or mortgagees of the building, and during the last six
months of the term for the purpose of showing the same to prospective
tenants. If Tenant is not present to open and permit an entry into the
demised premises, Owner or Owner's agent may enter the same whenever such
entry may be necessary or permissible by master key or forcibly and provided
reasonable care is exercised to safeguard Tenant's property, such entry shall
not render Owner or its agents liable therefor, nor in any event shall the
obligations of Tenant hereunder be affected. If during the last month of the
term Tenant shall have removed all or substantially all of Tenant's property
therefrom Owner may immediately enter, alter, renovate or redecorate the
demised premises without limitation or abatement of rent, or incurring
liability to Tenant for any compensation and such act shall have no effect on
this lease or Tenant's obligations hereunder.

OCCUPANCY:

15. Tenant will not at any time use or occupy the demised premises in
violation of the certificate of occupancy issued for the building of which
the demised premises are a part. Tenant has inspected the premises and
accepts them as is, subject to the riders annexed hereto with respect to
Owner's work, if any. In any event, Owner makes no representation as to the
condition of the premises and Tenant agrees to accept the same subject to
violations, whether or not of record.

<PAGE>
BANKRUPTCY:

16. (a) Anything elsewhere in this lease to the contrary notwithstanding,
this lease may be cancelled by Owner by the sending of a written notice to
Tenant within a reasonable time after the happening of any one or more of the
following events: (1) the commencement of a case in bankruptcy or under the
laws of any state naming Tenant or any guarantor of Tenant's obligations
hereunder as the debtor; or (2) the making by Tenant or any guarantor of
Tenant's obligations hereunder of an assignment or any other arrangement for
the benefit of creditors under any state statute. Neither Tenant nor any
person claiming through or under Tenant, or by reason of any statute or order
of court, shall thereafter be entitled to possession of the premises demised
but shall forthwith quit and surrender the premises. If this lease shall be
assigned in accordance with its terms, the provisions of this Article 16
shall be applicable only to the party then owning Tenant's interest in this
lease.

(b) It is stipulated and agreed that in the event of the termination of
this lease pursuant to (a) hereof, Owner shall forthwith, notwithstanding any
other provisions of this lease to the contrary, be entitled to recover from
Tenant as and for liquidated damages an amount equal to the difference
between the rent reserved hereunder for the unexpired portion of the term
demised and the fair and reasonable rental value of the demised premises for
the same period. In the computation of such damages the difference between
any installment of rent becoming due hereunder after the date of termination
and the fair and reasonable rental value of the demised premises for the
period for which such installment was payable shall be discounted to the date
of termination at the rate of four percent (4%) per annum. If such premises
or any part thereof be re-let by the Owner for the unexpired term of said
lease, or any part thereof, before presentation of proof of such liquidated
damages to any court, commission or tribunal, the amount of rent reserved
upon such re-letting shall be deemed to be the fair and reasonable rental
value for the part or the whole of the premises so re-let during the term of
the re-letting. Nothing herein contained shall limit or prejudice the right
of the Owner to provide for and obtain as liquidated damages by reason of
such termination, an amount equal to the maximum allowed by any statute or
rule of law in effect at the time when, and governing the proceedings in
which, such damages are to be proved, whether or not such amount be greater,
equal to, or less than the amount of the difference referred to above.

DEFAULT:

17. (1) If Tenant defaults in fulfilling any of the covenants of this
lease other than the covenants for the payment of rent or additional rent; or
if the demised premises become vacant or deserted; or if any execution or
attachment shall be issued against Tenant or any of Tenant's property
whereupon the demised premises shall be taken or occupied by someone other
than Tenant; or if this lease be rejected under Title 11 of the U.S. Code
(bankruptcy code); or if Tenant shall fail to move into or take possession of
the premises within thirty (30) days after the commencement of the term of
this lease, then, in any one or more of such events, upon Owner serving a
written fifteen (15) days notice upon the Tenant specifying the nature of
said default and upon the expiration of said fifteen (15) days, if Tenant
shall have failed to comply with or remedy such default, or if the said
default or omission complained of shall be of a nature that the same cannot
be completely cured or remedied within said fifteen (15) day period, and if
Tenant shall not have diligently commenced curing such default within such
fifteen (15) day period, and shall not thereafter with reasonable diligence
and in good faith, proceed to remedy or cure such default, then Owner may
serve a written five (5) days' notice of cancellation of this lease upon
Tenant, and upon the expiration of said five (5) days this lease and the term
thereunder shall end and expire as fully and completely as if the expiration
of such five (5) day xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxx for the end and expiration of this lease and the term
thereof and Tenant shall then quit and surrender the demised premises to
Owner but Tenant shall remain liable as hereinafter provided.

(2) If the notice provided for in (1) hereof shall have been given, and
the term shall expire as aforesaid; or if Tenant shall make default in the
payment of the rent reserved xxxxxxx xxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxx xxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxx rent herein mentioned or any part of either or in
making any other payment herein required; then and in any of such events
Owner may without notice, re-enter the demised premises either by force or
otherwise, and dispossess Tenant by summary proceedings or otherwise, and the
legal representative of Tenant or other occupant of demised premises and
remove their effects and hold the premises as if this lease had not been

<PAGE>

made, and Tenant hereby waives the service of notice of intention to re-enter or
to institute legal proceedings to that end. If Tenant shall make default
hereunder prior to the date fixed as the commencement of any renewal or
extension of this lease. Owner may cancel and terminate such renewal or
extension agreement by written notice.

REMEDIES OF OWNER AND WAIVER OF REDEMPTION:

18. In case of any such default, re-entry, expiration and/or dispossess by
summary proceedings or otherwise, (a) the rent shall become due thereupon and
be paid up to the time of such re-entry, dispossess and/or expiration, (b)
Owner may re-let the premises or any part or parts thereof, either in the
name of Owner or otherwise, for a term or terms, which may at Owner's option
be less than or exceed the period which would otherwise have constituted the
balance of the term of this lease and may grant concessions or free rent or
charge a higher rental than that in this lease, and/or (c) Tenant or the
legal representatives of Tenant shall also pay Owner as liquidated damages
for the failure of Tenant to observe and perform said Tenant's covenants
herein contained, any deficiency between the rent hereby reserved and/or
covenanted to be paid and the net amount, if any, of the rents collected on
account of the lease or leases of the demised premises for each month of the
period which would otherwise have constituted the balance of the term of this
lease. The failure of Owner to re-let the premises or any part or parts
thereof shall not release or affect Tenant's liability for damages. In
computing such liquidated damages there shall be added to the said deficiency
such expenses as owner may incur in connection with re-letting, such as legal
expenses, reasonable attorneys' fees, brokerage, advertising and for keeping
the demised premises in good order or for preparing the same for re-letting.
Any such liquidated damages shall be paid in monthly installments by Tenant
on the rent day specified in this lease and any suit brought to collect the
amount of the deficiency for any month shall not prejudice in any way the
rights of Owner to collect the deficiency for any subsequent month by a
similar proceeding. Owner, in putting the demised premises in good order or
preparing the same for re-rental may, at Owner's option, make such
alterations, repairs, replacements, and/or decorations in the demised
premises as Owner, in Owner's sole judgment, considers advisable and
necessary for the purpose of re-letting the demised premises, and the making
of such alterations, repairs, replacements, and/or decorations shall not
operate or be construed to release Tenant from liability hereunder as
aforesaid. Owner shall in no event be liable in any way whatsoever for
failure to re-let the demised premises, or in the event that the demised
premises are re-let, for failure to collect the rent thereof under such
re-letting, and in no event shall Tenant be entitled to receive any excess,
if any, of such net rents collected over the sums payable by Tenant to Owner
hereunder. In the event of a breach or threatened breach by Tenant of any of
the covenants or provisions hereof, Owner shall have the right of injunction
and the right to invoke any remedy allowed at law or in equity as if
re-entry, summary proceedings and other remedies were not herein provided
for. Mention in this lease of any particular remedy, shall not preclude Owner
from any other remedy, in law or in equity. Tenant hereby expressly waives
any and all rights of redemption granted by or under any present or future
laws in the event of Tenant being evicted or dispossessed for any cause, or
in the event of Owner obtaining possession of demised premises, by reason of
the violation by Tenant of any of the covenants and conditions of this lease,
or otherwise.

FEES AND EXPENSES:

19. If Tenant shall default in the observance or performance of any term
or covenant on Tenant's part to be observed or performed under or by virtue
of any of the terms or provisions in any article of this lease, after notice
if required and upon expiration of any applicable grace period if any,
(except in an emergency), then, unless otherwise provided elsewhere in this
lease, Owner may immediately or at any time thereafter and without notice
perform the obligation of Tenant thereunder. If Owner, in connection with the
foregoing or in connection with any default by Tenant in the covenant to pay
rent hereunder, makes any expenditures or incurs any obligations for the
payment of money, including but not limited to reasonable attorneys' fees, in
instituting, prosecuting or defending any action or proceeding, and prevails
in any such action or proceeding then Tenant will reimburse Owner for such
sums so paid or obligations incurred with interest and costs. The foregoing
expenses incurred by reason of Tenant's default shall be deemed to be
additional rent hereunder and shall be paid by Tenant to Owner within ten
(10) days of rendition of any bill or statement to Tenant therefor. If
Tenant's lease term shall have expired at the time of making of such
expenditures or incurring of such obligations, such sums shall be recoverable
by Owner, as damages.

<PAGE>
BUILDING ALTERATIONS AND MANAGEMENT:

20. Owner shall have the right at any time without the same constituting
an eviction and without incurring liability to Tenant therefor to change the
arrangement and/or location of public entrances, passageways, doors,
doorways, corridors, elevators, stairs, toilets or other public parts of the
building and to change the name, number or designation by which the building
may be known. There shall be no allowance to Tenant for diminution of rental
value and no liability on the part of Owner by reason of inconvenience,
annoyance or injury to business arising from Owner or other Tenants making
any repairs in the building or any such alterations, additions and
improvements. Furthermore, Tenant shall not have any claim against Owner by
reason of Owner's imposition of such controls of the manner of access to the
building by Tenant's social or business visitors as the Owner may deem
necessary for the security of the building and its occupants.

NO REPRESENTATIONS BY OWNER:

21. Neither Owner nor Owner's agents have made any representations or
promises with respect to the physical condition of the building, the land
upon which it is erected or the demised premises, the rents, leases, expenses
of operation or any other matter or thing affecting or related to the
premises except as herein expressly set forth and no rights, easements or
licenses are acquired by Tenant by implication or otherwise except as
expressly set forth in the provisions of this lease. Tenant has inspected the
building and the demised premises and is thoroughly acquainted with their
condition and agrees to take the same "as is" and acknowledges that the
taking of possession of the demised premises by Tenant shall be conclusive
evidence that the said premises and the building of which the same form a
part were in good and satisfactory condition at the time such possession was
so taken, except as to latent defects. All understandings and agreements
heretofore made between the parties hereto are merged in this contract, which
alone fully and completely expresses the agreement between Owner and Tenant
and any executory agreement hereafter made shall be ineffective to change,
modify, discharge or effect in abandonment of it in whole or in part, unless
such executory agreement is in writing and signed by the party against whom
enforcement of the change, modification, discharge or abandonment is sought.

END OF TERM:

22. Upon the expiration or other termination of the term of this lease,
Tenant shall quit and surrender to Owner the demised premises, broom clean,
in good order and condition, ordinary wear and damages which Tenant is not
required to repair as provided elsewhere in this lease excepted, and Tenant
shall remove all its property. Tenant's obligation to observe or perform this
covenant shall survive the expiration or other termination of this lease. If
the last day of the term of this Lease or any renewal thereof, falls on
Sunday, this lease shall expire at noon on the preceding Saturday unless it
be a legal holiday in which case it shall expire at noon on the preceding
business day.

QUIET ENJOYMENT:

23. Owner covenants and agrees with Tenant that upon Tenant paying the
rent and additional rent and observing and performing all the terms,
covenants and conditions, on Tenant's part to be observed and performed,
Tenant may peaceably and quietly enjoy the premises hereby demised, subject,
nevertheless, to the terms and conditions of this lease including, but not
limited to, Article 31 hereof and to the ground leases, underlying leases and
mortgages hereinbefore mentioned.

FAILURE TO GIVE POSSESSION:

24. If Owner is unable to give possession of the demised premises on the
date of the commencement of the term hereof, because of the holding-over or
retention of possession of any tenant, undertenant or occupants or if the
demised premises are located in a building being constructed, because such
building has not been sufficiently completed to make the premises ready for
occupancy or because of the fact that a certificate of occupancy has not been
procured or for any other reason, Owner shall not be subject to any liability
for failure to give possession on said date and the validity of the lease
shall not be impaired under such circumstances, nor shall the same be
construed in any wise to extend the term of this lease, but the rent payable
hereunder shall be abated (provided Tenant is not responsible for Owner's
inability to obtain possession or complete construction) until after Owner
shall have given Tenant written notice that the Owner is able to deliver
possession in condition required by this lease. If permission is given to
Tenant to enter into the possession of the demises premises or to occupy
premises other than the demised premises prior to the date specified as the
commencement of the term of this lease. Tenant covenants and agrees that such
possession and/or occupancy shall be deemed to be under all the terms,
covenants, conditions and provisions of this lease except the obligation to
pay the fixed annual rent set forth in the preamble to this lease. The
provisions of this article are intended to constitute "an express provision
to the contrary" within the meaning of Section 223-a of the New York Real
Property Law.

<PAGE>

NO WAIVER:

25. The failure of Owner to seek redress for violation of, or to insist
upon the strict performance of any covenant or condition of this lease or of
any of the Rules or Regulations, set forth or hereafter adopted by Owner,
shall not prevent a subsequent act which would have originally constituted a
violation from having all the force and effect of an original violation. The
receipt by Owner of rent and/or additional rent with knowledge of the breach
of any covenant of this lease shall not be deemed a waiver of such breach and
no provision of this lease shall be deemed to have been waived by Owner
unless such waiver be in writing signed by Owner. No payment by Tenant or
receipt by Owner of a lesser amount than the monthly rent herein stipulated
shall be deemed to be other than on account of the earliest stipulated rent,
nor shall any endorsement or statement of any check or any letter
accompanying any check or payment as rent be deemed an accord and
satisfaction, and Owner may accept such check or payment without prejudice to
Owner's right to recover the balance of such rent or pursue any other remedy
in this lease provided. No act or thing done by Owner or Owner's agents
during the term hereby demised shall be deemed an acceptance of a surrender
of said premises, and no agreement to accept such surrender shall be valid
unless in writing signed by Owner. No employee of Owner or Owner's agent
shall have any power to accept the keys of said premises prior to the
termination of the lease and the delivery of keys to any such agent or
employee shall not operate as a termination of the lease or a surrender of
the premises.

WAIVER OF TRIAL BY JURY:

26. It is mutually agreed by and between Owner and Tenant that the
respective parties hereto shall and they hereby do waive trial by jury in any
action proceeding or counterclaim brought by either of the parties hereto
against the other (except for personal injury or property damage) on any
matters whatsoever arising out of or in any way connected with this lease,
the relationship of Owner and Tenant. Tenant's use of or occupancy of said
premises, and any emergency statutory or any other statutory remedy. It is
further mutually agreed that in the event Owner commences any proceeding or
action for possession including a summary proceeding for possession of the
premises, Tenant will not interpose any counterclaim of whatever nature or
description in any such proceeding including a counterclaim under Article 4
except for statutory mandatory counterclaims.

INABILITY TO PERFORM:

27. This Lease and the obligation of Tenant to pay rent hereunder and
perform all of the other covenants and agreements hereunder on part of Tenant
to be performed shall in no wise be affected, impaired or excused because
Owner is unable to fulfill any of its obligations under this lease or to
supply or is delayed in supplying any service expressly or impliedly to be
supplied or is unable to make, or is delayed in making any repair, additions,
alterations or decorations or is unable to supply or is delayed in supplying
any equipment, fixtures, or other materials if Owner is prevented or delayed
from so doing by reason of strike or labor troubles or any cause whatsoever
including, but not limited to, government preemption or restrictions or by
reason of any rule, order or regulation of any department or subdivision
thereof of any government agency or by reason of the conditions which have
been or are affected, either directly or indirectly, by war or other
emergency.

BILLS AND NOTICES:

28. Except as otherwise in this lease provided, a bill, statement, notice
or communication which Owner may desire or be required to give to Tenant,
shall be deemed sufficiently given or rendered if, in writing, delivered to
Tenant personally or sent by registered or certified mail addressed to Tenant
at the building of which the demised premises form a part or at the last
known residence address or business address of Tenant or left at any of the
aforesaid premises addressed to Tenant, and the time of the rendition of such
bill or statement and of the giving of such notice or communication shall be
deemed to be the time when the same is delivered to Tenant, mailed, or left
at the premises as herein provided. Any notice by Tenant to Owner must be
served by registered or certified mail addressed to Owner at the address
first hereinabove given or at such other address as Owner shall designate by
written notice.

<PAGE>

SERVICES PROVIDED BY OWNERS:

29. As long as Tenant is not in default under any of the covenants of this
lease beyond the applicable grace period provided in this lease for the curing
of such defaults, Owner shall provide: (a) necessary elevator facilities on
business days from 8:30 a.m. to 5:30 p.m. and have one elevator subject to call
at all other times; (b) heat to the demised premises when and as required by
law, on business days from 8:30 a.m. to 5:30 p.m.; (c) water for ordinary
lavatory purposes, but if Tenant uses or consumes water for any other purposes
or in unusual quantities (of which fact Owner shall be the sole judge), Owner
may install a water meter at Tenant's expense which Tenant shall thereafter
maintain at Tenant's expense in good working order and repair to register such
water consumption and Tenant shall pay for water consumed as shown on said meter
as additional rent as and when bills are rendered; (d) cleaning service for the
demised premises on business days at Owner's expense provided that the same are
kept in order by Tenant. If, however, said premises are to be kept clean by
Tenant, it shall be done at Tenant's sole expense, in a manner reasonably
satisfactory to Owner and no one other than persons approved by Owner shall be
permitted to enter said premises or the building of which they are a part for
such purpose. Tenant shall pay Owner the cost of removal of any of Tenant's
refuse and rubbish from the building; (e) If the demised premises are serviced
by Owner's air conditioning/cooling and ventilating system, air
conditioning/cooling will be furnished to tenant from May 15th through September
30th on business days (Mondays through Fridays, holidays excepted) from 8:30
a.m. to 5:30 p.m., and ventilation will be furnished on business days during the
aforesaid hours except when air conditioning/cooling is being furnished as
aforesaid. If Tenant requires air conditioning/cooling or ventilation for more
extended hours or on Saturdays, Sundays or on holidays, as defined under Owner's
contract with Operating Engineers Local 94-94A. Owner will furnish the same at
Tenant's expense and owner shall furnish such service upon reasonable advance
notice from Tenant and Tenant shall pay, on demand, Owner's then standard charge
therefor; (f) Owner reserves the right to stop services of the heating,
elevators, plumbing, air-conditioning, electric, power systems or cleaning or
other services, if any, when necessary by reason of accident or for repairs,
alterations, replacements or improvements necessary or desirable in the judgment
of Owner for as long as may be reasonably required by reason thereof or by
reason of strikes, accidents, laws, orders or regulations or any other reason
beyond the control of Owner. If the building of which the demised premises are a
part supplies manually operated elevator service, Owner at any time may
substitute automatic control elevator service and proceed diligently with
alterations necessary therefor without in any wise affecting this lease or the
obligation of Tenant hereunder.

CAPTIONS:

30. The Captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this lease nor
the intent of any provisions thereof.

DEFINITIONS:

31. The term "office", or "offices", wherever used in this lease, shall
not be construed to mean premises used as a store or stores, for the sale or
display, at any time, of goods, wares or merchandise, of any kind, or as a
restaurant, shop, booth, bootblack or other stand, barber shop, or for other
similar purposes or for manufacturing. The term "Owner" or "Landlord" means a
landlord or lessor, and as used in this lease means only the owner, or the
mortgagee in possession, for the time being of the land and building (or the
owner of a lease of the building or of the land and building) of which the
demised premises form a part, so that in the event of any sale or sales of
said land and building or of said lease, or in the event of a lease of said
building, or of the land and building, the said Owner shall be and hereby is
entirely freed and relieved of all covenants and obligations of Owner
hereunder, and it shall be deemed and construed without further agreement
between the parties or their successors in interest, or between the parties
and the purchaser, at any such sale, or the said lessee of the building, or
of the land and building, that the purchaser or the lessee of the building
has assumed and agreed to carry out any and all covenants and obligations of
Owner, hereunder. The words "re-enter" and "re-entry" as used in this lease
are not restricted to their technical legal meaning. The term "business days"
as used in this lease shall exclude Saturdays, Sundays and all days as
observed by the State or Federal Government as legal holidays and those
designated as holidays by the applicable building service union employees
service contract or by the applicable Operating Engineers contract with
respect to HVAC service. Wherever it is expressly provided in this lease that
consent shall not be unreasonably withheld, such consent shall not be
unreasonably delayed.
<PAGE>

ADJACENT EXCAVATION-SHORING:

32. If an excavation shall be made upon land adjacent to the demised
premises, or shall be authorized to be made, Tenant shall afford to the
person causing or authorized to cause such excavation, license to enter upon
the demised premises for the purpose of doing such work as said person shall
deem necessary to preserve the wall or the building of which demised premises
form a part from injury or damage and to support the same by proper
foundations without any claim for damages or indemnity against Owner, or
diminution or abatement of rent.

RULES AND REGULATIONS:

33. Tenant and Tenant's servants, employees, agents, visitors, and
licensees shall observe faithfully, and comply strictly with, the Rules and
Regulations and such other and further reasonable Rules and Regulations as
Owner or Owner's agents may from time to time adopt. Notice of any additional
rules or regulations shall be given in such manner as Owner may elect. In
case Tenant disputes the reasonableness of any additional Rule or Regulation
hereafter made or adopted by Owner or Owner's agents, the parties hereto
agree to submit the question of the reasonableness of such Rule or Regulation
for decision to the New York office of the American Arbitration Association,
whose determination shall be final and conclusive upon the parties hereto.
The right to dispute the reasonableness of any additional Rule or Regulation
upon Tenant's part shall be deemed waived unless the same shall be asserted
by service of a notice, in writing upon Owner within fifteen (15) days after
the giving of notice thereof. Nothing in this lease contained shall be
construed to impose upon Owner any duty or obligation to enforce the Rules
and Regulations or terms, covenants or conditions in any other lease, as
against any other tenant and Owner shall not be liable to Tenant for
violation of the same by any other tenant, its servants, employees, agents,
visitors or licensees.

SECURITY:

34. Tenant has deposited with Owner the sum of $17,920.00 as security for
the faithful performance and observance by Tenant of the terms, provisions
and conditions of this lease; it is agreed that in the event Tenant defaults
in respect of any of the terms, provisions and conditions of this lease,
including, but not limited to the payment of rent and additional rent, Owner
may use, apply or retain the whole or any part of the security so deposited
to the extent required for the payment of any rent and additional rent or any
other sum as to which Tenant is in default or for any sum which Owner may
expend or may be required to expend by reason of Tenant's default in respect
of any of the terms, covenants and conditions of this lease, including but
not limited to, any damages or deficiency in the re-letting of the premises,
whether such damages or deficiency accrued before or after summary
proceedings or other re-entry by Owner. In the event that Tenant shall fully
and faithfully comply with all of the terms, provisions, covenants and
conditions of this lease, the security shall be returned to tenant after the
date fixed as the end of the Lease and after delivery of entire possession of
the demised premises to Owner. In the event of a sale of the land and
building or leasing of the building, of which the demised premises form a
part, Owner shall have the right to transfer the security to the vendee or
lessee and Owner shall thereupon be released by Tenant from all liability for
the return of such security; and Tenant agrees to look to the new Owner
solely for the return of said security, and it is agreed that the provisions
hereof shall apply to every transfer or assignment made of the security to a
new Owner. Tenant further covenants that it will not assign or encumber or
attempt to assign or encumber the monies deposited herein as security and
that neither Owner nor its successors or assigns shall be bound by any such
assignment, encumbrance, attempted assignment or attempted encumbrance.

ESTOPPEL CERTIFICATE:

35. Tenant, at any time, and from time to time, upon at least 10 days'
prior notice by Owner, shall execute, acknowledge and deliver to Owner,
and/or to any other person, firm or corporation specified by Owner, a
statement certifying that this Lease is unmodified and in full force and
effect (or, if there have been modifications, that the same is in full force
and effect as modified and stating the modifications), stating the dates to
which the rent and additional rent have been paid, and stating whether or not
there exists any default by Owner under this Lease, and, if so, specifying
each such default.

<PAGE>

SUCCESSORS AND ASSIGNS:

36. The covenants, conditions and agreements contained in this lease shall
bind and inure to the benefit of Owner and Tenant and their respective heirs,
distributees, executors, administrators, successors, and except as otherwise
provided in this lease, their assigns. Tenant shall look only to Owner's estate
and interest in the land and building, for the satisfaction of Tenant's remedies
for the collection of a judgment (or other judicial process) against Owner in
the event of any default by Owner hereunder, and no other property or assets of
such Owner (or any partner, member, officer or director thereof, disclosed or
undisclosed), shall be subject to levy, execution or other enforcement procedure
for the satisfaction of Tenant's remedies under or with respect to this lease,
the relationship of Owner and Tenant hereunder, or Tenant's use and occupancy of
the demised premises.

SEE RIDER ATTACHED HERETO AND MADE A PART HEREOF
CONTAINING PARAGRAPHS 37-59

<PAGE>
GUARANTY

FOR VALUE RECEIVED, and in consideration for, and as an inducement to
Owner making the within lease with Tenant, the undersigned guarantees to
Owner, Owner's successors and assigns, the full performance and observance of
all the covenants, conditions and agreements, therein provided to be
performed and observed by Tenant, including the "Rules and Regulations" as
therein provided, without requiring any notice of non- payment,
non-performance, or non-observance, or proof, or notice, or demand, whereby
to charge the undersigned therefor, all of which the undersigned hereby
expressly waives and expressly agrees that the validity of this agreement and
the obligations of the guarantor hereunder shall in no wise be terminated,
affected or impaired by reason of the assertion by Owner against Tenant of
any of the rights or remedies reserved to Owner pursuant to the provisions of
the within lease. The undersigned further covenants and agrees that this
guaranty shall remain and continue in full force and effect as to any
renewal, modification or extension of this lease and during any period when
Tenant is occupying the premises as a "statutory tenant." As a further
inducement to Owner to make this lease and in consideration thereof, Owner
and the undersigned covenant and agree that in any action or proceeding
brought by either Owner or the undersigned against the other on any matters
whatsoever arising out of, under, or by virtue of the terms of this lease or
of this guarantee that Owner and the undersigned shall and do hereby waive
trial by jury.

Date:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guarantor

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Witness

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guarantor's Residence

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business Address

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Firm Name

STATE OF NEW YORK ) ss.:

COUNTY OF )

On this day of , 19 , before me personally came
to me known and known to me to be the individual described in, and who
executed the foregoing Guaranty and acknowledged to me that he executed the
same.

. . . . . . . . . . . . . . .
Notary

IMPORTANT - PLEASE READ

RULES AND REGULATIONS ATTACHED TO AND
MADE A PART OF THIS LEASE
IN ACCORDANCE WITH ARTICLE 33.

1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or
encumbered by any Tenant or used for any purpose other than for ingress or
egress from the demised premises and for delivery of merchandise and
equipment in a prompt and efficient manner using elevators and passageways
designated for such delivery by Owner. There shall not be used in any space,
or in the public hall of the building, either by any Tenant or by jobbers or
others in the delivery or receipt of merchandise, any hand trucks, except
those equipped with rubber tires and sideguards. If said premises are
situated on the ground floor of the building, Tenant thereof shall further,
at Tenant's expense, keep the sidewalk and curb in front of said premises
clean and free from ice, snow, dirt and rubbish.

<PAGE>
2. The water and wash closets and plumbing fixtures shall not be used for
any purposes other than those for which they were designed or constructed and
no sweepings, rubbish, rags, acids or other substances shall be deposited
therein, and the expense of any breakage, stoppage, or damage resulting from
the violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any window
of the building and no Tenant shall sweep or throw or permit to be swept or
thrown from the demised premises any dirt or other substances into any of the
corridors or halls, elevators, or out of the doors or windows or stairways of
the building and Tenant shall not use, keep or permit to be used or kept any
foul or noxious gas or substance in the demised premises, or permit or suffer
the demised premises to be occupied or used in a manner offensive or
objectionable to Owner or other occupants of the building by reason of noise,
odors, and/or vibrations, or interfere in any way with other Tenants or those
having business therein, nor shall any bicycles, vehicles, animals, fish , or
birds be kept in or about the building. Smoking or carrying lighted cigars or
cigarettes in the elevators of the building is prohibited.
4. No awnings or other projections shall be attached to the outside walls of
the building without the prior written consent of Owner.
5. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside of the
demised premises or the building or on the inside of the demised premise if
the same is visible from the outside of the premises without the prior
written consent of Owner, except that the name of Tenant may appear on the
entrance door of the premises. In the event of the violation of the foregoing
by any Tenant, Owner may remove same without any liability, and may charge
the expense incurred by such removal to Tenant or Tenants violating this
rule. Interior signs on doors and directory tablet shall be inscribed,
painted or affixed for each Tenant by Owner at the expense of such Tenant,
and shall be of a size, color and style acceptable to Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any part of
the demised premises or the building of which they form a part. No boring,
cutting or stringing of wires shall be permitted, except with the prior
written consent of Owner, and as Owner may direct. No Tenant shall lay
linoleum, or other similar floor covering, so that the same shall come in
direct contact with the floor of the demised premises, and, if linoleum or
other similar floor covering is desired to be used an interlining of
builder's deadening felt shall be first affixed to the floor, by a paste or
other material, soluble in water, the use of cement or other similar adhesive
material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any Tenant, nor shall any changes be made in existing
locks or mechanism thereof. Each Tenant must, upon the termination of his
Tenancy, restore to Owner all keys of stores, offices and toilet rooms,
either furnished to, or otherwise procured by, such Tenant, and in the event
of the loss of any keys, so furnished, such Tenant shall pay to Owner the
costs thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter of
any description shall be delivered to and removed from the premises only on
the freight elevators and through the service entrances and corridors, and
only during hours and in a manner approved by Owner. Owner reserves the right
to inspect all freight to be brought into the building and to exclude from
the building all freight which violates any of these Rules and Regulations of
the lease or which these Rules and Regulations are a part.
9. Canvassing, soliciting and peddling in the building is prohibited and
each Tenant shall cooperate to prevent the same.
10. Owner reserves the right to exclude from the building all persons who do
not present a pass to the building signed by Owner. Owner will furnish passes
to persons for whom any Tenant requests same in writing. Each Tenant shall be
responsible for all persons for whom he requests such pass and shall be
liable to Owner for all acts of such persons. Tenant shall not have a claim
against Owner by reason of Owner excluding from the building any persons who
does not present such pass.
11. Owner shall have he right to prohibit any advertising by any Tenant which
in Owner's opinion, tends to impair the reputation of the building or its
desirability as a building for offices, and upon written notice from Owner,
Tenant shall refrain from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the
demised premises, any inflammable combustible, explosive, or hazardous fluid,
material, chemical or substance, or cause or permit any odors of cooking or
other processes, or any unusual or other objectionable odors to permeate in
or emanate from the demised premises.

<PAGE>
13. If the building contains central air conditioning and ventilation, Tenant
agrees to keep all windows closed at all times and to abide by all rules and
regulations issued by Owner with respect to such services. If Tenant requires
air conditioning or ventilation after the usual hours, Tenant shall give
notice in writing to the building superintendent prior to 3:00 p.m. in the
case of services required on week days, and prior to 3:00 p.m. on the day
prior in case of after hours service required on weekends or on holidays.
Tenant shall cooperate with Owner in obtaining maximum effectiveness of the
cooling system by lowering and closing venetian blinds and/or drapes and
curtains when the sun's rays fall directly on the windows of the demised
premises.
14. Tenant shall not move any safe, heavy machinery, heavy equipment, bulky
matter, or fixtures into or out of the building without Owner's prior written
consent. If such safe, machinery, equipment, bulky matter or fixtures
requires special handling, all work in connection therewith shall comply with
the Administrative Code of the City of New York and all other laws and
regulations applicable thereto and shall be done during such hours as Owner
may designate.
15. Refuse and Trash. (1) Compliance by Tenant. Tenant covenants and agrees,
at its sole cost and expense, to comply with all present and future laws,
orders, and regulations of all state, federal, municipal, and local
governments, departments, commissions and boards regarding the collection,
sorting, separation and recycling of waste products, garbage, refuse and
trash. Tenant shall sort and separate such waste products, garbage, refuse
and trash into such categories as provided by law. Each separately sorted
category of waste products, garbage, refuse and trash shall be placed in
separate receptacles reasonably approved by Owner. Such separate receptacles
may, at Owner's option, be removed from the demised premises in accordance
with a collection schedule prescribed by law. Tenant shall remove, or cause
to be removed by a contractor acceptable to Owner, at Owner's sole discretion
such items as Owner may expressly designate. (2) Owner's Rights in Event of
Noncompliance. Owner has the option to refuse to collect or accept from
Tenant waste products, garbage, refuse or trash (a) that is not separated and
sorted as required by law or (b) which consists of such items as Owner may
expressly designate for Tenant's removal, and to require Tenant to arrange
for such collection at Tenant's sole cost and expense, utilizing a contractor
satisfactory to Owner. Tenant shall pay all costs, expenses, fines,
penalties, or damages that may be imposed on Owner or Tenant by reason of
Tenant's failure to comply with the provisions of this Building Rule 15, and,
at Tenant's sole cost and expense, shall indemnity, defend and hold Owner
harmless (including reasonable legal fees and expenses) from and against any
actions, claims and suits arising from such noncompliance, utilizing counsel
reasonably satisfactory to Owner.

<PAGE>
Address 150 E. 58th Street

Premises a portion of the 21st flr

====================================

150 E. 58th ST. PARTNERS, L.P.
TO
IMATEC, LTD.

====================================

STANDARD FORM OF

Office

Lease

====================================

Dated 19

Rent Per Year

Rent Per Month

Term
From
To

Drawn by . . . . . . . . . . .

Check by . . . . . . . . . . .

Entered by . . . . . . . . . .

Approved by . . . . . . . . .

<PAGE>

RIDER TO LEASE, DATED AS OF, JANUARY 31, 1996,
BETWEEN 150 E. 58TH STREET PARTNERS, L.P. AND THE IMATEC, LTD., WITH
RESPECT TO A PORTION OF THE 21ST FLOOR OF
150 EAST 58TH STREET, NEW YORK, NEW YORK

The provisions of this Rider shall supersede any inconsistent provisions
contained in the printed portion of this Lease.

37. Limitation on Liability. If the Landlord or any successor in
interest be an individual joint venture, tenancy in common, co-partnership,
unincorporated association, or other unincorporated aggregate of individuals or
a corporation (all of which are referred to below in this paragraph individually
and collectively, as a "Landlord Entity"), then, anything elsewhere to the
contrary notwithstanding, Tenant and Tenant's officers, directors, stockholders,
partners, associates, employees, agents, licensees or investors (or any other
party claiming by or on behalf of Tenant), shall look solely to the estate and
property of such Landlord Entity in the land and building of which the Demised
Premises are a part, for the satisfaction of Tenant's remedies for the
collection of any judgment (or other judicial process) requiring the payment of
money by Landlord Entity with respect to any liability of Landlord Entity under,
pursuant to or in connection with this lease, and no other property or assets of
such Landlord Entity shall be subject to levy, execution or other enforcement
procedures for the satisfaction of Tenant's remedies. In no event shall Landlord
be liable to Tenant for consequential damages.

38. Insurance. Supplementing paragraphs 3 and 8 hereof, Tenant shall
carry minimum insurance coverage of $3,000,000.00 combined single limit for all
general liability, personal injury and property damage. Such insurance policies
shall name Landlord (and any other parties having an insurable interest in the
Demised Premises as are designated by Landlord) and Tenant as insureds. Tenant
shall also carry customary all risk insurance coverage for the full replacement
value of Tenant's contents and improvements located in or about the Demised
Premises. Certificates evidencing such insurance and other insurance coverage
referred to in this Lease shall be delivered to Landlord prior to the
commencement of any work or taking of possession of the Demised Premises, and
shall be maintained with Landlord throughout the term of this Lease. All
casualty insurance carried by Tenant shall specifically waive any right of
subrogation against Landlord and its agents. All insurance carried by Tenant
shall be issued by an insurance company licensed in the State of New York having
at least an "A" VI rating from Best Reports. Tenant agrees to indemnify, defend
and hold Landlord harmless from and against all claims, loss, liability, costs
and expenses (including reasonable attorney's fees) arising from any accident,
injury or damage of whatever nature caused to any person or to the property of
any person occurring in, on or about the Demised Premises during the term of
this Lease. Tenant likewise shall indemnify, defend and hold Landlord harmless
from and against all claims, loss, liability, costs, expenses (including
reasonable attorneys fees) for injury or damages arising from any accident,
injury or damage of whatever nature, occurring outside the Demised Premises but
within the Building, but only where such damage or injury results or is claimed
to have resulted from any action or omission on the part of Tenant or Tenant's
contractors, licensees, agents, invitees, visitors, servants or employees.

39. Brokers. Tenant warrants and represents that it dealt solely with
Jay G. Smith, Licensed Real Estate Broker and Newmark & Company Real Estate,
Inc. (collectively, the "Brokers") as brokers and that to Tenant's knowledge no
other broker was instrumental in bringing about or procuring this Lease. Tenant
agrees to indemnify and hold Landlord harmless from and against the claims of
other brokers or agents for compensation by reason of Tenant's acts. Landlord
shall be solely responsible for compensating the Brokers pursuant to separate
agreements.
<PAGE>

40. Condition of Premises. Without limiting the generality of
paragraph 21, Tenant has made or been given the opportunity to make a thorough
examination and inspection of the Demised Premises. Tenant agrees that it enters
into this Lease without any representations or warranties by Landlord, its
employees, agents, representatives or servants or any other person as to the
condition of the Demised Premises or the appurtenances thereof, or any
improvements therein or thereon, or any other matters pertinent thereto or to
this Lease. Tenant agrees to accept the Demised Premises "as is" in their
condition at the time possession is given to Tenant, without requiring any
alterations, improvements, repairs or decorations to be made by Landlord or at
Landlords expense.

41. Assignment and Subletting. (1) Supplementing paragraph II hereof,
if Tenant shall at any time or times during the term of this Lease desire to
assign this Lease or sublet all or part of the Demised Premises, Tenant shall
give notice thereof to Landlord, which notice shall be accompanied by (i) an
executed counterpart of the assignment or sublease (and all ancillary documents
to be executed in connection with or with respect to or modifying such proposed
assignment or sublease), the effective or commencement date of which shall be at
least forty five (45) days after the giving of such notice, (ii) a statement
setting forth in reasonable detail the identity of the proposed assignee or
subtenant, the nature of its business and its proposed use of the Demised
Premises, (iii) current financial information with respect to the proposed
assignee or subtenant, including, without limitation, its most recent financial
report and (iv) such other information as Landlord may reasonably request. Such
notice shall be deemed an offer from Tenant to Landlord whereby Landlord (or
Landlord's designee) may, at its option, (i) sublease such space from Tenant
upon the terms and conditions hereafter set forth (if the proposed transaction
is a sublease of all or part of the Demised Premises), (ii) have this Lease
assigned to it or its designee or terminate this Lease (if the proposed
transaction is an assignment or a sublease of all or substantially all of the
Demised Premises or a sublease of a portion of the Demised Premises which, when
aggregated with other subleases then in effect, covers all or substantially all
of the Demised Premises), or (iii) terminate this Lease with respect to the
space covered by the proposed sublease (if the proposed transaction is a
sublease of part of the Demised Premises). Said option may be exercised by
Landlord by notice to Tenant at any time within forty five (45) days after such
notice has been given by Tenant to Landlord and Landlord shall have received all
other information required to be furnished to Landlord by Tenant pursuant to the
provisions of this paragraph 41; and during such 45-day period Tenant shall not
assign this Lease or sublet such space to any person. Any termination of this
Lease with respect to all or any portion of the Demised Premises pursuant to
this paragraph 41 shall require the consent of the holders of any mortgages on
the land and the building.
<PAGE>

(2) (a) If Landlord exercises its option to terminate this Lease in
the case where Tenant desires either to assign this Lease or sublet all or
substantially all of the Demised Premises, therein, this Lease shall end and
expire on the date that such assignment or sublet was to be effective or
commence, as the case may be and the Base Annual Rent and additional rent shall
be paid and apportioned to such date.

(b) If Landlord exercises its option to have this Lease assigned
to it (or its designee) in the case where Tenant desires either to assign this
Lease or to sublet all or substantially all of the Demised Premises, then Tenant
shall assign this Lease to Landlord (or Landlord's designee) by an assignment in
form and substance reasonably satisfactory to Landlord. Such assignment shall be
effective on the date the proposed assignment was to be effective or the date
the proposed sublease was to commence, as the case may be. Tenant shall not be
entitled to consideration or payment from Landlord (or Landlord's designee) in
connection with any such assignment. If the proposed assignee or sublessee was
to receive any consideration or concessions from Tenant in connection with the
proposed assignment or sublease, the Tenant shall pay such consideration and/or
grant any such concessions to Landlord (or Landlord's designee) on the date
Tenant assigns this Lease to Landlord (or Landlord's designee).

(3) If Landlord exercises its option to terminate this Lease with
respect to the space covered by Tenant's proposed sublease in any case where
Tenant desires to sublet part of the Demised Premises, then (i) this Lease shall
end and expire with respect to such part of the Demised Premises on the date
that the proposed sublease was to commence; (ii) from and after such date the
Base Annual Rent and additional rent shall be adjusted, based upon the
proportion that the rentable area of the Demised Premises remaining bears to
the total rentable area of the Demised Premises; and (iii) Tenant shall pay to
Landlord, upon demand, as additional rent hereunder the costs incurred by
Landlord in physically separating such part of the Demised Premises from the
balance of the Demised Premises and in complying with any laws and requirements
of any public authorities relating to such separation.

(4) If Landlord exercises its option to sublet the Demised Premises
or the portion(s) of the Demised Premises which Tenant desires to sublet, such
sublease to Landlord or its designee (as subtenant) shall be at the lower of (i)
the rental rate per rentable square foot of Base Annual Rent and recurring
additional rent then payable pursuant to this Lease or (ii) the rentals set
forth in the proposed sublease, and shall be for the same term as that of the
proposed subletting, and:
<PAGE>

(a) The sublease shall be expressly subject to all of the
covenants, agreements, terms, provisions and conditions of this Lease except
such as are irrelevant or inapplicable, and except as otherwise expressly set
forth to the contrary in this section;

(b) Such sublease shall be upon the same terms and conditions as
those contained in the proposed sublease, except such as are irrelevant or
inapplicable and except as otherwise expressly set forth to the contrary in
this section;

(c) Such sublease shall give the sublessee the unqualified and
unrestricted right, without Tenant's permission, to assign such sublease or any
interest therein and/or to sublet the space covered by such sublease or any part
or parts of such space and to make any and all changes, alterations, and
improvements in the space covered by such sublease;

(d) Such sublease shall provide that any assignee or further
subtenant of Landlord or its designee, may, at the election of Landlord, be
permitted to make alterations, decorations and installations in such space or
any part thereof and shall also provide in substance that any such alterations,
decorations and installations in such space therein made by any assignee or
subtenant of Landlord or its designee may be removed, in whole or in part, by
such assignee or subtenant, at its option, prior to or upon the expiration or
other termination of such sublease provided that such assignee or subtenant, at
its expense, shall repair any damage and injury to such space so sublet caused
by such removal; and

(e) Such sublease shall also provide that (i) the parties to such
sublease expressly negate any intention that any estate created under such
sublease be merged with any other estate held by either of said parties, (ii)
any assignment or subletting by Landlord or its designee (as the subtenant) may
be for any purpose or purposes that Landlord, in Landlord's uncontrolled
discretion, shall deem suitable or appropriate, (iii) Tenant, at Tenant's
expense, shall and will at all times provide and permit reasonably appropriate
means of ingress to and egress from such space so sublet by Tenant to Landlord
or its designee, (iv) Landlord, at Tenant's expense, may make such alterations
as may be required or deemed necessary by Landlord to physically separate the
subleased space from the balance of the Demised Premises and to comply with any
laws and requirements of public authorities relating to such separation, and (v)
that at the expiration of the term of such sublease, Tenant will accept the
space covered by such sublease in its then existing condition, subject to the
obligations of the sublessee to make such repairs thereto as may be necessary to
preserve the premises demised by such sublease in good order and condition.

(5) In the event Landlord does not exercise its options pursuant to
paragraph 41(1) hereof to so sublet the Demised Premises or terminate (in whole
or in part) or have assigned to it or its designee this Lease and providing that
Tenant is not in default of any of Tenant's obligations under this Lease,
Landlord's consent (which must be in writing and in form satisfactory to
Landlord) to the proposed assignment or sublease shall not be unreasonably
withheld, provided and upon condition that:
<PAGE>

(a) Tenant shall have complied with the provisions of paragraph
41(l) hereof and Landlord shall not have exercised any of its options under said
paragraph 41(l) within the time permitted therefor;

(b) In Landlord's judgment the proposed assignee or subtenant is
engaged in a business and the Demised Premises, or the relevant part thereof,
will be used in a manner which (i) is in keeping with the then standards of the
Building, and (ii) will not violate any negative covenant as to use contained in
any other Lease of space in the Building;

(c) The proposed assignee or subtenant is a reputable person or
entity of good character and with sufficient financial worth considering the
responsibility involved, and Landlord has been furnished with reasonable proof
thereof,

(d) Neither (i) the proposed assignee or sublessee nor (ii) any
person which, directly or indirectly, controls, is controlled by, or is under
common control with, the proposed assignee or sublessee or any person who
controls the proposed assignee or sublessee, is then an occupant of any part of
the building or any other building in the County of New York owned or operated
under a ground or underlying Lease by Landlord or any person which, directly or
indirectly, controls, is controlled by, or is under common control with Landlord
or any person who controls Landlord or a party who dealt with Landlord or
Landlord's agent (directly or through a broker) with respect to space in the
Building during the six (6) months immediately preceding Tenant's request for
Landlord's consent;

(e) The form of the proposed sublease shall be reasonably
satisfactory to Landlord and shall comply with the applicable provisions of this
paragraph 41;

(f) The proposed assignee or sublessee is not a person with whom
Landlord or Landlord's agent dealt with in respect to space in the Building
during the four (4) months immediately preceding Tenants request for consent;

(g) There shall not be more than one (1) subtenant (including
Landlord or Landlord's designee) of the Demised Premises;

(h) The amount of the aggregate rent to be paid by the proposed
subtenant is not less than the then current market rent per rentable square foot
for the Demised Premises as though the Demised Premises were vacant, and the
rental and other terms and conditions of the sublease are the same as those
contained in the proposed sublease furnished to Landlord pursuant to paragraph
41(l) hereof;

(i) Tenant shall reimburse Landlord on demand for any costs that
may be incurred by Landlord in connection with said assignment or sublease,
including, without limitation, the costs of making investigations as to the
acceptability of the proposed assignee or subtenant, and legal costs incurred
in connection with the granting of any requested consent; and
<PAGE>

(j) Tenant shall not have (x) advertised or publicized in any way
the availability of the Demised Premises without prior notice to and approval by
Landlord, nor shall any advertisement state the name (as distinguished from the
address) of the Building or the proposed rental, (y) listed the Demised Premises
for subletting, whether through a broker, agent, representative, or otherwise at
a rental rate less than the greater of (1) the Base Annual Rent and additional
rent then payable hereunder for such space, or (2) the Base Annual Rent and
additional rent at which Landlord is then offering to Lease other space in the
Building.

(6) In the event that (x) Landlord fails to exercise any of its
options under paragraph 41(l) hereof, and consents to a proposed assignment or
sublease, and (y) Tenant fails to execute and deliver the assignment or sublease
to which Landlord consented within forty-five (45) days after the giving of such
consent, then, Tenant shall again comply with all of the provisions and
conditions of paragraph 41(l) hereof before assigning this Lease or subletting
all or part of the Demised Premises.

(7) With respect to each and every sublease or subletting authorized
by Landlord under the provisions of this Lease, it is further agreed:

(a) No subletting shall be for a term (including any renewal or
extension options contained in the sublease) ending later than one day prior to
the expiration date of this Lease.

(b) No sublease shall be valid, and no subtenant shall take
possession of the Demised Premises or any part thereof, until an executed
counterpart of such sublease (and all ancillary documents executed in connection
therewith, with respect to or modifying such sublease) has been delivered to
Landlord.

(c) Each sublease shall provide that it is subject and
subordinate to this Lease and to any matters to which this Lease is or shall be
subordinate, and that in the event of termination, reentry or dispossess by
Landlord under this Lease Landlord may, at its option, take over all of the
right, title and interest of Tenant as sublessor, under such sublease, and such
subtenant shall, at Landlord's option, attorn to Landlord pursuant to the then
executory provisions of such sublease, except that Landlord shall not be (i)
liable for any previous act or omission of Tenant under such sublease, (ii)
subject to any credit, offset, claim, counterclaim, demand or defense which such
subtenant may have against Tenant, (iii) bound by any previous modification of
such sublease or by any previous prepayment of more than one (1) month's rent,
(iv) bound by any covenant of Tenant to undertake or complete any construction
of the Demised Premises or any portion thereof, (v) required to account for any
security deposit of the subtenant other than any security deposit actually
delivered to Landlord by Tenant, (vi) bound by any obligation to make any
payment to such subtenant or grant any credits, except for services, repairs,
maintenance and restoration provided for under the sublease to be performed
after the date of such attornment, (vii) responsible for any monies owing by
Landlord to the credit of Tenant or (viii) required to remove any person
occupying the Demised Premises or any part thereof

(d) Each sublease shall provide that the subtenant may not assign
its rights thereunder or further sublet the space demised under the sublease,
in whole or in part, without Landlord's consent.
<PAGE>

(8) (a) If Landlord shall give its consent to any assignment of this
Lease or to any sublease, Tenant shall in consideration therefor, pay to
Landlord, as additional rent an amount equal to the Assignment Profit
(hereinafter defined) or Sublease Profit (hereinafter defined), as the case may
be.

(b) For purposes of this paragraph 41(8), the term "Assignment
Profit" shall mean an amount equal to all sum and other considerations paid to
Tenant by the assignee for or by reason of such assignment (including, but not
limited to, sums paid for the sale or rental of Tenant's fixtures, leasehold
improvements and equipment, less, in the case of a sale thereof, the then net
unamortized or undepreciated portion (determined on a straight-line basis over
the term of this Lease) of the amount, if any, by which the original cost
thereof exceeded any amounts paid for or contributed by Landlord which were
applied or could have been applied by Tenant against such original cost pursuant
to the terms of this Lease).

(c) For purposes of this paragraph 41(8), the term "Sublease
Profit" shall mean in any year of the term of this Lease (x) any rents,
additional charges or other consideration payable under the sublease to Tenant
by the subtenant which is in excess of the Base Annual Rent and recurring
additional rent accruing during such year of the term of this Lease in respect
of the subleased space (at the rate per square foot payable by Tenant hereunder)
pursuant to the terms hereof, and (y) all sums paid for the sale or rental of
Tenant's fixtures, leasehold improvements and equipment, less, in the case of
the sale thereof, the then net unamortized or undepreciated portion (determined
on a straight-line basis over the term of this Lease) of the amount, if any, by
which the original cost thereof exceeded any amounts paid for or contributed by
Landlord which were applied or could have been applied by Tenant against such
original cost pursuant to the terms of this Lease, which net unamortized amount
shall be deducted from the sums paid in connection with such sale in equal
monthly installments over the balance of the term of the sublease (each such
monthly deduction to be in an amount equal to the quotient of the net
unamortized amount, divided by the number of months remaining in the term of
this Lease).

(d) The sums payable under this paragraph 41(8) shall be paid to
Landlord as and when paid by the assignee or subtenant to Tenant.

(9) Except for any subletting by Tenant to Landlord or its designee
pursuant to the provisions of this paragraph 41, each subletting shall be
subject to all of the covenants, agreements, terms, provisions and conditions
contained in this Lease. Notwithstanding any such subletting to Landlord or any
such subletting to any other subtenant and/or acceptance of rent or additional
rent by Landlord from any subtenant, Tenant shall and will remain fully liable
for the payment of the Base Annual Rent and additional rent due and to become
due hereunder and for the performance of all the covenants, agreements, terms,
provisions and conditions contained in this Lease on the part of Tenant to be
performed and all acts and omissions of any licensee or subtenant or anyone
claiming under or through any subtenant which shall be in violation of any of
the obligations of this Lease, and any such violation shall be deemed to be a
violation by Tenant. Tenant further agrees that notwithstanding any such
subletting, no other and further subletting of the Demised Premises by Tenant or
any person claiming through or under Tenant (except as provided in paragraph
41(4) hereof) shall or will be made except upon compliance with and subject to
the provisions of this paragraph. If Landlord shall decline to give its consent
to any proposed assignment or sublease, or if Landlord shall exercise any of its
options under paragraph 41(l) hereof, Tenant shall indemnify, defend and hold
harmless Landlord against and from any and all loss, liability, damages, costs
and expenses (including, but not limited to, reasonable counsel fees) resulting
from any claim that may be made against Landlord by the proposed assignee or
sublessee or by any brokers or other persons claiming a commission or similar
compensation in connection with the proposed assignment or sublease.
<PAGE>

42. Escalation Rider Incorporated. Tenant agrees to pay additional rent and
any increases in the Base Annual Rental Rate in accordance with the provisions
of the Escalation Rider annexed hereto and hereby incorporated by reference.

43. Capital Improvements in Compliance with Law. If any capital improvement
or alteration to the Demised Premises or the Building, is made by Landlord at
any time during the term of this Lease in compliance with requirements of any
Federal, State or local law or governmental regulation, the necessity of which
Landlord is not aware of as of the date of the commencement of this Lease,
whether or not such law or regulation is valid or mandatory, the cost of any
such improvement or alteration shall, for the purposes herein, be deemed
amortized by Landlord in accordance with an amortization schedule with a
reasonable interest rate factored therein as determined in Landlord's reasonable
judgment, and during each calendar year or part thereof during the remaining
term of this Lease for which such amortization occurs, Tenant shall pay to
Landlord as additional rent, a sum equal to Tenant's Percentage (as defined in
the Escalation Rider) of the cost of any such improvements or alteration with
applicable interest as determined by such amortization schedule as applied to
such calendar year.

44. Hazardous Materials/Environmental Compliance. Tenant shall not allow
any Hazardous Materials (as hereinafter defined) to be brought upon, kept or
used in or about the Demised Premises. Tenant shall indemnify, defend and hold
Landlord harmless from any and all claims, judgments, damages, penalties, fines,
costs, liabilities or losses (including reasonable attorneys' fees) which arise
during or after the term of this Lease as a result of Tenant's breach of its
obligations hereunder. The foregoing indemnification includes, without
limitation, costs incurred in connection with any investigation of conditions or
any clean-up, remedial work, removal or restoration work in the Demised
Premises. Without limiting the foregoing, if the presence of any Hazardous
Materials within the Demised Premises caused or permitted by Tenant results in
any contamination of the Demised Premises, Tenant shall promptly take all
actions at its sole expense as are necessary to return the Demised Premises to
the condition existing prior to the introduction of any such Hazardous Materials
to the Demised Premises. As used in this paragraph, the term "Hazardous
Materials" means: (i) polychlorinated biphenyls (PCBS) and (ii) hazardous or
toxic materials, wastes and substances which are defined, determined or
identified as such pursuant to any applicable governmental regulations. Tenant
shall also comply with all rules and regulations imposed by Landlord within the
Building with respect to recycling waste, if required by applicable governmental
regulations.

45. Signs. Subject to prior written approval of Landlord, Tenant shall be
permitted to install a sign indicating Tenant's name on the exterior of the main
entrance door to the Demised Premises. The sign shall conform to Landlord's
guidelines for the Building. Tenant has the right to three listings in the
Building Directory.

46. Late Charges. If any amount required to be paid by Tenant to Landlord
is not paid within 10 days after the date such payment is due, then, in addition
to paying the amount due, Tenant shall pay as additional rent a late charge
("Late Charge") equal to 5% of the amount required to be paid, which late charge
shall be paid when billed. If any amount due from Tenant to Landlord remains
unpaid for 30 days after the date such payment is due, then in addition to such
Late Charge, Landlord shall be entitled to bill and collect, as additional rent,
interest on such sums from the due date until paid, at the rate which is the
lesser of (a) the greater of (i) 4% above the prime rate of Chemical-Bank (or
any successor thereto or, if Chemical Bank or its successor shall not then be
announcing a prime rate, the prime rate of the largest bank by capital and
assets then announcing a prime rate in the City of New York) at that time or
(ii) 18% per annum, or (b) the maximum rate then permitted under applicable law.
This paragraph shall not be deemed to permit Tenant to delay payment, or to
postpone or waive any rights of Landlord to collect any rent or additional rent,
with interest and expenses, by legal action or otherwise. If any legal action or
proceeding is commenced by Landlord to collect unpaid rent or additional rent,
Landlord shall be entitled to recover 5% of the amount of any such unpaid rent
or additional rent as reimbursement for Landlord's administrative expenses in
connection with Tenant's nonpayment.

<PAGE>

47. Hold Over. Tenant acknowledges the extreme importance to Landlord of
obtaining possession of the Demised Premises at the stated expiration date or
sooner termination of this Lease, and in the condition required by this Lease,
so that Landlord can prepare and rerent such Premises for a term commencing
promptly after the expiration or termination of this Lease. If Tenant shall
hold-over or retain possession of the Demised Premises after the expiration or
termination of this Lease, Tenant shall pay Landlord, upon demand, as liquidated
damages, three times the amount of the Base Annual Rental Rate and additional
rent in effect on the date of such expiration or termination, prorated for each
day that Tenant so holds over or retains possession. The provisions of the
foregoing sentence shall in no way be deemed a waiver of any rights or remedies
which Landlord may have against Tenant to obtain immediate possession of the
Demised Premises, and the demand or acceptance by Landlord of such payment shall
not be construed as a consent by Landlord to such holding over. The rights and
obligations hereunder and under paragraph 22 shall continue after the
termination or expiration of this Lease.

48. Remedies. If Tenant shall request Landlord's consent and Landlord shall
fail or refuse to give such consent, Tenant shall not be entitled to any damages
for any withholding by Landlord of its consent, it being intended that Tenant's
sole remedy shall be an action for specific performance or injunction, and that
such remedy shall be available only in those cases where, Landlord has expressly
agreed in writing not to unreasonably withhold its consent or where as a matter
of law Landlord may not unreasonably withhold its consent. If Tenant prevails in
an action for specific injunction or performance, Landlord shall reimburse
Tenant up to $2000.00 in reasonable attorneys fees.

49. Alterations. Supplementing paragraph 3 hereof, if Tenant desires to
make any changes or alterations to the Demised Premises, Tenant shall comply
with Landlord's then customary rules and regulations with respect to making of
alterations, which will be provided to Tenant upon request.

50. Not an Offer. This Lease is submitted by Landlord to Tenant for
signature and return with the understanding that there shall be no liability
upon the part of Landlord or Tenant and that it shall not bind Landlord or
Tenant unless and until it is executed by both Landlord and Tenant and an
executed copy delivered to Tenant.

51. Base Annual Rent. The Base Annual Rent payable by Tenant hereunder
(subject-to adjustment as provided in paragraph 5 of the Escalation Rider
annexed hereto and incorporated herein by reference) shall be as follows:

A. For the period commencing on February 1, 1996, and ending on
January 31, 1997, at the rate of SIXTY SEVEN THOUSAND FIVE HUNDRED EIGHTY FOUR
DOLLARS AND 00/100 ($67,584.00) DOLLARS per annum, payable in equal monthly
installments of FIVE THOUSAND SIX HUNDRED THIRTY TWO DOLLARS AND 00/100
($5,632.00) DOLLARS in advance on the first day of each calendar month during
such period.
<PAGE>

B. For the period commencing on February 1, 1997, and ending on
January 31, 1998, at the rate of SIXTY NINE THOUSAND SIX HUNDRED THIRTY TWO
DOLLARS AND 00/100 ($69,632.00) DOLLARS per annum, payable in equal monthly
installments of FIVE THOUSAND EIGHT HUNDRED TWO DOLLARS AND 67/100 ($5,802.67)
DOLLARS in advance on the first day of each calendar month during such period.

C. For the period commencing on February 1, 1998, and ending on
January 31, 1999, at the rate of SEVENTY ONE THOUSAND SIX HUNDRED EIGHTY DOLLARS
AND 00/100 ($71,680.00) DOLLARS per annum, payable in equal monthly installments
of FIVE THOUSAND NINE HUNDRED SEVENTY THREE DOLLARS AND 33/100 ($5,973.33)
DOLLARS in advance on the first day of each calendar month during such period.

D. Notwithstanding the foregoing provisions of this paragraph 51 and
provided Tenant is not in default of any of the terms of this Lease, if Tenant
installs the HVAC Unit as described in paragraph 58 hereinafter, the Base Annual
Rent payable under the Lease shall be partially abated for the month after said
installation, so that during only that one month, the monthly installment of
Base Annual Rent then payable by Tenant shall be at the rate of $512.00 per
month on account of electricity, subject to increase pursuant to the provisions
of paragraph 5 of the Escalation Rider annexed hereto. Except for the partial
rent abatement as herein provided, Tenant shall use and occupy the Demised
Premises pursuant to all of the other terms, covenants and conditions of this
Lease including, but not limited to, additional rent payments herein.

52. Security. Supplementing paragraph 34 hereof;

A. If and only if Tenant has furnished Landlord its Federal Tax
identification number in the space provided below, Landlord agrees to deposit
the security in an insured money market fund or other interest bearing account.
The interest or dividends that accrue on such security shall be credited to
Tenant if not in default, less an amount equal to 1% per annum of the security
hereinabove set forth which shall be retained by Landlord as an annual
administration fee. Tenant's Federal Tax identification number is 11-3289398. If
Landlord shall use or apply all or part of the security by reason of Tenant's
default, Tenant shall upon written demand from Landlord restore the security to
the original amount set forth in paragraph 34 hereof.

B. Tenant shall have the right from time to time to deposit with
Landlord, as the security deposit required pursuant to paragraph 34 hereof, a
clean, unconditional, irrevocable letter of credit in the aggregate amount of
THIRTY FIVE THOUSAND EIGHT HUNDRED FORTY DOLLARS AND 00/100 ($35,840.00) DOLLARS
and otherwise in form and substance satisfactory to Landlord and issued by a
member bank of the New York Clearinghouse Association or other bank acceptable
to Landlord, payable upon the presentation by Landlord to such bank of a
sight-draft and the letter of credit without presentation of any other
documents, statements or authorization, which letter of credit shall provide (a)
for the continuance of such credit for the period of at least one year from the
commencement date of the term of this Lease, (b) for the automatic extension of
such letter of credit for additional periods of one year from the initial and
each future expiration date thereof (the last such extension to provide for the
continuance of such letter of credit for at least 3 months beyond the expiration
date of the term) unless such bank gives Landlord notice of its intention not to
renew such letter of credit, in the manner provided in paragraph 28 hereof, not
less than 90 days prior to the initial or any future expiration date of such
letter of credit and (c) that in the event such notice is given by such bank,
Landlord shall have the right to draw on such letter of credit. Each letter of
credit to be deposited and maintained with Landlord (or the proceeds thereof)
shall be held by Landlord as security for the faithful performance and
observance by Tenant of the terms of this Lease as provided herein and in the
event that (i) any default occurs hereunder or (ii) Landlord notifies Tenant
that Landlord proposes to transfer its right, title, annual interest under this
Lease to a third party and the bank issuing such letter of credit does not
consent to the transfer of such letter of credit to such third party within
thirty (30) days after Tenant receives such notice from Landlord, or (iii)
notice is given by the bank of its intention not to renew as above provided,
then, in any such event, Landlord may draw on such letter of credit upon
presentation by Landlord to such bank of a sight-draft and the letter of credit
and the proceeds of such letter of credit shall then be held and applied as
security (and be replenished, if necessary) as provided in paragraph 34 hereof.

53. Landlord's Successors in Interest. In the event that any mortgagee or
any trustee under a trust indenture, or their respective assigns, shall succeed
to the interest of Landlord then, at the option of such mortgagee or trustee,
this Lease shall nevertheless continue in full force and effect and the Tenant
shall attorn to such mortgagee or such trustee.
<PAGE>

54. Change of Location. (a) Tenant covenants and agrees that Landlord shall
at any time during the term of this Lease have the absolute and unqualified
right, upon notice to Tenant to designate as the Demised Premises any part of
any other floor of the Building that is the same or higher floor as the Demised
Premises with substantially the same views and layout as reasonably acceptable
to Tenant. Tenant represents that it will not unreasonably withhold its
acceptance thereof. Such notice shall specify and designate the space so
substituted for the Demised Premises. Notwithstanding such substitution of
space, this Lease and all terms, provisions, covenants and conditions contained
in this Lease shall remain and continue in full force and effect, except that
the Demised Premises shall be and be deemed to be such substituted space
(hereinafter called "Substituted Space"), with the same force and effect as if
the Substituted Space were originally specified in this Lease, as the premises
demised hereunder.

(b) In the event of the substitution of space as provided in
subparagraph 54(a) above,

(i) Landlord shall at Landlord's expense, prepare the Substituted
Space in substantially the same manner as Tenant has prepared the Demised
Premises and shall have the right to remove any floor covering, wallcovering,
cabinet work, and any other decoration to the Substituted Space as well as
telephone lines and any other communication line to the Substituted Space,

(h) As soon as Landlord has completed preparing the Substituted
Spare as set forth in subparagraph (b), Tenant upon five (5) days prior written
notice shall move to the Substituted Space, and upon failure of Tenant to so
move to the Substituted Space, Landlord may as Tenant's agent, remove Tenant
from the Demised Premises to the Substituted Space.

(c) Following such substitution of space (pursuant to this
paragraph 54), if any, Landlord and Tenant shall, promptly at the request of
either party, execute and deliver an agreement in recordable form setting forth
such substitution of space and the change (if any) in the fixed annual rent,
and rentable area in the appropriate places in the Lease.

55. Subordination. (a) Supplementing paragraph 7 hereof, in the event of
any act or omission of Landlord that would give Tenant the right, immediately or
after lapse of a period of time, to cancel or terminate this Lease, or to claim
a partial or total eviction, Tenant shall not exercise such right (i) until it
has given written notice of such act or omission to the holder of each superior
mortgage and the lessor of each superior lease whose name and address shall
previously have been furnished to Tenant in writing and (ii) unless such act or
omission shall be one that is not capable of being remedied by Landlord or such
holder or lessor within a reasonable period of time, until a reasonable period
for remedying such act or omission shall have elapsed following the giving of
such notice and following the time when such holder or lessor shall have become
entitled under such superior mortgage or superior lease, as the case may be, to
remedy the same (which reasonable period shall in no event be less than the
period to which Landlord would be entitled under this Lease or otherwise, after
similar notice, to effect such remedy), provided that such holder or lessor
shall give Tenant written notice of its intention to remedy such act or omission
and shall, with due diligence, commence and continue to do so.

<PAGE>

(b) If the lessor of a superior lease or the holder of a superior
mortgage shall succeed to the rights of Landlord under this Lease, whether
through possession or foreclosure action or delivery of a new lease or deed,
then, at the request of the party so succeeding to Landlord's rights (herein
sometimes called the successor landlord) and upon such successor landlord's
written agreement to accept Tenants attornment, Tenant shall attorn to and
recognize such successor landlord as Tenant's landlord under this lease, and
shall promptly execute and deliver any instrument that such successor landlord
may reasonably request to evidence such attornment. Upon such attornment, this
Lease shall continue in full force and effect, or as if it were, a direct lease
between the successor landlord and Tenant, upon all of the terms, conditions and
covenants as are set forth in this Lease and shall be applicable after such
attornment, except that the successor landlord shall not:

(i) be liable for any previous act or omission
of Landlord under this Lease;

(ii) be subject to any offset, not expressly
provided for in this Lease, that shall have
theretofore accrued to Tenant against
Landlord; or

(iii) be bound by any previous modification of
this Lease, not expressly provided for in
this Lease, or by any previous prepayment
of more than one month's fixed rent or any
additional rent then due, unless such
modification or prepayment shall have been
expressly approved in writing by lessor of
the superior lease or the holder of the
superior mortgage through, or by reason of
which, the successor landlord shall have
succeeded to the rights of Landlord under
this Lease.

56. Labor Regulations. Tenant covenants and agrees that prior to and
throughout the term, it shall not take any action which would violate Landlord's
union contracts, if any, affecting the Building, nor create any work stoppage,
picketing, labor disruption or dispute, or any interference with the business of
Landlord or any other Tenant or occupant in the Building or with the rights and
privileges of any person(s) lawfully in said Building, nor cause any impairment
or reduction of the good name of the Building. Any default by Tenant under this
Article shall be deemed a material default entitling Landlord to exercise any or
all of the remedies provided in this Lease.

57. Cleaning. In the event Landlord shall furnish cleaning service to the
Demised Premises pursuant to the provisions of subparagraph (d) of paragraph 29
of the printed portion of this Lease, Tenant covenants and agrees that Tenant
shall pay to Landlord on demand the costs incurred by Landlord for (a) extra
cleaning work in the Demised Premises required because of (i) misuse or neglect
on the part of Tenant or its employees or visitors, (ii) use of portions of the
Demised Premises for preparation, serving or consumption of food or beverages,
data processing or reproducing operations, private lavatories or other special
purposes requiring greater or more difficult cleaning work than office areas,
(iii) unusual quantity of interior glass surfaces, (iv) non building standard
materials or finishes installed by Tenant or at its request, and (b) removal
from the Demised Premises and the Building of so much of any refuse and rubbish
of Tenant as shall exceed that ordinarily accumulated daily in the routine of
business office occupancy.
<PAGE>

58. Supplemental HVAC. Notwithstanding anything to the contrary contained
herein, and provided that Tenant is not in default of any of the terms of this
Lease, Landlord shall permit Tenant to install a supplementary HVAC unit (the
"HVAC Unit") at Tenant's own expense, subject to Landlord's pre-approval. Tenant
shall be responsible, at Tenant's sole cost and expense, for the installation,
operation, maintenance and repair of the HVAC Unit during the term of this
Lease. Such maintenance obligations shall be performed throughout the term of
this Lease, on Tenants behalf, by a reputable HVAC maintenance company engaged
by Tenant at its expense, and reasonably approved by Landlord. In the event
Tenant shall fail to engage an HVAC maintenance company as aforesaid, Landlord
may (but shall not be obligated to) perform such maintenance and/or engage an
HVAC service company at Tenant's expense to perform the aforesaid maintenance to
the HVAC Unit, and Tenant shall pay on demand as additional rent hereunder all
expenses incurred by Landlord in connection therewith. All electricity used in
connection with the operation of the HVAC Unit shall be supplied by Landlord
upon, and subject to, all of the terms, covenants, and conditions contained in
paragraph 5 of the Escalation Rider annexed hereto including, but not limited
to, Landlord's right to re-survey the value of the electrical service.

59. Miscellaneous. (a) If any of the provisions of this Lease, or the
application thereof to any person or circumstances, shall to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such provision or provisions to persons or circumstances other than those as to
whom or which it is held invalid or unenforceable, shall not be affected
thereby, and every provision of this Lease shall be valid and enforceable to the
fullest extent permitted by law.

(b) This Lease shall be governed in all respects by the laws of the
State of New York.

(c) If, in connection with obtaining financing for the Building, a
bank, insurance company or other lending institution shall request reasonable
modifications in this Lease as a condition to such financing, Tenant will not
unreasonably withhold, delay or defer its consent thereto, provided that such
modifications do not increase the obligations of Tenant hereunder or materially
adversely affect the leasehold interest hereby created.

(d) Tenant shall not be entitled to exercise any right of termination
or other option granted to it by this Lease (if any) at any time when Tenant is
in default in the performance or observance of any of the covenants, terms,
provisions or conditions on its part to be performed or observed under this
Lease.

(e) Tenant shall not place or permit to be placed any vending machines
in the Demised Premises, except with the prior written consent of Landlord in
each instance, provided Tenant may install such vending machines if the use
thereof is confined to Tenant's employees.

(f) Neither Tenant nor any corporation or other entity controlling,
controlled by or under common control with Tenant shall occupy any space in the
building (by assignment, sublease or otherwise) other than the Demised Premises,
except with the prior written consent of Landlord in each instance.

(g) The paragraph headings of this Lease are for convenience only and
are not to be given any effect whatsoever in construing this Lease.

(h) The Exhibits and Riders annexed to this Lease shall be deemed part
of this Lease with the same force and effect as if such Exhibits and Riders were
numbered Articles of this Lease.

(i) If the rent hereunder shall commence on any day other than the
first day of a calendar month, the rent for such calendar month shall be
prorated.

(j) The listing of any name other than that of Tenant, whether on the
doors of the Demised Premises, on the Building directory, if any, or otherwise,
shall not operate to vest any right or interest in this Lease or in the Demised
Premises, nor shall it be deemed to be the consent of Landlord to any assignment
or trader of this Lease, to any sublease of the Demised Premises, or to the use
or occupancy thereof by others.

<PAGE>

IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Lease as of the day and year first above written.

LANDLORD:
150 E. 58TH ST. PARTNERS, L.P.

BY: 58 ML General Corp., a general partner

By: /s/ Nathan Aber
---------------------------------------
Nathan Aber, Vice President

BY: 58 GR General Corp., a general partner

By: /s/ Nathan Aber
---------------------------------------
Nathan Aber, Vice President

TENANT:
IMATEC, INC

By: /s/ XXXXXXXXXXXXXXX
---------------------------------------
Name: XXXXXXXXXXXX
Title: President

<PAGE>

ESCALATION RIDER

1. Real Estate Tax Escalation. (a) For purposes of subparagraph 1(b) of
this Escalation Rider, the following definitions shall apply:

(i) "Real Estate Taxes" means the amount of annual real estate
taxes, assessments, sewer rent rates and charges, county taxes, transit taxes,
or any other governmental charge, general, special, ordinary or extraordinary,
which may now or hereinafter be imposed, levied, assessed and/or collected
against the Building and the land upon which it stands ("Land"). If due to a
change in the method of taxation, any franchise, income, profit, or other tax,
however designated, shall be levied against Landlord's interest in the property
in whole or in part for or in lieu of any tax which would otherwise constitute
Real Estate Taxes, such change in method of taxation shall be included in
determining the excess Real Estate Taxes over the Tax Base (as hereinafter
defined) for the purposes hereof;

(ii) "Tax Base" means the sum of (A) one-half of the amount of
Real Estate Taxes payable for the fiscal tax year commencing on July 1, 1995,
and ending on June 30, 1996, plus (B) one-half of the amount of the Real Estate
Taxes payable for the fiscal tax year commencing on July 1, 1996, and ending on
June 30, 1997.

(iii)"Tax Year" means each period, of twelve (12) consecutive
months commencing as of the first day of July of each such period, in which any
part of the term of this Lease shall occur, or such other periods of twelve
months as may be adopted as the fiscal year for real estate tax purposes of the
City of New York.

(iv) "Tenant's Percentage" means 0.40379%.

(b) Tenant agrees to pay as additional rent during each Tax Year or
portion thereof throughout the term of this Lease, or any renewal or extension
thereof, an amount equal to Tenant's Percentage of any increase in Real Estate
Taxes for such Tax Year over the Tax Base ("Tenant Tax Payment") regardless of
whether such increase results from a higher tax rate and/or an increase in the
assessed valuation of either the Land or the Building and/or the imposition of
any new form or type of tax against either the Land or the Building and/or from
the imposition of any special assessment(s) against the Land and/or the
Building. Reasonable fees and expenses, if any, incurred in obtaining any
reduction in assessed valuation shall also be considered an increase in Real
Estate Taxes for the purpose of this provision, provided such fees shall not
exceed the amount of the reduction obtained. Such payment shall be made promptly
by Tenant as additional rent on a semi-annual basis within 10 days' notice from
Landlord that such payment is due. Copies of tax bills applicable to the Tax
Base and to any such Tax Year shall be made available by Landlord for inspection
by Tenant during normal business hours. In the event of any reduction in Real
Estate Taxes with respect to which Tenant has paid its pro-rata share, Tenant
shall he entitled to a pro-rata portion of any such reduction, less a
proportionate amount of the actual fees and expenses incurred to obtain such
reduction.

(c) If the Taxes comprising the Tax Base are reduced as a result of an
appropriate proceeding or otherwise, the Taxes as so reduced shall, for all
purposes be deemed to be the Taxes for the Tax Base and Landlord shall give
notice to Tenant of the amount by which the Tenant's Tax Payments previously
made were less that the Tenant's Tax Payments required to be made under this
paragraph 1, and Tenant shall pay the amount of the deficiency within twenty
(20) days after demand therefor.
<PAGE>
2. Wage Rate Escalation. (a) For purposes of subparagraph 2(b) of this
Escalation Rider the following definitions shall apply:

(i) "Wage Rate" means the minimum hourly wage rate prescribed for
Porters (as hereinafter defined) in buildings classified as Class A Office
Buildings (or the then highest classification of office buildings) (hereinafter
called "Class A Office Buildings") under the agreement then in effect between
the Realty Advisory Board on Labor Relations, Incorporated ("R.A.B.") (or any
successor thereto) and Local 32B of the Building Service Employees International
Union, AFL-CIO (or any successor thereto) ("Local 32B-32J") covering the wage
rates of Porters in Class A Office Buildings. In the event, that any Labor
Agreement requires the regular employment of Porters on days or during hours
when overtime or other premium pay rates are in effect pursuant to the Labor
Agreement, then the term "hourly wage rate" as used in this paragraph shall be
deemed to mean the average hourly wage rate for the minimum number of hours in a
calendar week during which Porters are required to be regularly employed. Such
"hourly wage rate" shall exclude all social security and unemployment taxes,
worker's compensation, disability insurance, holiday, vacation and sick pay,
accident, health and welfare programs whether insured or not, pension plans,
guarantee pay plans, training, safety and advancement programs, annuities and
other fringe benefits required to be paid by Landlord to or on behalf of the
Porters in Class A Office Buildings under the Labor Agreement (collectively,
"fringe benefits"). If at any time there is no Labor Agreement in effect
prescribing such minimum "hourly wage rate" for Porters, computations and
payments shall be made on the basis of the minimum hourly wage rate actually
payable to Porters by Landlord or by the contractor performing the cleaning
services for Landlord.

(ii) "Base Wage Rate" means the Wage Rate in effect during calendar
year 1996.

(iii) "Porters" means that classification of employees engaged in the
general maintenance and operation of Class A Office Buildings, such
classification being presently termed "others" in the current agreement between
R.A.B, and Local 32B-32J.

(iv) "Wage Rate Year" means each calendar year subsequent to the year
1996 in which any part of the terms of this Lease shall occur.

(b) Tenant agrees to pay as additional rent for each Wage Rate
Year (or portion thereof) in which the Wage Rate has increased over the Base
Wage Rate, an amount equal to the product obtained by multiplying 2,048 by the
number of cents and fraction of a cent by which the Wage Rate is greater than
the Base Wage Rate. Such payment shall be made by Tenant as additional rent in
twelve equal monthly installments together with the payment of the Base Annual
Rental Rate and any other payments of additional rent required under this Lease.
Landlord shall give Tenant written notice of each change in the Wage Rate which
will be effective to create or change Tenant's obligation to pay additional rent
pursuant to the provisions of this Escalation Rider together with a statement of
the additional rent payable resulting from such increase in the Wage Rate.
Tenant acknowledges that the foregoing Wage Rate calculation is a derived
formula being used as an index of general changes in commercial operating costs
and is unrelated to actual costs of the Porters at the Building.

3. Building Utility Cost Escalation. (a) For purposes of paragraph 3(b)of
this Escalation Rider, the following definitions shall apply;

(i) "Comparison Year" means any calendar year subsequent to the
calendar year 1996 (the "Base Year").

(ii) "Tenant's Percentage" means representing the agreed percentage of
any increase or decrease in electricity costs allocable to Tenant under
paragraph 3(b) of this Escalation Rider.

<PAGE>

(iii) "Electricity Costs" means the total costs (including a fuel
adjustment factor and taxes, if any) incurred by Landlord in respect of
electricity service used in connection with the operation of the Building,
including all public and service areas but excluding premises occupied by
tenants of the Building, which for purposes of this Escalation Rider shall be
deemed to be 50% of Landlord's total costs for electricity consumed at the
Building.

(iv) "Base Electric Costs" means the Electricity Costs incurred in the
Base Year.

(b) If the Electricity Costs for any Comparison Year (any part or
all of which falls within the term for this Lease) shall be greater or less then
the Base Electricity Costs, then the Base Annual Rental Rate for such Comparison
Year shall be increased or decreased, as the case may be, by Tenant's Percentage
of the increase or decrease.

(c) At any time and from time to time, during or after any
Comparison Year (for any part or all of which there is an increase or decrease
in the Base Annual Rental Rate under the preceding subparagraphs of this
paragraph 3), Landlord shall send Tenant a comparative statement(s) setting
forth (i) a comparison of the Electricity Costs in the Comparison Year with the
Base Electricity Costs, (ii) and the amount of the increase or decrease in the
Base Annual Rental Rate resulting from each of such comparisons. On the first
day for the payment of the monthly Base Annual Rent installment following the
furnishing to Tenant of the comparative statement (x) Tenant, in case of an
increase, shall pay to Landlord a sum equal to 1/12th of such increase in Base
Annual Rental Rate multiplied by the number of prior and current months (any
fraction thereof) for which the increase is applicable, and in case of a
decrease, shall be entitled to a credit against the rent next becoming due, of a
sum equal to 1/12th of such decrease multiplied by the number of prior and
current months (and any fraction thereof) for which the decrease is applicable;
and (y) thereafter, commencing with the then current monthly rent installment
and continuing monthly thereafter until a different comparative statement is
sent to Tenant, the monthly installments of rent shall be increased or
decreased, as the case may be, by an amount equal to 1/12th of such increase or
decrease, plus 1/12th of the Landlord's estimate of Electricity Costs for the
current Comparison Year based on actual Electricity Costs for the prior year
increased by 10%. Upon the rendering of comparative statements by the Landlord
at the end of each Comparison Year, the estimated payment made by Tenant shall
be adjusted between the parties so as to reflect the actual Electricity Costs.
Said adjustment shall be made by the parties for each Comparison Year as soon as
practicable after the end of said year. Any excess payments by Tenant shall be
credited against the next ensuing payments provided for in this Escalation
Rider. Any deficiencies shall be paid by Tenant within 10 days after Landlord
furnishes Tenant with a comparative statement.

(d) Any comparative statement sent to Tenant shall be
conclusively binding upon Tenant unless, within 30 days after such statement is
sent, Tenant shall send a written notice to Landlord objecting to such statement
and specifying the respects in which such statement is claimed to be incorrect,
Tenant shall have the right to inspect any surveys or records upon which
Landlord's comparative statement is based.
<PAGE>

(e) Any provision in this paragraph 3 to the contrary
notwithstanding, under no circumstances shall any decrease pursuant to
subparagraph 3(d) reduce the rental payable hereunder below the aggregate of the
Base Annual Rental Rate provided in paragraph 51 hereof and the Real Estate Tax
escalation and Wage Rate escalation then in effect.

4. The expiration of this Lease during any calendar year for any part or
all of which there is a payment due but not yet billed under paragraph 1, 2 and
3 of this Escalation Rider, shall not affect the rights or obligaitons of the
parties hereto, and a statement relating to such payment may be sent to Tenant
subsequent to any such expiration prorated to the date of expiration. Payments
due under such statement shall be payable within 20 days after such statement is
sent to Tenant. The failure of Landlord to compute or bill any item of
escalation provided for in this Escalation Rider shall not be a waiver of
Landlord's rights or prohibit Landlord from billing and collecting such item at
a later date.

5. Demised Premises Electricity. (a) As part of the Base Annual Rental Rate
hereunder, Landlord will furnish to the Demised Premises electric current which
Landlord represents is sufficient for General Executive Office use in the
Demised Premises to be used by Tenant for the lighting fixtures and electrical
receptacles presently installed at the Demised Premises. Tenant shall furnish
and install, at Tenant's expense, all replacement light bulbs, tubes and
ballasts in the Demised Premises, unless Landlord, at its option, shall elect to
do so at Tenant's expense.

(b) Upon the written request of Tenant, or, if, in Landlord's sole
discretion, the existing feeders or risers supplying the Demised Premises are
inadequate for Tenant's usage, then additional feeders or risers to supply
Tenant's electrical requirements shall be installed by Landlord along with any
other equipment Landlord deems necessary, all at Tenant's sole expense, provided
such installation will not cause damage to the Building or Demised Premises,
cause a dangerous condition, entail unreasonable alterations, repairs or
expense, or interfere with other tenants. As a condition to Landlord's
installation of additional feeders, risers or other electrical equipment serving
the Demised Premises, Landlord and Tenant shall first agree upon an increase in
the Base Annual Rental Rate, which increase shall reflect the value to Tenant of
the additional service being supplied by Landlord. If Landlord and Tenant cannot
agree thereon, such increase shall be finally determined by a professional
electric rate consultant selected by Landlord, who shall certify such
determination in writing to Landlord and Tenant. The Base Annual Rental Rate
shall be increased for the remainder of the term of this Lease in an amount
equal to the value of such additional service as so agreed or determined, such
increase, however, to be retroactive to the date of the first availability to
Tenant of such additional service.

(c) The electricity charge of $6,144.00 per annurn included in the
Base Annual Rental Rate as of the date of execution of this Lease is based on
the present public utility rates as of the date of execution of this Lease. If
at any time after the date of execution of this Lease, the New York State Public
Service Commission shall authorize an increase or decrease in the public utility
rate schedule or if the public utility corporation supplying electrical service
to the Building shall increase or decrease its fuel adjustment factor or any
other charges, then the Base Annual Rental Rate hereunder shall thereupon be
adjusted by Landlord to reflect such increase or decrease in the applicable
rates and charges by a proportionate increase or decrease of that part of the
Base Annual Rental Rate attributable to Landlord's furnishing amounts of
electrical service to the Demised Premises. Whenever the amount of any such
increase or decrease is determined, Landlord shall advise Tenant in writing and
such increase or decrease shall be effective from the effective date of such
increase or decrease in the public utility rate schedule or other charges.
<PAGE>

(d) At any time during the term of this Lease, Landlord may retain a
professional electric rate consultant to make a determination of the value of
the electrical service furnished to Tenant. If the Base Annual Rental Rate
payable hereunder does not fully and fairly reflect the value of the electrical
service to Tenant, the Base Annual Rental Rate shall be increased or decreased
by an amount which shall fully and fairly reflect the value of such service to
Tenant as determined and certified in writing by such consultant. The findings
of the consultant shall he conclusive and binding upon the parties. Any such
increase or decrease in rent shall be effective from the date of such
consultant's written determination.

(e) Any retroactive increase in the Base Annual Rental Rate under the
provisions of this paragraph 5 with respect to the period from the effective
date of such increase, which shall be fixed by agreement or determination,
shall be payable by Tenant along with the next Base Annual Rental Rate
installment due pursuant to this Lease. Any retroactive decrease hereunder
shall be deducted from the next installment due under the Lease; however, in no
event shall any such decrease permit Tenant to pay less than the Base Annual
Rental Rate provided in paragraph 51 hereof.
<PAGE>

(f) If Landlord at any time elects to discontinue furnishing
electrical service, or is for any reason unable to continue furnishing
electrical service, to Tenant, this Lease shall continue in full force and
effect and shall be unaffected thereby, except that this paragraph 5 and all the
terms and conditions hereof shall cease and terminate without any liability by
either party to the other for such service after the date of such termination.
Landlord agrees to give not less than 30 days advance notice of any such
discontinuance to Tenant. In such event, the Base Annual Rental Rate reserved
shall be reduced to the Base Annual Rental Rate less the electricity charge
provided for in subparagraph (c) of this paragraph 5 as the same may have
increased. In the event of such discontinuance, Landlord shall permit Tenant to
receive such service directly from a public utility company and to permit its
existing wires, feeders, risers and facilities servicing the Demised Premises to
be used by Tenant. Tenant hereby agrees that any and all charges made by such
public utility company to Tenant for providing and installing electrical service
to the Demised Premises, including, but not limited to, the installation of
meters, shall be borne by Tenant.

(g) If Tenant disagrees with any determination made by Landlord's
electrical rate consultant as above provided in this paragraph 5, and, if a
licensed electrical engineer retained and paid for by Tenant certifies that the
determination of Landlord's electrical rate consultant is unreasonable, then
Landlord will consent to the submission of the contested issue to arbitration in
New York City before one arbitrator, in accordance with the then applicable
rules and regulations of the American Arbitration Association. The cost of any
such arbitration shall be shared equally between Landlord and Tenant (however
each party pay its own attorneys, witnesses and expert's fees).

<PAGE>

EXHIBIT A

FLOOR PLAN

GRAPHIC DESCRIPTION OF
FLOOR PLAN FOR

21ST FLOOR
150 EAST 58TH STREET
NEW YORK, NY

ALL AREAS, CONDITIONS AND
DIMENSIONS ARE APPROXIMATE

<PAGE>

EXHIBIT 16.1

PRESENT, COHEN, SMALLOWITZ & GLASSMAN
Certified Public Accountants
40 Cuttermill Road
Great Neck, NY 11021
Tel (516) 466-5150
Fax (516) 466-0897

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549

Ladies and Gentlemen:

We have read the disclosure contained under the heading
"Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures" in the Registration Statement on Form SB-2
of Imatec, Ltd. and we agree with the statements contained
therein insofar as they relate to our firm.

Very truly yours,

/s/ Present, Cohen, Smallowitz & Glassman
-----------------------------------------
Present, Cohen, Smallowitz & Glassman

Great Neck, New York
May 10, 1996

<PAGE>

Exhibit 24.1

MOST HOROWITZ & COMPANY, LLP
Certified Public Accountants
1133 Avenue of the Americas
New York, NY 10036
Tel (212) 764-4910
Fax (212) 764-2017

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We hereby consent to the use in this Registration Statement on Form SB-2
of our report dated April 29, 1996, relating to the financial statements of
Imatec, Ltd. as of and for the year ended December 31, 1995, and the reference
to our Firm under the caption "Experts" in the prospectus.

/s/ Most Horowitz & Company, LLP
---------------------------------
Most Horowitz & Company, LLP

New York, New York
May 10, 1996